Evening Headlines
Bloomberg:
- IMF's Strauss-Kahn Said to Be Placed on a Suicide Watch at Rikers Island. Dominique Strauss-Kahn, the International Monetary Fund chief jailed at New York’s Rikers Island prison complex on charges of sexual assault and attempted rape, was placed on suicide watch at the facility, a person familiar with the matter said. Strauss-Kahn has made no attempt to injure himself, said the person, who declined to be identified because the information isn’t public. An assessment of Strauss-Kahn and other factors, including that it’s his first time in jail, led to the precaution, the person said. Being on suicide watch at Rikers means that an inmate is watched constantly and given a specially designed prison jumpsuit and shoes with no laces, the person said.
- China April Home Prices Gain as Smaller Cities Defy Efforts to Curb Prices. China’s home prices rose in 67 of 70 cities monitored by the government in April from last year, led by smaller cities that are defying efforts to control property prices nationwide. Housing prices increased at a faster pace in smaller cities and slowed in major ones, data posted on the statistics bureau’s website today showed. New home prices in Urumqi, capital of far western Xinjiang province, posted the biggest gain, up 9.3 percent last month from a year earlier, while prices in northern Mu Danjiang climbed 8.7 percent. In the capital Beijing, prices rose 2.8 percent in April, compared with 4.9 percent in March, while those in Shanghai slowed to a 1.3 percent gain.
- Illinois Senator Kirk Wants Dominique Strauss-Kahn to Resign IMF Position. U.S. Senator Mark Kirk wants the U.S. executive director of the International Monetary Fund, Meg Lundsager, to seek the resignation of IMF chief Dominique Strauss-Kahn, the lawmaker’s spokeswoman said. Kirk, an Illinois Republican who serves on a Senate appropriations subcommittee that has partial oversight of the IMF, is also seeking hearings on how the international fund has managed the European debt crisis, his spokeswoman, Kate Dickens, said today in an e-mail. Kirk would like to see Lundsager “call for the immediate resignation of Mr. Strauss Kahn,” who was charged with sexual assault and attempted rape by New York prosecutors, Dickens said.
- Treasury Yields May Fall Bellow 3% on Neckline Breach: Technical Analysis. Treasury 10-year yields may fall below 3 percent after breaking through the so-called neckline of a head-and-shoulders pattern, according to Bank of Tokyo- Mitsubishi UFJ Ltd. The pattern is formed by highs reached on Dec. 16, Feb. 9 and April 8, according to data compiled by Bloomberg. Yields dropped as low as 3.10 percent yesterday, falling below the neckline at about 3.15 percent that connects the base of the three peaks, said Kenichi Imai, chief manager of proprietary trading at the unit of Japan’s largest bank. “A clear break below the 3.15 percent level suggests yields will head toward a 200-day moving average at 3.06 percent,” Tokyo-based Imai said. “Rates may even drop below 3 percent,” he said.
- U.S. Senators Question Aid to Pakistan. The Senate Armed Services Committee chairman, Carl Levin, said the U.S. should curtail economic aid to Pakistan unless that government stops harboring insurgent groups that target American troops in neighboring Afghanistan. Levin, a Michigan Democrat, said that continued U.S. financial support to Pakistan should hinge on whether the Pakistani military takes action against the Haqqani network, an Afghan Taliban-allied group based in Pakistan’s northwestern border region with Afghanistan. “There is a real problem with continuing financial support for Pakistan when they continue to support the Haqqani network,” Levin told reporters in Washington yesterday. “These are people killing us. These people are killing us. And this is open.”
- Obama to Pledge New Mideast Aid. President Barack Obama will announce this week a new aid plan for the Middle East and North Africa that U.S. officials say will be far bolder than previous American economic assistance to the region. Mr. Obama will outline the plan, which could include debt cancellation and a reprogramming of financial aid the U.S. already provides to countries like Egypt, in a speech he is scheduled to deliver Thursday at the State Department. Whatever aid he announces, though, is unlikely to assuage Arab governments, which had been hoping the White House would push forcibly for a resumption of Palestinian-Israeli peace talks. The president's aides say his speech will focus only briefly on the issue. Senior U.S. officials are particularly alarmed by the deterioration in Cairo's finances since the street revolt that ousted President Hosni Mubarak in February. The Egyptian government has been forced to spend between $3 billion and $3.5 billion of its foreign-exchange reserves a month to pay for food and other commodities as tourism has plunged and overseas remittances have dried up. Egypt's government has been seeking relief on around $1 billion in debts tied to wheat purchases in the 1970s, according to officials involved in the talks. Cairo has paid off the principal on these loans, but continues to service interest payments. The administration is looking at a mixture of direct aid, debt relief, and export credits to help stabilize Egypt's finances. "There are a whole range of tools we could use," said a U.S. official. "We've been looking for the right mix." Mr. Obama may struggle to win over skeptics in Congress. The U.S. already provides Egypt with roughly $1.3 billion a year, and lawmakers are pushing the White House for deep spending cuts. Additionally, a number of lawmakers have raised concerns in recent weeks about Egypt's post-Mubarak foreign policy, particularly its warming relations with Iran and militant Palestinian group Hamas, which the U.S. and the European Union designate as a terrorist entity.
- As Field Thins, Search Goes On. The stumbling start of Newt Gingrich and the withdrawals of Mike Huckabee and Donald Trump from the presidential race have boosted Mitt Romney's standing in the Republican nominating contest, while opening lanes for other candidates to jump in.
- Banks and Merchants Reload for Fee Battle. Banks and credit unions are using a recent debit-card scam at Michaels Stores Inc. as fresh ammunition in their fight against a federal proposal to reduce the amount they can charge merchants for processing such payments.
- Ronald McDonald Called Out by Health Groups. More than 550 health professionals and organizations have signed a letter to McDonald's Corp. asking the maker of Happy Meals to stop marketing junk food to kids and retire Ronald McDonald. The letter, slated to run in the form of full-page ads in six metropolitan newspapers around the country on Wednesday, acknowledges that "the contributors to today's (health) epidemic are manifold and a broad societal response is required. But marketing can no longer be ignored as a significant part of this massive problem." "We are committed to responsible advertising and take our communications to children very seriously," McDonald's said in a statement. "We understand the importance of children's health and nutrition, and are committed to being part of the dialogue and solution. We serve high quality food, and our Happy Meals offer choice and variety in portions just for kids. Parents tell us they appreciate our Happy Meal choices."
- Clive Capital Not Facing Giant Losses. Today, rumors swept energy and grains markets that London-based Clive Capital, the largest commodity-focused hedge fund, was suffering huge losses on a wrong-way bet on energy prices, as well as a short, or negative stance, on wheat. But people close to the matter say the $5 billion firm is down about 10% so far this month. Certainly, that’s a sizable loss. But it’s not much changed from where Clive’s performance stood just about a week ago.
- The Hidden State Financial Crisis by Meredith Whitney. My latest research into opaque state financial statements suggests taxpayers will be surprised by how much pensions are underfunded.
- China Private Equity Taking Risk For High Yields. PE favors firms with ties to monopolies, opaque business practices.
- Fed Wants Annual US Bank Stress Tests. The Federal Reserve wants to subject US banks to annual stress tests, reserving the right to veto dividend pay-outs if they do not pass.
- Dell(DELL) Profit Beats Forecasts, But Sales Miss Slightly. Dell shares jumped in extended-trading Tuesday after earnings easily exceeded Wall Street estimates, though the firm handed in revenue that fell just shy of analysts' forecasts.
- MATT TAIBBI: Here's How Goldman Sachs(GS) Lied To Its Customers and Congress. Matt Taibbi, the Rolling Stone writer who labeled Goldman Sachs a "vampire squid" in one of the defining stories of the financial collapse, has written another article on the Wall Street firm. This one is potentially more devastating.
- Watchmaker Rides The Comeback Of The Wristwatch. It's a company called Fossil Inc. (FOSL) that's riding high atop a surprising fashion wave that has revived the wristwatch.
- Europeans Face Up to Chance of 2nd Greek Bailout. Confronting the looming prospect of a second bailout for Greece, European finance ministers insisted Tuesday on further deficit-cutting efforts from the government in Athens and acknowledged for the first time that the private sector could be included in a restructuring of Greek loans.
- Chemical Suspected in Cancer Is In Baby Products. More than 30 years after chemical flame retardants were removed from children’s pajamas because they were suspected of being carcinogens, new research into flame retardants shows that one of the chemicals is prevalent in baby’s products made with polyurethane foam, including nursing pillows, and highchairs. The research does not determine if children absorbed the chemical, chlorinated Tris, from the products. But in an article to be published Wednesday in the journal Environmental Science & Technology, the researchers suggest that infants who use the products have higher exposure to the chemical than the government recommends.
- Gang of Six at 'Impasse' as Tom Coburn Drops Out. The Gang of Six lost its strong blocker on the right Tuesday, as Sen. Tom Coburn pulled out of the bipartisan deficit reduction talks and predicted no meaningful deal can be reached until Democrats accept a greater share of savings from government benefit programs. “These guys have worked hard, and we had 80 percent of some significant things the country needs to do,” the Oklahoma Republican told POLITICO. “But right now, I don’t see us solving what needs to be solved.”
- 7 in 10 Americans Say High Gas Prices Hurt. As gas prices hover near $4 a gallon, nearly seven in 10 Americans say the high cost of fuel is causing financial hardship for their families, a new USA TODAY/Gallup Poll finds. More than half say they have made major changes to compensate for the higher prices, ranging from shorter trips to cutting back on vacation travel. For 21%, the impact is so dramatic they say their standard of living is jeopardized. Nationally, the price of a gallon of regular gasoline averages $3.96. That's up 38%, or $1.09, from levels a year ago.
- $50 LED Light Bulbs Hit 100 Watts as Federal Ban Looms. Two leading makers of lighting products are showcasing LED bulbs that are bright enough to replace energy-guzzling 100-watt light bulbs set to disappear from stores in January. Their demonstrations at the LightFair trade show in Philadelphia this week mean that brighter LED bulbs will likely go on sale next year, but after a government ban takes effect. The new bulbs will also be expensive — about $50 each — so the development may not prevent consumers from hoarding traditional bulbs.
- Tunisia Warns Libya Over "Enemy Actions". The Tunisian government may report Libya to the U.N. Security Council for committing acts of an enemy, Tunisian television reported on Tuesday. Tunisia considers recent acts carried out by its neighbour as "enemy actions," the broadcast said, citing a government communique. It was not immediately clear which acts were being referred to but earlier on Tuesday at least four Grad rockets fired from Libya landed inside Tunisia, according to a Reuters reporter at the scene.
- Emerging Nations Push for Say on Next IMF Chief. Emerging market countries challenged Europe's grip on the leadership of the International Monetary Fund on Tuesday as pressure mounted for the fund's jailed managing director Dominique Strauss-Kahn to quit. In a significant move China, which last year become the IMF's third most powerful member country, called for "fairness, transparency and merit" in the selection of the next IMF boss.
- Banks Offer Pre-Crisis Loan Terms in Spain. Spanish banks have resumed offering mortgages on pre-crisis terms as they struggle to offload billions of euros of residential real estate repossessed during Spain’s property crash. The rush to get rid of repossessed homes in a housing market that has officially fallen 17 per
cent from its peak comes at a time when Spanish banks have tightened lending for regular mortgages sharply while offering looser terms for distressed property. Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and Caja Madrid, Spain's three largest banks by assets, have started offering mortgages on pre-crisis terms, with loan-to-value ratios of up to 100% for 40 years, as they try to sell off repossessed homes. - Housing Boom Raises Fears of Brazil Bubble.
- World Bank Sees End to Dollar's Hegemony. The World Bank expects the US dollar to lose its solitary dominance in the global economy by 2025, as the euro and the renminbi establish themselves on an equal footing in a new “multi-currency” monetary system.
- An emerging-market candidate should head the International Monetary Fund, Michael Fuchs, deputy floor leader of Chancellor Angela Merkel's Christian Democratic Union, said. It may be easier for an IMF leader who isn't from Europe to implement a "return to a solid budget" in some European countries affected by the debt crisis, Fuchs said.
Economic Observer:
- China's pork prices may rise to the highest level since 2008 because of high feed costs and low breeding stocks, citing a person familiar with the industry.
- About 1,000 of Beijing's real estate agents may close over the next three months because of low demand for housing, citing Beijing Homelink Real Estate Co. Vice President Lin Qian. The city's current existing home transaction volumes fell 50% from December and dropped about 20% from April of last year.
- Beijing's home prices may fall more than 15% by March 2012, citing property agent Beijing Homelink Real Estate Co. Vice President Lin Qian.
- Al Qaeda Has Caretaker Head, Expert Says. A leading specialist on al Qaeda said on Tuesday an Egyptian veteran militant was acting as an interim operational leader pending the expected appointment of deputy chief Ayman al-Zawahri as successor to Osama bin Laden. Noman Benotman, a former associate of bin Laden and now an analyst with Britain's Quilliam Foundation think tank, told Reuters Saif al-Adel was operating in effect as interim leader while the organisation collected pledges of loyalty to Zawahri.
Citigroup:
- Reiterated Buy on (DKS), target $47.
- Rated (THOR) Outperform, target $40.
- Rated (PODD) Outperform, target $25.
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 115.50 -.25 basis point.
- S&P 500 futures +.42%.
- NASDAQ 100 futures +.45%.
Earnings of Note
Company/Estimate
- (CHS)/.25
- (TGT)/.94
- (ANF)/.13
- (BJ)/.56
- (DE)/2.06
- (EV)/.46
- (ALKS)/-.13
- (PETM)/.55
- (AAP)/1.37
- (SNPS)/.45
- (JACK)/.19
- (LTD)/.39
- (SPLS)/.32
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,700,000 barrels versus a +3,781,000 barrel gain the prior week. Distillate inventories are estimated to rise by +250,000 barrels versus a -843,000 barrel decline the prior week. Gasoline supplies are expected to rise by +950,000 barrels versus a +1,275,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.43% versus a -1.1% decline the prior week.
- Minutes of FOMC Meeting.
- (ALXN) 2-for-1
- (TDSC) 2-for-1
- The Fed's Bullard speaking, 5-Year Treasury Note Auction, weekly MBA mortgage applications report, UBS Leveraged Finance Conference, (SYK) analyst meeting, (CAB) investor day, (PLT) analyst day and the (MTSN) analyst meeting could also impact trading today.
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