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Tuesday Watch

Late-Night Headlines
Bloomberg:

- European Union finance ministers said the region’s economy remains at risk even as signs emerge that the worst of the recession may have passed. “There are some positive signals but at the same time, still the situation is worrying,” EU Monetary Affairs Commissioner Joaquin Almunia said before a regular monthly meeting of euro-area finance chiefs in Brussels today. “We have to work on it.”

- Goldman Sachs Group(GS) and Morgan Stanley(MS) had their profit forecasts raised by Doug Sipkin at Pali Capital, who cited an improved outlook for trading and asset management. The analyst boosted his 2009 earnings estimate for Goldman Sachs to $15.10 a share from $14.12 and boosted his 2010 projection to $15.57 from $14.81. He raised his 2010 forecast for Morgan Stanley to $2.99 a share from $2.88, while cutting his 2009 estimate to 51 cents from 75 cents. “Morgan Stanley is probably the most attractive long-term investment we cover,” the NY-based analyst wrote in a note to clients today, citing the firm’s “stronger capital position” and increased distribution from newly formed retail brokerage joint venture, Morgan Stanley Smith Barney.

- Orange-juice prices jumped 8.6 percent, the most since October 2006, on a surprising surge in futures demand. “There are no fundamental reasons for prices to spike,” said Joe Nikruto, a senior broker at RJO Futures in Chicago. “Large orders from unknown sources” triggered preset bids, driving the price close to its 40-day moving average of 86.84 cents a pound.

- California’s credit rating was cut for the second time in as many weeks by Fitch Ratings after a stalemate over how to close a $26 billion budget deficit forced the most-populous U.S. state to pay some bills with IOUs.

- London dropped from third to sixteenth place in a survey of the world’s most expensive cities, taking it out of the top ten for the first time since 2001, after the pound declined against the U.S. dollar and rental prices in the U.K. capital fell. Tokyo replaced Moscow as the world’s most expensive city for expatriates and Osaka moved to number two after the yen “strengthened considerably” against the dollar, according to Mercer LLC’s Cost of Living Survey.

Wall Street Journal:

- Chinese security forces clamped down on large parts in this city of 2.4 million Monday, a day after long-simmering ethnic tensions erupted in rioting that authorities said left 156 dead and more than 1,000 injured. The number of fatalities, if confirmed, would represent one of the deadliest outbreaks of violence in China in decades. The government said more than 20,000 security personnel were deployed in Urumqi, capital of the Xinjiang region in northwestern China. Armored cars patrolled the city's streets and squads of paramilitary People's Armed Police marched through narrow alleyways where rioting had occurred. Late Monday, many streets were cordoned off and largely deserted. The violence grew out of protests by Uighurs, a Turkic-speaking and mainly Muslim ethnic group, against what they see as discrimination against them by the Han Chinese majority.

- Sarah Palin resigned as Alaska's governor because the volume of state investigations and public-record requests scrutinizing her activities kept her from doing what she wanted, said one of her closest confidantes. Kristan Cole, who has been friends with Gov. Palin since both were in the same elementary school nearly 40 years ago, said she heard personally from the governor over the Fourth of July weekend. She was one of the few to speak with Gov. Palin, who stunned the political world when she announced Friday she was resigning, effective July 26. The governor gave no specific reason for her exit, beyond citing relentless complaints into her affairs that were hampering her ability to do her job. In an interview with The Wall Street Journal, Ms. Cole said the investigations and scrutiny kept Gov. Palin from doing what she loved, which was interacting with Alaskans on issues such as her belief that there should be smaller government.

- European Central Bank policy makers are worried the design of some European government bank-rescue plans is discouraging commercial banks from tapping public funds and could fail to resuscitate lending across the 16-country bloc. Central bankers' concerns are rising as euro-zone private-sector loan growth hovers at record lows. Year-over-year growth in loans to the private sector slowed to 1.8% in May, down from 2.3% in April and the lowest since records began in 1992. Both ECB and national euro-zone officials fret that banks' reluctance to lend could worsen the recession. At a meeting Monday in Brussels, European finance ministers expressed concern about the region's banking system. European banks have been slower than their U.S. counterparts to write down the value of impaired assets.

- A group of the biggest U.S. banks said they would stop accepting California's IOUs on Friday, adding pressure on the state to close its $26.3 billion annual budget gap. Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and J.P. Morgan Chase & Co., among others. The banks had previously committed to accepting state IOUs as payment. California plans to issue more than $3 billion of IOUs in July. Ms. Mills of the CBA said some banks were concerned that there aren't processes in place to accept IOUs, and also worried about fraud issues. She noted that not all banks have set a July 10 deadline, and that dozens of credit unions in the state will keep accepting IOUs.

- Metals prices, which have risen 39 percent this year in London, will decline this quarter as re- stocking in China nears completion, according to UBS AG. “China’s re-stock appears complete, whereas the Western World is unlikely to experience similarly strong restocking activity ahead of its seasonal summer slowdown,” UBS analysts led by Sydney-based Glyn Lawcock said in a report dated yesterday. “The magnitude of the recent metal price recovery has in our view been exacerbated by the re-entry of commodity index, Chinese and speculative funds.” The price of copper will drop 17 percent this quarter, nickel 15 percent and zinc 10 percent ahead of an “economic recovery,” later this year, UBS said.

- ABB Grain Ltd., Australia’s largest exporter of barley, cut its full-year profit forecast because of slower demand for malt in Asia and for farm chemicals in Australia.

- The White House signaled a willingness Monday to compromise on details of a public plan to compete with private insurance companies as negotiators sought ways to advance health-care legislation. A senior administration official said one way to meet President Barack Obama's goals would be a mechanism under which a public plan is introduced only if the marketplace fails to provide sufficient competition on its own. Mr. Obama has pushed hard for a public option, saying it will keep the insurance industry honest, but he has also said he won't draw a "line in the sand."

CNBC.com:
- Bryan Marsal, CEO of Lehman Brothers Holdings, said the government should have acted to prevent the damage the firm's collapse caused to the financial markets. "It should have been an orderly wind-down or a bailout. It should not have been a freefall," he said. Marsal has been unwinding Lehman Brothers since the firm's historic collapse. He discusses the process with CNBC. (video)

- Bing is doing a good job of generating ad revenue – for Google(GOOG).

NY Times:

- Byron R. Wien, the chief investment strategist of Pequot Capital Management, is known for his list of “10 Surprises” at the beginning of every year. One event he didn’t predict in this year’s list: that his own firm would be forced to shut down. On Monday, Mr. Wien penned a swan song of sorts for his business partner and fellow hedge fund guru Arthur J. Samberg, the founder of Pequot. Mr. Samberg was forced to close what was once the largest hedge fund in the business in May after regulators reopened a long-simmering investigation into insider trading at the firm. Mr. Wien, who joined Pequot in December 2005 after two decades as Morgan Stanley’s chief strategist, wrote about Mr. Samberg’s dream to continue the firm he started in 1986 long past his retirement. He blames the reopening of the Securities and Exchange Commission’s investigation for leading, in large part, for shattering that vision. “I will never believe he has done anything wrong,” Mr. Wien wrote in the letter.

IBD:

- True Religion Apparel's (TRLG) namesake jeans continue to strike a chord with consumers, despite a price tag of $172 to more than $300.

CNNMoney.com:

- America’s fastest-growing small public companies.

Politico:

- Vice President Joe Biden is expected to announce Wednesday that three major hospital associations have agreed to provide $160 billion in savings to pay for a health care overhaul, according to sources close to the negotiations. The timing of the announcement is aimed at sustaining momentum for health reform as Democratic congressional leaders embark on a critical five-week period in which they hope to pass bills out of the Senate and House by the August recess.

BNET Technology:

- iPhone Running Away With Smartphone Market. I just got a look at a summary of Piper Jaffray analyst Gene Munster’s report to clients, which includes the incredible fact that 38 percent of 3GS customers were upgrading from the original iPhone, validating the idea that the only way for a customer to upgrade from an iPhone is to buy another iPhone.

Reuters:

- A restructured General Motors Corp will get the remaining $20 billion in government bankruptcy financing over the rest of this year and could be ready to launch an initial public stock offering in early 2010, a senior U.S. official said on Monday.

Financial Times:

- How Obama could introduce a petrol tax.

- The adoption of tough European restrictions on hedge funds would provoke a transatlantic regulatory war, one of the sector’s leading figures has warned. Stanley Fink, the former chief executive of Man Group known as the “godfather” of the British hedge fund industry, said that the European Commission’s proposed regulation would be “very restrictive” for non-EU funds and some styles of investing. “That could, and probably would, lead to retaliatory action whereby European hedge funds will be stopped from marketing in other jurisdictions [such as the US] – and that could be very bad for the industry,” he told the Financial Times in a video interview. Asked if the restrictions could spark an international hedge fund war, he said: “I think that could be one of the unintended consequences.”

Nikkei English News:

- Mizuno Corp., a Japanese maker of sporting goods, will close about 200 of its 902 retail sites in China this year because of disappointing sales.

Inquirer.net:

- Thirty-eight bomb attacks that the military blamed on the Moro Islamic Liberation Front (MILF) Special Operations Group have rocked various parts of Central Mindanao since January, records from the Armed Forces of the Philippines headquarters showed. Of these, 19 targeted civilians, 15 were aimed at the military and four at vital installations. Government troops have also recovered 18 unexploded bombs, records showed. But Sen. Rodolfo Biazon wants the government to explain the spate of bombings in the country, including Central Mindanao. Citing newspaper accounts, he said 57 bombings and attempted bombings had been reported since the start of the year. The latest was Sunday’s explosion near the Cotabato Immaculate Conception Cathedral in Cotabato City, killing five people and wounding 52 others.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Top Pick Buy on (CME), target $375.

Night Trading
Asian Indices are -.25% to +1.0% on average.

Asia Ex-Japan Inv Grade CDS Index +.89%.
S&P 500 futures -.18%.
NASDAQ 100 futures -.16%.

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Earnings of Note
Company/EPS Estimate
- (ISCA)/.31

- (RT)/.20

Economic Releases

- None of note

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish at Session Highs, Boosted by REIT, Airline, Insurance, Utility, I-Banking and Drug Shares

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In Play

Stocks Lower into Final Hour on Rising Economic Concerns, More Shorting, Profit-Taking

BOTTOM LINE: The Portfolio is mixed into the final hour as losses in my Technology longs and Medical longs offset gains in my Index hedges and Commodity/Emerging Market shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is below average. Investor anxiety is high. Today’s overall market action is mildly bearish. The VIX is rising 6.55% and is high at 29.78. The ISE Sentiment Index is around average at 137.0 and the total put/call is about average at .83. Finally, the NYSE Arms has been running high most of the day, hitting 1.78 at its intraday peak, and is currently 1.30. The Euro Financial Sector Credit Default Swap Index is rising 2.41% today to 109.0 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 2.29% to 140.78 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 2.37% to 40 basis points. The TED spread is now down 424 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 2.13% to 39.63 basis points. The Libor-OIS spread is down 4.37% to 34 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 4 basis points to 1.62%, which is down 102 basis points since July 7th. The 3-month T-Bill is yielding .15%, which is unch. today. The broad market is weaker than the major averages. Small-cap and the most economically sensitive shares are significantly underperforming. Despite a flat US dollar, increasingly hawkish rhetoric regarding Iran, Nigerian pipeline attacks and a better-than-expected ISM Non-manufacturing report, crude oil is falling another 4%. While this is a short-term negative as it pressures energy related names and boosts economic worries, a significant fall in oil from current inflated levels would be a large broad market positive. As well, it is a large positive to see long-term rates remain subdued despite this week’s coming supply. Finally, many market leading stocks are performing much better today than the broad market. Nikkei futures indicate an +80 open in Japan and DAX futures indicate an +14 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower energy prices, stable long-term rates and bargain hunting.

Today's Headlines

Bloomberg:

- Obama’s Health Plan Sparks Unease Among Nation’s Middle Class. Darryl and Shelly Syverson may be the real-life incarnation of “Harry and Louise.” And that could pose a danger for President Barack Obama’s plans to overhaul the U.S. health-care system. The Syversons of Strawberry Point, Iowa, and their neighbors are voicing many of the concerns stoked by Harry and Louise, a fictional middle-class couple whose appearance in television advertisements attacking President Bill Clinton’s health-care program in 1994 helped sink the plan. “The middle class always get stuck paying for everything,” Shelly, 59, said after a town-hall meeting last week in Elkader, Iowa, a mostly rural town of 1,465 residents about 60 miles northwest of Dubuque that houses a Caterpillar Inc. plant. As Congress returns this week to craft the legislation, Obama’s push to revamp an industry that makes up 17 percent of the nation’s economy will need support from American families earning between $50,000 and $100,000 a year, a group that pollsters define as middle class and which makes up about a quarter of the electorate. That backing is shaky, polls show.

- Last week, we discovered that the state of California will gladly pay you Tuesday for a hamburger today. With California mired in a budget crisis, largely the result of a political impasse that makes spending cuts and tax increases impossible, Controller John Chiang said the state planned to issue $3.3 billion in IOU’s in July alone. Instead of cash, those who do business with California will get slips of paper. The California morass has Democrats in Washington trembling. The reason is simple. If Obama’s health-care plan passes, then we may well end up paying for it with federal slips of paper worth less than California’s. Obama has bet everything on passing health care this year. The publicity surrounding the California debt fiasco almost assures his resounding defeat.

- China’s government said at least 140 people were killed in ethnic rioting in the capital of Xinjiang province, and blamed overseas Uighur groups for the violence. China Central Television aired images of smoke billowing from vehicles, crowds overturning police cars and bloodied people slumped on sidewalks in Urumqi. More than 825 people were also injured after rioting broke out in the city late yesterday, and the toll is likely to rise, the state-run Xinhua News Agency cited Liu Yaohua, the region’s police chief, as saying. The government said overseas separatists used the deaths of migrant Uighur workers in a factory brawl in southern China to fuel ethnic divisions. As many as 30 million migrant workers have lost their jobs during the global financial crisis, as demand from the U.S. and Europe vanishes, exacerbating already simmering social tensions. “It’s like Mao Zedong used to say, a spark can spread the fire into the prairie, and that’s the situation in Xinjiang,” said Jean-Philippe Beja, a senior researcher at the French Centre for Studies on Contemporary China in Hong Kong. Uighurs, a Muslim group comprising about half of Xinjiang’s 20 million people, have long complained of discrimination and unfair division of the region’s resources with the Han, who make up more than 90 percent of China’s 1.3 billion people.

- Indian stocks fell the most in six months, led by banks, after the government forecast the widest budget deficit in 16 years, increasing the risk of a cut in sovereign ratings. The rupee and bonds sank. ICICI Bank Ltd. and State Bank of India Ltd. led Indian lenders lower as the government budget omitted measures to open the industry and on concern that the borrowing plan will reduce the value of bond holdings. Larsen & Toubro Ltd., India’s largest engineering company, lost 8.9 percent and Reliance Infrastructure Ltd., the second-biggest utility, sank 12 percent even as Finance Minister Pranab Mukherjee pledged increased spending on roads and power. The Bombay Stock Exchange’s Sensitive Index, or Sensex, slumped 869.65, or 5.8 percent, to 14,043.4, the most since Jan. 7.

- Zimbabwe’s President Robert Mugabe described U.S. Assistant Secretary for African Affairs Johnnie Carson as an “idiot” after meeting with him briefly on July 2. In a transcript of an interview published on the Web site of the state-controlled Herald newspaper today, Mugabe said of Carson, “Who is he? I hope he was not speaking for Obama.” “You wouldn’t speak to an idiot of that nature,” Mugabe said. “I was very angry with him, and he thinks he could dictate to us what to do.”

- Marc Andreessen, who helped kick off the Internet boom 15 years ago by co-founding Netscape Communications Corp., is starting a $300 million venture capital fund to foster Silicon Valley startups. Andreessen, 37, and partner Ben Horowitz, 43, will seek investment opportunities and spend between $50,000 and $50 million on each, Andreessen said in an interview. The fund will concentrate on things he knows, such as the Internet and information technology, rather “clean tech, biotech, electric cars and rocket ships,” he said.

- Jean-Pierre Aguilar, chief executive officer of Capital Fund Management SA, France’s largest hedge fund firm, was killed in a gliding accident, the company told investors.

- The Baltic Dry Index, a measure of shipping costs for commodities, fell for a fourth straight session in London, led by a decline in the cost of hiring vessels to deliver iron ore. The index tracking transport costs on international trade routes dropped 145 points, or 4.1%, to 3,375 points, according to the Baltic Exchange today. “The dropping does seem to have a bit of momentum behind it,” Michael Gaylard, strategic director at Freight Investor Services Ltd. in London, said. Today’s decline in the Baltic Dry means the measure has already lost 10% of its value in July, declining every trading day so far this month.

- Crude oil and copper led commodities lower on speculation a faltering global economic recovery will erode demand. Oil extended a three-week decline, dropping 3.8 percent, and copper fell for a third day. U.S. gasoline demand over the July 4 holiday fell 2.6 percent, according to AAA, the nation’s largest motoring organization. Stockpiles of copper are growing in China, the world’s largest buyer of the metal. “There’s a lot of excess production and not that much demand,” said Barry R. James, who holds Exxon Mobil Corp., Chevron Corp. and ConocoPhillips shares among the almost $2 billion in investments he manages at the James Advantage Funds in Dayton, Ohio. “We don’t see much of a recovery.” Copper demand will decline 3.9 percent in 2009, leaving a supply surplus this year and in 2010, according to Deutsche Bank AG. A slowdown in investment in China along with “lower bank lending and weaker industrial production growth will eventually trigger a broad-based correction across the industrial metals complex,” Michael Lewis, head of commodities research at Deutsche Bank AG, wrote in a report today. “Copper prices are most exposed of the LME metals, given the importance of China in terms of global copper consumption growth.” “A stronger greenback has prompted fresh pressure,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a note. There is “limited physical interest and tepid investment demand.”

- Dwight Anderson, the commodities investor who liquidated his Ospraie Fund last year after a 39 percent loss, started two hedge funds this month with about $100 million, according to two people familiar with his firm.

- Cisco Systems Inc.(CSCO), facing waning demand for networking equipment from businesses, is working with phone and cable carriers on products and services that let consumers hold videoconferences through their televisions. The offerings, which build on Cisco’s TelePresence corporate-videoconferencing system, will debut within 12 months. In addition to holding video chats, users will also be able to exchange messages and leave videos for friends, said Ned Hooper, head of the consumer business at Cisco.

- FX Concepts Inc., the world’s largest currency hedge fund, says it lost 5.4 percent in this year’s first five months. John W. Henry & Co.’s foreign-exchange fund told investors it lost 2 percent, after 2008’s 76 percent gain, the best since its 1986 launching. Both use computer models to spot currency trends and, along with other momentum chasers, are getting hammered by this year’s lack of clear direction as the markets are pulled in opposing directions.

- The euro will probably fall to a six-week low versus the US dollar after failing to exceed resistance levels last week, Citigroup Inc. technical analysts wrote. The euro will probably fall to $1.3748 to a support level near the 55-day moving average, and a break even lower may lead to declines toward the 200-day moving average around $1.33, the strategists wrote.

- Treasury two-year notes rose for a third day as the Federal Reserve bought $7 billion in government securities and declining equities stoked demand for the relative safety of fixed-income assets. The advance pushed the two-year note yield to the lowest level in more than a month.

Wall Street Journal:

- As computing goes mobile thanks to the emergence of more powerful devices, Microsoft Corp. (MSFT) is finding itself increasingly threatened by new rivals - and some old ones, too. The company's mobile technology has suffered in comparison to both the iPhone, from traditional foe Apple Inc. (AAPL), and Research In Motion Ltd.'s (RIMM) BlackBerry. Meanwhile, device makers that have normally been big supporters of Microsoft's mobile operating system software, such as Motorola Corp. (MOT) and Palm Inc. (PALM), have been moving toward the use of different technology.

- Presidents Barack Obama and Dmitry Medvedev reached a framework agreement to reduce their nuclear arsenals but left open a host of vexing issues in U.S.-Russian relations.

- Regulators last month came out with a warning about some high-risk exchange-traded funds. Even more scrutiny is needed.

CNBC:

- The market may be slow but new technologies for vehicles are appearing at a blistering pace. Most are in the realm of safety, but some gadgets are pure convenience.

- Farrell: Don’t Head For The Exits Yet.

TechCrunch:

- Like most people who’ve had an iPhone 3GS in their hands, we’ve been extremely impressed with the video capabilities of this little device. Not only Does it take near-HD video, it has excellent basic editing software and video can be uploaded to YouTube over Wifi or the cell networks. Among other things, it is the most useful video camera in the world today. No wonder the video camera market is shaking in its collective boots. Thank God those iPhones are so expensive, and Apple will only sell 20 million or so of them in 2009. If Apple added cameras to its line of iPods, there would be another 3+million of them hitting the market per month, and the low end of the digital video camera market could be crushed. Uh oh. That’s exactly what we’re hearing is going to happen.

IBD:

- Treasury Secretary Timothy Geithner is scheduled to testify Friday before a joint congressional committee about potential regulation of over-the-counter derivatives, according to a statement Monday. Lawmakers are expected to clash about whether all derivatives, including the specialized over-the-counter derivative contracts that are considered to have played a part in the financial crisis, should be cleared through clearinghouses. Geithner and lawmakers are also expected to discuss a measure approved by the House that seeks to eliminate a type of derivatives security known as "naked" credit default swaps. In other words, the only buyers of those securities would be those investors who have direct exposure to financial loss on the underlying entity.

NY Post:

- Advertisers and television executives are wondering who will blink first in the stalemate over commercial time for the coming TV season.

LA Times:

- President Obama's landmark energy and global warming bill squeaked through the House only after the White House made dozens of concessions to coal, manufacturing and other interests. Now, as the battle moves to the Senate, Obama faces demands for even more concessions -- including pressure to open the nation's coastlines to offshore oil and gas drilling. The Senate also will take up a series of controversial issues that were glossed over or omitted from the House legislation. Among them: giving the government sweeping powers to approve thousands of miles of new transmission lines to carry electric power to coastal cities from wind turbines in the upper Midwest and solar power generators in the Southwest, regardless of local objections. With Republicans forming a near-solid phalanx of opposition and many Democrats concerned about the effects of specific sections of the bill on their constituents, the prospect is for a long, slow legislative process. Senate leaders say they will benefit from lessons learned from the way House leaders built their majority. Chief among them: the need to cut specific deals to ease the effects of new emissions restrictions -- which could translate into higher costs for businesses and rising prices for consumers -- in particular parts of the country. "The public is especially wary of passing this during a major recession, and public skepticism is growing about the man-made climate fears," said Marc Morano, editor of the global-warming-skeptic website ClimateDepot.com. Democrats and the two independents who caucus with them control 60 Senate seats. But more than a dozen have expressed concern over costs. They include Democrats from industry-heavy Ohio and Michigan, coal-dependent Indiana and oil-rich Louisiana.

- For three decades China's one-child policy helped power this nation's economic rise. With fewer mouths to feed, families saved. Poverty fell. Living standards improved.
But a social experiment that worked well in some respects is now threatening the country's hard-won gains. China's working-age population -- the engine behind its prolific growth -- will start shrinking within a few years. Meanwhile, the ranks of elderly are projected to soar. By the middle of this century, fully a third of China's population will be age 60 or older, compared with 26% in the United States. China's projected 438 million senior citizens will outnumber the entire U.S. population. With fewer workers to support an aging society in need of care, China faces the same demographic squeeze confronting Western nations. The difference: China's family-tinkering policy has accelerated a shift that the country is ill-prepared to manage and finance. "The problem is the age wave is coming while China is still relatively poor," said Richard Jackson of the Washington-based Center for Strategic and International Studies. "China may be the first major country to grow old before it grows rich." The challenge is profound.

Rassmussen:

- Sixty percent (60%) of U.S. voters now oppose the passage of a second economic stimulus plan this year, a five-point increase in opposition since the issue was first raised in March. A new Rasmussen Reports national telephone survey shows that just 27% of voters favor a new stimulus plan, unchanged from the earlier findings. Thirteen percent (13%) are not sure.

USA Today:

- Taxes on travel are soaring as states and cities target the wallets of tourists and business travelers for new revenue. Hotel taxes, car rental fees and other charges were jacked up in many states in an effort to balance budgets by last week, when the fiscal year started in 46 states. "You couldn't pick a worse time to make it more expensive to rent a hotel room," says Mark Woodworth, executive vice president of PKF Hospitality Research in Atlanta. Hotel occupancy this year will be at its lowest level — 55.5% — since his company started keeping track in 1936, Woodworth says. Popular tourist destinations were hit especially hard. Among places where taxes rose:

- The ballistic missiles that North Korea test-fired this weekend were likely capable of striking key government and military facilities in South Korea, a defense official said Sunday, amid growing concerns over Pyongyang's firepower. North Korean state media did not mention the launches but boasted that the country's military could impose "merciless punishment" on those who provoke it. Pyongyang launched seven missiles into waters off its east coast Saturday in a show of force that defied U.N. resolutions and drew international condemnation.

Reuters:
- A former Goldman Sachs computer programer accused of stealing secret trading codes from the investment bank was being held in federal custody on Monday, pending the posting of $750,000 bail. Sergey Aleynikov, 39, was ordered by U.S. Magistrate Kevin Nathaniel Fox in Manhattan on Saturday to post a $750,000 personal recognizance bond to be secured by three financially responsible people.

Financial Times:
- Bail-outs of the world’s banks pose a threat to free trade, warned Pascal Lamy, head of the World Trade Organization. “There is a danger that the finance industry will be on the side of the forces of deglobalization,” he said in an interview with the Financial Times. The government bail-outs had “constrained risk-taking” outside the familiar territories of national markets and this was already affecting foreign direct investment, now forecast to fall 50 per cent this year. “If there is less FDI there will be less trade,” Mr Lamy said. Speaking from the annual conference of France’s Cercle des Economists in Aix-en-Provence, Mr Lamy said he planned to attend this week’s G8 summit of world leaders in Italy to urge governments to resist growing pressures for protectionist measures and to keep the channels of trade open in finance as well as industry. The WTO head warned that free trade faced its severest test, with protectionist pressures poised to rise.

Haaretz.com:

- Israel is urging the United States and other countries to start preparing now for the possibility that Washington's proposed dialogue with Iran will fail, by readying a "Plan B" that includes "paralyzing sanctions" and other measures against Tehran. The U.S. has resisted this idea so far.