BETWEEN THE HEDGES

Thursday, July 29, 2010

Thursday Watch

Posted by Gary .....at 12:28 AM

Evening Headlines
Bloomberg:

Mortgage-Bond Spreads Surpass Lows Reached During Federal Reserve Buying. Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates reached record lows relative to 10-year Treasuries as investors search for higher returns amid limited refinancing by borrowers. Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds narrowed 0.02 percentage point to about 0.58 percentage point more than 10-year Treasuries as of 1:45 p.m. in New York, according to data compiled by Bloomberg. The gap reached 0.59 percentage point on March 29, two days before the Federal Reserve ended its buying of $1.25 trillion of so-called agency mortgage bonds.
Gross Calls Spending to Maintain Consumption a Waste. Pacific Investment Management Co.’s Bill Gross said deficit spending by governments that seek to maintain artificial levels of consumption “can be compared to flushing money down an economic toilet.” Without acceleration in population growth, developed countries finance more consumption to maintain economic growth, the world’s biggest bond-fund manager wrote in his August commentary today on Newport Beach, California-based Pimco’s website. Leveraged spending, he said, is not a substitute for demand created by people. “I will go so far as to say that not only growth but capitalism itself may be in part dependent on a growing population,” Gross wrote. “Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence.” Deficit spending will be unsuccessful in what Pimco calls the “new normal” because deleveraging, re-regulation and de- globalization produces structural headwinds that lead to slower growth and lower-than-average investment returns, Gross said. Japan is the modern-day example of what deleveraging in the face of a slowing and now negatively growing population can do, Gross said.
Pickens, Home Depot(HD) Beat Wind-Turbine Makers in Energy Measure. T. Boone Pickens, the billionaire energy hedge-fund manager, and Home Depot Inc., the largest U.S. home-improvement retailer, are winners in energy legislation that fails to help solar-panel and wind-turbine makers. The measure proposed yesterday by Senate Democrats would give Pickens victory in his lobbying campaign for more use of natural gas, providing $3.8 billion in rebates for cars and trucks powered by the fuel. Home Depot would benefit from provisions to channel $5 billion in rebates to homeowners who upgrade to more efficient appliances or add insulation that reduces energy use. The provisions were the main survivors among proposals to reshape U.S. energy use under the measure that would also set tougher rules for offshore drilling after BP Plc’s Gulf of Mexico oil spill, the worst in U.S. history. Absent from the measure were limits on carbon dioxide or requirements that utilities add solar and wind power to their portfolios.
CIC Sells Morgan Stanley Shares for Total of $396.5 Million in Past Week. China Investment Corp., the Chinese sovereign wealth fund that bought a 9.9 percent stake in Morgan Stanley in 2007, sold $132.8 million of shares in the investment bank yesterday, bringing the total amount sold in the last week to $396.5 million. CIC sold 4.88 million shares at a weighted average of $27.25 yesterday, the Beijing-based fund said in a regulatory filing. CIC still owns 161.6 million Morgan Stanley shares, according to the filing. The fund sold 14.6 million shares since July 21, the day Morgan Stanley jumped by the most in more than a year after reporting better-than-expected earnings.
Oliver Stone's Showtime Series Should be Canceled, Billionaire Saban Says. called on CBS Corp.’s Showtime Networks to cancel Billionaire Haim SabanOliver Stone’s planned “Secret History of America” documentary series after the filmmaker made remarks that were criticized as anti-Semitic. Saban, creator of the “Power Rangers” franchise and an investor in Univision Communications Inc., urged New York-based CBS to cancel the 10-hour series, his spokeswoman, Stephanie Pillersdorf, said today in an e-mail. “Anyone who works with this guy should be ashamed,” Saban, who is Jewish and a supporter of Israel, said in comments posted at HuffingtonPost.com and confirmed by Pillersdorf. “Oliver Stone should be given a helping hand --indeed, a vigorous shove -- into the land of forced retirement.”
Dendreon's(DNDN) Vaccine for Prostate Cancer Extends Life in Published Study. Dendreon Corp.’s prostate cancer vaccine, Provenge, extended lives by 4.1 months in a study published in the New England Journal of Medicine. The data, released previously, led to the drug’s U.S. approval in April. Provenge is the first drug designed to train the body’s immune system to fight cancer and is the most effective treatment for certain patients with advanced prostate tumors, said Philip Kantoff, a professor of medicine at Harvard Medical School and the study’s lead author.
Illinois Will Probably Raise Income-Tax Rate to 5%, Budget Director Says. Illinois, which is in its worst financial position ever, will raise the income-tax rate in January to address its deficit, Governor Pat Quinn’s budget director said. Lawmakers will likely increase the personal tax to 5 percent from 3 percent, generating $6 billion of new revenue, the budget director, David Vaught, said in an interview.
Avis Budget Offers $1.33 Billion for Dollar Thrifty. Avis Budget Group Inc.’s $1.33 billion offer for Dollar Thrifty Automotive Group Inc., which topped Hertz Global Holdings Inc.’s agreement to buy the rental- car company, may signal a bidding war is under way. The $46.50-a-share offer includes $39.25 in cash and 0.6543 of an Avis share for each Dollar Thrifty share, Parsippany, New Jersey-based Avis said yesterday in a statement. The proposal is 4.5 percent less than Dollar Thrifty’s closing price yesterday.
Vietnam's Debt Rating Lowered by Fitch on Foreign Borrowing, 'Weak' Banks. “Vietnam’s sovereign creditworthiness has deteriorated on the back of weaker external finances and rising external financing requirements amid an inconsistent macroeconomic policy framework,” Ai Ling Ngiam, a director in Fitch’s Asia Sovereign team, said in today’s release. She also cited a “weak banking system.”

Wall Street Journal:

Arizona Ruling Sparks Political Firestorm. A federal judge's decision to block the most controversial elements of Arizona's immigration law offered a fresh hot-button issue for the already heated political season. Jane Norton, a Republican candidate for the U.S. Senate in Colorado, had a hunch that by dinnertime Wednesday, conservative voters across the state would have heard about a federal judge blocking much of Arizona's immigration law. She had a hunch they would be angry.
Sanofi Likely to Make Formal Bid to Genzyme(GENZ) Board. Sanofi-Aventis SA is increasingly likely to make a formal takeover offer to Genzyme Corp.'s board, people familiar with the matter said, in an effort to win enough support among the U.S. biotechnology company's directors to secure a deal that could be valued at about $20 billion. There is growing expectation in both camps that the French pharmaceutical company will send a so-called "bear hug" letter to Genzyme, publicly detailing its proposal, these people said.
Americans Cut Back on Visits to Doctor. Insured Americans are using fewer medical services, raising questions about whether patients are consuming less health care as they pick up a greater share of the costs. The drop in usage is showing up as health-care companies report financial results. Insurers, lab-testing companies, hospitals and doctor-billing concerns say that patient visits, drug prescriptions and procedures were down in the second quarter from year-ago levels. "People just aren't using health-care like they have," said Wayne DeVeydt, WellPoint Inc.'s chief financial officer, in an interview Wednesday. "Utilization is lower than we expected, and it's unusual." Others say that consumers are beginning to forgo elective procedures like knee replacements. "We have a very weak economy and it's just a different environment for the elective parts of health care," said Paul Ginsburg, a health economist who runs the Center for Studying Health System Change and has been analyzing health-company earnings.
DirectTV(DTV) Plays Offense With NFL Ads. Satellite Provider Will Kick Off $100 Million Marketing Blitz to Boost Its Sunday Program Package. DirecTV Group Inc. is launching its biggest advertising campaign yet for its marquee property, NFL Sunday Ticket, as it faces mounting pressure from pay-television competitors increasingly offering rival NFL packages.
Kindle to Go 'Mass Market'. Amazon(AMZN) Digs in Heels by Introducing New, Cheaper Version of E-Book Reader.
Bruce Berkowitz Bets on Financials, Buys Morgan Stake(MS). Well-known mutual-fund manager Bruce Berkowitz is still betting on the U.S. financial sector, saying he recently accumulated a stake in Morgan Stanley (MS).
Fannie Mae, Freddie Mac Still Too Big to Nail: Jonathan Weil. The White House says it’s finally ready to consider new ideas for what to do about Fannie Mae and Freddie Mac. Still absent from the government’s agenda is any serious effort to hold anyone accountable for their ruin or investigate why they collapsed.
Dodd, Frank Plan Congressional Hearings on Basel Bank-Capital Regulations. Christopher Dodd and Barney Frank, authors of the U.S. financial overhaul, plan hearings on the status of global talks to revise bank-capital standards amid worries that proposed rules are being watered down. “I am concerned the recent proposals out of Basel will result in weak and perhaps even nonbinding provisions that provide credit to banks for holding forms of capital that have little or no value in absorbing losses,” said Senator Ted Kaufman, Democrat of Delaware. “The financial reform bill includes only a promise of higher capital requirements for U.S. banks, which we were told were going to be negotiated on an international level.”
China's Stocks Rally Will Wane on Inflation Outlook, HSBC's Mahendran Says. HSBC Private Bank’s Arjuna Mahendran, who predicted a decline in China’s stocks in January, said the the country’s month-long equities rally may falter if the government isn’t able to boost the economy and contain inflation.“It’s not going to be an easy ride to regain losses,” said Mahendran, the head of investment strategy for Asia in Singapore at HSBC Private Bank, a unit of Europe’s largest bank overseeing $460 billion globally. “We might see some short-term gains on the index, but there could be reversals until the picture of overall inflation is clearer.”
What Weeks of Real Usage Tells About New iPhone by Walt Mossberg.
Taxes: A Defining Issue. Barack Obama knows taxes define worldview. The GOP should offer voters an alternative.

Bloomberg Businessweek:

Barring BP(BP) From Drilling Would Cost U.S. Jobs, Company Says. BP Plc objected to proposed legislation that would bar the oil company from operating new drilling leases in U.S. waters, saying it could trigger job losses and threaten the nation’s energy security. A provision of the House bill may have a “drastic impact,” David Nagel, executive vice president of BP America, said in a July 28 letter to Democratic Speaker Nancy Pelosi of California and Republican Minority Leader John Boehner of Ohio. BP said it contributes “significantly” to U.S. oil output as the largest producer in the deep waters of the Gulf. “If this provision were to limit our ability to develop new and existing energy sources, it would harm the ongoing effort to increase America’s energy independence,” Nagel wrote. While BP supports stronger drilling regulation, it is concerned that the provision of the House measure “could have profound consequences for the Gulf Coast economy and jobs, and for the nation as a whole,” Nagel said in the letter.

CNBC:

SEC Investigates Trading in Anadarko Shares. Trading in shares of the oil and gas exploration company Anadarko Petroleum late this spring are under investigation by the Securities and Exchange Commission, according to someone familiar with the matter.
Visa(V) Results Improve, Top Analysts' Expectations. Visa turned in a quarterly profit of $716 million, outpacing Wall Street estimates, as consumers resumed spending.

Business Insider:

This Is Real: The White House Wants To Stimulate The Economy By Building More Cheap Housing. We must admit to being a tad perplexed by this post up at The White House blog: Affordable Housing in the Recovery Summer. That's right, apparently our central planners, in their infinite wisdom have decided that what the economy is really lacking right now is more cheap housing. Here's what Rosie Rios, the US Treasurer wrote:

Forbes:

Al-Qaeda's New Magazine. ''Inspire'' aims to turn Muslims in the Western world toward violent jihad. Can American publishers meet the challenge? So in case you missed it, al Qaeda has a brand new magazine. Yes, really. Just when publishing titans like Hearst and Conde Nast have closed the doors on classics such as Gourmet and O At Home and Newsweek struggles for its future, our friends at al Qaeda headquarters have come up with Inspire, an English-language, online publication aimed at turning Muslims in the English-speaking (Western) world toward violent jihad.
The Comeback in Airlines and Aerospace. In an economic setting less than perfect, but still expansive, airlines are a leveraged earnings play.

MobileCrunch:

RIM(RIMM) Buys "BlackPad.com", Presumably As a Home for The BlackBerry Tablet.

Crain's Chicago Business:

Bill Calls for Study Delinking Lake Michigan, Chicago River to Stall Asian Carp. A U.S. House water projects bill introduced Wednesday would require the Army Corps of Engineers to study separation of Lake Michigan from the Chicago River and the local canal system to prevent the migration of Asian carp and other invasive species. The bill, introduced by Rep. Jim Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, is expected to clear the panel Thursday and head to the full House for a vote soon. While many Midwest politicians have pushed the idea lately, separating the Great Lakes from the Mississippi River Basin has been highly controversial locally because it would disrupt industrial barge shipping and recreational boating in the Chicago area. The 108-page House bill contains hundreds of specific flood control and environmental projects across the country.

NASDAQ:

Viking Global Investors Suffers Bad 2Q, Large Redemptions. Viking Global Investors LP, a "Tiger Cub" hedge fund manager with $12.1 billion in assets under management as of June 30, suffered a bad second quarter with losses for both of its funds, according to its investor letter. Viking also has received large redemption requests when it offered a " liquidity option" to investors after its chief investment officer stepped down in the spring, the letter said. The letter, written by its Chief Executive O. Andreas Halvorsen and posted on website Dealbreaker.com, said its Viking Global Equities fund lost 5% and its Viking Long Fund lost 11.9% net in the second quarter, net of all fees on a composite basis. Gross external redemptions for Aug. 1 amounted to about 10.5% of capital in Viking Global Equities fund and about 13% for Viking Long Fund, as it offered investors a one-time liquidity option following the resignation of chief investment officer David Ott.

AppleInsider:

Apple's(AAPL) Newly Updated Mac Desktops Feature Only ATI Graphics. In this week's refresh of the Mac Pro and iMac lineup, Apple chose to only offer ATI graphics options in all configurations of the company's latest desktops. That's a change from last October, when the iMac line was redesigned, and buyers of the the 21.5-inch iMac had the option of integrated graphics via the Nvidia GeForce 9400M. The discrete graphics options available in last year's iMac line were all ATI cards. But with Tuesday's updates of the iMac and Mac Pro lines, ATI is now the sole graphics option on Apple's Mac desktop lineup. David Baumann, product manager for AMD's graphics division, which oversees the ATI graphics products, spoke with AppleInsider about the new lineup.

Rasmussen Reports:

28% Say U.S. Heading in Right Direction. Twenty-eight percent (28%) of Likely Voters say the country is heading in the right direction, according to a new Rasmussen Reports national telephone survey taken the week ending Sunday, July 25. Just over half (53%) of Democrats feel the country is heading in the right direction, but 91% of Republicans and 73% of voters not affiliated with either major party believe the country is heading down the wrong track. Sixty-seven percent (67%) of all voters say the country is heading down the wrong track, unchanged from last week.

Politico:

Rangel to Dems: Drop Me If You Must. Not even his colleagues know what Rangel will do Thursday, when the House ethics committee reveals what is expected to be a scathing slate of allegations of wrongdoing to open the congressional version of a trial. Rangel declined to comment on the specifics of his case, but his remarks suggest that he knows more calls for his resignation may be coming. Despite that possibility, he was prepared for a fight, according to some fellow black Democrats. There’s a lot riding on Rangel’s decisions — for him, his party and the integrity of the institution he has served in since 1971. “I think he’s going to have to go, maybe tomorrow,” said a member of the Congressional Black Caucus who asked not to be named.

USA Today:

Students Looking for Jobs Boost Metro Unemployment. The unemployment rate in about three-quarters of the nation's largest metro areas rose last month as nearly one million teenagers entered the work force looking for summer jobs. The Labor Department said Wednesday that the unemployment rate rose in 291 of 374 areas in June from May.
Getting a Grip on Government Debt. Continuous annual federal budget deficits have led to a big increase in the nation's overall debt. Explore this interactive to see:

AP:

Sarkozy Orders Illegal Roma Immigrants Expelled. French President Nicolas Sarkozy on Wednesday ordered authorities to expel Gypsy illegal immigrants and dismantle their camps, amid accusations that his government is acting racist in its treatment of the group known as Roma. Sarkozy called a government meeting Wednesday after Gypsies clashed with police this month following the shooting death of a youth fleeing officers in the Loire Valley. Sarkozy said those responsible for the clashes would be "severely punished" and ordered the government to expel all illegal Roma immigrants, almost all of whom have come from eastern Europe. He pushed for a change in France's immigration law to make such expulsion easier "for reasons of public order." He said illegal Gypsy camps "will be systematically evacuated," calling them sources of trafficking, exploitation of children and prostitution.

Reuters:

Downward pressure on the Chinese economy is increasing because of property market curbs, government debt vehicle controls, and carbon emission reduction efforts, citing Zhang Jianhua, the head of the People's Bank of China's research bureau.
Moody's: Regions Bank on Watchlist for Possible Downgrade.
Moody's: SunTrust Bank on Watch for Possible Downgrade.
Juniper(JNPR) To Be Key AT&T(T) Supplier, Details Due Thurs. Juniper Networks Inc (JNPR) said on Tuesday it will be named a key supplier to AT&T Inc's (T) network build-out, a move that could help it gain business with the country's top telecommunications carrier. Juniper will be chosen as a supplier for AT&T's IP (Internet Protocol), MPLS (Multi Protocol Label Switching), Ethernet and Evolved Packet Core domain, it said.
Akamai(AKAM) Profit and Cost Outlook Weigh on Shares. Akamai Technologies Inc's (AKAM) business outlook disappointed investors who expected greater profit from the growing popularity of online entertainment, sending the shares down 5 percent after-hours on Wednesday.
US Jobless Rate to Stay High-Ex Fed No.2. The United States will suffer high unemployment for some time as it slowlyrecovers from the deep recession that ended in 2009, a former second in command at the Federal Reserve said on Wednesday. "I see a very slow, uneven recovery. It will not be fast enough to put a dent in the painfully high unemployment rate for some time," Roger Ferguson, the Federal Reserve's vice chairman from 1999 to 2006, told Reuters after a speech in Cambridge, Massachusetts.
VistaPrint(VPRT) Sees Weak 2011; Shares Plunge. Vistaprint N.V., a provider of online printing and design services, posted weaker-than-expected quarterly revenue hurt by currency fluctuations and forecast 2011 results well short of the market consensus, sending it shares down 26 percent.

Financial Times:

Challenging Half at RAB Capital. RAB Capital, one of the worst-hit hedge fund managers during the financial crisis, said hopes of pushing ahead with its recovery had been dampened by a challenging first half to 2010. Revenues fell 14 per cent to £8.2m, the group’s pre-tax loss worsened to £3.3m from a loss of £2.7m the year before, and the group proposed to cut the interim dividend to 0.1p, against 0.6p a share last year. After two years of restructuring funds, disposals and cutting costs, assets under management fell to $1.26bn from $1.35bn in December. At RAB’s peak in 2007, RAB managed more than $7bn in assets until a wave of redemptions hit its funds.
Banks Plan for Loss of Eurozone Member. Banks have started early-stage planning to deal with the potential fallout on the derivatives and bond markets of a European country being forced to leave the euro. After having received queries by some banks about the impact of such an event, the body representing the swaps and derivatives industry last week contacted some of its members to form a group to consider what they may need to do if a eurozone state is ejected. One person close to the process said that because of the sensitivity of the issue only a small number of members, about 12, predominantly banks but also investors, had been approached. A spokeswoman for the International Swaps and Derivatives Association (ISDA) said the move expressed “no view as to the likelihood of such an event occurring”, but that the organisation had decided to establish a group to “explore the different scenarios in which a country may leave the eurozone and consider what legal and documentation issues could arise in each for the (over-the-counter) derivatives markets and what steps would be necessary in order to address them”.

iMarket News.com:

China PBOC Official Calls for Policy Adjustment Against Inflation. Inflation is the "main threat" to the Chinese economy in the current half of the year, and the central bank will need to adjust policies to drain interbank market liquidity and ease price pressures, a People's Bank of China official said Wednesday. Jiao Jinpu, a former central bank researcher and currently deputy-director of the bank's graduate school, told a forum here that the strength in M1 money supply growth seen during the first half will impact price indicators after a six month lag. "Money supply growth was a bit too fast," he said. "That money, will sooner or later translate into inflationary pressure." M1 growth ended the first half up 24.6% after hitting nearly 39% in January. Managing inflation will be the main challenge for monetary policy in the second half, Jiao said, though the broader policy picture will remain unchanged, with the government continuing with its moderately loose monetary policy stance. "The central bank needs to adjust its operations to drain excess liquidity and control inflation," Jiao said.

Shanghai Securities News:

China will keep its property market curbs in place after the policies successfully stemmed the rapid rise in home prices in some cities, said Liu Yingjie, head of the comprehensive department at the State Council Research Office.

Evening Recommendations
Citigroup:

Reiterated Buy on (PX), raised target to $99.

Night Trading

Asian equity indices are -.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 117.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 113.5 +4.0 basis points.
S&P 500 futures +.24%.
NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

(CME)/4.36
(GT)/.03
(ADP)/.42
(WMB)/.30
(IRM)/.24
(GR)/1.07
(XEL)/.27
(MCO)/.44
(CNX)/.66
(DPS)/.69
(MOT)/.08
(F)/.94
(BEN)/1.50
(KLAC)/.59
(FSLR)/1.62
(GNW)/.28
(AMGN)/1.30
(MWW)/-.05
(MET)/1.00
(EXPE)/.42
(AVP)/.35
(WYNN)/.42
(NOC)/2.20
(BDX)/1.24
(CELG)/.66
(LUV)/.26
(XOM)/1.45
(MFE)/.41
(CL)/1.17

Economic Releases
8:30 am EST

Initial Jobless Claims for last week are estimated to fall to 460K versus 464K the prior week.
Continuing Claims are estimated to rise to 4500K versus 4487K prior.

Upcoming Splits

None of note

Other Potential Market Movers

The Fed's Fisher speaking, $29 Billion 7-Year Treasury Note Auction, weekly EIA natural gas inventory report and the (MSFT) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day

Wednesday, July 28, 2010

Stocks Falling into Final Hour on Profit-Taking, Technical Selling, More Shorting, Rising Economic Fear

Posted by Gary .....at 3:40 PM

Broad Market Tone:

Advance/Decline Line: Substantially Lower
Sector Performance: Most Sectors Declining
Volume: Below Average
Market Leading Stocks: Outperforming

Equity Investor Angst:

VIX 24.01 +3.58%
ISE Sentiment Index 212.0 +152.38%
Total Put/Call .97 +16.87%
NYSE Arms 1.09 +9.29%

Credit Investor Angst:

North American Investment Grade CDS Index 104.26 bps +1.0%
European Financial Sector CDS Index 99.0 bps +2.54%
Western Europe Sovereign Debt CDS Index 112.0 bps -.70%
Emerging Market CDS Index 217.07 bps +1.75%
2-Year Swap Spread 17.0 -4 bps
TED Spread 33.0 -1 bp

Economic Gauges:

3-Month T-Bill Yield .15% +1 bp
Yield Curve 239.0 -2 bp
China Import Iron Ore Spot $135.10/Metric Tonne -.88%
Citi US Economic Surprise Index -41.10 -3.2 points
10-Year TIPS Spread 1.79% -1 bp

Overseas Futures:

Nikkei Futures: Indicating -90 open in Japan
DAX Futures: Indicating -2 open in Germany

Portfolio:

Lower: On losses in my Medical, Biotech and Technology long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges and added to my (EEM) short
Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows after failing to hold above its 200-day moving average. On the positive side, Gold, Ag, Telecom and Wireless stocks are holding up relatively well. The 2-year swap spread is falling to the lowest level since April 29th. After consolidating gains for the last 10 days, the S&P GSCI Ag Spot Index is breaking out again, rising +2.4% today. Copper also continues to trade well. The Shanghai Composite rose +2.3% last night and has been trading much better of late. On the negative side, Gaming, Homebuilding, HMO, Hospital, Biotech, Medical Equipment, Disk Drive, Semi, Computer, Paper and Oil Tanker shares are under meaningful pressure, falling more than -2.0%. Cyclical and small-cap shares are underperforming. Tech shares have been a bit heavy throughout the day. 3-Month Euro Libor is rising slightly again today. The US Muni CDS Index is rebounding +3.82%, which is also a negative. The Asia Ex-Japan High-Yield CDS Index is rising +4.08% today to 607.83 bps. This index has been trending higher lately, nearing its highest level since last November, even with global equity strength. The 10-year yield is falling -5 bps to session lows at 3.0%. I want to see how overseas market's react tonight/tomorrow morning to our afternoon weakness before further shifting market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on technical selling, more shorting, profit-taking and rising economic fear.

Bear Radar

Posted by Gary .....at 2:39 PM

Style Underperformer:

Small-Cap Growth (-1.52%)

Sector Underperformers:

1) Disk Drives -2.85% 2) Oil Tankers -2.47% 3) HMOs -2.47%

Stocks Falling on Unusual Volume:

TNE, WBSN, CEPH, HSP, ATHR, DRIV, LPHI, FORM, UTHR, WTFC, SLAB, CEPH, WPRT, CATY, GPN, CMP, TNE, HSP and IGT

Stocks With Unusual Put Option Activity:

1) VMED 2) AMLN 3) RRC 4) IGT 5) CHRW

Stocks With Most Negative News Mentions:

1) BP 2) EK 3) RIG 4) ERTS 5) FO

Bull Radar

Posted by Gary .....at 10:32 AM

Style Outperformer:

Large-Cap Growth (-.28%)

Sector Outperformers:

1) Telecom +.34% 2) Computer Services +.24% 3) Wireless +.23%

Stocks Rising on Unusual Volume:

CHRW, VIV, PIT, FCX, BBL, VPHM, EPIQ, BVF, ABB, CASY, BWLD, ODFL, CHRW, ILMN, VOCS, FSYS, EHTH, CRDN, SOHU, BRKR, FISV, TRMK, MKTX, APL, TI, JLL, ARW, PT and TNH

Stocks With Unusual Call Option Activity:

1) APL 2) CHRW 3) FDO 4) BRCM 5) BWLD

Stocks With Most Positive News Mentions:

1) AAPL 2) CMCSA 3) ADBE 4) COP 5) HES

Wednesday Watch

Posted by Gary .....at 12:35 AM

Evening Headlines
Bloomberg:

Europe Stress Relieved With Swap Gap Vanishing: Credit Markets. The bond market is saying that the threat of a European banking crisis is ending. The gap between European and U.S. benchmark credit-default swap indexes, used to hedge against losses or speculate on creditworthiness, narrowed to 0.7 basis point yesterday, the lowest since June 4, prices from Markit Group Ltd. show. That premium soared to a record 23 basis points on May 7 on concern that budget deficits in southern Europe would infect credit markets worldwide. The Markit iTraxx Financial index of swaps linked to the senior debt of 25 European banks and insurers, which on June 8 soared to 61 basis points more than the broader iTraxx index on 125 companies, has fallen to within 7.75 basis points of the main index, according to JPMorgan prices. The financial index has plunged 88.5 basis points to 111.5 basis points since June 8, according to JPMorgan.
Issa Asks FCIC to Explain Spending After Panel Seeks More Funds. U.S. Representative Darrell Issa is asking the Financial Crisis Inquiry Commission to explain its spending after the panel probing the 2008 credit market collapse requested that Congress supplement its $8 million budget. Issa, a California Republican, sent a letter to FCIC Chairman Phil Angelides today, seeking a list of contracts with media consultants and the amount of money spent on such services. Issa also asked Angelides, a Democrat who formerly served as California’s treasurer, to provide a full accounting of travel expenses by FCIC commissioners and their staffs, including payments for airfare, lodging and meals. “I am concerned that the FCIC’s own problems with financial mismanagement and partisanship may have resulted in a waste of taxpayer funds that does not warrant an additional appropriation,” wrote Issa, the top Republican on the House Oversight and Government Reform Committee.
Tiger Global Said to Invest in LinkedIn at $2 Billion Valuation. Tiger Global Management LLC, a hedge fund founded by Chase Coleman, paid $20 million for a stake in LinkedIn Corp., valuing the professional-networking website at more than $2 billion, said two people familiar with the matter. The purchase, at $21.50 a share for about a 1 percent stake, was from existing shareholders and doesn’t represent new investment, said one of the people, who declined to be identified because the sale has not been disclosed.
China Says Environment Accidents Almost Double as Rapid Growth Takes Toll. China, the largest polluter, said rapid economic growth is taking a toll on the environment with accidents doubling, underscoring the need to increase checks as after the worst metal and oil spills in years. Environment accidents jumped 98.1 percent in the first six months from a year ago, with at least 10 incidents each month, the environmental protection ministry said in a faxed statement in response to Bloomberg questions.
UnitedHealth(UNH) Said Near $1.5 Billion Purchase of Services Firm. UnitedHealth Group Inc. is nearing an agreement to buy Executive Health Resources Inc., a medical services firm backed by Abry Partners LLC, for about $1.5 billion, said three people with knowledge of the talks. UnitedHealth would add the Newtown Square, Pennsylvania- based company to its Ingenix database management and consulting unit, said the people, who spoke on condition of anonymity because the talks are private.
Three Former General Electric(GE) Bankers Are Indicted in Bid-Rigging Inquiry. Three former bankers with a General Electric Co. unit that sold investment contracts to state and local governments were indicted for conspiring to rig bidding to profit at taxpayers’ expense, the Justice Department said today.
Medtronic(MDT) Wins U.S. FDA Panel's Backing for Its Experimental Spinal Device. A panel of U.S. advisers voted 6 to 5, with 3 abstentions, that the benefits of Medtronic Inc.’s experimental spinal fusion device outweigh the risks.
Salary of $800,000 Sparks California Taxpayer Mutiny: Joe Mysak. The search is on for the next $800,000-a-year city manager. The taxpayers of Bell, California, a 2.5-square-mile city just outside Los Angeles forced the resignations last week of three public officials who made too much money. The taxpayers were responding to a Los Angeles Times article of July 15 that asked the question, “Is a City Manager Worth $800,000?” I think we all know the answer. The story reported that the city’s chief administrative officer was on a salary of $787,637, his assistant $376,288, the police chief $457,000. These paydays struck the Bell citizenry, and many other Californians, as a bit bloated. Ideas in public finance blow in from the West, an old municipal market saying goes. If the watchdogs where you live aren’t on the hunt for public officials making king-size compensation, they soon will be.
High Iron Ore Prices Are 'Unsustainable,' Australia's IMX Resources Says. IMX Resources Ltd., a mining company that’s started the first new iron ore project in South Australia in a century, said high prices for the steel-making material aren’t sustainable in the long term and will drop. “You’d be living in a different world if you thought these prices were going to last forever,” Duncan McBain, managing director of the Perth-based company, said in an interview. “The pricing will come down.”
Citigroup(C) May Move Prop Traders to Hedge Funds to Comply With Volcker Rule. Citigroup Inc. may move a team of proprietary traders into its hedge-fund unit, one of at least three alternatives the U.S. bank is studying to comply with the Dodd-Frank Act, people briefed on the matter said.

Wall Street Journal:

Rate Swings Sting Europe's Borrowers. Households and small businesses across Central and Eastern Europe are sinking under the weight of foreign-currency debts. It's a sign of how the problems go beyond the borrowing by spendthrift governments that has been the main focus of investors.
Citigroup(C) to Fund Housing Projects. Citigroup is bankrolling a $100 million fund to invest in low- and moderate-income housing in New York City, a move drawing cautious support from housing advocates critical of other private investments in affordable housing. The fund will focus on properties in the Bronx, Queens, Brooklyn and Upper Manhattan, said Ron Moelis, chief executive officer of L+M Development Partners, a New York firm that specializes in affordable housing and will manage the fund developed by Citigroup. He plans to invest primarily in buildings created for low-income tenants, including rent-stabilized buildings that are being foreclosed or in danger of foreclosure.
Fund Holders Sue BlackRock(BLK) Advisors Over Auction-Rate Shares. A group of investors in several closed-end funds advised by BlackRock Advisors LLC has sued, alleging that the adviser breached its fiduciary duties to common shareholders by the way in which it redeemed auction-rate preferred securities.
Google(GOOG) Develops a Facebook Rival. Google Inc. is in talks with several makers of popular online games as it seeks to develop a broader social-networking service that could compete with Facebook Inc., according to people familiar with the matter.
Our Divisive President by Pat Caddell and Douglas Schoen. Rather than being a unifier, Mr. Obama has divided America on the basis of race, class and partisanship. Moreover, his cynical approach to governance has encouraged his allies to pursue a similar strategy of racially divisive politics on his behalf.

Bloomberg Businessweek:

LNG Demand Growth in Asia Beats Oil on Emissions. Asia is boosting consumption of liquefied natural gas relative to oil as nations from China to India try to pollute less while driving economic growth. Demand for LNG in China and India is growing as much as nine times faster than that for crude, according to calculations based on data compiled from Facts Global Energy, BP Plc and the International Energy Agency. Oil use is shrinking in Japan and stagnant in South Korea. LNG use will rise 45 percent in China and 12 percent in India in 2011 from this year, said Facts, an energy consultant. “This strong demand growth will not purely be driven by gross domestic product,” Gavin Thompson, China gas study director for Wood Mackenzie Consultants Ltd., said in an e-mail from Edinburgh. “The gas demand story is about displacing oil products, not coal, in the industrial and residential sectors.” The energy consultant this week raised by 48 percent its forecast for China’s LNG demand in 2020.
BP(BP) Oil From Spill Is Biodegrading, Easing Threat to East Coast. Oil from BP Plc’s record spill in the Gulf of Mexico is biodegrading quickly, probably eliminating the risk that crude will go around Florida and hit the U.S. East Coast, the National Oceanic and Atmospheric Administration said.

CNBC:

BofA(BAC), Citi(C), Wells Fargo(WFC) Outlook Negative: Moody's. Moody's on Tuesday changed its outlook on Bank of America, Citigroup and Wells Fargo to negative, from stable, citing lessened government support for the institutions under new U.S. regulations.
Democrat Energy Bill Raises Liability Cap to 100%. U.S. Senate Democrats unveiled a slimmed-down energy bill on Tuesday aimed at reforming offshore drilling and promoting alternative-fuel vehicles.

Business Insider:

CNNMoney:

The Tax Hike Nobody's Talking About.

Forbes:

The Flawed Assumption Behind Ending The Bush Tax Cut For The Rich by Bob McTeer.

Boston Globe:

Massachusetts Legislature Approves Plan to Bypass Electoral College. The Massachusetts Legislature has approved a new law intended to bypass the Electoral College system and ensure that the winner of the presidential election is determined by the national popular vote. "What we are submitting is the idea that the president should be selected by the majority of people in the United States of America," Senator James B. Eldridge, an Acton Democrat, said before the Senate voted to enact the bill. Under the new bill, he said, "Every vote will be of the same weight across the country." But Senate minority leader Richard Tisei said the state was meddling with a system that was "tried and true" since the founding of the country. "We've had a lot of bad ideas come through this chamber over the years, but this is going to be one of the worst ideas that has surfaced and actually garnered some support," said Tisei, who is also the Republican candidate for lieutenant governor. The bill, which passed on a 28-to-9 vote, now heads to Democratic Governor Deval Patrick's desk. The governor has said in the past that he supports the bill, said his spokeswoman Kim Haberlin. Under the law, which was enacted by the House last week, all 12 of the state's electoral votes would be awarded to the candidate who receives the most votes nationally. Supporters are campaigning, state by state, to get such bills enacted. Once states accounting for a majority of the electoral votes (or 270 of 538) have enacted the laws, the candidate winning the most votes nationally would be assured a majority of Electoral College votes. That would hold true no matter how the other states vote and how their electoral votes are distributed. Illinois, New Jersey, Hawaii, Maryland, and Washington have already approved the legislation, according to the National Popular Vote campaign's website.

Politico:

No Deal in Sight for Rangel. Rep. Charles Rangel’s chances of striking a deal with the House ethics committee grew more distant Tuesday, even as the public airing of charges against him drew closer. New tinges of partisanship gripped the ethics process, making it appear far less likely that Rangel can find a settlement that suits both him and the panel’s Republican contingent.
Congress Clears War Funding. Tens of billions of dollars in new Afghanistan war funding cleared Congress late Tuesday, even as the House easily upended a liberal challenge to the increased U.S. military presence — and drone attacks — across the border in Pakistan. The back-to-back votes buy precious time for President Barack Obama to show progress on his strategy for the region. But even as the anti-war movement remains weak in Congress, Obama can’t ignore a growing split among House Democrats over the cost of his military commitments at a time of tighter budgets and economic troubles at home.
Issa: Obama "pre-occupied" with BP(BP) Politics. Rep. Darrell Issa (R-Calif.), one of the Obama administration’s harshest critics, is once again taking aim at the federal response to the BP oil spill – this time, over a White House decision to dispatch administration aides to Florida to deal with the political fallout from the crisis. “This is just the latest manifestation of the Obama administration’s pre-occupation with public relations dictating and in some cases hindering the effort to address the effects of the Gulf Coast oil spill,” Issa told POLITICO in a statement. “Rather than streamline the process and focus on ensuring that local officials have access to the resources they are literally begging for, the Obama administration has responded by dispatching campaign aides. It’s concerning that the West Wing appears more pre-occupied with the politics and public relations of this crisis, than actually managing it.”

Reuters:

CB Richard Ellis(CBG) Posts 2nd-Qtr Profit, Revenue Up. CB Richard Ellis Group Inc, one of the world's largest commercial real estate service companies, posted a second-quarter net profit and its strongest revenue growth since 2007, sending shares up 5.5 percent in after-hours trade.
Broadcom(BRCM) Revenue Up On Wireless Chip Demand. Broadcom Corp (BRCM) posted higher quarterly earnings and revenue on Tuesday on strong demand for its chips used in smartphones such as Apple Inc's (AAPL) iPhone and in broadband equipment. Broadcom shares rose 1.4 percent to $38.05 in extended trade after closing at $37.53 on Nasdaq.

Financial Times:

Greece 'Ahead of the Curve' on Fiscal Targets. Greece is determined to show it can outperform tough fiscal targets set by the European Union and International Monetary Fund, said George Papaconstantinou, finance minister. But the government still faces strong resistance to structural reforms – from opening up closed-shop professions such as truck driving to cutting about 50,000 jobs in local government and lossmaking state enterprises. In an interview with the Financial Times, Mr Papaconstantinou said in the first half of this year the budget deficit had been slashed by 45 per cent after deep cuts in public consumption and capital investment. He said Greece has taken more measures than were necessary to cut the deficit this year from 13.6 per cent to 8.1 per cent of gross domestic product. A 30-member mission from the so-called troika – the EU, IMF and European Central Bank – arrived in Athens this week to assess reforms launched in return for a €110bn loan package, which rescued Greece from a sovereign default. Mr Papaconstantinou sounded confident that the troika would award Greece a pass mark on progress, enabling it to draw down a second €9bn ($11.7bn, £7.5bn) loan tranche in September. “We are ahead of the curve, mostly due to reduction of expenditures ... Revenues are lagging slightly behind ... but we’re reasonably optimistic that even on the revenue side we’ll meet the targets,” he said. An increase of 4 percentage points in value added tax, on top of a 30 per cent rise in excise taxes, would help boost inflows in the second half, he said. The impact of cuts in public sector wages and pensions on overall spending would bring further reductions, he added. Mr Papaconstantinou also predicted that Greece’s recession would be shallower than forecast, with the economy set to shrink this year by 3 to 3.5 per cent, compared with an earlier projection of 4 per cent. But he admitted there were “danger zones” that could undermine fiscal consolidation, such as persistent spending overruns at state hospitals.
Pakistani Ex-Spy Master Blames US for Web Leak. A former Pakistani spy master has hit back at allegations he supported the Taliban, saying the US orchestrated a mass leak of confidential files in a bid to scapegoat him for its failures in Afghanistan. The claim by Hamid Gul, a retired general, is unlikely to gain much traction in Washington, where the publication of 75,000 classified reports by WikiLeaks, a website, has renewed debate over its Afghan strategy. But Mr Gul’s allegations that a hidden US government hand played a role in the huge breach of classified files may resonate in Pakistan, where anti-American sentiment runs high and conspiracy theories feed mainstream discourse.

Telegraph:

Afghanistan War Logs Could Lead to Revenge Killings, Say Intelligence. The lives of informants and double agents have been placed at risk by the release of tens of thousands of secret military documents, intelligence officials have said. Col Dave Lapan, a US Defence Department spokesman, said the military may need weeks to review all the records to determine "the potential damage to the lives of our service members and coalition partners". Teams of US military analysts were examining the documents, which catalogue attacks on and by coalition forces. One of their chief concerns is to assess the potential damage to the military's human intelligence network that has been built up over nearly a decade inside Afghanistan and Pakistan. Such figures range from Afghan village elders who have worked behind the scenes with US troops to militants who have become double agents. Wikileaks insists it has behaved responsibly, even withholding some 15,000 records that are believed to include names of specific Afghans or Pakistanis who helped US troops on the ground. But with the information gradually being uploaded on to the Wikileaks website, Michael Hayden, the former director of the CIA, predicted that the Taliban would take anything that described a US strike and the intelligence behind it "and figure out who was in the room when that particular operation, say in 2008, was planned, and in whose home". The militants would then likely punish the traitor who had worked with the Americans, he said. Robert Riegle, former senior intelligence officer, said: "It's possible that someone could get killed in the next few days."

Nikkei:

Intel Corp.(INTC) will cut the production capacity of a new chip plant in Dalian, Liaoning Province, by 25%, citing documents from China's Ministry of Environmental Protection. The plans will affect the $2.5 billion investment planned for the plant, scheduled to begin operations in October.

China Securities Journal:

China's land supply increased 65.1% in the first half from a year earlier, citing the Ministry of Land and Resources. The average price of land for property development fell 5% in the second quarter as compared with the first quarter.

China Daily:

China's Communist Party will hold "high-level" talks with the U.S. Democratic and Republican parties, citing Li Jun, spokesman for the International Department of the Communist Party's Central Committee.

China Business News:

China may link employee wage increases to local consumer prices, according to a draft of salary rules which will be submitted to the State Council soon, citing Yang Yongqi, a labor law specialist at the Chinese Academy of Labor Security Sciences.