Evening Headlines
Bloomberg:
- Homebuilder Bonds Recover From Subprime Losses: Credit Markets. U.S. homebuilder bonds have recovered to levels last seen before credit markets seized up as investors gain confidence that the economic recovery is strong enough to prevent borrowers from defaulting. Yields fell to within 6.21 percentage points of Treasuries as of yesterday, the narrowest since August 2007 when rising subprime-mortgage defaults sparked $1.8 trillion in losses and writedowns at the world’s biggest financial institutions, according to Bank of America Merrill Lynch’s U.S. High-Yield, Homebuilders/Real Estate index. Hovnanian Enterprises Inc. debt surged 11 percent to a more than two-year high since New Jersey’s largest homebuilder posted its first profit since 2006 on March 2. “There is no question that the worst is over for homebuilders,” said Christopher Towle, who helps oversee $47 billion in fixed-income assets, including Hovnanian debt, as a partner at Lord Abbett & Co. in Jersey City, New Jersey. “The numbers show it.”
- PC Shipments Jump 27% in First Quarter, Gartner Says. The growth topped Gartner’s projection of 22 percent, the Stamford, Connecticut-based research firm said today. IDC, based in Framingham, Massachusetts, also released PC estimates, pegging worldwide growth at 24 percent. “For most of last year, people were writing obituaries for desktops and we saw that desktops did well, helped by all-in-one designs and touch-screen displays,” said Jay Chou, an analyst with IDC. Intel’s report suggests the PC market should see “pretty good results going forward,” he said. Hewlett-Packard Co. remains the market leader, accounting for about a fifth of shipments. Even so, its growth was dwarfed by Taiwan’s Acer Inc., which passed Dell Inc. to take the No. 2 spot last year. Hewlett-Packard’s shipments climbed 20 percent last quarter, while Acer’s rose 43 percent, IDC said. In the U.S., PC shipments totaled 17.4 million units, up 20 percent from a year earlier, Gartner said. Apple Inc., was ranked No. 5, after Hewlett-Packard, Dell, Acer and Toshiba Corp. Apple’s shipments rose 34 percent, with consumers attracted to its brand by the “hype” over its iPad tablet computer, Gartner said.
- Lennar(LEN) Shares, Options Rise on Buyout Speculation. Lennar Corp. advanced the most since Feb. 11 in New York and trading of bullish options was five times the average on speculation the third-biggest U.S. homebuilder may be acquired in a leveraged buyout. More than 31,000 call options to buy shares changed hands, compared with an average of 5,460 in the past 20 days. The most- active contracts were April $18 calls, which jumped fivefold to 50 cents. April $19 calls rose to 15 cents from 1 cent, the biggest gain. “Lennar surged today on chatter that an LBO deal was in the works,” said Jamie Lissette, founder of the Hammerstone Group, a Westport, Connecticut-based operator of online discussion forums for institutional investors.
- Munster Says He Raised Apple(AAPL) Price Target to $299: Video. Gene Munster, an analyst at Piper Jaffray & Co., talks with Bloomberg's Carol Massar about the outlook for sales of Apple Inc.'s iPad and the company's shares.
- China Plans Policies to Curb Home Price Gains, Securities Says. China plans to accelerate the introduction of policies aimed at curbing property price gains, the Shanghai Securities News reported today, citing an unidentified industry official. One policy may be trials of a property tax in cities with high home prices, the Shanghai-based newspaper reported. Such a property tax would target luxury property and buyers of more than one home, according to the report. China may also tighten mortgage requirments for purchases of more than one home, the newspaper reported. That tightening may include increased down payment requirements and higher interest rates, according to the report. The government may also adjust land auction procedures and more tightly enforce value-added taxes imposed on land, the newspaper reported. Policies may also be introduced to prevent buyers from purchasing more than one home in cities where they do not have residence permits, according to the report.
- Euro Will Drop to $1.19 by Next Year on Greece Crisis, BNP Says. The euro will drop by the middle of next year to $1.19, a level last seen in March 2006, as government debt forces the European Central Bank to keep benchmark rates at record lows, according to BNP Paribas SA. “A program of severe fiscal consolidation is required, which will result in significant deflationary pressure,” currency strategists at BNP Paribas wrote in a note to clients today. “The ECB is still a long way from hiking interest rates, with a rise in the refinancing rate from the current 1 percent unlikely until the second half of 2011.” Germany’s parliament will probably be given a vote on any financial aid for Greece, the Finance Ministry said today, risking a showdown with lawmakers. Greek Prime Minister George Papandreou may be forced to activate the emergency-aid package within two weeks, Fitch Ratings Director Christopher Pryce said. “We expect any euro recovery to remain limited,” the BNP analysts wrote. “Many uncertainties regarding the aid package for Greece remain, which is likely to keep international investors cautious about committing funds to European asset markets.”
- 'Iron Man' Bets Loom as CFTC Staff Film Futures. The Commodity Futures Trading Commission staff, bucking Hollywood opposition, is recommending approval of a market for box-office contracts on films such as “Iron Man 2,” two people with knowledge of the situation said. The staff recommends the CFTC on April 16 approve Media Derivatives Inc.’s request to create a market for professional traders, the first of two applications, said the people, who asked not to be identified because the information isn’t public. The Motion Picture Association of America, representing the studios, says plans by Media Derivatives and Cantor Fitzgerald LP to open markets based on movie-ticket forecasts will lead to manipulation and hurt the industry.
- Iran Could Get Bomb Uranium, Block Oil, Pentagon Says. Iran could generate the enriched uranium needed for a nuclear weapon in one year and already has built defenses capable of shutting a major Persian Gulf oil- transit route in a confrontation, Pentagon officials said today.
- Goldman(GS) Sees 'Expensive' China Index Futures. China’s stock-index futures will begin trading tomorrow at the “expensive side of fair value” as volumes will be limited, Goldman Sachs Group Inc. said. “Under close monitoring by authorities, we expect a gradual increase in liquidity, but even then we do not expect a significant direct impact on the stock market,” Christopher Eoyang and Jason Lui, analysts at Goldman Sachs, wrote in a report today.
- China Economy Grows 11.9%, Pressuring Wen on Yuan Peg. China’s economic growth accelerated to the fastest pace in almost three years in the first quarter, adding pressure on Premier Wen Jiabao to sever the yuan’s peg to the dollar and raise interest rates. Gross domestic product rose 11.9 percent from a year earlier, the statistics bureau said at a briefing in Beijing today. That was more than the median 11.7 percent estimate in a Bloomberg News survey of 24 economists. “More needs to be done to curb increasingly harmful bubbles” in China, Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai, said before today’s data. “Inflationary pressures are building.”
- Hedge Funds May Be Hunted by Peers as SEC Poaches From Industry. Hedge fund managers may soon face a new regulatory nemesis: Their peers. Bruce Karpati and Robert Kaplan, co-chiefs of a Securities and Exchange Commission task force targeting hedge funds, buyout firms and mutual funds, are seeking five fund managers, chief operating officers or people with “direct exposure to trading and operations” at investment firms. The SEC placed its help- wanted ad last month.
- BofA(BAC) May Post Profit After 'Fabulous Month' for Merrill Lynch. “The value of the Merrill Lynch platform is one of commodities and international capability,” analyst Charles Peabody of Portales Partners LLC, said in an April 13 Bloomberg TV interview. “March was a fabulous month” for the bank’s capital markets business, raising investors’ expectations, he said.
- Flicker of Hope in Subprime Failings. For investors looking for a bottom in the troubled housing market, one nascent but significant sign emerged last month: Subprime-mortgage delinquencies dropped for the first time in almost four years. The share of subprime loans that were at least 60 days past due or in foreclosure fell to 46.3% in March from 46.9% a month earlier, according to Fitch Ratings, which studied the value of loans packaged into securities. The decline is effectively a rounding error and pales in comparison to the steady increase in delinquencies from their low of 6.2% in 2006. But subprime borrowers were the first to buckle under the weight of their debt—triggering what quickly became a global financial crisis—and an improvement in the sector could be seen as a notable marker in the recovery. The decline comes amid other signs credit conditions are improving. On Tuesday, J.P. Morgan Chase & Co. reported net income jumped as delinquencies declined and the provision for credit losses fell. Across the economy, the portion of consumer loans that were at least 60 days past due fell to 3.59% on a seasonally adjusted basis at the end of March, from 3.73% at the end of December, according to Equifax Inc. and Moody's Economy.com. It was the second consecutive decline in delinquencies for mortgages, home-equity loans, credit cards and other types of consumer debt. "Credit quality is improving pretty dramatically across the board," says Mark Zandi, chief economist of Moody's Economy.com.
- Evidence Mounts of Strong Recovery.
- Former NY Governor Spitzer Calls NY Fed An 'Absolute Sinkhole'. Former New York governor Eliot Spitzer on Wednesday called the Federal Reserve Bank of New York an "absolute sinkhole" of failed financial oversight over the last decade. "The New York Fed has failed utterly, and something has to be done" to fix the bank that has served as the Fed's primary interface with Wall Street, he said at an event held in New York by the Levy Economics Institute of Bard College. "Not a single person" at the bank understood what was happening on Wall Street, he charged. Timothy Geithner was president of the New York Fed before becoming Treasury Secretary in the Obama administration. Spitzer criticized the makeup of the bank's board of directors as completely unrepresentative of the public's interest despite being required to be, saying that leadership body was captive to the interest of finance.
- Europe's VAT Lessons. Rates start low and increase, while income tax rates stay high. As Americans rush to complete their annual tax returns today, there is still some consolation in knowing that it could be worse: Like Europeans, we could pay both income taxes and a value-added tax, or VAT. And maybe we soon will. Paul Volcker, Nancy Pelosi, John Podesta and other allies of the Obama Administration have already floated the idea of an American VAT, so we thought you might like to know how it has worked in Europe.
- Why Intel(INTC) Will Soar to $46. Intel could and should double, Cramer said Wednesday, after last night’s stellar earnings report, which was driven by “the most impressive product cycle I can ever recall.”
- Generic-Drug Maker Gets Bigger With Buy of Baby Formula Firm. Like a proud parent, health care supplier Perrigo(PRGO) recently announced that it will soon have a very important new product category to add to its growing brood of store labels: infant formula.
zerohedge:
- The Great Lehman Derivative Robbery: From A Tipster; Lehman May Have Grounds To Sue Goldman(GS) and Barclays(BCS) For Fraudulent Transfers. Earlier today we posted the unredacted version of the 5th volume of the Lehman Examiner report, which unhid all the specifics of the unwind related to Lehman's options and futures positions. There was a reason why Goldman et al felt sufficiently motivated to make the data hidden in the first place. The reason: the banks participating in the liquidation made a killing on the unwind. Yet another involuntary gift from the Lehman creditor estate to the big banks who had the inside scoop on Lehman's books all along, and certainly in the days just before the bankruptcy was announced. The market continues to be one for the banks, and one for "everyone else." And "everyone else" still can not borrow at the Discount Window. Although we are confident that that may change soon. From an anonymous tipster:
TechCrunch:
- Facebook Shares Hit $50 On ScondMarket. Facebook shares just keep going up on SecondMarket, a platform for buying and selling private company stock. Sales are now being closed at $50/share, we’ve heard from a source (and we’ve confirmed that the best asking price is also $50/share). That values Facebook at around $22.5 billion. That’s a 100% increase since January, just a couple of months ago.
- Pennsylvania Senate: Toomey 50%, Specter 40%. Republican hopeful Pat Toomey for the first time registers 50% support in his race against incumbent Democrat Arlen Specter in Pennsylvania’s contest for the U.S. Senate. The latest Rasmussen Reports telephone survey of likely voters in the state shows Specter earning 40% of the vote, a level he’s held steady at since the first of the year.
- GOP Leader: "No More Bailouts". (video) Senate Minority Leader Mitch McConnell on financial regulation reform: "The American people have been telling us for nearly two years that any solution must do one thing — it must put an end to taxpayer funded bailouts for Wall Street banks. This bill not only allows for taxpayer-funded bailouts of Wall Street banks; it institutionalizes them."
- Breaking Up Citi(C) and Other Mega-Banks: The Missing Blueprints. An anonymous executive inside one of the big banks recently said that breaking up the "Too Big To Fail" banks is crucial to decreasing systemic risk and shifting resources to the productive sectors of the economy. We agree and just published a report that explores how they should be broken up. We aren't the first to call for breaking up the banks. In fact, the Federal Reserve's longest-serving policymaker, Thomas Hoenig, President of the Federal Reserve Bank of Kansas City, released a paper in December that explains why breaking up the big banks is critical to reducing systemic risk. One of the more candid moments in Congress in recent years came when Senator Dick Durbin (D-IL) told a reporter that banks "own" Congress. And that was before the Citizens United decision. The "Government Sachs"(GS) gold-plated revolving door to Treasury and other parts of the executive branch is well known and didn't begin with Obama. But as Nobel Prize-winning economist and author Joseph Stiglitz has suggested, the ties between Obama and Wall Street mean that his administration's programs "have been designed to help Wall Street rather than create a viable financial system." No wonder former IMF economist Simon Johnson suggested that the financial "coup" reminded him of Russia and other countries ruled by elite oligarchies.
- Exclusive: TD Ameritrade(AMTD) Eyeing Deals, Sees Dividend. The head of TD Ameritrade Holding Corp. said it has lots of cash to make a possible acquisition and, eventually, it will "absolutely make sense" for the big online brokerage to offer a dividend.
- TD Ameritrade CEO Says Concerned Reforms May Hurt. U.S. financial reform legislation may not be aimed at the real causes of the financial crisis and may unintentionally hurt mainstream investors, TD Ameritrade Holding Co Chief Executive Fred Tomczyk said on Wednesday. A proposed a tax on Wall Street trading and a debate over whether to require all financial advisers to abide by the same fiduciary standard might be missing their mark, Tomczyk told reporters at a brokerage industry conference. Tomczyk said the proposed tax could unintentionally hurt mainstream investors. "The person who designed it or proposed it is really targeting Wall Street. It's an anti-Wall Street bill. But the reality is the relative impact is more severe on the online brokerage and the average investor," he said. "That tax will be a multiple of what we charge them to trade," Tomczyk explained. "That's not at the root cause of the crisis, so why are you doing it?
- UPS(UPS) Earnings, Outlook Rise; Shares Climb. The world's biggest package delivery firm reported on Wednesday that its adjusted first-quarter earnings were 71 cents per share, compared with an adjusted 52 cents per share a year earlier. Analysts on average were expecting earnings of 57 cents per share, according to Thomson Reuters I/B/E/S. Atlanta-based UPS raised its 2010 outlook to a range of $3.05 to $3.30 per share, up from February's forecast of $2.70 to $3.05 per share. The outlook's midpoint of $3.18 is well above Wall Street's view of $2.95 per share for 2010. Shares of UPS rose 4.2 percent to $68.20 in extended trading from their $65.45 close Wednesday on the New York Stock Exchange. Shares of UPS rival FedEx Corp (FDX) were up 1.9 percent in after-hours trade.
- Yum's(YUM) China Business Rebounds, Shares Rise. Yum Brands Inc, parent of the KFC, Taco Bell and Pizza Hut chains, said a return to growth in China helped it serve up better-than-expected quarterly earnings. Shares in Yum, which reaps more than a third of its profit from China, rose more than 2 percent in extended trade on Wednesday.
- Toyota to Test All SUVs After Lexus Sales Halt.
- JB Hunt(JBHT) Q1 Results Beat Market Expectations. J.B. Hunt Transport Services Inc posted better-than-expected quarterly results on strong performance at its intermodal segment, which moves freight across multiple transportation platforms. Revenue at intermodal, its biggest segment, jumped 20 percent to $469 million in the quarter, while volumes rose 21 percent. Shares of the company were up 2 percent at $37.70 in trading after the bell.
- Toshiba U.S. PC Sales Surge in Q1, Slates Coming. Toshiba Corp's personal computer sales in the United States jumped 50 percent in the first quarter, and the company said it was preparing to roll out tablet-style computing devices later this year to compete with Apple Inc's iPad.
- Obama Fails to Soften Derivatives Reform Opposition.Barack Obama, president, met Republican leaders to discuss financial regulatory reform on Wednesday but the meeting did nothing to improve the tone of an increasingly bitter debate. Mitch McConnell, the Senate Republican leader, and John Boehner, the top Republican in the House of Representatives, attacked the proposed legislation as they emerged from a White House meeting with the president and Democratic leaders. “If you need to know one thing about this bill, it’s that it would make it official government policy to bail out the biggest Wall Street banks,” said Mr McConnell.
- George Soros Issues Stark Economic Warning. Railway porter-turned-billionaire financier George Soros has delivered a stark warning that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis. The man who "broke" the Bank of England (and who is still able to earn $US3.3 billion in a year) said the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learnt. Mr Soros, who worked as a porter to pay for his studies at the London School of Economics after emigrating from Hungary, warned that modern economics had got it wrong and that markets are not inherently stable. “The success in bailing out the system on the previous occasion led to a superbubble, except that in 2008 we used the same methods,” he told a meeting hosted by The Economist in London on Tuesday night. “Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble. “We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount."
Citigroup:
- Reiterated Buy on (ESRX), target $122.
- Reiterated Buy on (FL), raised estimates, boosted target to $19.
- Reiterated Buy on (NKE), target $86.
- Reiterated Buy on (IBM), target $150.
- Asian indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 87.5 -2 basis points.
- S&P 500 futures -.17%.
- NASDAQ 100 futures -.14%.
Earnings of Note
Company/Estimate
- (SCHW)/.11
- (PPG)/.63
- (FCS)/.24
- (ISRG)/1.72
- (GOOG)/6.61
- (AMD)/-.04
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 440K versus 460K the prior week.
- Continuing Claims are estimated to rise to 4580K versus 4550K prior.
- Empire Manufacturing for April is estimated to rise to 24.0 versus a reading of 22.86 in March.
- Net Long-Term TIC Flows for February are estimated to rise to $29.7B versus $19.1B in January.
- Industrial Production for March is estimated to rise +.7% versus a +.1% gain in February.
- Capacity Utilization for March is estimated to rise to 73.3% versus 72.7% in February.
- Philly Fed for April is estimated to rise to 20.0 versus a reading of 18.9 in March.
- The NAHB Housing Market Index for April is estimated to rise to 16.0 versus a reading of 15.0 in March.
- None of note
- The Fed's Lacker speaking, Fed's Bullard speaking, Fed's Lockhart speaking, White House Advisor Volcker speaking, Fed's Yellen speaking, Credit Card Master Trust data, EIA weekly natural gas inventory report, (LEN) shareholders meeting and the (TXN) shareholders meeting could also impact trading today.
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