Friday, May 14, 2010

Friday Watch

Posted by Gary .....at 12:55 AM

Evening Headlines
Bloomberg:
  • Euro Breaks 14-Month Low as Debt-Cutting Steps May Hurt Growth. The euro headed for a fourth weekly decline, breaking through the 14-month low reached against the dollar last week, on concern European nations’ debt-cutting measures will undermine economic growth. The 16-nation currency touched the lowest in a week versus the yen before Greece submits a progress report tomorrow to the European Commission on the implementation of a deficit-reduction plan. New Zealand’s dollar was set for a second weekly loss against the greenback after government data showed retail sales rose in March at less than half the pace economists forecast. “The roots of the debt crisis in Europe have yet to be solved,” said Yoh Nihei, a Tokyo-based trading group manager at Tokai Tokyo Securities Co. “People have reservations about the effectiveness of the loan package. I remain negative on the euro from a long-term perspective.” “Investors are still concerned widespread fiscal tightening could derail the already weak European economic recovery,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “A test of the euro’s 2008 low of $1.2330 looks likely in coming sessions.”
  • Senate Approves Plan to Raise Capital Standards for Big Banks. The Senate approved a proposal that would require Citigroup Inc., Bank of America Corp. and other large U.S. banks to comply with higher capital standards, a change intended to limit their risk-taking. Lawmakers agreed to add the amendment to the financial- overhaul bill. The proposal, offered by Senator Susan Collins, a Maine Republican, would require lenders with more than $250 billion in assets to meet capital standards that are at least as strict as those that apply to smaller banks. The amendment “addresses the root cause of the financial crisis and that is excessive leverage and inadequate capital ratios,” Collins told reporters today. “It also strikes me as fundamentally unfair that small banks have to meet stricter capital requirements than large bank-holding companies.”
  • Senate Approves Debt-Card Swipe-Fee Limits in Financial Bill. The U.S. Senate today approved an amendment that would empower the Federal Reserve to impose limits on debit-card fees collected by the biggest banks as part of the financial-overhaul bill. Visa Inc.(V) and MasterCard Inc.(MA), the world’s biggest payment networks, set the fees and pass along that money to the banks that issue their cards.
  • Insurers Drag Bonds to Worst Since December: Credit Markets. Insurers are leading the first monthly decline for corporate bonds since December on speculation they face losses on sovereign debt just as cleanup costs for the Gulf of Mexico oil spill loom. American International Group Inc. and Axa SA are among insurers whose bonds lost 1.09 percent including reinvested interest, according to Bank of America Merrill Lynch index data. That compares with the negative 0.83 percent return on debt issued by energy companies hit by BP Plc’s oil rig explosion and the 0.68 percent loss on notes from banks, also big holders of debt of troubled European nations.
  • China to Crack Down on Commodities Price Speculation, NDRC Says. China will crack down on some commodities price speculation and hoarding to curb rising prices, the National Development and Reform Commission said in a statement on its website.
  • Oil Poised for Second Weekly Drop on Dollar's Gain Against Euro. Crude oil is poised for a second weekly decline as the strengthening dollar curbed the appeal of commodities and U.S. supplies increased. Oil dropped for a fourth day as the U.S. currency climbed against the euro after Portugal announced austerity measures, spurring concern that fiscal tightening across Europe will limit economic growth. The Energy Department said May 12 that crude inventories at Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is stored, rose to a record. “It looks like the Eurozone economy is going to slow by quite a bit, not helping the overall global economy, or that of crude oil demand,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “Oil is currently fighting a losing battle against the dollar. On the fundamental side, U.S. inventory levels are still at very high levels.” Stockpiles of crude oil at Cushing rose 784,000 barrels to 37 million, the highest level since the Energy Department began reporting on inventories at the hub in April 2004. Nationwide U.S. oil supplies gained 1.95 million barrels to 362.5 million, the 14th increase in 15 weeks, according to the department. That left stockpiles 6.1 percent above the five-year average for the period, up from 5.4 percent the previous week. “Builds will continue,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney.
  • Greenhouse-Gas Rules Made Final by EPA as Alternative to Bill. The U.S. Environmental Protection Agency issued final rules today to regulate greenhouse-gas emissions as an alternative if Congress fails to act. The EPA plans to regulate about 70 percent of U.S. greenhouse gases from stationary sources such as power plants, refineries and factories, the agency said today in a statement. “The Obama administration has again reminded Washington that if Congress won’t legislate, the EPA will regulate,” Kerry said today in a statement. “Those who have spent years stalling need to understand: killing a Senate bill is no longer success.” Next year, the EPA will begin consideration of a rule to extend the restrictions to smaller emitters. Today’s rules would rewrite the Clean Air Act, which only Congress can do, according to Gregory Scott, executive vice president of the refiner’s group. “EPA has adopted a tortured and legally unsupportable interpretation of the plain wording of the Clean Air Act in an effort to escape a regulatory train wreck of its own creation,” Scott said in a statement. “If EPA is allowed to get away with this, it sets a dangerous precedent for unelected officials in federal agencies to change laws approved by the elected representatives of the American people.”
  • Ford's(F) Mulally Says Profit Revival to Pick Up in 2011. Ford Motor Co. Chief Executive Officer Alan Mulally, who ended three years of losses in 2009 as rivals slid into bankruptcy, said the automaker’s earnings next year will improve on “solid” profit in 2010. “We expect to see continued improvement in 2011,” Mulally told shareholders today at their annual meeting in Wilmington, Delaware. “We’re clearly on a path now of profitable growth.”
  • CA Inc.(CA), 2011 Revenue Forecast Misses Analysts' Estimates. CA Inc., the second-largest maker of software for mainframe computers, forecast full-year sales that missed analysts’ projections as it invests in a new software market.
  • Sony(SNE) Tumbles After Forecasts Miss Analyst Estimates. Sony Corp. fell the most in a year in Tokyo trading after the maker of Bravia televisions and Cyber- shot cameras forecast earnings that missed analyst estimates. Sony dropped 6.5 percent to 2,958 yen at the 11 a.m. break on the Tokyo Stock Exchange, its biggest decline since May 2009.
  • Morgan Stanley's(MS) Doomed Baldwin CDOs Thwarted 'Natural Process'. In June 2006, a year before the subprime mortgage market collapsed, Morgan Stanley created a cluster of investments doomed to fail even if default rates stayed low -- then bet against its concoction.
  • Bond, Emerging-Market Stocks Lose Funds on Greece. High-yield bond funds posted the largest outflows in five years and emerging-market equity funds had a second straight week of redemptions as Europe’s sovereign- debt crisis dented demand for riskier assets, EPFR Global said.
Wall Street Journal:
  • Tokyo Grows Wary of China Military. Japan's foreign minister expressed concern about China's growing military muscle—a development he said raised the urgency for Washington and Tokyo to resolve their standoff over where to station U.S. troops in Japan. "I wouldn't use the word 'threat'—but we certainly will need to watch very carefully the nuclear arsenal and naval capabilities of China," Katsuya Okada said in an interview Thursday with The Wall Street Journal. "And it is because of this that, all the more, the Japan-U.S. alliance would be important."
  • Scrutiny for Bets on Municipal Debt. Federal regulators and state officials are examining Wall Street's role in trading derivatives that essentially bet the municipal bonds they sold would go bust. The Securities and Exchange Commission has launched a preliminary inquiry into banks' trades of municipal credit-default swaps that allow investors to short-sell, or bet against, municipal bonds, according to people familiar with the matter. The probe is exploring potential conflicts of interest by banks that sell municipal bonds and then poise themselves to profit if those bonds fail, these people said. A main thrust of their investigation is whether firms use their own money to bet against the bonds they sell and, if so, whether that activity is properly disclosed to bond buyers.
  • China Rights Group Roll Out Strategy. Chinese activists, up in arms over what they say is the Obama administration's failure to make human rights a priority in its dealings with Beijing, are seeking to join forces as the two nations discuss the topic in Washington.
  • Google(GOOG) CEO Tries to Reassure Investors. Google Inc. Chief Executive Eric Schmidt tried to reassure his shareholders Thursday, saying the company's business in China was stable and he expects the acquisition of mobile advertising company AdMob Inc. to pass regulatory muster.
Bloomberg Businessweek:
  • New Crisis, Record Yen Still Possible After Bailout, BTM Says. Europe’s unprecedented lending package to debt-ridden nations hasn’t eliminated the chance of a new financial crisis, which may drive the yen to 80 versus the dollar and euro, according to Bank of Tokyo-Mitsubishi UFJ Ltd. There remains a 10 percent chance of renewed turmoil, said Kazuto Uchida, chief economist at the unit of Japan’s largest banking group, Mitsubishi UFJ Financial Group Inc. Under this scenario, the credit ratings of Spain and Italy would be cut to near junk level, with losses spreading to banks in Germany, France and the U.K. “Europe’s economy would contract as much as 5 percent, and the global economy would suffer negative growth over the next two to three years,” Uchida said. The euro may plunge to parity with the dollar, while the Dow Jones Industrial Average may decline to as low as 7,000, he said. Greece’s fiscal recovery is hampered by the fact that it can’t weaken its own currency or change monetary policy that is guided by the European Central Bank under the euro system, Uchida said. Austerity measures face strong opposition from the nation’s citizens and may unleash a vicious cycle whereby the economy is dragged down by labor strikes, he said.
  • Euro Will Drop to 7-Year Low on ECB, Slowing Growth, UBS Says. The euro will drop more than 8 percent by December to its least since 2003 on spending cuts by currency members and as the European Central Bank lags behind the Federal Reserve in interest-rate increases, UBS AG said. The euro will reach $1.15 by December and $1.10 by the end of 2011, UBS said, trimming its previous forecasts for the currency to trade at $1.30 and $1.25, respectively.
CNBC.com:
IBD:
Business Insider:
  • Lloyd Blankfein Saves Chicago Community Bank That Just Happens To Have Ties To Obama and Bill Clinton. Look! Goldman Sachs (GS) is committing an act of generosity. The much-reviled Wall Street firm is in discussions to make an investment in South Side Chicago-based community bank ShoreBank, according to WSJ. Apparently the bank has one more day to become adequately capitalized, or else. As the article notes, though, there appears to be a political angle. ShoreBank is from Obama's old neighborhood, and in fact the bank is involved in microcredit, and Barack Obama once traveled to Kenya to promote the bank's microcredit mission. A video of his trip is posted on ShoreBank's website (and embedded below ht). Bill Clinton has also talked up the bank's work. ShoreBank co-founder and adviser to the board Ronald Grzywinsk testified in Congress in support of the 1977 Community Reinvestment Act, landmark legislation that requires some banks to make a portion of their loans in economically needy communities.
  • CHART OF THE DAY: Leading Indicators Around the World Rolling Over.
  • Another Sign The Bailout Has Done Very Little to Calm Banking Fears. Here's the latest look at the TED Spread, an indicator that became popular to look at during the crisis, as it shows the gap between LIBOR (what banks borrow at) and the risk-free rate. We posted a version of the chart right before the bailout to show that it had recently doubled. And now look. It dipped a little, but still remains quite elevated.
Zero Hedge:
CNNMoney:
  • Hedge Fund Vote Threatens EU-US Rift. European countries led by France and Germany plan to push through controversial hedge fund regulations next week after turning down British pleas to defer a vote in Brussels. The directive has also caused concern in the US. Tim Geithner, Treasury secretary, wrote to EU officials in March warning that, if unchanged, the new regulations could trigger a transatlantic rift by unfairly locking US funds out of European markets. "The Americans are going absolutely ape," said a person involved in the negotiations. "There's this overwhelming belief now in Europe that if we legislate first, then the US will follow what we do."
Institutional Investor:
American Petroleum Institute:

Rasmussen Reports:
Politico:
  • Reid Subpoenaed in Blago Case. The upcoming corruption trial for former Illinois Democratic Gov. Rod Blagojevich is becoming a political nuisance for top Senate Democrats. Blagojevich attorneys have subpoenaed Senate Majority Leader Harry Reid (D-Nev.) to testify in the trial, and Majority Whip Dick Durbin (D-Ill.) was subpoenaed last month and has been interviewed by FBI agents. It’s not clear that either Senate Democrat will actually ever appear at the Blagojevich trial or even be interviewed by his attorneys. The Senate’s legal counsel is examining whether the two lawmakers will comply with the subpoenas. A federal judge has already ruled that Blagojevich cannot call President Barack Obama in the case.
USA Today:
  • Thousands of Non-Profits Could Unwittingly Lose Tax Status. Hundreds of thousands of small non-profits, from Little League teams to community soup kitchens, could lose their tax-exempt status on Monday because of an IRS filing requirement. The 2006 Pension Protection Act included a provision requiring all non-profits to file an annual return with the IRS. Previously, non-profits with annual revenue of less than $25,000 were excluded. Non-profits that fail to file a return for three consecutive years lose their tax-exempt status. On May 17, the three-year clock runs out for non-profits that haven't filed a return since 2007. The Urban Institute estimates that up to 365,000 non-profits could lose their tax-exempt status if they fail to file by Monday.
Reuters:
  • Q+A With Oracle(ORCL) CEO Larry Ellison. In a recent interview with Reuters, Oracle CEO Ellison talked about competing against IBM(IBM) and EMC Corp(EMC), plans for more acquisitions, how Salesforce.com(CRM) is too expensive, litigation against SAP(SAP) and possible succession plans at Oracle:
  • Nvidia(NVDA) Sales Outlook Below Street, Shares Slip. Nvidia Corp (NVDA) reported better-than-expected results, but the graphics chipmaker's sales forecast for the current quarter was below Wall Street's target, and shares fell 3 in extended trading on Thursday.
  • Nordstrom(JWN) 1st-Qtr Net Rises, But Misses Street View. Nordstrom Inc (JWN) said its first-quarter net profit rose 43 percent over last year, but it missed analysts' forecasts and shares fell after hours.
Financial Times:
  • Spanish Finance Minister Elena Salgado said it is "very important" for Spain to generate confidence in the markets, citing an interview. The "difficulties" in the markets in the past two weeks for Spain and other countries has meant that the balance between growth and "fiscal consolidation has moved towards fiscal consolidation in the short term," Salgado said.
  • Europe Enters Era of Belt-Tightening. Amid cries of outrage and expressions of disbelief, a new age of austerity has arrived in Europe. As governments across the eurozone impose cuts on a scale unseen in decades, Greece – widely seen as the centre of the crisis – has already seen violent demonstrations and general strikes. Now there is growing concern that such displays of public anger will become more widespread. Spanish trade unions were on Thursday threatening nationwide walkouts and protests. The shock is palpable in countries which have moved from poverty to prosperity during the decades of almost uninterrupted growth since the second world war and have always enjoyed the material benefits of European Union membership. “Two things are hard to believe: I can get laid-off and that I’ll have to work to 65 to get a pension,” says Yannis Adamopoulos, who is a security guard at a state-controlled Greek corporation. Another Greek, Fotis Magriotis, a self-employed civil engineer, has put his sports utility vehicle up for sale. Work is hard to find and taxes on petrol have twice been increased. “There’s no alternative to downsizing,” he says. For the first time since EU aid started flowing freely in the 1980s, Greeks face a significant drop in living standards, with the economy set to shrink 4 per cent this year and another 2.6 per cent in 2011. The new reality being imposed by the Greek socialist government – a 12 per cent wage cut for civil servants, reductions in pensions and looming job losses in public sector corporations – stuns workers in the bloated state sector. A similar, if less severe, adjustment is being imposed by the socialist government of Spain.
TimesOnline:
  • Osborne Faces EU Defeat on Hedge Funds. David Cameron’s fledgling coalition Government faced its first major test in Europe last night as European regulators looked set to push through controversial new hedge fund and private equity regulations despite fierce opposition from the new administration. In the face of last-ditch lobbying by UK officials during the past two days, the European Parliament looks set to go ahead with a draconian crackdown on alternative investment fund managers early next week. George Osborne, the Chancellor, is likely to be in Brussels for the agreement on the new rules, which are being driven by France and Germany. He is expected to try to extract a compromise but is resigned to the vote going against him, as he believes that the process is too far advanced for him to intervene. The new rules, which have also provoked outrage in Washington, will be put before EU finance ministers next week. The UK and the US argue that the regulations are protectionist and will make it harder for hedge funds and private equity investors based outside Europe to trade in the eurozone. It is thought that the new rules will require hedge funds outside the EU to qualify under a new “passport system” that will enable them to carry out business only if they meet rigorous EU standards. These are expected to include providing extensive details about investment positions to regulators. Fund managers are also likely to have their pay capped or be forced to defer as much as 50 per cent of their bonuses over two or three years. Limits on the ability of private equity companies to withdraw capital from the companies in which they invest are also expected to be imposed. Critics of the directive in the UK have argued that it will force funds out of Britain and into offshore locations not covered by the rules. The UK is home to 80 per cent of Europe’s hedge funds.
BrazzilMag:
  • Lula Blames "Wise Guys" from Rich Countries for Global Crisis. The president of Brazil, Luiz Inácio Lula da Silva thanked, the United Nations for the two prizes awarded for his leadership in fighting hunger and poverty with a strong speech condemning rich countries, global speculation and "capitalist myopia". The Brazilian President recalled that in 2008 the world was taken by surprise by the soaring prices of food for which first the Chinese were blamed "for eating too much"; then oil and the Arabs, but later it was plain clear it was all to blame on a few "wise guys" from the rich countries making fortunes with papers and speculating with food". Lula went on to say that when the sub-prime crisis blew up in the United States, it was discovered that the serious financial disorders caused by fraudulent manipulation with these toxic mortgages was mostly behind the global speculation that ended punishing the poorest peoples of the world.
The Standard:
  • HSBC Chief Plays Cool Before AGM. "We know we have more to do to justify the support shareholders have given us," said group chief executive Michael Geoghegan. "We face headwinds, in common with the rest of the industry. HSBC Holdings expects return on equity to be at the lower end of its medium-term target range of 15 to 19 percent this year.
South China Morning Post:
  • Foxcomm Technology Group, the world's biggest maker of electronics and computer parts, has prevented almost 30 suicides attempts in less than a month, citing a company spokesman. A woman who worked at Foxconn died on Tuesday in an apparent suicide, the eighth such death at its Shenzhen plant this year. Foxconn set up a special suicide prevention hotline at its main Shenzhen factory in April and has been flooded with calls for help, spokesman Liu Kun said.
China Daily:
  • China Premier Pledges to Address Root Causes of School Attacks on Children. Security has been stepped up around schools across the country amid calls by sociologists that solutions be found to deep-seated social problems that have led to a spate of attacks around campuses. Minister of Public Security Meng Jianzhu ordered police forces to ensure criminals "dare not and cannot" get their hands on children. He stressed that security measures in privately-run schools and kindergartens as well as those in remote areas and rural regions should be reassessed to stem risks. The directive followed Wednesday's deadly attack in Northwest China's Shaanxi province, the fifth on children in the past month. A 48-year-old local farmer stabbed seven children and two adults to death - the youngest victim aged only 3 - before he killed himself. "In rural areas, especially remote villages, it is impossible for every kindergarten to be guarded by a police officer," said Guo Taisheng, professor and dean of the public security department of the Chinese People's Public Security University. Law professor Li Yunlong said the five attacks on children in the past month share some common characteristics, such as the attackers were jobless men in their 30s to 40s. "Their motives are to exact revenge on society and expose social problems, such as unemployment and unfair distribution of wealth," he said. Fang Changchun, associate professor at the sociology department of Nanjing University, said this group needs a way to vent long-suppressed frustration, which the attackers in the five cases apparently did not find. "They turned to children to express their resentment because they had no direct targets to do so, and compared to other places, schools and kindergartens are not as heavily guarded," he said. But before such social problems are resolved, placing schools under police protection is necessary, he said. In Beijing, 800 well-trained security guards, clad in helmets and armed with tear gas and batons, made their presence felt in primary schools and kindergartens. The municipality aims to equip each school with at least two such security guards. In Shanghai and Guangzhou, parents need passes to enter school. Despite all the security measures, a woman in her 30s carrying a long knife was caught on Thursday by security guards and traffic police when she ran into a children's activity center in Hangzhou, Zhejiang province, local newspaper City Express reported. No casualty was reported.
  • General Electric(GE) and China National Offshore Oil Corp., the parent of CNOOC Ltd., are considering setting up a 3 billion yuan private equity fund.
21st Century Business Herald:
  • China's tax bureau may announce by May 20 the expansion of its property tax on commercial-use properties to residences.
Evening Recommendations
Citigroup:
  • Reiterated Buy on (ETN), target $88.
  • Reiterated Buy on (AKAM), target $44.
  • Upgraded (PH) to Buy, boosted target to $82.
  • Reiterated Buy on (URBN), target $42.
  • Downgraded (NFLX) to Hold, target $110.
Night Trading
  • Asian indices are -1.0% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 114.0 +9.0 basis points.
  • S&P 500 futures +.13%.
  • NASDAQ 100 futures +.08%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (JCP)/.25
  • (DDS)/.51
  • (VSAT)/.43
Economic Releases
8:30 am EST
  • Advance Retail Sales for April are estimated to rise +.2% versus a +1.6% gain in March.
  • Retail Sales Less Autos for April are estimated to rise +.4% versus a +.6% gain in March.
  • Retail Sales Ex Auto & Gas for April are estimated to rise +.3% versus a +.7% gain in March.
9:15 am EST
  • Industrial Production for April is estimated to rise +.7% versus a +.1% gain in March.
  • Capacity Utilizati0n for April is estimated to rise to 73.8% versus 73.2% in March.
9:55 am EST
  • Preliminary Univ. of Mich. Consumer Confidence for May is estimated to rise to 73.5 versus a reading of 72.2 in April.
10:00 am EST
  • Business Inventories for March are estimated to rise +.4% versus a +.5% gain in February.
Upcoming Splits
  • (GMCR) 3-for-1
Other Potential Market Movers
  • The Fed's Evans speaking, (ISIL) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
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Thursday, May 13, 2010

Stocks Lower into Final Hour on Profit-Taking, Rising Financial Sector Pessimism, Technical Selling, More Shorting

Posted by Gary .....at 3:46 PM

Broad Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 25.38 -.55%
  • ISE Sentiment Index 106.0 -8.62%
  • Total Put/Call .79 -8.14%
  • NYSE Arms 1.36 +68.39%
Credit Investor Angst:
  • North American Investment Grade CDS Index 98.98 bps +1.84%
  • European Financial Sector CDS Index 118.15 bps +7.86%
  • Western Europe Sovereign Debt CDS Index 106.66 bps -2.88%
  • Emerging Market CDS Index 233.83 bps +1.18%
  • 2-Year Swap Spread 30.0 +3 bps
  • TED Spread 28.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 271.0 +1 bp
  • China Import Iron Ore Spot $169.50/Metric Tonne -1.22%
  • Citi US Economic Surprise Index +13.90 -.5 point
  • 10-Year TIPS Spread 2.30% -2 bps
Overseas Futures:
  • Nikkei Futures: Indicating -135 open in Japan
  • DAX Futures: Indicating -15 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Biotech, Retail and Technology long positions
  • Disclosed Trades: Added to my (IWM), (QQQQ) hedges and added to my (EEM) short
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish as equities trade near session lows this afternoon despite gains in most overseas markets. On the positive side, Oil Tanker and Food stocks are slightly higher. Sovereign debt angst is lower today with the Spain sovereign cds falling -2.46%, which is a positive. Oil is lower again on more euro weakness, rising supply and worries over China demand. Despite a calming of eurozone debt fears, the euro still trades very poorly and likely has further meaningful downside. On the negative side, Homebuilding, Semi, Disk Drive and Networking shares are under meaningful pressure, falling 2.0%+. Lumber prices have fallen -7.0% over the last five days. Some broad gauges of credit angst are moving higher again today. The eurozone investment grade cds index is jumping +6.5% today to 89.66 bps. As well, the California municipal cds is rising another +4.3% to 265 bps. The AAII % Bulls fell to 36.6 this week, while the % Bears rose to 36.6. Some gauges of investor angst are once again registering a bit too much complacency. The decline in the euro today is starting to take on a disorderly feel again and the S&P 500 failed again to break above its 50-day moving average. I will closely monitor Asia's reaction to our afternoon weakness tonight before further shifting market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, more shorting, rising financial sector pessimism and technical selling.

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Today's Headlines

Posted by Gary .....at 2:58 PM

Bloomberg:
  • Volcker Says Crisis Threatens Euro 'Disintegration'. Former Federal Reserve Chairman Paul Volcker said he’s concerned that the euro area may break up after the Greek fiscal crisis that sparked an unprecedented bailout by the region’s members. “You have the great problem of a potential disintegration of the euro,” Volcker, 82, said in a speech in London today. “The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”
  • Euro Trades Near Lowest in 14 Months on Concern Over Growth. The euro fell for a third day versus the dollar as Portugal announced deficit-cutting measures that will extend until the end of 2011, spurring concern that fiscal tightening across Europe will limit economic growth. The 16-nation currency fell against nearly all of its most- traded counterparts as a Spanish union called for strike a day after austerity measures were announced, increasing concern that governments may not be able to cut budgets fast enough. “Portugal announced some pretty aggressive austerity measures and you can bet that the next thing we hear is a public union calling for a strike,” said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago, who expects the euro to drop as much as 12.5 percent in the next four months. “That creates additional uncertainty for the euro zone.”
  • Euro May Test Parity With Dollar in 'Hard Landing', RBS Says. The euro “can easily head through parity” with the U.S. dollar under a “hard landing” recovery scenario from the European deficit crisis, according to Royal Bank of Scotland Group Plc. The shared currency’s forecast was reduced to $1.14 for the middle of next year, Alan Ruskin, head of foreign-exchange strategy at RBS Securities in Stamford, Connecticut, wrote in a note today.
  • Mortgage Rates on 30-Year U.S. Loans Fall to 4.93%. U.S. mortgage rates fell for the third straight week as investors filled a void left by the end of a Federal Reserve program to purchase bonds backed by home loans. Rates for 30-year fixed loans dropped to 4.93 percent in the week ended today from 5 percent last week, Freddie Mac said in a statement. The average 15-year rate was 4.3 percent, the McLean, Virginia-based mortgage finance company said.
  • Crude Oil Tumbles to 12-Week Low as Dollar Climbs Against Euro. Crude oil tumbled to a 12-week low in New York as the strengthening dollar curbed the appeal of commodities as an alternative investment. Oil slipped as much as 2.7 percent as the U.S. currency climbed against the euro after Portugal announced austerity measures, spurring concern that fiscal tightening across Europe will limit economic growth. Stockpiles of crude at Cushing, Oklahoma, where the New York-traded West Texas Intermediate oil grade is stored, rose 784,000 barrels to 37 million, the second straight week supplies reached the highest level since the department began reporting on inventories at the hub in April 2004. “What we’re seeing today is mostly a Cushing story,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The weakness in the June crude-oil contract confirms that there’s no shortage of crude oil.” “The big build in Cushing is having a big impact on WTI, it is now trading at a discount to everything,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “It’s also becoming clear that the economy isn’t roaring back. There will be issues in countries such as Greece, which limit growth.”
  • Jobless Claims in U.S. Declined to 444,000 Last Week. The number of Americans filing claims for jobless benefits dropped for a fourth straight week, a sign that employers are retaining more workers as the economy expands. Initial jobless claims fell by 4,000 to 444,000 in the week ended May 8, higher than the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The four-week moving average of initial claims, a less volatile measure than the weekly figures, dropped to 450,500 last week from 459,500, today’s report showed. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended May 1.
  • PIMCO Says Europe Shows World Caught in 'New Normal'. Pacific Investment Management Co. said the debt crisis in Europe shows its outlook for an extended period of below-average economic growth remains valid, even after global markets rebounded from the financial crisis. “What is happening in Europe is a vivid illustration of an underlying theme of the new normal,” Mohamed El-Erian, the chief executive officer of Pimco, said in an interview. There are “structural forces overwhelming traditional cyclical ones,” he said.

Wall Street Journal:
  • Financial News: Blackstone(BX) to Raise Largest Private Equity Fund($14 Billion) for 15 Months. The Blackstone Group (BX) is close to completing the largest private equity fundraising for 15 months, providing additional firepower to its recent return to the mega buyout market. The listed US firm, founded by Stephen Schwarzman and Peter Peterson, is set to raise the funds imminently, three people familiar with the situation said.
  • CFTC Documents Reveal Internal Debate on Position Limits. Commodity Futures Trading Commission Chairman Gary Gensler is pushing for speculative trading curbs in the energy marketplace, but newly released documents suggest there is still internal debate on whether new limits will damp price volatility. The documents include memos, emails and a draft economic analysis never viewed by CFTC commissioners containing recent findings from agency economists concerning the effect of speculators and commodity-index traders on prices.
CNBC:
MarketWatch:
NY Post:
  • Obama to Cut NYC Anti-Terror Funding Even After Times Square Bombing Attempt. The Obama administration will announce tomorrow it has slashed anti-terror funds for New York City, despite the attempted Times Square bombing less than two weeks ago that underscored the enormous threat to the city. The Department of Homeland Security informed New York officials yesterday that grants to the city were cut 27 percent for mass transit security and 25 percent for port security. The mass transit funds dropped $42 million, from $153 million last year to $111 this year. Port security funds suffered a $11.2 million cut, from $45 million to $33.8 million, officials said. The timing of the announcement drew howls from New York lawmakers on Capitol Hill, whose recent pleas for increased anti-terror spending in the Big Apple – along with the same plea from Mayor Bloomberg – fell flat. They said the Times Square bomb attempt shows that New Yok remains the top target for terrorists and that the city deserves the lion’s share of federal spending on security. "For the administration to announce these cuts two weeks after the attempted Times Square bombing shows they just don’t get it and are not doing right by New York City on anti-terrorism funding," Sen. Chuck Schumer (D-NY) said. Rep. Pete King (R-LI), the ranking Republican on the House Homeland Security Committee, said the cuts were "dangerous and unconscionable." "The threat against New York City, the top target of al-Qaeda, is increasing, not decreasing," he said, noting that the city has been the target of at least 11 foiled terror plots since 9/11. "The Times Square attempt served as a wake-up call for many, but apparently not for the Obama Administration, which should be dramatically increasing New York City’s homeland security funding, not decreasing it." It is not the first time President Obama has short-changed the city on homeland security dollars. Obama has moved for the second year in a row to eliminate a $30 million program called "Securing our Cities." It would create a ring of radiation detectors around the city to monitor for nuclear and dirty bombs.
  • FBI Searches LI, NJ and Boston-Area Homes in Times Square Bomb Plot, 4 Arrested. An army of FBI agents executed search warrants at several locations on Long Island, New Jersey and in the Boston suburbs this morning in connection with the failed Times Square car bombing, authorities said. Four people were being held on immigration-related charges. Attorney General Eric Holder told a Congressional panel today that “several people” had been taken into custody in connection with the Times Square case. "They do not relate to any known immediate threat. ... This is part of an ongoing investigation," he said.
Business Insider:
TechCrunch:
  • U.S. Online Ad Revenues Hit Nearly $6 Billion in First Quarter. Internet advertising revenues in the U.S. hit $5.9 billion for Q1 2010, representing a 7.5 percent increase over the same period in 2009, according to numbers released moments ago by the Interactive Advertising Bureau in tandem with PricewaterhouseCoopers. This marks the highest first-quarter revenue level ever for the industry.
L.A. Times:
  • Square Launches, Enables Cellphones to Take Credit Card Payments. The newest start-up called Square from Twitter creator Jack Dorsey launched Tuesday. The San Francisco company makes a thumb-size plastic gizmo that can plug into an iPhone, a smart-phone running Google's Android, an iPod Touch or an iPad, unlocking the ability to conduct credit card transactions. The Square gadget is free, available online at SquareUp.com. Because it's designed to be plugged into the headphone jack, the company can manufacture one device to work with many phones and consumer electronics. The gadget will eventually support phones from Palm and Research In Motion's BlackBerry.
Politico:
  • Climate Bill's Fate Down to Business. In an ornate Senate hearing room, Sen. John Kerry (D-Mass.) and Sen. Joe Lieberman (I-Conn.) unveiled their energy measure Wednesday before an audience packed with both environmentalists and industry titans. The presence of traditionally warring opponents reflected the attempt by Kerry, Lieberman and co-author Sen. Lindsey Graham (R-S.C.) to craft one of the first major bills to deal with climate change that wasn’t instantly viewed as anathema by the business community. And the fate of the bill is likely in business’s hands. While the green lobby is already firing up grass-roots support and running ads to advance the bill, getting the 60 Senate votes needed to pass it will require help from corporate lobbying shops with deep ties to conservative Democrats and Republicans.
Real Clear Politics:
  • Crony Capitalism: From GM to Greece, the Lies Keep Growing. To understand the pertinence to America of events in Greece, notice General Motors' most recent misbehavior. A television commercial featuring CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears. In the commercial, Whitacre says GM has "repaid our government loan in full." Rep. Paul Ryan, R-Wis., noted that GM used government funds to pay back the government: It "simply transferred $6.7 billion from one taxpayer-funded TARP account to another." The government still owns 60.8 percent of GM's common equity, and the Congressional Budget Office projects that the government will lose about $34 billion of the $82 billion of TARP funds dispersed to the automotive industry.
Reuters:
Lidove Noviny:
  • The European Commission's proposal to control and approve individual EU members' budgets before they are put up for a vote should not be taken seriously, citing Czech President's advisor Ladislav Jakl. Big EU members are sure to reject the proposal which would mean a complete loss of sovereignty of their governments, citing Jakl.
Financial Post:
  • Investors Pour $2.3 Billion into Gold ETFs in 6 Days. Gold exchange-traded funds, including the popular SPDR Gold Shares, have seen more than US$2.3-billion in net inflows in the six trading days ended Monday. TrimTabs Investment Research said on Wednesday that the net inflows into gold ETFs are the highest in 12 months. Last Thursday during the near 1,000-point plunge in the Dow Jones industrial average, gold ETFs saw net inflows of US$1.1-billion, TrimTabs said.
El Economista:
  • Spanish trade union UGT called a public sector strike for June 2, citing the union.
DigiTimes:
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Bear Radar

Posted by Gary .....at 2:12 PM

Style Underperformer:
  • Large-Cap Growth (-.10%)
Sector Underperformers:
  • Homebuilders (-2.37%), Networking (-1.89%) and Semis (-1.35%)
Stocks Falling on Unusual Volume:
  • FISV, NTGR, NTY, NETL, CSCO, TRIT, AMED, MIDD, MPWR, URBN, ASIA, RPT, CYD, GFA, CNW, KSS and SKY
Stocks With Unusual Put Option Activity:
  • 1) RTP 2) CIT 3) AMED 4) MHP 5) MCO
Stocks With Most Negative News Mentions:
  • 1) GS 2) WEN 3) WMT 4) LPS 5) RIG
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Bull Radar

Posted by Gary .....at 11:03 AM

Style Outperformer:
  • Mid-Cap Growth (+.43%)
Sector Outperformers:
  • Coal (+1.55%), Steel (+1.02%) and Construction (+.68%)
Stocks Rising on Unusual Volume:
  • SY, CSTR, PRGS, AA, TIE, BT, EQIX, CMTL, SUPX, LOGM, CRUS, NFLX, MBLX, WFMI, BIDU, CLNE, INFA, CHBT, PANL, SFSF, VRSK, AMSC, MAKO, SPTN, BT, RZG, ANW, CGX and GIL
Stocks With Unusual Call Option Activity:
  • 1) SY 2) EQIX 3) HES 4) DAL 5) BMC
Stocks With Most Positive News Mentions:
  • 1) KSS 2) AAPL 3) BP 4) THI 5) MSFT
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