Today's Headlines

Bloomberg:

• Economists Cut U.S. Growth Forecasts, Hiring Limited. A lack of jobs will shackle consumer spending and restrain the U.S. recovery more than previously estimated, according to economists polled by Bloomberg News. Gross domestic product will expand at an average 2.55 percent annual rate in the last six months of 2010, according to the median of 67 estimates in a survey taken July 31 to Aug. 9, down from the 2.8 percent pace projected last month. Household purchases will climb at a 2.25 percent rate, compared with a 2.6 percent gain previously forecast. “Simply put, job growth in the private sector hasn’t improved as we would’ve expected,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The consumer continues to contribute to growth but at a subpar pace.” Consumer spending, which accounts for about 70 percent of the economy will grow 1.5 percent this year, down from a 2.4 percent gain forecast a month ago, according to the survey median estimate. In addition to the lowered expectations for the second half of 2010, the downgrade also reflects the annual GDP revisions issued by the Commerce Department last month. Purchases, which rose 3 percent on average over the past three decades, dropped 1.2 percent last year, the biggest decrease since 1942. Joblessness will be slow to fall, signaling it will take years for the economy to recover the more than 8 million jobs lost during the recession that began in December 2007. Unemployment will average 9.6 percent in 2010 and 9.1 percent next year, according to the survey. “Unemployment is high, income growth has been pretty slow,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who lowered estimates for growth and spending. “Household wealth is a lot lower than it was three years ago.” Job creation, the sluggish recovery and the growing budget deficit are likely to be top issues in November elections that will decide control of Congress.
• Default Swaps Climb to Two-Week High on U.S. Recovery Concern. The cost of protecting European corporate bonds from default rose to the highest in more than two weeks after the Federal Reserve said it would buy more Treasuries to support a weakening economic recovery. Credit-default swaps on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 13 basis points to 495.25, according to Markit Group Ltd. at 2:22 p.m. in London. That’s the highest level since the European Union released results of bank stress tests on July 23. The Markit iTraxx Europe index of 125 companies with investment-grade ratings increased 4 basis points to 119.75, Markit prices show. The cost of hedging against losses on Treasuries rose for a seventh day, with credit-default swaps linked to U.S. government debt rising 2.5 basis points to 46.5, according to data provider CMA. The contracts have risen from 36.2 on Aug. 2 and are at the highest in two months.
• HUD Offers Interest-Free Loans for Borrowers Facing Foreclosure. The U.S. Department of Housing and Urban Development will offer $1 billion in zero-interest, short- term loans to help unemployed homeowners avoid foreclosure. The loans will provide as much as $50,000 for borrowers to make payments on mortgages, taxes and insurance for as long as two years, HUD said today in a news release. The loan program will be available to borrowers at risk of foreclosure who have experienced a “substantial reduction” in income because of involuntary unemployment, underemployment or a medical condition, HUD said in the release. The U.S. Treasury Department said it will offer as much as $2 billion in aid to 17 states and the District of Columbia to help homeowners in areas hardest-hit by unemployment and foreclosures.
• U.S. Trade Deficit Unexpectedly Widens to $49.9 Billion. The trade deficit in the U.S. unexpectedly widened in June to the highest level since October 2008 as consumer goods imports rose to a record and exports declined. The gap grew 19 percent to $49.9 billion in June, Commerce Department figures showed today in Washington. A $42.1 billion deficit was projected by economists, according to the median forecast in a Bloomberg News survey. Imports climbed 3 percent, while exports dropped 1.3 percent, the most since April 2009. The figures signal trade subtracted more from second-quarter gross domestic product than previously estimated. Economists at UBS Securities in New York said the Commerce Department, in estimating growth from April through June at a 2.4 percent annual rate, assumed a $3.2 billion widening of the adjusted trade deficit in June. Exports minus imports subtracted 2.8 percentage points from growth during the three months, the most since 1982, the Commerce Department said July 30. Exports from the U.S. decreased to $150.5 billion from $152.4 billion, reflecting fewer shipments abroad of semiconductors, computers and steelmaking materials. Imports increased in June to $200.3 billion from $194.4 billion, led by telecommunications equipment, automobiles and consumer goods such as pharmaceutical preparations, televisions and furniture.
• Green Mountain(GMCR) Call Trades Surge After Lavazza Purchases Stake.
  

Wall Street Journal:

• German Debt Ratio May Rise to 90% of GDP on Bank Bailout - Report. The bailout of Germany's banking sector may swell the country's public debt rate to 90% of gross domestic product, Die Zeit weekly newspaper reports Wednesday. The weekly based this estimate on a recent decision by Eurostat requiring Germany to include the balance sheets of public-owned bad banks--set up to help financial institutions offload toxic and non-strategic assets--into its overall debt ratio. In July, it forecast Germany's debt level will rise from 73.1% in 2009 to 79% of GDP in 2010, 80% in 2011, to 80.5% respectively in 2012 and 2013 before easing to 80% in 2014. Die Zeit said that if nationalized mortgage lender Hypo Real Estate is added to the equation, Germany's debt level could widen to 90%. A debt ratio of 90% of GDP would be much higher than the 60% threshold set under the European Union's Maastricht Treaty.
• Health Care Continues to Wound Democrats. With less than three months before the November elections, the preponderance of the evidence is that the health care bill remains a political problem for Democratic candidates. In the “zero-sum” world of politics, Republicans see the issue as a plus for GOP challengers of Democratic lawmakers who voted for the bill. In March, when the legislation was approved, House Republican leader John Boehner pledged that the GOP would make the new law’s unpopularity a major campaign issue in the November elections. “You can only ignore the will of the people for so long and get away with it,” he said.

CNBC:

• Could Fed's Move Against Delflation End Up Backfiring? If you weren't worried about deflation, you may be now—thanks to the Federal Reserve's latest move to jumpstart the languid economy.
• Hard Times Investing: For Some, Cash Is Everything And Only Thing. Burned in the past decade by the dot-com bubble, Enron-style corporate governance, the housing bubble, the credit crunch and the Great Recession, retail investors have their money in places with little or no return but virtually no chance of a loss.

NY Post:

• Ameristar Casinos(ASCA) Mulling Sale. Ameristar Casinos, a regional operator of casinos in the Southwest and Midwest that has held up better than rivals in destinations like Las Vegas and Atlantic City, has hired an investment bank and is weighing a sale, The Post has learned. The company, which has an enterprise value of $2.4 billion -- or market cap plus debt -- has hired Lazard to explore the potential sale. The bank has begun to contact potential bidders, according to one source with direct knowledge of the situation. The sales process, a source said, is expected to begin in the fall.

Business Insider:

• Chart of the Day: Markets Losing Faith in Ben Bernanke's Deflation-Fighting Skills.
• Deja Vu: Slovakia Rejects Aid to Greece, Rumors About Irish Debt Flop, Fed Swap Lines Reopen, Euro Plunges.
  

Zero Hedge:

• July Budget Deficit Hits ($165 Billion), Longest String of Monthly Deficits on Record. With 22 months of deficits, it is now increasingly clear that America will never have a monthly surplus ever again. And the more debt is issued, the riskier the budget picture becomes, as the second rates begin increasing, now that the duration of US debt has increased by one year in the past 18 months, the interest payments are sure to explode, requiring even more borrowing, and so on, in true subprime borrower fashion, ad inf.
• Lack of Stock Dispersion Hits All Time Record as Most Stocks Now Trade as One. (graph)
  

CNN:

• Florida Attorney General Proposes Immigration Legislation. Florida Attorney General Bill McCollum -- who is in the midst of an intense Republican primary fight for governor -- has proposed legislation aimed at curbing illegal immigration, according to a statement from his office. Joined in Orlando, Florida, by legislators and law enforcement officials, McCollum unveiled the proposal Wednesday. It would require law enforcement officers to check suspected illegal immigrants' status in the course of a lawful stop. It would also require Florida businesses to use the E-Verify system to check that applicants are legally authorized to work and would enhance penalties for illegal aliens who commit crimes in Florida.

LA Times:

• Goldman Sachs(GS) Could Be Largely Unaffected by Financial Overhaul. As Wall Street scrambles to find the best and most profitable way to operate under the new financial reform law, Goldman Sachs Group Inc. — the firm that was expected to suffer the most under the legislation — could emerge practically unscathed. Top Goldman executives privately advised analysts that the bank did not expect the reform measure to cost it any revenue. "The statement was perhaps surprising in its level of conviction," Bank of America Merrill Lynch analyst Guy Moszkowski wrote in a note to clients, "but we've learned to take such judgments from GS very seriously." The contentious legislation has been viewed by some supporters as a way to rein in Wall Street, perhaps especially Goldman, which last year recorded net income of $13.4 billion. Richard Bove, a bank analyst at Rochdale Securities, said he had changed his view of the law's effect on Goldman. "I thought this company was going to be really harmed by this bill; now I've figured out that it's not going to happen," he said. "They should win big here."

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-six percent (46%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).
• 57% of Likely Voters Describe Democratic Agenda as Extreme. Most U.S. voters believe the Democratic congressional agenda is extreme, while a plurality describe the Republican agenda as mainstream. A new Rasmussen Reports national telephone survey finds that 57% of Likely U.S. Voters think the agenda of Democrats in Congress is extreme. Thirty-four percent (34%) say it is more accurate to describe the Democratic agenda as mainstream.

Reuters:

• Russia's LUKOIL Resumes Gasoline Supply to Iran. Russian oil giant LUKOIL has resumed gasoline sales into Iran in partnership with China's state-run firm Zhuhai Zhenrong, even as the United States urges the international community to be tough with Tehran. Iran is the world's fifth-largest oil exporter but lacks adequate refining capacity to meet domestic demand for motor fuel, forcing it to import up to 40 percent of its requirements. LUKOIL's trading arm, Litasco, and Zhenrong discharged a 250,000-barrel gasoline cargo at the Iranian port of Bandar Abbas last week, industry sources said. Geneva-based Litasco was expected to ship a second cargo of the motor fuel to Bandar Abbas later this week, traders said. Chinese companies have delivered about half of Iran's gasoline imports in recent months. State-run Zhenrong is the single largest lifter of Iranian crude oil. LUKOIL has significant exposure in the United States, with 1,500 retail gasoline stations.
• UBS Says Sell Petrobras(PBR) on Capital Plan Doubts. Swiss bank UBS on Wednesday cut its rating on common shares of Brazilian state oil company Petrobras, recommending investors sell the stock on concerns about uncertainties linked to a massive oil-for-shares capitalization plan. UBS said the company runs an increasing risk of overpaying for oil reserves in the capitalization plan that would give Petrobras rights to up to 5 billion barrels of oil and raise as much as $25 billion from minority shareholders. The stock was cut to "sell" from "neutral."

Times of India:

• India May Temporarily Ban BlackBerry Services. India may temporarily shut down BlackBerry services if security concerns are not addressed in a meeting on Thursday, sources said, a sign the Canadian firm's tussle with authorities around the world is far from over.