Duke Says Fed Has 'No Plans' to Use More Monetary Policy Tools. Federal Reserve Governor Elizabeth Duke said the central bank has no current plans to deploy additional tools for stimulating the economy. The Fed could alter its communications strategy, lower the interest rate it pays on excess reserves or replace mortgage- backed securities that are rolling off its balance sheet, Duke said today in an interview with Bloomberg Television, when asked what tools the central bank has at its disposal. “I would emphasize there are no plans to do that at this point,” she said. “There are a lot of reserves out there in the system,” Duke said. “We don’t think the barrier is there’s not enough money out there.” She also said “I think we are in the right place” on monetary policy. On the economy, Duke said, “we are seeing moderate growth, we are seeing subdued inflation.”
U.S. Hospitals Improving Speed, Quality of Heart-Attack Care. Hospitals in the U.S. are delivering faster emergency care to heart-attack patients, increasing their survival, an analysis found. In 2009, 88 percent of patients with the most urgent kind of heart attacks received artery-clearing procedures within the recommended 90 minutes of arriving at the hospital, compared with 64.5 percent in 2007, the study found.
Suntech Power(STP) Falls Most in Two Month After Citigroup Recommends 'Sell'. China’s Suntech Power Holdings Co., the world’s largest maker of polysilicon solar-power modules, fell the most in two months in New York after Citigroup Inc. recommended selling the stock and said next year’s earnings may miss analysts’ estimates. Suntech declined 7 percent to $10.57, the biggest drop since May 6.
China Stocks Drop Most in Two Weeks as Government Maintains Property Curbs. China’s stocks fell, with the benchmark index declining the most in two weeks, after the government quashed speculation it will abandon real-estate curbs that drove property prices to snap 15 months of gains. “The government isn’t likely to relax tightening measures as it wants to transform the country’s growth model to focus on consumption rather than investment,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 29.73, or 1.2 percent, to 2,460.99 as of 10:27 a.m., the most since June 29. The gauge has slumped 25 percent in 2010, making it Asia’s worst performer, on concern government efforts to curb inflation and property speculation will slow the economy. The Ministry of Housing and Urban-Rural Development reiterated that it will maintain curbs on speculative purchases and increase market supply. The statement was in response to media reports that said China may abandon its current property policies, it said. China’s banking regulator also said it has made no changes to policies on home loans, according to a statement posted late yesterday to the website of the China Banking Regulatory Commission. The regulator called on commercial banks to strictly enforce home loan rules, it said. Harvard University professor Kenneth Rogoff said July 6 that a “collapse” in real estate is beginning, while Barclays Capital forecasts prices may fall as much as 30 percent in the next 12 months.
(BP) Installs Sealing Cap on Errant Well. Apparent Success of Company's Latest Effort Holds Promise of Containing a Nearly Three-Month Long Environmental Crisis.
Avis Aims to Outbid Rival Hertz for Dollar. Avis Budget Group Inc. is proceeding with plans to make an offer for Dollar Thrifty Automotive Group Inc. that would top rival Hertz Global Holdings Inc.'s $1.2 billion bid, and is looking to take on more debt to finance the deal, people familiar with the matter said Monday.
Bloomberg Businessweek:
EU Officials Want Banks to Seek Private Cash Before State Help. European officials want banks to try to raise money themselves before seeking state support if stress tests by regulators reveal “vulnerabilities.” “It is firstly up to the banks themselves,” Dutch Finance Minister Jan Kees de Jager said in Brussels late yesterday after a meeting with euro-area counterparts.
CNBC:
Cramer: Is Washington's War Against Business Over? “Could we be seeing a cease-fire, or even a truce, in Washington’s war against business?” Cramer asked viewers on Monday. “That would be about the most bullish thing that could happen right now.” (video)
New U.S. Attorney Vows Crackdown on Hedge Funds. Seconds after officially becoming Connecticut's new U.S. Attorney, David Fein announced a crackdown on securities fraud, particularly criminal management in the operation of hedge funds. Fein said he is in the process of building a securities fraud task force composed of investigators and prosecutors. Its aim will be to "investigate and prosecute sophisticated financial fraud that has caused so much harm to investors and the financial market."
Politico:
Gibbs Stokes Dems' November Anxiety. Robert Gibbs says he merely “stated the obvious” in predicting Republicans could win control of the House in November. But Democratic strategists are privately grumbling that the White House press secretary gift-wrapped a bludgeon and handed it to the GOP. “It was the dumbest thing in the world to do,” one major Democratic money-bundler told POLITICO. “Barack Obama doesn’t understand this [election] is a referendum on his agenda.” Gibbs’ perhaps too-candid remarks about losing the House has exacerbated Democratic anxieties about the prospect of fighting a political war on two fronts, against Republicans and their own White House.
Group to Oppose Obama Mideast Policy. Leading conservatives will launch a new pro-Israel group this week with a scathing attack on Rep. Joe Sestak, the Democratic Senate candidate in Pennsylvania, the first shot in what they say will be a confrontational campaign against the Obama administration’s Mideast policy and the Democrats who support it. The Emergency Committee for Israel’s leadership unites two major strands of support for the Jewish state: The hawkish, neoconservative wing of the Republican Party, many of whom are Jewish, and conservative Evangelical Christians who have become increasingly outspoken in their support for Israel.
Reuters:
Whitman Takes Lead in Poll for California Governor. Republican Meg Whitman on Monday took the lead over Democrat Jerry Brown for the first time in a general election poll, four months before voters go to the polls to chose the next California governor. Whitman, the former CEO of eBay Inc making her first run for political office, leads Brown, the state's attorney general, by a margin of 46 percent to 39 percent, according to the survey by CBS-5 KPIX TV.
NYSE Short Interest Drops from Year High. Short interest on the New York Stock Exchange fell from its highest level in almost a year in late June, the exchange said on Monday, with further falls seen ahead following the best week for stocks in a year. Short interest on the NYSE fell 2.7 percent to 14.08 billion shares in late June, while on the Nasdaq it held steady, rising just 0.1 percent to 7.39 billion shares.
Novellus Systems(NVLS) Q2 Beats Wall Street. Novellus Systems Inc (NVLS), which provides equipment for the semiconductor industry, posted quarterly results above expectations, helped by a surge in bookings and shipments. For the second quarter, the chip-gear maker reported net income of $63.3 million, or 66 cents per share, compared with a loss of $50 million, or 55 cents per share, a year ago.
Telegraph:
Twelve Killed as Violence Spreads to Northern Afghanistan. At least 11 police officers and a government official were killed in three separate insurgent attacks in increasingly restive provinces of northern Afghanistan. The deaths came as an Afghan rights group said escalating violence in the country was now the worst since the early months of the nearly 9-year-old war.
Financial Times Deutschland:
Lawmakers in German Chancellor Angela Merkel's CDU/CSU bloc are considering introducing stricter tax rules for the country's banks, citing members of the bloc. Lawmakers may seek to prevent lenders from setting up "bogus banks" in tax havens, the newspaper said.
More than half of Chinese textile companies may go bankrupt if the yuan appreciates 5% against the U.S. dollar, citing Gao Young, vice president of the China National Textile and Apparel Council
China Business News:
China needs to "normalize" monetary policy to stabilize economic growth, Wu Xiaoling, a former People's Bank of China deputy governor, said. Wu called last year's policy "extremely loose," the report said.
Evening Recommendations Citigroup:
Rated (WLP) Buy, target $58.
Rated (GTS) Buy, target $25.
Rated (HNT) Buy, target $30.
Rated (OCLR) Buy, target $16.50.
Night Trading
Asian equity indices are -.50% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 128.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 125.50 +1.75 basis points.
The Trade Deficit for May is estimated at -$39.0 Billion versus -$40.3 Billion in April.
2:00 pm EST
The Monthly Budget Deficit for June is estimated at -$69.4 Billion versus -$94.3 Billion in May.
Upcoming Splits
None of note
Other Potential Market Movers
The NFIB Small Business Optimism Index, $21 Billion 10-Year Treasury Notes Auction, weekly retail sales reports, SEMICON West, ABC Consumer Confidence Reading, IBD/TIPP Economic Optimism Index, (LRCX) analyst meeting, (KLAC) analyst meeting and the (DLM) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by real estate and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 112.02 bps -.59%
European Financial Sector CDS Index 124.04 bps +5.66%
Western Europe Sovereign Debt CDS Index 120.0 bps -2.57%
Emerging Market CDS Index 246.67 bps +.11%
2-Year Swap Spread 31.0 unch.
TED Spread 38.0 unch.
Economic Gauges:
3-Month T-Bill Yield .14% -1 bp
Yield Curve 241.0 -1 bp
China Import Iron Ore Spot $118.10/Metric Tonne -3.04%
Citi US Economic Surprise Index -17.20 +2.4 points
10-Year TIPS Spread 1.84% +1 bp
Overseas Futures:
Nikkei Futures: Indicating +62 open in Japan
DAX Futures: Indicating +14 open in Germany
Portfolio:
Higher: On gains in my Retail and Technology long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is neutral as the S&P 500 trades flat, notwithstanding the decline in the euro, fall in commodities and recent stock gains. On the positive side, Road & Rail, Restaurant, Wireless, Disk Drive, Semi, Software and Internet stocks are especially strong, rising .75%+. The MS Tech Index is strongly outperforming, rising +.75%. (XLF)/(IYR) trade pretty well considering last week's gains. The 10-year yield is flat, but near session highs. The Western Europe Sovereign CDS Index is building on last week's sharp losses, which is a major positive. Moreover, the US Muni CDS Index is falling another -4.6% to 235.50 bps, which is also a big positive. On the negative side, Education, Biotech, Steel, Gold, Oil Tanker, Alt Energy, Coal and Defense shares are falling 1.25%+. China Import Iron Ore Spot prices continue to decline at a rapid rate. As well, Shanghai copper inventories, which had been declining, jumped +14.2% today. The European Financial Sector CDS Index is rebounding a bit after last week's sharp drop, which is also a negative. Overall, various key cds indices trade well considering last week's sharp drops. Today's quiet equity action appears to be a healthy consolidation of last week's sharp gains. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less real estate sector pessimism, falling sovereign debt angst, lower energy prices, bargain-hunting and diminishing economic fear.
BP(BP) Gains on Bid to Stop Gulf Oil Leak, Alaskan Sales. BP Plc jumped the most in 20 months in London trading on speculation the company may succeed in halting the biggest oil spill in U.S. history this week as it negotiates the sale of assets in Alaska. BP climbed 9.4 percent, the most since November 2008, to close at 398.95 pence in London. That’s 31 percent higher than the low reached June 25.
Aon(AON) Agrees to Buy Hewitt Assoc.(HEW) for $4.9 Billion. Aon Corp., the world’s largest insurance broker, agreed to buy Hewitt Associates Inc. for $4.9 billion in cash and stock to expand its division advising companies on employee pay and benefits. Hewitt shareholders will receive $25.61 in cash and 0.6362 of an Aon share, valuing the offer at $50 a share, Chicago-based Aon said in a statement. That’s 41 percent more than Hewitt’s closing price on July 9.
Iron Ore Spot Price Slumps to 2010 Low as Chinese Demand Slows. The spot price of iron ore delivered to China, the world’s biggest buyer of the steelmaking ingredient, slumped to its lowest level this year as steel production in the Asian nation slows. The cost of 62 percent iron ore delivered to the port of Tianjin dropped for a 15th consecutive day, declining 3 percent to $118.10 a metric ton, according to The Steel Index. That’s the lowest since Dec. 29. The price has tumbled 37 percent since reaching a high for the year of $186.50 a ton on April 21. Chinese iron ore buyers have been absent from the spot market for almost a month and are shunning purchases amid speculation of lower prices, Goldman Sachs JBWere Pty analysts said in a report dated July 9.
Gold Falls as Dollar's Gain Cuts Demand for Alternative Asset. Gold futures fell as the dollar’s rally eroded demand for the precious metal as an alternative asset. The greenback gained as much as 0.6 percent against a basket of six major currencies. Last week, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, dropped 0.4 percent, ending a 10-week climb. Gold futures for August delivery dropped $9.20, or 0.8 percent, to $1,200.60 an ounce at 12:12 p.m. on the Comex in New York. Bets on higher prices by hedge-fund managers and other large speculators dropped. Speculative long positions outnumbered short positions by 209,042 contracts on the Comex in the week ended July 6, down 15 percent from a week earlier, government data showed. “The highs for gold have been seen for the year,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.
Uganda Says Islamists Behind Bombings That Killed 70. At least 70 people died in the Ugandan capital, Kampala, in two bomb attacks suspected to have been carried out by Somali insurgents linked to al-Qaeda, Ugandan security officials said. The blasts occurred at two bars where crowds were watching the soccer World Cup final, Fred Opolot, director of the Uganda Media Center, told reporters today in the city.
CEOs Questioning Obama Policies Put on Boards. Last month, Verizon Communications Inc. Chairman Ivan Seidenberg accused the federal government of “injecting uncertainty into the marketplace.” Last week, he was named to a presidential panel on U.S. exports. “Obama is employing an age-old strategy used by presidents that’s known as co-optation,” said Ross Baker, a political scientist at Rutgers University in New Brunswick, New Jersey. “You bring into the bosom of your administration outsiders who are either hostile or might become hostile and lock them in.”
Avon(AVP) to Buy Jewelry Seller Silpada for $650 Million. Avon Products Inc., the world’s largest door-to-door cosmetics seller, agreed to buy jewelry company Silpada Designs Inc. for at least $650 million in cash to broaden its product line.
EU Says Withholding Sovereign Risk Will Hurt Banks. The European Commission told government officials that failure to publish individual banks’ exposure to sovereign debt could damage investor confidence. “There is considerable opposition to the publication of individual exposures to sovereign debt,” the European Union’s executive arm said in a confidential letter dated July 9 that was obtained by Bloomberg News. “Stepping back” from planned publication of this information “would give the impression that we have something to hide.”
Bernanke Says Borrowing Difficult for Small Firms. Federal Reserve Chairman Ben S. Bernanke said small businesses are having a tough time getting loans they need to expand or stay afloat and keep the U.S. economic recovery going. Some “creditworthy” firms with “strong” cash flows and a decline in collateral values are have trouble getting loans, Bernanke said today in opening comments in Washington to a Fed- hosted conference on efforts to reverse a drop in lending to small businesses. Banks’ loans to small businesses fell to $670 billion from $710 billion over the past two years, Bernanke said, citing government data. “Making credit accessible to sound small businesses is crucial to our economic recovery and so should be front and center among our current policy challenges,” said Bernanke, 56.
U.S. to Issue New Drilling Moratorium. The Obama administration plans to issue a new order to halt deepwater oil and natural-gas drilling projects Monday, two people familiar with the matter said. Details of the new order—such as how many rigs it would cover, and how it would be structured—were not immediately available.
U.S. Magazines See First Rise In Ad Pages, Revenue Since 2007. The number of U.S. magazine advertising pages and revenue increased in the second quarter on a surge from the auto sector, the first growth in 2 1/2 years for overall advertising, as a bottom may have finally been reached for the industry.
Hedge-Fund Inflows $4 Billion in May - TrimTabs/Barclays. The hedge-fund industry recorded estimated inflows of $4 billion in May, the third month of more money getting put into them than leaving in the past four months, according to TrimTabs and BarclayHedge.
S&P Affirms Britain's AAA Sovereign Rating. Maintains negative outlook over uncertainty about spending cuts. Standard & Poor's affirmed Great Britain's AAA sovereign rating Monday, but the credit-rating agency warned the possibility of a downgrade remains if the new U.K. government doesn't deliver on making cuts to the budget deficit.
NY Times:
Governors Voice Grave Concerns on Illegal Immigration. In a private meeting with White House officials this weekend, Democratic governors voiced deep anxiety about the Obama administration’s suit against Arizona’s new immigration law, worrying that it could cost a vulnerable Democratic Party in the fall elections. While the weak economy dominated the official agenda at the summer meeting here of the National Governors Association, concern over immigration policy pervaded the closed-door session between Democratic governors and White House officials and simmered throughout the three-day event.
Business Insider:
Inside Apple's(AAPL) Amazing Store in China. Apple opened it second retail store in China's wealthiest city, Shanghai, this Saturday. As is tradition for Apple opening a new store, hundreds of people lined up to be the first to plow through the doors. This is just the start of Apple's big China push. The Wall Street Journal reports Apple plans on opening 25 stores in China by year end.
New Layoffs Coming to CBS News? Another round of layoffs is said to be coming to CBS News, according to two veteran producers at the network. "My understanding is that the cuts are coming this month. I've heard this from the highest level," says one producer. If the cuts are made, it will be the third major round of layoffs at the network since 2008.
NYPost:
NYC Taxpayers Foot 90% of Municipal Pensions. Taxpayers kick in an average $8.60 for every dollar that city employees contribute to their pensions, a sweet deal costing the Big Apple a bundle. Even though their own retirements are less secure, as private businesses have shifted from traditional pensions to riskier savings plans like 401(k)s, taxpayers' support for rock-solid public employee pension plans is growing. That's because pension funds are guaranteed to grow 8 percent a year -- and taxpayers have to make up the difference if they don't. Taxpayers' share of city pension costs has skyrocketed more than 900 percent in the last decade -- from $703.1 million in 2000 to $6.5 billion in 2009, according to the city comptroller's annual reports. The cost is expected to hit $7.6 billion this fiscal year and $8.7 billion next year. "It's a double-whammy for taxpayers," said E.J. McMahon, a senior fellow at the Manhattan Institute. "If they're privately employed, they shoulder the risks of saving for their own retirement. At the same time, they have to pay a steadily mounting cost of guaranteed pensions for government workers."
Rasmussen Reports:
53% Favor Repeal of Health Care Law. Fifty-three percent (53%) of voters nationwide favor repeal of the recently passed national health care law. The latest weekly Rasmussen Reports national telephone survey on the subject finds that 42% oppose repeal.
Politico:
Moment of Truth for Energy Bill. The next three weeks represent Democrats’ last, best shot at getting an energy and climate change bill passed this year. In the White House and the office of Senate Majority Leader Harry Reid, it’s moment-of-truth time. People on every side of the energy debate say that Reid must unveil a concrete plan backed by a full-court press from the president this week, or the entire effort will fall apart in the run-up to the midterm elections. After weeks of indecisive caucus meetings and passionate but vague speeches calling for “comprehensive energy legislation,” Reid’s office on Friday assured POLITICO that clarity, at long last, is coming.
TheStreet.com:
Finreg May Shine Light on Short Sellers.A little-noticed provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act may require large investors to disclose short positions in stocks to the Securities and Exchange Commission, something they are not currently required to do. The language in Section 929X(a) seems fairly clear in requiring the SEC to mandate detailed public disclosure of short interest on a monthly basis via what are known as 13(f) filings. Such filings currently require large investors -- defined as those that manage more than $100 million -- to disclose only their long positions.
Majority in Europe, U.S. Back Cuts, FT/Harris Poll Indicates. Spending cuts in Europe and the U.S. have substantial public support, citing the latest FT/Harris opinion poll. The poll indicates that most people disagree with governments' decision to let their budget deficits rise in response to the financial crisis that began in 2008. In all five European Union countries covered in the survey, majorities ranging from 68% in France and Italy to 54% in the U.K. took that view, the FT said. To the question of whether spending cuts are necessary to help long-term economic recovery, 84% of French responses, 71% of Spanish, 69% of British, 67% of German and 61% of Italian were in the affirmative, as were 73% of U.S. replies, the newspaper said.
Obama Attacked Over Business Regulation. Antagonism between the Obama administration and the US Chamber of Commerce, America’s largest business lobby, appears set to ratchet up further this week with the group’s plan to host a “jobs summit” highlighting where it thinks Washington is going wrong. Accusing President Barack Obama of following a pro-union agenda that is burying US businesses in a new generation of regulations, Tom Donohue, president of the Chamber, whose imposing headquarters stands opposite the White House, said Washington’s trajectory is creating more uncertainty for businesses that will mean more job destruction. Mr Donohue cited Mr Obama’s failure to move the trade agenda forward at a stage when much of the rest of the world is powering ahead. “Just write down this number: $450m. That’s what the labour unions spent in the elections 18 months ago,” Mr Donohue told the Financial Times in its View From DC video series. “I think the Obama administration has demonstrated in more than many ways that they are concerned about a union agenda...They [unions] paid a deep price for it and they want some return.” US corporations have almost $2,000bn in cash in their treasuries, according to estimates. “Look at the tax cost in the healthcare bill and the tax cost in the capital markets bill and they add up to hundreds of billions of dollars,” said Mr Donohue. “It is a fundamental uncertainty [that is holding businesses back].”
Algirdas Semeta, the European Union's Budget-Commissioner, said he is not sure that members will agree on a European financial transaction tax. Semeta said that EU tax decisions have to be "unanimously" accepted and he does not expect all states to agree on the terms. The competitiveness of European financial centers "must not suffer," Semeta said.
