Late-Night Headlines
Bloomberg:
- Copper’s 80 percent rally this year may soon end on signs that China has stockpiled more than it can use in new homes, cars and appliances. Inventories monitored by the London Metal Exchange posted their first back-to-back weekly gains since February, increasing 8.6 percent from an eight-month low. Sumitomo Metal Mining Co., Japan’s second-largest smelter, said Chinese imports are slowing after record purchases boosted domestic supplies, and U.S. copper-scrap exporters report shipments to Asia are dropping. Prices will also decline because the 4 trillion yuan ($585 billion) of economic stimulus spending by China, the world’s biggest metals user, won’t make up for weak demand elsewhere, said Michael Pento, chief economist at Huntington Beach, California-based Delta Global Advisors, which manages $1.5 billion. “China’s copper imports are likely to fall in the second half of this year because it bought so much in the first half, the government has stopped buying and demand from end-users may not be as big as people anticipated,” said Zhao Mingwang, manager of futures trading at Zhuji, China-based Zhejiang Honglei Copper Co., which produces about 100,000 tons of wires and rods a year. “The imports were so large it’s hard to fathom where it all went.” Most of the gains in LME-monitored inventories during the past month reflect the eightfold jump in warehouses in Singapore and South Korea, the closest ones to China. As those LME stockpiles increased, China’s scrap-copper imports tumbled 18 percent in May and 15 percent in June after rising for three months, government data show. Inventories monitored by the Shanghai Futures Exchange more than doubled this year, sparking concern the pace of consumption in China hasn’t kept up with imports. Some of those purchases were by the State Reserve Bureau, which contracted to buy between 300,000 tons and 400,000 tons of the refined metal this year, according to Sydney-based Macquarie Group Ltd. The amount is equivalent to as much as 22 percent of first-half imports. “Excessive imports mean much of the purchased metal was just stored, raising the risk that they may sell it back to the market and depress prices,” said Koichi Kaku, the general manager of the copper and precious metals sales department at Tokyo-based Sumitomo Metal Mining. Imports may have exceeded manufacturing demand by as much as 1.3 million metric tons in the first half, Kaku said on July 24. “I don’t think copper prices climbed because of a dramatic improvement in supply-demand conditions,” he said. “I’m skeptical about a strong recovery in the market.”
- The U.S. “must seriously consider” strict position limits on energy markets to curb speculation, Commodity Futures Trading Commission Chairman Gary Gensler said. Bart Chilton, one of four commissioners, said the case for expanding oversight may be bolstered by a report the CFTC plans for next month on the role of index investors and swaps dealers in commodity markets. “It is abundantly clear that large-scale, institutional investors speculating in the energy markets continue to act as the driving force behind energy prices,” Sean Cota, treasurer of the Arlington, Virginia-based association told the CFTC.
- Tanning beds are as certain to cause cancer as smoking, according to a new risk assessment. Sun beds and all types of ultraviolet rays are now ranked in the highest risk group by the International Agency for Research on Cancer, putting them in the same group as plutonium and radium, researchers said in a paper published today in the medical journal Lancet Oncology.
- Station Casinos Inc., taken private by Colony Capital LLC and management in 2007, filed for Chapter 11 bankruptcy after failing to reach agreement with unsecured creditors on a plan for a pre-packaged court restructuring. None of the company’s operating casinos were included in the filing in U.S. Bankruptcy Court in Reno, Nevada, Station said today in a statement to regulators.
- Microsoft Corp.(MSFT) and Yahoo! Inc.(YHOO) are getting closer to forging a partnership to collaborate on Internet-search technology and advertising, a person familiar with the matter said. An agreement may be announced as soon as tomorrow if it’s not delayed, said the person, who declined to be identified because the talks are private. A deal, which would involve the companies sharing revenue from Web-search ads, hasn’t been signed and the terms aren’t final, the person said.
Wall Street Journal:
- Liberals who see the effort to overhaul health care as a once-in-a-generation opportunity are growing anxious that a final deal will negotiate away their top priority: a public plan to compete with private health insurers. Some Democrats are threatening to oppose any bill that excludes this option, and sympathetic outside groups are pressuring wavering lawmakers. President Barack Obama regularly emphasizes that he supports a vigorous public option, and he did so again Tuesday. But in talking with lawmakers privately, and when asked directly by reporters, Mr. Obama has made it clear that he wouldn't necessarily veto a bill without a public option. Already liberals feel they have compromised enough. Most of them would prefer a single-payer system with government as the sole insurer and no private insurance at all. For the White House, the idea is to keep all sides at the table for an endgame that could go either way. Outside Congress, Health Care for America Now, a liberal group, and the American Federation of State, County and Municipal Employees spent $800,000 on television ads targeting moderate Democrats, citing their opposition to a public option. In the House, liberal lawmakers have adopted a strategy of countering almost every statement against a public option with a threat to vote en masse against any final bill that excludes it. When one moderate Democrat suggested in a closed-door meeting that the public plan could function merely as a fallback option, Rep. Jerrold Nadler warned that if that were the case, a large bloc of House liberals would vote no. "We are making clear to the leadership that we insist on a robust public option and our votes won't be there if there isn't a public option," said Mr. Nadler (D., N.Y.), a senior member of the House Progressive Caucus.
- Proposals from the White House and Congress to give an independent commission significant power over Medicare payments are drawing opposition from the American Medical Association and the American College of Surgeons. Both groups have thus far supported significant pieces of the Democrats' health-care agenda, and President Barack Obama has repeatedly cited physicians' backing for his health-overhaul plans. But doctors are objecting to proposals that would allow a federal commission to set the size of Medicare payments to doctors, hospitals and other health-care providers. Surgeons would "vigorously oppose" legislation that gave an unelected executive agency power to set Medicare rates, said the American College of Surgeons, which claims more than 74,000 members, in a letter to House Speaker Nancy Pelosi last week. Several surgical-specialty societies also signed the letter. The AMA, which claims 250,000 members, said a commission shouldn't be authorized to set Medicare payment rates for physicians. "If the solution is we're just going to have a big board that will make draconian slashes, that's not getting at the root cause of what the problem is," said AMA President J. James Rohack.
- Vornado Realty Trust, one of the U.S.'s largest real-estate investment trusts, is planning on raising between $550 million and $600 million through a bond sale that would qualify for a key government program aimed at resuscitating the commercial-property market, according to people familiar with the matter. The potential deal, along with two by shopping-center giant Developers Diversified Realty Corp., would be among the first batch of offerings of commercial mortgage-backed securities, or CMBS, that will take advantage of the Term Asset-Backed Securities Loan Facility, or TALF, program.
- Information and communications technology companies, whose bust dragged down the world economy in 2001-2002, are much less of a problem and much more of the solution in the current recession, a report by the Organization for Economic Cooperation and Development suggests. The ICT industry — which includes anything from manufacturers (think Intel Corp.) to software firms ( Microsoft Corp.) to Internet companies ( Google Inc.) — took a hit from slumping global demand, but it is showing signs of a rebound, the OECD found. After a “tough start to 2009” with nearly all performance indicators plunging in the first quarter, sometimes as much as 40% from year-ago levels in Japan, Korea, China and other Asian economies, the industry has seen “positive month-on-month growth for most countries, and inventories running down sharply” in May and June.Asian firms, particularly in Japan, Korea, Taiwan and China, are leading the sector’s recovery. Though production drops were generally sharper in this downturn than in 2001-2002, so was the rebound in the first quarter of 2009. Even Europe and the U.S., where analysts haven’t yet spotted strong signs of recovery, appear to have at least bottomed out, the OECD noted. And the upturn looks likely to hold up.
MarketWatch.com: Shares of WellCare Health Plan Inc.(WCG) and McKesson Corp.(MCK) climbed Tuesday evening after the health-care industry firms each issued forecasts that outstripped Wall Street's current expectations.
- Goldman Sachs Group(GS), already under fire for reaping record trading profits in the aftermath of the financial crisis, is now fighting to defend one of its biggest sources of revenue -- commodities trading -- with regulators considering setting limits on Wall Street speculators. At issue for Goldman Sachs is a major exemption it enjoys from limits on trading in certain types of agricultural commodities. Such an exemption is usually reserved for traders classified as "hedgers," such as farmers or food producers who depend on stable prices for their businesses. Goldman opened the door for investment banks to apply for a similar status when it won the first exemption 18 years ago to help its big institutional clients in commodity-index trading, or investment in a range of commodities by tracking a major index. The result, according to some members of Congress, has been a surge in all commodity speculation in the past few years, pushing oil prices near $150 a barrel and gold prices above $1,000 an ounce. Speculators' index trading is "creating price disruptions for producers and consumers," said Sen. Carl Levin, D-Mich., late last month after the release of a 247-page report documenting how index traders have made large purchases on the wheat-futures market in Chicago and pushed up futures prices over the past few years. It's time for regulators to "change course, rein in commodity index traders and clamp down on excessive speculation that is disrupting commodity prices," he added. Besides considering removal of the special exemption, the CFTC, the U.S. futures market regulator, is also thinking of adopting position limits on all commodities, not just in agriculture. The move could curb the growth of some major commodity exchange-traded funds. Goldman argues that any new limits will severely impact liquidity in commodities markets, hurting both large and small investors by reducing their access to these markets. The bank derives almost half of its revenue from trading commodities, currencies and bonds. Brad Hintz, analyst at Sanford C. Bernstein & Co., estimated that commodities trading accounts for about 8% to 9% of Goldman's revenue. While the percentage is not as big as fixed-income trading, it's an important sector for Goldman because "there are only a handful of major players." "It's a powerful, powerful piece of the firm," said Hintz.
CNBC.com: After posting three straight months of positive data, the residential real estate market has reached an equilibrium where prices will stop falling, said Sam Zell, founder and chairman of Equity Group Investments. This, in turn, will spark stabilization throughout the rest of the economy. (video)
- A new bill giving the SEC power to directly limit compensation for Wall Street employees will help put an end to a culture of excessive risk-taking, Congressman Barney Frank told CNBC Tuesday. The bill was was approved late Tuesday by the House Financial Services Committee, which Frank chairs. The measure was approved in a 40-28 party-line vote. Frank, a Democrat, introduced the bill, which gives "explicit instructions to the SEC with regard to financial institutions to disallow any compensation schemes that excessively reward risk," he says. When asked what he meant by "excessive risk," Frank declined to quantify it.
CNNMoney.com:
- No special treatment for GE Capital. If GE's finance arm is so good at what it does, then why is it trying to escape higher oversight of its balance sheet?
Forbes:
- Suspend Mark-to-Market—Now. In late 2007, the Financial Accounting Standards Board(FASB) changed the definition of mark-to-market accounting rules as they applied to the U.S. financial industry. The board forced financial firms and auditors to use "observable," market prices to value securities rather than models or cash flow. Within a year, the U.S. was in the middle of the worst pure financial panic in a hundred years. Coincidence? We think not.
Rasmussen:
- Support for Republican and Democratic congressional candidates changed little this week in the latest edition of the Generic Ballot. A new Rasmussen Reports national telephone survey shows that 42% would vote for their district’s Republican congressional candidate while 39% would opt for their Democratic opponent.
Washington Times:
- Two powerful Senate Democrats said Tuesday that they knew they got low mortgage-rate deals in a lender's VIP program but thought the special treatment was a "courtesy" or the same as "frequent flier" discounts. Both vehemently denied any wrongdoing or ethical lapse in the mortgage deals, which came to light a year ago and triggered investigations by the Senate Select Committee on Ethics and the House Oversight and Government Reform Committee. "I thought this was like a frequent-flier program," Sen. Kent Conrad, chairman of the Senate Budget Committee, said of the special benefits. "I thought nothing of it." Sen. Christopher J. Dodd, chairman of the Banking, Housing and Urban Affairs Committee, said an account executive at Countrywide Financial Corp. told him that the VIP status was "nothing more than ... courtesy stuff." A Countrywide official who handled the loans had said that both senators knew they got preferential treatment in the form of waived fees and points that likely saved them tens of thousands of dollars.
Reuters:
- Companies that service risky residential mortgages are warning U.S. officials that a key program to slow foreclosures may push some financing costs higher and derail their efforts, said a leading subprime firm. Companies forming the Independent Mortgage Servicers Coalition, service many of the riskiest mortgages made during the housing boom, making them key players in programs to rein in foreclosures. The group collects and distributes payments on more than $700 billion in loans, according to its leader, Carrington Mortgage Services of Santa Ana, California. Their concerns about financing payments for defaulted homeowners comes as pressure mounts from Congress, regulators and state legislators for servicers to do more for the plan, which aims to slow foreclosures and modify loans. The U.S. Treasury wants the companies to spend more on its resources, including hiring staff and expanding training programs. At least four servicers from the coalition were among the 25 meeting with the Treasury on Tuesday, where new commitments were forged to increase foreclosure prevention efforts under President Obama's Home Affordable Modification Program. But manpower isn't the main worry for the independent servicers, which don't include large banks such as Wells Fargo & Co. Implementing the program means giving delinquent homeowners more time fix their loans, which to servicers will the boost costs of extending payments to investors as contractually promised.
- ABC News said on Tuesday that its U.S. consumer confidence index climbed in the latest week, after hovering just above its record low for most of the summer. The Consumer Comfort Index rose to -47 in the week to July 26 from -50 the prior week.
It was the highest reading since the week ended June 7, though the index still remains in deeply negative territory.
Financial Times:
- Controversial draft regulations for hedge funds will be substantially amended, the new head of the European parliament's economic and monetary affairs committee has told the Financial Times. Sharon Bowles, British MEP and new chair of the committee, said European pension funds and institutional investors faced "excommunication" from global capital markets if the draft directive on alternative investment funds was implemented unchanged.
The Australian: EUROPEAN Union trade officials approved pre-emptive penalties on imports of steel pipe from China, a precedent-setting move that suggests the trading bloc is growing more protectionist in the face of the economic downturn. The vote by trade officials from the EU's 27 member states is significant, say trade experts, because they accepted an argument from steel producers -- including the world's largest by volume, ArcelorMittal -- that punitive tariffs are needed to protect them from the threat of underpriced imports from China. Previously, complainants have had to prove the imports had already hurt their businesses. Trade lawyers say they expect a host of industries to ask the EU for protective tariffs in August. The case also concerns one of the steel sector's most important finished products. Seamless steel pipes are major parts in housing construction, gas and oil plants and the automotive industry. The vote was close, according to EU officials familiar with the matter, although they declined to reveal the final tally. After clearing procedural hurdles, the duties, which will range from 17.7 per cent to 39.2 per cent, are expected to take effect in October and last five years, EU officials said. Temporary duties of up to 24.2 per cent have been in place since April.
Late Buy/Sell Recommendations
Citigroup:
- Upgraded .
- Reiterated Buy on (X), target $49.
- Reiterated Buy on (CSGS), target $19.
Night Trading
Asia Ex-Japan Inv Grade CDS Index -.52%.
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? Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (PX)/.99
- (CCE)/.51
- (MHS)/.65
- (TWX)/.37
- (WLP)/1.44
- (Q)/.09
- (AMT)/.16
- (S)/-.02
- (SO)/.59
- (COP)/.84
- (TER)/-.24
- (ESRX)/.87
- (VAR)/.64
- (TSO)/-.40
- (OI)/.90
- (FLS)/1.92
- (CBG)/.05
- (HIG)/1.16
- (AFL)/1.14
- (SEE)/.34
- (HES)/.00
- (EQR)/.54
- (GD)/1.57
- (CTX)/-1.31
- (AKAM)/.41
- (SYMC)/.35
Economic Releases
8:30 am EST
- Durable Goods Orders for June are estimated to fall .6% versus a 1.8% gain in May.
- Durables Ex Transports for June are estimated unch. versus a 1.1% increase in May.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,500,000 barrels versus a -1,796,000 barrel decline the prior week. Gasoline supplies are expected unch. versus a +813,000 barrel increase the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +1,218,000 barrel increase the prior week. Finally, Refinery Utilization is expected unch. versus a -2.03% decline the prior week.
2:00 pm EST
- Fed’s Beige Book
Upcoming Splits
Other Potential Market Movers
Fed’s Dudley speaking, , (RF) investor day and the Keefe Bruyette Woods Community Bank Conference
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and shipping shares in the region. I expect US
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