Stocks Slightly Higher into Final Hour on Short-Covering, Less Economic Pessimism, Bargain-Hunting

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs and Medical longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is mildly positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is very high. Today’s overall market action is mildly bullish. The VIX is falling 5.62% and is high at 29.52. The ISE Sentiment Index is low at 109.0 and the total put/call is above average at 99. Finally, the NYSE Arms has been running slightly below average most of the day, hitting .54 at its intraday trough, and is currently .74. The Euro Financial Sector Credit Default Swap Index is falling .67% today to 110.33 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling .93% to 144.10 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 4.29% to 35 basis points. The TED spread is now down 431 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 2.28% to 36.44 basis points. The Libor-OIS spread is down 3.74% to 31 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 3 basis points to 1.55%, which is down 109 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is unch. today. Cyclicals are bouncing back a bit today. Bank, Semi, Gaming, Homebuilding, Oil Service and Construction shares are especially strong. Given today’s decline in the dollar, cyclical outperformance, better-than-expected economic data and recent crude declines, oil’s inability to bounce is noteworthy. The AAII % Bulls dropped to 27.91 this week, while the % Bears jumped to 54.65, which is a big positive. On the negative side, I am surprised the broad market isn’t bouncing more today. (IYR) has been heavy throughout the day and it is beginning to weigh on (XLF). Moreover, several key stocks aren’t participating in today’s gains. Nikkei futures indicate an +104 open in Japan and DAX futures indicate an +3 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as short-covering, bargain-hunting and less economic pessimism offsets commercial real estate worries and higher long-term rates.

Today's Headlines

Bloomberg:

- Mortgage rates in the U.S. fell for a second consecutive week, easing concern that a Federal Reserve plan to lower the cost of home loans had lost momentum. The average 30-year rate dropped to 5.2 percent from 5.32 percent, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The 15-year rate averaged 4.69 percent.

- President Barack Obama has failed thus far to clinch the support of a handful of pivotal Democratic senators on two of his top priorities: extending health coverage to the uninsured and reducing greenhouse gases. The lawmakers represent Republican-leaning states, practice bipartisan politics, at times vote against their party and will influence legislation from health care to spending. “Senators aren’t sheep,” Senator Evan Bayh of Indiana said in an interview. He and the four other Democrats in this small group “were hired by their constituents to make independent judgments of their own, not to be told by somebody else what to do,” he said. These independent-minded Democratic lawmakers have all expressed reservations about a central element of Obama’s health-care proposal -- a government-run insurance program that would compete with private plans --and about the cost of capping greenhouse-gas pollution. On health care, these senators all express concern about Obama’s proposal. “How are we going to pay for this at a time when the economy is already sluggish and we don’t want to raise people’s taxes?” Bayh, 53, said. On climate change, these senators are concerned about rising energy costs and the consequences of forcing U.S. businesses to meet stricter standards. “You have to find a way to get the developing world, particularly China and India, to cooperate,” said Bayh. Obama’s plan to limit greenhouse gases and encourage the use of renewable energy is a hard sell in Nebraska, said Nelson, 68. “We’re the only state with 100 percent public power, and when they tell you it could as much as double utility rates in the state, it doesn’t take long to unite the state pretty dramatically,” he said. On fiscal matters, the senators push spending restraint. In April, Nelson and Bayh voted against their party’s $3.55 trillion budget plan for 2010.

- North American refiners will leave about 25% of plants idle by 2014, the International Energy Agency says, as a rise in capacity around the world increases the available supply of gasoline and distillates. Refinery utilization in North America may drop 5 percentage points to 75% as global crude distillation capability increases by 7.6 million barrels a day between 2008 and 2014, the IEA said June 29 in its Medium-Term Oil Market Report. That is more than twice the 3.2 million barrels of projected oil demand growth. The US refinery utilization rate is 2.4 percentage points lower than a year ago, the Energy Dept. said. Plants operated at 87% of capacity in the week ended July 3. The IEA forecast the North American rates to average 80% in the second quarter of this year. “North American refinery utilization is expected to decline slightly from the low levels seen today, as the recovery in demand is met by rising imports and ethanol supplies, rather than a rebound in domestic capacity utilization,” the IEA said.

- Volunteers for a children’s clinic in Moline, Illinois, are collecting empty beer and pop cans after TARP slashed the money it will receive from the city’s John Deere Classic golf tournament. Wells Fargo & Co. and U.S. Bancorp are among those that didn’t renew their sponsorship while under scrutiny for how they’re using Troubled Asset Relief Program money, said Clair Peterson, director of the golf tourney that starts today. Moline-based Deere & Co. is the main sponsor of the event, which was sixth in fundraising among 44 PGA Tour events last year. “A lot of it is just being paranoid about what Congress has said about the sponsorships,” Zach Johnson, the 2007 Masters champion who serves on the Deere Classic’s board, said as he left the 18th green after a practice round this week.

- The U.S. dollar will remain the world’s main reserve currency, White House Press Secretary Robert Gibbs said at the Group of Eight summit today. “Despite whatever talk you might have heard, I don’t see that there is movement away from the notion of the dollar being that currency,” Gibbs told reporters at a briefing at the start of the second day of the three-day meeting in L’Aquila, Italy.

- Inventories at U.S. wholesalers fell in May for a ninth straight month as an increase in sales helped distributors get rid of some of their excess supply. At the current sales pace, it would take 1.29 months for distributors to deplete the amount of goods on hand, the lowest since November, compared with 1.31 months in April. The reading was as low as 1.1 months in June 2008.

- Police fired tear gas as thousands of protesters defied a ban on a march toward Tehran University to mark unrest during student protests in 1999, Agence France- Presse said, citing witnesses. Demonstrators chanted “Death to the dictator” as they gathered in the streets around the university, the center of the protests 10 years ago, AFP said.

- Iranian President Mahmoud Ahmadinejad said that although the world’s powers are angry over his re- election, they must “interact” with his administration. “The enemies of the Iranian people are very angry because, despite their efforts and propaganda, a government will be in power with the support of 40 million votes,” he said in a meeting with officials in Tehran today, according to the state- run Iranian Students News Agency. “We will not give them any advantage, and they must interact with this government.”

- Treasury 10-year note yields will resume the declines posted yesterday even as the US sold $19 billion of the securities and stocks recovered from their lows, according to a Barclays Plc repot citing chart patterns. “The failure to give back session gains speaks to the strength of the bull trend,” the analysts said. The notes face resistance at 3.44% should yields increase, he said.

- The number of Americans filing claims for unemployment benefits fell last week to the lowest since January, as early automotive plant closures altered the timing of layoffs that typically happen at this time of year. The four-week moving average of initial claims, a less volatile measure, fell to 606,000 last week from 616,000.

- General Motors Corp., poised to exit bankruptcy as soon as today, will keep losing U.S. market because it lacks new-model introductions for early 2010, according to Erich Merkle, an independent auto analyst. GM’s only new vehicle slated for that time period is the Chevrolet Cruze compact car, said Merkle, who is based in Grand Rapids Michigan, in an interview today on Bloomberg Radio. “One product, for a company the size of General Motors with its market share, quite honestly isn’t enough,” he said. “Their market-share results will go lower as a result of very poor product cadence. That’s what happens in bankruptcy. A lot of these products are being canceled or delayed.”

Wall Street Journal:

- Chinese President Hu Jintao presided over a meeting of the country's top leaders who vowed "severe punishment" for those responsible for the deadly unrest in the country's northwest, state media reported Thursday, in the first public account of Mr. Hu's actions since he hurried home from a global summit to oversee the response to the turmoil.

- The Public Option Two-Step. Why Obama won’t acknowledge the ‘Trojan Horse’ in the room.

CNBC:

- Oil traders continue to squeeze past tighter U.S. market rules via a loophole that allows them to bet for bigger stakes on certain fuel futures that are under British regulation, brokers and analysts said. The opening in what has been called the London loophole, which U.S. authorities tried to close in June 2008, allows the kind of high-risk plays that concern the Group of 8 leaders who have shone the political spotlight on oil price volatility. Traders buying oil contracts in London played a part in the spike in oil prices to nearly $150 a barrel last year, critics have said. Trading volumes have since jumped on gas oil futures not monitored by the U.S. Commodity Futures Trading Commission (CFTC) on the InterContinental Exchange (ICE) in London. Traded volumes on the gas oil futures contract on ICE surged by more than 20 percent in the first six months of 2009, from the first half of 2008.

NY Times:

- TiVo(TIVO), the Silicon Valley company that popularized the digital video recorder, and Best Buy, the national electronics chain, are forging a broad partnership. On Thursday, the companies plan to announce that Best Buy will heavily promote TiVo products in its 1,100 stores in the United States. TiVo will develop a version of its set-top box, to be sold in Best Buy stores, that will let the retailer advertise its products and services to TiVo subscribers on their home televisions.

- Man Group, the world’s biggest listed hedge fund firm, said investors have continued to withdraw their money although private investor sales have picked up, as flows in the battered industry slowly improve. Investors pulled out a net $1.4 billion in the three months to June, the firm said, helping push assets down to $43.3 billion, Reuters reported.

MarketWatch:
- Cerberus Capital Management LP unveiled a restructuring of its main hedge fund late last week that offers few ways for redeeming investors to get their money back quickly, according to people familiar with the situation. Under the plan, described in a Friday letter from the firm, investors in Cerberus Partners LP will get about 5% of their money back by the end of 2009 at most, the people said on condition of anonymity.

HousingWire.com:

- For the first time since 2006, the nation posted positive quarter-over-quarter price returns in Q209, according to the July Home Data Index Report released Thursday by Clear Capital. Fueled by strong seasonal spring sales in the Midwest, which had a price increase of 5.3% over Q109, the overall US price growth increased by 1.7% in a quarter-over-quarter comparison. The South also added to the surge, climbing 2% from the previous quarter.

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 30% of the nation's voters now Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-eight percent (38%) Strongly Disapprove giving Obama a Presidential Approval Index rating of –8. The President’s Approval Index rating has fallen six points since release of a disappointing jobs report last week (see trends).

Politico:

- In a potentially alarming trend for the White House, independent voters are deserting President Barack Obama nationally and especially in key swing states, recent polls suggest. “This is a huge sea change that is playing itself out in American politics,” said Democratic pollster Doug Schoen. “Independents who had become effectively operational Democrats in 2006 and 2008 are now up for grabs and are trending Republican. “They’re saying, ‘Costing too much, no results, see the downside, not sure of the upside,’” he said.

Miami Herald:

- Some Chinese-made drywall imported into the United States contained radioactive material, news reports suggest, but state and federal tests so far haven't detected it. Copies of customs reports obtained by The Los Angeles Times show drywall made with a radioactive waste product was shipped to the states in 2006 by at least four Chinese manufacturers and trading firms.

Reuters:
- Gold jewelry sales in Dubai are down around 30 percent in June on a year ago, as high prices of the metal and the economic downturn deter tourists from visiting the emirate, five jewelry retailers told Reuters.

- The Obama administration's dash through the bankruptcies for General Motors Corp (GMGMQ) and Chrysler is nearly done, but the debate about the government's conflicted role in reshaping the American auto industry has only just begun. While the administration has been praised for its rapid reorganizations of GM and Chrysler, it has also been blamed for placing itself and its officials in situations with conflicts of interest. The U.S. government stepped in to save GM by becoming its largest creditor and majority investor, positions that inevitably clashed with its role as regulator and referee of its pending deals with outside investors. "Whenever you have a group that is regulator, owner and funder, there is a massive conflict of interest," said David Logan, associate dean at the University of Southern California's Marshall School of Business.

- Banks and hedge funds already go to extraordinary lengths to protect the automated trading secrets critical to generating big, fast profits, but after an purported theft last month, they have even more work to do.

TimesOnline:

- A drug used by transplant patients can extend the lives of mice by about a third, according to research that raises the prospect of a life-prolonging pill for people. Male mice given rapamycin lived on average 28 per cent longer than a control group of animals, while the effect on females was greater still, with a 38 per cent increase in life expectancy. The animals were treated at an age of 20 months, which is the equivalent of 60 years in humans. The study, led by David Harrison, of the Jackson Laboratory in Maine, is the first to identify a drug that can lengthen the lives of mammals, and suggests that similar medical techniques might be capable of doing the same thing in people.

- Man Group’s flagship fund, AHL Diversified, lost investors 11.2 per cent of their money in first five months of the year, as the world’s largest listed hedge fund manager missed out on the sector’s wider recovery.

Bear Radar

Style Underperformer:
Large-cap Growth (+.45%)

Sector Underperformers:
Education (-2.21%), Tobacco (-1.08%) and Drugs (-.70%)

Stocks Falling on Unusual Volume:
JCP, MRK, VRGY, FTGX, EXBD, KMT and YPF

Stocks With Unusual Put Option Activity:
1) AIG 2) WYE 3) GOLD 4) RIGL 5) DDUP

Bull Radar

Style Outperformer:
Mid-cap Growth (+.58%)

Sector Outperformers:
Semis (+2.12%), Steel (+1.60%) and Banks (+1.47%)

Stocks Rising on Unusual Volume:
PVA, LFC, CSIQ, DB, NVLS, SNP, COP, HBC, RIGL, HIG, GSK, RIGL, VOLC, HELE, NILE, CPKI, GYMB, SCSC, ICUI, GOLD, WYNN, VSEA, LIHR, ROST, CTXS, NVLS, CVLT, CYBX, WFMI, FWLT, ILMN, DLX, TBH, DW and KEX

Stocks With Unusual Call Option Activity:
1) QLGC 2) HOG 3) ELX 4) ROST 5) GPS

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Thursday Watch

Late-Night Headlines
Bloomberg:

- The momentum for overhauling U.S. health care slowed in the Senate as disagreements hardened over how to finance President Barack Obama’s $1 trillion plan to extend coverage to 46 million uninsured Americans. Lawmakers in both parties urged Senate leaders to abandon their goal of bringing health-care legislation to a vote in the next month, amid clashes over whether to impose a surtax on wealthy Americans and tax employee-provided health benefits. Budget Committee Chairman Kent Conrad suggested that the complexities of crafting a plan may derail Majority Leader Harry Reid’s goal of passing a bill before the August recess. Snowe, a member of the Finance Committee, is among a handful of Republicans that Democrats are trying to persuade to back the health-care overhaul, Obama’s top domestic priority. Conrad is playing a lead role in working to win over Republicans. Their appeal to go slowly came a day after Democratic leaders told finance panel Chairman Max Baucus to find alternatives to his plan to tax the costliest employer- provided health benefits, one of the most contentious issues. West Virginia Democrat Jay Rockefeller, a Finance Committee member, said he would vote against health-care legislation that taxes employer benefits. Rockefeller would favor consideration of a “millionaire’s tax” to help finance the plan, he said in an interview. The nonpartisan budget office cast further doubt on the potential cost of the overhaul. It estimated that another plan being drafted by the Senate Health, Education, Labor and Pensions Committee to expand eligibility for Medicaid could cost as much as $500 billion over the next decade. That could bring the total cost of the plans being drafted by the panel’s chairman, Senator Edward Kennedy, to more than $1 trillion. Altogether, CBO said, the Kennedy plan could still leave 15 million to 20 million Americans uninsured.

- Goldman Sachs(GS) Loses Grip on Its Doomsday Machine. This brings us to the strange tale of Goldman Sachs Group Inc. and Sergey Aleynikov. It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.” All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program? It would be nice to see someone at Goldman go on the record to explain what’s stopping the world’s most powerful investment bank from using its trading program in unfair ways.

- Data Domain Inc. agreed to a $2.1 billion acquisition by EMC Corp., the world’s largest maker of data-storage computers, backing out of a deal with NetApp Inc. and ending a two-month bidding war.

- The United States Natural Gas Fund expanded today to the largest position in its 27-month history as investors snapped up the last of its shares and it awaited government approval to issue more units. As of early today, the exchange-traded fund owned the equivalent of 124,926 natural gas futures contracts on the New York Mercantile Exchange. The number of shares outstanding reached a record yesterday, rising 14.5 percent to 322.3 million, more than 10 times the total at the start of the year, and worth $3.97 billion. The fund’s natural gas position, spread across swaps and futures on the Nymex and the ICE over-the counter-market, equals the equivalent of 86 percent of the open interest in natural gas futures on the NYMEX. “Clearly, this has become an extraordinarily attractive investment,” said Dave Nadig, an associate editor at IndexUniverse.com, in Decatur, Georgia. “There’s a lot of speculation among people like us who are wondering who is in this.” The ETF can’t grow further for now because yesterday it ran out of new shares to issue. The ETF asked the Securities Exchange Commission on June 5 for permission to create 1 billion new shares, and is awaiting approval. The fund rose 2 cents, or 0.2 percent, to $12.20 on the New York Stock Exchange. It’s down 47 percent this year, while natural gas has fallen 40 percent on the Nymex. “The size of their position is so big that it creates distortions in the market,” said Olivier Jakob, managing director of PetroMatrix in Switzerland. “And that doesn’t mean it just drives prices up. It can also drive prices down.”

- Lori Richards will step down as head of the U.S. Securities and Exchange Commission office that inspects money managers and brokerages after lawmakers criticized her unit for missing Bernard Madoff’s Ponzi scheme. Richards, director of the Office of Compliance Inspections and Examinations since its creation in 1995, will leave Aug. 7, the SEC said in a statement today. The unit’s associate director-chief counsel, John Walsh, will serve as acting director when Richards steps down.

- American International Group Inc., the insurer bailed out four times by the U.S., will likely have no value left for private shareholders after repaying the government, Citigroup Inc. said. “Our valuation includes a 70 percent chance that the equity at AIG is zero,” said Joshua Shanker, an analyst at Citigroup, in a note to investors today on the New York-based insurer.

- Facebook Inc.’s social-networking Web site and Amazon.com Inc.’s site have been inaccessible in China, according to the Berkman Center for Internet & Society at Harvard University. There have been 33 reports of Facebook’s Web site being inaccessible in China this week and 11 reports of inaccessibility at Amazon’s site in the country since yesterday, according to Herdict.org, a project at the Berkman Center that tracks Web outages worldwide.

- Web sites of the U.S. departments of State, Treasury and Transportation were attacked by unidentified hackers during the July 4 holiday weekend and in some cases the attacks were continuing today, officials said. In addition, NYSE Euronext, the world’s largest owner of stock exchanges, said it was notified by authorities that it had been the target of a cyber attack aimed at slowing or shutting down its Web site. The Department of Homeland Security is aware of the attacks and its Computer Emergency Readiness Team, or CERT, has advised government agencies and private companies on “steps to take to mitigate against such attacks,” Amy Kudwa, a spokeswoman for the department, said in an e-mail today.

- Double-digit unemployment looms. The country is in a funk. The federal budget deficit is widening to an extent not seen in decades. This scenario isn’t new. It also describes the U.S. in 1982. Somehow, the 1980s and the 1990s turned out to be pretty good years. So it’s worthwhile to compare current policy to the one followed then.

Wall Street Journal:

- As early as Thursday, General Motors Corp. and the Obama administration are expected to launch the new GM as a house of four brands. But forget Buick, Cadillac and GMC. The fate of GM will mainly ride on Chevrolet. "In the next year, Chevy could get upward of 70%" of total GM sales, says Ed Peper, the Chevy chief at GM. Is Chevy fit to carry that load? The built-for-duty image of the division's Silverado pickups may suggest that Chevy can carry anything, but the trucks illustrate a problem. To lift the fortunes of a parent company that is closing or casting off three car brands -- Pontiac, Saturn and Saab -- Chevrolet will probably need to recapture the glory days of its sedans. But two-thirds of its sales and most of its profit now come from trucks, and its most celebrated cars are sports models, the Corvette and the newly launched Camaro. Among Chevy cars, says David Champion, senior director of Consumer Reports' auto test division, the subcompact Aveo "is dismal," as is the compact Cobalt. He adds, the Impala is pretty long in the tooth, and the Malibu is the only model in the lineup "that is legitimately able to help them get back on their feet."

- A provision in the House-passed climate bill could violate world-trade rules by favoring U.S. auto makers in the distribution of some $2 billion in government subsidies, a leading free trade group warned Wednesday. The provision would provide an estimated $2.14 billion over five years to auto makers to build plug-in electric vehicles "that are developed and produced in the United States." The language, added late in negotiations after heavy lobbying from the United Auto Workers, also directs the government to give preference to auto makers "located in local markets that have the greatest need for the facility." Bill Reinsch, president of the Washington-based National Foreign Trade Council, said the electric-vehicle program could amount to government subsidies for U.S. auto makers, likely violating World Trade Organization rules that prohibit countries from favoring domestic companies. Mr. Reinsch warned the program for electric vehicles would invite retaliation from other countries. "One of two things will happen: either the Europeans will complain about it or they'll do the same thing and they'll provide subsidies in Europe to European car manufacturers," he said. "From a trade-policy standpoint, either outcome is market-distorting."

- Pacific Investment Management Co. said it withdrew its application to become a manager of the government's latest effort to bolster bank balance sheets, citing "uncertainties" over how the plan would be implemented. Pimco was widely expected to be named a manager of the Public Private Investment Partnership, or PPIP. Treasury announced the nine managers of the program today. "As a result of uncertainties of the design and implementation of the program, Pimco withdrew its application to serve as a manager for the PPIP in early June," according to spokesman for the Newport Beach, CA investment firm.

- As the White House begins to ponder whether to reappoint or replace Ben Bernanke when his term expires in January, the Federal Reserve chairman's standing on Wall Street is on the rise while attacks on him from Congress mount.

- Massachusetts sued the federal government Wednesday, seeking to overturn a key part of the U.S. law that defines marriage as a union between one man and one woman. The lawsuit, brought by the first state to legalize gay marriage, said the 1996 Defense of Marriage Act infringed on a state's sovereign right to define marital status. The state wants a judge to rule that part of the act, known as DOMA, is unconstitutional.

Barron’s:

- Canaccord Adams analyst Peter Misek this afternoon raised his rating on Research In Motion (RIMM) to Buy from Hold, maintaining his price target on the stock at $95. Misek says he is making the move following a recent 23% slide in the company’s stock price, as well as positive recent channel checks. He says that, according to global carrier contacts and partners, the company “delivered a healthy month of June, beating internal expectations.” Misek contends the launch of the Palm (PALM) Pre and the Apple (AAPL) iPhone 3GS “has done little to disrupt RIMM’s momentum and may have in fact benefited the company as competing carriers aggressively position BlackBerry as an alternative.”

MarketWatch.com:
- Alcoa Inc.(AA) shares rose 7% in late trading Wednesday after the industrial bellwether reported a smaller loss than Wall Street had expected.

CNBC.com:
- The Mad Money host today laid out what he thinks that plan is: Futures traders will reach out to the politicians whose elections they funded to influence Washington’s response. They’ll take the same approach with the universities that accepted their cash and get academics to publish “research” on how futures markets are too “deep” to be manipulated. A full-on media assault will trumpet message as well. Then they’ll get so-called captains of industry to say that speculation provides the market with liquidity, and that makes better markets for hedging. And, of course, they’ll deny that last summer’s near $150 oil prices had anything to do with speculation at all – it was Chinese demand. Those that benefit most from deregulation will also say that investors need to be able to hedge against skyrocketing prices, such as those from last summer, even though they were the investors that drove crude to that level. Lastly, they’ll say that it’s regulation that caused these problems in the first place, and that more rules will cause more problems. Maybe they’ll tap White House chief of staff Rahm Emmanuel, a native of Illinois, home also to the Chicago Mercantile Exchange, where many of these trades take place, to stop the call for greater government control. They might even threaten to pull their operations offshore, which would most certainly kill any new rules. While Cramer admitted he was being a “tad facetious,” he said, “I don’t think I’m being too cynical.” Oil is “a national imperative and an economic lifeline,” and it should be protected from trader abuse. So what the US needs is fair market in which to trade it.

NY Times:

- With their allies controlling the White House and Congress, the nation’s labor unions should be making hay. Instead many unions are making war — largely with one another — in the biggest, nastiest surge of labor fratricide in decades.

- In Chrome, Hints of a Real Rival to Windows.

IBD:

- You won't find the team at Anaren (ANEN) putting all their eggs in one basket.

Politico:

- A letter released late Wednesday by six Democratic House members claims that Central Intelligence Agency Director Leon Panetta testified that "top CIA officials have concealed significant actions… and misled" members of Congress since 2001 — a claim the CIA is contesting. The letter did not specify what actions were concealed, or how members of Congress were misled. In it, the Democrats demanded that Panetta correct a statement he issued on May 15 – just after House Speaker Nancy Pelosi accused the CIA of misleading her during the Bush years about the agency’s use of waterboarding techniques – stating that it is not the CIA’s “policy or practice to mislead Congress.” CIA spokesman George Little told the Washington Independent late Wednesday, said the claim that Panetta admitted his agency has misled Congress is “completely wrong.” He added, “Director Panetta stands by his May 15 statement.”

- President Barack Obama is likely to come home from a series of back-to-back international summits here without agreement on the crux of a global deal to limit climate change, after developing countries balked at setting numerical targets to reduce their carbon emissions, U.S. officials said.

RTTNews:

- The U.S. economic stimulus program received mixed grades Wednesday from a government watchdog agency. The Government Accountability Office issued a report saying state and local governments will receive $49 billion from the so-called American Recovery and Reinvestment Act during the current fiscal year. Since the program was enacted four months ago, about 60-percent of that amount, or $29 billion, has already been distributed. The distribution is faster than expected, the GAO said in Wednesday's report, but it claimed methods of checking on the way the money is spent have been inadequate. Most of the payments have been used to help state and local governments pay for, health-related expenses for the poor through the Medicaid program. The federal share of the program was increased for 27 months through the stimulus package. The extra funding was offset, however, by 7 percent increases in Medicaid enrollment. "States reported that they are using or planning to use freed-up funds to cover their increased Medicaid caseload, to maintain current benefits and eligibility levels, and to help finance their respective state budgets," the GAO said. The report also noted that about half of the money earmarked for road and bridge repairs is being spend to repave highways instead of to build new infrastructure. The report also found that state officials are not directing the funds to counties that are most in need of new jobs. The stimulus program, carrying a total price tag of $787 billion, has come under fire from Republicans in Congress. Republican Congressman Darrell Issa noted the nation's unemployment rate has reached its highest levels since 1983, and the Obama administration has been "unable to justify its questionable claims related to jobs 'saved or created' by the stimulus." President Obama has repeatedly said the stimulus package will be a means to "save or create" 3 million to 4 million jobs. Since the stimulus bill was signed into law in February, more than 2 million American jobs have been lost.

USA Today.com:

- The Swiss government said Wednesday that it will block banking giant UBS from turning client account data over to U.S. authorities — even by seizing the information, if necessary. Raising the stakes in an international showdown, the response came days before an evidentiary hearing in a Miami federal court lawsuit in which the IRS seeks the names of 52,000 American clients of UBS. UBS has refused to turn over the information on grounds that it would violate Swiss banking secrecy laws and subject the bank to prosecution by the Swiss government.

Financial Times:

- An unprecedented rise in demand for euro banknotes outside the eurozone could cause problems for borrowers and lenders in eastern Europe, the European Central Bank warned on Wednesday. The ECB said businesses and households outside the eurozone had continued to take out loans in euros in spite of the financial crisis, in the hope of taking advantage of lower interest rates. This could hurt borrowers as local currencies depreciated and servicing loans got more expensive, the bank warned. “The prevalence of foreign currency lending may create significant macroeconomic risks,” the ECB said in its report.

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Company/EPS Estimate
- (COMS)/.05

- (CHTT)/1.20

- (SGR)/.60

Economic Releases

8:30 am EST

- Initial Jobless Claims for last week are estimated to fall to 603K versus 614K the prior week.

- Continuing Claims are estimated to rise to 6710K versus 6702K prior.

10:00 am EST

- Wholesale Inventories for May are estimated to fall -1.0% versus a -1.4% decline in April.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Duke speaking, ICSC chain store sales reports, weekly EIA natural gas inventory report, (CTX) shareholders meeting, (CTX) shareholders meeting and the (SMSC) analyst day could also impact trading today.

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