Today's Headlines

Bloomberg:

- Housing starts in the U.S. unexpectedly rose in June as construction of single-family dwellings jumped by the most since 2004, signaling the market is stabilizing even as unemployment worsens. The 3.6 percent increase brought starts to an annual rate of 582,000, the highest level since November and followed a 562,000 pace in May that was higher than previously estimated, the Commerce Department said today in Washington.

- Corporate bond spreads fell to the lowest in 10 months in Europe, driven by investor demand for the securities after company earnings beat analysts’ estimates and new issues dried up. Investment-grade bond yields relative to government debt have shrunk 1.65 percentage points this year to 2.65 percentage points, according to Merrill Lynch & Co.’s Euro Corporates bond index. Perceptions of credit quality improved, with the cost of protecting debt in the default swaps market falling the most since the week ended May 8, according to JPMorgan Chase & Co. “The summer’s going to be a good one for credit,” said Suki Mann, a London-based strategist at Societe Generale SA. “We don’t anticipate even a modest retracement in spreads because for that to be realized we need many more sellers than the few sporadic profit-takers we’re seeing now.”

- Crude oil rose more than $1 a barrel as construction of single-family dwellings jumped by the most since 2004, signaling the worst of the recession is over.

- Leveraged exchange-traded funds that tripled their share of the US ETF market in 18 months are attracting the scrutiny of the top financial regulators in Massachusetts, who is investigating whether the securities are being pitched to the wrong investors. Leveraged ETFs now make up 24% of the dollar value of all ETF trading in the US, according to data compiled by Bank of America.

- U.S. lawmakers attempting to reshape the nation’s health-care system encountered a stumbling block when the head of the Congressional Budget Office said their proposals would fail to rein in spending. “We do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount,” Douglas Elmendorf, director of the nonpartisan agency, told the Senate Budget Committee yesterday. “The curve is being raised.” Elmendorf’s comments on draft plans issued by one Senate committee and being debated by three House panels may hinder efforts to pass the biggest expansion of health care since the establishment of Medicare and Medicaid in 1965. His office releases cost projections that can make or break legislation. Democrats are trying to craft a plan to both trim health- care costs and expand coverage to an estimated 46 million uninsured Americans. A leading issue is how to pay for the measure, which may cost more than $1 trillion over a decade.

- Novellus Inc.(NVLS) Chief Executive Officer Richard Hill said California’s budget crisis is partly to blame for his company’s decision to move jobs out of the state to Oregon. “Companies today, given the turmoil in the markets, have to adapt to make themselves competitive,” Hill said in a telephone interview yesterday. “Our costs in California are historically higher. If we project taxes going up on our employees, the company will ultimately have to pay the burden of that. We’re trying to get ahead of the game.”

- The S&P 500 Index may climb another 28% within six months as the “smart money” piles back into equities, building on the steepest rally since the 1930s, said Don Hays, founder of Hays Advisory Group. Trading in options on the S&P 100 Index and buying and selling by company insiders show that the most-informed investors turned more bullish in the past month. “I am very encouraged and believe we may see a breakout in the next two weeks on the upside,” Hays said.

- General Electric Co.(GE) declined the most in seven weeks in New York trading after second-quarter sales dropped more than analysts predicted and the GE Capital finance arm pulled down earnings. Revenue fell 17 percent to $39.1 billion, the Fairfield, Connecticut-based company said in a statement today, trailing the average estimate of $41.9 billion in a Bloomberg survey. Profit from continuing operations declined 47 percent. Equipment orders in the GE units that make jet engines, medical imaging machines and locomotives dropped more than 40 percent.

- Swine flu has taken root across the globe faster than previous influenza pandemics, and its full force may strike the U.S. earlier than the typical flu season, health officials said.

Wall Street Journal:

- The White House issued a call Friday for a more powerful outside agency to determine Medicare payments for medical services.

- JAKARTA, Indonesia -- Suicide bombers set off explosions at two hotels here Friday morning that killed eight people and wounded 53, police said, in Indonesia's worst terrorist attack in four years.

- Say this about the 1,018-page health-care bill that House Democrats unveiled this week and that President Obama heartily endorsed: It finally reveals at least some of the price of the reckless ambitions of our current government. With huge majorities and a President in a rush to outrun the declining popularity of his agenda, Democrats are bidding to impose an unrepealable European-style welfare state in a matter of weeks.

The Business Insider:

- So what was President Barack Obama doing at Citigroup's Park Avenue headquarters last night? Around 6 p.m. the presidential limousine was spotted outside 399 Park Avenue and the building was on security lockdown. The visit was first noticed by Fox Business Network, although no one seems to know what the POTUS was doing at Citi. Any clue? Note, only the top executives offices are still at the Park Avenue building. Most Citi operations are run out of its lower Manhattan headquarters.

NY Times:

- A half-dozen senators friendly to labor have decided to drop a central provision of a bill that would have made it easier to organize workers. The so-called card-check provision — which senators decided to scrap to help secure a filibuster-proof 60 votes — would have required employers to recognize a union as soon as a majority of workers signed cards saying they wanted a union. Currently, employers can insist on a secret-ballot election, a higher hurdle for unions. The abandonment of card check was another example of the power of moderate Democrats to constrain their party’s more liberal legislative efforts. Though the Democrats have a 60-40 vote advantage in the Senate, and President Obama supports the measure, several moderate Democrats opposed the card-check provision as undemocratic.

Roll Call:

- Dissident House Democrats are threatening to block a health care bill if their leaders try to bypass the Energy and Commerce Committee, where odds of passing it appear dim without a major overhaul.

zerohedge:

- A recent story in Advanced Trading goes after some of the minutae of High Frequency Trading and provides a glimpse of the total value that HFT may provide to behemoth PT powerhouses such as Goldman Sachs(GS). The article presents a very valuable perspective on just why HFT is so critical these days, especially when cash traders go for 6 hour Starbucks breaks between 10 am and 3:30 pm: "high frequency trading firms, which represent approximately 2% of the 20,000 or so trading firms operating in the US markets today, account for 73% of all US equity trading volume.

Rassmussen:

- Eighty percent (80%) of Americans now say Wall Street benefited more from the bailout of the financial industry than the average U.S. taxpayer. Only eight percent (8%) of adults say the taxpayer benefited more, according to a new Rasmussen Reports national telephone survey. Twelve percent (12%) are not sure.

Politico:

- Stung by complaints that it did too little, too late in the House, the Obama administration has launched an intense, senator-by-senator effort to push climate change legislation through the Senate. Call it climatedate.com. The White House is working closely with Senate Democratic aides to match each skeptical senator with the Cabinet member or other key administration official most likely to be persuasive.

- Three House Democratic leaders who were whipping members on the climate change bill gave tens of thousands in campaign cash to party moderates around the time of the 219-212 vote on June 26, according to Federal Election Commission records.

Housingwire.com:

- Improvements in mortgage availability and the belief that prices have hit rock bottom has buyers moving in the Southern California and the San Diego Bay area, according to La Jolla-based data analyzer MDA DataQuick. In So Cal, buyers are responding to price cuts on mid- to high-end homes and the availability of credit for pricier homes. There were a 23,262 total new and existing homes and condo sales completed in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties in June, up 12% from May. While foreclosures are still having an impact on the SoCal market, the effect is weakening. Foreclosure sales made up 45.3% of resales in June, down from 49.7% in May and the February peak of 56.7%. Fewer foreclosure sales meant resale of homes priced $500,000 and above rose to represent nearly 20% of all sales in the SoCal region. It’s the first time that segment of the market made up more than 19% of all sales since October 2008, and comes after that figure had dipped to a low of 13.4% in January. The increase in pricier home sales helped increase the median sales price for the second consecutive month to $265,000, up 6.4% from $249,000 in May.

Reuters:
- A forward-looking measure of U.S. economic growth fell in the latest week but its yearly growth rate surged to levels last seen in 2004, easing concerns that a second economic stimulus may be needed from Washington, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its projection that the recession will end this summer is not based on results from the Obama administration's current $787 billion stimulus package. "The bulk of that government spending is still in front of us," said Lakshman Achuthan, managing director at ECRI, adding that calls for a second stimulus are unnecessary. The current stimulus "may reinforce the recovery many

quarters from now, but it's not the reason you're having a recovery," said Achuthan, reiterating comments made earlier Friday on CNN. The research group's Weekly Leading Index slipped to 118.1 in the week to July 10 from a revised 119.0 the prior week, which ECRI originally reported at 118.5. But the index's annualized growth rate surged to a five-year high of 7.0 percent from 6.2 percent one week ago, which was revised higher from 5.4 percent. It was the gauge's highest yearly growth rate reading since the week ended May 14, 2004, when it was 7.1 percent. "The recession is already ending," Achuthan said. "With WLI growth surging to a five-year high, the recession's days are numbered, and the coming recovery is looking more resilient."

- CIT Group Inc(CIT) is in talks with JPMorgan Chase & Co and Goldman Sachs Group Inc for short-term financing of $2 billion to $3 billion as it looks for ways to avoid a potential bankruptcy, a source close to the company said on Friday. The lender is still in talks with bondholders for a debt-to-equity swap, the source said. One potential scenario before CIT is also a sale of some assets to raise capital, the source said. A bankruptcy, however, is still possible over the next few days, and CIT is maintaining an ongoing dialogue with regulators about the situation, the source said.

- Wall Street, where hundreds of commodity traders lost jobs last year as the recession set in, is on a new hiring phase where banks and hedge funds want to pay top dollar but only to a few, highly productive people. The actual number of hires is unlikely to match the pace seen during the commodities super-cycle from 2003 to 2008, when investment banks ran a maze of desks that handled almost everything in the energy, metals and agricultural space. Analysts say the recession has taught the industry the importance of being lean. Yet, the doubling in oil and copper prices from the lows of last year has reinforced the wisdom of investing in traders who can maximize opportunities in market swings. Some firms like Goldman Sachs (GS) are willing to pay higher salaries than ever to lure the best talents from rivals and keep their own star traders, headhunters say. Goldman Sachs, the bank hurt least by the recession, said it had allocated $6.7 billion for total compensation and benefits in the second quarter of 2009. That was almost double the $3.4 billion profit it made for the quarter, helped by commodity earnings higher than a year ago. Analysts said commodity traders were among those in big pay league at Goldman Sachs because they "are the people accountable for the kind of profits that Goldman is doing," said Gustavo Dolfino, president of WhiteRock Group, another headhunter in New York. Dolfino estimated the top Goldman Sachs bonus for this year -- including for star commodity traders -- will be around $11 million -- still a fraction of the tens of millions the company paid out as late as 2007.

Financial Times:
- Akbar Hashemi-Rafsanjani, Iran’s former president, on Friday threw his weight behind reformists and declared that the country was in “crisis” following the disputed presidential election. He told the hundreds of thousands of protesters attending his address at Friday prayers in Tehran university: “Conditions today are bitter ... and we all have lost.” In the biggest show of dissent since a crackdown by Iran’s security forces, many in the crowd wore the opposition’s trademark green scarves, wrist and headbands after a month in which no one had dared to do so. Eyewitnesses said clashes erupted as security forces used teargas against protesters, many of whom were reportedly arrested. Gunshots were heard but there were no immediate reports of any deaths. Mir-Hossein Moussavi, the opposition leader who claims that the election was stolen from him, was present in a show of solidarity with his supporters, many of whom were attending Friday prayers for the first time. Many protesters, encouraged by what was a rare tough speech by Mr Raf­sanjani’s, shouted: “Death to the dictator”, “Ahmadi-Nejad, resign, resign” and “Allahu Akbar [God is great]”.

Telegraph:

- Scientists at Liverpool University and engineers at car giants Ford(F) have developed a new ignition system which uses focused beams of laser light to ignite the fuel. The researchers claim the technology is more reliable and efficient than current spark plug technology and will enable cars to start more easily in cold and damp conditions.

TorontoStar:

- Honey bees are normally, well, busy as bees at this time of year, but a relentless cool summer has taken the buzz out of honey and other crop production. "The last week to 10 days it has been very unseasonably cold. We're normally looking at extracting honey right now and plants are just starting to produce nectar," says Calvin Parsons, president of the Saskatchewan Beekeepers board of directors.

Alibaba.com:

- China's corporate goods price index in June dropped 8.0 percent from a year earlier, compared with May's fall of 7.6 percent, the People's Bank of China said on Friday. China's producer price index, a separate measure of wholesale inflation, fell 7.8 percent in June from a year earlier, accelerating from a 7.2 percent fall in May.