Today's Headlines

Bloomberg:

• Death of Bin Laden Prompts Review of Pakistan Relations, Afghanistan Goals. The death of Osama bin Laden prompted immediate calls from U.S. lawmakers to re-evaluate the relationship with Pakistan, where the al-Qaeda leader was found and killed less than 35 miles from the capital of Islamabad. Even as Secretary of State Hillary Clinton said the U.S. is “committed to supporting the people and government” of Pakistan, politicians and analysts raised questions about support for the country and the need to maintain troop levels in neighboring Afghanistan. The discovery of bin Laden’s hideaway in the military town Abbottabad is the latest event to heighten U.S.-Pakistan tensions. Pakistan’s foreign ministry issued a statement today saying that the U.S. action that killed bin Laden was mounted without the country’s knowledge and may undermine future cooperation. CIA Director Leon Panetta, in an interview released today by Time magazine, said U.S. officials planning the raid “decided that any effort to work with the Pakistanis could jeopardize the mission” because “they might alert the targets.”Democratic Senator John Kerry of Massachusetts, an architect of a 2009 bill that tripled non-military aid to Pakistan, committing $1.5 billion annually for five years, called a new round of hearings to “assess the strategic relationship” between the two countries and to examine how to arrive at an “acceptable end-state” in Afghanistan. White House counterterrorism adviser John Brennan said yesterday that members of Congress are “understandably” raising questions about whether bin Laden got support from some elements of the Pakistani government. “We are looking right now at how he was able to hold out there for so long, and whether or not there was any type of support system within Pakistan that allowed him to stay there.” Obama’s 2012 budget proposes $1.2 billion in assistance for Pakistan, largely to support counterinsurgency training for troops posted along the border with Afghanistan.
• Indian Equities Drop Most Among Major Indexes on Rate Increase. Indian stocks dropped the most among major indexes in the world after rate increases by the nation’s central bank exceeded economists’ estimates. State Bank of India (SBIN) paced losses among lenders after the Reserve Bank of India raised rates by half a percentage point, more than analysts’ forecast, and predicted inflation to remain at about 9 percent until September because of higher oil costs. Mahindra & Mahindra Ltd. (MM), the largest maker of tractors, fell the most in three months. Jaiprakash Associates Ltd. (JPA), a builder of dams, roads and bridges, sank 8.2 percent. “The central bank is reacting to the alarming situation of inflation,” said Manish Sonthalia, who manages $300 million in stocks for wealthy individuals at Motilal Oswal Securities Ltd. in Mumbai. “I was expecting a 75 basis point increase by the end of the year, but there’s been front-loading of rate tightening.” Sonthalia is avoiding companies that require large amounts of capital as borrowing costs are set to rise. The Bombay Stock Exchange Sensitive Index, or Sensex, lost 463.33, or 2.4 percent, to 18,534.69 at the 3:30 p.m. close in Mumbai. The gauge fell for the seventh day, its longest run of losses since November 2008, to close at the lowest level since March 24.
• Sell Bullish Options on Indian State Banks on Rates, Morgan Stanley Says. Investors should sell bullish options on India’s state-owned banks because their values may fall as lower lending profits reverse the “strong” revenue growth of the past two years, Morgan Stanley derivatives strategists said.
• China April Home Prices Rise as Premier Wen Is 'Determined' to Cool Them. China’s home prices rose for the eighth consecutive month in April, Soufun Holdings Ltd. said today, defying government steps to cool prices. The latest gain underscores the challenge facing Premier Wen Jiabao, who said May 1 that the nation is “determined” to bring down housing prices in some cities to a “reasonable” level. Home prices rose 0.4 percent in April from March and climbed in 77 of 100 cities tracked by the nation’s biggest real-estate website owner. Wen said the government is committed to bringing down some cities’ property prices during a visit to a construction site in Beijing, the official Xinhua News Agency reported yesterday. The comments may help correct a misconception in the stock market that the government only wanted to curb increases, according to Credit Suisse Group AG. “We still expect more tightening measures,” Credit Suisse analysts led by Jinsong Du wrote in an e-mailed note today, noting that Wen’s comment was the first time he has committed to lowering some prices. “We continue to prefer taking profits on China property sector, especially after the 25% sector rally in the past one and a half months.”
• China's Central Bank Signals Tightening May Continue Even as Growth Cools. China’s central bank said controlling inflation is its top priority, even after a manufacturing survey indicated that growth may slow in the second-biggest economy. “Stabilizing prices and managing inflation expectations are critical,” the People’s Bank of China said in a first- quarter monetary policy report published on its website today. Bank reserve requirements have no “absolute ceiling,” the report said, restating an April 16 comment from Governor Zhou Xiaochuan. “Given the loose monetary policies of major economies and gradual recovery of the global economy, commodity prices keep climbing and global inflation expectations are rising significantly,” the People’s Bank of China said. “China is seeing increasing pressure from imported inflation.”
• Navy SEAL Raid on Bin Laden Reflects Tradition of Grit, Secrecy. The fatal shooting of Osama bin Laden with two bullets, the first to the chest and the second to the head, was the climax in a risky, secret Navy SEAL mission of the kind the U.S. is turning to more frequently for its national security. In a post-Cold War era of “irregular warfare” against antagonists such as insurgents and drug traffickers, the U.S. leans increasingly on covert skills and operations. The U.S. military’s Special Operations Command, which includes the SEALs, has more than tripled its budget and quadrupled the number of operatives deployed overseas since the Sept. 11, 2001, terrorist attacks.
• Russian Manufacturing Falls Most Since 2008 as Ruble Strength Hits Exports. Russian manufacturing growth slowed in April for the largest monthly drop since December 2008 after export orders declined and companies scaled back investment. The Purchasing Managers’ Index fell to a seasonally adjusted 52.1, the weakest level since November, from 55.6 in March, HSBC Holdings Plc (HSBA) said in a report today, citing data compiled by Markit Economics, a financial information services company.
• Syria Detains 1,000 People in Two Days, Local Human Rights Group Says. Syrian authorities have arrested more than 1,000 people in the last two days as a crackdown on demonstrations intensifies, according to a local activist group.
• Williams-Sonoma(WSM) Chooses Clicks Over Bricks in Web Rollout. Williams-Sonoma Inc. (WSM), the 55-year-old housewares chain known for its meticulously arranged stores and baking demonstrations, is cooking up a new strategy: remaking itself as an Internet company. Web orders are already the fastest-growing source of revenue for the San Francisco-based company, and now it’s preparing to make its e-commerce sites global by the end of June, Chief Marketing Officer Patrick Connolly said last week. Williams-Sonoma, which also owns Pottery Barn and West Elm, will invest tens of millions in the project. “We are absolutely obsessed with the Web right now,” Connolly said. By the end of next month, the company’s e- commerce site will go live in more than 75 countries.
• Orders Placed With U.S. Factories Increase More Than Forecast. Orders placed with U.S. factories rose more than forecast in March on increasing demand for machinery and computers that points to further gains in business spending. Bookings for manufacturers’ goods climbed 3 percent, a fifth consecutive increase, after a 0.7 percent February advance, the Commerce Department said today in Washington. The report also revised up estimates for capital equipment bookings issued last week.
• Sears Holdings(SHLD) Tumbles After Same-Store Sales Decline. Sears Holdings Corp. (SHLD), the department- store chain majority-owned by Edward Lampert, dropped the most in almost a year in Nasdaq trading after comparable-store sales fell and the company predicted a first-quarter loss. Sales at stores open at least a year declined 3.6 percent in the quarter ended April 30, the Hoffman Estates, Illinois- based company said yesterday in a statement.
• Senate Report on Goldman(GS) Under Review by Justice Department. The Justice Department is reviewing a report by a U.S. Senate panel that said Goldman Sachs Group Inc. (GS) misled clients about the firm’s bets on securities tied to the housing market, according to Attorney General Eric Holder. Holder told the House Judiciary Committee at a hearing today that the department is reviewing the April report by the Senate Permanent Subcommittee on Investigations. Holder didn’t elaborate on which aspects of the report are under review. At the time the report was released, Senator Carl Levin said he wanted the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought the complex securities known as collateralized debt obligations without knowing the firm would benefit if they fell in value.
• Deutsche Bank(DB) Faces U.S. Fraud Lawsuit Over Mortgage Lending. Deutsche Bank AG (DBK), Germany’s biggest bank, was sued for more than $1 billion by the U.S. government, which claims it “repeatedly lied” so that thousands of risky mortgages qualified for a government insurance program. The Frankfurt-based bank and its MortgageIT unit falsely certified that borrowers didn’t face risk of default, qualifying the loans for insurance by the Housing and Urban Development Department’s Federal Housing Administration, according to a complaint filed today in Manhattan federal court. The bank and MortgageIT masked problem loans through “egregious” violations of HUD rules for analyzing the income and creditworthiness of borrowers, the Justice Department said. MortgageIT endorsed more than 39,000 loans for FHA insurance after 1999, making them “highly marketable for resale,” the U.S. said. Of those, 12,500 defaulted.

Wall Street Journal:

• Pakistan Criticizes U.S. Raid on Bin Laden. Pakistan said Tuesday it had "concerns and reservations" about Washington's decision to attack and kill al Qaeda leader Osama bin Laden deep inside Pakistan without seeking their permission or giving forewarning. "This event of unauthorized unilateral action cannot be taken as a rule," Pakistan's foreign ministry said in a statement.
• Citi(C) Slashes Price Target on AOL(AOL). Citi cuts its target price and earnings estimates for AOL, as the market scribblers fret about the online company’s spending on new deal toy the Huffington Post and on Patch, AOL’s local-news umbrella organization. Citi expects AOL’s results — first up: first quarter numbers are due in Wednesday — to be “fundamentally weak” amid the $315 million HuffPo acquisition and continued “declines in (AOL’s) various businesses.” Citi expects the first quarter to show the — gasp! — 20th straight quarter of revenue declines for AOL. Citi lowers its price target to $23 from $28 and keeps its investment rating at hold.

Bloomberg Businessweek:

• Digital Realty(DLR) Gains on Data-Center Frenzy. Digital Realty Trust, the largest provider of data-center real estate, has almost tripled on the New York Stock Exchange since late 2008, amid a server-farm demand surge that the company says may intensify this year. The proportion of companies that plan to expand data centers rose four percentage points, to 85 percent, this year, San Francisco-based Digital Realty said yesterday in a statement, citing a survey it commissioned from Campos Research & Analysis.

CNBC.com:

• Fed Still Lacks 'Exit Strategy,' But Talks Are Heating Up. Federal Reserve officials held intense talks about exit strategies at their last meeting, with policymakers divided over whether to sell billions of dollars of assets first or simply raise interest rates, according to people familiar with the matter.
• A Perverse Bin Laden Incentive for Pakistan. It's pretty clear that at least some of Pakistan's intelligence operatives were hiding Osama bin Laden from the United States.

Business Insider:

• These Hedge Funders ARE Getting Slammed by Today's Silver Nosedive.
• The Red-Hot Chinese Internet Stocks Are Getting Killed Today.
• Former Goldman(GS) Client Explains How Goldman Treats Clients Like They're Dumber Than They Are.
• Why You Should Blame Tim Geithner, Not the GOP, If the US Defaults.
• Everything Facebook Will Tell The Police About You.
• Why One of the World's Biggest China Bulls Is Getting Worried. Goldman's(GS) Jim O'Neill is the man who invented BRICs, and he's been a fervent China bull. And yet in his latest monthly note, he's concerned. Basically, he's not seeing China shift its growth strategy the way he'd like. Inflation is still torrid, and the central bank is being forced to resort to blunt instruments.
• Dubai-Owned Emirates Says Oil Prices "Threaten To Bring All Of Us To Our Knees".
• Chinese Real Estate Developers Profits Drop, Debts Approach One Trillion. Chinese real estate developers have finished reporting their first quarter results. According to this report, the profits of 113 real estate companies dropped, while inventories and debts rose to some unprecedented levels.

Zero Hedge:

• Pew Finds $1.26 Trillion State Retirement Shortfall, Says States Only Have $31 Billion In Assets To Pay For $635 Billion In Liabilities.

NY Post:

• Sources: Goldman(GS) Chief to Stay 2 Years. Ceo Lloyd Blankfein, approaching his fifth anniversary running the storied investment bank amid some Wall Street speculation that recent regulatory tussles have left him burned out and looking to step down, is likely to stay put at the helm of Goldman Sachs for at least two years, sources tell The Post. Call it a desire to do more of "God's work," as Blankfein once famously described it two years ago. Or call it Bronx-born Blankfein's unwillingness to the leave the gold-plated Manhattan franchise with a reputation more tarnished than when he found it on June 29, 2006, the day he ascended to the top spot following Hank Paulson's confirmation as Treasury Secretary.

Time:

• CIA Chief Breaks Silence: U.S. Rued Out Involving Pakistan in Bin Laden Raid Early On. In his first interview since commanding the mission to kill Osama bin Laden, CIA chief Leon Panetta tells TIME that U.S. officials feared that Pakistan could have undermined the operation by leaking word to its targets.
  

Rasmussen Reports:

• 19% of Workers Report Their Firm is Hiring, 25% Laying Off.
• 72% Say $5-A-Gallon Gas Likely By July 1.
  

Reuters:

• Alcoa(AA) Shares Rise on Talk of Bid Interest: Traders. U.S. aluminum producer Alcoa Inc (AA.N) shares rose as much as 3.2 percent in early trade on Tuesday, with three traders in Europe citing market talk of bid interest from miner Rio Tinto (RIO.L)(RIO.AX).
• Nissan Wins NYC Taxi Contract. Japan's Nissan Motor Co Ltd (7201.T) won New York City's 10-year contract to build the next generation of taxis for the city, a deal estimated to be worth more than $1 billion, the New York Daily News reported on Tuesday, citing unnamed sources. The other two finalists for the concession were Turkish manufacturer Karsan Otomotiv (KARSN.IS) and U.S. automaker Ford Motor Co (F.N).
• Senate Democrat's Budget Would Hike Taxes. Democratic Senator Kent Conrad said his budget proposal does not necessarily conflict with efforts by the bipartisan "Gang of Six" senators, who are trying to come up with a budget deal acceptable to both Republicans and Democrats.
• Global Manufacturing Growth Eases in April - JPMorgan(JPM).
  

USA Today:

• Doctors, Lawyers, Dentists Tops in Fed Jobs That Pay $180,000-Plus. As Congress eyes the federal payroll for budget cuts, do you know who the nation's highest-paid federal workers are? Department of Veterans Affairs doctors, Securities and Exchange Commission lawyers and National Institutes of Health physicians represent the most numerous groups among at least 17,828 federal employees whose annualized salaries totaled $180,000 or more in September 2010.

Financial Times:

• Renren Replaces Audit Chief Ahead of IPO. Renren has replaced the head of its audit committee on the eve of its initial public offering on Nasdaq, as the Chinese social network is trying to protect itself from the fall-out of an accounting controversy at another company at which the executive serves. According to an amendment to Renren’s prospectus filed with the US Securities and Exchange Commission on Monday, Derek Palaschuk, chief financial officer of Longtop, a Chinese Nasdaq-listed specialist software company, no longer heads Renren’s audit committee and is also no longer an independent director appointee. The step follows an accounting controversy at Longtop which sent the firm’s shares plummeting last week.

National Business Daily:

• China can't control inflation with yuan appreciation, citing Tan Yaling, director of the China Forex Investment Research Institute. The pace of the currency's current appreciation is too fast and goes against the laws of economics, Tan said. The government should intervene in the yuan exchange rate, he said.