- The momentum for overhauling U.S. health care slowed in the Senate as disagreements hardened over how to finance President Barack Obama’s $1 trillion plan to extend coverage to 46 million uninsured Americans. Lawmakers in both parties urged Senate leaders to abandon their goal of bringing health-care legislation to a vote in the next month, amid clashes over whether to impose a surtax on wealthy Americans and tax employee-provided health benefits. Budget Committee Chairman Kent Conrad suggested that the complexities of crafting a plan may derail Majority Leader Harry Reid’s goal of passing a bill before the August recess. Snowe, a member of the Finance Committee, is among a handful of Republicans that Democrats are trying to persuade to back the health-care overhaul, Obama’s top domestic priority. Conrad is playing a lead role in working to win over Republicans. Their appeal to go slowly came a day after Democratic leaders told finance panel Chairman Max Baucus to find alternatives to his plan to tax the costliest employer- provided health benefits, one of the most contentious issues. West Virginia Democrat Jay Rockefeller, a Finance Committee member, said he would vote against health-care legislation that taxes employer benefits. Rockefeller would favor consideration of a “millionaire’s tax” to help finance the plan, he said in an interview. The nonpartisan budget office cast further doubt on the potential cost of the overhaul. It estimated that another plan being drafted by the Senate Health, Education, Labor and Pensions Committee to expand eligibility for Medicaid could cost as much as $500 billion over the next decade. That could bring the total cost of the plans being drafted by the panel’s chairman, Senator Edward Kennedy, to more than $1 trillion. Altogether, CBO said, the Kennedy plan could still leave 15 million to 20 million Americans uninsured.
- Goldman Sachs(GS) Loses Grip on Its Doomsday Machine. This brings us to the strange tale of Goldman Sachs Group Inc. and Sergey Aleynikov. It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.” All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program? It would be nice to see someone at Goldman go on the record to explain what’s stopping the world’s most powerful investment bank from using its trading program in unfair ways.
- The United States Natural Gas Fund expanded today to the largest position in its 27-month history as investors snapped up the last of its shares and it awaited government approval to issue more units. As of early today, the exchange-traded fund owned the equivalent of 124,926 natural gas futures contracts on the New York Mercantile Exchange. The number of shares outstanding reached a record yesterday, rising 14.5 percent to 322.3 million, more than 10 times the total at the start of the year, and worth $3.97 billion. The fund’s natural gas position, spread across swaps and futures on the Nymex and the ICE over-the counter-market, equals the equivalent of 86 percent of the open interest in natural gas futures on the NYMEX. “Clearly, this has become an extraordinarily attractive investment,” said Dave Nadig, an associate editor at IndexUniverse.com, in Decatur, Georgia. “There’s a lot of speculation among people like us who are wondering who is in this.” The ETF can’t grow further for now because yesterday it ran out of new shares to issue. The ETF asked the Securities Exchange Commission on June 5 for permission to create 1 billion new shares, and is awaiting approval. The fund rose 2 cents, or 0.2 percent, to $12.20 on the New York Stock Exchange. It’s down 47 percent this year, while natural gas has fallen 40 percent on the Nymex. “The size of their position is so big that it creates distortions in the market,” said Olivier Jakob, managing director of PetroMatrix in Switzerland. “And that doesn’t mean it just drives prices up. It can also drive prices down.”
- Lori Richards will step down as head of the U.S. Securities and Exchange Commission office that inspects money managers and brokerages after lawmakers criticized her unit for missing Bernard Madoff’s Ponzi scheme. Richards, director of the Office of Compliance Inspections and Examinations since its creation in 1995, will leave Aug. 7, the SEC said in a statement today. The unit’s associate director-chief counsel, John Walsh, will serve as acting director when Richards steps down.
- American International Group Inc., the insurer bailed out four times by the U.S., will likely have no value left for private shareholders after repaying the government, Citigroup Inc. said. “Our valuation includes a 70 percent chance that the equity at AIG is zero,” said Joshua Shanker, an analyst at Citigroup, in a note to investors today on the New York-based insurer.
- Facebook Inc.’s social-networking Web site and Amazon.com Inc.’s site have been inaccessible in China, according to the Berkman Center for Internet & Society at Harvard University. There have been 33 reports of Facebook’s Web site being inaccessible in China this week and 11 reports of inaccessibility at Amazon’s site in the country since yesterday, according to Herdict.org, a project at the Berkman Center that tracks Web outages worldwide.
- Web sites of the U.S. departments of State, Treasury and Transportation were attacked by unidentified hackers during the July 4 holiday weekend and in some cases the attacks were continuing today, officials said. In addition, NYSE Euronext, the world’s largest owner of stock exchanges, said it was notified by authorities that it had been the target of a cyber attack aimed at slowing or shutting down its Web site. The Department of Homeland Security is aware of the attacks and its Computer Emergency Readiness Team, or CERT, has advised government agencies and private companies on “steps to take to mitigate against such attacks,” Amy Kudwa, a spokeswoman for the department, said in an e-mail today.
- Double-digit unemployment looms. The country is in a funk. The federal budget deficit is widening to an extent not seen in decades. This scenario isn’t new. It also describes the U.S. in 1982. Somehow, the 1980s and the 1990s turned out to be pretty good years. So it’s worthwhile to compare current policy to the one followed then.
Wall Street Journal:
- As early as Thursday, General Motors Corp. and the Obama administration are expected to launch the new GM as a house of four brands. But forget Buick, Cadillac and GMC. The fate of GM will mainly ride on Chevrolet. "In the next year, Chevy could get upward of 70%" of total GM sales, says Ed Peper, the Chevy chief at GM. Is Chevy fit to carry that load? The built-for-duty image of the division's Silverado pickups may suggest that Chevy can carry anything, but the trucks illustrate a problem. To lift the fortunes of a parent company that is closing or casting off three car brands -- Pontiac, Saturn and Saab -- Chevrolet will probably need to recapture the glory days of its sedans. But two-thirds of its sales and most of its profit now come from trucks, and its most celebrated cars are sports models, the Corvette and the newly launched Camaro. Among Chevy cars, says David Champion, senior director of Consumer Reports' auto test division, the subcompact Aveo "is dismal," as is the compact Cobalt. He adds, the Impala is pretty long in the tooth, and the Malibu is the only model in the lineup "that is legitimately able to help them get back on their feet."
- A provision in the House-passed climate bill could violate world-trade rules by favoring U.S. auto makers in the distribution of some $2 billion in government subsidies, a leading free trade group warned Wednesday. The provision would provide an estimated $2.14 billion over five years to auto makers to build plug-in electric vehicles "that are developed and produced in the United States." The language, added late in negotiations after heavy lobbying from the United Auto Workers, also directs the government to give preference to auto makers "located in local markets that have the greatest need for the facility." Bill Reinsch, president of the Washington-based National Foreign Trade Council, said the electric-vehicle program could amount to government subsidies for U.S. auto makers, likely violating World Trade Organization rules that prohibit countries from favoring domestic companies. Mr. Reinsch warned the program for electric vehicles would invite retaliation from other countries. "One of two things will happen: either the Europeans will complain about it or they'll do the same thing and they'll provide subsidies in Europe to European car manufacturers," he said. "From a trade-policy standpoint, either outcome is market-distorting."
- Pacific Investment Management Co. said it withdrew its application to become a manager of the government's latest effort to bolster bank balance sheets, citing "uncertainties" over how the plan would be implemented. Pimco was widely expected to be named a manager of the Public Private Investment Partnership, or PPIP. Treasury announced the nine managers of the program today. "As a result of uncertainties of the design and implementation of the program, Pimco withdrew its application to serve as a manager for the PPIP in early June," according to spokesman for the Newport Beach, CA investment firm.
- As the White House begins to ponder whether to reappoint or replace Ben Bernanke when his term expires in January, the Federal Reserve chairman's standing on Wall Street is on the rise while attacks on him from Congress mount.
- Massachusetts sued the federal government Wednesday, seeking to overturn a key part of the U.S. law that defines marriage as a union between one man and one woman. The lawsuit, brought by the first state to legalize gay marriage, said the 1996 Defense of Marriage Act infringed on a state's sovereign right to define marital status. The state wants a judge to rule that part of the act, known as DOMA, is unconstitutional.
- Canaccord Adams analyst Peter Misek this afternoon raised his rating on Research In Motion (RIMM) to Buy from Hold, maintaining his price target on the stock at $95. Misek says he is making the move following a recent 23% slide in the company’s stock price, as well as positive recent channel checks. He says that, according to global carrier contacts and partners, the company “delivered a healthy month of June, beating internal expectations.” Misek contends the launch of the Palm (PALM) Pre and the Apple (AAPL) iPhone 3GS “has done little to disrupt RIMM’s momentum and may have in fact benefited the company as competing carriers aggressively position BlackBerry as an alternative.”
- The Mad Money host today laid out what he thinks that plan is: Futures traders will reach out to the politicians whose elections they funded to influence Washington’s response. They’ll take the same approach with the universities that accepted their cash and get academics to publish “research” on how futures markets are too “deep” to be manipulated. A full-on media assault will trumpet message as well. Then they’ll get so-called captains of industry to say that speculation provides the market with liquidity, and that makes better markets for hedging. And, of course, they’ll deny that last summer’s near $150 oil prices had anything to do with speculation at all – it was Chinese demand. Those that benefit most from deregulation will also say that investors need to be able to hedge against skyrocketing prices, such as those from last summer, even though they were the investors that drove crude to that level. Lastly, they’ll say that it’s regulation that caused these problems in the first place, and that more rules will cause more problems. Maybe they’ll tap White House chief of staff Rahm Emmanuel, a native of Illinois, home also to the Chicago Mercantile Exchange, where many of these trades take place, to stop the call for greater government control. They might even threaten to pull their operations offshore, which would most certainly kill any new rules. While Cramer admitted he was being a “tad facetious,” he said, “I don’t think I’m being too cynical.” Oil is “a national imperative and an economic lifeline,” and it should be protected from trader abuse. So what the US needs is fair market in which to trade it.
- With their allies controlling the White House and Congress, the nation’s labor unions should be making hay. Instead many unions are making war — largely with one another — in the biggest, nastiest surge of labor fratricide in decades.
- A letter released late Wednesday by six Democratic House members claims that Central Intelligence Agency Director Leon Panetta testified that "top CIA officials have concealed significant actions… and misled" members of Congress since 2001 — a claim the CIA is contesting. The letter did not specify what actions were concealed, or how members of Congress were misled. In it, the Democrats demanded that Panetta correct a statement he issued on May 15 – just after House Speaker Nancy Pelosi accused the CIA of misleading her during the Bush years about the agency’s use of waterboarding techniques – stating that it is not the CIA’s “policy or practice to mislead Congress.” CIA spokesman George Little told the Washington Independent late Wednesday, said the claim that Panetta admitted his agency has misled Congress is “completely wrong.” He added, “Director Panetta stands by his May 15 statement.”
- President Barack Obama is likely to come home from a series of back-to-back international summits here without agreement on the crux of a global deal to limit climate change, after developing countries balked at setting numerical targets to reduce their carbon emissions, U.S. officials said.
- The U.S. economic stimulus program received mixed grades Wednesday from a government watchdog agency. The Government Accountability Office issued a report saying state and local governments will receive $49 billion from the so-called American Recovery and Reinvestment Act during the current fiscal year. Since the program was enacted four months ago, about 60-percent of that amount, or $29 billion, has already been distributed. The distribution is faster than expected, the GAO said in Wednesday's report, but it claimed methods of checking on the way the money is spent have been inadequate. Most of the payments have been used to help state and local governments pay for, health-related expenses for the poor through the Medicaid program. The federal share of the program was increased for 27 months through the stimulus package. The extra funding was offset, however, by 7 percent increases in Medicaid enrollment. "States reported that they are using or planning to use freed-up funds to cover their increased Medicaid caseload, to maintain current benefits and eligibility levels, and to help finance their respective state budgets," the GAO said. The report also noted that about half of the money earmarked for road and bridge repairs is being spend to repave highways instead of to build new infrastructure. The report also found that state officials are not directing the funds to counties that are most in need of new jobs. The stimulus program, carrying a total price tag of $787 billion, has come under fire from Republicans in Congress. Republican Congressman Darrell Issa noted the nation's unemployment rate has reached its highest levels since 1983, and the Obama administration has been "unable to justify its questionable claims related to jobs 'saved or created' by the stimulus." President Obama has repeatedly said the stimulus package will be a means to "save or create" 3 million to 4 million jobs. Since the stimulus bill was signed into law in February, more than 2 million American jobs have been lost.
- The Swiss government said Wednesday that it will block banking giant UBS from turning client account data over to U.S. authorities — even by seizing the information, if necessary. Raising the stakes in an international showdown, the response came days before an evidentiary hearing in a Miami federal court lawsuit in which the IRS seeks the names of 52,000 American clients of UBS. UBS has refused to turn over the information on grounds that it would violate Swiss banking secrecy laws and subject the bank to prosecution by the Swiss government.
- An unprecedented rise in demand for euro banknotes outside the eurozone could cause problems for borrowers and lenders in eastern Europe, the European Central Bank warned on Wednesday. The ECB said businesses and households outside the eurozone had continued to take out loans in euros in spite of the financial crisis, in the hope of taking advantage of lower interest rates. This could hurt borrowers as local currencies depreciated and servicing loans got more expensive, the bank warned. “The prevalence of foreign currency lending may create significant macroeconomic risks,” the ECB said in its report.
Late Buy/Sell Recommendations
- None of Note
Asian Indices are -.50% to +25% on average.
S&P 500 futures +.52%.
NASDAQ 100 futures +.36%.
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Top 25 Stories
Top 20 Business Stories
Today in IBD
Earnings of Note
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 603K versus 614K the prior week.
- Continuing Claims are estimated to rise to 6710K versus 6702K prior.
10:00 am EST
- Wholesale Inventories for May are estimated to fall -1.0% versus a -1.4% decline in April.
- None of note
Other Potential Market Movers
- The Fed’s Duke speaking, ICSC chain store sales reports, weekly EIA natural gas inventory report, (CTX) shareholders meeting, (CTX) shareholders meeting and the (SMSC) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.