Today's Headlines

Bloomberg:

- The S&P 500 will climb 15% through the end of the year as profit margins improve, Deutsche Bank AG said. The year-end forecast of 1,060 for the S&P 500 is an 18% increase from the bank’s previous projection of 900. Historically, profit margins have closely tracked the growth rate of GDP, which Deutsche Bank economists say bottomed in the first quarter. The aggregate margin for companies in the S&P 500 “remains well below the average of the last few years, implying considerable potential upside over the medium term.” Chada raised his earnings estimate for the index to $48.80 a share this year from $39.50. Excluding writedowns by financial companies, he predicted “underlying” profit of $64.60 a share, up from an earlier estimate of $58.30. For 2010, Chadha forecast underlying earnings of $77.0, up from $73.30. Chadha set a target of 1,260 for the S&P 500 for the end of 2010, a 37% advance from the May 29 close. The 1,060 year-end target for the S&P 500 is higher than all but two of the 11 Wall Street strategist forecasts compiled weekly by Bloomberg. Thomas Lee of JPMorgan and David Bianco, of Bank of America today, each forecast 1,100.

- Manufacturing in the U.S. shrank less than forecast in May as new orders increased for the first time since the recession began, a sign that companies are growing more confident the slump will end this year. The Institute for Supply Management’s factory index rose to 42.8 from 40.1 in April. The new-orders measure jumped to 51.1 from 47.2. The ISM’s production index rose to 46, the highest since August, from 40.4 the prior month. A gauge of export orders rose to 48 from 44. The supplier delivery gauge, a measure of the time it takes to receive goods, increased to 49.8 from 44.9 the prior month. The measure of orders waiting to be filled rose to 48 from 40.5. The inventory index fell to 32.9 from 33.6.

- Leveraged loans in Europe rose to the highest in almost eight months as investors sought riskier assets amid signs the worst of the global recession may be over. An index of such loans compiled by Standard & Poor’s LCD, which tracks 17 portions of widely traded high-yield leveraged loans, rose to 82.14 cents on the dollar as of May 28, the highest since Oct. 2. The index has risen 36 percent this year.

- The cost of protecting corporate bonds from default fell to the lowest since October on speculation General Motors Corp.’s bankruptcy will be “pain- free” and that the worst of the global recession is over. Credit-default swaps on the Markit iTraxx Crossover Index of 45 companies with mostly high-risk, high-yield credit ratings dropped 20 basis points to 704, the lowest since Oct. 14, according to JPMorgan Chase & Co. prices at 12:10 p.m. in London. The Markit iTraxx Financial index of 25 European banks and insurers declined 5 basis points to 114 and the subordinated index fell 17.5 to 197.5.

- The Organization of Petroleum Exporting Countries increased oil output by 1.5 percent in May, the biggest gain since 2007, a Bloomberg News survey showed. Oil output averaged 28.15 million barrels a day last month, up 405,000 from April, according to the survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.76 million barrels a day, 915,000 more than their target. “Some members have been suffering because of recent cutbacks and have decided to take advantage of the higher prices,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “There’s a feeling that the market can tolerate greater production because of the recent rise in prices.” Saudi Arabia, the world’s biggest oil exporter, increased daily production by 75,000 barrels to 8 million, the survey showed. Iran, OPEC’s second-biggest producer, raised daily output by 80,000 barrels to 3.78 million, the biggest increase of any member. The country’s production is now averaging 444,000 barrels a day above its target, exceeding the quota by more than any other member, according to the survey.

- US stocks are worth buying for the first time in six years, according to an indicator that has signaled bull markets all but once since World War II. The “Coppock Guide” was named for E.S.C. Coppock, who introduced what he described as a “very-long-term buying guide” in an October 1962 story for Barron’s. Leuthold Group LLC has a version known as VLT Momentum that Steve Leuthold, the research firm’s founder, developed after reading the Barron’s article. Coppock wrote that his indicator gave “a picture of the emotional factor” behind stock swings. He advised investors to buy shares in anticipation of “an important, sustained advance” when the guide started to increase from less than zero. That kind of shift occurred last month, according to data compiled by Bloomberg. The guide for the S&P 500 climbed to -409.4 from April’s -417.2, the lowest reading since June 1938. US stocks advanced 16 or 17 times in the first year after the broader index’s Coppock curve turned higher.

- Violent crime in the U.S. fell for the second year in a row in 2008, dropping 2.5 percent, the FBI said. All four categories of violent crime surveyed by the Federal Bureau of Investigation -- forcible rape, murder, robbery and aggravated assault -- declined in 2008 compared to the previous year, according to preliminary data released today.

- Tony Crescenzi, chief bond-market strategist at Miller Tabak & Co. will join Pacific Investment Management Co., a person familiar with his plans said.

- India’s exports fell the most in at least 14 years as the worst global recession since the Great Depression slashed demand for the nation’s jewelry, clothing and other products. Merchandise shipments dropped 33.2 percent from a year earlier to $10.74 billion in April, the government said in New Delhi today. That was the biggest fall since at least April 1995, when Bloomberg data began. Exports slid 33 percent in March. Imports fell 36.6 percent in April from a year earlier and the trade deficit narrowed to $5 billion from $8.7 billion in the same month in 2008, today’s report showed. Oil imports slid 58.5 percent to $3.6 billion, while non-oil purchases dropped 24.6 percent to $12.11 billion.

- China’s Ministry of Commerce said it started an anti-dumping investigation into imports of some kinds of flat-rolled electrical steel from the US and Russia. The ministry has also started investigating subsidies on electrical steel imported from the US.

Wall Street Journal:

- Ford(F) Seeks to Gain Amid Rivals’ Pain. Ford Motor Co. is preparing an effort to gain market share while its two main rivals are bogged down in bankruptcy and restructuring. Ford, the only one of Detroit's Big Three that didn't need a bailout from the federal government, plans to increase production of cars and trucks in the third quarter by about 10% from the level of a year ago, a company official said. It will be Ford's first significant production increase in almost two years. In contrast, General Motors Corp., which is expected to file for Chapter 11 protection Monday, and Chrysler LLC, which is nearing the end of its bankruptcy reorganization, are planning to shut down their plants for nearly all of the third quarter. The difference in production plans will give Ford a chance to push sales through the prime summer selling months while GM and Chrysler focus on their internal issues. "This is a once-in-a-lifetime opportunity to separate us from our other domestic competitors," said a person familiar with the matter at Ford. "No one is going to gift-wrap it for us. You have to deliver the product people want to buy. That said, you have to take this historic opportunity to grab market share."

- Travelocity.com, a unit of Sabre Holdings Corp., and Orbitz Worldwide Inc. plan to announce Monday that they will stop charging a fee when customers book airline tickets over the Internet. During March and April, several major online travel agencies eliminated airline booking fees on a promotional basis through May 31. Then, last Thursday , Expedia.com, a unit of Expedia Inc., eliminated the fee on a long-term basis, forcing other large online agencies to do the same.

- General Motors Corp. filed for Chapter 11 bankruptcy early Monday, marking the humbling of an American icon that once dominated the global car industry and setting up a high-stakes gamble for U.S. taxpayers.

- Now that the Iraq war is going well, media coverage in America has all but vanished. So we thought you might like to know that the month that ended yesterday saw the fewest deaths from terrorist violence in that country since the U.S.-led invasion in 2003.

Washington Post:

- Cap-and-Trade: All Cost, No Benefit. The Obama administration and congressional Democrats have proposed a major cap-and-trade system aimed at reducing carbon dioxide emissions. Scientists agree that CO2 emissions around the world could lead to rising temperatures with serious long-term environmental consequences. But that is not a reason to enact a U.S. cap-and-trade system until there is a global agreement on CO2 reduction. The proposed legislation would have a trivially small effect on global warming while imposing substantial costs on all American households. And to get political support in key states, the legislation would abandon the auctioning of permits in favor of giving permits to selected corporations. The Congressional Budget Office recently estimated that the resulting increases in consumer prices needed to achieve a 15 percent CO2 reduction -- slightly less than the Waxman-Markey target -- would raise the cost of living of a typical household by $1,600 a year. Some expert studies estimate that the cost to households could be substantially higher. The future cost to the typical household would rise significantly as the government reduces the total allowable amount of CO2. Americans should ask themselves whether this annual tax of $1,600-plus per family is justified by the very small resulting decline in global CO2. Since the U.S. share of global CO2 production is now less than 25 percent (and is projected to decline as China and other developing nations grow), a 15 percent fall in U.S. CO2 output would lower global CO2 output by less than 4 percent. Its impact on global warming would be virtually unnoticeable. The U.S. should wait until there is a global agreement on CO2 that includes China and India before committing to costly reductions in the United States.

The Detroit News:

- The world's most powerful laser, created to help keep tabs on the nation's nuclear weapons stockpile while also studying the heavens, has been unveiled. The super laser, known officially as the National Ignition Facility, was unveiled Friday at the Lawrence Livermore National Laboratory about 50 miles east of San Francisco.

Lloyd’s List:

- The number of supertankers sailing through Egypt’s Suez Canal fell 70% in the first quarter, citing data from the Lloyd’s Marine Intelligence Unit. 18 very large crude carriers navigated the waterway compared with 61 a year earlier. Overall westbound supertanker shipments from the Persian Gulf declined to 118 from 169 last year.

- The number of bulk carriers idle at ports around the world has risen over the last month, at a time when surging iron ore and coal shipments have seen rates more than double for larger vessels. A total of 382 bulk carriers above 10,000 dwt are classified as inactive, with no movement for 35 days.

- Tanker values still have some way to fall before they hit their low point despite having already declined by about half since last year’s peak level, an industry expert has warned. Charles Lawrie, of London-based Richardson Lawrie Associates, said the surplus capacity in the tanker fleet, which could be running at about 30% of overall supply in the next two or three years, will ensure that freight rates do not show genuine signs of recovery until 2012.

Reuters:
- Global semiconductor sales rose 6.4 percent in April to $15.6 billion from March, helped by moderate improvements in a number of end-demand drivers and inventory replenishment. The PC market, which is a major consumer of semiconductors, has been stronger than predicted earlier in the year, the Semiconductor Industry Association (SIA) said. "Consensus forecasts currently project that PC unit sales in 2009 will decline by about 6 percent compared to earlier forecasts of a decline in the range of 12 percent," said SIA President George Scalise. Cell phone unit sales are now expected to fall by around 7 percent compared with earlier forecasts of 15 percent for the year.

- Mexican truckers are suing the United States for $6 billion over Washington's refusal to allow Mexican haulers onto its roads as required under the NAFTA trade pact, a trucking association said on Monday. About 4,500 trucking companies represented by Mexico's National Cargo Transportation Association (Canacar) are involved in the lawsuit, according to Canacar. The United States agreed under NAFTA -- the North American Free Trade Agreement with Mexico and Canada -- to let Mexican trucks use its highways beginning in 1995.

- Global factory activity fared better in May than preceding months across major economies as output contracted at a much less fierce pace in a heavy recession, a survey showed on Monday. The global index, produced by JP Morgan with research and supply management organizations, rose to 45.3 in May from 41.8 in April. That was its highest level in nine months.

Financial Times:
- The reason the US government is putting $60 billion into General Motors can only be to slow the company’s decline so that workers, suppliers and communities can prepare for its eventual disappearance, said Robert Reich, who was labor secretary during the Clinton administration. He said the expenditure is plainly not an investment, for it’s unlikely taxpayers will get their money back, let alone any return; many younger people have never bought a GM car and wouldn’t consider doing so. Nor can the main point be to save jobs, because GM, told by the Treasury that it must shrink, plans to shut plants and shed at least 20,000 workers, Reich said. The purpose of the bailout can’t be to create a lean company, free of debt, which might one day be profitable, for that’s what a reorganization under the insolvency regime is supposed to achieve. Yet if the purpose of spending the $60 billion is to buy time to carry through social adjustments, there are better ways of using the cash.

IRNA:
- Iraqi Kurdistan held a ceremony attended by Iraqi and Kurdish officials as oil exports began from the region. The exports from the Taq-Taq and Tawke fields will amount to 100,000 barrels a day and the Kurdish regional government will try to raise this to 120,000 barrels a day in two years.