Evening Headlines
Bloomberg:
- Goldman Sachs Sees 25% to 30% Chance of U.S. Falling Back Into Recession. Goldman Sachs(GS) said there is a 25 to 30% chance that the U.S. economy will fall back into recession, in a note e-mailed to clients. "As signs of slower U.S. growth have multiplied, market participants have become worried about the possibility of a double-dip recession," wrote analysts including Ed McKelvey, Goldman Sachs's senior U.S. economist. "We think the probability is unusually high - between 25% and 30% - but we do not see double dip as the base case."
- KKR, Bain Companies Repay Leveraged Loans as Economy Sours: Credit Markets. Speculative-grade companies are doubling the rate at which they’re repaying leveraged loans as they try to curb the likelihood of rising defaults amid signs the U.S. economy is slowing. Rite Aid Corp., the third-biggest pharmacy retailer, KKR & Co.’s First Data Corp. and Toys “R” Us Inc., part-owned by Bain Capital LLC, sold or marketed $27.9 billion of high-risk, high-yield bonds and loans in August, with 25 percent of proceeds slated to refinance bank debt, according to data compiled by Bloomberg and Standard & Poor’s Leveraged Commentary and Data. Borrowers with $482.7 billion in loans due in coming years are trying to extend debt maturities as the Federal Reserve forecasts the pace of economic recovery is likely to be “more modest in the near term” than anticipated. Bond sales surged to $20.9 billion in the first two weeks of August, exceeding the $16.7 billion for all of July, Bloomberg data show. “It’s the marginal issuer who has access in this type of environment who may not have had access under tougher market conditions that swings the needle,” said John Fenn, a credit market analyst at Citigroup Inc. in New York. “What we need is a steady run rate of $15 billion to $20 billion of bonds and loans every month until 2012 to make a considerable dent in the maturity wall.”
- China Bank Clampdown May Trigger 'Flood' of Bond Sales by Property Firms. China’s order for banks to transfer off-balance-sheet loans may lead to a “flood” of bond issuance from real-estate companies, CLSA Asia-Pacific Markets said. The China Banking Regulatory Commission said assets linked to wealth management products provided by trust companies must be shifted on to banks’ balance sheets by the end of 2011. The “important tightening measure” put a funding squeeze on local governments’ special-purpose vehicles and the property industry, CLSA strategist Christopher Wood said. “Property developers and local government-backed infrastructure projects were important beneficiaries of such funding,” Wood wrote in his Greed & Fear report yesterday. “These are precisely the areas the CBRC has been trying to curb lending to.” The slowdown in the Chinese economy reduces the possibility of further tightening measures while beneficiaries of the nation’s growth such as the “commodity complex” are vulnerable in coming months, CLSA’s Wood wrote.
- Two New Jersey Men Charged in $200 Million Fraud Targeting Orthodox Jews. Two New Jersey men were charged for their role in a $200 million Ponzi scheme that targeted Orthodox Jews, according to the Federal Bureau of Investigation and U.S. prosecutors. Eliyahu Weinstein, 35, was charged with orchestrating a real-estate investment fraud to dupe fellow Orthodox Jews in New Jersey, New York, Florida, California and abroad, U.S. Attorney Paul Fishman said today in a statement. Vladimir Siforov, 43, also was charged in the scheme. By using “lies, threats, deliberate misrepresentations and even counterfeit checks,” Weinstein and Siforov “exploited the close community ties of the Orthodox Jewish community for one goal: to steal money through an elaborate real estate and Ponzi scheme,” Michael B. Ward, special agent in charge of the FBI’s office in Newark, New Jersey, said in a statement.
- Nvidia(NVDA) Said to Be Planning Direct Challenge on Intel(INTC) in Tablet Processors. Nvidia Corp., the maker of chips for computer graphics cards, is working on a microprocessor for tablet devices that would directly compete with Intel Corp. products, two people familiar with the matter said.
- Oracle(ORCL) Says Google's(GOOG) Android Operating System Infringes Its Java Patents.
- U.S. Saudi Sale, With Helicopters, Said to Approach $60 Billion. A proposed U.S. weapons sale to Saudi Arabia of Boeing Co. F-15 fighter jets also includes as many as 132 Boeing Apache attack helicopters and United Technologies Corp. UH-60 Black Hawk helicopters that bring the total value of the package to around $60 billion, according to a government official familiar with the plan. “I think it would be the largest ever,” said William Hartung, director of the New York City-based New America Foundation’s Arms and Security Initiative. “Other deals that used to be considered large,” like the $9 billion sale of 72 F-15s to the Saudis in 1992-93 or the kingdom’s $9 billion acquisition of U.S. AWACS surveillance aircraft in 1981, “aren’t even in the ballpark, even allowing for inflation,” Hartung said. The package includes 84 F-15s at a cost of $30 billion and helicopter sales totaling about $30 billion that include spare parts, training simulators, long-term logistics support and some munitions. The Saudis would buy about 72 UH-60 Black Hawk helicopters and as many as 60 AH-64D Longbow Apaches, the official said. The Longbow is the U.S. Army’s premier anti-tank helicopter, capable of firing laser-guided or all-weather air-to-ground missiles.
- Cable Firms Eye Tablet Space. More TV shows and movies may be coming to tablet computers like Apple Inc.'s iPad—for those who pay to watch. At least seven of the ten largest subscription-TV providers in the U.S. are building new tablet-computer applications that offer select TV shows and movies to their existing subscribers, often for little or no additional fee.
- Pakistan Fight Stalls for U.S. The U.S. military has stopped lobbying Pakistan to help root out one of the biggest militant threats to coalition forces in Afghanistan, U.S. officials say, acknowledging that the failure to win better help from Islamabad threatens to damage a linchpin of their Afghan strategy. Until recently, the U.S. had been pressing Islamabad to launch major operations against the Haqqani network, a militant group connected to al Qaeda that controls a key border region where U.S. defense and intelligence officials believe Osama bin Laden has hidden.
- Treasury's New Idea for Laggard Banks: We'll Sit in at Your Meeting. The U.S. wants to send Treasury employees to observe board meetings at banks that have consistently missed dividend or interest payments related to the government's financial-sector bailout.
- Investigators Question Attendant's Tale. Investigators probing the circumstances surrounding a JetBlue flight attendant's outburst and exit from a plane at Kennedy Airport are beginning to question the narrative that he was provoked by an injury suffered during a confrontation with an unruly passenger, according to Port Authority officials with knowledge of the investigation.
- Pentagon Slams WikiLeaks' Plan to Post More War Logs. U.S. defense officials on Thursday responded angrily to WikiLeaks' plan to post additional Afghan war logs, with Defense Secretary Robert Gates suggesting that the move could further endanger the lives of Afghans who helped the U.S. war effort. WikiLeaks founder Julian Assange, speaking to a group in London by video link on Thursday, said his group had gone through 7,000 of the 15,000 documents the group has so far withheld from publishing.
- Lehman: Och-Ziff Helped Spread Rumors. One of the world's largest hedge funds participated in spreading false rumors that helped bring down Lehman Brothers Holdings Inc., according to allegations filed in court papers in a Manhattan bankruptcy court. Och-Ziff Capital Management LLC "likely disseminated and/or was the recipient" of an inaccurate rumor that Lehman had spun off debt to two Lehman-controlled hedge funds to reduce the investment bank's leverage, according to the filing. Investors were focused on Lehman's debt levels in the months before its failure. The rumor was one of many "lies" spread by unscrupulous market participants looking to profit from shorting the troubled investment bank's stock, alleged the filing, made on Wednesday by lawyers investigating Wall Street firms on behalf of Lehman's bankruptcy estate.
Business Insider:
The Daily Caller:
- Obama Approval Rating Falls into New Danger Zone, Weighed Down by Growing Economic Fears. President Obama’s approval rating has crossed into a new danger zone over the last month, as fresh concerns over the economy have pushed his positives and negatives into upside down territory, a development that will cause political winds to blow even harder against Democrats this fall. One month ago on July 12, Obama’s approval and disapproval both stood at 47 percent in the Real Clear Politics poll average. On Tuesday, the president’s approval had fallen to 44.4 percent. Disapproval had jumped to 50.4 percent. The graph illustrating the movement is stark. After muddling through the past year in parallel lines, the black line for approval has taken a nose dive and the red line for disapproval has shot up.
- California Democrat Blasts HUD for Happy Talk. Rep. Dennis Cardoza doesn’t think that Housing and Urban Development Department Secretary Shaun Donovan has any right to tout the administration’s successes at preventing home foreclosures in California. The California Democrat has fired off a heated letter to President Barack Obama after reading an op-ed piece from Donovan in the Fresno Bee, highlighting the falling foreclosure rate in California’s Central Valley as evidence that HUD’s efforts to tackle the housing crisis are yielding results. “I’m incredibly disappointed in the lack of professionalism and lack of understanding shown by this agency. They don’t get it,” Cardoza told POLITICO. “For him to try to convince my folks, who are suffering on a daily basis, that he’s right because he’s read some statistics in Washington when he doesn’t get it, it’s really just absurd,” Cardoza continued.
- Judge OK's Same-Sex Marriages to Begin Next Week. A federal judge in California accelerated the battle over same-sex marriage Thursday by giving the green light for such marriages to begin in that state next week unless a higher court steps in. The new order from U.S. District Court Judge Vaughn Walker said such marriages may begin Aug. 18 under the landmark ruling he issued last week holding California’s voter-approved ban on same-sex marriages to be unconstitutional.
- Consumer Spending Was Tepid in July, MasterCard Says. Shoppers dug in their heels in July, bad news for the stalling economy and worse for struggling retailers. Excluding gasoline and autos, U.S. retail sales rose a meager 0.1% last month from June, according to figures released Thursday by MasterCard Advisors' SpendingPulse, which estimates spending in all forms including cash. Excluding autos, sales fell — 0.9%.
- India to Target Google(GOOG), Skype Messaging Next - FT. India may shut down Google (GOOG) and Skype Internet-based messaging services over security concerns, the Financial Times reported on Friday, as the government threatened a similar crackdown on BlackBerry services.
- Kohl's(KSS), Nordstrom(JWN) Cautious on 2010, Shares Fall. Department stores Kohl's Corp (KSS) and Nordstrom Inc (JWN) disappointed investors with conservative profit outlooks, while Kohl's said the cost to adapt to new consumer credit card laws would bite into profit. Kohl's, which caters to a cost-conscious customer, lowered its 2010 profit view, while Nordstrom stood by a previously-issued earnings forecast but did not raise it. The outlooks signaled both companies' uncertainty over consumer spending in the highly-competitive retail apparel market.
- July U.S. Video Game Sales Down 1% - NPD. Retail sales of video game software and equipment fell 1 percent in July, industry tracker NPD said on Thursday, as the sector showed some signs of improvement. Game software sales fell 8 percent to $403.3 million, while hardware sales rose 12 percent to $313.8 million. Sales of video game accessories, slipped 2 percent to $129.3 million.
- US Probes Corruption in Big Pharma. The US Department of Justice is scrutinising payments by leading pharmaceuticals companies for hospitality, consultants, licensing agreements and charitable donations in markets around the world as part of a wide-ranging corruption probe. GlaxoSmithKline(GSK), Pfizer(PFE), Bristol-Myers Squibb(BMY) and Eli Lilly(LLY), among others, have disclosed being contacted by the DoJ and Securities and Exchange Commission in connection with the investigation. Merck(MRK), the US drugs group, announced last week that it had also been contacted and was co-operating with investigators. An industry attorney familiar with the probe said that the DoJ was looking at whether pharma companies had ignored a “systematic risk” inherent in the global drugs business and ignored obligations under local and US anti-bribery law. The highly regulated nature of the business, combined with the fact that healthcare officials in many non-US markets were government funded, made the industry a natural target for such a probe, the person added. The investigation is at a relatively early stage but is considered a priority for the DoJ.
- The Stunning Decline of Barack Obama: 10 Key Reasons Why The Obama Presidency is in Meltdown.
- US Bank Bail-Out 'Helped Foreign Banks'. The US Treasury has been accused of mishandling taxpayers money after a Congressional panel found that the $700bn (£449bn) bail-out of the banking industry at the height of the financial crisis helped foreign banks far more than overseas bail-outs helped American banks.
- China Should Raise Ceiling on Deposit Rates - Economist. China should target a rise in banks' deposit interest rate ceiling, rather than hiking the benchmark interest rates, to pull real deposit rates out of negative territory, a senior government economist said in remarks published on Friday. Since February, the country's consumer inflation has been higher than the official one-year deposit rate, now at 2.25 percent. Consumer inflation in July reached 3.3 percent. "We must give the market a signal that we are pulling it (the real deposit rate) to a positive level," Xia Bin, an adviser to the cabinet and the central bank, told the official People's Daily overseas edition. "But to avoid the unnecessary negative impact from a one-off interest rate rise amid the economic slowdown, we should rather push ahead with the market-oriented interest rate reform and allow the deposit rate to float appropriately," he added.
- Former Chinese central bank adviser Fan Gang said the pace of growth for the nation's money supply is "overly high."
Citigroup:
- Reiterated Buy on (KSS), target $68.
- Rated (N) Buy, target $20.
- Rated (SFSF) Buy, target $25.
- Rated (TLEO) Buy, target $27.
- Rated (CTCT) Buy, target $30.
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 122.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 121.75 +3.75 basis points.
- S&P 500 futures +.54%.
- NASDAQ 100 futures +.53%.
Earnings of Note
Company/Estimate
- (JCP)/.05
8:30 am EST
- The Consumer Price Index for July is estimated to rise +.2% versus a -.1% decline in June.
- The CPI Ex Food & Energy for July is estimated to rise +.1% versus a +.2% increase in June.
- Advance Retail Sales for July are estimated to rise +.5% versus a -.5% decline in June.
- Retail Sales Less Autos for July are estimated to rise +.3% versus a -.1% decline in June.
- Retail Sales Ex Autos & Gas for July are estimated to rise +.1% versus a +.1% gain in June.
- The Preliminary Univ. of Mich. Consumer Confidence reading for August is estimated to rise to 69.0 versus a reading of 67.8 in July.
- Business Inventories for June are estimated to rise +.2% versus a +.1% increase in May.
- None of note
- The Fed's Hoenig speaking and the BofA Merrill Specialty Pharma Conference could also impact trading today.
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