Today's Headlines

Bloomberg:

• U.S. Economy: Confidence Tumbles Risking Slowdown. Confidence among U.S. consumers tumbled in July to the lowest level in a year, heightening the risk of a slowdown in economic growth. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 66.5, the lowest since August and less than the most pessimistic forecast of economists surveyed by Bloomberg News. Another report showed inflation cooled last month. The sentiment figures showed a record-low share of Americans expected their incomes will rise in the next 12 months, underscoring growing pessimism over employment prospects. The 9.5-point decline from June’s final reading of 76 was the biggest since October 2008. The Michigan report’s gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, fell to an eight-month low of 75.5 from 85.6 in the prior month. The index of consumer expectations for six months from now, which more closely projects the direction of spending, dropped to 60.6, the lowest since March 2009, from 69.8. The share of consumers anticipating income gains during the coming year dropped to 39 percent, the lowest on record. Three of four Americans surveyed said they expected no decline in unemployment in the next 12 months. Today’s sentiment report also showed confidence about the government’s economic policy fell to the lowest level since the start of the Obama administration. The proportion that said economic policies were unfavorable rose to 42 percent in July, almost twice the low of 22 percent in May 2009, the report said.
• Bank of America(BAC), Citigroup(C) Fall as Loan Books, Interest Shrink. Bank of America Corp. and Citigroup Inc. fell in New York trading after profit reports showed their loan books shrinking, a sign volatile markets and a stalling U.S. economy may be keeping borrowers away. Bank of America, based in Charlotte, North Carolina, declined 8.3 percent, the most in more than a year, in New York Stock Exchange composite trading at 11:33 a.m. New York-based Citigroup fell 3.7 percent. Consumers and companies are balking at taking on more debt amid Greece’s debt crisis and concern the U.S. economic rebound will stall. Total loans at Bank of America, the largest U.S. lender, fell 2 percent from the first quarter to $956.2 billion, pushing down interest income 6.2 percent, the company said in a statement. At Citigroup, the nation’s third-biggest bank, loans shrank 4 percent to $646 billion and interest income declined 3.6 percent. “I don’t see a great deal of demand in the near term,” Citigroup Chief Financial Officer John Gerspach said on a conference call with reporters. Corporate borrowers are “sitting on the sidelines” and “almost every major company” has a “decent amount of cash sitting in their balance sheet,” Gerspach said.
• Hedge Funds to Increase Use of Trading Algorithms, Tabb Says. Asset managers such as hedge funds will probably increase their use of computer programs known as algorithms to execute their stock trades in 2011, according to securities-industry research firm Tabb Group LLC. The proportion of orders processed by algorithms will probably amount to 35 percent next year, up from 29 percent in 2010, according to a report from Tabb analyst Cheyenne Morgan and director of research Adam Sussman. Human traders at broker- dealers will execute 35 percent of orders in 2011, down from 39 percent this year, the report said. The growth during the past decade of electronic trading that allows investment firms to exert greater control over their orders has diminished the importance of sales traders at securities firms. Sales desks will generate $9.5 billion of the $15.3 billion in equity commissions paid to brokers this year, compared with almost $3 billion paid for algorithms, Tabb said.
• Commodity Shipping Gains; Snaps Longest Losing Run in 15 Years. Commodity shipping rates measured by the Baltic Dry Index ended their longest losing streak in almost 15 years on speculation owners are refusing to offer vessels at current hire rates. The index rose 20 points, or 1.2 percent, to 1,720 points, according to the Baltic Exchange in London. That ended a run of 35 consecutive drops, the longest since November 1995, during which the measure lost 60 percent of its value. Daily rates for capesizes, typically iron-ore carriers and the biggest tracked by the gauge, gained 3.5 percent to $12,495. “We interpret the recent weakness in the Baltic Index as reflecting the early stages of a slowdown in Chinese steel demand,” Daniel Brebner, an analyst at Deutsche Bank AG in London, said in a note e-mailed today. “A slowdown in orders for steel products has resulted in a slowdown in orders for iron ore over the past month, resulting in a decline in shipping.”
• Gold Falls Most in Two Weeks on Speculation of Stronger Euro. Gold futures fell the most in two weeks on speculation that the euro’s rebound against the dollar reduced demand for the precious metal as a haven against European debt concerns. “There’s continued unwinding of the gold-euro trade,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “As the euro firms up, the risk premium comes off.” Gold futures for August delivery fell $19.80, or 1.6 percent, to $1,188.50 at 12:46 p.m. on the Comex in New York.
• Business Set for 'Supreme Court' Battle Over Consumer Chief. The imminent reshaping of U.S. banking regulation creates a new center of gravity in Washington, a consumer chief with thousands of employees, a $400 million budget and power to impose federal rules on mortgages, credit cards and lay-away plans.
• U.K. Denounces Inaccuracies in U.S. Over BP(BP), Libya. British Ambassador to the U.S. Nigel Sheinwald rejected suggestions that the release last year of Lockerbie bomber Abdel Basset Al-Megrahi and BP Plc’s commercial interests were linked. “I am troubled by the claims made in the press that Megrahi was released because of an oil deal involving BP, and that the medical evidence supporting his release was paid for by the Libyan government.” Sheinwald wrote in a letter to Senator John F. Kerry, a Massachusetts Democrat and chairman of the Foreign Relations Committee. He said these were “inaccuracies” that were “harmful to the U.K.”
• Shadow Banking Debt Still Tops Regulator Banks', Fed Report Says. Liabilities of shadow banks, or institutions without access to central bank loans or permanent federal guarantees, still exceed the traditional banking system’s three years after the financial crisis began, according to a report from the Federal Reserve Bank of New York. The shadow banking system had about $16 trillion of obligations in the first quarter, compared with $13 trillion for banks, the report said. The gap has narrowed from 2008, when obligations were $20 trillion and $11 trillion, respectively. The U.S. had to lend, spend or guarantee $11.6 trillion to bolster financial markets and fight the longest recession in 70 years, according to data compiled by Bloomberg as of last September.
• BofA's(BAC) 'Brutal Honesty' on Cost of New Rules Pushes Banks Lower. Bank of America Corp. led financial stocks lower after saying U.S. curbs on debit-card fees may trigger a $10 billion charge, spurring speculation that rival banks have underestimated their own costs. Goldman Sachs Group Inc. was the only gainer among the nation’s largest lenders at midday, while Bank of America, the biggest in the U.S., dropped as much as 8.6 percent. Citigroup Inc., Wells Fargo & Co. and Visa Inc., which runs the largest card-payment network, slid more than 5 percent. MasterCard Inc. and American Express Co. declined as much as 4 percent.
• Congress Should Take Up $90 Billion Bank Tax, Frank Says. U.S. Representative Barney Frank, an architect of the financial-overhaul bill lawmakers sent to President Barack Obama yesterday, said he wants Congress this year to take up the White House plan for a $90 billion bank tax to recoup government bailout funds. Frank said Treasury Secretary Timothy F. Geithner had urged him not to look for bank fees, which Frank had sought to help pay for the legislation, because the administration plans a major push for a broader tax.
• Yield Curve May Have Peaked, Pimco's Crescenzi Says.
  

Wall Street Journal:

• How Financial Overhaul Changes the Mortgage Market. The financial-regulatory overhaul promises some big changes concerning how Americans go about getting a mortgage. The bill will offer more protections for consumers against risky or complex mortgages, but bankers say that with fewer choices and more safeguards, loans could be slightly more expensive. The upshot, says Howard Glaser, an industry consultant and Clinton administration housing official, is that consumers will have “safer” loans, but fewer of borrowers will qualify. Some of the provisions of the bill will take effect immediately, but many of the effects won’t be noticed right away. That’s partly because many of the exotic mortgages that fueled the subprime bubble were swept away when the market melted down three years ago. Mortgage bankers say that lending standards are tighter today than at any time in the past two decades, and most loans being made today are conventional fixed-rate loans that are backed in some way by the federal government. Here’s a look at some of the main changes for mortgages:

CNBC:

• Apple's(AAPL) Solution for iPhone 4: Free Protective Case for Users.

Zero Hedge:

• Gold Plunges; Paulson Liquidation Speculation Abounds Again as Fund Rumored to be Down $1 Billion for the Day. There are some crocodile tears over at the 50th floor of 1251 Avenue of the Americas this morning. With a holding of 168 million shares of BAC and 506 million in Citi, Paulson and Co. is down nearly $300 million on just its top two positions alone. When one adds the other top ten positions, which include $3.5 billion worth of GLD, as well as massive positions in ANG, CMCSA, STI, TRE, RIO, BSC, COF, WFC, MGM and many others, it is not surprising that the market is rife with rumors that the once vaunted bearish and now very much bullish (who according to Goldman's carefully crafted settlement press release yesterday, only achieved his subprime-related wealth due to prospectus misrepresentations by Goldman, which is now permanently in the public record) is down about $1 billion for the day so far.

Boston Globe:

• A Revival for Tech Stocks. The economic recovery may be wheezing and stalling, but you’d never know it by following the revived business at technology companies. Tech companies of many different stripes are emerging as the business stars of 2010, reporting sharply higher revenues, thanks to customers who are either replacing old equipment or buying new products that do more. Many industries continue to post healthy profits, relying in part on expenses that were cut to the bone. But few can match technology this year when it comes to growth in actual demand for products and services from customers. The tech-spending recovery that started in the last months of 2009 continued into this year and appears to be going strong. Early second-quarter business reports from technology companies like Intel Corp. show continued momentum. That wave has benefited many Massachusetts tech companies, including three clear stock stars: EMC Corp.(EMC), Akamai Technologies Inc.(AKAM), and Acme Packet Inc.(APKT) “Corporate IT departments pretty much stopped buying for most of the decade,’’ says Rob Enderle, a technology analyst at Enderle Group. “They’ve got aging and failing hardware that needs to be replaced on the desktop and in the back office.’’

Kurier:

• Jean-Claude Juncker, who heads the group of euro-area finance ministers, said he expects stress tests of European banks to be smooth, citing an interview. "I don't expect any major disasters," Juncker said. "There can't be any sugarcoating; reality will catch up."

Der Standard:

• The eurozone safety net intended to protect the European currency is "poorly conceived," Slovakia's Finance Minister Ivan Miklos said in an interview. The European package to protect its currency does more to aid banks than countries with fiscal difficulties like Greece, Miklos said. Europe has introduced "moral hazard" into the system by not holding banks accountable for their actions, he said. Europe needs to create a process in which countries can enter insolvency in an orderly fashion, Miklos said.