Today's Headlines

Bloomberg:

- MasterCard Inc.(MA), the world’s second- biggest electronic payments network, said the “freefall” in U.S. retail spending has abated amid an increase in consumer confidence. “The recovery is showing signs of life,” McWilton said at the conference, sponsored by KBW Inc., adding that consumer confidence is improving.

- Shares of US banks are in “the beginning stages of a multi-year bull market” and will perform better than benchmark stock indexes, according to analysts at RBC Capital Markets. RBC raised its rating on the group to “overweight” from “sector weight” today. Earnings potential has replaced “burn down analysis” as the main catalyst for stock price moves, the report said.

- European Central Bank President Jean- Claude Trichet indicated the ECB has no immediate plans to increase its asset-purchase plan or cut interest rates further as the economy shows signs of recovery. Interest rates are “appropriate,” Trichet said at a press conference in Frankfurt today after the ECB held its benchmark at a record low of 1 percent. Asked if the bank will expand its bond plan, Trichet replied: “We have decided to embark on a 60 billion-euro purchase of covered bonds, full stop.”

- Fifth Third Bancorp(FITB), the largest lender based in Ohio, led the KBW Bank Index higher after saying it more than filled the $1.1 billion capital gap found by federal stress tests, and that the company will concentrate on paying back the U.S. bailout fund.

- Intel Corp.(INTC), the world’s largest maker of semiconductors, agreed to buy software company Wind River Systems Inc.(WIND) for about $884 million, a bid to get its chips into more consumer electronics and wireless devices. The price is $11.50 a share in cash, Santa Clara, California-based Intel said today in a statement, offering a 44 percent premium over Wind River’s closing price yesterday.

- General Dynamics Corp.(GD), the maker of the U.S. Army’s Abrams battle tanks, agreed to buy Axsys Technologies Inc.(AXYS) for about $643 million to expand its line of surveillance equipment such as infrared cameras. The $54-a-share acquisition will be neutral to 2009 earnings and add to profit after that, Falls Church, Virginia- based General Dynamics said today in a statement.

- Derivatives dealers would face new regulations under a Commodity Futures Trading Commission proposal that seeks to ensure privately negotiated contracts are subject to the same oversight as trades on an open exchange. Regulators must make sure that dealers aren’t able to make slight modifications to the structure of derivatives transactions to evade public reporting requirements for standardized contracts, CFTC Chairman Gary Gensler told the Senate Agriculture Committee today in Washington. “All derivative dealers should be subject to capital requirements, initial margining requirements, business conduct rules and reporting and recordkeeping requirements,” Gensler said in prepared remarks. “Standards that already apply to some dealers, such as” banks, should be strengthened, he said.

- Bonds of retailers fell out of distressed territory yesterday for the first time since September after slashing jobs, costs and inventories. The extra yield investors demand to own bonds of Sears Holdings Corp. and other similar retailers rated below investment grade narrowed to an average of 9.93 percentage points more than Treasuries, according to Merrill Lynch & Co. index data. The spread has held above 10 percentage points, a level investors consider “distressed,” since Sept. 23, eight days after Lehman Brothers Holdings Inc. filed for bankruptcy. Retailer bonds and stocks are rallying as cost cutting bolsters cash flow and traders bet the U.S. recession is easing.

- Crude oil rose to a seven-month high after Goldman Sachs Group Inc. said prices may reach $85 by the end of the year as demand recovers and supplies shrink.

Wall Street Journal:

- United Airlines(UAUA) has asked Boeing Co.(BA) and Airbus to propose dueling bids for up to 150 new airliners -- the latest example of major companies exploiting the recession to bargain-hunt. For the two aircraft makers, the deal could be worth more than $10 billion at a time when both are watching other customers cancel or defer orders.

- Rio Tinto PLC(RTP) Thursday said it is "pursuing a range of options" to shore up its heavily indebted balance sheet as Aluminum Corp. of China's proposed $19.5 billion investment in the Anglo-Australian miner appeared headed for the scrap heap.

- A Connecticut bill that sought to impose transparency regulations on hedge funds has effectively died after the state House of Representatives didn't bring the measure to a vote.

- The number of investors withdrawing their investments with hedge funds has slowed to about one-fifth of the record redemption levels at the end of 2008, according to new research, but investors still are holding off putting new money into an industry recovering from its worst year to date. A Morgan Stanley report called ‘Wholesale Financials’ estimates that in the second quarter investors have redeemed 5% of all money invested in the $1.3 trillion hedge-fund industry. If that estimate is correct, it would be just one fifth of the record 25% investors pulled in the fourth quarter. Investors pulled 10% of their money in the first quarter, according to the report.

- Not so long ago, we were warned about the prospect of devastating deflation, a widespread decline in wages and prices. Today, we hear equally dire warnings of an outbreak of inflation. It's like preparing for an epochal drought and suddenly being told, "Never mind! Get ready for a flood of Biblical proportions." An immediate outbreak of inflation is improbable.

CNBC:

- Billionaire investor Carl Icahn told CNBC in a telephone interview that he thinks the future of large pharmaceutical companies is in buying biotechnology companies.

- Fewer U.S. workers filed new claims for jobless benefits for a third straight week last week and productivity rose at a stronger-than-expected pace in the first quarter, data showed on Thursday, supporting budding hope that the recession was losing force.

NY Times:

- Ramius, one of the nation’s largest hedge fund managers, struck a deal on Thursday to merge with Cowen Group, a boutique investment banking firm that has struggled recently as takeover deals have dried up. The combined company, which will continue to use the Cowen name, will encompass a broad mix of financial services including equity and debt raising, proprietary trading, asset management and research.

MarketWatch:
- Ford Motor Co.'s(F) joint venture partner in China reported a 49% rise in vehicle sales during May, with 27,800 vehicles snapped up by consumers during the month.

Forbes:

- Investors who were attracted to Highland Capital's tough investment style are now feeling a little roughed up. Before the credit crisis hit, investors poured money into hedge funds run by Highland Capital Management in Dallas, which at its peak was running $38 billion. The two founders, James Dondero and Mark Okada, had a reputation for scoring big returns using leverage and tough tactics like squeezing fees out of companies whose outstanding debt Highland purchased. Now three of Highland's funds, including its Crusader Fund, have failed, and investors are getting more of Highland's hardball tactics than they bargained for.

USAToday:

- It's official: The Internet is a part of daily life. According to a new report by the Census Bureau, Internet use tripled from 1997 to 2007. Sixty-two percent of U.S. households used the Internet from home; 18% did that in 1997.

- The Obama administration's plan to boost aid to Afghanistan is shaping up as a boon to private contractors, including a company whose previous work on U.S.-funded Afghan aid programs has been criticized by auditors. Despite Secretary of State Hillary Rodham Clinton's call to reduce the reliance on foreign aid contractors, the main U.S. aid agency is continuing to award multimillion-dollar contracts as it proposed to increase development spending in Afghanistan to $2.8 billion. Clinton has dubbed past Afghanistan aid efforts a "heartbreaking" failure. Last month, the U.S. Agency for International Development awarded a $150 million cooperative agreement to a partnership led by DAI, a Maryland company whose past Afghanistan contracts have been criticized by USAID's inspector general. The program is to promote alternatives to poppy crops.

Politico:

- In a nearly 6,000-word address Thursday extending an olive branch to the Muslim world, President Barack Obama managed never to utter the one word that comes to mind most often when many Americans think about Islam: terrorism. While both the White House and the Pentagon denied earlier this year that the Obama administration had issued orders to stamp out the phrase “war on terror,” the president’s decision to rely on the word “extremism” throughout his high-profile speech made clear his desire to execute a rhetorical shift. More than that, Obama sought to decouple Islam entirely from those who perpetrate violence. “Islam is not part of the problem in combating violent extremism — it is an important part of promoting peace,” Obama said.

LATimes:

- Though California is in the throes of a budget crisis, Vice President Joe Biden said Wednesday that the state's high-speed rail project is well-positioned to compete for a significant share of the $8 billion that the Obama administration set aside in the American Recovery and Reinvestment Act for rail lines. This summer, California officials will be vying against other states to get funding for a planned high-speed rail corridor that would ferry passengers between Los Angeles and San Francisco in a 2-hour, 40-minute trip. Voters approved $9 billion in bonds for the project in November -- and promoters hope the federal government and the private sector will kick in enough money to help them complete the $34-billion first phase.

American Chronicle:

- New York State's pay-to-play pension scandal appears to be pushing at least one prominent New York hedge fund close to the brink. Mezzacappa Management, founded by former Lazard Freres Vice Chairman Damon Mezzacappa, recently shed a raft of employees - including the firm's chief investment officer - amid withdrawal requests from the firm's single largest investor, the scandal- scarred New York State Common Retirement Fund, sources tell The Post. Now, the firm's 73-year-old founder, who launched the Fifth Avenue-based business in 1999, is considering the company's fate, which may include shutting it down, sources said.

Reuters:
- Discounter Wal-Mart Stores Inc says it will add more than 22,000 jobs in its U.S. namesake stores in 2009. The forecast points to lower growth compared with last year, as the world's biggest retailer opens fewer of its U.S. Wal-Mart discount stores to focus on expansions and renovations. Last year, the company created 33,800 U.S. jobs, though that figure also included new jobs at its much smaller Sam's Club members-only chain of warehouse stores.

Financial Times:
- US President Barack Obama called for a new beginning in relations between America and the Muslim world on Thursday with a dramatic address in Cairo that sought to overcome decades of deep mistrust. Drawing repeated rounds of applause as he quoted the Koran and spoke frankly to every segment of Muslim society – young people, women, leaders – Mr Obama appeared as a defender of Islam. Pointing to the glorious days of Muslim civilization, and to his own family background, he said in an hour-long speech: “I consider my responsibility as president of the US to fight against negative stereotypes of Islam whenever they appear.” The much-awaited speech in the domed hall of Cairo University did not lay out a detailed plan for Middle East peace, as some governments in the region had hoped. Mr Obama said the US relationship with Israel was “unbreakable” and called on Palestinians to pursue their aspirations for statehood peacefully. But he also had sharp words for Jewish state, insisting that the US “does not recognize the legitimacy of continued Israeli settlements” on occupied Palestinian land, and calling on Israel to improve the daily lives of Palestinians. He went further: “Let there be no doubt... the situation for the Palestinian people is intolerable,” he said, adding that America would not turn its back to the legitimate aspirations for dignity and a state of their own. For young people in the region, it was perhaps the last part of the speech that was most appealing, as Mr Obama promised to increase scholarships to the US, host a summit on entrepreneurship, and launch a fund to support technological development. Ayatollah Ali Khamenei, Iran’s supreme leader, weighed in on Wednesday, hours before Mr Obama spoke in Cairo, to remind Muslims that they hated the US. ”The nations in the region hate the US from the bottom of their hearts because they have seen violence, military intervention and discrimination,” Mr Khamenei said. ”The new US government seeks to transform this image. I say firmly, that this will not be achieved by talking, speech and slogans.”