Friday Watch

Evening Headlines
Bloomberg:

• Yields Dropping to '04 Levels Spark Busiest July for Sales: Credit Markets. U.S. corporate bond sales soared 31 percent this month, the busiest July on record, as yields fell to the lowest in more than six years on growing investor confidence in the economic recovery. Issuance of $85.7 billion exceeded the previous high for the month of $71.1 billion set last year, according to data compiled by Bloomberg. The cost of borrowing fell to 5.04 percent, the lowest since April 2004, and down from the 2010 high of 5.75 percent on Jan. 4, according to Bank of America Merrill Lynch’s U.S. Corporate & High Yield index. That decline would save issuers about $7.1 million of interest per $1 billion of bonds.
  
• Health Law Needs Repeal: Douglas Holtz-Eakin and Michael Ramlet. The new health-care law is a threat to the health of small businesses. Its heavy dosage of mandates and penalties will be a financial burden, and the law is riddled with hidden barriers to stronger job growth. The small business implications of the legislation are important because data from the ADP National Employment Report shows that since January 2001 companies with one to 49 employees were responsible for 36 percent of job growth, while those with 50 to 499 workers accounted for 44 percent of new jobs. Small business vitality is crucial to the economic fortunes of U.S. workers, and substantial new costs that curtail their hiring should be of concern to companies, workers and policymakers alike. Sadly, the new health-care law is an assault on small business, beginning with the 3.8 percent Medicare tax on net investment income -- a direct tax on many business owners. Of even greater concern is the law’s most celebrated feature -- the mandate to cover full-time employees with health insurance. For businesses with more than 50 workers, this means paying a penalty if any full-time workers receive subsidized coverage. For larger companies already providing insurance, the law codifies the status quo. For every other company, the mandate will compete for scarce capital that might be used for hiring and expansion. It is even worse for firms with 50 employees or fewer, as the mandate presents a tremendous growth hurdle. For a business not offering insurance, hiring the 51st worker will trigger a penalty of $42,000. How many firms will choose not to expand?
• Citigroup(C) Said to Pay $75 Million to Settle SEC Subprime Case. Citigroup Inc. will pay $75 million to settle U.S. regulatory claims that it misled investors by understating holdings linked to subprime mortgages by billions of dollars as the housing crisis unfolded in 2007.
• Iceland's Credit Outlook Cut to Negative at Moody's on Foreign Loan Ruling. Iceland’s rating outlook was cut to negative at Moody’s Investors Service after a court ruling on foreign currency loans threatened to trigger bank losses that may require a government cash injection to offset. Iceland’s Baa3 sovereign rating, the lowest investment grade, may be lowered to junk if the bank ruling hurts the island’s economic recovery and forces the government to raise its debt levels by bailing out the banks, Moody’s said in a statement. “The magnitude of the banking system losses that will result from the recent court ruling is not known at this time but it is clear that Iceland still faces significant risks to its economic and financial recovery,” said Kathrin Muehlbronner, a Moody’s vice president and lead analyst for Iceland, in the statement.
• Orexigen's(OREX) Two-Drug Obesity Pill Cuts Hunger, Cravings, Weight in Study. Obese patients who took Orexigen Therapeutics Inc.’s experimental pill combining an anti- addiction drug and an antidepressant lost more weight than those who took a placebo, a company-sponsored study found. Patients who took the Orexigen pill, Contrave, and were given diet and exercise suggestions shed 5 percent to 6 percent of their body weight compared with an average weight loss of 1.3 percent among those taking placebos. La Jolla, California-based Orexigen is racing with Vivus Inc. and Arena Pharmaceuticals Inc. to bring weight-loss drugs to market. Applications from all three are pending before the U.S. Food and Drug Administration.
• Samsung Electronics Profit Jumps 83% to Record on Recovery in Memory Chips. Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, said second-quarter profit jumped 83 percent to a record, fueled by a recovery in demand for computer-memory chips. Net income climbed to 4.28 trillion won ($3.6 billion) in the three months ended June 30, from 2.33 trillion won a year earlier, the Suwon, South Korea-based company said in a statement today. Revenue increased 17 percent to 37.9 trillion won, Samsung said. Samsung joined technology companies including Intel Corp., Apple Inc. and Hynix Semiconductor Inc. in posting higher earnings for the latest quarter after prices increased on demand.
• Mexican Authorities Find 15 Bodies Near Monterrey; Drug Cartels Suspected. Mexican authorities discovered at least 15 bodies in a garbage ditch outside of the city of Monterrey, said David Perales, spokesman for the Nuevo Leon state investigation agency. The agency suspects the dead were killed by drug cartels, Perales said, speaking in a telephone interview from Monterrey, which is 280 miles south of San Antonio, Texas. Officials are investigating whether there were more victims, he said. Separately, investigators in the southern town of Taxco uncovered at least 77 bodies in an abandoned mine last month.

Wall Street Journal:

• Republicans Press FDA Head on Chinese Heparin. Two Texas Republicans want FDA Commissioner Peggy Hamburg to press Beijing on what Chinese health authorities did to track the contaminated heparin linked 81 deaths in the U.S. in 2008. Hamburg is visiting China next month, and Reps. Joe Barton and Mike Burgess see an opportunity to figure out how the how the contamination occurred and what is being done now to ensure supplies are pure. “The case of the tainted blood thinner remains unsolved,” the two said in a letter to Hamburg. “You are going to the source country of that crime,” and added: “Your trip represents the best hope of a breakthrough in solving this case.”
• From Tiananmen Square to Possible Buffett Successor. Twenty-one years ago, Li Lu was a student leader of the Tiananmen Square protests. Now a hedge-fund manager, he is in line to become a successor to Warren Buffett at Berkshire Hathaway Inc. Mr. Li, 44 years old, has emerged as a leading candidate to run a chunk of Berkshire's $100 billion portfolio, stemming from a close friendship with Charlie Munger, Berkshire's 86-year-old vice chairman. In an interview, Mr. Munger revealed that Mr. Li was likely to become one of the top Berkshire investment officials. "In my mind, it's a foregone conclusion," Mr. Munger said.
• Computer Evidence Ties Leaks to Soldier. Investigators have found concrete evidence on computers used by Pfc. Bradley Manning that link him with the leak of classified Afghanistan war reports, a U.S. defense official said. The disclosure came as Defense Secretary Robert Gates pledged Thursday to "aggressively investigate the leak" and find ways to prevent further breaches, and told reporters that he had invited the Federal Bureau of Investigation to assist the probe. Defense officials said the FBI was investigating whether civilians aided Pfc. Manning in providing the information to WikiLeaks, a Web-based group that this week released 76,000 secret reports from Afghanistan.
• Democrats Under Fire Over Health-Law Reporting Mandate. Congressional Democrats may water down or repeal new tax-reporting rules that are supposed to raise $16 billion for health-care legislation, facing a chorus of criticism about the rules. House Democrats were forced to postpone a vote late Thursday on a GOP motion calling for repeal of the reporting requirement. That, in turn, delayed action on an $11 billion bill that expands federally-subsidized bonds for infrastructure projects. House lawmakers may add language to the infrastructure bill to weaken or repeal the IRS reporting regime, Democratic aides said. "This is an issue we want to address and now we have an opportunity to do so," said Kristie Greco, a spokeswoman for House Majority Whip James Clyburn (D., S.C.).

Bloomberg Businessweek:

• U.S. Nuclear Projects Tied Up Awaiting Federal Loan Guarantees. The so-called nuclear renaissance that was supposed to boost U.S. capacity to generate emissions- free power may stall as developers await decisions from the Obama administration on federal aid.
• The New Abnormal. Americans are broke and depressed—and also swilling $3 lattes and waiting in line for iPhones. Welcome to the schizophrenic economy.

CNBC:

• Chinese Economy Strong? Depends Who You Ask.

Business Insider:

• With Case Against The Wyly Brothers, The SEC Goes To War Against Offshore Finance. We're still reading and digesting the details of the just-announced insider trading charges against Texas investors The Wyly brothers, but one thing is already clear: this is a major shot across the bow aimed at offshore tax.

Star-Telegram:

• Obama to Raise Money in Dallas. President Barack Obama is expected to be in Dallas in early August as part of a two-city Texas trip to raise money for Democratic candidates, Democratic sources said Wednesday. The Dallas fundraiser, at a private residence, has apparently replaced plans for a presidential visit to either Houston or San Antonio. Obama is also scheduled to be in Austin on Aug. 9 for a fundraiser sponsored by the Democratic National Committee. Republican Gov. Rick Perry has asked for a meeting with him after he arrives in Texas to discuss concerns over border security and the administration's planned deployment of 250 National Guard troops to the border, far fewer than the 1,000 Perry requested. Obama's campaign travels this week called for fund-raisers in Washington, D.C., and New York City as well as the taping of an interview with ABC's "The View." His schedule next month, according to press reports, includes Democratic events in Atlanta and Chicago, as well as the Texas stops.
  

Boston Globe:

• Patrick Yields Ground on Casino Bill, Says One Slot Parlor OK. In a significant shift in his public position, Massachusetts Governor Deval Patrick said this afternoon that he would sign a casino gambling bill with one slot parlor and three full-scale casinos if legislators agreed to break a "logjam" on other unrelated measures.

PIMCO:

• Stress Test Smokescreen Can't Hid Europe's Hard Future by Andrew Balls, Head of European Portfolio Management.

AppleInsider:

• Apple(AAPL) Job Listing Hints at 'Revolutionary' New Mac OS X 10.7 Feature. A new corporate job listing from Apple boasts of a "revolutionary" new feature for the foundations of Mac OS X that will "truly amaze everyone." The new job listing posted this week and discovered by AppleInsider makes numerous references to a specific, singular feature said to be a part of the Mac OS X operating system. Of course, it declines to reveal what that feature could be, but the ad does use the word "revolutionary" on three separate occasions.

Politico:

• EPA Rejects Challenge to Climate Rules. The Environmental Protection Agency Thursday rejected an effort to keep it from regulating greenhouse gas emissions, saying that e-mails released in last fall’s “Climategate” scandal gave it no reason to reconsider the science of global warming. In a sternly written opinion, EPA Administrator Lisa Jackson said she didn’t agree with requests from the GOP attorneys general from Texas and Virginia, the U.S. Chamber of Commerce and other conservative groups that questioned the underlying science linking humans to global warming and also warned of the potential economic burdens from new climate rules. EPA last December concluded that greenhouse gases are a threat to public health and welfare, a decision clearing the way this spring for climate-based regulations for new cars and trucks. Next year, the agency is expected to write standards for power plants and other major industrial sources of heat-trapping gases. In their petitions, EPA’s opponents had highlighted stolen e-mails from prominent climate scientists that they allege showed collusion to hide contrary information debunking global warming. Texas Attorney General Greg Abbott had also warned that the EPA rules would lead to “unprecedented bureaucratic licensing and regulatory burdens on farmers, ranchers, small businesses, hospitals and even schools.” But Jackson said the groups’ arguments lack merit.
• Ethics Unveils 13 Rangel Charges. A scathing House ethics report charges that Rep. Charles Rangel, an iconic New York powerbroker, violated 13 ethics and federal regulations covering public officials, including pressuring lobbyists and corporations to cough up millions for a New York college building bearing Rangel’s name. In releasing a "Statement of Alleged Violation" of against Rangel, investigators drew a portrait of a veteran lawmaker who used his office and staffers for his own personal benefit and aggrandizement, repeatedly running afoul of House financial disclosure rules. He now faces an ethics “trial” unless he’s able to cut a deal with the ethics committee.

Reuters:

• Republican Concerns Could Stall START Treaty. Senate Republicans voiced objections on Thursday to the new START nuclear arms treaty with Russia. At a Senate Armed Services Committee hearing, Republicans said the accord could impede U.S. plans for an anti-missile defense system and pressed the Obama administration to release the full treaty negotiating record to answer their questions. "We originally were told that there would be no references to missile defense in the treaty and no linkage drawn between offensive and defensive weapons," Senator John McCain said, adding that one section included a "clear, legally binding limitation on our missile defense options." "Why did the administration agree to this language after saying they would do no such thing?" he asked. "We're insisting on an opportunity to review the negotiating record for ourselves, specifically those parts dealing with the ambiguous references to missile defense."
• Wynn(WYNN) Q2 Profit Doubles, Shares Decline. Casino operator Wynn Resorts Ltd's (WYNN) quarterly profit more than doubled as revenue in Macau rose 74 percent, but much of the beat came from a spike in casino winnings, and shares fell more than 3 percent.
• First Solar(FSLR) Profit Tops Street, Trims Sales View. First Solar (FSLR) reported better-than-expected quarterly profits on Thursday, but trimmed its 2010 sales forecast because of weaker prices. Its shares fell 4 percent in after hours trading.

Financial Times:

• US Banks in Rush for Cheap Finance. US banks are taking advantage of improving earnings and growing investor demand to raise billions of dollars in debt at historically low interest rates, a move that could boost the sector’s profits in coming years. The burst of fundraising in the US is in stark contrast to Europe where banks have struggled to issue debt as the eurozone crisis and worries about the financial industry have undermined market confidence. The cheap finance locked in by big institutions such as JPMorgan Chase, US Bancorp, Goldman Sachs and Morgan Stanley in recent days marks a remarkable comeback for a sector that was shunned by investors during the financial crisis. Less than two years after the government was forced to intervene to ease a dramatic credit crunch, US banks sold more than $7bn in debt last week – the largest weekly total since September 2009, says Dealogic. US Bancorp, a Minneapolis-based lender, raised $1bn in five-year bonds at an interest rate of 2.45 per cent – one of the lowest ever paid by a bank. Lower funding costs boost profits because they increase the margins earned by banks on their loans to consumers, companies and investors.

China Securities Journal:

• Chinese central bank adviser Zhou Qiren said the nation can consider a small yuan depreciation to help stabilize export growth.

Oriental Morning Post:

• Shanghai will announce tightening measures for the real estate market in the second half of the year, citing Zhou Bo, head of Shanghai's National Development and Reform Commission.

Evening Recommendations
Citigroup:

• Reiterated Buy on (IRM), raised target to $32.
• Reiterated Buy on (NIHD), target $50.
• Reiterated Buy on (JNPR), target $36.
  

Morgan Stanley:

• Reiterated Overweight on (POT), raised estimates, target $135.

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 118.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 113.0 -.5 basis point.
  
• S&P 500 futures -.50%.
  
• NASDAQ 100 futures -.47%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NWL)/.44
• (FSS)/.07
• (SPG)/1.34
• (MCK)/1.07
• (ACI)/.25
• (WY)/.13
• (ITT)/1.07
• (CVX)/2.46
• (AEP)/.69
• (FO)/.75
• (BWA)/.67
• (MSTR)/.86
• (MRK)/.82

Economic Releases
8:30 am EST

• 2Q Advance GDP is estimated to rise+2.6% versus a +2.7% gain in 1Q.
• 2Q Advance Personal Consumption is estimated to rise +2.4% versus a +3.0% gain in 1Q.
• 2Q Advance GDP Price Index is estimated to rise +1.1% versus a +1.1% gain in 1Q.
• 2Q Advance Core PCE is estimated to rise +1.0% versus a +.7% gain in 1Q.
• The 2Q Employment Cost Index is estimated to rise +.5% versus a +.6% gain in 1Q.

9:45 am EST

• Chicago Purchasing Manager for July is estimated to fall to 56.0 versus a reading of 59.1 in June.

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for July is estimated to rise to 67.0 versus a prior estimate of 66.5.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking on CNBC, Bloomberg FCI for July and the NAPM-Milwaukee for July could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day

Stocks Lower into Final Hour on Profit-Taking, Fed Comments, Earnings Reports

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Mixed
  
• Volume: Above Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 23.54 -2.93%
  
• ISE Sentiment Index 101.0 -44.51%
  
• Total Put/Call 1.0 +4.17%
  
• NYSE Arms 1.02 -23.17%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 103.66 bps -.58%
  
• European Financial Sector CDS Index 105.0 bps +5.53%
  
• Western Europe Sovereign Debt CDS Index 112.0 bps -.60%
  
• Emerging Market CDS Index 214.26 bps -1.42%
  
• 2-Year Swap Spread 17.0 unch.
  
• TED Spread 32.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 240.0 +1 bp
  
• China Import Iron Ore Spot $136.10/Metric Tonne +.74%
  
• Citi US Economic Surprise Index -40.80 +.2 point
  
• 10-Year TIPS Spread 1.79% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -10 open in Japan
• DAX Futures: Indicating +21 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech and Retail long positions
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and covered some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 reverses higher from morning losses on decent volume despite some earnings disappointments. On the positive side, Homebuilding, Insurance, Airline, I-Banking and Ag stocks are especially strong, rising 1.0%+. Small-cap shares are outperforming today. (XLF) has also outperformed throughout the day. The S&P GSCI Ag Spot Index is rising another +1.6% today. Copper also continues to trade well, rising another +1.36%. On the negative side, Food, Networking, Computer and Utility shares are under pressure, falling more than -1.0%. Tech and Consumer shares are underperforming. 3-Month Euro Libor is rising slightly again today. Overseas markets reacted well today to our afternoon weakness yesterday. I suspect tomorrow's economic reports will be mildly disappointing, however this should be mostly priced into stocks. Thus, we may see another afternoon surge in stocks after any morning weakness. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, short-covering, less economic fear and less financial sector pessimism.

Today's Headlines

Bloomberg:

• Falling U.S. Mortgage Rates May Aid Economy Outside Housing. Mortgage rates for U.S. homes set a record low for the sixth straight week, potentially freeing up money for consumers to spend elsewhere. Investors seeking the relative safety of bonds backed by government-controlled home finance companies Fannie Mae and Freddie Mac drove the average rate for a 30-year fixed mortgage down to 4.54 percent in the week ended today from 4.56 percent last week, McLean, Virginia-based Freddie Mac said. The average 15-year rate was 4 percent, also a record in the data going back to 1971, the company said in a statement. “It’s not going to help out everybody but it will help,” said Dana Johnson, chief economist at Comerica Inc. in New York. “Lower rates are a mechanism by which the economy can strengthen over time.”
• Well's Fargo's(WFC) Stumpf Sees New Costs for Customers. Wells Fargo & Co. Chief Executive Officer John Stumpf said customers, not just the bank, will bear the financial burden for U.S. regulations that cover services ranging from home loans to credit cards. “I can’t guarantee that we won’t pass on some of those costs,” Stumpf, 56, said in an interview at his San Francisco office. “We’ll try to tighten our belt and absorb some of the costs of compliance, but some costs may change and customers might pay for their financial services in new ways.” Stumpf’s comments add to evidence that new rules mean new expenses for consumers as banks make up for lost revenue and increased costs. JPMorgan Chase & Co. CEO Jamie Dimon said July 15 the legislation may translate into higher fees and credit- card rates, and Bank of America Corp.’s Brian T. Moynihan told shareholders a day later he’s looking for ways to soften the impact on annual revenue, which the lender said could be $2.3 billion. Wells Fargo, with the biggest U.S. branch network, is already passing on costs by charging for checking accounts and raising interest rates on credit cards and loans, said Richard Bove, a banking analyst at Rochdale Securities LLC. The bank ended free checking last month by adding a $5 monthly fee for customers who don’t meet certain conditions. “This bank does not intend to sit there and get nailed,” said Bove, who recently upgraded Wells Fargo shares to a “buy.” “Wells Fargo has moved well ahead of the crowd, and everyone will follow.”
• Jobless Claims in U.S. Declined 11,000 Last Week to 457,000. The number of Americans filing first-time claims for unemployment insurance fell to 457,000 last week, a figure that signals the labor market will be slow to improve even as the economy grows. Initial jobless claims dropped by 11,000 in the week ended July 24 from a revised 468,000, Labor Department figures showed today in Washington. “The underlying pace of claims has not made any measurable improvement,” said Ellen Zentner, senior U.S. macro economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Businesses are investing in equipment but other than that there’s little impetus” for them to hire, she said. The four-week moving average of claims, a less-volatile measure, dropped to 452,500 last week, the lowest since May 8, from 457,000, today’s report showed. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3.6 percent in the week ended July 17 from 3.5 percent in the prior week.
• Exxon(XOM) Profit Rises Most Since 2003 as Output Climbs. Exxon Mobil Corp. posted its biggest profit increase since 2003, exceeding analysts’ estimates, as rising production helped the largest U.S. oil company take advantage of gains in energy prices. Second-quarter net income jumped 91 percent to $7.56 billion, or $1.60 a share, from $3.95 billion, or 81 cents, a year earlier, Irving, Texas-based Exxon said today in a statement. Exxon and Royal Dutch Shell Plc, Europe’s biggest energy company, capitalized on jumps in oil and fuel prices by boosting production. Exxon’s output climbed 8.4 percent to the equivalent of 4 million barrels of oil a day.
• Fed's Fisher Says Firms May Not React to More Accommodation. Federal Reserve Bank of Dallas President Richard Fisher said the U.S. economy faces a “slow slog” and further monetary accommodation may not help revive “dispirited” businesses. “As long as our economic players, businesses and consumers, are beset by unmanageable uncertainty, they will refrain from making decisions that provide the stuff of economic growth,” Fisher said in a speech today in San Antonio. The regional Fed chief, 61, said he expects growth below 3 percent for a “prolonged period,” buttressing the Fed’s Beige Book business survey yesterday which showed the recovery slowing in some areas over the past two months. Businesses “are increasingly distressed by the lack of consistent direction coming from Washington,” Fisher said. “They are confused and dispirited by random refereeing.” It’s possible “further monetary accommodation might make the situation worse” if the Fed is seen as “politically pliable” and “prone to substituting such accommodation for fiscal discipline.” Fisher reiterated his view that the Fed will not “monetize” the nation’s debt by effectively printing money to finance the shortfall, and said “neither inflation nor deflation will be tolerated” by policy makers. The banking industry “appears to be on a very slow mend,” and yet “uncertainty reigns,” he said.
• North Korea Gets China Cooperation Deal After U.S. Sanctions. North Korea signed an economic and technical cooperation agreement with China today, a week after U.S. Secretary of State Hillary Clinton announced further trade sanctions to halt the regime’s nuclear-weapons program. Liu Hongcai, the Chinese ambassador to North Korea, and Ri Ryong Nam, the nation’s Minister of Foreign Trade, signed the agreement during a ceremony held in Pyongyang, according to the state-run Korean Central News Agency. China has so far refused to condemn North Korea for the attack on the Cheonan, which killed 46 South Korean sailors. China accounted for 79 percent of the North’s 2009 international trade, according to the Seoul-based Korea Trade-Investment Promotion Agency. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a July 2009 report by the New York-based Council on Foreign Relations.
• Bunge(BG) Cuts Profit Forecast as Soybean Margins Shrink. Bunge Ltd., the world’s second- largest sugar trader, reduced its full-year earnings forecast after soybean-processing margins in the U.S. and South America shrank. The shares dropped the most in more than a year. Profit excluding some one-time items will be $3.25 to $3.50 a share this year, the White Plains, New York-based company said today in a statement. It had previously forecast earnings of $5.30 to $5.80, and analysts had projected $5.25, the average estimate in a Bloomberg survey. “The miss was broad-based across all segments, though agribusiness, sugar, and fertilizer were the clear underperformers,” Vincent Andrews, a New York-based analyst at Morgan Stanley, said in a report today. Bunge dropped $5.61, or 10 percent, to $48.36 at 9:30 a.m. in New York Stock Exchange composite trading, the biggest intraday percentage decline since April 23, 2009. The shares fell 15 percent this year through yesterday.
• Volatility Trade Buffett Embraces Backfiring for Hedge Experts. A bullish stock market trade embraced by the smartest money is backfiring. And that has investors wondering if what Warren Buffett and Goldman Sachs Group Inc.(GS) know about derivatives is obsolete. Goldman Sachs, the world’s most profitable securities firm, reported losses from derivatives last quarter after selling insurance that protected clients against stock swings during the Standard & Poor’s 500 Index’s biggest retreat in more than a year. Buffett, the chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., underwrote $37 billion of the contracts since 2004, filings with the Securities and Exchange Commission show. The combination of hedging by insurance companies, tighter regulation of bank speculation and reluctance among securities firms to write derivatives known as variance swaps means speculators who sold them are now facing losses, according to Morgan Stanley and Societe Generale SA. Money-losing trades in both rising and falling markets show the hazards of the business for even Wall Street’s most sophisticated investors.
• German Unemployment Fell for 13th Straight Month as Exports Boom. German unemployment fell for a 13th month in July as companies from Infineon Technologies AG to Deutsche Lufthansa AG benefit from the strengthening global economy. The number of people out of work declined a seasonally adjusted 20,000 to 3.21 million, the Federal Labor Agency in Nuremberg said today. That’s the lowest since November 2008. Unemployment was forecast to fall 20,000, according to the median of 34 estimates in a Bloomberg News survey. The adjusted jobless rate declined to 7.6 percent.
• JPMorgan(JPM) to Open Full Saudi Branch in Emerging-Market Expansion. JPMorgan Chase & Co. plans to become the first U.S. bank to open a full-service commercial branch in Saudi Arabia this year, six years after Citigroup Inc. exited a venture in the world’s biggest oil exporter.
• High-Frequency Trading Faces EU Probe, Regulator Says. High-frequency trading will be investigated by regulators to “better understand any risks,” Europe’s top market watchdog said in a report on proposed industry rules.
• Most Pakistanis View U.S. as Enemy, Want War Over, Survey Finds. Two-thirds of Pakistanis oppose the U.S.-led war in Afghanistan and roughly six in 10 think the U.S. is an enemy, according to a new survey.
• Bullard Urges FOMC Purchase Treasuries If Deflation Risk Grows. Federal Reserve Bank of St. Louis President James Bullard said the central bank should resume purchases of Treasury securities if the economy slows and prices fall rather than maintain a pledge to keep rates near zero. “‘The U.S. is closer to a Japanese-style outcome today than at any time in recent history,” Bullard said, warning in a research paper released today about the possibility of deflation. “A better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities.” “The most likely possibility from where we sit today is that the recovery will continue through the fall, inflation will start to move up and this issue will all go away,” Bullard said to reporters on a conference call today. “Suppose we get another negative shock, another surprise. We have to be prepared in that event to have a plan in place to do something.” Bullard, a voting member of the Federal Open Market Committee this year, said using Fed communications to pledge rates will stay near zero may prove to be detrimental. While some people say rates near zero will accelerate inflation, such an interest rate policy may also cause a broad-based decline in prices, he said. “Under current policy in the U.S., the reaction to a negative shock is perceived to be a promise to stay low for longer, which may be counterproductive because it may encourage a permanent, low nominal interest rate outcome,” he said in a paper released by the St. Louis Fed.
• Oil Rises for First Time in Week as Dollar Weakens Versus Euro. Oil gained as much as 2.5 percent as the dollar fell to a 12-week low against the euro. Unemployment also dropped in Germany, and confidence in Europe’s economy improved.

Wall Street Journal:

• Evidence Ties Manning to Afghan Leaks. Investigators have found concrete evidence linking Pfc. Bradley Manning with the leak of classified Afghanistan war reports, a U.S. defense official said.
• Redbox Parent Coinstar(CSTR) Explores Beauty Kiosk Business. Coinstar Inc. (CSTR) may try to do for makeup what its Redbox unit has done for movie DVDs. The DVD-vending and coin-counting machine maker is recruiting a vice-president-level manager to oversee a new venture in the beauty or cosmetics space.
• U.S. Needs to Articulate Credible Fiscal Consolidation Plan - Moody's. The U.S. government needs to articulate clearly a credible plan to tackle its bulging debt profile in order to keep its triple-A credit rating, Moody's Investors Service's lead sovereign analyst for the country said Thursday. In contrast to the U.S., the credit health of Asian countries remains broadly positive and their resilience has been highlighted by Europe's debt crisis, which looks to have peaked, Steve Hess, senior credit officer in the sovereign risk group at Moody's told Dow Jones Newswires in an interview.

CNBC:

• Letting Bush Tax Cuts Die Would Kill Recovery: Analysts.

NY Times:

• Comeback Heralded for Japanese Electronic Giants. Buoyed by a long-awaited turnaround in its television and video game businesses, Sony said Thursday it swung to a net profit of ¥25.7 billion, or $293.9 million, in the April-June quarter and raised its outlook for the full year. The company’s chief financial officer said it was time for Sony to “go on the offensive” amid signs that a global economic recovery was finally pulling Japan’s electronics giants out of a long slump.

Washington Post:

• White House Proposal Would Ease FBI Access to Records of Individual's Internet Activity. The Obama administration is seeking to make it easier for the FBI to compel companies to turn over records of an individual's Internet activity without a court order if agents deem the information relevant to a terrorism or intelligence investigation. The administration wants to add just four words -- "electronic communication transactional records" -- to a list of items that the law says the FBI may demand without a judge's approval. Government lawyers say this category of information includes the addresses to which an Internet user sends e-mail; the times and dates e-mail was sent and received; and possibly a user's browser history. What officials portray as a technical clarification designed to remedy a legal ambiguity strikes industry lawyers and privacy advocates as an expansion of the power the government wields through so-called national security letters. These missives, which can be issued by an FBI field office on its own authority, require the recipient to provide the requested information and to keep the request secret. To critics, the move is another example of an administration retreating from campaign pledges to enhance civil liberties in relation to national security. The proposal is "incredibly bold, given the amount of electronic data the government is already getting," said Michelle Richardson, American Civil Liberties Union legislative counsel. The critics say its effect would be to greatly expand the amount and type of personal data the government can obtain without a court order. "You're bringing a big category of data -- records reflecting who someone is communicating with in the digital world, Web browsing history and potentially location information -- outside of judicial review," said Michael Sussmann, a Justice Department lawyer under President Bill Clinton who now represents Internet and other firms.
• D.C. Area Jobless Rate Rises Again as Labor Force Grows. Unemployment in the Washington region rose to 6.4 percent in June from 6 percent the previous month, according to federal government data released Wednesday, highlighting the fragility of the recovery in the local labor market. The Bureau of Labor Statistics data contrasted with numbers it released last week on the District, Maryland and Virginia that showed their unemployment rates had dropped in June. The difference is attributable in part to Wednesday's data not taking in the entire states of Maryland and Virginia. At the same time, experts say the Washington area's relatively positive labor market has been drawing job seekers from outside the region faster than it has been adding jobs.

NYPost:

• It's Not Personal. Uncle Sam Shuns Goldman(GS) Until It's Business. Goldman Sachs has become Uncle Sam's guilty little pleasure. When the cameras are rolling and the public is watching,and other public officials soundly reprimand or ignore CEO Lloyd Blankfein's gold-encrusted investment bank. That was the case in April when the Senate subcommittee raked the firm's executives over the coals and called their financial products "shi**y," "crap," and "junk." Then, earlier this month, Blankfein was one of just two major bank CEOs not invited to the FinReg bill signing. But behind closed doors and out of camera shot, Goldman is still considered the gold standard that the federal government turns to when it needs to raise billions in the markets or complete major transactions. In a second case, it was Goldman that won the plum assignment of handling the public offering of stock of taxpayer-owned insurer American International Group's sale of its Asian unit, AIA. What's more, Goldman scored that juicy, lucrative assignment after it was accused of being the biggest beneficiary of AIG's $182 billion government rescue by members of both parties on Capitol Hill. Uncle Sam also couldn't keep its hands off Goldman when it came to hiring a firm to lead the auction of the Residential Capital, the mortgage unit of the bailed-out and government owned GMAC. "They all articulate anger at the company, but they all do business there," said Dick Bove, an analyst at Rochdale Securities. That love-hate relationship was clear hours after the FinReg invitation diss when officials from the Obama administration -- away from the cam eras and public -- called Blankfein to apologize for not invit ing him to the historic signing event. Goldman's government jobs, including $13.5 billion in municipal bond deals, came as the firm was negotiating a settlement of the Securities and Exchange Commission's fraud case. It settled earlier this month, paying a $550 million fine.

The Washington Times:

• OMB Nominee Got $900,000 After Citigroup(C) Bailout. President Obama's choice to be the government's chief budget officer received a bonus of more than $900,000 from Citigroup Inc. last year -- after the Wall Street firm for which he worked received a massive taxpayer bailout. The money was paid to Jacob Lew in January 2009, about two weeks before he joined the State Department as deputy secretary of state, according to a newly filed ethics form. The payout came on top of the already hefty $1.1 million Citigroup compensation package for 2008 that he reported last year.

HuffingtonPost:

• Obama Mocks Polls But Spends More On Them($4.4M) Than Bush Did. During his daily press briefing on July 13, White House Press Secretary Robert Gibbs was peppered with questions about why the president's popularity numbers are in decline and his policy positions are so difficult to sell. ABC News's Jake Tapper sought reaction to the network's newest poll showing that 51 percent of respondents would rather have Republicans running Congress. CNN's Ed Henry wanted to know why, in that same poll, "six in 10 Americans have little or no faith in the President to make the right decisions." CBS's Chip Reid then pointed to his own network's poll showing that only 13 percent of respondents thought the president's economic programs had affected them personally. Exasperated, Gibbs deployed a classic rejoinder: mocking the polling-obsessed media culture.
• Cable News Rating July 2010: Fox Dominates, MSNBC Tops CNN. Fox News continued its domination of cable news ratings in July. The network averaged 1.85 million viewers in primetime for the month--more than CNN, MSNBC and HLN combined. How did individual programs do? Below see the top 30 programs in cable news for July 2010.

Miami Herald:

• Big Drop in U.S. Agricultural Sales to Cuba. U.S. agricultural exports to Cuba fell 35 percent in the first five months of this year compared with the same period in 2009, largely because of the island's shortage of hard currency, according to a recent report. The report by the U.S.-Cuba Trade and Economic Council, a New York-based group that monitors bilateral trade, showed U.S. sales to Cuba from January to May of this year hit $182 million, compared with $278 million for the same period last year. U.S. exports to Cuba already had seen a 24 percent drop in 2009 -- $528 million, compared with 2008, when they hit a record of $710 million, according to the report issued Tuesday.

Politico:

• The Barack Obama-Nancy Pelosi Event. President Barack Obama’s endless summer of fundraising is heating up — with the addition of a big-money August house party to help out House Speaker Nancy Pelosi’s imperiled Democrats, POLITICO has learned. Obama plans to headline an Aug. 16 fundraiser for the Democratic Congressional Campaign Committee in Los Angeles — the first such appearance by the president on behalf of Pelosi since White House press secretary Robert Gibbs rankled House Democrats by suggesting they could lose their majority.

Reuters:

• US Commercial Paper Market Grows for 3rd Week - Fed. The U.S. commercial paper market expanded for the third straight week, showing companies are able to use it to borrow as an alternative to tight bank lending, Federal Reserve data showed on Thursday.

Bild Zeitung:

• 20 Years after German reunification, labor costs in the eastern part of the country are still almost 28% lower than in the west.

China Business News:

• China may face deflationary pressures in the second half of this year, citing Wang Ziaoguang, head of macroeconomic research under the National Development and Reform Commission. China's economic growth path may be "W-shaped," Wang said. The effects of China's property curbs should be seen in the first quarter of next year, Wang said.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-1.07%)

Sector Underperformers:

• 1) Networking -2.85% 2) Utilites -1.80% 3) Computer Hardware -1.80%

Stocks Falling on Unusual Volume:

• BG, NETL, CL, VLTR, K, CEG, TNE, VPRT, TAYC, GSIC, AMAG, AKAM, TNDM, SRDX, ASIA, SYMC, LIFE, LKQX, MPWR, BMC, ATHR, MBLX, PPDI, CVD, HSC, CTV, CRI, EEP, EEQ and KEX
  

Stocks With Unusual Put Option Activity:

• 1) ACI 2) CL 3) BG 4) CTXS 5) FXE
  

Stocks With Most Negative News Mentions:

• 1) K 2) MNI 3) TRB 4) CNX 5) MF
  

Bull Radar

Style Outperformer:

• Small-Cap Value (+.19%)

Sector Outperformers:

• 1) I-Banks +1.17% 2) Gold +.90% 3) Insurance +.72%

Stocks Rising on Unusual Volume:

• FTE, MFC, TEF, SLF, CLF, HES, GMCR, TER, AVP, SCMR, ITRI, CTXS, GENZ, LOGI, PSSI, ESRX, CLNE, OII and TGI
  

Stocks With Unusual Call Option Activity:

• 1) GMCR 2) TER 3) AKAM 4) BG 5) CHS
  

Stocks With Most Positive News Mentions:

• 1) XOM 2) LUV 3) CL 4) AMZN 5) NOC