Today's Headlines

Bloomberg:

• U.S. Industrial Production Rises More Than Forecast. Production jumped twice as much as forecast in July, signaling manufacturing is shouldering a U.S. economic recovery that is showing signs of moderating in the second half of the year. Output climbed 1 percent as factories churned out more computers, appliances, automobiles and industrial machinery, the Federal Reserve said today in Washington. Another report showed work began last month on fewer houses than forecast. This year, GM kept most of its U.S. plants open during the traditional shutdowns, a move that economists said propelled auto output last month. Production jumped twice as much as forecast in July, signaling manufacturing is shouldering a U.S. economic recovery that is showing signs of moderating in the second half of the year. “This is encouraging,” said Lou Crandall, chief economist at Jersey City, New Jersey-based Wrightson ICAP LLC, who correctly forecast the jump in output. “This is a welcome interruption in the softening trend of economic data. Factory output is still growing solidly.” Output of motor vehicles and parts surged 9.9 percent in July after falling 2.5 percent a month earlier. Excluding autos and parts, manufacturing still increased 0.6 percent after declining 0.3 percent.
• A benchmark gauge of corporate credit risk in the U.S. fell the most in more than two weeks, as companies reported profits that topped estimates and wholesale costs increased last month. The Markit CDX North America Investment Grade Index dropped 3.5 basis points to a mid-price of 107.1 basis points as of 12:02 pm in New York, according to Markit Group. Swaps on Ford Motor Credit fell 27 basis points to a mid-price of 360 basis points, according to CMA. Contracts on Bank of America(BAC) fell 6.5 basis points to 148, CMA prices show.
• Potash(POT) Rejects $39 Billion Bid From BHP Billiton(BHP). Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, rejected an unsolicited $39 billion takeover proposal from BHP Billiton Ltd. as too low, prompting speculation of a higher bid. Potash Corp. turned down the $130-a-share offer, saying it was “grossly inadequate,” and adopted a so-called shareholder rights plan as a defense. Potash Corp. jumped as high as C$151.08 ($146.18) in Toronto trading and competitors rallied on expectation the industry will consolidate. The shares of competitors Intrepid Potash Inc.(IPI) and Mosaic Co.(MOS) also advanced today, gaining 6.4 percent and 8.4 percent respectively. Yara International ASA, the largest publicly traded nitrogen-fertilizer maker, jumped 5.9 percent to 254.2 kroner in Oslo, the highest closing price since March.
• Hefty Bag Maker Pactiv(PTV) to Be Bought by Rank. Pactiv Corp., the maker of Hefty trash bags, agreed to be bought by Rank Group Ltd. in a transaction valued at about $6 billion, helping the New Zealand packaging company expand in takeout-food containers and cutlery. The per-share price is $33.25, 39 percent more than the $23.97 close on May 14, before talks were disclosed. The financing includes equity from Rank Group and unit Reynolds Group Holdings Ltd., as well as debt financing from Credit Suisse, HSBC and Australia New Zealand Bank. The acquisition is the biggest deal for Rank Group’s owner and New Zealand’s richest man, Graeme Hart, a former tow-truck driver who amassed a fortune investing in businesses from lumber to dairy and built a global packaging empire through takeovers. His holdings include the world’s second-biggest drink-carton company and the maker of Reynolds Wrap foil.
• Soros Boosts Stake in Massey Energy(MEE), Adds 1.7 Million Shares of Coal Miner. Billionaire George Soros’s hedge fund boosted its stake in Massey Energy Co., owner of the West Virginia mine where 29 people died in April, to 2.2 million shares during the second-quarter. Soros Fund Management LLC, which oversees $25 billion, purchased 1.7 million shares of Massey during the quarter, according to a filing with the U.S. Securities and Exchange Commission yesterday. The New York-based fund’s position was valued at $59.4 million at the end of June.
• PMI Group(PMI) Leads Mortgage-Insurer Rally on John Paulson's 'Pure Play' Bet. PMI Group Inc., the insurer that posted 12 straight quarterly losses, rose the most in three months, leading mortgage guarantors higher after billionaire John Paulson’s hedge fund disclosed it bought 5 million shares. Paulson’s stake in the Walnut Creek, California-based company makes his hedge fund the ninth largest holder of PMI, according to data compiled by Bloomberg. “The mortgage insurers are the most pure play” to bet on stabilization and recovery of the housing market, said Matthew Howlett, a New York-based analyst at Macquarie Group Ltd. in an interview today. “He views PMI as surviving, and it’s got the largest discount to others in the group.” The insurer climbed 15 percent, or 38 cents, to $2.98 at 11:38 a.m. in New York Stock Exchange composite trading, making it the biggest gainer in the Russell 2000 Index. MGIC Investment Corp., the largest U.S. mortgage guarantor, rose 6 percent to $7.82 and No. 2 Radian Group Inc. gained 8.9 percent to $7.22.
• Copper Prices Climb to One-Week High. Copper climbed to the highest price in a week after a drop in the dollar boosted demand from buyers seeking alternative assets. Copper prices also gained today as inventories monitored by the London Metal Exchange sank to the lowest level since Nov. 13. Copper futures for December delivery added 5.5 cents, or 1.7 percent, to $3.3555 a pound at 9:16 a.m. on the Comex in New York. “Copper is a bellwether, and the fact that it is holding up is a good sign” for the economy, McGhee said. “It is acting as a leader rather than a follower.”
• U.S. Household Debt Shrank 1.5% in the Second Quarter. U.S. household debt fell 1.5 percent in the second quarter as consumers, facing an unemployment rate near a 26-year high, reduced mortgages and credit-card accounts, according to the Federal Reserve Bank of New York. Respondents to a quarterly survey of consumers conducted by the New York Fed for the first time showed total consumer indebtedness was $11.7 trillion at the end of June, down 6.5 percent from its peak in the third quarter of 2008. Household delinquency rates declined in the second quarter for the first time since early 2006, falling to 11.4 percent of outstanding debt from 11.9 percent on March 31, the New York Fed said.
• Home Depot(HD) Profit Tops Analysts' Estimates as Sales Increase. Home Depot Inc., the largest U.S. home-improvement retailer, reported second-quarter profit that exceeded analysts’ estimates as U.S. sales rose 1 percent amid high unemployment. Net income increased 6.8 percent to $1.19 billion, or 72 cents a share, in the quarter ended Aug. 1, from $1.12 billion, or 66 cents, a year earlier, Atlanta-based Home Depot said today in a statement. Analysts projected 71 cents, the average of 23 estimates in a Bloomberg survey. Home Depot advanced 4.93% to $28.71 at 2:12 p.m. in composite trading on the New York Stock Exchange.
• Pimco's Gross Urges 'Full Nationalization' of Housing Finance. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. should consider “full nationalization” of the mortgage- finance system as the Obama administration plots the revival of a market that was at the center of the 2008 credit crisis. “To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,” Gross said today at a U.S. Treasury Department conference in Washington. “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.”
• Fed Buys $2.551 Billion Treasuries in Resumption of Purchases. The Federal Reserve bought $2.551 billion of Treasuries in the first outright purchase of U.S. government debt since October to prevent money from being drained from the financial system. The Fed bought 14 of the 25 securities listed for possible purchase. The notes mature from August 2014 to February 2016, the Federal Reserve Bank of New York said in a statement today on its website. The New York Fed conducts open-market operations to implement the policies of the Federal Reserve System.

Wall Street Journal:

• Freddie Mac Ramps Up Pressure On Banks Over Defective Loans. Mortgage finance giant Freddie Mac is getting more aggressive toward banks that it says sold it crummy mortgages. Already, Freddie Mac (FMCC), and its sibling Fannie Mae (FNMA), have recovered billions from the banks as they seek to hold them accountable for improperly underwritten mortgages sold to them in the past. Now, in a regulatory filing, Freddie Mac has said that if banks didn't buy back defectively underwritten mortgages "on a more timely basis," it would saddle slow-poke banks "with financial consequences or with stated remedies for non-compliance, as part of the annual renewals of our contracts with them." In other words: If a bank won't buy back defective mortgages at a reasonable clip, it may face penalties imposed by Freddie Mac.
• Were Ireland Fears Overdone? Here’s a read on the good reaction Ireland’s successful bond sale is getting in the market. In the fancy-schmantzy world of derivatives, the cost to insure against an Irish sovereign-debt default is falling. It now costs about $280,000 a year to insure $10 million of Irish government debt, compared with $286,000 before Tuesday’s €1.5 billion bond sale and as much as $305,000 yesterday, according to data provider Markit. Prices of so-called credit-default swaps tied to Spain and Portugal have also fallen, while credit-default swap indexes tied to European companies with less than stellar credit ratings have also improved.
• Geithner Sees U.S. Role in Mortgage Market. The U.S. government will likely continue to play a role in guaranteeing mortgages, but policy makers must figure out how to design a system that doesn't lead to a rerun of the collapse of mortgage-finance giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner told attendees at a housing summit convened on Tuesday.

Barron's:

• Research In Motion(RIMM): Torch Price Cut In Half After Weak Launch. The price of the Research In Motion (RIMM) BlackBerry Torch has been cut in half - to $99.99 - on Amazon.com (AMZN) and some other sites, less than a week after the new phone went on sale at $199.99. Early reports from the Street suggest sales of the new phone have been tepid at best.

CNBC:

• Economy Not as Bad as Investors Fear: Kocherlakota. The Federal Reserve's decision last week to buy more U.S. government debt should not be viewed as a sign the economic outlook is worse than investors thought, a top Federal Reserve official said on Tuesday.

Zero Hedge:

• Guest Post: The Purpose Behind Engineered Economic Collapse.

New York Times:

• China Tells Banks to Cut High-Risk, Hidden Loans.

GIZMODO:

• Apple(AAPL) Reportedly Testing Proximity-Aware iPhone Prototypes. Apple's recent hiring of Benjamin Vigier, an expert in near field communications, led many to wonder if the next iPhone could also be our next wallet. According to TechCrunch, Apple's already testing prototypes of just such a proximity-aware iPhone. According to TechCrunch's sources, Apple's testing contactless payment-capable iPhones equipped with hardware from NXP Semiconductor, suggesting that such functionality is definitely something they're working on for inclusion in the next iPhone.
• Apple(AAPL) Awarded Patents for iPhone's Slide to Unlock and Pop-Up Keyboard.
  

SiliconRepublic:

• Battle of the Tablets as Apple(AAPL) Readies 7-Inch iPad. According to Engadget Apple has been at work on a number of new formats, with rumours ranging from large to small versions of the ‘magical’ iPad.

Rasmussen Reports:

• Just 37% Say Their Congress Member Deserves Reelection. Incumbent members of Congress don’t exactly get a vote of confidence from their constituents in a new Rasmussen Reports national telephone survey. Just 27% of Likely U.S. Voters think their representative in Congress is the best possible person for the job, down six points from November of last year. Only 37% think their local congressional representative deserves reelection, compared to 42% who felt that way last fall.

Politico:

• Obama Hits New Polling Low. President Barack Obama's approval rating has dipped to a new low in the latest Gallup poll. Obama's 44 percent average approval in Gallup's daily tracking polls last week marks the weakest level of support he has registered since taking office. His weekly average had been holding steady at 45 percent approval in recent weeks. Additionally, the share of Americans who disapprove of the president's job performance reached 50 percent for the first time over the three-day stretch of Aug. 13-15. The drop can likely be attributed to the loss of independents. Obama's approval rating among independents now stands at 39 percent, down 4 points from June. Obama began his presidency with the support 74 percent of independents.
• MoveOn.org Calls for Boycott of Target(TGT). The liberal group MoveOn.org ramped up its campaign against Target Corp. Tuesday with a new TV ad urging shoppers to boycott the retail giant over its $150,000 donation to a Minnesota politician who opposes gay marriage – and its decision not to give a matching amount to pro-gay candidates for balance.

Financial Times:

• Agricultural Traders Positioned to Reap Gains. As US farmers reap the benefits from failing crops around the world, the traders that handle the country’s grain exports will cash in too. The windfall highlights the profitability of a multibillion sector led by Cargill, the world’s largest agricultural commodities trader, which rose to prominence during the 2007-2008 food crisis, when agricultural commodities prices hit all-time highs. “The US is the world’s island of wheat supply,” says Dan Basse, president of AgResource, a Chicago-based consultancy, who forecast that traders would ship overseas about 5bn bushels of corn, soyabeans and wheat on the year to June 2011, up more than 15 per cent from 4.3bn bushels in the 2009-2010 season. “The increase in exports bodes very well for US grain traders,” he says, echoing a view widely held in the industry.

AFP:

• Israel Has '8 Days' to Hit Iran Nuclear Site: Bolton. Israel has "eight days" to launch a military strike against Iran's Bushehr nuclear facility and stop Tehran from acquiring a functioning atomic plant, a former US envoy to the UN has said. Iran is to bring online its first nuclear power reactor, built with Russia's help, on August 21, when a shipment of nuclear fuel will be loaded into the plant's core. At that point, John Bolton warned Monday, it will be too late for Israel to launch a military strike against the facility because any attack would spread radiation and affect Iranian civilians. "Once that uranium, once those fuel rods are very close to the reactor, certainly once they're in the reactor, attacking it means a release of radiation, no question about it," Bolton told Fox Business Network. "So if Israel is going to do anything against Bushehr it has to move in the next eight days." Absent an Israeli strike, Bolton said, "Iran will achieve something that no other opponent of Israel, no other enemy of the United States in the Middle East really has and that is a functioning nuclear reactor." But when asked whether he expected Israel to actually launch strikes against Iran within the next eight days, Bolton was skeptical. "I don't think so, I'm afraid that they've lost this opportunity," he said.

Caijing:

• China will reduce its holdings of Treasuries because of potential risks from the U.S. government's medium-to-long-term debt level, citing Zhang Ming, a China Academy of Social Sciences researcher. China had a fundamental shift in its "risk appetite" for U.S. debt, it said, citing Zhang's research.