Late-Night Headlines
Bloomberg:
- U.S. farmland values declined last year for the first time since 1987 as the country suffered the worst housing crisis since the Great Depression. The value of all land and buildings on farms averaged $2,100 an acre at the start of this year, down 3.2 percent from a revised $2,170 a year earlier, the U.S. Department of Agriculture said today in an annual report.
- Venezuelan President Hugo Chavez said he may nationalize two coffee companies after taking temporary control of their processing plants yesterday and vowed to keep seizing monopolies as he works to construct a socialist economy. “We’ve intervened in these big companies,” Chavez said today on state television. “Now we are conducting a study to expropriate them. They will become property of the nation.”
- President Barack Obama and top U.S. military commanders are under pressure from senators and civilian advisers to double the size of Afghan security forces, a commitment that would cost billions of dollars. In private letters and face-to-face meetings, these supporters of mounting a stronger effort against the Taliban seek to boost the Afghan National Army and police to at least 400,000 personnel from the current 175,000. “Any further postponement” of a decision to support a surge in Afghan forces will hamper U.S. efforts to quell an insurgency in its eighth year, Senators Joseph Lieberman, chairman of the Homeland Security Committee, and Carl Levin, chairman of the Armed Services Committee, wrote to the White House in a July 21 letter obtained by Bloomberg News.
- The U.S. government is likely to decide within 18 months that Fannie Mae and Freddie Mac need to be wound down and replaced with a similar entity that would support U.S. housing, Moody’s Investors Service said. The government-chartered mortgage-finance companies, which were seized by regulators in September 2008 and since have used $85.7 billion of their capital lifelines, face mounting losses that will mean “it could take a decade or longer” before they are able to emerge from U.S. control as “viable standalone entities,” the New York-based ratings company said in a report. The increasing losses that will be caused in part by government efforts to use Washington-based Fannie Mae and Freddie Mac of McLean, Virginia as tools to stem the housing slump, as well as the probability it will be “politically untenable to resurrect” the firms, mean the U.S. will likely create a new organization that won’t be owned by shareholders to play a similar role in the economy, Moody’s said.
- Whole Foods Markets Inc.(WFMI), the largest natural-goods grocer in the U.S., reported third-quarter profit that topped some analysts’ estimates, sending the stock higher in late Nasdaq trading. Net income climbed 26 percent to $42.8 million, or 25 cents a share, in the period ended July 5, exceeding the average estimate of 20 cents in a survey of 13 analysts by Bloomberg. Whole Foods advanced $3.28, or 13 percent, to $28.10 at 6:51 p.m. after the close of regular trading on the Nasdaq Stock Market. The stock has more than doubled this year.
Wall Street Journal:
- In the largest wave of upward revisions of GDP forecasts since the financial crisis began, UBS AG is now predicting 2.5% growth in the third quarter, up from 2%, and 3% growth in the fourth quarter, up from 2.5%. Wells Fargo & Co. also revised its third-quarter forecast to 3% growth, up from 2.2%. For the fourth quarter, it is now predicting 2.0%, up from 1.6%. T. Rowe Price Group Inc. increased its third-quarter projection to 2.75% from 1.3%. Economists already had expected growth to rebound in coming months after companies drew down inventories in the first half of the year. A promising manufacturing report this week showed a jump in new orders and production, building on those expectations. "When you combine leaner inventories with more sales, that's the fundamental reason for being more optimistic about at least the second half of this year," said Mark Zandi, chief economist for Moody's Economy.com. The firm revised its third-quarter forecast to 1.6% from 1.1%, and its fourth-quarter outlook to 2.1% from 0.2%.
- Stimulus spending on infrastructure projects is moving slowly and many projects won't get started before the summer construction season ends, complicating the Obama administration's efforts to tout the impact of the $787 billion economic recovery act. The General Services Administration has decided how to spend $1 billion on federal building upgrades, but only about 1% of that money has been spent. The GSA will approve another $1 billion by year's end, but Anthony Costa, acting commissioner of the GSA's public buildings services, said it will take until 2011 before the agency picks projects for all of the $5.5 billion it was allocated for infrastructure work. The Federal Transit Administration has spent about $500 million of the $8.4 billion it received. The Coast Guard has decided to spend the majority of its $240 million on four bridges, but a spokesman said the money "won't transfer hands for a while." California's transportation department has decided how to spend $1.7 billion of the $2.6 billion it is getting for highway infrastructure projects, but the agency says its spending on such projects probably won't peak until next year. The gradual start means many projects won't get under way before the beginning of the fall, when many construction projects in the northern half of the country typically halt before the winter rain and snow. That is providing fodder to critics of the recovery act who say it was overhyped as a way to quickly boost the economy. It may also hamper any potential efforts to pass another stimulus bill later this year. The White House Recovery Office said Tuesday that government agencies have decided how to spend about $31 billion of the $73 billion going directly to construction projects, but it couldn't offer a figure on how much has actually been spent.
- Former President Bill Clinton won the release of two U.S. journalists held by North Korea in a diplomatic stroke fraught with promise and potential pitfalls for the Obama administration's drive to halt the proliferation of nuclear weapons.
- Few of President Obama’s 2008 campaign pledges were more definitive than his vow that anyone making less than $250,000 a year “will not see their taxes increase by a single dime” if he was elected. And he was right, very strictly speaking: It’s going to be many, many, many billions of dimes. Asked about raising taxes on the middle class on Sunday on CBS’s “Face the Nation,” White House economist Larry Summers wouldn’t repeat Mr. Obama’s pre-election promise. “It is never a good idea to absolutely rule things out no matter what,” Mr. Summers said—except, apparently, when his boss is running for office. Meanwhile, on ABC’s “This Week,” Treasury Secretary Timothy Geithner also slid around Mr. Obama’s vow and said, “We have to bring these deficits down very dramatically. And that’s going to require some very hard choices.” These aren’t even nondenial denials. The Obama advisers are laying the groundwork for taxing the middle class while claiming the deficit made them do it.
- Microsoft(MSFT) Needs More to Stall Google’s(GOOG) Engine.
MarketWatch.com: A possible U.S. regulatory clampdown on big energy speculators could also hit exchange-traded funds backed by commodities, making it harder for investors of all sizes to buy new shares and forcing fundamental changes to the way the funds do business. The Commodity Futures Trading Commission, which will hold its last of three hearings on commodities speculation Wednesday, is considering setting strict caps on the number of contracts financial investors can buy in energy futures. These position limits are designed to prevent single, large investors from exerting too much influence over the price of any one commodity. Big investment banks have drawn policymakers' ire over their role in helping financial speculators bet on oil, which some contend has helped drive up prices more than double from lows this year. But ETFs, heavily used by institutional investors such as hedge funds and banks like Goldman Sachs Group Inc.(GS) , as well as an increasingly popular tool for retail investors, have also come under scrutiny for contributing to wild swings in prices. Since the two biggest energy ETFs are also big buyers of energy futures, new position limits could make it harder for United States Oil Fund(USO) , United States Natural Gas Fund(UNG) , and their competitors, to keep growing, analysts say. Setting position limits in futures markets could "increase ETFs' expense, their tracking error, and ultimately, it makes them less transparent, makes them a worse product," said Matt Hougan, editor of the Exchange-Traded Funds Report. "Eventually they will run out of bullets in ways to provide accurate exposure to commodities." Citigroup(C) , Morgan Stanley(MS) and Goldman are among the biggest holders of USO and UNG, according to FactSet. Total holdings of USO, including futures contracts on the ICE and the Nymex, stand equivalent to 32.5 million barrels of oil.
CNBC.com: Citigroup plans to sell 20 businesses in consumer finance area, many of them located in Europe, its Chief Executive Vikram Pandit said in an interview with Singapore's Business Times.
NY Times:
- The Treasury Department said on Tuesday that only a small number of homeowners — 235,247, or 9 percent of those eligible — had been helped by the latest government program created to modify home loans and prevent foreclosures.
IBD:
- Soldiers are pulling out of Iraq, but DynCorp International's (DCP) work there is far from done.
Rasmussen:
- Support for Republican congressional candidates has risen to its highest level in recent years, giving the GOP a seven-point lead over Democrats in the latest Congressional Ballot and stretching the out-of-power party's lead to six weeks in a row. The latest Rasmussen Reports national telephone survey shows that 43% would vote for their district’s Republican congressional candidate while 38% would opt for his or her Democratic opponent.
Financial Times:
- Investor appetite for more complex over-the-counter derivatives could rebound next year, according to Tullett Prebon , as the inter-dealer broker on Tuesday reported better than expected pre-tax earnings. The financial crisis sparked a retreat across the board from riskier assets, including bespoke OTC derivatives, some of which were blamed for exacerbating the crisis. However Terry Smith, Tullett chief executive, predicted an eventual return of interest in many OTC derivatives. Asked how much of the market would return to around pre-crisis levels, Mr Smith said: “The balance of it I think will come back quite strongly, maybe next year.”
- The Global Times, controlled by the People’s Daily, the Chinese Communist party mouthpiece, reported that the public reacted with “banter and sarcasm” to NBS figures showing average urban wages in China rose 13 per cent in the first half to $2,142. It quoted an online poll showing 88 per cent of respondents doubted the official numbers. An editorial on Tuesday in the China Daily, the government’s English-language mouthpiece, quoted another survey that found 91 per cent of respondents skeptical of official data, up from 79 per cent in 2007. Economists abroad have also questioned the reliability of the data in recent months. “Despite starkly limited resources and a dynamic, complex economy, the state statistical bureau again needed only 15 days to survey the economic progress of 1.3bn people,” said Derek Scissors, of the Washington-based Heritage Foundation, referring to the time it took for the bureau to produce the figures after the end of the first half this year. “At worst, results are manufactured to suit the Communist party.” Some economists say provincial officials have enormous incentives to improve their career prospects by exaggerating local economic growth.
BBC:
- One third of Europeans have never used the net, according to an EU report. The study, which examined the region's digital landscape over the last five years, also revealed that more than one in four Europeans had never used a PC.
China Daily:
- Property sales across 30 cities in China fell 4 percent in July as prices soared and supplies dwindled with big cities feeling the pinch for the first time this year, analysts said. According to the UWIN property transaction system, the floor space of apartments sold in July dipped 5.37 percent over June to 1.04 million sq m. Statistics put out by the Beijing Real Estate Transaction website showed that sales of forward delivery housing in Beijing fell to 10,862 units last month, compared to 12,840 units in June. Property transactions in Guangzhou fell 36 percent over June. The figure is only half of that of May, said Guangzhou's official property website.
- GUANGZHOU: Workers here could have their wages cut under a new salary guideline designed to take pressure off businesses during the financial crisis. According to Guangdong's corporate salary guideline for 2009, the standard salary increase has been set at 7 percent this year, compared to 15 percent in 2008. The upper limit is 12 percent, compared with 21 percent for 2008. The lower limit is zero or even negative, compared with a 5.5 percent increase in 2008. The guideline did not specify by how much a wage could be reduced. This is the first time that the province has set the lower limit of salary increase at zero or below.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (KFT), boosted estimates, raised target to $33.
CSFB:
- Rated (RGA) Outperform, target $50.
- Reiterated Outperform on (REGN), boosted target to $25.
Night Trading
Asia Ex-Japan Inv Grade CDS Index unch.
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
- (MMC)/.33
- (OSG)/-.67
- (FWLT)/.62
- (XTO)/.82
- (PWR)/.17
- (DF)/.42
- (BHI)/.45
- (PCG)/.84
- (OC)/.07
- (DVN)/.58
- (BYD)/.12
- (RL)/.50
- (ASCA)/.37
- (NWSA)/.18
- (CSCO)/.28
- (ALL)/1.11
- (PRU)/1.20
- (MUR )/.66
- (ATHN)/.14
- (CECO)/.19
- (JCOM)/.44
Economic Releases
8:30 am EST
- The ADP Employment Change for July is estimated at -350K versus -473K in June.
10:00 am EST
- ISM Non-Manufacturing for July is estimated at 48.0 versus 47.0 in June.
- Factory Orders for June are estimated to fall .8% versus a 1.2% gain in May.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +600,000 barrels versus a +5,152,000 barrel increase the prior week. Gasoline supplies are expected to fall by -800,000 barrels versus a -2,315,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,225,000 barrels versus a +2,108,000 barrel increase the prior week. Finally, Refinery Utilization is expected to fall by -.2% versus a -1.27% decline the prior week.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and financial shares in the region. I expect US
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