Evening Headlines
Bloomberg:
- Yields Dropping to '04 Levels Spark Busiest July for Sales: Credit Markets. U.S. corporate bond sales soared 31 percent this month, the busiest July on record, as yields fell to the lowest in more than six years on growing investor confidence in the economic recovery. Issuance of $85.7 billion exceeded the previous high for the month of $71.1 billion set last year, according to data compiled by Bloomberg. The cost of borrowing fell to 5.04 percent, the lowest since April 2004, and down from the 2010 high of 5.75 percent on Jan. 4, according to Bank of America Merrill Lynch’s U.S. Corporate & High Yield index. That decline would save issuers about $7.1 million of interest per $1 billion of bonds.
- Health Law Needs Repeal: Douglas Holtz-Eakin and Michael Ramlet. The new health-care law is a threat to the health of small businesses. Its heavy dosage of mandates and penalties will be a financial burden, and the law is riddled with hidden barriers to stronger job growth. The small business implications of the legislation are important because data from the ADP National Employment Report shows that since January 2001 companies with one to 49 employees were responsible for 36 percent of job growth, while those with 50 to 499 workers accounted for 44 percent of new jobs. Small business vitality is crucial to the economic fortunes of U.S. workers, and substantial new costs that curtail their hiring should be of concern to companies, workers and policymakers alike. Sadly, the new health-care law is an assault on small business, beginning with the 3.8 percent Medicare tax on net investment income -- a direct tax on many business owners. Of even greater concern is the law’s most celebrated feature -- the mandate to cover full-time employees with health insurance. For businesses with more than 50 workers, this means paying a penalty if any full-time workers receive subsidized coverage. For larger companies already providing insurance, the law codifies the status quo. For every other company, the mandate will compete for scarce capital that might be used for hiring and expansion. It is even worse for firms with 50 employees or fewer, as the mandate presents a tremendous growth hurdle. For a business not offering insurance, hiring the 51st worker will trigger a penalty of $42,000. How many firms will choose not to expand?
- Citigroup(C) Said to Pay $75 Million to Settle SEC Subprime Case. Citigroup Inc. will pay $75 million to settle U.S. regulatory claims that it misled investors by understating holdings linked to subprime mortgages by billions of dollars as the housing crisis unfolded in 2007.
- Iceland's Credit Outlook Cut to Negative at Moody's on Foreign Loan Ruling. Iceland’s rating outlook was cut to negative at Moody’s Investors Service after a court ruling on foreign currency loans threatened to trigger bank losses that may require a government cash injection to offset. Iceland’s Baa3 sovereign rating, the lowest investment grade, may be lowered to junk if the bank ruling hurts the island’s economic recovery and forces the government to raise its debt levels by bailing out the banks, Moody’s said in a statement. “The magnitude of the banking system losses that will result from the recent court ruling is not known at this time but it is clear that Iceland still faces significant risks to its economic and financial recovery,” said Kathrin Muehlbronner, a Moody’s vice president and lead analyst for Iceland, in the statement.
- Orexigen's(OREX) Two-Drug Obesity Pill Cuts Hunger, Cravings, Weight in Study. Obese patients who took Orexigen Therapeutics Inc.’s experimental pill combining an anti- addiction drug and an antidepressant lost more weight than those who took a placebo, a company-sponsored study found. Patients who took the Orexigen pill, Contrave, and were given diet and exercise suggestions shed 5 percent to 6 percent of their body weight compared with an average weight loss of 1.3 percent among those taking placebos. La Jolla, California-based Orexigen is racing with Vivus Inc. and Arena Pharmaceuticals Inc. to bring weight-loss drugs to market. Applications from all three are pending before the U.S. Food and Drug Administration.
- Samsung Electronics Profit Jumps 83% to Record on Recovery in Memory Chips. Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, said second-quarter profit jumped 83 percent to a record, fueled by a recovery in demand for computer-memory chips. Net income climbed to 4.28 trillion won ($3.6 billion) in the three months ended June 30, from 2.33 trillion won a year earlier, the Suwon, South Korea-based company said in a statement today. Revenue increased 17 percent to 37.9 trillion won, Samsung said. Samsung joined technology companies including Intel Corp., Apple Inc. and Hynix Semiconductor Inc. in posting higher earnings for the latest quarter after prices increased on demand.
- Mexican Authorities Find 15 Bodies Near Monterrey; Drug Cartels Suspected. Mexican authorities discovered at least 15 bodies in a garbage ditch outside of the city of Monterrey, said David Perales, spokesman for the Nuevo Leon state investigation agency. The agency suspects the dead were killed by drug cartels, Perales said, speaking in a telephone interview from Monterrey, which is 280 miles south of San Antonio, Texas. Officials are investigating whether there were more victims, he said. Separately, investigators in the southern town of Taxco uncovered at least 77 bodies in an abandoned mine last month.
- Republicans Press FDA Head on Chinese Heparin. Two Texas Republicans want FDA Commissioner Peggy Hamburg to press Beijing on what Chinese health authorities did to track the contaminated heparin linked 81 deaths in the U.S. in 2008. Hamburg is visiting China next month, and Reps. Joe Barton and Mike Burgess see an opportunity to figure out how the how the contamination occurred and what is being done now to ensure supplies are pure. “The case of the tainted blood thinner remains unsolved,” the two said in a letter to Hamburg. “You are going to the source country of that crime,” and added: “Your trip represents the best hope of a breakthrough in solving this case.”
- From Tiananmen Square to Possible Buffett Successor. Twenty-one years ago, Li Lu was a student leader of the Tiananmen Square protests. Now a hedge-fund manager, he is in line to become a successor to Warren Buffett at Berkshire Hathaway Inc. Mr. Li, 44 years old, has emerged as a leading candidate to run a chunk of Berkshire's $100 billion portfolio, stemming from a close friendship with Charlie Munger, Berkshire's 86-year-old vice chairman. In an interview, Mr. Munger revealed that Mr. Li was likely to become one of the top Berkshire investment officials. "In my mind, it's a foregone conclusion," Mr. Munger said.
- Computer Evidence Ties Leaks to Soldier. Investigators have found concrete evidence on computers used by Pfc. Bradley Manning that link him with the leak of classified Afghanistan war reports, a U.S. defense official said. The disclosure came as Defense Secretary Robert Gates pledged Thursday to "aggressively investigate the leak" and find ways to prevent further breaches, and told reporters that he had invited the Federal Bureau of Investigation to assist the probe. Defense officials said the FBI was investigating whether civilians aided Pfc. Manning in providing the information to WikiLeaks, a Web-based group that this week released 76,000 secret reports from Afghanistan.
- Democrats Under Fire Over Health-Law Reporting Mandate. Congressional Democrats may water down or repeal new tax-reporting rules that are supposed to raise $16 billion for health-care legislation, facing a chorus of criticism about the rules. House Democrats were forced to postpone a vote late Thursday on a GOP motion calling for repeal of the reporting requirement. That, in turn, delayed action on an $11 billion bill that expands federally-subsidized bonds for infrastructure projects. House lawmakers may add language to the infrastructure bill to weaken or repeal the IRS reporting regime, Democratic aides said. "This is an issue we want to address and now we have an opportunity to do so," said Kristie Greco, a spokeswoman for House Majority Whip James Clyburn (D., S.C.).
- U.S. Nuclear Projects Tied Up Awaiting Federal Loan Guarantees. The so-called nuclear renaissance that was supposed to boost U.S. capacity to generate emissions- free power may stall as developers await decisions from the Obama administration on federal aid.
- The New Abnormal. Americans are broke and depressed—and also swilling $3 lattes and waiting in line for iPhones. Welcome to the schizophrenic economy.
Business Insider:
- With Case Against The Wyly Brothers, The SEC Goes To War Against Offshore Finance. We're still reading and digesting the details of the just-announced insider trading charges against Texas investors The Wyly brothers, but one thing is already clear: this is a major shot across the bow aimed at offshore tax.
- Obama to Raise Money in Dallas. President Barack Obama is expected to be in Dallas in early August as part of a two-city Texas trip to raise money for Democratic candidates, Democratic sources said Wednesday. The Dallas fundraiser, at a private residence, has apparently replaced plans for a presidential visit to either Houston or San Antonio. Obama is also scheduled to be in Austin on Aug. 9 for a fundraiser sponsored by the Democratic National Committee. Republican Gov. Rick Perry has asked for a meeting with him after he arrives in Texas to discuss concerns over border security and the administration's planned deployment of 250 National Guard troops to the border, far fewer than the 1,000 Perry requested. Obama's campaign travels this week called for fund-raisers in Washington, D.C., and New York City as well as the taping of an interview with ABC's "The View." His schedule next month, according to press reports, includes Democratic events in Atlanta and Chicago, as well as the Texas stops.
- Patrick Yields Ground on Casino Bill, Says One Slot Parlor OK. In a significant shift in his public position, Massachusetts Governor Deval Patrick said this afternoon that he would sign a casino gambling bill with one slot parlor and three full-scale casinos if legislators agreed to break a "logjam" on other unrelated measures.
AppleInsider:
- Apple(AAPL) Job Listing Hints at 'Revolutionary' New Mac OS X 10.7 Feature. A new corporate job listing from Apple boasts of a "revolutionary" new feature for the foundations of Mac OS X that will "truly amaze everyone." The new job listing posted this week and discovered by AppleInsider makes numerous references to a specific, singular feature said to be a part of the Mac OS X operating system. Of course, it declines to reveal what that feature could be, but the ad does use the word "revolutionary" on three separate occasions.
- EPA Rejects Challenge to Climate Rules. The Environmental Protection Agency Thursday rejected an effort to keep it from regulating greenhouse gas emissions, saying that e-mails released in last fall’s “Climategate” scandal gave it no reason to reconsider the science of global warming. In a sternly written opinion, EPA Administrator Lisa Jackson said she didn’t agree with requests from the GOP attorneys general from Texas and Virginia, the U.S. Chamber of Commerce and other conservative groups that questioned the underlying science linking humans to global warming and also warned of the potential economic burdens from new climate rules. EPA last December concluded that greenhouse gases are a threat to public health and welfare, a decision clearing the way this spring for climate-based regulations for new cars and trucks. Next year, the agency is expected to write standards for power plants and other major industrial sources of heat-trapping gases. In their petitions, EPA’s opponents had highlighted stolen e-mails from prominent climate scientists that they allege showed collusion to hide contrary information debunking global warming. Texas Attorney General Greg Abbott had also warned that the EPA rules would lead to “unprecedented bureaucratic licensing and regulatory burdens on farmers, ranchers, small businesses, hospitals and even schools.” But Jackson said the groups’ arguments lack merit.
- Ethics Unveils 13 Rangel Charges. A scathing House ethics report charges that Rep. Charles Rangel, an iconic New York powerbroker, violated 13 ethics and federal regulations covering public officials, including pressuring lobbyists and corporations to cough up millions for a New York college building bearing Rangel’s name. In releasing a "Statement of Alleged Violation" of against Rangel, investigators drew a portrait of a veteran lawmaker who used his office and staffers for his own personal benefit and aggrandizement, repeatedly running afoul of House financial disclosure rules. He now faces an ethics “trial” unless he’s able to cut a deal with the ethics committee.
- Republican Concerns Could Stall START Treaty. Senate Republicans voiced objections on Thursday to the new START nuclear arms treaty with Russia. At a Senate Armed Services Committee hearing, Republicans said the accord could impede U.S. plans for an anti-missile defense system and pressed the Obama administration to release the full treaty negotiating record to answer their questions. "We originally were told that there would be no references to missile defense in the treaty and no linkage drawn between offensive and defensive weapons," Senator John McCain said, adding that one section included a "clear, legally binding limitation on our missile defense options." "Why did the administration agree to this language after saying they would do no such thing?" he asked. "We're insisting on an opportunity to review the negotiating record for ourselves, specifically those parts dealing with the ambiguous references to missile defense."
- Wynn(WYNN) Q2 Profit Doubles, Shares Decline. Casino operator Wynn Resorts Ltd's (WYNN) quarterly profit more than doubled as revenue in Macau rose 74 percent, but much of the beat came from a spike in casino winnings, and shares fell more than 3 percent.
- First Solar(FSLR) Profit Tops Street, Trims Sales View. First Solar (FSLR) reported better-than-expected quarterly profits on Thursday, but trimmed its 2010 sales forecast because of weaker prices. Its shares fell 4 percent in after hours trading.
- US Banks in Rush for Cheap Finance. US banks are taking advantage of improving earnings and growing investor demand to raise billions of dollars in debt at historically low interest rates, a move that could boost the sector’s profits in coming years. The burst of fundraising in the US is in stark contrast to Europe where banks have struggled to issue debt as the eurozone crisis and worries about the financial industry have undermined market confidence. The cheap finance locked in by big institutions such as JPMorgan Chase, US Bancorp, Goldman Sachs and Morgan Stanley in recent days marks a remarkable comeback for a sector that was shunned by investors during the financial crisis. Less than two years after the government was forced to intervene to ease a dramatic credit crunch, US banks sold more than $7bn in debt last week – the largest weekly total since September 2009, says Dealogic. US Bancorp, a Minneapolis-based lender, raised $1bn in five-year bonds at an interest rate of 2.45 per cent – one of the lowest ever paid by a bank. Lower funding costs boost profits because they increase the margins earned by banks on their loans to consumers, companies and investors.
- Chinese central bank adviser Zhou Qiren said the nation can consider a small yuan depreciation to help stabilize export growth.
- Shanghai will announce tightening measures for the real estate market in the second half of the year, citing Zhou Bo, head of Shanghai's National Development and Reform Commission.
Citigroup:
- Reiterated Buy on (IRM), raised target to $32.
- Reiterated Buy on (NIHD), target $50.
- Reiterated Buy on (JNPR), target $36.
- Reiterated Overweight on (POT), raised estimates, target $135.
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 118.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 113.0 -.5 basis point.
- S&P 500 futures -.50%.
- NASDAQ 100 futures -.47%.
Earnings of Note
Company/Estimate
- (NWL)/.44
- (FSS)/.07
- (SPG)/1.34
- (MCK)/1.07
- (ACI)/.25
- (WY)/.13
- (ITT)/1.07
- (CVX)/2.46
- (AEP)/.69
- (FO)/.75
- (BWA)/.67
- (MSTR)/.86
- (MRK)/.82
8:30 am EST
- 2Q Advance GDP is estimated to rise+2.6% versus a +2.7% gain in 1Q.
- 2Q Advance Personal Consumption is estimated to rise +2.4% versus a +3.0% gain in 1Q.
- 2Q Advance GDP Price Index is estimated to rise +1.1% versus a +1.1% gain in 1Q.
- 2Q Advance Core PCE is estimated to rise +1.0% versus a +.7% gain in 1Q.
- The 2Q Employment Cost Index is estimated to rise +.5% versus a +.6% gain in 1Q.
- Chicago Purchasing Manager for July is estimated to fall to 56.0 versus a reading of 59.1 in June.
- Final Univ. of Mich. Consumer Confidence for July is estimated to rise to 67.0 versus a prior estimate of 66.5.
- None of note
- The Fed's Bullard speaking on CNBC, Bloomberg FCI for July and the NAPM-Milwaukee for July could also impact trading today.
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