Today's Headlines

Bloomberg:

- A “remarkable change” in investor sentiment has doubled the price of some collateralized loan obligation securities in the past month, according to Morgan Stanley analysts. CLOs are a type of collateralized debt obligation that pool high-yield, high-risk, or junk, loans and slice them into securities of varying risk and return. Pieces graded AA, the third highest-level of investment grade, rose from 23 cents on the dollar to 47 cents in the past month, Morgan Stanley analysts led by Vishwanath Tirupattur wrote in a June 5 report.

- UBS AG(UBS), the European bank with the biggest losses from the financial crisis, is in talks with the Swiss government about the repayment of 6 billion francs ($5.5 billion) in aid, two people with knowledge of the matter said. UBS is weighing options, including a stock sale, to raise funds to pay back the state, said the people, who declined to be identified because the talks are private.

- Credit-default swaps traders are expediting an auction to settle General Motors Corp. contracts to ensure payouts are made before bonds disappear in a U.S.-led restructuring, according to people familiar with the matter.

- Ford Motor Co.(F) is telling lawmakers it is concerned that federal support for GMAC LLC is giving the rival auto lender cheaper borrowing costs. The Senate Banking Committee will examine fair treatment for Ford at a June 10 hearing about how President Barack Obama’s auto task force is restructuring the auto industry, said Justine Sessions, spokeswoman for Chairman Christopher Dodd, a Connecticut Democrat. Ford is the only major U.S. carmaker that hasn’t filed for bankruptcy protection.

- Citigroup Inc. is poised to start a $58 billion stock swap that was held up while Federal Deposit Insurance Corp. Chairman Sheila Bair questioned Chief Executive Officer Vikram Pandit’s leadership and the bank awaited regulatory approvals, people close to the bank said.

- HSBC Holdings Plc’s U.S. securities division will no longer extend structured financing to hedge-fund investors to leverage their investments, a person familiar with the company’s plans said.

- I’ve finally figured out the Obama economic strategy. President Barack Obama and his team have been having so much fun wielding dictatorial power while rescuing “failed” firms, that they have developed a scheme to gain the same power over every business. The plan is to enact policies that are so anticompetitive that every firm needs a bailout. Once that happens, their new pay czar Kenneth Feinberg can set the wage for everybody and Rahm Emanuel can stack the boards of all of our companies with his political cronies.

- Ireland had its credit rating lowered for the second time this year by Standard & Poor’s, which cited the nation’s rising bill for propping up its banks. The rating was cut one step to AA, from AA+, S&P said in a statement today, moving it to the same level as Japan, Slovenia and the United Arab Emirates.

- A group of Senate Republicans sent a letter to President Barack Obama declaring their opposition to including a government-run plan in a health-care overhaul, saying it would be a “federal government takeover” of the health system. “Creating a brand-new government program will not only worsen our long-term financial outlook but also negatively impact American families who enjoy the private coverage of their choice,” said the letter from nine Republicans who are working on bipartisan health-care legislation.

- Oil companies are storing crude on at least seven supertankers off the coast of the U.K., enough to supply the country for more than a week, even as higher prices reduce the incentive to put more oil into storage. Seven Very Large Crude Carriers, containing as much as 14 million barrels of North Sea crude, are anchored off Britain, according to AISLive tracking data and the median estimate of six oil traders surveyed by Bloomberg.

Wall Street Journal:

- Many Western companies that opened centers in India to perform back-office tasks on the cheap have recently sold or closed those facilities, reversing a decade-long trend as companies look to slash costs and eliminate headaches during the recession.

- Hennessee Group LLC said its hedge-fund index advanced 5.68% in May as the industry posted its best returns since February 2000, when the Internet bubble was about to burst.

- North Korea sentenced two American journalists to 12 years in prison labor camps after convicting them of illegally entering the country, a harsh penalty handed down after a closed trial and mysterious arrest that underline Pyongyang's reputation for injustice and its hostile relationship with the U.S. The ruling against Euna Lee and Laura Ling, reporters for Current TV LLC, of San Francisco, raises the prospect that they will be the first Americans subjected to North Korea's gulag-style prisons, among the world's most horrific, though it wasn't immediately known where they would be sent.

- The main White House argument for health-care reform goes something like this: If we spend now on a hugely expensive new insurance program for the middle class, we can save later by reducing overall U.S. health spending. This "tastes great, less filling" theory could stand some scrutiny, not least because it is being used to rush through the greatest social spending program in American history.

CNBC:

- As gasoline prices get closer to the point where consumers will stop buying, the corresponding rally in oil is probably over, commodities analyst Dennis Gartman told CNBC.

- Apple(AAPL) plans to overhaul its popular iPhone and will price them "aggressively," CNBC has learned, sending its shares AAPL down sharply. At the widely anticipated Apple Developers Conference in San Francisco, the company showed its new iPhone 3.0, which comes with 100 new features. Among these, users can now rent and buy movies right from their phones via iTunes, and access more than 500 best-selling books. Soon, they will also be able to access 50 magazines, 170 newspapers and 1 million books through the App Store. The company also showcased new MacBook Pro laptops with longer battery lives, faster processors and lower prices.

Yale:

- Freeman Dyson Takes On the Climate Establishment. Princeton physicist Freeman Dyson has been roundly criticized for insisting global warming is not an urgent problem, with many climate scientists dismissing him as woefully ill-informed. In an interview with Yale Environment 360, Dyson explains his iconoclastic views and why he believes they have stirred such controversy. On March 3, The New York Times Magazine created a major flap in the climate-change community by running a cover story on the theoretical physicist Freeman Dyson that focused largely on his views of human-induced global warming. Basically, he doesn’t buy it. The climate models used to forecast what will happen as we continue to pump CO2 into the atmosphere are unreliable, Dyson claims, and so, therefore, are the projections. Dyson is hard to dismiss in part because of his brilliance. He’s on the faculty at the Institute for Advanced Study, where as a young physicist he hobnobbed with Albert Einstein. When Julian Schwinger, Sin-Itiro Tomonaga and Richard Feynman shared the 1965 Nobel Prize in physics for quantum electrodynamics, Dyson was widely acknowledged to be almost equally deserving — but the Nobel Committee only gives out three prizes for a given discovery.

Washington Post:

- The Obama administration plans to announce as soon as today that some of the nation's largest banks can repay billions in federal aid, but some officials caution that the show of progress is being underwritten by multiple layers of less visible government support. Through cheap loans, debt guarantees and a promise that big banks will not be allowed to fail, these officials say the government has created an artificial environment in which profits and stock prices have rebounded, helping banks in recent weeks to raise about $50 billion from private investors. The money allows the strongest banks to return federal aid provided at the peak of the fall financial crisis, but few banks have expressed eagerness for the government to end the other forms of support, creating concern that these programs will be habit-forming and more difficult to terminate.

- The Obama administration entered office determined to give negotiations with North Korea every opportunity. Secretary of State Hillary Clinton hinted that she was seriously considering a visit to Pyongyang. Stephen Bosworth, a distinguished scholar and moderate diplomat, was appointed principal negotiator. These overtures were vituperatively rejected. Pyongyang refuses to return to the negotiating table and has revoked all its previous concessions. It has restarted the nuclear reprocessing plant it had mothballed and has conducted nuclear weapons and missile tests. It has said the Korean Armistice Agreement of 1953 no longer applies. The explanation for this may lie in a domestic struggle for succession to the clearly ailing "Dear Leader," Kim Jong Il. North Korea's leaders also seem to have recognized that no matter how conciliatory U.S. diplomacy, its goal of the abandonment of North Korea's nuclear weapons capability cannot be accepted. They apparently have concluded that no degree of political recognition could compensate them for abandoning the signal (and probably sole) achievement of their rule, for which they have obliged their population to accept unprecedented oppression. They may well calculate that weathering a period of international protest is their ticket to emerging as a de facto nuclear power.

NY Post:

- While as many as nine banks are expected to be told today that they are getting paroled from Uncle Sam's Troubled Asset Relief Program, one banking giant that went into the crisis fairly healthy may not be one of them. Wells Fargo(WFC), which throughout much of the financial meltdown managed to hold steady while its rivals stumbled, has become ensnared by the troubles of Wachovia Bank, which it bought last year without the help of taxpayer dough, and as a result may not be left off the TARP hook just yet.

The Deal.com:

- Cisco Systems Inc.(CSCO) is hardly your ordinary acquirer of technology companies. With $33 billion in cash and equivalents and a track record of 133 acquisitions since it snapped up its first company in 1993, it's no stretch to say Cisco wrote the book on tech M&A But when the San Jose, Calif., networking equipment giant, which has slowed its pace of dealmaking since the financial turmoil of last year, says its about to start firing up its M&A engines again, the news will likely reverberate through the world of tech buyers. "We certainly aren't clear on when the upturn will occur, but we are starting to feel some stabilization," says Charles Carmel, Cisco's vice president of corporate business development. "Stable footing for us and potential targets mean we will be more active in the second half of this calendar year than the first half ... and we'll do more this year than last."

Market Folly:

- We came across this interesting piece in Dealbook the other day and thought it was very intriguing. Simply put: hedge funds are now investing in lawsuits now. The premise is pretty simple: they invest in one side of the lawsuit and get a share of the winnings (if, of course, they win the case).

Seeking Alpha:

- The collapse in the US housing sector may stabilize and bottom out this year based on some of the data presented below. Sub-prime and Alt-A mortgages have been some of the worst loans that have hit lenders in recent months. However there have been reports of even prime mortgages including jumbo mortgages going bad due to rising unemployment, fall in income and other factors.

Reuters:
- General Motors Corp, which filed for bankruptcy protection a week ago, said on Monday that it would cease production of medium-duty trucks by July 31 after attempts to sell the operation failed. "After four years of working with multiple potential buyers, General Motors has decided to wind down its medium-duty truck operations," the automaker said in a statement.

- A rush of investors betting signs of an economic rebound will spark demand for oil and other raw materials has driven prices to levels that may belie fundamentals and created the specter of another commodities bubble. The gains come despite forecasts that fuel demand will fall by the steepest rate since 1981 this year, and despite strong supplies in some agricultural markets. That sets the stage for creation of a bubble similar to the one seen last year, analysts say, and raises questions about the sustainability of the recent price rise. "Right now the price of crude oil is really not supported by fundamentals," said Rob Kurzatkowski, futures analyst with optionsXpress in Chicago. Hedge-fund manager Michael Masters last week appeared before the U.S. Senate Agriculture Committee arguing another bubble may be growing and that prices again were being determined by trading desks of large Wall Street firms -- and not by supply and demand. "This bull market is being manufactured by a bunch of guys trying to get their marks, not on the fundamentals," said Stephen Schork, editor of The Schork Report energy newsletter. "Momentum and high prices have become the justification for buying, not the real fundamentals of this market." Delays in corn and soybean planting have accounted for some of the bullish attitudes about agriculture futures during the past few weeks. But the crops were generally in better shape in most areas than they were a year ago. In 2008, Midwest farmers managed to produce bumper crops of both corn and soybeans despite severe flooding that left millions of acres of key production areas underwater. "Eventually there has to be some pressure on prices but it has not happened yet," said Darrell Jobman, senior analyst for TraderPlanet.com.

- A group of technology heavyweights, including chiefs of IBM (IBM) and Motorola Inc (MOT) enlisted a former Clinton administration economist to beat back President Barack Obama's plan to boost some taxes on overseas profits. The Technology CEO Council recruited Robert J. Shapiro, a former top Commerce Department official, who wrote a report released on Monday arguing that significant jobs losses could occur under Obama's plan.

Financial Times:
- President Barack Obama appears less interested in pursuing a “special relationship” with India than his predecessor as US leader, says Kashmir’s chief minister. Omar Abdullah says this state of affairs reduces the likelihood that Washington can nudge New Delhi and Islamabad to resolve their decades-old conflict over the troubled state. While campaigning for the US presidency last year, Mr Obama said one of his “critical tasks” would be to help settle the poisonous Kashmir dispute, as part of the wider effort to stabilize south Asia, including Afghanistan. His words provoked expectations among the disgruntled, mostly-Muslim residents of Indian-administered Kashmir that Washington would try to broker a deal to end a conflict that has claimed about 70,000 lives, mostly civilians, and left 500,000 Indian troops, there. But Mr Obama’s words raised hackles in New Delhi and were described by Selig Harrison, a top US expert on Asia, as Mr Obama’s “first big foreign policy mistake”. India’s national security adviser was sufficiently affronted to warn the new president last February against “barking up the wrong tree”.

- The wife of the presidential candidate challenging Mahmoud Ahmadi-Nejad in Friday’s election has threatened to sue Iran’s fundamentalist president for comments he made in a television debate. Zahra Rahnavard, who has played a significant role in her husband Mir-Hossein Moussavi’s election campaign, said on Sunday that if Mr Ahmadi-Nejad did not apologize within 24 hours she would take him to court, after he questioned her degree and academic status. The spat is the latest in a campaign that grows increasingly aggressive as election day approaches.

- Most of the world’s major economies are now close to the low point of their slowdowns, in a sign that the global recession is easing, according to data published on Monday. The Organization for Economic Co-operation and Development reported that a “possible trough” had been reached in April for its monthly analysis of forward-looking indicators in advanced economies. The composite leading indicators index for the 30 countries in the OECD rose 0.5 points in April, the second monthly rise in a row, although it remains 8.3 points lower than April 2008. The index seeks to identify turning points in the cycle about six months in advance.

Yonhap News:
- North Korea is showing signs it’s preparing to test-fire a short-range missile from its coast, citing South Korean military sources. North Korea may launch the missile between June 10-30 as it has imposed a shipping ban in an area off its northeastern coast for that period.

Bear Radar

Style Underperformer:
Mid-cap Growth (-1.77%)

Sector Underperformers:
HMOs (-3.89%), Steel (-2.85%) and Computer Hardware (-2.35%)

Stocks Falling on Unusual Volume:
CETV, VIP, EQIX, BBL, VRSN, PALM, TNDM, TITN, SSRI, ALNY, GROW, BUCY, BOOM, SPWRA, EQIX, CSIQ, JOYG, AFAM, CASY, TNH, RTI and FSF

Stocks With Unusual Put Option Activity:
1) SLM 2) FMCN 3) MBI 4) UAUA 5) PALM

Bear Radar

Style Outperformer:
Large-Cap Value (-.44%)

Sector Outperformers:
Education (+1.35%), Banks (+1.0%) and Road & Rail (+.83%)

Stocks Rising on Unusual Volume:
ESRX, CNSL, ATHN, FUQI, MANT, CEPH, GMCR, AKO/A and PNY

Stocks With Unusual Call Option Activity:
1) STAR 2) ARNA 3) SOL 4) RTI 5) STJ

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Monday Watch

Weekend Headlines
Bloomberg:

- Under a draft bill to overhaul the U.S. health-care system all employers would be required to supply health insurance for workers or contribute to the cost. The bill, by Senator Edward M. Kennedy, would create a public health plan to compete with private insurers, a priority of President Barack Obama’s that is opposed by Republicans. It would provide all Americans with health benefits, penalize those who don’t buy them and bar insurers from limiting coverage.

- The US dollar advanced the most against the yen in more than three months and rose versus the euro as economic data showed evidence the U.S. recession is easing, boosting demand for the nation’s assets. The greenback climbed this week as a government report indicated slower deterioration of the labor market, supporting bets dollar-denominated assets will gain as the U.S. leads the global economy out of its slump. “There’s no denying the dollar’s had a strong move in a week of decent data,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “It’s a tantalizing possibility. If so, that would be good news because that’s the way we were all raised to understand the relationship between yields, currencies and data.”

- Iranian president Mahmoud Ahmadinejad touted his economic achievements in a televised debate while his challenger, Mehdi Karrubi, accused the incumbent of misrepresenting his record.

- Japan’s former Economic and Fiscal Policy Minister Hiroko Ota said the world’s second-largest economy is likely to stumble again later this year after a temporary rebound. “Japan’s recovery may be W-shaped,” Ota, 55, said in an interview in Tokyo on June 4. “The worst is over but I can’t say the economy is heading for a recovery at all.”

- Brazilian and French salvage teams recovered 17 bodies from the Atlantic Ocean where planes and ships are searching for the wreckage of Air France flight 447, which went down with 228 people aboard last week.

Wall Street Journal:

- Governments from Germany to Ireland lost seats to rivals and extreme-right fringe parties in European Parliament elections, as voters punished ruling parties in many parts of the Continent on Sunday. Political leaders and analysts described the vote, involving an electorate of 385 million across 27 nations, as a bellwether for the public's mood in the wake of a crisis that has cost hundreds of thousands of jobs. Voters voiced their unease by sending record numbers of far-right candidates to Brussels -- or by staying home. Turnout fell for the seventh straight time, to a record low of 43.01%, according to preliminary estimates, despite a concerted effort by European Union civil servants to get out the vote through splashy ad campaigns.

- The Obama administration rushed an alliance between Chrysler LLC and Fiat SpA despite Chrysler's worries about Fiat's financial health and its willingness to share technology, according to internal company emails. The emails show Fiat ignoring requests for documents and trying to change contract terms late in the talks. A Chrysler adviser at one point said the deal risked looking as if the U.S. auto maker and the Treasury Department, which helped broker the pact, were "in bed with a shady partner." In another note, an official referred to the Treasury Department as "God."

- China plans to require that all personal computers sold in the country as of July 1 be shipped with software that blocks access to certain Web sites, a move that could give government censors unprecedented control over how Chinese users access the Internet. The government, which has told international PC makers of the requirement but has yet to publicly announce it, says the effort is aimed at protecting young people from "harmful" content.

- Secretary of State Hillary Clinton said the Obama administration is considering putting North Korea back on the U.S. list of nation's that sponsor terrorism after a nuclear test and missile launches by Pyongyang last month. She said the U.S. is "just beginning to look at" whether there is any recent evidence that Pyongyang had supported international terrorism, such as by shipping nuclear materials to those engaged in terrorist activities. "If we do not take significant and effective action against the North Koreans now, we'll spark an arms race in Northeast Asia," said Mrs. Clinton, in an appearance on ABC News's "This Week with George Stephanopoulos" airing Sunday. "I don't think anybody wants to see that."

IBD:
- George "Doc" Lopez, a medical doctor and inventor, has a goal: to turn ICU Medical (ICUI) into a $1 billion company. He's better than halfway there.

NY Times:

- President Obama was getting his daily economic briefing one recent morning when a fly distracted him. The president swatted and missed, just as the pest buzzed near the shoes of Lawrence H. Summers, the chief White House economic adviser. “Couldn’t you aim a little higher?” deadpanned Christina D. Romer, the chairwoman of the Council of Economic Advisers. Mrs. Romer was joking, she said in an interview, adding, “There are only a few times that I felt like smacking Larry.” Yet few laughed in the president’s presence. If the Oval Office incident was meant as a lighthearted moment, it also exposed the underlying tensions that have gripped Mr. Obama’s economic advisers as they have struggled with the gravest financial crisis since the Depression, according to several dozen interviews with administration officials and others familiar with the internal debates. By all accounts, much of the tension derives from the president’s choice of the brilliant but sometimes supercilious Mr. Summers to be the director of the National Economic Council, making him the policy impresario of the team. The widespread assumption, from Washington to Wall Street, was that the job would be Mr. Summers’s way station until the president could name him chairman of the Federal Reserve when Ben S. Bernanke’s term expires early next year. But Mr. Bernanke’s aggressive response to the crisis has so improved his reputation that people close to Mr. Obama increasingly suggest the president could well reappoint him in the interests of financial stability — just as Presidents Ronald Reagan and Bill Clinton retained Fed chiefs who had been picked by predecessors of the other party.

- Russian Reporter Kanev Covers Crime, Defies Threats.
- The Obama administration has made a serious proposal to regulate derivatives — the multitrillion-dollar market in financial contracts that malfunctioned so disastrously last year. The plan goes further than many thought politically possible, especially in its call for federal oversight of all large derivatives dealers. But it does not go far enough. Those dealers — including big banks like JPMorgan Chase, Goldman Sachs and Morgan Stanley — trade derivatives mainly as one-to-one private contracts, largely without any regulation. The plan would allow regulators to impose rules on dealers and track their activities and presumably put a timely halt to abuses. But it does not demand the full transparency that would come from trading all derivatives on exchanges, like stocks.

- Developers of programs for the iPhone have already managed to make a decent living selling hundreds of thousands of copies of games from their living rooms or garages. But now, a new way to profit from writing software for the iPhone is emerging: Sell the apps, then sell your company. With the number of downloads through Apple’s App Store topping one billion and more than 40 million iPhones and iPod Touches sold since 2007, an increasing number of companies are seeing the mobile industry as a source of sustained revenue. Recently, IAC/InterActiveCorp, the Internet media conglomerate founded by Barry Diller, and Amazon.com, have bought app developers. Smaller companies have begun to assemble properties.

- LOOK closely at recent supermarket coupons, and you may see some new markings on them near the traditional bar code: sets of neat black bars stacked in two rows. The new symbols, called GS1 DataBars, can store more data than traditional bar codes, promising new ways for stores to monitor inventory and for customers to save money.

- Nickelodeon is moving its teenage and adult fare an hour earlier in the evening — but not because of any earlier bedtime for its young viewers. Instead, it is the network’s attempt to encourage children and parents to watch television together.

Business Week:
- A new study says rising Chinese mainland wages and higher shipping costs, among other things, make Mexico a better choice for manufacturing.

- Citi denies a shuffle impends, but published reports say the FDIC's Sheila Bair wants new management. Will Jerry Grundhofer take over?

Politico:

- Sen. Richard Shelby (R-Ala.) told Chris Wallace on "Fox News Sunday" that President Barack Obama's proposed health care plan is the "first step in destroying the best health care system the world has ever known." "When the government is involved more and more in the details," Shelby said, "and you start the one-pay deal and you got the government competing with private enterprise with all the incentives the government has and the power, they can destroy the marketplace for health care and it will be a mistake and the American people better be careful in what they want."

- Sen. Mel Martinez (R-Fla.), a Cuban-American, has been suspicious of Havana's overtures to the Obama administration -- now he wants to slam the opening door after the feds uncovered a pair of longtime Cuban spies in the State Department. Martinez, whose opinions on Cuba are respected on both sides of the aisle, wants to put negotiations between the two countries on hold pending a review of the damage done by Walter Kendall Myers and Gwendolyn Steingraber Myers during their more than two decades of espionage.

USA Today:

- A solo fund manager pleaded guilty Friday to operating an $80 million Ponzi scheme that defrauded more than 70 victims, including a family foundation and a couple who lost their life savings. Joseph S. Forte, 53, of Broomall admits he lured investors by promising returns ranging from 18% to 38% — and pledged they would never lose money.

Rasmussen Reports:

- The latest Rasmussen Reports national telephone survey found that 53% of Americans believe the GM bailout was a bad idea. Of this group, 30% favor a boycott, 54% oppose the idea and 16% are not sure. Men are more supportive of a boycott than women. Middle income Americans are also more supportive of a boycott than those at either end of the income scale. Democrats are evenly divided as to whether the government takeover was a good idea or not. By wide margins, Republicans and those not affiliated with either major party believe it was a bad idea.

LA Times:

- Reporting from Tehran -- Powerful reformists and conservatives within Iran's elite have joined forces to wage an unprecedented behind-the-scenes campaign to unseat President Mahmoud Ahmadinejad, worried that he is driving the country to the brink of collapse with populist economic policies and a confrontational stance toward the West. The prominent figures have put their considerable efforts behind the candidacy of reformist Mir-Hossein Mousavi, who they believe has the best chance of defeating the hard-line Ahmadinejad in the presidential election Friday and charting a new course for the country.

Denverpost.com:

- Biotechnology entrepreneur Fred Mitchell fretted last month as swine- flu cases mounted. Existing tests can take several days to confirm a swine-flu diagnosis — a period in which infected people may unknowingly be spreading the virus. Mitchell's firm, Beacon Biotechnology, says it has a medical tool that could dramatically speed up the diagnosis of flu and other diseases and even the detection of biological warfare agents. Aurora-based Beacon has developed a disposable computer chip, the size of a pencil eraser, that it says can use a single drop of body fluid to detect up to 112 diseases or genetic conditions in as little as 15 minutes.

Reuters:

- Indiana pension funds and consumer groups asked the U.S. Supreme Court on Sunday to stop the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA while they challenge the deal. The separate requests, which moved the legal battle to the nation's highest court, were filed after a U.S. appeals court in New York approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments. The Chrysler case could set a precedent for General Motors Corp, which is using a similar quick sale strategy in its bankruptcy in New York. The three state pension funds, which hold about $42 million of Chrysler's $6.9 billion in secured loans, argued the sale unlawfully rewarded unsecured creditors such as the union ahead of secured lenders. "The need for the court to review the profound issues presented by Chrysler's novel bankruptcy sale far outweighs the cost of delaying" a sale, lawyers for the pension funds and the Indiana attorney general said in seeking an immediate stay. The pension and construction funds also argued the U.S. government, which kept Chrysler afloat with emergency loans before the automaker's bankruptcy and financed its Chapter 11 filing, overstepped its legal authority by using bailout funds Congress intended for banks. "The public is watching and needs to see that, particularly, when the system is under stress, the rule of law will be honored and an independent judiciary will properly scrutinize the actions of the massively powerful executive branch," the lawyers said. "The issues presented by this case are of immediate and enduring national significance," they said.

- The dwindling U.S. financial bailout fund will get a boost this week with repayments from some large banks and could see more resources freed up as once-ambitious programs to buy up toxic bank assets shrink. This could present the U.S. Treasury with a welcome dilemma: what to do with potentially more than $100 billion in unallocated funds as financial market confidence strengthens. Among the options are increased aid for the housing sector, programs to support mortgage insurers and municipal borrowers that have been clamoring for help, or perhaps just socking the money away for a future emergency.

- The Obama administration is expected to announce next week that a higher-than-expected number of large financial institutions will be allowed to repay their government bailout funds, the Washington Post reported in its Saturday edition. Citing unnamed sources who spoke on the condition of anonymity because the official announcement has not been made yet, the newspaper report said the size of the repayments may be twice the initial estimate of $25 billion. That could mean that nearly all of the nine institutions found to have sufficient reserves in a recent government-run "stress test" might be allowed to return the money under the Treasury Department's Troubled Asset Relief Program. The companies include JPMorgan Chase & Co, American Express Co, Bank of New York Mellon Corp, BB&T Corp, Capital One Financial Corp, Goldman Sachs Group Inc, State Street Corp and U.S. Bancorp. MetLife Inc>, the ninth company, did not take money from TARP.

Financial Times:

- The controversial US toxic asset clean-up plan, aimed at clearing bad loans from US banks’ books to enable them to raise capital and lend freely, has fallen behind schedule, and may never be fully implemented. The plan has fallen prey to concerns from potential investors and regulators and waning interest from the banks themselves. Investors fear that Congress may set caps on pay while regulators are beginning to doubt whether the plan is really necessary. “Banks have been able to raise capital without having to sell bad assets through the LLP [limited liability partnership], which reflects renewed investor confidence in our banking system,” Sheila Bair, chairman of the FDIC, said last week.

- Gordon Brown faces a showdown with his MPs on Monday after his party suffered a humiliating night in the European elections, with early indications that Labour support had slumped. With counting under way across the country, there were reports that in some areas Labour had fallen behind the Conservatives and UK Independence party, in a sign that the British electorate remains Eurosceptic.

- Much of the advance debate devoted to the Apple(AAPL) conference that begins on Monday in San Francisco has concerned the features and pricing of forthcoming iPhone models. It was the sleek design and intuitive user interface of the iPhone that vaulted Apple from nowhere into a leading position in the smartphone market. But Apple has held on to that position because of the tens of thousands of applications for the handset available through Apple’s year-old online store, which Nokia, BlackBerry maker Research in Motion and, most recently, Palm have been unable to match. “This is a race to capture developer resources, and Apple is way ahead,” said Kathryn Huberty, Morgan Stanley technology analyst. “It’s all about gaining share, and then the hardware sales will follow.” In the long run, the most important thing to come out of the Worldwide Developers Conference will probably not be the latest phones. It will be the revisions to iPhone software and the App Store, which aim to widen Apple’s lead. A big innovation is that the store will start allowing developers to collect money not just when a user buys and downloads an application, but through follow-on transactions or subscriptions. Apple is likely to show off some of the most compelling repeat-purchase offerings at the conference. The change dramatically increases the potential pay day for developers, provides Apple with an additional revenue stream from the percentage it takes on app sales, and gives users more choice – and more reasons to stick with the iPhone instead of switching to the me-too hardware reaching the marketplace.

Telegraph:

- Barclays(BCS) is finalizing a deal to merge its $1trillion fund management arm with BlackRock(BLK) of the US.

Yonhap News:

- The United States has agreed to guarantee South Korea's defense against nuclear armed North Korea in writing, stipulating an extended provision of its nuclear umbrella, South Korea's foreign minister said Friday.

Nikkei English News:
- Hitachi Ltd., Toshiba Corp. and Fuji Electric Holdings Co. are among a group of Japanese companies expected to build a smart grid in the US that could begin operations in 2010.

Haaretz.com:

- Hezbollah is still trying to undermine the Egyptian regime, Egyptian sources said. The Lebanese Shi'ite group is also funding militants in the Gaza Strip, at times without Hamas' approval, and instructing them to carry out attacks on Israel, Egyptian and Israeli sources said.

Jerusalem Post:

- Just after US President Barack Obama's landmark address in Cairo, and just before US Mideast envoy George Mitchell returns to the region on Tuesday, the dispute between Washington and Jerusalem over settlement construction ratcheted up a notch.

Aswat al-Iraq:

- Iraq raised oil production from its northern Kirkuk fields to 670,000 barrels a day from 580,000 barrels a day, citing an official in the state-run North Oil Company. Improved security and an increase in the number of wells helped raise production, citing the North Oil Company Planning Chief.

Al-Hayat

- Saudi King Abdullah urged US President Barack Obama to “impose a solution” to achieve peace in the Middle East. King Abdullah told President Obama in Riyadh that the Arab world was losing patience with the pace of the peace process.

Weekend Recommendations
Barron's:
- Made positive comments on (AAPL), (CORE), (CYBS), (VPRT), (EPIQ), (UNG), (HD), (ALL) and (FCX).

- Made negative comments on (AAPL).

Citigroup:

- Reiterated Buy on (ORCL), raised target to $25.

Night Trading
Asian indices are -1.0% to +.50% on avg.
S&P 500 futures -.55%.
NASDAQ 100 futures -.59%.

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
- (PLL)/.42

- (ZQK)/.06

Upcoming Splits

- None of note

Economic Releases

- None of note

Other Potential Market Movers
- The Fed’s Tarullo speaking, UBS Tech & Service Conference and the Merrill Lynch Samurai Conference could also impact trading today.

BOTTOM LINE: Asian indices are most lower, weighed down by technology and commodity stocks in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. 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 some economic reports of note and just a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – None of note

Tues. – Wholesale Inventories, weekly retail sales reports, IBD/TIPP Economic Optimism Index, US Sells $35B 3-Year Notes

Wed. – Bloomberg Global Confidence, weekly MBA mortgage applications report, weekly EIA energy inventory report, Trade Balance, Monthly Budget Statement, Fed’s Beige Book, US Sells $19B 10-Year Notes

Thur. – Advance Retail Sales, Initial Jobless Claims, Business Inventories, US Sells $11B 30-Year Bonds

Fri. – Import Price Index, Univ. of Mich. Consumer Confidence

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

Mon. – Quiksilver Inc.(ZQK)

Tues. – Korn/Ferry(KFY), Talbots(TLB), Navistar Intl(NAV), PEP Boys(PBY)

Wed. – Brown-Forman(BF/B), Men’s Wearhouse(MW)

Thur. – National Semi(NSM), Del Monte(DLM)

Fri. – Genentech(DNA)

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

Mon. – The Fed’s Tarullo speaking, UBS Tech & Service Conference, Merrill Lynch Samurai Conference

Tue. – UBS Tech & Service Conference, CSFB Convergence Conference, Needham Internet & Digital Media Conference, (IP) Investor Day, William Blair Growth Stock Conference, Piper Jaffray Consumer Conference, Goldman Sachs Healthcare Conference, Merrill Lynch Samurai Conference, RBC Capital Tech/Communications/Media Conference, Morgan Stanley Shipping/Commodities Conference

Wed. – The Fed’s Lacker speaking, Fed’s Duke speaking, William Blair Growth Stock Conference, RBC Capital Tech/Communications/Media Conference, UBS Tech/Service Conference, Needham Biotech & Medtech Conference, BofA/Merrill Transportation Conference, Deutsche Bank Alt Energy Conference, (HD) Investor Conference, Piper Jaffray Consumer Conference, Goldman Sachs Healthcare Conference, CSFB Convergence Conference, (AGU) Investor Day

Thur. – The Fed’s Lockhart speaking, UBS Electronic Payments Summit, BofA/Merrill Transportation Conference, William Blair Growth Stock Conference, Needham Biotech & Medtech Conference, Goldman Sachs Healthcare Conference, UBS Basic Materials Conference, (SYMC) Analyst Meeting, CSFB Convergence Conference

Fri. – The Treasury’s Geithner speaking at G-8 Meeting

BOTTOM LINE: I expect US stocks to finish the week mixed as rising long-term rates, profit-taking, more hawkish Fed commentary and more shorting offset technical buying, less economic fear, falling credit market angst, investment manager performance anxiety and lower energy prices. My trading indicators are giving bullish signals and the Portfolio is 100% net long heading into the week.