Today's Headlines

Bloomberg:

• Sarkozy, Merkel Urge Faster EU Curbs on Speculation. France and Germany called on the European Union to speed up curbs on financial speculation, saying some bets against stocks and government bonds should be banned as markets suffer a resurgence of “strong volatility.”
• Coal's Share of Energy Use Rises as Natural Gas Falls. Coal’s share of global energy consumption rose last year to its highest level since 1970 as use of natural gas fell the most on record, a tendency that may continue, BP Plc said in a report. Coal accounted for 29 percent of world energy use, BP said today in its annual Statistical Review of World Energy. Global consumption dropped 1.3 percent in 2009 to 11.16 billion metric tons of oil equivalent, the first decline since 1982, BP said. “China became a large-scale coal importer, which prevented global coal consumption from falling,” Tony Hayward, BP’s chief executive officer, said today in an introduction to the review. “Given the OPEC cuts, the world’s largest increase in oil production by far came from the U.S., mainly from the Gulf of Mexico. This is not an excuse for anything but a piece of the reality in which we all live.”
• Crude Oil Rises the Most in Almost Two Weeks as Dollar Declines. Oil jumped as much as 4.1 percent and the dollar retreated as Federal Reserve Chairman Ben S. Bernanke told a congressional panel the central bank will act as needed to aid financial stability and economic growth, increasing the likelihood U.S. interest rates will remain at record lows.
• Bank of America(BAC) May Lead Banks in Home-Equity Losses. Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. may lead 20 publicly traded U.S. banks that charge off as much as $40.9 billion on home-equity investments this year, Fitch Ratings said. In the worst-case scenario considered by Fitch, the three banks may write off a combined $31.2 billion as loans from the height of the housing market sour, analysts John Mackerey and Ken Ritz wrote in a report today. The 20 banks on the list, which includes only lenders with above-average exposure to the business, may charge off a total of as much as $76.7 billion in the two years through 2011, the New York-based rating company estimated. “Fitch is concerned that large core portions of these portfolios that were originated during the peak of the housing boom are increasingly at risk due to continued weakness in the housing market,” the analysts wrote. “These loans are becoming less secured and will increasingly exhibit loss severities more similar to unsecured credit.”
• Fed Says Economy Improved, With 'Modest' Gains in Many Regions. The Federal Reserve said the U.S. economy, driven partly by consumer and business spending, strengthened in all 12 of the central bank’s regions in April and May, while noting growth in many districts was subdued. “Economic activity continued to improve since the last report across all 12 Federal Reserve Districts, although many Districts described the pace of growth as ‘modest,’” the Fed said in its Beige Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy.

Wall Street Journal:

• BP(BP) Investors Brace for Dividend Suspension.
• U.N. Imposes New Sanctions on Iran.
  
• Goldman(GS) Being Sued by Hedge Fund Over Toxic CDOs. An Australian hedge fund manager said it has filed a lawsuit against Goldman Sachs Group Inc. (GS) seeking more than $1 billion in damages after losing money in troubled mortgage-linked securities. Basis Capital's Basis Yield Alpha Fund alleges it was defrauded when it purchased $78 million of the Timberwolf synthetic collateralized debt obligations being sold by Goldman in June 2007. The Sydney-based hedge fund manager said in the suit that Goldman knew at the time that the securities were doomed.
• Pimco Treasury Head Rodosky: US Economy To Slow Down In 2H. A senior fund manager at bond fund giant Pacific Investment Management Co. said the U.S. economy peaked in the first quarter and will slow down in the second half of the year. Against this backdrop, Steve Rodosky, head of Treasury and derivatives trading at Newport Beach, Calif.-based Pimco, said that he has bought Treasurys in recent weeks--as have many other investors fleeing the euro zone's debt crisis.

CNBC:

• ECB's Weber: High Public Debt Could Lead to Higher Rates. High and rising public debt could force the European Central Bank into higher interest rates to anchor inflation expectations, European Central Bank Governing Council member Axel Weber said on Wednesday.
• Lack of Refinancing is Another Blow For Housing. A surprise in this morning's weekly mortgage applications report from the Mortgage Bankers Association. I'm not talking about the part that said purchase applications tanked another 5.7 percent, now down 42 percent from where they were at the end of the home buyer tax credit April 30th. I'm talking about the refinance index. Despite the rate on the 30-year fixed still hanging around 4.8 percent, refinances took a plunge last week for the first time in a month, down 14.3 percent. "Despite the historically low rates, many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance," writes Michael Fratantoni, MBA's VP of Research and Economics.

Zero Hedge:

• Gasparino Says Financial Crisis Panel May Probe Lehman and JPMorgan(JPM).
• Europe's Horrendous Liquidity Just Got Even Worse(And Nonexistent In Spain).
  

Market Folly:

• Renaissance Technologies' Medallion Fund: Performance Numbers Illustrated. As we detailed previously, Medallion returned 80% in 2008 in a year where many hedge funds stumbled and some completely crumbled. Additionally according to Barron's, Medallion returned 39% in 2009 and has a 3 year annual compound return of 62.8%. While it's cheesy to say, Medallion certainly holds the gold medal in the land of hedge fund lore.

FINalternatives:

• Florida to Jump into Hedge Funds, Boost Private Equity. The Florida Retirement System is taking the plunge into hedge funds, allocating 6% of its $109.5 billion in assets to the alternative asset class. The move comes amidst a raft of changes at the public pension fund that will dramatically increase its exposure to alternative investments. In addition to the hedge fund allocation, Florida will increase its allocation to private equity from 3.5% to 5% under plans approved by the Florida State Board of Administration yesterday. It will also move 2% of its assets into infrastructure and an unspecified amount into commodities and timberland.

Forbes:

• The Big Tax Increases Facing Small Business. Hedge fund taxes get all the attention. Congress is about to raise billions in taxes on some doctors, accountants and architects.
• The Dark Side of Stimulus. Americans are getting increasingly anxious - and for good reason.
  

Chicago Tribune:

• Disney(DIS) to Close ESPN Zone Restaurants.

Boston Globe:

• E-Mails Reveal Rift Over Health Insurance Caps. Industry seizes on disagreements of state regulators. The official in charge of monitoring Massachusetts insurer solvency at the state Division of Insurance sent an internal e-mail this spring warning that the rates the division imposed on health plans “have no actuarial support’’ and could lead to “a train wreck’’ in the industry. Shortly after the division rejected proposed double-digit rate increases for small businesses and individuals, Robert G. Dynan, the division’s deputy commissioner for financial analysis, wrote to members of his staff on April 6 that “our jobs of monitoring solvency just got exponentially more difficult’’ as a result of “artificial price caps.’’ Dynan also complained that “this action was taken against my objections and without including me in the conversation.’’ The division’s internal rift “is very serious and should not be taken lightly,’’ said Lora Pellegrini, president of the Massachusetts Association of Health Plans, a trade group representing most of the state’s heath insurers. Pellegrini said the Patrick administration’s rate caps are forcing carriers to lose money on their policies. The four major Massachusetts health insurers posted first-quarter losses totaling more than $150 million, blaming the bulk of the losses on the rate cap. Dynan followed up the April 6 e-mail to his staff with a longer e-mail to Murphy on April 30 suggesting state officials should make an effort to settle the lawsuit filed by the insurers. “There is the potential for catastrophic consequences to our non-profit health care industry if they are not allowed to charge actuarially sound rates,’’ he wrote. He also warned the rate cap could jeopardize the financial conditions of hospitals if they weren’t able to collect on bills sent to insurers.

Cars.com:

• Nine More Cars, SUVs Earn Top Safety Pick Status.

Huffington Post:

• Blanche Lincoln Win Sparks Furious Sniping Between White House, Labor. "Organized labor just flushed $10 million of their members' money down the toilet on a pointless exercise," the unnamed official said to Politico's Ben Smith. "If even half that total had been well-targeted and applied in key House races across this country, that could have made a real difference in November." Another senior Democrat (who also would not be quoted by name) echoed the point in an exchange with the Huffington Post. "Labor is humiliated," the source said. "$10 million flushed down the toilet at a time when Democrats across the country are fighting for their lives, they look like absolute idiots."

Real Clear Politics:

• Obama Approval Tanks in Florida. Just ahead of the President's trip to Florida to check out the oil spill, Quinnipiac is out with a poll today showing Obama's job approval taking a dramatic turn for the worse in the Sunshine State. Six weeks ago, 50% of Floridians approved of the job Obama was doing as President, while 45% disapproved. Today, however, Quinnipiac finds a 54% majority disapproves of how Obama is handling his job as President while just 40% approve - a net swing of 19 points against the President in the last month and a half. Not surprisingly, those numbers are nearly identical to Floridians' view of Obama's handling of the Gulf oil spill. Just 37% approve of the job he's done on the oil spill, while 54% disapprove of the way he's handled the disaster.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).

Peter Welch:

• Welch Calls on BP(BP) to Suspend Dividend Payments and Marketing Campaigns. After BP announced its intention to move forward with a payment to shareholders Tuesday, Rep. Peter Welch (D-Vt.) and a coalition of House members called on CEO Tony Hayward to suspend dividend payments and advertising campaigns until it remedies the environmental disaster it caused in the Gulf of Mexico.

Reuters:

• Exxon(XOM), Petronas to Lift Tapis Oil Output in 2013. Exxon Mobil Corp (XOM) plans to invest more than $1 billion to enhance crude oil output at Malaysia's maturing Tapis field in 2013, a company spokeswoman said on Wednesday.
• China Bank ICBC Head Warns Recovery Not Solid.
  

Financial Times:

• U.K. Chancellor of the Exchequer George Osborne told cabinet ministers that departmental spending cuts of 15 to 20% might be necessary as part of the drive to reduce the public deficit.

Cinco Dias:

• Spanish lenders have failed to secure financing in the interbank market from foreign banks since June 4.

21st Century Business Herald:

• Chinese banks can withstand a 30%-50% decline in home prices, citing bank officials. The nation's banks have completed stress test on their exposure to mortgages. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. can withstand about a 35% decline in home prices. Bank of Communications Co. can withstand a 30% decline in prices and Agricultural Bank of China can take a 20% drop. China Minsheng Banking Corp. can withstand a decline of 40%. China Merchants Bank Co. can withstand a drop of 37%.

Caixin Online:

• New-home prices fell 3% in Beijing last month from April and may fall further, citing Lin Qian, vice president of real estate agency Homelink.

Xinhua:

• Yum!'s(YUM) Agrees to Raise Some China Workers' Pay. Workers at Yum! Brands Inc.’s fast- food chain KFC in northeast China will see their minimum wages rise to 900 yuan ($132) a month from 700 yuan after the company agreed to demands from the local trade union, the official Xinhua news agency reported. Employees of the U.S. company’s branch in Shenyang, Liaoning province, will also receive an annual pay rise of 5 percent, Xinhua said in a report late yesterday, citing Feng Hui, head of the Shenyang Municipal Trade Union for Service Industries.

DEBKAfile:

• Osama Bin Laden and Top Aides Are Hiding in Sabzevar, Iran. Osama bin Laden's hiding place was pinned down for the first time Monday, June 7, by the Kuwaiti Al-Siyassa Monday, June 7, as the mountainous town of Savzevar in the northeastern Iranian province of Khorasan, 220 km west of Mashhad. He is said to have lived there under Tehran's protection for the last five years, along with Ayman Al-Zawahiri and five other high-ranking al Qaeda leaders.
  

Bear Radar

Style Underperformer:

• Large-Cap Value (+.66%)

Sector Underperformers:

• Gold (-1.51%), Education (-.09%) and I-Banks (+.35%)

Stocks Falling on Unusual Volume:

• BP, HMC, MDRX, TTWO, CVC, CTEL, IPCM, RMBS, PLXS, REGN, FARO, IPGP, TLVT, TITN, MATK, NFP, NFP, PNM, KNM, EVR and MLR
  

Stocks With Unusual Put Option Activity:

• 1) TLAB 2) ADSK 3) ABK 4) RMBS 5) BP
  

Stocks With Most Negative News Mentions:

• 1) BP 2) GS 3) BA 4) KWK 5) ABK
  

Bull Radar

Style Outperformer:

• Mid-Cap Growth (+1.96%)

Sector Outperformers:

• Oil Service (+4.03%), Construction (+3.47%) and REITs (+2.92%)

Stocks Rising on Unusual Volume:

• EQIX, PXP, SGY, BG, NKTR, CIEN, NFLX, FWLT, GWR, PLL, OXM, RDY and HGT
  

Stocks With Unusual Call Option Activity:

• 1) MDCO 2) NRG 3) CAR 4) ODP 5) ROST
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) ECLP 3) TXN 4) CAH 5) GOOG

Wednesday Watch

Evening Headlines
Bloomberg:

• IMF Says Risks to Global Economy Have Risen 'Significantly'. Risks to the global economic outlook have “risen significantly” and policy makers have limited room to provide support to growth, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said. “A key concern is that the room for continued policy support has become much more limited and has, in some cases, been exhausted.” “After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility,” Shinohara said. “The global outlook remains unusually uncertain and downside risks have risen significantly.”
  
• Greek Default Seen by Almost 75% in Poll Doubtful About Trichet. Global investors have little confidence in Europe’s efforts to contain its debt crisis or in European Central Bank President Jean-Claude Trichet, with 73 percent calling a default by Greece likely. Only 23 percent say they expect the region’s almost $1 trillion rescue package to both keep the European monetary union together and prevent a debt default by a government, according to a quarterly poll of investors and analysts who are Bloomberg subscribers. More than 40 percent say Greece is likely to abandon the euro. “There is clearly a risk of a breakup of the euro,” says Geoff Marson, managing director at a Guernsey subsidiary of London-based Odey Asset Management, which oversees about $6 billion. Trichet, whose ECB supported the rescue package by buying bonds of Greece and other European governments, saw his approval rating tumble from a January Bloomberg poll. A plurality -- 48 percent -- give the 67-year-old central banker an unfavorable rating in the latest poll, while 41 percent view him favorably. In January, Trichet received a 60 percent approval rating, with 27 percent regarding him negatively. “Trichet has sacrificed the ECB’s independence by helping to rescue Greece,” says Cyril Boudin, a participant in the poll and a derivatives trader at Unicredit Group in London. More than 60 percent of those surveyed say they expect the euro to fall further against the dollar over the next three months. While the European currency may be due for a “corrective bounce” in the short run, “longer term, the market has parity in its sights,” says Marson, who took part in the poll. “This crisis could be a significant step that leads to an eventual breakup of the euro zone,” says William Aston-Reese, vice president of money-market sales at New York-based broker Tradition Asiel Securities Inc. and a poll participant.
• Crude-steel production capacity in South Korea, Asia's fourth-biggest producer, will surge 25% to a record this year as Hyundai Steel Co. adds plants, an industry group forecast. Total capacity may gain by 16 million metric tons to 80.2 million tons from a year ago, the Korea Iron & Steel Association said today.
• Hornbeck(HOS) Sues U.S. to Lift Deepwater Drilling Ban. Hornbeck Offshore Services Inc. sued the U.S. Interior Department to lift the six-month ban on deepwater drilling in the Gulf of Mexico triggered by the deadly explosion of a drilling rig and subsequent oil spill. Hornbeck, whose supply boats serve almost all 33 drilling rigs that were operating in the deepwater gulf, said one customer has already said it will cancel a contract as a result of the moratorium. “There is nothing in the report that suggests OCS drilling is more dangerous today than it was on the day immediately preceding the tragic incident involving the Deepwater Horizon,” Carl Rosenblum, an attorney for the company said in a complaint filed in New Orleans federal court. Hornbeck is seeking an injunction stopping the moratorium. “Hornbeck is suffering immediate irreparable harm,” including the ability to retain trained staff for its vessels and offshore operations, which have been idled by the ban on drilling in waters deeper than 500 feet, according to the complaint.
• Iran Guard Corps Companies Among Targets for UN Council Vote. The United Nations Security Council is set to vote today on a fourth round of sanctions on Iran that target companies controlled by Iran’s Revolutionary Guard Corps, a bank and a top official of the nation’s atomic energy agency.
• Iran Opposition Struggles as Nuclear Wrangle Boosts Ahmadinejad.
• SEC Plans to Seek Circuit Breakers for 'Thousands' of Stocks. U.S. Securities and Exchange Commission Chairman Mary Schapiro said the agency will expand a proposal that would halt trading of stocks after they’ve risen or fallen 10 percent during a five-minute period. The SEC intends to add “thousands” of companies to a plan that would initially affect companies listed on the Standard & Poor’s 500 Index, Schapiro said during a speech today.
• Aussie Faces 'Volatile Ride' as China Bubble May Pop, HSBC Says. The Australian dollar faces a “bumpy and volatile ride” because of the risk that China’s property bubble may deflate, HSBC Plc said as they lowered their year-end forecast for the currency to 85 U.S. cents. The absence of any shocks from China or from Australian banks’ large foreign borrowings could allow the Aussie to climb to $1, said HSBC, which earlier this year had forecast parity. The Aussie could drop to 70 cents if such shocks occur, analysts from HSBC wrote in an e-mailed report.
• India Free-Float Rules May 'Drag' on Stocks, Credit Suisse Says. India may fail to absorb a surging supply of stocks as increased sales “drag” on the market after the government raised the minimum public holding for all companies, Credit Suisse Group AG said. More than 200 companies may need to sell at least $13 billion of shares over the next 12 months, analysts led by Nilesh Jasani wrote in a report. Some $15 billion of equity offerings are already planned, they said. All companies must increase the public holding to at least 25 percent by selling at least 5 percent a year, the government said on June 4. “Implementation could prove to be a substantial drag for the market,” the analysts wrote. “Without a rampant bull market supported by massive unprecedented inflows, the rule- modified primary market demand for funds cannot be met.”

Wall Street Journal:

• Washington Wire: Primary Updates.
  
• Lincoln Bucks Wave Against Incumbents. Arkansas Sen. Blanche Lincoln survived a strong challenge Tuesday from Lt. Gov. Bill Halter in a hard-fought Democratic primary runoff, pulling out a narrow victory on a night when results across the country showed both the power and limits of this year's anti-establishment tide. Ms. Lincoln barely avoided becoming the third senator this year to be defeated by her own party. Labor unions and liberal groups had sought to make an example of Ms. Lincoln for her deviation from liberal positions, putting millions of dollars behind Mr. Halter's challenge. Even with the victory Tuesday, Ms. Lincoln will have a hard fight to avoid succumbing to an anti-incumbent tide that has left its mark across the country this year. She is trailing by double digits in multiple public opinion surveys against her GOP opponent, four-term Rep. John Boozman.
• Lincoln's Win: Support for Derivatives Plan May Firm Up. It’s unclear what Sen. Blanche Lincoln’s victory in the Arkansas Democratic primary will mean for the details of the financial overhaul bill, but it certainly means she will remain a powerful lawmaker in the coming weeks. Many bankers had assumed she would lose her primary. And that, they hoped, would allow lawmakers negotiating a final bill to ditch a provision she wrote that could force banks to spin off derivatives. It’s in the bill that passed the Senate, but not the one that passed the House. With her political stock potentially rising and a seat on the conference committee to finalize details of the bill, she will be in a powerful perch in the days ahead. In fact, her derivatives provision might just have helped her win her primary, so it’s doubtful she’ll be looking to shed it. Her victory might encourage more Democrats to support the provision as a way to send a message to Wall Street that resonates with voters.
• S&P Takes Negative Action On 8 US Oil & Gas Companies. Standards & Poor's Ratings Services took several negative ratings actions, including four downgrades, on eight U.S. oil and gas companies following the U.S. Department of the Interior's extension of the moratorium on drilling permits. The ratings agency said the actions also reflect "our heightened concerns about the burgeoning scope of the Macondo well disaster." S&P's action affect those operating in the Gulf of Mexico, which could be hit by operating disruptions and the flow of oil from the well disaster. S&P said the six-month moratorium affects permits issued for new drilling operations at water depths greater than 500 feet. S&P believes when the moratorium is eventually lifted, there could be extensive delays in issuing new permits due to high initial volume and new safety and operating standards. Uncertainty about the ultimate costs and potential financial liabilities associated with the disaster already resulted in a ratings downgrade for BP on Friday. Tuesday's ratings actions on Transocean and Anadarko Petroleum Corp. (APC) also reflect those concerns. S&P on Tuesday lowered its junk-level ratings on ATP Oil & Gas Corp. (ATPG), Hercules Offshore Inc. (HERO), Helix Energy Solutions Group Inc. (HLX) and Hornbeck Offshore Services Inc. (HOS). ATP's rating was slashed two notches, to highly speculative territory, while the other three ratings were cut by one notch each. Anadarko and Seacor Holdings Inc.'s (CKH) barely investment-grade ratings' outlooks were revised to negative from stable. Transocean and PHI Inc. (PHII), meanwhile, were placed on watch for downgrade. Transocean's rating is at BBB+, or three notches into investment-grade territory, while PHI is four notches into junk, at B+.
• Citadel Veterans Open Up Own Shop. Three Executives From Hedge Fund's Execution-Services Arm Start a Computer-Driven Trading Firm.
• U.S. Hits China With Steel Penalty. In a move that could escalate trade tensions between the U.S. and China, the Department of Commerce found that Chinese drill-pipe makers were selling roughly $200 million of pipes in the U.S. for less than their market value. The ruling, while preliminary, places a 15.7% subsidy on finished and unfinished drill pipe, mainly used for oil and natural gas extraction, coming into U.S. ports beginning Wednesday.

CNBC:

• Teens Face Worst Summer Job Market in 41 Years. Employment among 16-to 19-year olds in May grew by just 6,000, the smallest increase since 1969, when teen jobs fell by 14,000, according to government data analyzed by employment firm Challenger, Gray & Christmas. In May 2008 and 2009, teen employment grew by over 110,000. “It’s certainly a preliminary strong indication that it’s going to be a tough job market for teens,” said John Challenger, CEO of Challenger, Gray & Christmas.
• Texas Instruments(TXN): High End of Quarterly Outlook Likely.
  

IBD:

• Boutique Investment Bank Fills The Void Left By Exit Of Big Guns. Evercore Partners (EVR) has flourished in this somewhat neglected domain.

NY Times:

• The Blog Prophet of Euro Zone Doom. For years, almost nobody paid attention to the sky-is-falling alarms of Edward Hugh, a gregarious British blogger and self-taught economist who repeatedly predicted that the euro zone could not survive. Living a largely hand-to-mouth existence here on his part-time teacher’s salary, he sent one post after another into the Internet wilderness. It was the height of policy folly, he warned, to think that aging, penny-pinching Germans could successfully coexist under one currency umbrella with the more youthful, credit-card-wielding Irish, Greeks and Spaniards who shared the euro with them. But now that the European sovereign debt crisis is rattling world markets, driving the euro lower almost every day and raising doubts about the future of the monetary union, his voluminous musings have become a must-read for an influential and growing global audience, including policy makers in the White House.

Business Insider:

• BP(BP) Expresses Extreme Confidence About Latest Leak Fix, Says Flow Will Slow To A "Trickle".
• Google(GOOG): Here's Why Our New Search Engine "Caffine" Is So Amazing.
• Taylor Energy Denies Significant Gulf Leak, Says Photos From Unidentified Aircraft Were Misleading.
  

CNNMoney:

• Beware of Falling Prices. Lumber prices are sinking. And while that might make a trip to Home Depot cheaper, it's also a sign that the global economic recovery and the U.S. housing rebound are in danger of stalling.
• Medicaid: States' $24 Billion Black Hole. Governors and state lawmakers are anxiously waiting to see whether Congress will send them another $24 billion to help cover their ever-expanding Medicaid rolls.

Institutional Investor:

• British Hedge Funds Were the Biggest Losers in May.

Atlanta Journal Constitution:

• Enough of It! Stop the Federal Spending Spree. Runaway federal spending has emerged as the chief issue on the minds of voters heading into the fall election season — and for good reason. In 2000, the federal government spent $1.8 trillion while debt held by the public stood at $3.4 trillion. A mere decade later, the federal government is on pace to spend $3.7 trillion while publicly held debt is approaching $10 trillion. There’s no blame game left to be played. President George W. Bush left office having presided over one of the largest expansions of federal spending in history. President Barack Obama appears intent on pulling off the amazing feat of making Bush look like a relative tightwad.

ObamacareWatch.org:

• The More We Learn, The Worse It Gets. The truth is, the more we learn about ObamaCare, the worse it gets. It’s filled with budgetary gimmicks and flawed assumptions that will bankrupt the U.S. treasury. Its taxes will force deep cuts in employment in the medical device and other industries. Restaurants and other employers will have strong incentives to avoid hiring workers from low income households in order to lessen the burden from the law’s mandates and penalties. It will disrupt insurance for millions of Americans who are perfectly happy with the coverage they have today. And the government’s clumsy cost-cutting efforts will undermine the quality of American medicine. Most Americans already instinctively understand all of this. But it’s also clear that the administration and its allies will spend millions trying to persuade them that up is down when it comes to health care. We have launched this web site to set the record straight. ObamaCareWatch.org pulls together all of the best evidence and analysis about the legislation, as well as relevant news items and commentary, in an accessible and searchable format for anyone to use as they need to. Our aim is to provide Americans with the facts so that they can hold those who sponsored and passed ObamaCare accountable for what they have done.

McClatchy:

• How Senator Dodd Empowered Fed to Assume AIG's(AIG) Toxic Assets. A little noticed 1991 amendment to a Depression-era law, written by a securities industry lawyer and pushed by Sen. Christopher Dodd, D-Conn., allowed AIG to post tens of billions of dollars in shaky mortgage securities as collateral for taxpayer loans. In rescuing the insurance giant and several Wall Street firms in the fall of 2008, top government officials wrestled with how to deal with so-called "toxic" securities tied to the risky home loans at the root of the subprime mortgage meltdown. Their solution, amounting to a transfer of about $90 billion in mostly subprime mortgage securities from major financial institutions to American taxpayers, is likely to remain one of the most controversial aspects of the massive federal response to the crisis. Critics contend that the Federal Reserve Bank of New York failed to protect taxpayers sufficiently when it paid $29 billion for toxic assets in saving the foundering investment house Bear Stearns and about $60 billion to settle AIG's liabilities for investments in subprime mortgage securities. The Fed wound up lending $43.8 billion to take possession of those securities. William Ford, a former president of the Federal Reserve Bank of Atlanta, voiced support for senior Fed officials' decisions to serve as a lender of last resort in the heat of the crisis, but called it "dangerous" to accept subprime mortgage securities as collateral. A government watchdog says that the Fed engaged in a bit of legerdemain to make it appear that taxpayers have profited from the toxic securities. The amendment to Section 13(3) of the Federal Reserve Act allows the Fed to accept any collateral to its "satisfaction" for loans to "non-banks" such as AIG, as opposed to typical Fed loans to banks requiring investment-grade collateral. One person who was present during the legislative process, but declined to be identified for fear of damaging relationships, called it "fascinating, the whole way this thing gets slipped in. No one really understood what was happening, and boom, it's in the law." Rodgin Cohen, a prominent Wall Street lawyer, said he drafted the amendment, with help from others. While he's represented Goldman Sachs(GS) and AIG for years, Cohen said he wasn't acting on a client's behalf. Dodd, who's retiring from Congress this year, received $41,625 in campaign donations in 1991 and 1992 from Goldman Sachs, Bear Stearns, J.P. Morgan and three other big Wall Street firms that would benefit from the 2008 bailout. Since then, those banks donated another $883,800 to his political committees, according to Federal Election Commission records.

Boston Globe:

• Patrick Plans for Possible $800 Million Cut in Massachusetts State Budget. Governor Deval Patrick's administration today announced a broad plan to slice more than $800 million from next year's state budget if anticipated federal funding doesn't come through, proposing cuts across nearly every aspect of state government. Only the local aid Beacon Hill sends to cities and towns would be protected, preserving a priority Patrick has set as he campaigns for re-election. Patrick, the House, and the Senate all built into their spending plans for next fiscal year money the state expected to get through a federal stimulus program that boosts Medicaid reimbursements, which frees up money to fill other budget gaps. But Congress has so far failed to extend the program past Dec. 31, leaving the funds in doubt. Massachusetts is one of about 30 states depending on a six-month extension to help ease the effects of the economic crisis on its budget, but some in Congress worry the increase in spending will further swell the federal budget deficit.

Politico:

• Anti-Incumbent Wave Rolls On.

Big Government.com:

• Congressman Issa to Investigate Paulson, Center for Responsible Lending. On April 22nd we published an article entitled IndyMac Attack: Did Schumer, Paulson, Soros, and the CRL Kill the Bank and Profit From Its Collapse? We summarized the story as follows:

Reuters:

• Goldman(GS)-Basis Talks Look to be Breaking Down: Source. Goldman Sachs Group Inc (GS) may be looking at a new legal headache as settlement talks with an Australian hedge fund that invested $100 million in a now toxic mortgage-linked security appear to be breaking down, a source said. Lawyers working for the Basis Yield Alpha Fund could file a lawsuit against Goldman over the transaction -- called Timberwolf -- as early as Wednesday if a deal is not reached, said a person familiar with the situation. Negotiations between Goldman and Basis began months ago, but have heated up in the wake of a lawsuit filed by the U.S. Securities and Exchange Commission against Goldman over another subprime mortgage-linked security.
• Australia Mining Tax Hits Projects. Aluminum Corp of China (Chalco) could be forced to call off its $2.5 billion Aurukun bauxite and alumina refining projects in Australia if a proposed mining tax is introduced, the Australian Financial Review reported.
• Fed's Hoenig Again Calls for Hike in Interest Rates.
  

TimesOnline:

• Airlines Attack 'Cash-Grab' German Tax. Airlines reacted furiously to plans announced by Angela Merkel, the German Chancellor, to raise €1 billion from a new “eco tax” on aviation. Lufthansa said it was a “black day” for the sector, while the industry’s trade association denounced it as a “cash grab” and a “kick in the teeth” for airlines and passengers alike.

Telegraph:

• BP(BP) Oil Spill Fears Hit North Sea as Norway Bans Drilling. Norway has banned new deepwater oil drilling in the North Sea amid in a sign that panic over BP's Gulf of Mexico spill is spreading.

Les Echos:

• The French government plans to introduce a tax on individuals earning more than 11,000 euros a month to help finance the country's pension system, citing government officials.

Yonhap News:

• U.S. Cautious About U.N. Condemnation of N. Korea Amid Reluctant China. The United States Tuesday was cautious about how to punish North Korea for the torpedoeing of a South Korean warship amid China's lukewarm position on further sanctions on its communist ally.
• South Korean President Lee Myung Bak said "tangible" actions need to be taken against North Korea related to the sinking of a warship, citing participants in a defense policy advisory committee meeting.
  

Sing Tao Daily:

• Wharf (Holdings) Ltd. expects revenue from home sales in China to decline this year as the government tries to curb speculation in the property market, Peter Woo, the company's chairman, said. The developer, which owns Times Square complexes in mainland cities including Shanghai, Dalian and Wuhan, said housing prices in China may drop 20% to 30% this year.

South China Morning Post:

• Beijing Worried Over ABC Flotation. Not Enough Interest Seen in Bank's IPO. The central government is getting cold feet over the Agricultural Bank of China's planned US$20 billion share sale, two people involved in the offering said. China's Ministery of Finance and Central Huijin Investment Co., the two main shareholders of the Agricultural Bank of China, want the lender to delay a planned share sale in Hong Kong on concern there isn't enough interest, citing two people involved in the offering.
  

National Business Daily:

• Shanghai Greenland Group Co. plans to cut prices at its 100 property developments in 41 Chinese cities, citing the company. The developer's sales in Shanghai fell to about 7,000 square meters last month from 32,700 square meters in April, citing Lu Qiling, an analyst at Shanghai Uwin Real Estate Information Services Co.

Evening Recommendations
Citigroup:

• Reiterated Buy on (BEN), target $132.

Thomas Weisel:

• Upgraded (MDRX) to Overweight, target $24.
  

Night Trading

• Asian indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 148.0 +.5 basis point.
• S&P 500 futures -.25%.
  
• NASDAQ 100 futures -.18%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CIEN)/-.17
• (BF/B)/.53
• (MW)/.14
• (ALOG)/.31
• (SHFL)/.10
• (TITN)/.09
• (THO)/.60
• (KFY)/.13

Economic Releases
10:00 am EST

• Wholesale Inventories for April are estimated to rise +.5% versus a +.4% gain in March.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -900,000 barrels versus a -1,902,000 barrel decrease the prior week. Gasoline supplies are estimated to fall by -500,000 barrels versus a -2,647,000 barrel decline the prior week. Distillate inventories are expected to rise by +500,000 barrels versus a +445,000 barrel increase the prior week.

2:00 pm EST

• The Fed's Beige Book.

Upcoming Splits

• (DHR) 2-for-1
  

Other Potential Market Movers

• The Fed's Bernanke speaking, $21 Bln 10-Year Treasury Note Auction, weekly MBA mortgage applications report, (ECPG) investor day, Jefferies Life Sciences Conference, UBS Tech/Services Conference, RBC Tech/Media/Communications Conference, JPMorgan Diversified Industries Conference, Piper Consumer Conference, BofA Merrill Small/Mid Cap Conference and the Needham Healthcare Conference could also impact trading today.
  

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

Stocks Reversing Higher into Final Hour on Euro Bounce, Less Financial Sector Pessimism, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Rising
  
• Volume: Above Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 33.15 -3.88%
  
• ISE Sentiment Index 116.0 +17.17%
  
• Total Put/Call 1.12 +16.67%
  
• NYSE Arms .70 -64.55%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 128.65 bps +1.63%
  
• European Financial Sector CDS Index 186.28 bps +6.25%
  
• Western Europe Sovereign Debt CDS Index 143.50 bps +1.18%
  
• Emerging Market CDS Index 310.36 bps +2.54%
  
• 2-Year Swap Spread 43.0 -3 bps
  
• TED Spread 43.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .10% -1 bp
  
• Yield Curve 243.0 -2 bps
  
• China Import Iron Ore Spot $146.60/Metric Tonne -.61%
  
• Citi US Economic Surprise Index +2.60 -2.3 points
  
• 10-Year TIPS Spread 1.93% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -22 open in Japan
• DAX Futures: Indicating +12 open in Germany

Portfolio:

• Slightly Higher: On gains in my Retail, Medical and Biotech long positions
  
• Disclosed Trades: Covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades near session highs on a bounce in the euro and rises in (XLF)/(IYR). On the positive side, Food, Restaurant, Insurance, Bank, Telecom, Paper, Utility, Steel, Energy and Coal stocks are especially strong, rising .75%+. Weekly retail sales rose +3.6% this week versus a +2.7% gain the prior week. This is the biggest gain since the week of April 6. On the negative side, HMO, Hospital, Biotech, Disk Drive, Oil Tanker and Alt Energy shares are under pressure, falling more than -1.0%. The tech sector has underperformed throughout the day again and remains a big worry. The California Municipal CDS is rising +4.8% to 293 bps, which is the highest since March 1. The GE Capital CDS is rising 8.0% to 271.64 bps, which is the highest since Sept. of last year. Given the market's oversold state, today's rally could be extended a few days. However, until gauges of credit angst begin to roll over, I would view any meaningful stock rally as suspect. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less financial sector pessimism and bargain-hunting.

Today's Headlines

Bloomberg:

• Fitch Says U.K. Fiscal Challenge 'Formidable;' Pound Declines. Britain is facing a fiscal challenge and needs to accelerate plans to reduce its budget deficit, Fitch Ratings said. The pound extended declines. “The scale of the U.K.’s fiscal challenge is formidable and warrants a strong medium-term consolidation strategy, including a faster pace of deficit reduction than set out in the April 2010 budget,” Fitch analysts including Brian Coulton in London wrote in a report today. Interest payments on U.K. debt, rated AAA at Fitch, may reach a “staggering” 70 billion pounds ($101 billion) in five years, from 31 billion pounds in the past fiscal year, Prime Minister David Cameron said yesterday. Standard & Poor’s, which also gives Britain the top credit grade, has a “negative” outlook amid concern about the deficit.
  
• Bank Risk Nears Record High on Spain's $60 Billion Capital Call. Bank credit-default swaps surged near to a record on concern Spanish lenders will have to raise $60 billion to shore up capital as lawmakers struggle to finance a swollen budget deficit. The Markit iTraxx Financial Index of swaps on 25 European banks and insurers climbed as much as 14 basis points to 208, approaching the all-time closing high of 210 basis points set in March 2009, JPMorgan Chase & Co. prices show. Banco Santander SA, Spain’s biggest bank, increased 23 basis points to a record 258, according to CMA DataVision. Spanish lenders need as much as 50 billion euros ($60 billion) of capital, according to Banco Bilbao Vizcaya Argentaria SA, as they face mounting writedowns triggered by a housing market collapse and losses on government bond holdings. Civil servants went on strike today to protest at Prime Minister Jose Luis Rodriguez Zapatero’s efforts to tame the euro area’s third-largest deficit. “There is illness in the Spanish banking system,” said Jeroen van den Broek, head of credit strategy at ING Groep NV in Amsterdam. “It’s very similar to 2008, when the market was hunting down the next bank failure. Now, the market’s hunting the next sovereign fiscal problem.” The spread between Spanish 10-year securities and German bunds widened 10 basis points to 213 basis points, a level not seen since before the introduction of the euro in 1999. Spanish bank capital needs may amount to about 5 percent of the nation’s gross domestic product of about 1 trillion euros through 2013, Bilbao-based BBVA said yesterday. The estimate exceeds a forecast by Standard & Poor’s that a state-backed rescue of Spain’s banking industry could cost 35 billion euros. Swaps on Bancaja, the Valencia-based lender downgraded by Fitch Ratings on June 1, rose 32.5 basis points to 668.5, CMA prices show. Contracts on BBVA increased 23 basis points to a record 292, Banco de Sabadell SA climbed 20 to 369 and Banco Pastor SA rose 35.5 to 495, CMA prices show. Investors are paying record high rates to protect bonds of banks in Europe from default relative to the rest of the market. The Markit iTraxx Financial Index is more than 60 basis points higher than the corporate Markit iTraxx Europe Index, according to JPMorgan. “There’s no doubt that this EU sovereign crisis will change the course of economic history,” Jim Reid, head of fundamental strategy at Deutsche Bank AG in London, wrote in a note to investors. “It may be up to the central banks to provide stability going forward.”
• The pace of hedge fund liquidations quickened in the first quarter after a year of declines, according to Hedge Fund Research Inc. About 240 funds shuttered in the first quarter, following 165 closures in the prior three months. Firms that invest client money in hedge funds had the most closures at 102. More than 1,000 hedge funds closed last year, making 2009 the second-highest year on record after 2008, when 1,471 hedge funds liquidated.
• 'Herculean' Europe Debt Effort May Not Save Euro Area, RBS Says. Europe’s 750 billion euro ($900 billion) aid package might fail to save the 11-year-old monetary union and usher in an “extended period” of market stress and disorder, according to Royal Bank of Scotland Group Plc. “Maybe we reach the point where this Herculean effort works and enough policy stimulus is provided so countries can fly again,” David Simmonds, global head of research and strategy at RBS, said in Singapore today. “However I do not subscribe to this view because one cannot treat a debt-fuelled over-consumption problem with a lot more debt.” Financial institutions globally have combined exposure to Portugal, Spain and Greece of more than 2 trillion euros, about half taken up by banks, Simmonds said. “About 500 billion euros or so is held by French and German banks, so the point to stress is there will be a Herculean effort to hold this thing together,” he said.
• Babson Capital to Trim Equity on U.S. Downturn Bet. Babson Capital Management LLC, which oversees more than $100 billion, is betting on weak U.S. growth by limiting its equity holdings of companies acquired in leveraged buyouts. “We believe economic growth will be pretty sluggish for the next few years so we are making a strategic decision to take a more defensive posture, meaning we prefer to get a bit more of our return from coupons of the investments rather than equity kickers,” Michael Hermsen, a managing director who co-heads Babson Capital’s Mezzanine and Private-Equity Group in Springfield, Massachusetts, said.
• The rate to exchange Australian dollars for yen is moving in lockstep with U.S. stocks by the most on record as concern Europe's debt crisis will derail growth pushes investors to the safety of the Japanese currency. The 120-day correlation between Aussie-yen and the Standard & Poor's 500 Index rose to .8277 today, the highest since at least 1991, or as far back as Bloomberg data goes.
• Senate Democrats Propose Trimming Tax Rise on Buyout Managers. Senate Democrats said they will scale back a House-approved tax increase on investment-fund managers as part of their jobs legislation. The plan would tax an increasing amount of the profit share paid to fund executives, known as carried interest, at higher ordinary income tax rates rather than at the lower capital gains rate. The measure also would reinstate a provision dropped by House Democrats that would send state governments $24 billion to help pay for Medicaid health care for the poor. It would pay for that in part by increasing to 41 cents the current 8-cent tax oil companies pay on each barrel of oil they produce.

Bloomberg Businessweek:

• Hedge Funds Spent $1.4 Million Lobbying in 1Q. A trade group representing hedge funds spent nearly $1.4 million in the first quarter lobbying federal officials on proposed financial regulations, including stricter oversight of derivatives trading. The $1.37 million that the Managed Funds Association spent on lobbying was up from the $790,000 that the organization spent in the same quarter a year ago. It also tops the nearly $1.1 million spent in last year's fourth quarter by the lobbying organization for hedge funds, which cater to institutional investors and wealthy individuals.
• Gold Rises to Record on Demand for Haven From European Crisis. Gold rose to a record on demand for a haven from financial turmoil in Europe. Gold futures climbed to $1,254.50 an ounce in New York and also touched highs in sterling, euros and Swiss francs. European equities fell and Fitch Ratings said the U.K. must deepen budget cuts to protect its top credit rating.

CNBC:

• Housing's Double Dip: Numbers Tell How Bad It Is.

Fox News:

• JPMorgan(JPM) May Take Brunt of New Financial Reform. The conventional wisdom on Wall Street has been that the new financial-reform package will squeeze earnings at Goldman Sachs (GS: 135.5085, -3.2815, -2.36%) much tighter than most of its competitors because of limitations on so-called proprietary trading. But executives at Goldman Sachs have been telling clients and investors just the opposite is true; in fact, it’s the firm’s chief competitor, JPMorgan Chase (JPM: 37.11, 0.38, 1.03%), that could get hit the hardest, FOX Business Network has learned.

NY Times:

• Trade by Iran is Veiled by Web of Shell Companies.
• With Strikes, China's Workers Seem to Gain Power.
  

NY Post:

• JPMorgan(JPM) Coal Hole. JPMorgan Chase's CEO Jamie Dimon may get burned by a coal trade that is said to have rung up a loss of as much as $250 million this quarter, The Post has learned.The hit, which occurred on the bank's commodities desk, is believed to have been the result of wrong-way bets that JPMorgan placed in recent weeks on coal traded in different regions of the world.The potential losses come at an inopportune time, as Washington lawmakers review sweeping changes to Wall Street rules on proprietary trading.
• Where Are the Jobs?
  

Business Insider:

• What A Downgrade of Tencent Says About China's Online Gaming Sector.
• Taylor Energy Will Soon Put Out Comments On Saratoga Oil Leak. A spokesperson from Taylor Energy contacted us about the second oil leak everyone's talking about. Denise Fields declined to comment, saying only that the Louisiana-based company will release an emailed statement later this afternoon. Although the Ocean Saratoga is leaking less than Deepwater Horizon and has been leaking for at least five weeks, all parties are treating this with great caution. Rig operator Diamond Offshore has refused to comment.
• North Korea Shoots Three Chinese At Border, As Relations Between The Countries Deteriorate Further.
• Here Are The Countries And Banks Most Exposed to the Emerging Crisis in Hungary.
  

Zero Hedge:

• China Sovereign Wealth Fund Announces 10% Mark-to-Market Loss for May.
• 7-Day Commercial Paper Rate Hits 18 Month Highs. The crunch in funding continues. As we wrote yesterday, there is $673 billion in Commercial Paper maturing over the next month and a half. The problem is that the rolling of all this paper will come at increasingly higher costs.

Seeking Alpha:

• Top Stocks Owned by Hedge Funds.

Washington Post:

• Hilarious Aussie Video Explaining Europe's Impossible Debt Problem. (video)

TheStreet.com:

• Hedge Funds Struggle Amid Manager Scandals. Some of the biggest victims of the Madoff scandals were investors who relied on vehicles known as funds of hedge funds. Hundreds of millions of dollars vanished from funds of funds run by Maxam Capital Management and Tremont Group Holdings. Shaken by the losses, investors fled funds of funds. Withdrawals totaled $158 billion in 2008 and 2009, according to industry tracker Hedge Fund Research.

Washington Times:

• Lawmakers Got Fed Funds for Fancy Frontage. With a rooftop pool and 24-hour concierge service, the new luxury condominiums off Frank Sinatra Drive here seem an unlikely spot in need of a multimillion-dollar federal giveaway. Yet U.S. taxpayers doled out at least $8 million on a public walkway and park space in front of the Maxwell Place development here overlooking the New York City skyline - an amenity the development touts alongside its entertainment lounge, rooftop hot tub and theater screening room. But the decision to use tax dollars to fund the walkway project was made after private developers had already agreed in 2003 to pay for it - indeed, it was a key condition for getting the project off the ground, according to public records and interviews. Still, under the so-called earmarking process, by which Capitol Hill lawmakers slip requests for pet projects into larger spending bills, Sens. Frank R. Lautenberg and Robert Menendez, New Jersey Democrats, later pushed for millions of dollars in federal funding for the project.

The Hill:

• Ax May Fall on Tax Break for Mortgages. The popular tax break for mortgage interest, once considered untouchable, is falling under the scrutiny of policymakers and economic experts seeking ways to close huge deficits. Although Congress last year rejected the White House’s proposed cut to the amount wealthier taxpayers can deduct for home mortgage interest payments, the administration included it again in its 2010 budget — saying it could save $208 billion over the next decade. And now that sentiment has turned against all the federal red ink — and cost-cutting is in vogue — Democrats on President Barack Obama’s financial commission are considering the wisdom of permanent tax breaks such as the mortgage deduction and corporate deferral. Calling them “tax entitlements,” senior Democratic lawmakers have argued they should be on the table for reform just like traditional entitlement programs Medicare, Social Security and Medicaid.

Politico:

• Poll: Oil Response Worse Than Katrina. More than two-thirds of Americans rate the federal government's response to the oil spill off the Gulf Coast negatively — topping the number of those who said the same about Katrina soon after the hurricane, according to a new ABC News/Washington Post poll. Sixty-nine percent of the 1,004 adults polled nationwide held a negative view of the federal government's response to the spill; only 28 percent gave the government a positive rating.
• Spending Fears Threaten Dem Agenda. At a closed-door meeting with a small group of House Democrats late last month, House Speaker Nancy Pelosi heard gripes from members not happy about having to vote on a big spending measure at a time when many voters think government growth and deficits are out of control. Nothing new there. Pelosi’s been hearing this type of message from the noisy caucus of moderate Blue Dog Democrats for a year and a half. But this time was different: The malcontents were freshmen, many of whom have enthusiastically backed President Barack Obama’s agenda most of the way but now are choking on its cost.
  

ABC News:

• Incumbents Beware: Poll Shows Frustration Index at New Highs. Ahead of 2010 Midterm Elections, Frustration with Government Past Boiling Point.

USA Today:

• More Than 1 in 5 Kids Live in Poverty. The rate of children living in poverty this year will climb to nearly 22%, the highest rate in two decades, according to an analysis by the non-profit Foundation for Child Development. Nearly 17% of children were living in poverty in 2006, before the recession began. The foundation's Child and Youth Well-Being Index tracks 28 key statistics about children, such as health insurance coverage, parents' employment, infant mortality and preschool enrollment. The report projects that the percentage of children living in families with an "insecure" source of food has risen from about 17% in 2007 to nearly 18% in 2010, an increase of 750,000 children. Up to 500,000 children may be homeless this year, living either in shelters or places not meant for habitation.

Reuters:

• US Weekly Gasoline Demand Down 5.8% - Mastercard. Year-on-year, U.S. gasoline demand slipped 1.7 percent, the SpendingPulse report said.

Le Figaro:

• U.K. Foreign Secretary William Hague said his country can't give more financial guarantees to help nations in the euro-zone because it faces its largest-ever peacetime budget deficit, citing an interview with Hague.

The Economic Times:

• Foxconn Ends Death Payouts to Halt Suicides: Xinhua. iPhone maker Foxconn International Holdings will no longer pay compensation to families of employees who kill themselves to discourage suicides. Xinhua cited posters in Foxconn's Shenzhen complex as saying the company had "concrete evidence" that some of its employees who killed themselves in a recent spate of suicides had done so in order to win compensation money for their families. Most of the victims' families received more than 100,000 yuan ($14,640), Xinhua said.