Today's Headlines

Bloomberg:

• High-Yield Default Swaps Gauge Falls to 13-Week Low in Europe. The cost of protecting European corporate bonds from default fell, with a gauge of high-yield company debt risk dropping to the lowest level in 13 weeks. The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly junk credit ratings declined 6.5 basis points to 451, the lowest since May 4, according to JPMorgan Chase & Co. at 12 p.m. in London. The Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings dropped 1.5 basis points to 98, the lowest since May 13, JPMorgan prices show. The cost of protecting bank bonds from default fell to the lowest since April 21, with the Markit iTraxx Financial Index of 25 banks and insurers down 1.75 at 108.5 and the subordinated index 3 lower at 173.5. The cost of insuring against losses on government debt also fell. Contracts on Greece dropped 15 basis points to 711.5, Portugal declined 2 to 219, Spain decreased 1.5 to 179, Italy fell 1 to 130 and Ireland was 6 lower at 203, CMA prices show.
• U.S. Economy: Consumer Spending Stagnates, Home Sales Retreat. Consumer spending, pending home sales and factory orders were all weaker than projected in June, showing the U.S. recovery lost momentum heading into the second half of the year as employment stagnates. Household purchases, which account for about 70 percent of the economy, were unchanged from May, according to figures from the Commerce Department issued today in Washington. Contracts to buy existing houses unexpectedly dropped for a second month and factory bookings fell more than twice as much as economists estimated, other reports showed. The savings rate for American households increased to 6.4 percent, the highest level since June 2009, to $725.9 billion. The index of pending home resales dropped to 75.7, the lowest level since data began in 2001, figures from the National Association of Realtors showed.
• MasterCard(MA) Profit Rises as Travel Spending Increases. MasterCard Inc., the world’s second- biggest payments network, posted a 31 percent increase in second-quarter profit as consumers used their cards more while traveling beyond their home countries. Net income rose to $458 million, or $3.49 per diluted share, compared with $349.1 million, or $2.67, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was for earnings per share of $3.34. “I feel optimistic about our future growth prospects,” Banga said today in a conference call with analysts. “The majority of our revenues come from outside of the United States, which as of now is showing faster growth.” Worldwide spending on MasterCard credit and debit cards climbed 7.9 percent to $493 billion, when adjusting for currency fluctuations, driven by 21 percent growth in Latin America, 15 percent in the Asia-Pacific, Middle East and Africa and 13 percent in Europe, MasterCard’s second-biggest market outside the U.S. Total card spending in the U.S. climbed 0.7 percent.
• New York Hedge-Fund Manager Tax Likely to Fail, Paterson Says. New York’s Senate is unlikely to enact a plan to raise $50 million a year by taxing hedge fund managers who commute into the state, Governor David Paterson said. The proposal led Governor Jodi Rell of neighboring Connecticut to offer relocation assistance to New York-based fund executives who leave for her state. The New York Post reported that Rell held a dinner for representatives of 15 financial firms in Darien, Connecticut, on Aug. 2. “You have my promise to do all I can to help,” she said in a July 16 letter to the New York Hedge Fund Roundtable, a trade group.
• Oil Rises to Three-Month High Above $82 Before U.S. Supply Data. Oil rose to a three-month high in New York as the dollar weakened and analysts forecast that crude inventories declined last week in the U.S. Crude oil for September delivery climbed as much as 76 cents, or 0.9 percent, to $82.10 a barrel, in electronic trading on the New York Mercantile Exchange, the highest level since May 5.
• Europe's Abandoned Edifices Spell Trouble for Lafarge, Builders. The delayed revamp of Berlin’s Stadtschloss palace and a wobbly $8 billion bridge project in Sicily are setting off investor alarm bells that Europe’s building industry will bear the brunt of state spending cuts. “We’re expecting construction stocks to remain very much under pressure and sluggish for the next six months,” said Franck Nicolas, head of global asset allocation at Paris-based Natixis Asset Management, which oversees 309 billion euros ($400 billion) of investments. “Budgetary austerity won’t quicken the end of the crisis.”
• North Korea Threatens 'Physical Retaliation' Against Naval Drills. North Korea’s military warned it may make a “physical retaliation” against South Korean naval ships carrying out military drills near their disputed border later this week, and told all shipping to avoid the area. South Korea plans to stage anti-submarine exercises for five days starting Aug. 5 to improve the nation’s defenses. The South says a North Korean torpedo sank one of its warships in March, killing 46 sailors. he maneuvers by South Korea “are not simple drills but undisguised military intrusion into the inviolable territorial waters of” the North, state-run Korea Central News Agency said, citing the army. “It is the unshakable will and steadfast resolution of the army and people of the DPRK to return fire for fire,” it said, using the initials of the North’s official name.
• Goldman Sachs(GS) Offers More Power to AAA Holders in CMBS Deal. Goldman Sachs Group Inc. is offering to give investors in the highest-rated portions of a bond sale backed by commercial mortgages control in the event the loans go bad as bankers attempt to revive the market. The $788.5 million offering gives holders of the safest portion of the transaction, or about 81 percent of the deal, the power to direct and replace firms hired to handle loans that become troubled, according to marketing documents distributed last week to investors. Typically, that right is held by investors who buy the smaller, riskiest slice. It’s “plowing new ground,” said Patrick Sargent, a partner at Dallas law firm Andrews & Kurth LLP. Goldman Sachs is attempting to address concern that holders of the riskiest pieces of commercial mortgage bonds in the $700 billion market may make decisions that favor their interest over other investors in the transactions when loans sour. “This is a big nod to the AAA buyers,” Lisa Pendergast, a strategist at Jefferies & Co. in Stamford, Connecticut, said in an interview.
• Israeli Officer, Lebanese Soldiers Killed on Border. Israeli and Lebanese soldiers exchanged fire in the most serious border incident since a monthlong conflict in 2006, leaving an Israeli battalion commander, two Lebanese soldiers and a local journalist dead. Another Israeli officer was critically wounded in the fighting, Major-General Gadi Eisenkot, head of Israel’s Northern Command, said on Army Radio. In addition to the Lebanese deaths, 15 soldiers and civilians from Lebanon were injured, said a Lebanese Army spokesman, who commented on condition of anonymity due to military regulations.
• Cloud Formation, Copper Signal S&P 500 Gain: Technical Analysis. A Japanese charting technique and surging copper prices suggest U.S. stocks may extend gains through October, according to Katie Stockton, chief market technician at MKM Partners.

Wall Street Journal:

• New Drilling Rules Imperil Some Rig Operators. Higher costs arising from tough new rules for the offshore-oil industry prompted by the Gulf of Mexico oil spill could pose a serious threat to contractors with older fleets of drilling rigs. Legislation designed to prevent a repeat of the Deepwater Horizon accident sets minimum safety standards for well design and requires oil companies to use an enhanced type of blowout preventer, or BOP, the device which failed to control BP PLC's rogue well. But many drilling rigs are too small to accommodate newer and bigger BOPs, and it will cost billions of dollars to upgrade them all.
• Commission Clears Way for Ground Zero Mosque. The New York City Landmarks Commission unanimously voted Tuesday to deny landmark designation to the site of the proposed mosque near Ground Zero, paving the way for the controversial community center and worship space to rise two blocks from the site of the Sept. 11, 2001, terrorist attacks.

CNBC:

• Hedge Fund Merger to Reunite Star Traders. Two hedge funds that were both started by former star traders at Goldman Sachs are to merge in a deal that marks one of the biggest steps over the past year in the long-anticipated consolidation of the industry. New York-based TPG-Axon, one of the world’s biggest hedge funds, has agreed a deal to merge with UK-based Montrica Investment Management, one of London’s largest hedge funds specialising in trading on events such as takeovers.

MarketWatch:

• Microsoft(MSFT) and Ballmer Under Fire. A firestorm is raging through the media and the blogosphere these days over Microsoft Corp. Chief Executive Steve Ballmer and whether or not it's time for him to go.

NY Times:

• Most Carmakers Reported Higher Sales in July.

NY Post:

• NY Hedge Funders Wined and Dined by Connecticut Governor. Several New York hedge-fund honchos crossed the border last night for a date with the governor of Connecticut to talk about moving in with her. Representatives of 15 city-based financial firms were lured to a private meeting in Darien with Gov. Jodi Rell to hear her pitch to move their businesses to the Nutmeg State -- and avoid a tax on their industry that's being considered in New York.

Business Insider:

• 100 Wasteful Stimulus Projects That Actually Cost America Jobs by Senator John McCain and Senator Tom Coburn.
• Sorry, But The BlackBerry Torch Won't Save RIM(RIMM).
• The Administration Is Still Double-Counting Medicare Cuts.
  

Zero Hedge:

• Is Goldman(GS) Preparing to Spin Off Its $82 Billion Private Equity Division?

NewTeeVee:

• Apple(AAPL) Pushes Forward With Streaming Video Plans. The latest evidence that Apple will soon begin streaming video comes from CNET, which reports that the consumer electronics manufacturer is putting its resources behind a cloud-based video service. The report comes as Apple has transitioned many on the team from online music service Lala to work on streaming video instead. Apple acquired Lala in December of last year, but shortly thereafter shut down the streaming music service. Now it seems that Lala’s technology and personnel are being used to build a cloud-based video service, which could replace Apple’s current system for downloading movies and TV shows. The rollout of Apple’s streaming video service could coincide with the introduction of the next version of Apple TV, which is expected to be sold for around $99.

LA Times:

• Bell Withholds Public Records. Despite vowing greater transparency in the wake of a salary scandal, the city of Bell is refusing to turn over public records to The Times, community activists and even a sitting councilman. "They continue to keep us in the dark," said Councilman Lorenzo Velez, who has been critical of the high salaries paid to top Bell administrators and other City Council members. "The problem is a continuation of so many years of doing whatever they wanted in City Hall."

TechCrunch:

• Mobile Video Revenues Estimated at $548 Million in 2010. Revenues from mobile video in the U.S. are estimated to grow from $548 million in 2010 to $1.3 billion in 2014, according to eMarketer.
  

Time:

• Referendum in Missouri: Will the Show-Me State Show Up Obamacare? Missouri voters go to the polls Tuesday for the first-in-the-nation referendum on President Obama's health care plan. It is likely to give Republicans a chance to brag about the unpopularity of Obamacare, but the vote will be largely symbolic. Courts will eventually decide whether Missouri and other states can legally trump federal law and exempt citizens from the mandate to buy insurance. But sending a signal to Washington will be victory enough for the Republicans and Tea Party activists pushing Proposition C.

Rasmussen Reports:

• 67% Say Disclosure of Afghanistan War Secrets Hurts U.S. National Security. The Obama administration is wrestling with the illegal disclosure on the Internet of thousands of secret documents related to the war in Afghanistan, and 67% of U.S. voters believe the release of this kind of information hurts national security. A new Rasmussen Reports national telephone survey finds that just 19% believe media outlets that release secret government documents relating to the war in Afghanistan are providing a public service.

Politico:

• The Lame Duck Looms. As Congress heads home for August, Republicans and conservative activists have a new rallying cry to energize voters: Fear the Lame Duck! With dark warnings, GOP members of Congress and right-wing media figures are suggesting that the Democratic majority could use a post-election session of Congress to jam through tax increases, cap and trade, immigration reform and legislation making it easier for unions to organize workers. The campaign began with a John Fund column in the Wall Street Journal, which was picked up by the heavily trafficked Internet gateway The Drudge Report early last month and gained steam when columnist Charles Krauthammer sounded the alarm not long after. Now the GOP is rallying around the perceived threat of a lame-duck session.

Real Clear Politics:

• A Bleak Picture of Government Debt. Rumors of Congressional Democrats privately expressing disapproval of the Obama administration's actions and policies have been given more credence by such things as House Speaker Nancy Pelosi's public criticism of White House spokesman Robert Gibbs. But when two long-time Democratic pollsters, Patrick Caddell and Douglas Schoen, called President Obama "cynical" and "racially divisive," that was a dramatic statement. It was like saying that the emperor has no clothes.

Reuters:

• U.S. Authorities Able to Tap Blackberry Messaging. The BlackBerry -- renown for the security of its messaging -- doesn't offer 100 percent protection from eavesdropping. At least not in the United States. U.S. law enforcement officials said they can tap into emails and other conversations made using the device, made by Research in Motion, as long as they have proper court orders.