Evening Headlines
Bloomberg:
- Mortgage-Bond Spreads Surpass Lows Reached During Federal Reserve Buying. Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates reached record lows relative to 10-year Treasuries as investors search for higher returns amid limited refinancing by borrowers. Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds narrowed 0.02 percentage point to about 0.58 percentage point more than 10-year Treasuries as of 1:45 p.m. in New York, according to data compiled by Bloomberg. The gap reached 0.59 percentage point on March 29, two days before the Federal Reserve ended its buying of $1.25 trillion of so-called agency mortgage bonds.
- Gross Calls Spending to Maintain Consumption a Waste. Pacific Investment Management Co.’s Bill Gross said deficit spending by governments that seek to maintain artificial levels of consumption “can be compared to flushing money down an economic toilet.” Without acceleration in population growth, developed countries finance more consumption to maintain economic growth, the world’s biggest bond-fund manager wrote in his August commentary today on Newport Beach, California-based Pimco’s website. Leveraged spending, he said, is not a substitute for demand created by people. “I will go so far as to say that not only growth but capitalism itself may be in part dependent on a growing population,” Gross wrote. “Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence.” Deficit spending will be unsuccessful in what Pimco calls the “new normal” because deleveraging, re-regulation and de- globalization produces structural headwinds that lead to slower growth and lower-than-average investment returns, Gross said. Japan is the modern-day example of what deleveraging in the face of a slowing and now negatively growing population can do, Gross said.
- Pickens, Home Depot(HD) Beat Wind-Turbine Makers in Energy Measure. T. Boone Pickens, the billionaire energy hedge-fund manager, and Home Depot Inc., the largest U.S. home-improvement retailer, are winners in energy legislation that fails to help solar-panel and wind-turbine makers. The measure proposed yesterday by Senate Democrats would give Pickens victory in his lobbying campaign for more use of natural gas, providing $3.8 billion in rebates for cars and trucks powered by the fuel. Home Depot would benefit from provisions to channel $5 billion in rebates to homeowners who upgrade to more efficient appliances or add insulation that reduces energy use. The provisions were the main survivors among proposals to reshape U.S. energy use under the measure that would also set tougher rules for offshore drilling after BP Plc’s Gulf of Mexico oil spill, the worst in U.S. history. Absent from the measure were limits on carbon dioxide or requirements that utilities add solar and wind power to their portfolios.
- CIC Sells Morgan Stanley Shares for Total of $396.5 Million in Past Week. China Investment Corp., the Chinese sovereign wealth fund that bought a 9.9 percent stake in Morgan Stanley in 2007, sold $132.8 million of shares in the investment bank yesterday, bringing the total amount sold in the last week to $396.5 million. CIC sold 4.88 million shares at a weighted average of $27.25 yesterday, the Beijing-based fund said in a regulatory filing. CIC still owns 161.6 million Morgan Stanley shares, according to the filing. The fund sold 14.6 million shares since July 21, the day Morgan Stanley jumped by the most in more than a year after reporting better-than-expected earnings.
- Oliver Stone's Showtime Series Should be Canceled, Billionaire Saban Says. called on CBS Corp.’s Showtime Networks to cancel Billionaire Haim SabanOliver Stone’s planned “Secret History of America” documentary series after the filmmaker made remarks that were criticized as anti-Semitic. Saban, creator of the “Power Rangers” franchise and an investor in Univision Communications Inc., urged New York-based CBS to cancel the 10-hour series, his spokeswoman, Stephanie Pillersdorf, said today in an e-mail. “Anyone who works with this guy should be ashamed,” Saban, who is Jewish and a supporter of Israel, said in comments posted at HuffingtonPost.com and confirmed by Pillersdorf. “Oliver Stone should be given a helping hand --indeed, a vigorous shove -- into the land of forced retirement.”
- Dendreon's(DNDN) Vaccine for Prostate Cancer Extends Life in Published Study. Dendreon Corp.’s prostate cancer vaccine, Provenge, extended lives by 4.1 months in a study published in the New England Journal of Medicine. The data, released previously, led to the drug’s U.S. approval in April. Provenge is the first drug designed to train the body’s immune system to fight cancer and is the most effective treatment for certain patients with advanced prostate tumors, said Philip Kantoff, a professor of medicine at Harvard Medical School and the study’s lead author.
- Illinois Will Probably Raise Income-Tax Rate to 5%, Budget Director Says. Illinois, which is in its worst financial position ever, will raise the income-tax rate in January to address its deficit, Governor Pat Quinn’s budget director said. Lawmakers will likely increase the personal tax to 5 percent from 3 percent, generating $6 billion of new revenue, the budget director, David Vaught, said in an interview.
- Avis Budget Offers $1.33 Billion for Dollar Thrifty. Avis Budget Group Inc.’s $1.33 billion offer for Dollar Thrifty Automotive Group Inc., which topped Hertz Global Holdings Inc.’s agreement to buy the rental- car company, may signal a bidding war is under way. The $46.50-a-share offer includes $39.25 in cash and 0.6543 of an Avis share for each Dollar Thrifty share, Parsippany, New Jersey-based Avis said yesterday in a statement. The proposal is 4.5 percent less than Dollar Thrifty’s closing price yesterday.
- Vietnam's Debt Rating Lowered by Fitch on Foreign Borrowing, 'Weak' Banks. “Vietnam’s sovereign creditworthiness has deteriorated on the back of weaker external finances and rising external financing requirements amid an inconsistent macroeconomic policy framework,” Ai Ling Ngiam, a director in Fitch’s Asia Sovereign team, said in today’s release. She also cited a “weak banking system.”
- Arizona Ruling Sparks Political Firestorm. A federal judge's decision to block the most controversial elements of Arizona's immigration law offered a fresh hot-button issue for the already heated political season. Jane Norton, a Republican candidate for the U.S. Senate in Colorado, had a hunch that by dinnertime Wednesday, conservative voters across the state would have heard about a federal judge blocking much of Arizona's immigration law. She had a hunch they would be angry.
- Sanofi Likely to Make Formal Bid to Genzyme(GENZ) Board. Sanofi-Aventis SA is increasingly likely to make a formal takeover offer to Genzyme Corp.'s board, people familiar with the matter said, in an effort to win enough support among the U.S. biotechnology company's directors to secure a deal that could be valued at about $20 billion. There is growing expectation in both camps that the French pharmaceutical company will send a so-called "bear hug" letter to Genzyme, publicly detailing its proposal, these people said.
- Americans Cut Back on Visits to Doctor. Insured Americans are using fewer medical services, raising questions about whether patients are consuming less health care as they pick up a greater share of the costs. The drop in usage is showing up as health-care companies report financial results. Insurers, lab-testing companies, hospitals and doctor-billing concerns say that patient visits, drug prescriptions and procedures were down in the second quarter from year-ago levels. "People just aren't using health-care like they have," said Wayne DeVeydt, WellPoint Inc.'s chief financial officer, in an interview Wednesday. "Utilization is lower than we expected, and it's unusual." Others say that consumers are beginning to forgo elective procedures like knee replacements. "We have a very weak economy and it's just a different environment for the elective parts of health care," said Paul Ginsburg, a health economist who runs the Center for Studying Health System Change and has been analyzing health-company earnings.
- DirectTV(DTV) Plays Offense With NFL Ads. Satellite Provider Will Kick Off $100 Million Marketing Blitz to Boost Its Sunday Program Package. DirecTV Group Inc. is launching its biggest advertising campaign yet for its marquee property, NFL Sunday Ticket, as it faces mounting pressure from pay-television competitors increasingly offering rival NFL packages.
- Kindle to Go 'Mass Market'. Amazon(AMZN) Digs in Heels by Introducing New, Cheaper Version of E-Book Reader.
- Bruce Berkowitz Bets on Financials, Buys Morgan Stake(MS). Well-known mutual-fund manager Bruce Berkowitz is still betting on the U.S. financial sector, saying he recently accumulated a stake in Morgan Stanley (MS).
- Fannie Mae, Freddie Mac Still Too Big to Nail: Jonathan Weil. The White House says it’s finally ready to consider new ideas for what to do about Fannie Mae and Freddie Mac. Still absent from the government’s agenda is any serious effort to hold anyone accountable for their ruin or investigate why they collapsed.
- Dodd, Frank Plan Congressional Hearings on Basel Bank-Capital Regulations. Christopher Dodd and Barney Frank, authors of the U.S. financial overhaul, plan hearings on the status of global talks to revise bank-capital standards amid worries that proposed rules are being watered down. “I am concerned the recent proposals out of Basel will result in weak and perhaps even nonbinding provisions that provide credit to banks for holding forms of capital that have little or no value in absorbing losses,” said Senator Ted Kaufman, Democrat of Delaware. “The financial reform bill includes only a promise of higher capital requirements for U.S. banks, which we were told were going to be negotiated on an international level.”
- China's Stocks Rally Will Wane on Inflation Outlook, HSBC's Mahendran Says. HSBC Private Bank’s Arjuna Mahendran, who predicted a decline in China’s stocks in January, said the the country’s month-long equities rally may falter if the government isn’t able to boost the economy and contain inflation.“It’s not going to be an easy ride to regain losses,” said Mahendran, the head of investment strategy for Asia in Singapore at HSBC Private Bank, a unit of Europe’s largest bank overseeing $460 billion globally. “We might see some short-term gains on the index, but there could be reversals until the picture of overall inflation is clearer.”
- What Weeks of Real Usage Tells About New iPhone by Walt Mossberg.
- Taxes: A Defining Issue. Barack Obama knows taxes define worldview. The GOP should offer voters an alternative.
- Barring BP(BP) From Drilling Would Cost U.S. Jobs, Company Says. BP Plc objected to proposed legislation that would bar the oil company from operating new drilling leases in U.S. waters, saying it could trigger job losses and threaten the nation’s energy security. A provision of the House bill may have a “drastic impact,” David Nagel, executive vice president of BP America, said in a July 28 letter to Democratic Speaker Nancy Pelosi of California and Republican Minority Leader John Boehner of Ohio. BP said it contributes “significantly” to U.S. oil output as the largest producer in the deep waters of the Gulf. “If this provision were to limit our ability to develop new and existing energy sources, it would harm the ongoing effort to increase America’s energy independence,” Nagel wrote. While BP supports stronger drilling regulation, it is concerned that the provision of the House measure “could have profound consequences for the Gulf Coast economy and jobs, and for the nation as a whole,” Nagel said in the letter.
- SEC Investigates Trading in Anadarko Shares. Trading in shares of the oil and gas exploration company Anadarko Petroleum late this spring are under investigation by the Securities and Exchange Commission, according to someone familiar with the matter.
- Visa(V) Results Improve, Top Analysts' Expectations. Visa turned in a quarterly profit of $716 million, outpacing Wall Street estimates, as consumers resumed spending.
- This Is Real: The White House Wants To Stimulate The Economy By Building More Cheap Housing. We must admit to being a tad perplexed by this post up at The White House blog: Affordable Housing in the Recovery Summer. That's right, apparently our central planners, in their infinite wisdom have decided that what the economy is really lacking right now is more cheap housing. Here's what Rosie Rios, the US Treasurer wrote:
- Al-Qaeda's New Magazine. ''Inspire'' aims to turn Muslims in the Western world toward violent jihad. Can American publishers meet the challenge? So in case you missed it, al Qaeda has a brand new magazine. Yes, really. Just when publishing titans like Hearst and Conde Nast have closed the doors on classics such as Gourmet and O At Home and Newsweek struggles for its future, our friends at al Qaeda headquarters have come up with Inspire, an English-language, online publication aimed at turning Muslims in the English-speaking (Western) world toward violent jihad.
- The Comeback in Airlines and Aerospace. In an economic setting less than perfect, but still expansive, airlines are a leveraged earnings play.
Crain's Chicago Business:
- Bill Calls for Study Delinking Lake Michigan, Chicago River to Stall Asian Carp. A U.S. House water projects bill introduced Wednesday would require the Army Corps of Engineers to study separation of Lake Michigan from the Chicago River and the local canal system to prevent the migration of Asian carp and other invasive species. The bill, introduced by Rep. Jim Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, is expected to clear the panel Thursday and head to the full House for a vote soon. While many Midwest politicians have pushed the idea lately, separating the Great Lakes from the Mississippi River Basin has been highly controversial locally because it would disrupt industrial barge shipping and recreational boating in the Chicago area. The 108-page House bill contains hundreds of specific flood control and environmental projects across the country.
- Viking Global Investors Suffers Bad 2Q, Large Redemptions. Viking Global Investors LP, a "Tiger Cub" hedge fund manager with $12.1 billion in assets under management as of June 30, suffered a bad second quarter with losses for both of its funds, according to its investor letter. Viking also has received large redemption requests when it offered a " liquidity option" to investors after its chief investment officer stepped down in the spring, the letter said. The letter, written by its Chief Executive O. Andreas Halvorsen and posted on website Dealbreaker.com, said its Viking Global Equities fund lost 5% and its Viking Long Fund lost 11.9% net in the second quarter, net of all fees on a composite basis. Gross external redemptions for Aug. 1 amounted to about 10.5% of capital in Viking Global Equities fund and about 13% for Viking Long Fund, as it offered investors a one-time liquidity option following the resignation of chief investment officer David Ott.
- Apple's(AAPL) Newly Updated Mac Desktops Feature Only ATI Graphics. In this week's refresh of the Mac Pro and iMac lineup, Apple chose to only offer ATI graphics options in all configurations of the company's latest desktops. That's a change from last October, when the iMac line was redesigned, and buyers of the the 21.5-inch iMac had the option of integrated graphics via the Nvidia GeForce 9400M. The discrete graphics options available in last year's iMac line were all ATI cards. But with Tuesday's updates of the iMac and Mac Pro lines, ATI is now the sole graphics option on Apple's Mac desktop lineup. David Baumann, product manager for AMD's graphics division, which oversees the ATI graphics products, spoke with AppleInsider about the new lineup.
- 28% Say U.S. Heading in Right Direction. Twenty-eight percent (28%) of Likely Voters say the country is heading in the right direction, according to a new Rasmussen Reports national telephone survey taken the week ending Sunday, July 25. Just over half (53%) of Democrats feel the country is heading in the right direction, but 91% of Republicans and 73% of voters not affiliated with either major party believe the country is heading down the wrong track. Sixty-seven percent (67%) of all voters say the country is heading down the wrong track, unchanged from last week.
- Rangel to Dems: Drop Me If You Must. Not even his colleagues know what Rangel will do Thursday, when the House ethics committee reveals what is expected to be a scathing slate of allegations of wrongdoing to open the congressional version of a trial. Rangel declined to comment on the specifics of his case, but his remarks suggest that he knows more calls for his resignation may be coming. Despite that possibility, he was prepared for a fight, according to some fellow black Democrats. There’s a lot riding on Rangel’s decisions — for him, his party and the integrity of the institution he has served in since 1971. “I think he’s going to have to go, maybe tomorrow,” said a member of the Congressional Black Caucus who asked not to be named.
- Students Looking for Jobs Boost Metro Unemployment. The unemployment rate in about three-quarters of the nation's largest metro areas rose last month as nearly one million teenagers entered the work force looking for summer jobs. The Labor Department said Wednesday that the unemployment rate rose in 291 of 374 areas in June from May.
- Getting a Grip on Government Debt. Continuous annual federal budget deficits have led to a big increase in the nation's overall debt. Explore this interactive to see:
- Sarkozy Orders Illegal Roma Immigrants Expelled. French President Nicolas Sarkozy on Wednesday ordered authorities to expel Gypsy illegal immigrants and dismantle their camps, amid accusations that his government is acting racist in its treatment of the group known as Roma. Sarkozy called a government meeting Wednesday after Gypsies clashed with police this month following the shooting death of a youth fleeing officers in the Loire Valley. Sarkozy said those responsible for the clashes would be "severely punished" and ordered the government to expel all illegal Roma immigrants, almost all of whom have come from eastern Europe. He pushed for a change in France's immigration law to make such expulsion easier "for reasons of public order." He said illegal Gypsy camps "will be systematically evacuated," calling them sources of trafficking, exploitation of children and prostitution.
- Downward pressure on the Chinese economy is increasing because of property market curbs, government debt vehicle controls, and carbon emission reduction efforts, citing Zhang Jianhua, the head of the People's Bank of China's research bureau.
- Moody's: Regions Bank on Watchlist for Possible Downgrade.
- Moody's: SunTrust Bank on Watch for Possible Downgrade.
- Juniper(JNPR) To Be Key AT&T(T) Supplier, Details Due Thurs. Juniper Networks Inc (JNPR) said on Tuesday it will be named a key supplier to AT&T Inc's (T) network build-out, a move that could help it gain business with the country's top telecommunications carrier. Juniper will be chosen as a supplier for AT&T's IP (Internet Protocol), MPLS (Multi Protocol Label Switching), Ethernet and Evolved Packet Core domain, it said.
- Akamai(AKAM) Profit and Cost Outlook Weigh on Shares. Akamai Technologies Inc's (AKAM) business outlook disappointed investors who expected greater profit from the growing popularity of online entertainment, sending the shares down 5 percent after-hours on Wednesday.
- US Jobless Rate to Stay High-Ex Fed No.2. The United States will suffer high unemployment for some time as it slowlyrecovers from the deep recession that ended in 2009, a former second in command at the Federal Reserve said on Wednesday. "I see a very slow, uneven recovery. It will not be fast enough to put a dent in the painfully high unemployment rate for some time," Roger Ferguson, the Federal Reserve's vice chairman from 1999 to 2006, told Reuters after a speech in Cambridge, Massachusetts.
- VistaPrint(VPRT) Sees Weak 2011; Shares Plunge. Vistaprint N.V., a provider of online printing and design services, posted weaker-than-expected quarterly revenue hurt by currency fluctuations and forecast 2011 results well short of the market consensus, sending it shares down 26 percent.
- Challenging Half at RAB Capital. RAB Capital, one of the worst-hit hedge fund managers during the financial crisis, said hopes of pushing ahead with its recovery had been dampened by a challenging first half to 2010. Revenues fell 14 per cent to £8.2m, the group’s pre-tax loss worsened to £3.3m from a loss of £2.7m the year before, and the group proposed to cut the interim dividend to 0.1p, against 0.6p a share last year. After two years of restructuring funds, disposals and cutting costs, assets under management fell to $1.26bn from $1.35bn in December. At RAB’s peak in 2007, RAB managed more than $7bn in assets until a wave of redemptions hit its funds.
- Banks Plan for Loss of Eurozone Member. Banks have started early-stage planning to deal with the potential fallout on the derivatives and bond markets of a European country being forced to leave the euro. After having received queries by some banks about the impact of such an event, the body representing the swaps and derivatives industry last week contacted some of its members to form a group to consider what they may need to do if a eurozone state is ejected. One person close to the process said that because of the sensitivity of the issue only a small number of members, about 12, predominantly banks but also investors, had been approached. A spokeswoman for the International Swaps and Derivatives Association (ISDA) said the move expressed “no view as to the likelihood of such an event occurring”, but that the organisation had decided to establish a group to “explore the different scenarios in which a country may leave the eurozone and consider what legal and documentation issues could arise in each for the (over-the-counter) derivatives markets and what steps would be necessary in order to address them”.
- China PBOC Official Calls for Policy Adjustment Against Inflation. Inflation is the "main threat" to the Chinese economy in the current half of the year, and the central bank will need to adjust policies to drain interbank market liquidity and ease price pressures, a People's Bank of China official said Wednesday. Jiao Jinpu, a former central bank researcher and currently deputy-director of the bank's graduate school, told a forum here that the strength in M1 money supply growth seen during the first half will impact price indicators after a six month lag. "Money supply growth was a bit too fast," he said. "That money, will sooner or later translate into inflationary pressure." M1 growth ended the first half up 24.6% after hitting nearly 39% in January. Managing inflation will be the main challenge for monetary policy in the second half, Jiao said, though the broader policy picture will remain unchanged, with the government continuing with its moderately loose monetary policy stance. "The central bank needs to adjust its operations to drain excess liquidity and control inflation," Jiao said.
- China will keep its property market curbs in place after the policies successfully stemmed the rapid rise in home prices in some cities, said Liu Yingjie, head of the comprehensive department at the State Council Research Office.
Citigroup:
- Reiterated Buy on (PX), raised target to $99.
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 117.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 113.5 +4.0 basis points.
- S&P 500 futures +.24%.
- NASDAQ 100 futures +.13%.
Earnings of Note
Company/Estimate
- (CME)/4.36
- (GT)/.03
- (ADP)/.42
- (WMB)/.30
- (IRM)/.24
- (GR)/1.07
- (XEL)/.27
- (MCO)/.44
- (CNX)/.66
- (DPS)/.69
- (MOT)/.08
- (F)/.94
- (BEN)/1.50
- (KLAC)/.59
- (FSLR)/1.62
- (GNW)/.28
- (AMGN)/1.30
- (MWW)/-.05
- (MET)/1.00
- (EXPE)/.42
- (AVP)/.35
- (WYNN)/.42
- (NOC)/2.20
- (BDX)/1.24
- (CELG)/.66
- (LUV)/.26
- (XOM)/1.45
- (MFE)/.41
- (CL)/1.17
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 460K versus 464K the prior week.
- Continuing Claims are estimated to rise to 4500K versus 4487K prior.
- None of note
- The Fed's Fisher speaking, $29 Billion 7-Year Treasury Note Auction, weekly EIA natural gas inventory report and the (MSFT) analyst meeting could also impact trading today.
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