Wednesday, June 24, 2009

Thursday Watch

Late-Night Headlines

- Gold imports by India, the world’s biggest buyer, probably halved in June as higher prices and weak currency deterred jewelry buyers, a traders group said. Purchases were 8 to 10 metric tons in the first three weeks of this month, compared with 17 to 18 tons in a year-ago period, said Suresh Hundia, president of the Bombay Bullion Association Ltd., citing preliminary data. India’s bullion imports have fallen for nine straight months because of high prices and increased supply of scrap jewelry. “There has been no demand in the last four months and the main reason for that are the high prices,” Hundia said in a phone interview. “Although gold has corrected by as much as $75 an ounce from recent highs, we have seen very little demand from the jewelry industry over the past few weeks,” John Reade, UBS’s chief metals strategist in London, said in a note today. “The gold price is still too high to attract bargain hunters.”

- NYSE Euronext’s(NYX) control of U.S. stock trading is slipping away. Two-hundred seventeen years after the New York Stock Exchange was founded under a Wall Street buttonwood tree, its modern-day parent executed a record low 30.2 percent of May’s trades, data compiled by Bloomberg show. That’s down 2.8 points from February for the worst three months since June 2008. The beneficiary wasn’t Nasdaq OMX Group Inc., the Big Board’s main rival for 38 years. It was Direct Edge Holdings LLC and Bats Exchange Inc., which more than doubled their combined share since August to 22.8 percent.

- Nike Inc.(NKE), the world’s largest athletic-shoe maker, fell in late trading after it said orders declined 12 percent because of the global economic slump. Excluding the effect of currency exchange rates, worldwide orders for delivery from June through November fell 5 percent from a year earlier. Sara Hasan, an analyst with McAdams Wright Ragen Inc. in Seattle, projected orders would decline 2 percent at most, on that basis.

- Bed Bath & Beyond Inc.(BBBY) reported first-quarter profit rose 14 percent, beating analysts’ estimates, as the largest U.S. home-furnishings retailer lowered expenses to guard against the recession.

- Legg Mason Inc.(LM) rose 11 percent in New York trading after the Telegraph newspaper reported that billionaire Nelson Peltz acquired a stake in the fund manager and may push for a sale or breakup. Peltz bought 12 million to 13 million shares of Baltimore- based Legg Mason, or about 9 percent of the outstanding stock, the British newspaper said, citing “well-placed” sources it didn’t identify. Peltz held 745,846 shares, or 0.52 percent, as of March 31, according to data compiled by Bloomberg.

- Watson Pharmaceuticals Inc.(WAT) won U.S. approval to sell the first generic copy of Plan B, the emergency contraceptive made by Teva Pharmaceutical Industries Ltd. The Watson medicine will be available by prescription only to women ages 17 and younger, according to a notice posted today on the Food and Drug Administration’s Web site. Teva, of Petah Tikva, Israel, has exclusive rights to an over-the-counter version of the pill for women ages 18 and older until Aug. 24, the FDA said

- Goldman Sachs Group Inc.(GS) refused to grant the government’s auditor access to advisory work it did for the U.K. Treasury during the rescue of Northern Rock Plc, a panel of lawmakers in Parliament said. The Public Accounts Committee in the House of Commons said the U.S. bank withheld access to its work on Northern Rock from the National Audit Office. It also said the Treasury was poorly prepared to cope with the run on deposits at the Newcastle-based lender, which was nationalized in 2008. “Goldman Sachs refused the National Audit Office access to the financial modeling underpinning its analyses for the Treasury, even though this work had been paid for by the taxpayer,” the committee said in a report in London today.

- The euro may decline 7% to its weakest level since April as yields on German government bonds drop at a faster pace than those on Treasuries, reducing demand for the 16-nation currency, according to Deutsche Bank AG. “The recovery is stronger in the US than in Europe,” said Koji Fukaya, a senior currency strategist at the brokerage unit of Deutsche Bank in Tokyo.

- A credit market stress indicator returned to normal this week for the first time since the collapse of Lehman Brothers Holdings in September, according to analysts at Barclays Capital. The gap, called the skew, between the cost of default protection measured by the Markit iTraxx Europe index of investment-grade companies and the average price of buying credit-default swaps for each of the 125 index constituents turned positive this week and is trading at about 3 basis points, compared with a negative 60 basis points in December, according to Barclays data. “Systemic risk has been taken out and the massive dislocation we saw post-Lehman has normalized,” said Puneet Sharma, head of investment-grade credit strategy at Barclays in London.

- Google Inc.(GOOG), criticized by China for disseminating “vulgar content,” said it’s investigating whether its Web site is inaccessible in the country. “We have received reports that most users cannot access in China,” spokeswoman Marsha Wang said in an e-mail today. “We are investigating the matter and hope that the service will be restored soon.”

Wall Street Journal:

- Analog Devices Inc.(ADI) Chief Executive Jerald G. Fishman said the Norwood, Mass., chip maker is planning for an upturn in business in fiscal 2010, having concluded that "the bottom has been established."

- Best Buy Co.(BBY) is planning to open 40 standalone mobile-phone stores this fiscal year and now believes that it can quintuple its share of the U.S. mobile-phone market to 15%, the company's new chief executive said on Wednesday.

- In its latest effort to help cash-strapped entrepreneurs, the Small Business Administration on Wednesday permanently changed a key loan program so that businesses can refinance if they plan to expand or buy equipment. Previously, business owners could only take advantage of the SBA's 504 program when they sought new loans to buy real estate, upgrade machinery and make improvements. Now, borrowers can refinance their existing SBA-backed loans as long as the amount is 50% or less than the total cost of expansion. The change is designed to help business owners restructure debt under better terms and "improve their cash flow and enhance their viability so that they can grow and create jobs," said Hayley Matz, an SBA spokeswoman.

- GMAC LLC is suspending wholesale financing for certain Chrysler Group LLC dealers it considers to be too risky to lend to, both GMAC and Chrysler confirmed on Wednesday. The move could ultimately push some dealers out of business and hurt Chrysler's ability to sell cars.

- A breakdown of longstanding business models and the crisis in client confidence due to last year’s financial havoc mean a new reality for wealth-management firms. More than a quarter of high-net-worth individuals withdrew assets from their wealth-management firm or left their firm altogether in 2008, according to the 13th annual World Wealth Report. The report was compiled by Bank of America Corp.’s Merrill Lynch Global Wealth Management and Capgemini Group. The 15 largest firms surveyed saw the dollars they manage fall by almost a quarter in 2008, a sharp reversal from the 17% growth they saw in 2007, the report said.

- Seagate Technology Inc. (STX) boosted its fiscal fourth-quarter revenue guidance and projected first-quarter revenue above analysts' estimates, saying unit demand and pricing are tracking more favorably than it expected in April. The computer disk-drive maker also said improvements in operational efficiencies, product management, and a transition to new products have helped its margins.

- Jefferies Group Inc. (JEF) projected second-quarter results well above expectations, saying earnings will come in above $50 million amid record net revenue topping $500 million. The forecast - which many considered a strong sign that others on Wall Street will do well - sent Jefferies shares up 8.8% in late trading to $22.25. Analysts polled by Thomson Reuters had been expecting $25.8 million in earnings and $341.2 million in revenue. The strong guidance comes after Jefferies had been struggling with declining revenue for several quarters, but things started to turn around last quarter as the company ended its five-quarter losing streak and revenue nearly doubled.
- Clashes between security services and demonstrators erupted again late Wednesday in central Tehran, even as one unsuccessful presidential candidate protesting June 12 elections dropped his objections, dealing a significant blow to the opposition's so-far united front. Amid the domestic unrest -- the worst since the Iranian revolution 30 years ago -- Tehran scrambled to project its military might to the rest of the world.

- Back when the housing mania was taking off, Massachusetts Congressman Barney Frank famously said he wanted Fannie Mae and Freddie Mac to "roll the dice" in the name of affordable housing. That didn't turn out so well, but Mr. Frank has since only accumulated more power. And now he is returning to the scene of the calamity -- with your money. He and New York Representative Anthony Weiner have sent a letter to the heads of Fannie and Freddie exhorting them to lower lending standards for condo buyers. You read that right. After two years of telling us how lax lending standards drove up the market and led to loans that should never have been made, Mr. Frank wants Fannie and Freddie to take more risk in condo developments with high percentages of unsold units, high delinquency rates or high concentrations of ownership within the development.

- Rail-car maker Greenbrier Cos. has enlisted members of Congress in a dispute with General Electric Co.(GE) over a $1.2 billion contract, arguing that the conglomerate should maintain its commitment to buy cars because it benefits from government spending. Seventeen lawmakers, including Democratic Sen. Ron Wyden of Oregon, wrote to GE Chief Executive Jeffrey Immelt on June 12, calling it "disconcerting" that GE might delay or cancel some of the 11,900 rail cars covered by the eight-year pact.

NY Times:

- The recession in Russia will run deeper and longer than it appeared even a few months ago, the World Bank concluded in a report released Wednesday, underscoring the impression that Russia has been one of the countries hit hardest in the downturn. The Russian economy, which seesaws from boom to bust along with commodity prices in the best of times, has experienced the most extreme swing from growth to contraction of any large economy in the current downturn. The bank’s new projection showed that the Russian economy would contract by 7.9 percent this year and not recover to precrisis levels until at least 2012.


- Colds and flus are rough on those unfortunate enough to catch them. But this past season was good for SXC Health Solutions (SXCI).

Business Week:
- From the outside, nearly everything about Apple's iPhone 3GS seems nearly identical to the iPhone 3G released last year. Even Apple's TV ads make light of this fact: The phone looks the same as before, the company says, but it does so much more. Still, all the new features in Apple's million-selling new phone have to come from somewhere, and there have been some important changes inside the new iPhone, according to an Apple iPhone 3GS teardown analysis by the market research firm iSuppli.

- It wasn't too long ago that the thought of buying a reliable car from Korea seemed laughable. Today, Korean vehicles are common fare and automakers from India are getting ready to invade the U.S. market. Experts say their vehicles are no joke. Plus, Detroit's turmoil could give Indian automakers a foot in the door here. With General Motors and Chrysler both looking to save money, in part by trimming their dealer ranks, hundreds of new-car dealers could be ready to sign up with new competitors like these.

- What’s next for Qualcomm(QCOM)? The company rakes in cash every time someone else builds a wireless device. No wonder CEO Paul Jacobs wants to put a phone in every conceivable gadget.


- Sen. Chris Dodd conceded Wednesday that health care reform may not clear a key committee this week — the latest logistical speed bump in President Barack Obama’s push for new legislation addressing the country’s health care crisis. Dodd told reporters Wednesday that the Senate Health, Education, Labor and Pensions Committee still faced a raft of amendments to wade through, including those related to workforce, fraud and abuse, and long-term care.

- They still call it the Waxman-Markey climate-energy bill — but it’s Nancy’s bill now. By saying she would pass the massive — and massively controversial — cap-and-trade bill by the start of the July 4 recess, the House speaker took a big gamble, setting herself up for a daring political victory or the biggest defeat of her six months as President Barack Obama’s legislative ramrod. And on Monday, Pelosi doubled down, scheduling a Friday vote on the legislation, overriding the objections of farm staters and moderates who fear the vote could explode into a potentially lethal election issue next year as Republicans cast it as a one huge tax hike.


- Seventy-six percent (76%) of Americans say it is at least somewhat likely that a large amount of money in the $787-billion economic stimulus plan will be wasted due to inadequate government oversight. Nearly half (46%) say it is very likely, according to a new Rasmussen Reports national telephone survey.

Washington Post:

- The United States has sent a shipment of weapons and ammunition to the government of Somalia, according to a U.S. official who said the move signals the Obama administration's desire to thwart a takeover of the Horn of Africa nation by Islamist rebels with alleged ties to al-Qaeda. The shipment arrived in the capital, Mogadishu, this month, according to the official, who is helping craft a new U.S. policy on Somalia and spoke on the condition of anonymity because of the sensitivity of the matter. "A decision was made at the highest level to ensure the government does not fall and that everything is done to strengthen government security forces to counter the rebels," the official said. Still, the situation in the volatile nation continues to deteriorate. Somalia's government issued an urgent plea last weekend for foreign troops as the heaviest fighting in months has engulfed the capital and other regions, killing more than 200 people, including the minister for internal security and the police chief. Fighting since early May has displaced more than 120,000 people, with scores of legislators also fleeing the country, paralyzing parliament.


- A Chula Vista man and two entities he controls were charged June 24 by the Securities and Exchange Commission with operating a Ponzi-like scheme through five hedge funds. The SEC alleges that Moises Pacheco, owner of Advanced Money Management and Business Development & Consulting, raised $14.7 million from 200 investors, telling them of a lucrative investment strategy based on the purchase and sale of covered call options. Pacheco claimed that the funds were generating annual profits between 30 percent and 48 percent, or between 2.5 percent and 4 percent a month, according to the complaint.


- Junk bonds are signaling that the worst of a U.S. default wave may be over in as little as three months, though for junk bond investors, a recent rally may be as good as it gets. After government repair work to the financial system encouraged risk-taking, junk, or high-yield bonds rallied hard in the first half, returning 28 percent through Tuesday and more than erasing last year's record losses, according to Bank of America Merrill Lynch data.

- The United States and Venezuela will soon reinstate ambassadors expelled in a diplomatic spat last year, a sign of warmer relations between President Hugo Chavez and what he calls the U.S. "empire." Leftist Chavez has toned down his strident criticism of U.S. foreign policy since Barack Obama took office in January, partly because the U.S. president is popular in Latin America in contrast to his predecessor George W. Bush. Obama, in turn, has pledged to engage with countries considered problematic by the United States. Venezuela, one of the United States' top crude oil suppliers, said its envoy would be back in Washington this week. A source at the U.S. State Department said Ambassador Patrick Duddy will return to Caracas, but did not say when. Along with his close friend Fidel Castro of Cuba and other Latin American leaders, Chavez often says he respects Obama. The Venezuelan joked earlier this month that Obama was more left-wing than he was for effectively nationalizing General Motors -- a reference to the large stake the U.S. government now owns as part of auto giant's bankruptcy. The announcement about the envoys came as leaders from Bolivia, Cuba, Ecuador and Nicaragua, who are all critical of the U.S. influence in Latin America, gathered in Venezuela for a summit of an alternative trade alliance started by Chavez. Despite the warmer tone and a handshake with Obama at a summit of countries in the Americas in April, Chavez is still committed to countering Washington's global influence and recently accused U.S. spies of plotting to kill him without Obama's knowledge. During Wednesday's summit in the Venezuela town of Maracay, Chavez said the CIA was behind recent post-electoral turmoil and protests in Iran. The easing of relations with Venezuela has hit some bumps. Chavez has bristled at some comments by Obama and in March called him an "ignoramus."

- Short interest rose slightly in early-June on both the New York Stock Exchange and the Nasdaq, the exchanges said on Wednesday, suggesting an increase in bearish sentiment in the stock market. Technology and pharmaceuticals were the most heavily represented sectors in the top five short position net increases on both the Nasdaq and NYSE. The following list shows some stocks in those sectors that saw increased interest from short sellers, who bet that a certain stock's price will fall, and key recent news events for those stocks.

- Long-term mutual funds saw overall buying, or inflows, for a 14th week, though inflows to stock funds slowed and the total amount hit a three-week low, according to the Investment Company Institute. Total estimated inflows were $11.1 billion in the week to June 17, down $1.5 billion or 12 percent from $12.61 billion the prior week, the data released on Wednesday showed. While the numbers represent a drop, inflows were still higher than a month ago. Mutual funds saw $9.72 billion in estimated inflows for the week ending May 20.

Late Buy/Sell Recommendations

- Reiterated Buy on (BAC), target $18.

Night Trading
Asian Indices are +.50% to +1.50% on average.

Asia Ex-Japan Inv Grade CDS Index +.5%.
S&P 500 futures unch.
NASDAQ 100 futures -.10%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (LEN)/.-70

- (JTX)/1.69

- (MKC)/.41

- (CAG)/.41

- (PALM)/-.66

- (FINL)/.01

- (MU)/-.41

- (RBN)/.25

Economic Releases

8:30 am EST

- Final 1Q GDP is estimated to decline 5.7% versus a prior estimate of a 5.7% decline.

- Final 1Q Personal Consumption is estimated to rise 1.5% versus a prior estimate of a 1.5% gain.

- Final 1Q GDP Price Index is estimated to rise 2.8% versus a prior estimate of a 2.8% increase.

- Final 1Q Core PCE is estimated to gain 1.5% versus a prior estimate of a 1.5% increase.

- Initial Jobless Claims for last week are estimated to fall to 600K versus 608K the prior week.

- Continuing Claims are expected to rise to 6714K versus 6687K prior.

Upcoming Splits
- None of note

Other Potential Market Movers
The Fed’s Fisher speaking, (CHS) analyst meeting and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and mining shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

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