Today's Headlines

Bloomberg:

• Greece Cut Four Steps to Junk by Moody's on Economic 'Risks'. Greece’s credit rating was cut four steps to non-investment grade, or junk, by Moody’s Investors Service, which cited the country’s economic “risks.” “It’s a significant downgrade,” said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley Smith Barney. “It’s not a surprise to people, but the timing and magnitude is what has taken Treasuries off the lows and is providing some support.”
• Bullard Says Europe Woes Shouldn't Delay Fed Increase. Europe’s debt crisis shouldn’t postpone an increase in the Federal Reserve’s benchmark interest rate, a regional Fed president said, differing from at least two of his colleagues. “Unless events in Europe turn out to be much worse, I think that in the near term, the U.S. is probably a beneficiary of the crisis in Europe” because of lower Treasury yields and cheaper commodities, St. Louis Fed President James Bullard said at a press briefing in Tokyo today. “I don’t think it should push back” the date for the Fed to begin tightening, he said.
• Senate's Lincoln Considers Compromise on Swaps Desk Provision. Senator Blanche Lincoln is considering compromise language to her derivatives proposal that would phase in over two years a requirement that commercial banks push out their swaps trading desks to subsidiaries. The proposal also would allow the Federal Reserve to provide system-wide emergency assistance to swaps dealers in exigent circumstances, according to a draft of the compromise obtained by Bloomberg News and confirmed by Lincoln’s office today.
• Human Trafficking 'Serious' in U.S., Report Says. The trafficking of men, women and children for labor and commercial sex is a “serious” problem in the U.S., according to the State Department. The department’s 10th annual report grades 175 nations on their efforts to fight this modern form of slavery. The U.S. is listed for the first time, placed among those countries that are doing best to comply with the Trafficking Victims Protection Act, the American law against human trade. Still, the report said the U.S. is a source as well as a transit and destination country for people forced into labor, debt bondage and prostitution. The International Labor Organization estimated there were 12.3 million victims of forced labor, sex trafficking, debt bondage and recruitment of child soldiers worldwide in 2009.
• BlueGold Fund Said to Decline Almost 11% in Year Through June 4. BlueGold Capital Management LLP, the energy hedge fund manager overseeing $1.8 billion in assets, fell 10.7 percent in the year through June 4, according to two investors in the fund. A 2.9 percent drop in the first week of June and a 12.5 percent decrease in May erased gains in the first four months of the year, the two people said, declining to be identified because the information isn’t public.

Wall Street Journal:

• Labor Unrest in China Leads to Rethinking. Japanese managers at a Honda Motor Co. lock factory here have tried everything from government mediation to intimidation to end a strike, but can't bridge what one executive called a "communication gap" with restless young workers—a problem confronting many foreign companies that are rethinking their labor practices amid a wave of industrial unrest.

CNBC:

• Gartman 'Appalled' by US Political Reaction to BP Spill.

MarketWatch:

• Credit Spreads Jump as Investors Seek Safety. Credit spreads on high-yield and investment-grade debt hit six-month highs last week as money fled to the safe haven of Treasury bonds -- just as it seemed investors were getting comfortable with riskier debt.

NY Post:

• TV Screen Test. Families may soon get the chance to watch in-theater movies from the comfort of their living room couch -- for between $20 and $30 a flick. That day appears to be approaching as Hollywood warms up to the "home theater" concept of putting movies on video-on-demand cable platforms while they're still playing in the cinema. It's an effort to compensate for declining DVD sales and to thwart companies like Redbox, whose kiosks rent first-run flicks for $1 a night.
• You're Losing Your Plan. ObamaCare's True Face Emerges. Late last week saw the first leaks of the administration's draft regulations for imple menting the ObamaCare law -- and everything is playing out just as the critics warned. The 3,000-odd pages of legislation left most of the really important (and controversial) policy decisions to the regulations that government agencies were told to issue once the bill passed. Now that those regs are starting to take shape, it's clear that the Obama team is using its new power to exert tight control over the payment and delivery of all formerly "private" health insurance. The ObamaCare law references the Secretary of Health and Human Services almost 2,200 times and uses the phrase "the secretary shall" more than 725. Each reference requires HHS to set new rules on medical care, giving control to an existing federal office or one of 160 new agencies that the bill created.

Business Insider:

• BP(BP) Hires Blackstone Group, Goldman Sachs to Defend Itself Against Takeover Attempts.
• Here's Everything You Need to Know About Who's Exposed in Europe.
  

Zero Hedge:

• Baltic Dry Index Rolls Over. The Baltic Dry index, which is the closest proxy for China's bubbleliciousness, has dropped to one month lows, and continues accelerating its drop to the downside.
• Gallup Polling Paints a Much Bleaker Economic Outlook Picture Than UMichigan.
  

Washington Post:

• HGS(HGSI) Awaiting FDA Approval on Lupus Drug Benlysta. After years of developing what could be the first drug in decades to treat systemic lupus, Human Genome Sciences could receive Food and Drug Administration approval for Benlysta in a matter of months. The Rockville-based company submitted its application to the FDA last week, and executives and Wall Street analysts said they anticipate a smooth and speedy review. If that's the case, Benlysta could be given the green light as early as December. Benlysta is one of three drugs in late-stage development that HGS has submitted to the FDA. Its approval would be a boost for the region's biotech sector. HGS is well-positioned after following an FDA testing protocol.
• Retirements by Baby-Boomer Doctors, Nurses Could Strain Overhaul. Since the passage of the health-care law in March, much has been said about the coming swarm of millions of retiring baby boomers and the strain they will put on the nation's health-care system. That's only half the problem. Overlooked in the conversation is a particular group of boomers: doctors and nurses who are itching to call it quits. Health-care economists and other experts say retirements in that group over the next 10 to 15 years will greatly weaken the health-care workforce and leave many Americans who are newly insured under the new legislation without much hope of finding a doctor or nurse. Nearly 40 percent of doctors are 55 or older, according to the Center for Workforce Studies of the Association of American Medical Colleges. Included in that group are doctors whose specialties will be the pillars of providing care in 2014, when the overhaul kicks in; family medicine and general practitioners (37 percent); general surgeons (42 percent); pediatrics (33 percent), and internal medicine and pediatrics (35 percent). About a third of the much larger nursing workforce is 50 or older, and about 55 percent expressed an intention to retire in the next 10 years, according to a Nursing Management Aging Workforce Survey by the Bernard Hodes Group. New registered nurses are flowing from colleges, but not enough to replace the number planning to leave the profession. "Moving into the future, we see a very large shortage of nurses, about 300,000," said Peter Buerhaus, a nurse and health-care economist and a professor at Vanderbilt University. "That number does not account for the demand created by reform. That's a knockout number. It knocks the system down. It stops it." In an article for the Journal of the American Medical Association, Buerhaus and colleagues Douglas Staiger and David Auerbach predicted that there will be at least 100,000 fewer doctors in the workplace than the 1.1 million the federal government projects will be needed in 2020 under the health-care overhaul. Reform will add demand on top of shortages already projected, and as a result the health-care workforce might not be attractive. According to the American Association of Colleges of Nursing, 75 percent of nurses said in a survey they think the shortage "presents a major problem for the quality of their work life, the quality of patient care, and the amount of time that nurses can spend with patients." In a survey by New York University's Christine Kovner, 13 percent of newly registered nurses changed principal jobs after a year, and 37 percent said they were ready to change jobs.

Advertising Age:

• Pandora: iPad Will Be a Bigger Ad Platform for Us Than iPhone.
  

Boston Herald:

• Anti-Addiction Drug Gets Boost. It took seven turns at detox centers and more than a few brushes with the law before Jennifer Ulich was able to kick her heroin habit.

Huffington Post:

• Obama's Treasury Dept. Working to Defeat Derivatives Proposal 'Of Utmost Importance' to Reforming Wall Street.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).
• 58% Favor Repeal of the Health Care Bill. For the second week in a row, 58% of Likely U.S. Voters favor repeal of the national health care plan adopted into law by Congress in late March. The latest Rasmussen Reports national telephone survey finds 36% oppose repeal. These findings include 47% who Strongly Favor repeal and 28% who are Strongly Opposed.

Politico:

• Gulf Fuels New Energy-Bill Push. President Barack Obama and his Democratic allies plan a major new push for a broad global warming bill, fueled in part by public outrage over the BP disaster, according to top aides. Joel Benenson, a pollster for the Democratic National Committee and Obama’s presidential campaign, argues in a new briefing for top Capitol Hill officials that a comprehensive energy bill “could give Democrats a potent weapon to wield against Republicans in the fall.” “The oil spill is intensifying the public’s desire for clean energy investments and increased regulation on corporate polluters,” Benenson writes in the briefing, which he prepared on behalf of the League of Conservation Voters. “In the aftermath of the spill, people firmly believe Congress needs to do more than just make BP pay. Even when pressed with opposition messaging that now is not the time for some ‘job killing energy tax,’ people coalesce around comprehensive clean energy reform. Consequently, support for a comprehensive energy bill is very high.
  

Frankfurter Allgemeine Zeitung:

• European Central Bank President Jean-Claude Trichet and European Commission President Jose Manuel Barroso are in favor of European financial aid to ease Spain's debt. Trichet and Barroso are concerned about the difficulties of Spanish banks.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.05%)

Sector Underperformers:

• Education (-2.35%), Gold (-1.16%) and Oil Service (-.88%)

Stocks Falling on Unusual Volume:

• BP, LAZ, FORM, RDY, TCAP, TTES, APOL, SLRC, ARCL, STST and BSI
  

Stocks With Unusual Put Option Activity:

• 1) PXD 2) FMCN 3) LXK 4) CBS 5) GLW
  

Stocks With Most Negative News Mentions:

• 1) BP 2) F 3) EBAY 4) XOM 5) FNM
  

Bull Radar

Style Outperformer:

• Small-Cap Value (+2.20%)

Sector Outperformers:

• Disk Drives (+3.59%), Coal (+3.08%) and Gaming (+2.81%)

Stocks Rising on Unusual Volume:

• AIXG, TEI, SI, VLO, VQ, BRKR, SAIA, MMSI, RBCN, ONXX, ROSE, AIPC, GSM, SNDK, IRWD, EWBC, JBHT, CTCM, MRCY, AMLN, TRS, CAGC, ARUN, WPRT, CVC, HMC, VQ, KNM, MMC, PZI, CPA and HLX
  

Stocks With Unusual Call Option Activity:

• 1) CMC 2) KEY 3) JBL 4) JCI 5) JBLU
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) CVC 3) LNC 4) GOOG 5) VZ

Monday Watch

Weekend Headlines
Bloomberg:

• Euro Volatility Signaling Weakness as Traders Lose Confidence in Currency. The biggest currency fluctuations since the aftermath of the collapse of Lehman Brothers Holdings Inc. are signaling waning confidence in the economic recovery and prospects for a rebound in the euro. Europe’s sovereign-debt crisis, the failure of regional leaders to improve sentiment toward the euro and diverging growth rates around the world means elevated volatility for years, according to UBS AG, the world’s second-biggest currency trader. Less predictable foreign-exchange levels may endanger the recovery by driving up short-term rates, even as a weaker euro stimulates exports, the Zurich-based bank said. “The sources of concern won’t go away anytime soon,” said Dale Thomas, head of currencies in London at Insight Investment Management Ltd., which oversees about $144 billion. “We’re defensive and still don’t like the euro.”
• Hedge Funds May Face Different Tax Increases: Clifford S. Asness. Next week the Senate will likely pass a massive spending program called the American Jobs and Closing Tax Loopholes Act of 2010. Since it’s now deemed unacceptable to simply tack another $112 billion onto the deficit, Congress needs to offset this spending with a bit of revenue from new sources, this time with a precedent-setting tax on the sale of certain small businesses. The practical problem for Congress is that the carried- interest tax increase is “scored” by the Joint Committee on Taxation to raise only one quarter of the $19 billion or so Congress hopes to raise from these businesses. That is just not enough for their spending desires. The remaining amount supposedly would come from a so-called enterprise-value tax, a new taxation plan whereby owners of investment partnerships that have ever earned as little as $1 of carried-interest income would become subject to ordinary income tax rather than the capital-gains tax rate on the future sale of any portion of their business. This would be a more than doubling of the tax on their long-term value creation. Note this is not a tax on carried-interest income; but even generating $1 of carried-interest income causes the enterprise tax to kick in. It’s a pure tax on business value. This would establish a tax for owners of investment-management firms that is different from all other U.S. businesses, which now pay tax when they are sold at the capital-gains rate. While this tax regime would apply to investment partnerships today, this sets a dangerous precedent for all businesses that might be subject to future political disfavor or have value that can be turned into government revenue.
• Hedge Funds Cut Bullish Oil Futures Bets to 10-Month Low: Energy Markets. Hedge funds cut their bets on higher oil-futures prices to a 10-month low as U.S. economic reports signaled fuel demand is diminishing. Speculative net-long positions, or wagers that prices will increase, in crude futures declined 30 percent to 17,457 contracts on the New York Mercantile Exchange in the week ended June 8, the lowest level since July, according to the Commodity Futures Trading Commission’s Commitments of Traders Report released on June 11. Bets on gains have dropped 87 percent since reaching a record 135,669 in January. Oil demand in the world’s biggest economy will be 18.97 million barrels a day in 2010, the International Energy Agency said June 10, compared with 20.68 million in 2007. It was 18.77 million barrels a day last year.
• Fannie-Freddie Fix Expands to $160 Billion With Worst Case at $1 Trillion. The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history. Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts. “It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.
• BP(BP) Oil Spill Wipes $19 Billion From Value of Energy Bonds: Credit Markets. Debt sold by energy companies worldwide has lost almost 4 percent of its value from this year’s peak on April 27, as potential costs of the Deepwater Horizon oil rig explosion on April 20 mount, according to Bank of America Merrill Lynch’s Global Corporates Energy index. The market value of the index, which contains 805 securities of companies ranging from London- based BP Plc to Anadarko Petroleum Corp. of The Woodlands, Texas, ended June 11 at $510.8 billion. “There are fears in the market of much tighter regulation and concern they’ll have to re-price the risk of fines and cleanup costs,” said Christian Weber, a Munich-based strategist at UniCredit SpA. “The entire sector is under a lot of pressure.”
• China's Nickel Pig Iron Makers Curb Output on Demand Slump, Antaike Says. Nickel pig iron producers in China, the world’s largest consumer of nickel, have started to idle capacity as prices slump and demand weakens, according to Beijing Antaike Information Development Co. Refined-nickel futures in London have tumbled into a bear market since April on concern that Europe’s fiscal crisis will slow the global recovery and China’s curbs on property speculation will cut demand. Nickel futures on the London Metal Exchange slumped 29 percent from a 23-month high of $27,595 a ton on April 16 to the close on June 11. The analysts’ comments add to signs that the government’s drive to prevent a property bubble is helping to hurt demand for commodities used in construction. Zinc smelters in China have also idled as much as 8.8 percent of capacity amid the property curbs, Shanghai Metals Market said earlier this month. Baoshan Iron & Steel Co. is “not very optimistic” that stainless-steel consumption growth in China will match last year, China’s second-biggest stainless steelmaker said May 26. China’s stainless-steel output was 2.8 million tons in the first quarter, according to Antaike, 27 percent more than in the same period in 2009 and 36 percent more than in 2008. The price of the widely-used type 304 stainless-steel sheet in Shanghai dropped 10 percent in May, according to data from Metal Bulletin, an industry publication. Refined-nickel output in China grew 26 percent to 17,300 tons in May from a year ago, the National Bureau of Statistics said on June 11.
• Senator Snowe Calls Tax Provision in Jobs Measure 'Poison Pill'. Senator Olympia Snowe, a Maine Republican who Democrats view as a possible vote in favor of a jobs bill, said a provision in the measure would unfairly saddle small businesses with new payroll taxes. In a statement released with fellow Republican Senator Mike Enzi of Wyoming that Snowe posted to her Web site, she called the tax a “poison pill” that would “cripple” so-called S corporations, the most common business structure. The proposal would force such corporations to pay as much as a 15.3 percent payroll tax on earnings reinvested in the business rather than taken in salary, she said. “This is a job-killing tax hike that will force entrepreneurs across the nation to retrench and reconsider any plans for hiring employees or expanding their business,” Snowe said in the statement.
• North Korea Threatens Military Strike Over South's Broadcasts, KCNA Says. North Korea warned of an “all-out military strike” to destroy South Korean loudspeakers and other propaganda tools along their fortified border, according to the North’s state-run Korean Central News Agency. South Korea’s preparation for psychological warfare, is a “direct declaration of a war” against the North, the general staff of the communist state’s military said today in a statement on KCNA. The North’s military retaliation may even turn Seoul into “a sea of flame,” said the statement.
• Apple(AAPL) Under Pressure to Ease Software Limits as Jobs's Influence Expands. Apple Inc., under growing scrutiny from antitrust regulators, may have to loosen restrictions on software developers and music labels to avoid legal wrangling with the government and prevent damage to how its brand is perceived by the public, lawyers and analysts said. Federal Trade Commission officials are preparing to review allegations that Apple is trying to trammel rivalry in mobile advertising, people familiar with the matter said last week. Regulators were already weighing a probe of Apple’s treatment of Adobe Systems Inc., and the U.S. Justice Department has made preliminary inquiries into Apple’s behavior in the music market.

Wall Street Journal:

• U.S. to Demand BP(BP) Fund. The Obama administration, facing growing public anger over the Gulf of Mexico oil spill, plans to ask BP PLC to establish an independently administered fund for reimbursing victims—in effect, taking some of the compensation decisions out of the company's hands. The calls came as BP said over the weekend it was now collecting about 15,000 barrels of oil a day at the site, due to a special cap installed over the leaking pipe. U.S. officials upped their leak estimate last week to as much as 40,000 barrels a day, although on Sunday, Coast Guard Admiral Thad Allen said they believe the leak was closer to 35,000 barrels a day.
• Jordan's Nuclear Ambitions Pose Quandary for the U.S. The Kingdom of Jordan is in a sprint to become the Arab world's next nuclear power. And America wants to help it succeed. U.S. and Jordanian officials are negotiating a nuclear-cooperation agreement that would allow American firms to export nuclear components and know-how to the Mideast country, America's closest Arab ally in the volatile region.
• Politicizing the Fed. Congress seeks more control over the 12 regional banks.
  
• Germany Probes Russian Shipments to Iran. German prosecutors are investigating whether Russia's main nuclear exporter broke European rules by routing Iran-bound cargo through Europe—an incident that diplomats say turned into a major battleground as world powers hashed out international sanctions against Iran. The shipments wouldn't break sanctions agreed on at the United Nations, including new rules approved Wednesday. But the U.S. and European Union plan to use their own regimes to put bigger obstacles in front of Iran's nuclear development—and to make up for the weaknesses of the U.N. sanctions, which were softened to get agreement from Russia and China. The formal investigation into Russia's activities by Frankfurt prosecutors, which has previously not been disclosed, provides a window into the extent of the ongoing nuclear traffic with Iran, as well as the international tug of war over how much of it to stop.
• Drilling Rules Hit Alaska Pipeline. The federal government's new wariness about offshore drilling in the wake of the Gulf of Mexico oil spill is dimming what may be the best hope for extending the life of the Trans-Alaska Pipeline, a crucial artery supplying one-quarter of the West Coast's oil. The 800-mile pipeline, owned by a BP PLC-led consortium, carries about 670,000 barrels of oil a day—13% of U.S. production—from Alaska's North Slope the length of the state to Port Valdez. From there it is sent by tanker to refineries in Washington and California. That is a lot less than the two million barrels a day the pipeline carried at its peak back in 1988, because of a rapid—and probably permanent—decline in Alaska's onshore oil production. Volumes may fall low enough to halt operations by the middle of the next decade without an expensive modification of the pipeline to handle less oil.
• Mosaic(MOS) in Talks to Buy Mexican Firm. The Mosaic Co. is in talks to acquire Mexican fertilizer company Grupo Fertinal SA de CV in a deal that could be worth up to $1 billion, people familiar with the matter said.
• BIS: Exchange-Traded Derivatives Turnover Rose 16% in 1Q. Activity in exchange-traded derivatives markets accelerated in the first quarter of 2010, the Bank for International Settlements said late Sunday. Turnover, measured by notional amounts of futures and options on interest rates, stock price indexes and foreign exchange, increased by 16% from the previous quarter, to $514 trillion. Open interest, in notional amounts outstanding, rose 12% to $82 trillion.

Bloomberg Businessweek:

• Kagan Played Lead Role in Abortion Rights Fight Under Clinton. Elena Kagan helped shape the Clinton administration’s fight against a Republican bill to limit abortion, aiming to bolster the rights of women and honing the message of the administration and its allies. Now President Barack Obama’s nominee for the U.S. Supreme Court, Kagan in 1996 and 1997 immersed herself in both the legal and political aspects of the fight over a procedure opponents termed partial-birth abortion, according to documents released yesterday by the William J. Clinton Presidential Library in Little Rock, Arkansas.
• Europe's Banks Face Second Funding Squeeze on Sovereign Crisis. European banks at risk of writedowns from the sovereign debt crisis face a funding squeeze that may depress earnings, curb lending and imperil economic recovery in the region.

Marketwatch.com:

• Rising Tensions as China Weighs a Double Dip. Credit policy, real-estate controls, other issues cast shadow over growth.
  

NY Times:

• Obama Takes a Hard Line Against Leaks to Press. The indictment of Mr. Drake was the latest evidence that the Obama administration is proving more aggressive than the Bush administration in seeking to punish unauthorized leaks. In 17 months in office, President Obama has already outdone every previous president in pursuing leak prosecutions. His administration has taken actions that might have provoked sharp political criticism for his predecessor, George W. Bush, who was often in public fights with the press.
• New York State Plan Makes Fund Both Borrower and Lender. Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund. And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund. As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits. “It’s a classic Albany example of kicking the can down the road,” said Harry Wilson, the Republican candidate for comptroller, who holds an M.B.A. from Harvard.
• U.S. Identifies Vast Riches of Minerals in Afghanistan. The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials. The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe. An internal Pentagon memo, for example, states that Afghanistan could become the “Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and Blackberrys.
• Debt Burden Falls Heavily on Germany and France. French and German banks have lent nearly $1 trillion to the most troubled European countries and are more exposed to the debt crisis than the banks of any other countries, according to a new report that is likely to add pressure on institutions to detail their holdings.

NY Post:

• John Paulson Takes Ex-SEC Bigs on Board. In what appears to be a move to protect his firm from getting further ensnared in the Securities and Exchange Commission's legal spat with Goldman Sachs, hedge fund titan John Paulson has enlisted two high-profile former SEC officials to act as consultants to him and his firm, The Post has learned. In a letter to investors yesterday, Paulson announced he has added former SEC Chairman Harvey Pitt and former SEC Commissioner Roel Campos as "independent directors" to the firm's board of directors, sources tell The Post. Pitt was chairman of the regulatory agency from 2001 to 2003, and Campos served as a commissioner from 2002 to 2007. While Paulson's not been charged with any wrongdoing, his name has been marred by the SEC's allegations that Goldman Sachs deceived customers about his role in mortgage security offerings that imploded during the housing meltdown.

Business Insider:

• China's Property Index Forecasts a Plunge in Copper Prices. Bloomberg’s chart of the day shows the very high correlation between the Chinese property market and copper prices. Property prices have been a reliable leading indicator of economic activity in China and commodity prices. If the Chinese property market is telling us anything right now it’s that global economic activity could be due for a dip in the coming months:
• Bad News for Commodity Bulls: There's Now Massive Opposition to Australia's Mining Tax. Australia's proposed super profits tax would be great news for commodities bulls, given that it could stunt expansion of the Australian mining industry. Too bad the tax is facing enormous opposition. The current government could lose big over the issue:
• The Crisis in Detroit is Worse Than a Recession.
• Obama Officially Begins Push for New Bailout of the States. It's clear from recent news and official government stats that the budget cutting at the state level is proving to be a real drag on growth, via lost jobs. Not surprisingly, Obama wants another bailout.

Zero Hedge:

• Obama Begins "Lifestyle Health Modification" Program, Mandating Behavioral Changes Within US. Last week, with little fanfare, among the ever deteriorating oil spill crisis, the White House quietly noted the issuance of an executive order "Establishing the National Prevention, Health Promotion, and Public Health Council", in which the president, citing the “authority vested in me as President by the Constitution and the laws of the United States of America” is now actively engaging in "lifestyle behavior modification" for American citizens that do not exhibit "healthy behavior."

ABC News:

• The Big Tax Increase Facing Small Business. Congress Wants to Collect $11 Billion More in Taxes Over 10 Years. While a possible increase in taxes on the "carried interest" of hedge fund and private equity money managers is getting all the attention, in the same bill Congress is also creating a tax mess for small-business owners in the form of an $11 billion tax hike over the next 10 years. The tax increase was included in H.R. 4213, a peddler's wagon of legislation (new spending, physicians' reimbursement, extensions of expired tax breaks, etc.) that was passed by the House in a narrow vote just before Memorial Dayand is now being considered by the Senate. The Democratic-backed Senate version of the bill includes the same tax on small business.

NYDailyNews.com:

• Federal Officials Considering Whether to Ban Peanuts on Commercial Flights, Farmers Cry Foul. Federal regulators are mulling whether to restrict or even completely ban serving peanuts on commercial flights. The snack attack would ease fears and reduce the potential harm to nearly 1.8 million Americans who suffer from peanut allergies, advocates say. But peanut farmers are crying foul, saying the ruling is overreaching. "The peanut is such a great snack and such an American snack," Martin Kanan, CEO of the King Nut Companies, told the Associated Press. "What's next? Is it banning peanuts in ballparks?"

MercuryNews.com:

• Cisco(CSCO) Plans iPhone, iPad Apps for Corporate Social Networking.

Rasmussen Reports:

• 48% in California Favor Offshore Oil Drilling. Despite the continued struggle to stop the massive oil leak in the Gulf of Mexico, the plurality (48%) of Likely Voters in California still favor offshore oil drilling, according to a Rasmussen Reports telephone survey in the state. Thirty-eight percent (38%) are opposed to offshore oil drilling.

Politico:

• Environmentalists Give Barack Obama a Pass on Oil Spill. As the greatest environmental catastrophe in U.S. history has played out on Obama’s watch, the environmental movement has essentially given him a pass — all but refusing to unleash any vocal criticism against the president even as the public has grown more frustrated by Obama’s performance. Some say there’s little doubt that if a spill like the one in the Gulf took place on former President George W. Bush’s watch, environmental groups would have unleashed an unsparing fury on the Republican in the White House. For their liberal ally, Obama, they seem willing to hold their tongues. These guys have bet the farm on this administration,” said Ted Nordhaus, chairman of an environmental think tank, the Breakthrough Institute. “There has been a real hesitancy to criticize this administration out of a sense that they’re kind of the only game in town. … These guys are so beholden to this administration to move their agenda that I think they’re unwilling to criticize them.

Reuters:

• U.N. Report Raises Concerns About North Korea Sanctions. A report from a U.N. panel that monitors compliance with sanctions on North Korea showed more than 100 countries may not be doing enough to implement the punitive steps. The latest report to the U.N. Security Council from the Panel of Experts on North Korea, obtained by Reuters, said 111 of the 192 U.N. member states -- mostly developing nations -- had not submitted reports on their implementation of the council's two sanctions resolutions against North Korea. Those resolutions, adopted in 2006 and 2009 in response to Pyongyang's two nuclear tests, restricted arms deals, banned trade in technology usable in nuclear and other weapons of mass destruction, called for travel bans and asset freezes and banned North Korean imports of luxury goods.

Financial Times:

• Burgeoning Bullion Prices See Vaults Leap to Head of Banks' Priority Lists. Some of the world's biggest banks and security companies are building vaults to store gold bars and coins worth tens of billions of dollars, cashing in on resurgent demand and record prices. The growing interest in gold among investors worried about the global economy and Europe's sovereign debt crisis has led to a shortage of long-term storage space.Bankers said that vaulting had become highly profitable. "Physical gold is being sought more than ever and that is causing all sorts of strains," said Peter Hambro, chairman of Petropavlovsk, the gold miner. Much of the increased demand comes from exchange-traded funds. The world's largest, the SPDR Gold Trust, was yesterday holding a record 42m ounces of gold worth $51.5bn at current prices. While some banks said they had space, others said their vaults were nearly full. Several said they were building or planning new vaults. JPMorgan recently opened a new gold vault in Singapore and Via Mat International, the Swiss-based security company, has just opened a -silver safe warehouse in west London. Deutsche Bank is mulling a new vault, bankers said. Frank Ziegler, head of precious metals at BayernLB in Germany, said its vault was full. "We are discussing increasing the size. We are just at the planning phase," he said. Roger Jones, global head of commodities at Barclays Capital in London, said the bank was "actively looking at the precious metal vaulting business".
• Wall Street Faces Defeat in Push to Retain Swaps Desks. Banks are likely to lose a key lobbying battle in the US over whether they will be forced to spin off their swaps desks, say people familiar with financial reform talks in Congress. Defeat, which would be a further blow to Wall Street, has been made more likely by Paul Volcker, the former Federal Reserve chairman, softening his opposition to the provision. Blanche Lincoln, the Senate agriculture chairman, is the lead proponent of the plan to force banks to create separately capitalised subsidiaries for lucrative derivatives operations. The restructuring would be costly and could drive activity into more lightly regulated rivals and overseas competitors, warns the Federal Reserve and Federal Deposit Insurance Corporation, opposing the plan. There remains disagreement over whether the current proposal would prevent a newly capitalised swaps desk from selling a swap to a customer or from using them for its own hedging purposes. Ms Lincoln says it does not; many lawyers say it does. Talks on the text, which is due to be signed into law next week, are focused on ensuring those activities are preserved rather than removing the rule entirely, say those familiar with the issue. However, that does not satisfy the industry or its regulators. Some senators want to modify the Volcker Rule, which also prevents banks from owning or sponsoring hedge funds in the name of risk reduction, to allow banks to "organise" a hedge fund and make an investment in a small amount of capital alongside a customer. Mr Volcker felt that would be the thin end of the wedge: "From my point of view, I'd like it pure."

TimesOnline:

• Saudi Arabia Gives Israel Clear Skies to Attack Iranian Nuclear Sites. Saudi Arabia has conducted tests to stand down its air defences to enable Israeli jets to make a bombing raid on Iran’s nuclear facilities, The Times can reveal. In the week that the UN Security Council imposed a new round of sanctions on Tehran, defence sources in the Gulf say that Riyadh has agreed to allow Israel to use a narrow corridor of its airspace in the north of the country to shorten the distance for a bombing run on Iran. To ensure the Israeli bombers pass unmolested, Riyadh has carried out tests to make certain its own jets are not scrambled and missile defence systems not activated. Once the Israelis are through, the kingdom’s air defences will return to full alert. “The Saudis have given their permission for the Israelis to pass over and they will look the other way,” said a US defence source in the area. “They have already done tests to make sure their own jets aren’t scrambled and no one gets shot down. This has all been done with the agreement of the [US] State Department.” Sources in Saudi Arabia say it is common knowledge within defence circles in the kingdom that an arrangement is in place if Israel decides to launch the raid. Despite the tension between the two governments, they share a mutual loathing of the regime in Tehran and a common fear of Iran’s nuclear ambitions. “We all know this. We will let them [the Israelis] through and see nothing,” said one. Passing over Iraq would require at least tacit agreement to the raid from Washington. So far, the Obama Administration has refused to give its approval as it pursues a diplomatic solution to curbing Iran’s nuclear ambitions. Israeli intelligence experts say that Egypt, Saudi Arabia and Jordan are at least as worried as themselves and the West about an Iranian nuclear arsenal.Israel has sent missile-class warships and at least one submarine capable of launching a nuclear warhead through the Suez Canal for deployment in the Red Sea within the past year, as both a warning to Iran and in anticipation of a possible strike.
• Vince Cable Backs Break-Up of Big UK Banks. Vince Cable, the Business Secretary, has given official backing to recommendations that call for investment banks to be broken up. The cross-party Future of Banking Commission has published a list of recommendations that urges the Government to consider a break up of the big “integrated” banks such as Royal Bank of Scotland and Barclays, which run both retail and investment banking businesses.

Independent:

• Obama Urged to 'Punish' BP(BP) with $100 Billion Action. Senior US politicians are pushing President Barack Obama to seek $100bn in damages against BP for the Gulf of Mexico oil spill in an attempt to kill the company. If such an action were to be taken and won, the Ftse 100 flagbearer would almost certainly collapse into bankruptcy. Many prominent US figures would welcome this as suitable punishment for the environmental devastation off the Louisiana coast. It is understood that a group of senior congressmen from Mr Obama's Democratic Party are pushing the President to sue for up to $100bn. These would include punitive, as well as physical damages, effectively representing a punishment to the company and a broader industry deterrent to breaching safety regulations – even though it is not yet clear that BP failed to meet its responsibilities. The congressmen are understood to have taken their lead from a 1987 case involving Texaco, which was forced into bankruptcy after a $10.53bn damages claim was awarded against the company, even though that amount was later severely cut. A source close to the politicians said: "There are US congressmen who understand the heartbeat of the Obama administration that are looking at [Texaco]. There is a real chance – 30 per cent, perhaps a bit more – that BP cannot survive." If the argument sways Mr Obama, it will devastate leading British figures who have tried to defend BP.

Nationen:

• About 62.5% of Norwegians, the most ever recorded, are against membership in the European Union, citing a poll. Support for EU membership dropped to 26.7%, according to a Sentio poll.

El Universal:

• Mexico had 85 deaths related to organized crime yesterday, the highest toll since President Felipe Calderon took office in December 2006. The border state of Chihuahua was the most violent yesterday with 38 killings, including the execution-style shootings of 19 people in a drug rehabilitation center in the state capital of the same name.

Radio Free Asia:

• China won't support a resolution by the United Nations Security Council on the South Korea ship sinking case.

GulfNews.com:

• Superfund Confirms Exit From Dubai. Globally operating Austrian hedge fund firm Superfund confirmed on Friday that it is closing its branch in Dubai together with other bureaus in Singapore, Sydney, Sao Paulo, Liechtenstein and Monaco, which account for a third of its international branches. The company, which uses sophisticated computer software to run trades in commodity and financial futures, has come under financial pressure in the current market environment and is forced to cut costs and lay off staff, Superfund said in a statement.
  

Weekend Recommendations
Barron's:

• Made positive comments on (SNDK), (TYC), (ROSE), (LVS), (TWX), (MSFT), (BDX), (AVII), (PFE) and (WFC).

Citigroup:

• Reiterated Buy on (HD), raised estimates, boosted target to $45.
• Reiterated Buy on (GOOG), lowered estimates, cut target to $630.

Night Trading

• Asian indices are +.50% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 139.5 -2.5 basis points.
• S&P 500 futures +.32%.
• NASDAQ 100 futures +.37%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (KFY)/.13
• (CASY)/.43

Economic Releases

• None of note

Upcoming Splits

• (LNCR) 3-for-2
  

Other Potential Market Movers

• The Fed's Bullard speaking, Wells Fargo Industrial Conference, Goldman Sachs Healthcare Conference, (SOLF) investor day and the (ATVI) corporate presentation could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by automaker and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Week Ahead by CNBC.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as China bubble worries, rising deflation fears and oil spill concerns offset short-covering, falling sovereign debt angst and bargain-hunting. My intermediate-term trading indicators are giving mostly bearish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,091.60 +2.51%*



The Weekly Wrap by Briefing.com.

*5-Day Change