Today's Headlines

Bloomberg:

- The S&P 500 will climb 15% through the end of the year as profit margins improve, Deutsche Bank AG said. The year-end forecast of 1,060 for the S&P 500 is an 18% increase from the bank’s previous projection of 900. Historically, profit margins have closely tracked the growth rate of GDP, which Deutsche Bank economists say bottomed in the first quarter. The aggregate margin for companies in the S&P 500 “remains well below the average of the last few years, implying considerable potential upside over the medium term.” Chada raised his earnings estimate for the index to $48.80 a share this year from $39.50. Excluding writedowns by financial companies, he predicted “underlying” profit of $64.60 a share, up from an earlier estimate of $58.30. For 2010, Chadha forecast underlying earnings of $77.0, up from $73.30. Chadha set a target of 1,260 for the S&P 500 for the end of 2010, a 37% advance from the May 29 close. The 1,060 year-end target for the S&P 500 is higher than all but two of the 11 Wall Street strategist forecasts compiled weekly by Bloomberg. Thomas Lee of JPMorgan and David Bianco, of Bank of America today, each forecast 1,100.

- Manufacturing in the U.S. shrank less than forecast in May as new orders increased for the first time since the recession began, a sign that companies are growing more confident the slump will end this year. The Institute for Supply Management’s factory index rose to 42.8 from 40.1 in April. The new-orders measure jumped to 51.1 from 47.2. The ISM’s production index rose to 46, the highest since August, from 40.4 the prior month. A gauge of export orders rose to 48 from 44. The supplier delivery gauge, a measure of the time it takes to receive goods, increased to 49.8 from 44.9 the prior month. The measure of orders waiting to be filled rose to 48 from 40.5. The inventory index fell to 32.9 from 33.6.

- Leveraged loans in Europe rose to the highest in almost eight months as investors sought riskier assets amid signs the worst of the global recession may be over. An index of such loans compiled by Standard & Poor’s LCD, which tracks 17 portions of widely traded high-yield leveraged loans, rose to 82.14 cents on the dollar as of May 28, the highest since Oct. 2. The index has risen 36 percent this year.

- The cost of protecting corporate bonds from default fell to the lowest since October on speculation General Motors Corp.’s bankruptcy will be “pain- free” and that the worst of the global recession is over. Credit-default swaps on the Markit iTraxx Crossover Index of 45 companies with mostly high-risk, high-yield credit ratings dropped 20 basis points to 704, the lowest since Oct. 14, according to JPMorgan Chase & Co. prices at 12:10 p.m. in London. The Markit iTraxx Financial index of 25 European banks and insurers declined 5 basis points to 114 and the subordinated index fell 17.5 to 197.5.

- The Organization of Petroleum Exporting Countries increased oil output by 1.5 percent in May, the biggest gain since 2007, a Bloomberg News survey showed. Oil output averaged 28.15 million barrels a day last month, up 405,000 from April, according to the survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.76 million barrels a day, 915,000 more than their target. “Some members have been suffering because of recent cutbacks and have decided to take advantage of the higher prices,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “There’s a feeling that the market can tolerate greater production because of the recent rise in prices.” Saudi Arabia, the world’s biggest oil exporter, increased daily production by 75,000 barrels to 8 million, the survey showed. Iran, OPEC’s second-biggest producer, raised daily output by 80,000 barrels to 3.78 million, the biggest increase of any member. The country’s production is now averaging 444,000 barrels a day above its target, exceeding the quota by more than any other member, according to the survey.

- US stocks are worth buying for the first time in six years, according to an indicator that has signaled bull markets all but once since World War II. The “Coppock Guide” was named for E.S.C. Coppock, who introduced what he described as a “very-long-term buying guide” in an October 1962 story for Barron’s. Leuthold Group LLC has a version known as VLT Momentum that Steve Leuthold, the research firm’s founder, developed after reading the Barron’s article. Coppock wrote that his indicator gave “a picture of the emotional factor” behind stock swings. He advised investors to buy shares in anticipation of “an important, sustained advance” when the guide started to increase from less than zero. That kind of shift occurred last month, according to data compiled by Bloomberg. The guide for the S&P 500 climbed to -409.4 from April’s -417.2, the lowest reading since June 1938. US stocks advanced 16 or 17 times in the first year after the broader index’s Coppock curve turned higher.

- Violent crime in the U.S. fell for the second year in a row in 2008, dropping 2.5 percent, the FBI said. All four categories of violent crime surveyed by the Federal Bureau of Investigation -- forcible rape, murder, robbery and aggravated assault -- declined in 2008 compared to the previous year, according to preliminary data released today.

- Tony Crescenzi, chief bond-market strategist at Miller Tabak & Co. will join Pacific Investment Management Co., a person familiar with his plans said.

- India’s exports fell the most in at least 14 years as the worst global recession since the Great Depression slashed demand for the nation’s jewelry, clothing and other products. Merchandise shipments dropped 33.2 percent from a year earlier to $10.74 billion in April, the government said in New Delhi today. That was the biggest fall since at least April 1995, when Bloomberg data began. Exports slid 33 percent in March. Imports fell 36.6 percent in April from a year earlier and the trade deficit narrowed to $5 billion from $8.7 billion in the same month in 2008, today’s report showed. Oil imports slid 58.5 percent to $3.6 billion, while non-oil purchases dropped 24.6 percent to $12.11 billion.

- China’s Ministry of Commerce said it started an anti-dumping investigation into imports of some kinds of flat-rolled electrical steel from the US and Russia. The ministry has also started investigating subsidies on electrical steel imported from the US.

Wall Street Journal:

- Ford(F) Seeks to Gain Amid Rivals’ Pain. Ford Motor Co. is preparing an effort to gain market share while its two main rivals are bogged down in bankruptcy and restructuring. Ford, the only one of Detroit's Big Three that didn't need a bailout from the federal government, plans to increase production of cars and trucks in the third quarter by about 10% from the level of a year ago, a company official said. It will be Ford's first significant production increase in almost two years. In contrast, General Motors Corp., which is expected to file for Chapter 11 protection Monday, and Chrysler LLC, which is nearing the end of its bankruptcy reorganization, are planning to shut down their plants for nearly all of the third quarter. The difference in production plans will give Ford a chance to push sales through the prime summer selling months while GM and Chrysler focus on their internal issues. "This is a once-in-a-lifetime opportunity to separate us from our other domestic competitors," said a person familiar with the matter at Ford. "No one is going to gift-wrap it for us. You have to deliver the product people want to buy. That said, you have to take this historic opportunity to grab market share."

- Travelocity.com, a unit of Sabre Holdings Corp., and Orbitz Worldwide Inc. plan to announce Monday that they will stop charging a fee when customers book airline tickets over the Internet. During March and April, several major online travel agencies eliminated airline booking fees on a promotional basis through May 31. Then, last Thursday , Expedia.com, a unit of Expedia Inc., eliminated the fee on a long-term basis, forcing other large online agencies to do the same.

- General Motors Corp. filed for Chapter 11 bankruptcy early Monday, marking the humbling of an American icon that once dominated the global car industry and setting up a high-stakes gamble for U.S. taxpayers.

- Now that the Iraq war is going well, media coverage in America has all but vanished. So we thought you might like to know that the month that ended yesterday saw the fewest deaths from terrorist violence in that country since the U.S.-led invasion in 2003.

Washington Post:

- Cap-and-Trade: All Cost, No Benefit. The Obama administration and congressional Democrats have proposed a major cap-and-trade system aimed at reducing carbon dioxide emissions. Scientists agree that CO2 emissions around the world could lead to rising temperatures with serious long-term environmental consequences. But that is not a reason to enact a U.S. cap-and-trade system until there is a global agreement on CO2 reduction. The proposed legislation would have a trivially small effect on global warming while imposing substantial costs on all American households. And to get political support in key states, the legislation would abandon the auctioning of permits in favor of giving permits to selected corporations. The Congressional Budget Office recently estimated that the resulting increases in consumer prices needed to achieve a 15 percent CO2 reduction -- slightly less than the Waxman-Markey target -- would raise the cost of living of a typical household by $1,600 a year. Some expert studies estimate that the cost to households could be substantially higher. The future cost to the typical household would rise significantly as the government reduces the total allowable amount of CO2. Americans should ask themselves whether this annual tax of $1,600-plus per family is justified by the very small resulting decline in global CO2. Since the U.S. share of global CO2 production is now less than 25 percent (and is projected to decline as China and other developing nations grow), a 15 percent fall in U.S. CO2 output would lower global CO2 output by less than 4 percent. Its impact on global warming would be virtually unnoticeable. The U.S. should wait until there is a global agreement on CO2 that includes China and India before committing to costly reductions in the United States.

The Detroit News:

- The world's most powerful laser, created to help keep tabs on the nation's nuclear weapons stockpile while also studying the heavens, has been unveiled. The super laser, known officially as the National Ignition Facility, was unveiled Friday at the Lawrence Livermore National Laboratory about 50 miles east of San Francisco.

Lloyd’s List:

- The number of supertankers sailing through Egypt’s Suez Canal fell 70% in the first quarter, citing data from the Lloyd’s Marine Intelligence Unit. 18 very large crude carriers navigated the waterway compared with 61 a year earlier. Overall westbound supertanker shipments from the Persian Gulf declined to 118 from 169 last year.

- The number of bulk carriers idle at ports around the world has risen over the last month, at a time when surging iron ore and coal shipments have seen rates more than double for larger vessels. A total of 382 bulk carriers above 10,000 dwt are classified as inactive, with no movement for 35 days.

- Tanker values still have some way to fall before they hit their low point despite having already declined by about half since last year’s peak level, an industry expert has warned. Charles Lawrie, of London-based Richardson Lawrie Associates, said the surplus capacity in the tanker fleet, which could be running at about 30% of overall supply in the next two or three years, will ensure that freight rates do not show genuine signs of recovery until 2012.

Reuters:
- Global semiconductor sales rose 6.4 percent in April to $15.6 billion from March, helped by moderate improvements in a number of end-demand drivers and inventory replenishment. The PC market, which is a major consumer of semiconductors, has been stronger than predicted earlier in the year, the Semiconductor Industry Association (SIA) said. "Consensus forecasts currently project that PC unit sales in 2009 will decline by about 6 percent compared to earlier forecasts of a decline in the range of 12 percent," said SIA President George Scalise. Cell phone unit sales are now expected to fall by around 7 percent compared with earlier forecasts of 15 percent for the year.

- Mexican truckers are suing the United States for $6 billion over Washington's refusal to allow Mexican haulers onto its roads as required under the NAFTA trade pact, a trucking association said on Monday. About 4,500 trucking companies represented by Mexico's National Cargo Transportation Association (Canacar) are involved in the lawsuit, according to Canacar. The United States agreed under NAFTA -- the North American Free Trade Agreement with Mexico and Canada -- to let Mexican trucks use its highways beginning in 1995.

- Global factory activity fared better in May than preceding months across major economies as output contracted at a much less fierce pace in a heavy recession, a survey showed on Monday. The global index, produced by JP Morgan with research and supply management organizations, rose to 45.3 in May from 41.8 in April. That was its highest level in nine months.

Financial Times:
- The reason the US government is putting $60 billion into General Motors can only be to slow the company’s decline so that workers, suppliers and communities can prepare for its eventual disappearance, said Robert Reich, who was labor secretary during the Clinton administration. He said the expenditure is plainly not an investment, for it’s unlikely taxpayers will get their money back, let alone any return; many younger people have never bought a GM car and wouldn’t consider doing so. Nor can the main point be to save jobs, because GM, told by the Treasury that it must shrink, plans to shut plants and shed at least 20,000 workers, Reich said. The purpose of the bailout can’t be to create a lean company, free of debt, which might one day be profitable, for that’s what a reorganization under the insolvency regime is supposed to achieve. Yet if the purpose of spending the $60 billion is to buy time to carry through social adjustments, there are better ways of using the cash.

IRNA:
- Iraqi Kurdistan held a ceremony attended by Iraqi and Kurdish officials as oil exports began from the region. The exports from the Taq-Taq and Tawke fields will amount to 100,000 barrels a day and the Kurdish regional government will try to raise this to 120,000 barrels a day in two years.

Bear Radar

Style Underperformer:
Large-cap Value (+2.35%)

Sector Underperformers:
Gold (+.09%), Biotech (+.46%) and Drugs (+.63%)

Stocks Falling on Unusual Volume:
GG, OSIP, MAPP, THOR and TAR

Stocks With Unusual Put Option Activity:
1) KWK 2) GNK 3) ESV 4) OSIP 5) DFS

Bull Radar

Style Outperformer:
Small-cap Value (+4.26%)

Sector Outperformers:
Steel (+6.05%), REITs (+5.21%) and Road & Rail (+5.05%)

Stocks Rising on Unusual Volume:
WTI, CHU, PXP, RTP, PCU, KTC, PTR, STO, LPHI, FOSL, HMIN, FACT, NETL, SVVS, LULU, FUQI, TNDM, CRESY, CSIQ, CENT, SINA, AAUK, GSIC, BEAT, TBSI, MTRX, HOS, OSIR, IAK, TMB, ITB, XOP, CPY, SXE, ROS and XSD

Stocks With Unusual Call Option Activity:
1) CL 2) PCU 3) CSX 4) OSIP 5) X

Links of Interest

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Monday Watch

Weekend Headlines
Bloomberg:

- For all the hand-wringing over the dollar’s slide, the expanding U.S. deficit and the nation’s AAA credit rating, the bond market shows international demand for American financial assets is as high as ever. The Federal Reserve’s holdings of Treasuries on behalf of central banks and institutions from China to Norway rose by $68.8 billion, or 3.3 percent, in May, the third most on record, data compiled by Bloomberg show. The Treasury said bidding from foreigners was above average at its $101 billion of note auctions last week.

- The cost of protecting Asia-Pacific corporate and government bonds from default decreases, according to traders of credit default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 7 basis points to 183 as of 8:29 am in Singapore, according to Royal Bank of Scotland Group Plc prices. The Markit iTraxx Japan fell 5 basis points to 180 at 9:39 am in Tokyo, Credit Suisse Group AG prices show. The Markit iTraxx Australia index was quoted 6 basis points lower at 195 as of 10:31 am in Sydney, Westpac Banking Corp data show.

- China, the world’s second-biggest energy consumer, will raise fuel prices tomorrow, allowing the nation’s refiners to pass on higher crude oil costs and offset potential losses in processing. The statement said that the retail ceiling prices for gasoline and diesel will increase by 400 yuan a metric ton effective tomorrow.

- AstraZeneca Plc’s Zactima, the experimental lung cancer drug that failed in two small studies, helped slow the advance of tumors in a bigger test the drugmaker will use to seek U.S. marketing approval. Adding Zactima to treatment with chemotherapy shrank tumors and reduced disease symptoms, the research found. It also lengthened the time before the cancer progressed to 17.3 weeks, compared with 14 weeks for those on chemotherapy only.

- French President Nicolas Sarkozy and German Chancellor Angela Merkel said they favor business people and employees over financial speculators, in a joint commentary they wrote for a French newspaper and a German newspaper.

- Fortress Investment Group LLC, Crestview Partners LP and Lightyear Capital LLC agreed to inject as much as $150 million each into First Southern Bancorp, part of the Boca Raton, Florida-based bank’s plan to increase assets.

- Australia’s oil and gas producers propose projects valued in excess of A$200 billion ($160 billion) that may help lead the country out of its first recession since 1991, the industry’s biggest lobby group says.

- Bristol-Myers Squibb Co.(BMY) is negotiating to buy a share of Elan Corp.(ELN), the Irish drugmaker seeking financing to repay debt and develop its experimental Alzheimer’s drug, a person familiar with the deal said.

- Total SA, Europe’s third-largest oil company, is calculating investment in North Sea fields will make it the U.K.’s biggest oil and gas operator within three years, challenging top-ranked BP Plc on its home turf. “Our strategy is more aggressive than other companies,” Roland Festor, managing director of Total E&P U.K. Ltd., said in an interview May 28 in Aberdeen, Scotland. “We don’t have a strategy to grow by acquisitions but by exploration in our hubs.”

- China suspended exchanges with North Korea after Kim Jong Il’s regime tested its second nuclear weapon and test-fired short-range missiles, Yonhap News reported, citing diplomatic sources in Beijing it didn’t identify. China has halted plans to send officials on visits to North Korea and won’t accept visits from North Korean officials either, the Korean-language news agency said today.

Wall Street Journal:

- General Motors Corp. will file for Chapter 11 bankruptcy early Monday, marking the humbling of an American icon that once dominated the global car industry and setting up a high-stakes gamble for U.S. taxpayers.

- Lawmakers Bill Taxpayers For TVs, Cameras, Lexus. Florida Rep. Alcee Hastings spent $24,730 in taxpayer money last year to lease a 2008 luxury Lexus hybrid sedan. Ohio Rep. Michael Turner expensed a $1,435 digital camera. Eni Faleomavaega, the House delegate from American Samoa, bought two 46-inch Sony TVs. The expenditures were legal, properly accounted for and drawn from allowances the U.S. government grants to lawmakers. Equipment purchased with office expense accounts must be returned to the House or the federal General Services Administration when a lawmaker leaves office. But as British politicians come under widening scorn for spending public money on everything from candy bars to moat-dredging, an examination of U.S. lawmakers' expense claims shows Washington's elected officials have also used public funds for eye-catching purchases.

- Senior Obama administration officials said Friday that policy adjustments necessary to contain soaring budget deficits would be made once an economic recovery takes hold, in response to growing concerns about a run-up in long-term interest rates. Treasury Secretary Timothy Geithner, National Economic Council chief Lawrence Summers and Office of Management and Budget director Peter Orszag said in separate interviews that the administration was acutely aware that rising interest rates pose a threat to the improving U.S. economy.

- In a move that could shake up the clubby business of exchange-traded funds, bond giant Pacific Investment Management Co. is poised to launch its first ETF early this week. The move by Pimco, a unit of Allianz SE co-founded by bond guru Bill Gross, marks the first time in years such a high-profile mutual-fund company has tried to muscle its way into the ETF business, long dominated by a handful of large-but-lesser-known asset managers that specialize in indexing, such as Barclays PLC and State Street Corp.

- The fast money is proving slow to jump on the market's bandwagon. Hedge funds, decried by many as quick traders, have played catch-up during the market rally since March. The average fund was 45% "net long" as of May 19, or had investment holdings valued at 45% more than its bearish "short" positions, according to Hedge Fund Research. That figure is up from 33% earlier this year, but still is far below its 55% level a year ago. Funds are less bullish now than they were just before the market crumbled last fall. Hedge-fund managers, and their investors, said many remain in a neutral position. If stocks keep surging, hedgies might have to jump in with two feet, giving the market another lift.

- The expected bankruptcy filing by General Motors Corp. (GM) will trigger the settlement of around $3 billion in credit-default swaps written against the auto maker.

- Private-equity firm Carlyle Group and a group of investors are discussing an agreement to acquire Silverton Bank, the failed Atlanta "bank of banks" that serves small financial institutions throughout the U.S., according to people familiar with the situation. A deal for Silverton would be Carlyle's second major bank transaction with the federal government in two weeks, giving the large, politically connected buyout shop a banking beachhead in both Florida and Georgia.

- Potential Conflicts Abound in Government Role. Even after nine months of extraordinary government intervention, the scope and complexity of the General Motors Corp. rescue present a thicket of conflicts unlike any seen before in Washington. The federal government is likely within weeks to emerge as the principal owner of a storied U.S. corporation whose factories and products touch the lives of tens of millions of Americans. It will simultaneously serve as the company's regulator, tax collector, customer, pension backstop and lender.

- A bond default by a Chinese timber company is the latest example of trouble emerging from complex debt deals that foreign investors rushed to strike in China during the past few years. Investors and debt watchers say other defaults are likely to follow among Chinese companies that issued foreign debt, many of which are privately held ventures with ties to local government officials. Foreign creditors fear China's restructuring process will place the interests of equity holders, workers and Chinese lenders ahead of their own. Such problematic debt illustrates the potential pitfalls facing Western investors and bankers eager to profit from China's growth.

- A new class of drugs under development at several pharmaceutical companies showed promise in early studies against two types of especially tough-to-treat breast cancer.

- A homemade bomb found aboard an Iranian plane Sunday follows a string of incidents in Iran that are raising concerns about rising sectarian violence between Sunnis and Shiites ahead of the June 12th presidential election. The recent violence, scattered along Iran's borders with Iraq and Pakistan, has revived longstanding fears among Iranian officials that sectarian violence within those countries could spill over into Shiite-majority Iran, which hasn't had a recent history of such strife.

- Back in December, in an economy far, far away, then-CEO Rick Wagoner tossed out the scary cost to taxpayers of $100 billion if General Motors wasn't saved by the government. Well, GM was saved in December and again in March, and as early as today the feds will rescue it a third time in a prepackaged bankruptcy that is already costing at least $50 billion, and that's for starters. Welcome to Obama Motors, and what is likely to be a long, expensive and unhappy exercise in political car making. Taxpayers have so far put up nearly $20 billion, which was supposed to be a loan at market rates but under Treasury's forced restructuring will mostly be converted into equity in the new GM. The feds are also putting up $30.1 billion in "debtor in possession" financing and will effectively nationalize the once-mighty auto maker by taking roughly 60% ownership. (That's not counting $12.5 billion to save GMAC, the company's financing arm.) The Canadian government will go along for the ride for 12% of the new GM, the UAW will get about 17.5%, and the hapless bond holders have to settle for 10%.

MarketWatch.com:

- While the U.S. government and electricity producers get ready to spend hundreds of billions to upgrade the nation's power lines and electricity infrastructure, the so-called smart grid may not be clever enough to escape economic uncertainty. After Congress OK'd $30 billion for the electric grid, advanced battery manufacturing and energy efficiency projects, much of the money included in the $787 billion economic stimulus bill signed into law on Feb. 18 remains unused.

CNBC.com:
- If you think crude is marching higher, think again. Option investors are betting that it doesn't!

NY Times:

- It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism. But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry. Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing — “he’s got this beard that appears and disappears,” says Steven Rattner, one of the leaders of President Obama’s automotive task force — Mr. Deese was thrown into the auto industry’s maelstrom as soon the election-night parties ended.

- When a new crop of future business leaders graduates from the Harvard Business School next week, many of them will be taking a new oath that says, in effect, greed is not good. Nearly 20 percent of the graduating class have signed “The M.B.A. Oath,” a voluntary student-led pledge that the goal of a business manager is to “serve the greater good.” It promises that Harvard M.B.A.’s will act responsibly, ethically and refrain from advancing their “own narrow ambitions” at the expense of others.

- The Obama administration is supporting efforts by the Saudi royal family to defeat a long-running lawsuit seeking to hold it liable for the Sept. 11, 2001, attacks. The Justice Department, in a brief filed Friday before the Supreme Court, said it did not believe the Saudis could be sued in American court over accusations brought by families of the Sept. 11 victims that the royal family had helped finance Al Qaeda. The department said it saw no need for the court to review lower court rulings that found in the Saudis’ favor in throwing out the lawsuit. The government’s position comes less than a week before President Obama is scheduled to meet in Saudi Arabia with King Abdullah as part of a trip to the Middle East and Europe intended to reach out to the Muslim world. Lawyers for the Saudi family said that they were heartened by the department’s brief and that it served to strengthen their hand before the court, which has not decided whether to hear the case. But family members of several Sept. 11 victims said they were deeply disappointed and questioned whether the decision was made to appease an important ally in the Middle East. The Saudis have aggressively lobbied both the Bush and Obama administrations to have the lawsuit dismissed, government officials say. “I find this reprehensible,” said Kristen Breitweiser, a leader of the Sept. 11 families, whose husband was killed in the attacks on the World Trade Center. “One would have hoped that the Obama administration would have taken a different stance than the Bush administration, and you wonder what message this sends to victims of terrorism around the world.” Bill Doyle, another leader of the Sept. 11 families whose son was killed in the attacks, said, “All we want is our day in court.”

- From TV to the Web to Your Phone. TECHNOLOGY evangelists and television aficionados want all their TV on the Web, and they are tired of waiting for Internet companies and content owners to make it happen. But such an entertainment nirvana already exists — at least for owners of a silver and black gadget called the Slingbox.

- As the financial crisis entered one of its darkest phases in October, a handful of the nation’s largest banks began holding daily telephone sessions. Murmurs were already emanating from Washington about the need for a wide-ranging regulatory overhaul, and Wall Street executives girded for a fight. Atop the agenda during their calls: how to counter an expected attempt to rein in credit-default swaps and other derivatives — the sophisticated and profitable financial instruments that were intended to limit risk but instead had helped take the economy to the brink of disaster. The nine biggest participants in the derivatives market — including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America — created a lobbying organization, the CDS Dealers Consortium, on Nov. 13, a month after five of its members accepted federal bailout money.

Business Week:
- Cancer Drugs: News from ASCO.

NY Post:

- With the economy still lagging and corporate bottom lines under pressure, private-equity firms are expected to play an increasingly large role in shaping any recovery -- deciding whether or not to plow more money into their companies that are facing default.

Politico:

- As Republicans continue to hammer Supreme Court nominee Sonia Sotomayor for a 2001 assertion that’s become known as the “wise Latina” remark, her backers are struggling to come up with a single coherent line of defense. In the past few days, supporters confronted with the remark have offered a range of divergent tactics and tones, offering explanations that span from apologetic to defiant to suggesting Sotomayor may have been joking. President Obama himself addressed the bubbling controversy, which is emerging as among the leading GOP lines of attack against Sotomayor, asserting on Friday Sotomayor “would have restated” the comment if given another chance.

- President Barack Obama and Michelle Obama landed in New York Saturday afternoon, and after taking a helicopter from JFK into Manhattan, drove up the West Side Highway, where the northbound lanes were shut down by police for their visit, past Ground Zero, into the Village for dinner at the Village's Blue Hill restaurant. From there, they went north to Times Square, where they went to to see a production of "Joe Turner's Come and Gone" at the Belasco Theater on West 44 Street. Deputy Press Secretary Josh Earnest read a statement from Obama: "I am taking my wife to New York City because I promised her during the campaign that I would take her to a Broadway show after it was all finished." Asked about the cost of the trip, which Republicans have criticized as indulgent, coming just ahead of the expected announcement of GM's bankruptcy filing on Monday, Josh Earnest told pool reporter Dave Michaels of the Dallas Morning News, that he "didn't anticipate being able to provide a cost estimate tonight."

- Since Obama took office, CNN’s prime-time audience has dropped sharply, raising doubts about whether the network’s middle-of-the-road strategy can be effective against more opinionated programming on Fox News and MSNBC.

Chicagtribune.com:

- Senate Democrats late Saturday night approved a plan to raise personal income taxes by 67 percent and broaden the Illinois sales tax to include services such as cable TV, but the measure faces an uncertain future in the House with a late Sunday deadline to fix the state budget. The 31-27 vote shifted Statehouse dynamics after Democrats spent much of the day struggling to find support for a tax increase.

Rasmussen Reports:

- Only 21% of voters nationwide support a plan for the government to bail out General Motors as part of a structured bankruptcy plan to keep the troubled auto giant in business. The latest Rasmussen Reports national telephone survey finds that 67% are opposed to a plan that would provide GM with $50 billion in funding and give the government a 70% ownership interest in the company. Even when presented with the stark choice between providing government funding or letting GM go out of business, only 32% of voters support the bailout. Most voters (56%) say it would be better to let GM go out of business.

Inland Valley Daily Bulletin:

- Home sales across San Bernardino and Riverside counties are rising fast, sending positive vibes through the community. Home prices are still falling, but at a much slower speed than the breakneck pace set over most of the past two years. Is this the bottom? Home sales in San Bernardino County have skyrocketed 88 percent from April 2008 to April 2009, while sales in Riverside County jumped 40 percent over the same period, according to MDA DataQuick, a La Jolla-based real estate data tracker.

Tampa Bay Online:

- Hedge funds take aim at Florida real estate. Some consider them good capitalists. Others see them as opportunists. Still others call them vultures. Whatever the name, hedge fund investors likely will be major players in Florida real estate in the next few years, buying up mortgage notes — troubled or not — for a fraction of their original value.

Crain’s NY Business:

- For years, Dan Loeb was the hedge fund world's hanging judge, firing off blistering letters to hapless chief executives that condemned them for their shortcomings. “Do what you do best,” he hissed in a 2005 letter to a soon-to-be-gone CEO. “Retreat to your waterfront mansion in the Hamptons. ... The matter of repairing the mess you have created should be left to professional management.” How times change. After years of posting average gains of 27%, Mr. Loeb's Third Point hedge fund crashed to earth last year with a shattering 33% loss. In response, many investors grabbed their money and ran, driving assets under management to less than $2 billion from more than $5 billion previously. Now it's Mr. Loeb who's left to clean things up—or face oceanfront exile.

MercuryNews.com:

- 49ers’ Santa Clara stadium plan would cost public $114 million.

AP:

- Iran’s Center for Strategic Research blamed President Mahmoud Ahmadinejad’s refusal to halt uranium enrichment for provoking UN sanctions against the country, citing the center. It also accused Ahmadinejad of “distorting facts” to boost his chances in Iran’s upcoming elections.

- Iraq’s Taq Taq oil field will boost exports of crude from the country’s autonomous Kurdistan region by half by October, citing an official. Flows of crude oil by pipeline to Turkey will rise to 60,000 barrels a day in the fall from 40,000 barrels at the start, citing field manager Okutan Mehmet.

Reuters:

- The central bank chief for the United Arab Emirates said he saw weakness in the dollar as a "temporary situation" and expressed support for the greenback, saying no other money could replace it as a reserve currency. "There is no other currency to replace the dollar, not the euro," Central Bank Governor Sultan Nasser al-Suweidi told reporters on Sunday at a regulatory event. "It is the currency for investment."

Financial Times:

- Microsoft(MSFT) and Sony(SNE) are launching a video-game offensive against Nintendo this week, as the clear leader in console sales shows its first signs of flagging. Industry executives and analysts gathering in Los Angeles for the main show of the year – the Electronic Entertainment Expo (E3) – expect Microsoft to announce a new motion-sensing game controller on Monday, with more sophisticated capabilities than the one that has driven the success of Nintendo’s Wii. Then on Tuesday, Sony plans to show off a new version of its PlayStation Portable – the PSP Go – that does not require an optical disc drive. It is designed to take on the latest Nintendo DS handheld console, as well as tackle emerging competition from Apple’s(AAPL) games platform.

- China’s top steel negotiator has formally rejected iron ore price cuts negotiated between Rio Tinto, the Australian mining giant, and Japanese and South Korean steel mills, signaling a showdown between Beijing and the miners. Individual Chinese steelmakers signaled last week their dissatisfaction with price levels negotiated between Rio Tinto and leading steelmakers in Japan and South Korea, but Cisa’s statement is the first formal rejection of the deal. This indicates that the association, which this year has replaced China’s largest mill Baosteel to lead the price-setting talks for the first time, is taking a hard line. The miners have warned China that they will not settle benchmark prices below spot prices – which would be the result if they agreed to Beijing’s request for a cut of up to 50 per cent in benchmark prices. They had told the Chinese steelmakers that they would rather move iron ore transactions into the spot market, said executives involved in the talks.

- Barclays Capital has revealed that just 17.5 per cent of the 605 investors interviewed for its quarterly FX investor sentiment survey – including central banks, asset managers, hedge funds and international corporate customers – think risky assets have further to rise. The survey revealed that 91 per cent of investors were running positions that were “light” or “average” in terms of their risk limit or capacity. This leaves just 9 per cent whose positions are “large” or “at limit”. “This is consistent with a widely shared view that many investors have missed the rally,” said Mr Woo. “It is conceivable that some of these investors may be pressured to jump on the bandwagon if equities extend their gains.”

- North Korea has started moving a long-range missile towards a launch pad in possible preparation for another missile test, according to US officials. One told the Financial Times that Pyongyang may be gearing up for “additional activity” just days after it defied the world by conducting a nuclear test. American intelligence officials estimate that the Taepodong-2 could theoretically reach the west coast of the US. Mr Gates told the defense forum on Saturday that the US would not “stand idly by as North Korea builds the capability to wreak destruction on any target in Asia”. He added that while North Korea did not yet pose a direct threat to the US, the progress the regime had made on its nuclear and missile programs was a “harbinger of a dark future”.

TimesOnline:
- Hermes is calling for a post-credit-crunch shake-up of the secretive hedge-fund industry. The manager of the BT pension fund, handling more than £30 billion of funds in total, has set up an action committee to pressure hedge funds to hand over more financial information about their funds and better align their fee structures with investors.

Telegraph:

- One of America's biggest fund management groups has tabled a $5bn (£3.1bn) bid for iShares, a division of Barclays' profitable asset management arm. Vanguard, which is headquartered in Pennsylvania and had about $1trillion under management at the end of last year, is understood to have lodged the offer with Barclays in recent weeks. It is being advised by William Blair & Company, a Chicago-based investment banking group.

Xinhua News Agency:

- Guangdong province, a manufacturing hub heavily dependent on exports, reported a drop in foreign trade of 18.1% in April from the same period in 2008, citing the provincial statistics bureau.

Nikkei:
- Nintendo Co. plans to release an updated version of its “Wii Fit” game software this fall. The new version, “Wii Fit Plus,” measures body weight more precisely and has Internet connection so users can compare game data with people at remote locations.

South China Morning Post:

- Semiconductor Manufacturing International Corp., China’s biggest contract maker of chips, predicts sales will rise in the third quarter after July orders swelled. The company is on target to post as much as 62% growth from the previous quarter in the April-June period, management told investors at a conference.

Weekend Recommendations
Barron's:
- Made positive comments on (AAPL), (AMZN), (NKE), (BBBY), (CMG), (JCG), (URBN), (SWY), (TGT), (VAR), (RIMM), (BA), (SCHW) and (TM).

- Made negative comments on (GMCR).

Citigroup:

- Reiterated Buy on (DVA), target $62.

Night Trading
Asian indices are +1.25% to +2.50% on avg.
S&P 500 futures +.73%.
NASDAQ 100 futures +.44%.

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
- (AZPN)/.22

- (AINV)/.34

Upcoming Splits

- None of note

Economic Releases

8:30 am EST

- Personal Income for April is estimated to fall .2% versus a .3% decline in March.

- Personal Spending for April is estimated to fall .2% versus a .2% decline in March.

- The PCE Core for April is estimated to rise .2% versus a .2% gain in March.

10:00 am EST

- ISM Manufacturing for May is estimated to rise to 42.0 versus 40.1 in April.

- ISM Prices Paid for May is estimated to rise to 35.0 versus 32.0 in April.

- Construction Spending for April is estimated to fall 1.5% versus a .3% gain in March.

Other Potential Market Movers
- Geithner’s Visit to China, the ASCO Annual Meeting, the Goldman Lodging/Gaming/Restaurant/Leisure Conference and the RBC Capital Markets Energy/Power Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by gains in financial and mining stocks in the region. I expect US stocks to open modestly higher and to build on gains into the afternoon, finishing higher. The Portfolio is 100% 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 a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Personal Income, Personal Spending, PCE Core, ISM Manufacturing, ISM Prices Paid, Construction Spending

Tues. – Pending Home Sales, Total Vehicle Sales, weekly retail sales reports

Wed. – Weekly EIA energy inventory data, weekly MBA mortgage applications, Challenger Job Cuts, ADP Employment Change, ISM Non-Manufacturing, Factory Orders

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

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, Consumer Credit

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

Mon. – None of note

Tues. – Verifone(PAY), Hovnanian(HOV), Bob Evans(BOBE), United Natural Foods(UNFI)

Wed. – Joy Global(JOYG), Toll Brothers(TOL), William-Sonoma(WSM), Jos. A. Bank(JOSB)

Thur. – Ciena(CIEN), Teekay Shipping(TK), Cooper Cos(COO), Guess(GES), Sina(SINA)

Fri. – None of note

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

Mon. – Geithner Visits China, ASCO Annual Meeting, Goldman Lodging/Gaming/Restaurant/Leisure Conference, RBC Capital Markets Energy/Power Conference

Tue. – Geithner Visits China, Fed’s Fisher speaking, KeyBanc Capital Markets Industrial/Automotive/Transportation Conference, Goldman Lodging/Gaming/Restaurant/Leisure Conference, (CAH) investor day, RBC Capital Markets Energy/Power Conference, (THC) investor day, (MDT) analyst meeting, Cowen Display Conference

Wed. – Bernanke testimony before House Budget Committee, Fed’s Hoenig speaking, BofA-Merrill Tech Conference, Goldman Basic Materials Conference, Keefe/Bruyette/Woods Financial Services Conference, (FE) analyst meeting, Stephens Investment Conference, KeyBanc Industrial/Auto/Transport Conference, (ERTS) analyst meeting, Lazard Alt Energy/Infrastructure Conference

Thur. – Fed’s Pianalto speaking, Fed’s Dudley speaking, Bernanke gives speaks at Fed Conference, Keefe Bruyette Financial Services Conference, CSFB Engineering/Construction Service Conference, (MCO) Investor Day, Goldman Basic Materials Conference, Lazard Alt Energy/Infrastructure Conference, Sandler O’Neil Electronic Trading Conference, Citi Power/Utility Conference, BofA-Merrill Tech Conference, Raymond James Investors Conference

Fri. – Fed’s Rosengren, Yellen and Kohn in Panel Discussion, (WMT) analyst meeting, Sandler O’Neil Electronic Trading Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on less credit market angst, declining economic fear, diminishing financial sector pessimism, lower energy prices, short covering, lower long-term rates, a firmer US dollar and investment manager performance anxiety. My trading indicators are giving bullish signals and the Portfolio is 100% net long heading into the week.