Today's Headlines

Bloomberg:

- Short sellers, the bane of Wall Street executives last year, are back. The number of Citigroup Inc.(C) shares borrowed and sold short increased sixfold since Feb. 27, the day the U.S. Treasury announced it would convert some of its preferred shares in the New York-based bank into common stock. Short interest in Bank of America Corp., MetLife Inc. and American Express Co. climbed more than 40 percent in the same period, according to data compiled by Bloomberg. In total, short sales of the 18 publicly traded financial companies undergoing government stress tests were twice as high on April 15 as they were at their peak last year in July, two months before Lehman Brothers Holdings Inc. collapsed. The increase in short selling occurred as the S&P 500 Financials Index posted its best two months since 1989, when Standard & Poor’s started keeping records. The 80-member index has surged 41 percent since Feb. 27. Short sellers were accused last year by Wall Street chief executive officers, including Lehman’s Richard S. Fuld and Morgan Stanley’s John J. Mack, of using abusive tactics to attack firms. Fuld, 63, told congressional investigators on Oct. 6, less than a month after Lehman filed the biggest bankruptcy in history, that short sellers played a role in a “storm of fear” that led to the demise of the 158-year-old firm. Mack, 64, helped persuade government officials in the days following Lehman’s collapse to suspend short selling, which he said was sending his New York-based firm’s shares into a free fall. The SEC will convene a meeting May 5 to discuss proposals for restricting short sales, including an outright ban when a stock’s price declines. Short interest rose after Feb. 27 for 14 of the 18 publicly traded companies under review by the Fed, according to Bloomberg data. Citigroup’s increase was the biggest at 509 percent, followed by New York-based insurer MetLife at 66 percent, American Express at 44 percent and Bank of America at 42 percent. The average increase for the 18 companies was 47 percent. It was 201 percent excluding Citigroup. The total short interest for the 18 firms as of April 15, the last date for which New York Stock Exchange data are available, was 2.1 billion shares, or 7.1 percent of those available for trading. That compares with 1.05 billion shares on July 15, or 4 percent of those available for trading. The number of shares sold short in Morgan Stanley totaled 52 million on April 15. While that’s down 12 percent since Feb. 27, it’s higher than the 45.3 million shares on Sept. 15, when Mack was lobbying lawmakers and regulators for a ban.

- Pending sales of U.S. existing homes in March posted their first back-to-back gain in almost a year and construction spending ended a six-month slide, spurring a rally in stocks and sell-off in Treasuries. The number of Americans signing contracts to buy previously owned homes jumped 3.2 percent after a 2 percent gain in February, the National Association of Realtors said today in Washington. Construction unexpectedly rose 0.3 percent as gains in commercial and government projects overshadowed a continued drop in homebuilding, Commerce Department data showed. Economists forecast the pending sales index would be unchanged, according to the median of 32 projections in a Bloomberg News survey. NAR’s affordability index, which tracks mortgage rates, home prices and incomes, surged in February to the highest level in 20 years of data.

- US investors should stick with stocks and ignore the axiom of “sell in May and go away,” according to David Bianco, UBS AG’s chief equity strategist. “Hold for further gains in May,” Bianco wrote in a recent report. Seasonal patterns are “a weak force” by comparison with the economy, which is showing “clear signs of improvement,” the report said. He repeated a year-end estimate of 1,100 for the S&P 500.

- Ever since the Standard & Poor’s 500 Index peaked in October 2007, six of eight strategies -- which are supposed to make money whether stocks rise or fall -- failed, according to back-testing data compiled by Bloomberg. As the bear market erased $11 trillion from the value of U.S. equities, buy and sell signals from those six technical indicators produced losses of as much as 49 percent, the data show. “Technical analysis on its own as a discipline does not work,” said Diane Garnick, the New York-based investment strategist at Invesco Ltd., which oversees $348 billion. Using it in isolation is “the fastest way to lose money,” she said. Of the eight strategies, stochastics, Bollinger bands, relative strength, commodity channels, parabolic systems and the Williams %R indicator generated buy and sell signals that resulted in losses between the S&P 500’s peak of 1,565.15 on Oct. 9, 2007, and its March 9 trough, the data show. They did worse as the index then rallied 30 percent through last week.

- The European Union cut its forecast for the euro-area economy to show a contraction twice as deep as it projected just three months ago, and said the region’s budget deficit will swell to more than double the EU limit. The economy of the 16 countries sharing the euro will shrink 4 percent in 2009 and 0.1 percent in 2010, the European Commission, the EU executive in Brussels, said today, revising a January estimate for a contraction of 1.9 percent this year. The region’s average budget deficit will swell to 6.5 percent of output next year, when unemployment will rise to 11.5 percent, the commission said. “We are no longer in free fall, but even if some positive signals appear, we don’t have the critical mass of data to say we are out of the woods,” EU Monetary Affairs Commissioner Joaquin Almunia told a news conference in Brussels. Euro-area inflation will slow to 0.4 percent this year before accelerating to 1.2 percent in 2010, the commission projected. That follows a report from the commission last week showing consumers expect prices to decline over the next 12 months, the first time the price-outlook gauge has been negative since at least 1990.

- General Motors Corp.(GM) may be more likely to end up in bankruptcy based on the Obama administration’s willingness to place Chrysler LLC into court protection to safeguard union health-care benefits. Chrysler filed for protection April 30 after the U.S. was unable to persuade secured lenders to swap $6.9 billion in claims for $2.25 billion in cash. A union retiree health-care trust was offered a 55 percent stake in Chrysler. “This confirms the fear, which right along has been that the Obama administration is more sensitive or beholden to the unions than the bondholders,” Fridson said. “It makes it clear that GM bondholders aren’t likely to be able to work out anything outside of bankruptcy.” GM bondholders proposed April 30 they get a 58 percent ownership stake in the Detroit-based automaker in exchange for their $27 billion in unsecured claims. Bondholders are objecting to GM’s proposal they get a 10 percent share of GM equity while a union health fund would get $10 billion in cash and as much as a 39 percent stake for $20 billion in unsecured claims.

- Remember the good old days of the late 1990s, when the stock market was buoyant and big technology companies like Microsoft Corp. and Cisco Systems Inc. led the way? Those days are here again -- at least for a while. There is a time near the end of recessions when the tech sector usually does very well. It is the half-lit-dawn period, when the stock market has started to recover, but the economy hasn’t yet. Statistics from Ned Davis Research Inc. covering the past five recessions show that information-technology stocks are usually the best performers during such times. And the pattern is holding true again this year.

- Citigroup Inc.(C), girding for results of the Federal Reserve’s bank stress test, may try to wring capital from private investors instead of U.S. bailout funds as a way of bolstering equity without ceding control to the government, people briefed on the matter said. Regulators have indicated to the New York-based bank, which got a $52 billion rescue last year, that another taxpayer-funded cash infusion won’t be required, according to one of the people, who asked not to be identified because the talks aren’t public. Discussions now center on how much of the government’s preferred shares in the firm must be converted into common stock, the person said. Under a plan set in February, the government would convert as much as $25 billion of its stake, for a 36 percent voting interest. Getting money from private backers may help Citigroup dissuade the Treasury Department from converting all or part of its remaining $27 billion investment -- a step that may increase the government’s ownership to more than 50 percent and nationalize what was once the biggest U.S. bank. One likely solution for the company would be to convert $10 billion of privately held securities that could easily be added to the pending exchange, said Kevin Starke, who analyzes bank capital structures for hedge-fund clients of CRT Capital Group LLC.

Wall Street Journal:

- The Federal Reserve Bank of New York shaped Washington's response to the financial crisis late last year, which buoyed Goldman Sachs Group(GS) Inc. and other Wall Street firms. Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after. During that time, the New York Fed's chairman, Stephen Friedman, sat on Goldman's board and had a large holding in Goldman stock, which because of Goldman's new status as a bank holding company was a violation of Federal Reserve policy. The New York Fed asked for a waiver, which, after about 2½ months, the Fed granted. While it was weighing the request, Mr. Friedman bought 37,300 more Goldman shares in December. They've since risen $1.7 million in value. Mr. Friedman also was overseeing the search for a new president of the New York Fed, an officer who has a critical role in setting monetary policy at the Federal Reserve. The choice was a former Goldman executive. Jerry Jordan, a former president of the Fed bank in Cleveland, says Mr. Friedman should have stepped down once Goldman became a bank holding company in September and thus fell under the Fed policy barring stock ownership by certain directors of Fed banks. "Any kind of financial transaction at all by any of the directors is always a problem," Mr. Jordan said. "He should have resigned." Goldman was one of nine big banks the Treasury aided with capital injections in early October. The prior month, the government decided, partly at the urging of New York Fed officials, to bail out insurer American International Group Inc. The initial $85 billion provided to AIG enabled it to pay a portion of $8.1 billion it owed to Goldman, stemming from past trading agreements. By the end of the year, Goldman had gotten all of the $8.1 billion as AIG received more government aid.

- The first exchange-traded fund whose managers pick its stocks is making its debut Monday. Unlike other ETFs, which mainly track indexes, the "actively managed" Grail American Beacon Large Cap Value ETF will be comprised of names that the ETF's managers choose based on research aimed at finding good, cheap stocks.

- The last time Amazon (AMZN) held a press conference in New York City was in February, when it introduced the Kindle 2.0. Now it is scheduling one for Wednesday morning at Pace University in lower Manhattan. Expect a new, large format device that’s optimized for reading newspapers and magazines.

- President Barack Obama Monday unveiled a far-reaching crackdown on offshore tax avoidance, targeting many U.S.-based multinational corporations and wealthy individuals. The sweep of the administration's plan took some tax experts by surprise, and foreshadows potential fights with big businesses later this year over some of their most cherished breaks, particularly as Congress looks for revenue to pay for new initiatives. Many of Mr. Obama's proposals will require congressional approval. And while Democrats control both houses of Congress, many members of his own party have expressed reluctance about raising taxes, so prospects for the proposals are uncertain, even though none would take effect until 2011. A senior Republican aide termed the proposals a "revenue grab," predicting they could end up driving more corporate operations overseas. "If rules are changed on tax deferral and we are taxed in the U.S. on non-U.S. profit, this significant additional U.S. tax cost would adversely impact our ability to invest and grow our business in the U.S....and to compete against our foreign competitors who are not subject to this U.S. tax," said John Earnhardt, a Cisco Systems Inc. spokesman.

- President Barack Obama, in seeking to strike a balance between being fair to workers and business during negotiations over Chrysler LLC, gave an early indication of how he might treat organized labor. The president, who won November's election in part due to labor's support, also has started to use the regulatory apparatus to address worker concerns. But his relationship with labor could grow more complex when debates peak over issues such as trade and overhauling labor law. Mr. Obama is "walking a fine line," said Gary Chaison, an industrial-relations professor at Clark University in Worcester, Mass. "He is clearly supportive of labor, but he's trying not to appear to be too supportive, because then Republicans will make the case that what he's doing is a payoff for labor bosses with taxpayer money." Addressing Chrysler's bankruptcy filing Thursday, Mr. Obama emphasized the sacrifices made by the United Auto Workers union and other stakeholders. Under the bankruptcy-reorganization agreement, which would culminate in Fiat SpA taking over Chrysler, workers will see cuts in pay and benefits, but the union's retiree health fund will end up with a 55% equity stake in the company to help pay for retiree benefits. Cerberus Capital Management LP, which struck a $7.4 billion deal to buy control of Chrysler two years ago, will lose all of its equity in the company.

- Regulators, academics and representatives from major companies will converge at the Securities and Exchange Commission Tuesday morning to discuss the agency's five proposed rules to limit short-selling.

- Unions already are the big winners of the Chrysler bankruptcy. But, Wall Street bankers warn that companies with large union work forces may end up being losers in the future. Many investment bankers, bankruptcy experts and investors are worried about the precedent being set by the government’s preferential treatment of Chrysler’s unions at the expense of Chrysler’s secured lenders, who are supposed to be the first to be paid off in bankruptcy proceedings and who typically get the best recovery. In the government-led plan for Chrysler, the UAW pension fund will end up owning 55% of the auto maker, while the secured lenders were forced to take just 29 cents on the dollar for the debt they hold. To financiers, that represents a troubling signal that union interests will supercede financial interests in future cases. ““You can imagine banks, hedge funds, are going to think twice about lending to a company with union exposure,” said a banker who helps companies raise money. “If you don’t know what the rules are going to be, the amount of debt that companies are going to be able to raise is going to drop for unionized companies and their cost of capital is going to get much higher as well.”

- Mobile advertising growth has slowed sharply over the past few months but is expected to reaccelerate next year, just as a growing number of cellphones built with Google Inc.'s (GOOG) Android software are expected to hit the market. U.S. advertisers are seen spending $229 million on mobile ads this year, up 26% from $169 million in 2008, according to a report by Brian Wieser, global director of forecasting for Magna. Magna predicted that mobile ad spending could nearly double by 2011, reaching $409 million. Chief Executive Eric Schmidt said last month he expected Android to have a "very, very strong year," adding that a number of wireless carriers and hardware makers will be making "significant" announcements by the end of the year.

CNBC:

- BlackRock Inc.(BLK) is maintaining its 1,000 estimate for the S&P 500 for this year, Bob Doll, vice chairman and chief investment of the financial company, said. The recovery will be “subpar,” Doll said, in part because the government hasn’t made an “exit plan” from its interventions in the economy.

MarketWatch:
- The New York Times Co.(NYT) has reached tentative agreement with a number of unions at The Boston Globe, and has agreed to hold off on a threat to shut the Globe down in two months, according to a published report Monday.

Mass. High Tech:

- American Science and Engineering Inc.(ASEI) reports it has landed $4.7 million from an unnamed law enforcement agency for its cargo screening vans. Under the contract, the Billerica-based company will deliver multiple Z Backscatter Vans to an unnamed law enforcement agency. AS&E said the vans will be used to scan vehicles at border crossings and other checkpoints to detect illegal drugs and other contraband. The Z Backscatter Van system comprises a mobile X-ray screening system built into standard commercial vans to allow for “drive-by” inspection. One or two operators can conduct X-ray imaging while the ZBV drives past suspicious vehicles and objects.

Politico:

- President Barack Obama’s ambitious first-year agenda has some House Democrats fearing a repeat of 1994, when the priorities of a new president collided headfirst with the prerogatives of senior leaders on Capitol Hill and the party lost control of both the House and the Senate. While few leaders would predict a similar collapse at this early stage in his presidency, those fears provided the backdrop for a leadership meeting Thursday in the speaker's Capitol conference room, people present said. In the run-up to the meeting, Democratic Congressional Campaign Committee Chairman Chris Van Hollen (D-Md.) argued in several newspaper interviews that the House should move cautiously on a cap-and-trade bill if it doesn’t look like the Senate will approve it. Van Hollen doesn’t want vulnerable House Democrats — especially the freshmen under his care — to be forced to take difficult votes on the measure if it’s not going to pass anyway. But Energy and Commerce Committee Chairman Henry Waxman, a 34-year veteran of the House who knocked off his longtime predecessor last fall to push an ambitious climate change bill, took umbrage with Van Hollen’s public stance during Thursday’s leadership meeting, people present said. Brandishing an issue of that day’s CQ in which Van Hollen laid out the merits of holding off, an agitated Waxman reminded his junior colleague that raising procedural concerns in public didn’t make it any easier for the Energy and Commerce Committee chairman to broker a compromise with the members of his committee — or help him pass an ambitious bill in the House.

The Detroit News:

- The all-electric car -- which had a brief heyday less than a decade ago before the car companies killed it -- is about to make a comeback. Charged up with lighter, more efficient batteries and competitively priced with gasoline-driven vehicles, the new offers will be marketed and sold primarily as second cars. These silent electric autos will be plugged into home outlets and will be able to travel 100 miles or more without stopping for a charge. Nissan said recently it has developed a mass-market electric car, due out by the end of next year, that will seat five and can have its battery charged to 80 percent of capacity in 26 minutes. It will have all the amenities buyers want, Nissan says, such as navigation, super stereo and heated seats, and will cost between $20,000 and $30,000. The company is not alone. Ford, Mitsubishi, Chrysler and Subaru, among others, are planning to introduce electric vehicles over the next year, according to the Electric Drive Transportation Association, a trade group. "The electric car is clearly on its way back," said Ron Cogan, editor and publisher of the magazine Green Car Journal, which covers the alternative-energy-auto industry. "Every automaker and battery company has been making incremental breakthroughs" in technology.

AP:

- A solid majority of Jewish Israelis worry that President Barack Obama's outreach to the Arab and Muslim world will come at their expense, a new poll showed Monday. Israelis also strongly back stopping Iran's nuclear program, even if Israel has to attack Iran without American approval, according to the survey. The poll found that 63 percent of those questioned believe Israel will suffer from Obama's declared intention to reconcile with the Muslim and Arab worlds.

Reuters:
- Iran will not suspend its disputed nuclear programme even if the United States imposes sanctions targeting companies that ship fuel to the Islamic Republic, a Foreign Ministry spokesman said on Monday. Twenty-five U.S. senators from both parties have proposed giving President Barack Obama new leverage in the dispute over Tehran's nuclear ambitions. The bill gives Obama the authority to sanction companies supplying petrol to Iran.

- Bank of America Corp(BAC) said on Monday it does not have plans to raise $10 billion in common equity, as the Financial Times had reported.

- Research In Motion (RIMM) is planning a next-generation version of its touchscreen BlackBerry Storm smartphone as part of a continuing push into the retail market, its co-CEO said on Monday. "We see this very large and untapped consumer market," Jim Balsillie said during a presentation to analysts and investors, adding that more than half of RIM's 25 million subscribers now fall into the non-corporate category. Asked about whether the Storm -- which debuted to mixed media reviews last year -- has been a hit, Balsillie said "that product was a huge success in terms of sales and adoption."

- A wave of hedge funds are being launched this year by traders as the financial crisis fuels a shakeout of talent from Wall Street banks and big investment firms, an industry executive said.

- Global manufacturing activity contracted at its slowest pace in seven months in April helped by signs of improvement across the euro zone and the Unites States, a survey showed on Monday. The global index, produced by JP Morgan with research and supply management organizations, rose to 41.8 in April from 37.3 in March, its highest in seven months. The rise in the PMI was helped by the biggest month-on-month gains in the survey's 12-year history in the output, new orders, new export orders and employment indices.

Financial Times:
- The European Union’s attempt to regulate hedge funds will affect other classes of alternative investment such as real estate funds and investment trusts, lawyers studying the fine print of the new rules have warned.

The Globe and Mail:

- After months of upheaval, Alberta's energy companies are rolling out new project cost estimates low enough that the hard-hit province could see a spending revival worth billions of dollars. The dramatic retreat in oil sands development, forced by last year's oil price freefall, punished the Alberta economy and resulted in thousands of layoffs. Now, labor and material costs have been lowered enough that the prospect of new life in the oil sands has become a topic of discussion in a province that just a few months ago watched as more than $200-billion in oil sands projects were either shelved or outright cancelled. "Rather than needing $80- to $100-a-barrel [U.S.] to make projects work, all of a sudden you're looking at these and saying maybe they are economic in a $60 world, and fairly competitive globally," said UBS Securities analyst Andrew Potter.

Etemaad:
- Mohsen Rezai, a former commander of Iran’s Revolutionary Guards who’s running in presidential elections, said President Mahmoud Ahmadinejad is “adventurous” and leading the country to a precipice. Ahmadinejad’s rhetoric over the country’s nuclear program is putting Iran’s national interests at risk, Rezai, who is secretary of the Expediency Council, an advisory body to Supreme Leader Ayatollah Ali Khamenei, was cited as saying.

Bear Radar

Style Underperformer:
Large-cap Growth (+1.69%)

Sector Underperformers:
Education (-1.91%), Software (-.13%) and Utilities (+.01%)

Stocks Falling on Unusual Volume:
PHI, DV, THO, DTV, QDEL, CMTL, ADBE, HAE and CCC

Stocks With Unusual Put Option Activity:
1) ONNN 2) DTV 3) PTEN 4) CLWR 5) WY

Bull Radar

Style Outperformer:
Small-cap Value (+3.53%)

Sector Outperformers:
Homebuilders (+8.38%), Steel (+7.45%) and Banks (+5.79%)

Stocks Rising on Unusual Volume:
KB, STI, CRZO, WFC, CEO, PTR, CHL, CHU, BGFV, LMDIA, JRCC, EBIX, NAFC, GMCR, SOHU, TBSI, ATLS, JRJC, HSIC, DISCA, VLCCF, HSII, NILE, RAIL, AMSC, GTLS, LOGI, EL, EMG, ASF, KND, GMR, FRO and VMC

Stocks With Unusual Call Option Activity:
1) AET 2) BDK 3) CSIQ 4) NIHD 5) ELN

Links of Interest

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Monday Watch

Weekend Headlines
Bloomberg:

- From Frankfurt to London to New York to Tokyo, bond traders say the Lehman Brothers Holdings Inc. bankruptcy is fading into history as the cost of credit retreats throughout the Group of Seven industrialized nations. The record pace of corporate bond sales, declining money market rates and a drop in mortgage costs all suggest the global economy is on the mend. In the government debt market, yields on 10-year notes exceed those of two-year securities by at least 1 percentage point in all the G-7 nations for the first time since before 1991, according to data compiled by Bloomberg. The so-called yield curve typically steepens when traders anticipate a recovery. Lending has resumed. The London interbank offered rate for three-month dollar loans fell to 1.01 percent on May 1, the lowest since June 2003. The TED spread measuring the difference between Libor and Treasury bill rates, which rose as high as 4.64 percentage points on Oct. 10, narrowed to 0.86 percentage point last week. The Libor-OIS premium that indicates banks’ reluctance to lend to each other fell to 0.79 percentage point last week, the lowest level since before Lehman’s collapse, from 3.64 percent on Oct. 10.

- Berkshire Hathaway Inc.(BRK/A) Vice Chairman Charles Munger, whose company is the largest private shareholder in Goldman Sachs Group Inc. and Wells Fargo & Co., said banks will use their “enormous political power” to prevent changes to the industry that would benefit society. “This is an enormously influential group of people, and 90 percent of that influence is being spent to gain powers and practices that the world would be better off without,” Munger, 85, said yesterday in an interview with Bloomberg Television. “It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.” Munger said policy makers should seek to impose limits on banks that are deemed “too big to fail” after financial institutions worldwide suffered more than $1 trillion in losses. “We need to remove from the investment banking and the commercial banking industries a lot of the practices and prerogatives that they have so lovingly possessed,” Munger said. “If they are too big to fail, they are too big to be allowed to be as gamey and venal as they’ve been -- and as stupid as they’ve been.” Munger said the financial companies spent $500 million on political contributions and lobbying efforts over the last decade. They have a “vested interest” in protecting the system as it exists because of the high levels of pay they were earning, he said. The five biggest U.S. securities firms, only two of which still exist as independent companies, paid their employees about $39 billion in bonuses in 2007. “They would like to get back as closely as possible to business as usual, and they have enormous political power,” he said.

- Berkshire Hathaway Inc.(BRK/A) Chairman Warren Buffett dismissed the importance of the government stress tests in helping him assess banks, and said Wells Fargo & Co. will prosper no matter what the results show. “I think I know their future, frankly, better than somebody that comes in to take a look,” Buffett said yesterday of the bank stocks that Omaha, Nebraska-based Berkshire owns. Regulators “may be using more of a checklist-type approach.” “All banks aren’t alike by a long shot, and in our view Wells Fargo, among the large banks, has some advantages the others do not,” Buffett said at Berkshire’s annual meeting.

- Berkshire Hathaway Inc.(BRK/A) Vice Chairman Charles Munger said he supports an outright ban of credit- default swaps to prevent speculators from profiting on the failure of companies. “If I were the governor of the world, I would eliminate it entirely -- 100 percent,” Munger said in a Bloomberg Television interview today. “That’s the best solution. It isn’t as though the economic world didn’t function quite well without it, and it isn’t as though what has happened has been so wonderfully desirable that we should logically want more of it.” The proliferation of credit-default swaps in the portfolios of debt investors and banks can eliminate incentives lenders have to keep companies out of bankruptcy, according to academics including Henry Hu, a law professor at the University of Texas in Austin, who testified before Congress in October on the so- called debt decoupling created by derivatives. Creditors that have hedged themselves “might well want its borrower to go into bankruptcy and have incentives to use its control rights to help grease the skids,” Hu told the House Committee on Agriculture, which oversees the Commodity Futures Trading Commission. “The whole mass of incentives created is quite counterproductive,” Munger said. Buyers of the swaps get a “vested interest in the destruction of some business.” House Agriculture Committee Chairman Collin Peterson in January circulated a draft bill that would have banned credit swaps trading unless investors owned the underlying bonds. The bill that passed the Minnesota Democrat’s committee the following month stopped short of an outright ban, though it would allow the CFTC to suspend trading in the market, if needed, to protect investors. The bill has not been taken up by the full House of Representatives. U.S. Treasury Secretary Timothy Geithner, who in his past post as president of the Federal Reserve Bank of New York pushed dealers to curb the potential for systemic risks from the market, told Congress in March that a ban such as Peterson had proposed “is not necessary and wouldn’t help fundamentally.”

- The U.S. Securities and Exchange Commission should be given authority to regulate what hedge funds can buy and how much money they can borrow to maximize bets because registration falls short of what’s needed to police the $1.33 trillion industry, Chairman Mary Schapiro said. “It’s probably not enough just to register hedge funds” with the SEC, Schapiro said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “It may well be necessary to put in place particular kinds of rules.”

- Crude oil fell from a five-week high in New York trading on speculation increased output by non-OPEC producers and weak demand may increase stockpiles. Daily oil output in Russia, the world’s second-largest producer, gained about 49,000 barrels in April, the nation’s Energy Ministry said May 2. “Some of these leading indicators have been reasonably encouraging, but that inventory over-hang is going to do a lot to stifle any rallies,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. Crude-oil supplies in the U.S., the world’s largest user of the commodity, rose for an eighth week to 374.7 million on April 24, the Energy Department reported last week. The gain left inventories at the highest level since September 1990 and 15 percent above the five-year average for the period. Stockpiles rose even as April output from Alaska, the country’s second-largest producing state, fell 10.2 percent from a month earlier after a volcanic eruption. Production from Prudhoe Bay, the biggest U.S. oil field, fell 15 percent from March, a May 1 government report showed. “It is difficult to see a sustained rally in oil given the inventory status,” Hassall said. Daily exports from Iraq, the only OPEC nation not restricted by quota, increased by 5,000 barrels to 1.821 million last month, according to the state-run oil marketing company. Shipments may rise as much as 4 percent to 1.9 million this month, Falah Al-Amri, head of the agency, said yesterday.

- The yen fell for a fifth day against the euro, its longest losing streak in six weeks, as speculation the worst of the global recession is over encouraged investors to buy higher-yielding assets.

- The recent spate of bombings in Iraq means U.S. officials may have to keep troops there longer than they planned, and Iraqis may have to live with a higher level of violence than they wish. American military officials say they are now reconsidering plans to withdraw troops from all cities in Iraq by the end of June in the wake of car and suicide bombings that killed 191 people in Baghdad between April 23 and April 29.

- Australian house prices fell for a fourth straight quarter in the three months through March as the nation’s first recession since 1991 and surging unemployment sapped demand for property. An index measuring the weighted average of prices for established houses in the eight capital cities dropped 2.2 percent from the fourth quarter, when it declined a revised 1.2, the Australian Bureau of Statistics said in Sydney today. House prices slumped 6.7 percent in the year through March, after dropping a revised 3.9 percent in the fourth quarter, today’s report showed. Economists forecast a 3.9 percent annual decrease.

Wall Street Journal:

- Berkshire Hathaway Vice Chairman Charlie Munger is known for his dour views during the company’s annual shareholder meetings. But this year, he was unusually optimistic.

- Wal-Mart Stores Inc.(WMT) is expanding a pilot prescription-drug program for companies, heating up the race among pharmacy retailers to transform the way drugs are priced and sold. The discount retailer is offering businesses low-priced drugs if they sign up to buy directly from Wal-Mart's network of in-store pharmacies, rather than contracting to buy drugs through third parties known as pharmacy-benefit managers.

- New reports showed the A/H1N1 swine flu had spread to 18 countries, as the World Health Organization moved closer to officially declaring the new strain a global pandemic. Incidents of the new flu continued to turn up, including in a herd of swine in Canada, U.S. officials said. But health officials cautioned that declaring a pandemic doesn't mean the disease, which has proven mild outside of Mexico, is deadly to most people or will sweep the entire globe.

- Why Tech Stocks Are on a Tear.

CNBC.com:
- Green shoots aren't just popping up in the economy. In case you haven't noticed, we're in the midst of a gardening boom.

NY Times:

- The problem with global warming, some environmentalists believe, is “global warming.” The term turns people off, fostering images of shaggy-haired liberals, economic sacrifice and complex scientific disputes, according to extensive polling and focus group sessions conducted by ecoAmerica, a nonprofit environmental marketing and messaging firm in Washington. Instead of grim warnings about global warming, the firm advises, talk about “our deteriorating atmosphere.” Drop discussions of carbon dioxide and bring up “moving away from the dirty fuels of the past.” Don’t confuse people with cap and trade; use terms like “cap and cash back” or “pollution reduction refund.” EcoAmerica has been conducting research for the last several years to find new ways to frame environmental issues and so build public support for climate change legislation and other initiatives. A summary of the group’s latest findings and recommendations was accidentally sent by e-mail to a number of news organizations by someone who sat in this week on a briefing intended for government officials and environmental leaders. Environmental issues consistently rate near the bottom of public worry, according to many public opinion polls. A Pew Research Center poll released in January found global warming last among 20 voter concerns; it trailed issues like addressing moral decline and decreasing the influence of lobbyists. “Another key finding: remember to speak in TALKING POINTS aspirational language about shared American ideals, like freedom, prosperity, independence and self-sufficiency while avoiding jargon and details about policy, science, economics or technology,” said the e-mail account of the group’s study.

- Fresh from pushing Chrysler into bankruptcy, President Obama and his economic team are hoping that the hard line they took last week gives them leverage to force huge changes in General Motors(GM), a far larger and more complex company.

- The big idea behind the Obama administration’s long-in-the-making policy for Afghanistan and Pakistan was that the two countries are inextricably linked. The key to stabilizing Afghanistan, the White House concluded five weeks ago, is a stable and cooperative Pakistan. That calculation has been utterly scrambled by the Taliban offensive in western Pakistan, which has forced the United States to concentrate on the singular task of preventing further gains in Pakistan by an Islamic militant insurgency that has claimed territory just 60 miles from Islamabad.

- Fear of Attacks Stokes Armored Car Sales in Brazil.

- The results of the bank stress tests to be released by the Obama administration this week are expected to include more detailed information about individual banks — assessing specific parts of their loan portfolios — than many analysts have been expecting. Using these results, the administration seems prepared to argue that, while a few banks may need additional money, the broad financial system is healthier than many investors fear.

- The iPod stemmed losses in the music industry. The Kindle gave beleaguered book publishers a reason for optimism. Now the recession-ravaged newspaper and magazine industries are hoping for their own knight in shining digital armor, in the form of portable reading devices with big screens.

Washington Post:
- As Chrysler began its journey through bankruptcy in a New York courtroom yesterday, members of the administration's autos task force had already turned their focus toward a larger and more daunting problem: General Motors(GM).

- President Obama's health-care goals may be garnering attention, but his higher-education proposals are no less ambitious. If adopted, they could transform the financial aid landscape for millions of students while expanding federal authority to a degree that even Democrats concede is controversial. At stake is a plan to expand the Pell Grant program, making it an entitlement akin to Medicare and Social Security.

Forbes.com:

- April ended with 23,700 layoffs announced at the largest American companies, down from the 37,400 in March. It was the third monthly decline in layoff announcements since the peak of 163,700 in January.

- Apple(AAPL) appears to be preparing an all-out assault on the handheld gaming market, moving to snap up gaming industry insiders from Microsoft to go with its growing team of graphics-chip specialists. News that Apple has poached Richard Teversham from Microsoft's Xbox business this week is only the latest sign Apple has gotten serious about the gaming business.

CNNMoney.com:

- Apple’s (AAPL) iPhone took first place in J.D. Power’s 2009 smartphone consumer satisfaction survey released Thursday. The iPhone ranked highest in every category except battery life.

Business Week:
- GM: The Government Is in Charge. The White House task force in charge of salvaging the carmaker is using a heavy hand. Is it hurting or helping? The Obama Administration has "no desire to run an auto company on a day-to-day basis," says White House spokesman Robert Gibbs. If so, somebody forgot to tell the team of Treasury Dept. staffers and management consultants now camped out at the Detroit Renaissance Center, a hotel and office complex anchored by General Motors' (GM) headquarters.

Politico:

- The Charlotte News and Observer confirms a report last month from the (super-reliable on this topic, no?) National Enquirer of a federal investigation into the Edwards campaign: Federal investigators are sifting through the records of money that helped John Edwards' presidential campaign to determine if any was used to keep quiet his affair with Rielle Hunter. Edwards, a Democrat and former U.S. senator, acknowledged the investigation to The News & Observer.

Zero Hedge:

- In an interview of momentous importance, WJR's Frank Beckmann interviews Tom Lauria, the Head of Restructuring at top five law firm White & Case, in which the lawyer, who represents Chrysler hold-out hedge funds Stairway Capital and Oppenheimer Funds, discusses on the record the amazing treatment by the White House of Perella Weinberg, which initially had been a transaction hold out but after threats by the White House (not my words) was forced to drop their objection and go with the administration. Says Lauria: "One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight...That was Perella Weinberg." In the clip below, fast forward to the two minute mark, where the Obama administration's negotiating tactics become very, very clear. What is very odd is that Perella Weinberg could possibly have veered away from the administration's path in the first place: Zero Hedge readers know that P-W is the very firm advising the rapidly sinking FDIC "on transactions and strategies to stabilize the banking system, and also on the proper way to dispose failed institutions and how to handle delinquent securities assumed from banks, as well as the creation of the aggregator bank." This leads to the conclusion that this was really the work of one Dan Arbess, who runs the recently acquired by P-W, Xerion Capital, but nonetheless does not explain the lack of strategic integration at this most critical of advisors to Sheila Bair, and by implication the U.S. administration. How it is possible that one's core advisor would go against its client, even if offset by a Chinese Wall, is likely the big story here, and speaks volumes about the chaos behind the scenes currently occurring with regard to Wall Street's sentiment for the ruling administration.

Seeking Alpha:

- Global Crisis? Not for Tech Stocks.

Reuters:

- Italy's Fiat SpA could seek a merger of its auto group with General Motors Corp's Europe unit, then spin off the combined company and list it, Fiat said on Sunday. Fiat Chief Executive Sergio Marchionne, fresh from a partnership with ailing U.S. automaker Chrysler, will meet German government ministers on Monday to discuss a bid for German car maker Opel, part of GM Europe. Fiat's board met on Sunday to review the Chrysler deal and back Marchionne in weighing a potential merger of Fiat's auto group, including "the Chrysler interest," with GM Europe into a new company, Fiat said in a statement.

- The U.S. government expects to have flu vaccines ready for both the new strain of the H1N1 virus and the seasonal flu by autumn, Health and Human Services Secretary Kathleen Sebelius said on Sunday.

Financial Times:

- US homeowners could save close to $18bn (€13.5bn, £12bn) on their mortgage repayments this year as record low interest rates allow millions of borrowers to switch to cheaper home loans. Those people that took advantage of cheaper borrowing costs in the first quarter saved about $160 a month on a $200,000 loan, Frank Nothaft, chief economist at Freddie Mac said. “In aggregate, this adds up to about $2.5bn in extra spending cash in the pockets of those homeowners to spend over the coming year.” With the refinancing trends expected to be boosted by the government’s plans to help more borrowers to qualify for mortgage renegotiations, this year’s savings for homeowners could reach $18bn. The sum would add firepower to the existing stimulus and underpin US personal consumption, which totaled $10,000bn in 2008. Wilbur Ross, the billionaire investor, said in an interview with the Financial Times that the positive effects of giving consumers additional disposable income were being felt.

- Citigroup(C) and Bank of America(BAC) are working on plans to raise more than $10bn each in fresh capital, even as they launch last-ditch attempts to convince the US government they do not need to bolster their balance sheets. People close to the situation said Citi, BofA and at least two other lenders will on Monday attempt to convince the Treasury and the Federal Reserve that the findings of “stress tests” into their financial health were too pessimistic. But with time running out – the government will present the final test results to 19 banks tomorrow with an announcement scheduled for Thursday – both Citi and BofA are looking at how they could raise extra capital. Preliminary findings have revealed that Citi, which has already been bailed out three times by the authorities, could need an extra $10bn or more if the economy worsens. BofA, which has had $45bn in government aid, was found to need well in excess of $10bn, people familiar with the matter said. Regional lenders Wells Fargo(WFC) and PNC Financial(PNC) were also among the banks that would need to raise more capital unless they could persuade the authorities their findings were wrong, said people close to the situation.

TimesOnline:
- The European Central Bank is set to cut its key interest rate to 1% this week, the lowest in its 10-year history. The ECB is also expected to embrace other measures to boost the money supply and head off the threat of deflation. Analysts will also be closely watching Thursday’s announcement from the Bank of England. Its monetary policy committee (MPC) will keep Bank rate on hold at the current record low of 0.5%, but markets will be scrutinising what it says about quantitative easing – deliberately boosting the money supply by purchasing bonds.

Die Welt:

- The German economy will continue to contract next year, citing an internal paper by the commission of the European Union, which will be published May 4^th. The German economy will shrink 5.6% this year and as much as .3% next year.

Yomiuri:
- Panasonic Corp. raised its monthly output capacity for plasma panels at two plants to 940,000 units as television sales recover in Japan.. Osaka-based Panasonic will make an extra 160,000 units at the two factories in Amagasaki city, western Japan, citing the company.

EE Times:

- PC processor makers have sold off "most of not all" their excess inventory that piled up due to the recession creating "the potential for positive growth" in the next three to six months, according to an upcoming report from Mercury Research (Cave Creek, Az.).

Weekend Recommendations
Barron's:
- Made positive comments on (SPG), (VNO), (PLD), (KIM), (MORN), (WYNN), (NILE), (MMM), (FAST), (MDT), (CLX), (SLB), MENT) and (PSA).

Night Trading
Asian indices are +1.50% to +3.75% on avg.
S&P 500 futures +.58%.
NASDAQ 100 futures +.61%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/Estimate
- (B)/.20

- (OSG)/1.05

- (ASF)/.29

- (S)/-.05

- (DISCA)/.25

- (MCK)/1.14

- (PPS)/.25

- (VMC)/-.08

- (N)/.00

- (MYGN)/.25

- (CGNX)/-.05

- (CHK)/.49

- (MGM)/-.04

- (FST)/.16

- (CKEC)/-.09

- (CNA)/.30

- (SYY)/.39

- (L)/.80

- (TSN)/-.06

- (EL)/.-.05

- (TDW)/1.96

Upcoming Splits

- None of note

Economic Releases

10:00 am EST

- Pending Home Sales for March are estimated unch. versus a 2.1% increase in February.

- Construction Spending for March is estimated to fall 1.7% versus a .9% decline in February.

Other Potential Market Movers
- The Fed’s Hoenig speaking, Fed’s Lacker speaking, (ZMH) shareholders meeting, (RIMM) Capital Markets Day, (SEE) analyst meeting, (AFL) shareholders meeting, (SHLD) shareholders meeting and the (MOT) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by technology and financial shares in the region. I expect US stocks to open modestly higher and to build on gains into the afternoon, finishing higher. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for stocks in focus for Monday by MarketWatch.

There are a number of economic reports of note and many significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Pending Home Sales, Construction Spending

Tues. – Weekly retail sales reports, ISM Non-Manufacturing Index

Wed. – Weekly EIA energy inventory report, weekly MBA mortgage applications report, Challenger Job Cuts, ADP Employment Change

Thur. – 1Q Non-farm Productivity, 1Q Unit Labor Costs, Initial Jobless Claims, ICSC Chain Store Sales, Consumer Credit

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, Wholesale Inventories

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Administaff(ASF), Sprint Nextel(S), Mckesson(MCK), Post Properties(PPS), Vulcan Materials(VMC), Chesapeake Energy(CHK), MGM Mirage(MGM), Loews(L), Tyson Foods(TSN), Estee Lauder(EL), Tidewater(TDW)

Tues. – Automatic Data Processing(ADP), Diebold(DBD), St Joe(JOE), Weyerhaeuser(WY), Emerson Electric(EMR), Kraft Foods(KFT), Duke Energy(DUK), Walt Disney(DIS), Centex(CTX), Electronic Atrs(ERTS), Pulte Homes(PHM), CVS Caremark(CVS), Archer-Daniels-Midland(ADM), Las Vegas Sands(LVS), Avon Products(AVP), IntercontinentalExchange(ICE), Wynn Resorts(WYNN)

Wed. – News Corp.(NWS/A), Anadarko Petroleum(APC), Cisco Systems(CSCO), Symantec(SYMC)

Thur. – DR Horton(DHI), Allstate(ALL), Microchip Tech(MCHP), Nvidia(NVDA)

Fri. – Priceline.com(PCLN), El Paso(EP), Gartner(IT)

Other events that have market-moving potential this week include:

Mon. – The Fed’s Hoenig speaking, Fed’s Lacker speaking, (ZMH) shareholders meeting, (RIMM) Capital Markets Day, (SEE) analyst meeting, (AFL) shareholders meeting, (SHLD) shareholders meeting, (MOT) shareholders meeting

Tue. – The Fed’s Rosengren speaking, Fed Chairman Bernanke’s testimony on economy, Fed’s Hilton speaking, Fed’s Stern speaking, Fed’s Yellen speaking, (D) shareholders meeting, (BMY) shareholders meeting

Wed. – The Fed’s Stern speaking, Fed’s Yellen speaking, (FWLT) shareholders meeting, (PEP) shareholders meeting, (HOT) shareholders meeting, (GILD) stockholders meeting

Thur. – The Fed’s Evans speaking, Fed’s Bernanke speaking, (POT) shareholders meeting, (VZ) shareholders meeting, (BTU) shareholders meeting

Fri. – The Fed’s Evans speaking, Fed’s Lacker speaking, (AA) shareholders meeting, (GS) shareholders meeting

BOTTOM LINE: I expect US stocks to finish the week modestly higher on less credit market angst, better-than-feared earnings reports, declining economic fear, lower energy prices, short covering, investment manager performance anxiety, less swine flu fear and diminishing financial sector pessimism. My trading indicators are giving bullish signals and the Portfolio is 75% net long heading into the week.