Today's Headlines

Bloomberg:

• Merkel Says Greece Must Show Cuts to Get German Aid. German Chancellor Angela Merkel said she won’t release Greek rescue funds until the country shows it’s got a “sustainable, credible” plan to cut its budget deficit. A decision may be in a “few days,” she said.
• Greek Contagion Concern Spurs Sovereign Default Risk to Record. Greece led an increase in European sovereign credit risk on concern the bill for bailing out the region’s most-indebted nations will surge as they struggle to finance swollen budget deficits. Credit-default swaps on Greece soared as much as 98.5 basis points to a record 713 and Portugal jumped 39 basis points to an all-time high of 318, spurring the Markit iTraxx SovX Western Europe Index of swaps on 15 governments to 117 basis points, according to CMA DataVision. Contracts on Spain climbed 10.5 basis points to 184 and Ireland increased 16.5 to 200. “On the face of it, a restructuring, a rescheduling or an external prop for the debt looks unavoidable” for Greece, Mark Schofield, head of interest-rate strategy at Citigroup Inc. in London, wrote in an investor note. That “could trigger rapid contagion that would cause a much graver problem should Spain, Portugal and Ireland be impacted,” he wrote. There is a risk that fiscal strains in the euro region will be “more dramatic” than they now appear, said Swedish central bank First Deputy Governor Svante Oeberg. “Greece is not the only potential problem,” Oeberg said in a speech posted on the Web site of the Stockholm-based Riksbank today. “Other countries also have major problems and in a worst-case scenario, this could develop into a debt crisis in several countries, which also affects the bank system.” Investors are paying record high rates to protect bonds of banks in Europe from default relative to the rest of the market as the region’s fiscal crisis deepens. The Markit iTraxx Financial Index of default swaps is about 26.5 basis points higher than the corporate Markit iTraxx Europe Index, according to JPMorgan Chase & Co.
• Caterpillar(CAT) Profit Tops Estimates as Economy Improves. Caterpillar Inc., the world’s largest maker of construction equipment, posted its first earnings increase in seven quarters, exceeding analysts’ estimates, as the global economy began to improve. First-quarter profit excluding costs for a new health-care law was 50 cents a share, beating the average estimate of 39 cents a share in a Bloomberg survey of 21 analysts. Caterpillar stock rose the most since mid-February. Full-year sales, profit and economic growth will be higher than executives previously predicted, Peoria, Illinois-based Caterpillar said today in a statement.
• Options Bets Against U.S. Retailers Double as Estimates Rise. Traders have doubled their bearish bets against U.S. retailers in the options market, speculating next month’s reports on sales and unemployment will disappoint investors after a record 12-week rally. The ratio of puts to sell the SPDR S&P Retail exchange- traded fund versus calls to buy it has jumped to 4.1-to-1, close to the highest level since August, and put trading surged to a nine-month high on April 23. Wagers are most concentrated on contracts that pay off should the ETF fall 18 percent by May 21. Derivatives traders are diverging from equity analysts, who have increased 2010 profit growth forecasts for the industry to 9.5 percent from 8.8 percent at the beginning of April, according to data compiled by Bloomberg.
• Mexicans Are 'Angered' by Arizona Law, Calderon Says. Mexicans are “angered and saddened” by an Arizona law making it a state crime to be in the U.S. illegally, President Felipe Calderon said.
• Whirlpool(WHR) Soars After Boosting Annual Profit Forecast. Whirlpool Corp., the world’s largest appliance maker, advanced to the highest level in at least three decades in New York trading after increasing its forecast and posting earnings that exceeded analysts’ estimates. Earnings will be as much as $8.50 a share this year, compared with a previous forecast of at most $7, the Benton Harbor, Michigan-based company said in a statement today. Excluding some items, profit will total $8.10 to $8.60, Whirlpool said. Analysts predicted earnings of $6.83, the average of estimates compiled by Bloomberg.

Business Insider:

• Cumberland's David Kotok Says He Knows of Investors Pulling Money Out of Paulson's Fund.
• Forget About The Consumer Revolution, China Has A Long Way To Go(Stratfor).
  

AppleInsider:

• Estimate Says Apple(AAPL) Has Sold More Than a Millino iPads. The numbers were calculated by seeing how many new, unique iPads were spotted coming through Chitika's online advertising network. The running tally has been in place since soon after the iPad launched, and the advertising firm's calculations have been adjusted a number of times in an effort to provide more accurate estimates.
  

The Big Money:

• C'Mon - Break it Up! The case for splitting up the nation's megabanks. Last week, Senators Sherrod Brown and Ted Kaufman introduced a bill that would break up the biggest financial institutions and cap bank sizes so that they can never get so big again. Senate Banking Committee Chairman Christopher Dodd (so far) hasn’t bought it, and the administration hasn’t bought it, and the biggest banks aren’t keen on it. Yet it might be the single most important piece of financial reform legislation currently under consideration, and is the only legislation on the table that could protect against what should be our two biggest worries: 1) another major meltdown driven by financial institutions that aren’t worried about failure, and 2) an economy run by uncompetitive, enormous financial institutions that distort the market because they are too big to be bothered to compete.

Rasmussen Reports:

• 60% Believe Health Care Law Will Increase Deficit, 58% Favor Repeal. Support for repeal of the recently-passed national health care plan remains strong as most voters believe the law will increase the cost of care, hurt quality and push the federal budget deficit even higher. The latest Rasmussen Reports national telephone survey finds that 58% of likely voters nationwide favor repeal, while 38% are opposed. Those figures are little changed from a week ago and include 47% who Strongly Favor repeal. Twenty-nine percent (29%) Strongly Oppose the repeal effort.

Politico:

• Republican Party May Release Their Own Financial Overhaul Bill. Senate Republicans are weighing the release of their own financial overhaul bill if the parties reach an impasse over the bipartisan talks, aides to Sen. Richard Shelby (R-Ala.) said Monday. The decision would be made after a key test vote Monday night to open debate on the bill passed through the Senate Banking Committee on a party-line vote, the aides said. All 41 Senate Republicans are expected to block consideration of the bill, stalling the reform push – at least temporarily.

Real Clear Politics:

• Hold the VAT - Taxpayers May Prefer Spending Cuts.

Reuters:

• Congo Sees Copper, Cobalt Output Doubling by 2012. Copper and cobalt production from Democratic Republic of Congo will more than double over the next two years, signaling a surge in revenues, according to a government forecast obtained by Reuters on Monday. The projected rise in output, the bulk of which is expected to come from Freeport-MacMoRan's Tenke Fungurume mine, could pad coffers in the vast central African state where the two minerals already represent about 75 percent of exports. Copper production will rise to 851,608 tonnes in 2012 from an estimated 409,935 tonnes this year, while cobalt output will hit 91,355 tonnes from 39,327 tonnes over the same period, according to the forecast.
• Hedge Funds Wary of Deserting Wounded Goldman(GS). Hedge fund managers are sticking by an old rule of thumb in the wake of SEC charges against Goldman Sachs. Don't kill the golden goose.
• Boeing(BA) 'Gaining Solid Momentum' - CEO. Boeing Co, the world's second-largest plane maker, is gaining momentum as the economy improves and is looking forward to several years of steady or increasing commercial production, Chief Executive Jim McNerney told the company's annual meeting on Monday. "We see an improving business environment," McNerney said. "Clearly this company is gaining solid momentum."
• Dallas Fed Texas April Manufacturing Activity 21.1.
• US Q1 Home Vacancy Rate Falls to 2.6% from 2.7.
  

Bandao.cn:

• China may raise interest rates by the end of June to curb inflation and to prevent the economy from overheating, citing Chen Dongqi, a researcher at the National Development and Reform Commission.

Daily NK:

• North Korea's military is celebrating what it called "a revenge against the enemies" in a possible reference to last month's deadly sinking of a South Korean naval ship. South Korea is "shaking in fear" after a retaliation by North Korea's army, a ruling party official said. The comments reaffirmed many North Koreans' suspicion that their government was responsible for the March 26 sinking, Daily NK said.