Today's Headlines

Bloomberg:

• CFTC Wants Budget Boost, Is Ready to Write Swap Rules. The Commodity Futures Trading Commission is requesting a bigger budget as it organizes staff to write new rules governing the $615 trillion over-the-counter derivatives market, Chairman Gary Gensler said. Congressional legislation, which may be voted on today by the Senate, would give the CFTC new authority over swaps markets that have been explicitly unregulated since 2000. The commission has identified 30 areas where rules will need to be written, Gensler said, according to prepared remarks he is expected to deliver today at a Security Industry and Financial Markets Association conference in New York. The $261 million CFTC budget proposed by President Barack Obama for 2011 is an increase from $168.8 million this year and represents “a substantial boost in funding,” Gensler said. Based on how the legislation has taken shape, however, the commission is requesting $25 million more, he said. This comes on top of an additional $45 million Gensler asked for earlier this year to deal with the legislation’s demands. “We need significant new resources,” Gensler said. “The next year of rule writing will test the very talented staff of the CFTC.” The commission will rely on the bill language as well as input from other regulators and the public in its creation of new rules, Gensler said.
• Back-to-School Sales May Rise 16%, Fueling Recovery. Back-to-school spending may rise as much as 16 percent in the U.S. this year, reversing year-ago declines and putting more muscle behind the economic rebound. Families with students plan to spend about $55.1 billion in the period, compared with $47.5 billion a year earlier, the National Retail Federation said, citing consumers surveyed by BIGResearch. “I’m pretty confident the sales will be good,” Fifth Third Asset Management fund manager Dan Popowics said in a telephone interview. “The profitability will be a bit under pressure given the urgency companies have of achieving those sales. It will be promotional.” His firm has $18 billion in assets under management, including Target Corp. shares. Sales at stores that sell family clothing, shoes, electronics and books will jump 5.4 percent in the July to September period from a year ago, when they declined 2.8 percent, the International Council of Shopping Centers said today. That would be the best showing since 2005. Clothing will have the biggest gain with 6.5 percent, the group said. This year, the average family with students in kindergarten through 12th grade may spend $606.40, up from $548.72 last year, for a total of $21.4 billion, the Washington-based NRF said. College spending probably will amount to about $33.8 billion.
• Commodity Shipping Has Longest Drop in 15 Years on Oversupplies. Commodity shipping costs measured by the Baltic Dry Index extended their longest losing streak to almost 15 years as reduced demand for iron ore carriers worsened a surplus of vessels with fleets expanding. Fleet capacity of vessels able to carry commodities shipped in bulk, such as iron ore and coal, will grow 16 percent this year, according to Clarkson Plc, the world’s biggest shipbroker. Imports of iron ore by China, the world’s biggest user of the commodity, will decline this year for the first time since 1998, Mysteel Research Institute forecasts. “We’re faced with oversupply,” Nigel Prentis, director of research and consultancy at HSBC Shipping Services Ltd., said by phone today. The fleet of capesize vessels, three times the size of the Statue of Liberty, expands by about one every two days, he said. The index fell 9 points, or 0.5 percent, to 1,700 points, according to the Baltic Exchange in London. That’s the 35th consecutive drop, the longest streak since November 1995.
• U.S. Jobless Claims Fall as Fewer Factories Shut Down. Fewer Americans than projected filed applications for unemployment benefits last week, reflecting a smaller number of factory closings for this time of year. Initial jobless claims dropped by 29,000 to 429,000 in the week ended July 10, the fewest since August 2008, Labor Department figures showed today in Washington. The government anticipates an increase in temporary factory layoffs in early July that did not occur this year, leading to the decrease in applications, a Labor Department spokesman said. “The key story here is the extreme uncertainty over the near-term path of claims as a result of the annual retooling shutdowns, which throw the seasonal adjustments into chaos,” Ian Shepherdson, chief U.S. economist at High Frequency Economics LLC in Valhalla, New York, said before the report. The four-week moving average, a less volatile measure than the weekly figures, fell to 455,250 last week from 467,000, today’s report showed. The number of people continuing to receive jobless benefits jumped by 247,000 in the week ended July 3 to 4.68 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3.7 percent in the week ended July 3, from 3.5 percent in the prior week. Twenty-three states and territories reported a decline in claims, while 30 reported an increase.
• U.S. Economy: Manufacturing Contracts, Wholesale Prices Decline. Manufacturing in the U.S. contracted in June by the most in a year and wholesale prices declined more than anticipated, underscoring the Federal Reserve’s reduced forecasts for economic growth and inflation. Factory output fell 0.4 percent in June, a Fed report showed today. Producer prices slid 0.5 percent after a 0.3 percent decline the month before, the Labor Department said. Other reports showed factories pulled back in the New York and Philadelphia regions in July.
• Guber, Lacob Said to Buy NBA's Warriors for $450 Million. Peter Guber and Joe Lacob bought the Golden State Warriors for $450 million, a record price for a National Basketball Association team, according to a person familiar with the transaction.
• Dutch City's Marijuana Curbs Are Justified, Aide Says. A Dutch city’s ban on sales of marijuana and hashish to foreign customers in so-called coffee shops is a lawful and necessary measure to cut crime from drug- tourism, an adviser to the European Union’s highest court said. The city of Maastricht’s ban on shops selling cannabis- derived products to non-residents is necessary to maintain public order, Yves Bot, an advocate general at the European Court of Justice, said in a non-binding opinion today. “As drug tourism represents a genuine and sufficiently serious threat to public order in Maastricht, the exclusion of non-residents from coffee shops” is a “necessary” means to protect residents, said Bot.
• Hamptons Home Sales More Than Double in First Half. Home sales in the Hamptons, the beachside resort towns favored by celebrities and Wall Street financiers, more than doubled in the first half of 2010 from a year earlier, according to property broker Corcoran Group. Sales in 15 New York villages and hamlets that make up the Hamptons rose to 923 homes from 433, Corcoran said in a report today. The dollar volume of all transactions more than doubled to $1.5 billion, while the median price of homes sold climbed 34 percent to $935,000. “We’ve returned to a fairly healthy normal market,” Rick Hoffman, a Corcoran senior vice president who oversees sales on Long Island’s East End, said in a telephone interview.

Wall Street Journal:

• Copper, Nickel Stolen from JPMorgan(JPM) U.K. Warehouses. Thieves swiped hundreds of tons of nickel and copper from a Liverpool warehouse in May, the latest in a rash of commodities heists spurred by high prices. The material was stolen May 31 from a shed in Liverpool's docklands area that was owned by warehousing company Henry Bath & Son, a unit of J.P. Morgan Chase & Co. According to police in Merseyside County, which includes Liverpool, the metal sheets were worth "several million pounds."
• Senate VIP Loans Mount. Countrywide Dealt With More Lawmakers and Staffers Than Previously Known. U.S. senators or Senate employees received 30 loans—far more than had previously been known—under a controversial lending program at Countrywide Financial Corp. that provided cut-rate terms to favored borrowers. The information is contained in a letter sent to the Senate Select Committee on Ethics by Rep. Darrell Issa (R., Calif.), who has been spearheading the House Oversight and Government Reform Committee's investigation into Countrywide's so-called VIP mortgage program. Sens. Christopher Dodd (D., Conn.) and Kent Conrad (D., N.D.), have previously been identified among the high-profile individuals who received such loans. Both senators have denied wrongdoing. Until the Issa letter, no other senators or their staff members had been linked to the VIP loan program.
• Greek Union, Employers Groups Clinch 3-Year Wage Pact. Greece's private sector umbrella union GSEE and the country's major employers' groups reached a three-year wage pact Thursday that freezes wages and pegs future increases to euro zone inflation. According to a statement by GSEE, Greek workers will get no salary increase this year, and will only see rises of roughly 1.5% in 2011 and 1.7% in 2012.
• BP(BP) Fixes Leak on Cap, Prepares for Test.
  

CNBC:

• Millions of Americans Will Lose Access to Banks: Bove. Financial regulation reforms, now in the last stages before becoming law, will mean that millions of people will lose access to banking services, Dick Bove, banking analyst at Rochdale Securities, told CNBC Thursday.
• One Retail Sector Defies Sluggish Economy. As murky as the consumer picture is now, there is one spot on retail landscape that is still shining bright: online sales. Shop.org and Forrester Research surveyed retailers about their gross online sales, and found that second-quarter Web sales were up about 15.1 percent from the same period a year ago, and nearly half of those who responded said their growth was more than 10 percent.

NY Times:

• Fund-Raising Before House Financial Reform Vote Draws Scrutiny. Lawmakers take contributions every day from corporate executives and lobbyists hoping for their votes. The question of whether that represents business as usual in Washington or an ethics breach is at the heart of a far-reaching Congressional ethics investigation that is stirring concerns throughout Washington and Wall Street. The Office of Congressional Ethics has sent corporate donors and fund-raising hosts more than three dozen requests for documents involving eight members who solicited and took large contributions from financial institutions even as they were debating the landmark regulatory bill, according to lawyers involved in the inquiry. The requests are focusing on a series of fund-raisers last December, in the days immediately before the House’s initial adoption of the sweeping overhaul, which could win final approval this week. Some of the fund-raising events took place the same days as crucial votes. For example, on Dec. 10, one of the lawmakers under investigation, Representative Joseph Crowley, a New York Democrat who sits on the Ways and Means Committee, left the Capitol during the House debate to attend a fund-raising event for him hosted by a lobbyist at her nearby Capitol Hill town house that featured financial firms, along with other donors. After collecting thousands of dollars in checks, Mr. Crowley returned to the floor of the House just in time to vote against a series of amendments that would have imposed tougher restrictions on Wall Street.

Business Insider:

• Now The Amount Hedge Funds Are Using Algos Is Increasing and Sales Desks are Doomed. There's a new research report by TABB that says hedge fund trading activity in US equities is growing in contrast to trades carried out by proprietary trading desks. The TABB report, US equity trading 2010: low-touch trends, showed two interesting things. From Hedge Fund Review:

Zero Hedge:

• China Has Been Covertly Funding a Housing Bubble Five Times Larger Than that of the US: 65 Million Vacant Home Uncovered.
• ICI Reports Largest Equity Fund Outflow in Two Months, Coinciding With Short-Covering Market Surge.
  

Institutional Investor:

• Big Asset Managers Fight Rising High-Frequency Trading Cancel Orders. Large asset managers such as mutual funds and some hedge funds are meeting with legislators and lobbyists in the U.S. to discuss ways to clamp down on the high rate of cancel-and-replace orders originating from high frequency trading firms. “The rhetoric has picked up,” says the head of one bulge-bracket prime broker, who says that banks are also reevaluating their pro-HFT stance.
• Renaissance Funds Lead the Way in First Half. Super-secretive Medallion, the computer-driven, rapid trading fund closed to outsiders for years, was up 17 percent for the first half. Renaissance Institutional Equities Fund International L.P. (RIEF), its newer fund that had been struggling, climbed about 2.4 percent in June and was up about 3.5 percent for the first half of the year.

World Net Daily:

• Top Democrat Fundraiser Sentenced to 12 Years. Backer of Hillary, Obama, Kerry heads to prison for bank fraud. Hassan Nemazee, a multimillionaire Iranian-American investment banker and top Democratic Party fundraiser, was sentenced today to 12 years in federal prison for bank fraud. Nemazee, 60, served as the national finance chairman of Hillary Clinton's 2008 presidential campaign before raising more than $500,000 for Barack Obama's campaign.

Lloyd's List:

• Secondhand Dry Bulk Values Could Plunge by Up to 25%. SECONDHAND dry bulk values are forecast to crash by 20%-25% in the next three months as plunging freight rates sees deals fail, and owners withdraw ships from the market. Bulk carriers are losing more than a million dollars in value each week, brokers reported, as the Baltic Dry Index continued its 34-day freefall today, closing at 1,700 points, down 60% since late May.

Politico:

• Pollution Fight Cools Climate Talks. Closed-door meetings between a select group of environmentalists and a handful of electric utility executives may determine the fate of climate change legislation in the Senate.

Real Clear Politics:

• Financial Reform's Empty Promises by Senator Tom Coburn.

Reuters:

• 30-Year Mortgage Rate Holds Record Low - Freddie Mac. U.S. 30-year fixed mortgage rates held at record lows last week, while shorter-term borrowing costs hovered at or near all-time lows, home funding company Freddie Mac said on Thursday. The 30-year mortgage rate stayed at 4.57 percent for the week ended July 15, matching the prior's week's all-time low in Freddie Mac records dating back to 1971.
• Gulf Projects Hit By Drilling Moratorium. President Barack Obama's administration issued a new six-month moratorium on deepwater oil drilling in the Gulf of Mexico, replacing an earlier ban that had been struck down by U.S. courts as being too broad.Here are examples of 2010 drilling operations by major Gulf producers that have been delayed by the ban:
• U.S. Card Losses Improve Despite Recovery Fears. Fewer Americans fell behind on credit card payments in June, with delinquencies at their lowest this year at major U.S. card lenders.

Les Echos:

• European banks may receive some of the aid to be distributed by a new fund charged with containing the region's debt crisis, the fund's head said. While the fund will provide aid only to national governments, "a country can decide to request aid for different reasons, and it is possible that part of the funds will be used to recapitalize the banking sector," Klaus Regling, who on July 1 became chief executive officer of the European Financial Stability Facility, said. Greece, which has already received 110 billion euros in aid from the EU and IMF, has allocated about 10% of that to banks, Regling said. "That example could be followed elsewhere."

DigiTimes:

• Apple(AAPL) Readies 11.6-Inch MacBook Air and New iPod Touch. Apple is ready to launch a new generation MacBook Air featuring an 11.6-inch display and Intel Core i-series ultra-low voltage processor in the second half of 2010, as well as a new iPod touch in August or September.

China Daily:

• A survey of southern China's Guangdong found that 40% of the province's soil is polluted with heavy metals, citing Wang Hongfu, a researcher with the Guangdong Institute of Eco-environment and Soil Sciences. Soil pollution in Guangdong has "severely worsened" since 2008, Wang said.

China Business News:

• It would not be "unusual," if China's economic growth in the second half slowed to less than 9%, citing Li Daokui, an advisor to the central bank. Slowing growth in China will be a normal deceleration because a series of economic stimulus policies, which went into effect in 2008, is going to an end.

Caijing:

• China's macro policy won't change in the second half of the year, Xia Bin, an adviser to the People's Bank of China, said. China won't implement a second stimulus package this year, Xia said

Bear Radar

Style Underperformer:

• Small-Cap Growth (-1.16%)

Sector Underperformers:

• Steel (-2.46%), Airlines (-1.90%) and Oil Service (-1.76%)

Stocks Falling on Unusual Volume:

• DNDN, TCB, GSIC, WBSN and AIXG
  

Stocks With Unusual Put Option Activity:

• 1) ARNA 2) SWC 3) CIT 4) CHL 5) ELX
  

Stocks With Most Negative News Mentions:

• 1) JPM 2) TASR 3) COF 4) DFS 5) LPS
  

Bull Radar

Style Outperformer:

• Large-Cap Growth (-1.05%)

Sector Outperformers:

• Agriculture (+.19%), Drugs (-.05%) and Biotech (-.26%)

Stocks Rising on Unusual Volume:

• NTY, NVO, POT, NIHD, PT, IBKR, ENSG, CLNE, SINA, AIRM, CTXS, GTIV, WMAR, WPRT, PRGO, NYM, GWW and WPC
  

Stocks With Unusual Call Option Activity:

• 1) CIT 2) HUN 3) ERTS 4) SKX 5) CMCSA
  

Stocks With Most Positive News Mentions:

• 1) EBAY 2) GOOG 3) GWW 4) AMGN 5) BA

Thursday Watch

Evening Headlines
Bloomberg:

• Americans in 73% Majority Oppose Deepwater Drilling Ban. Most Americans oppose President Barack Obama’s ban on deepwater oil drilling in response to BP Plc’s Gulf of Mexico spill, even as they hold the company primarily responsible for the incident. Almost three-fourths, or 73 percent, say a ban is unnecessary, calling the worst oil spill in U.S. history a “freak accident,” according to a Bloomberg National Poll. Barely more than a third say they support drilling less than they did a few months ago. The BP rig sank in April. The administration issued a new moratorium this week after a court rejected a six-month one imposed in May. “A ban will destroy the economy in that area over nothing,” said poll respondent Ron Smallcomb, 64, a used-car dealer in Mountaintop, Pennsylvania. “This is crazy. If there’s a plane crash you don’t ground all the airlines and stop flying completely.” While public objections to a drilling ban echo the views of Republican leaders such as Louisiana Governor Bobby Jindal, the sentiment is strong regardless of political leaning: 85 percent of Republicans, 73 percent of independents and 65 percent of Democrats oppose a ban, according to the poll. Jindal, whose state has been hardest hit by the spill, says a prohibition on drilling is an overreaction that will turn an “environmental disaster into an economic catastrophe,” costing as many as 20,000 jobs in Louisiana alone. “We need the federal government to do their jobs to ensure drilling is done safely without killing thousands of jobs for our people,” Jindal said in a statement July 13. Eight in 10 of those questioned say BP shouldn’t be assessed penalties beyond payment for damages, such as being banned from future drilling in the U.S. The House Natural Resources Committee yesterday approved an amendment that would bar the company from new offshore leases in the U.S. “I totally expect them to pay for the damages done, but to ban BP or other companies from future drilling is ridiculous,” said John P. Sennet, 65, a retired manager from AK Steel Corp. in Middletown, Ohio. “I just don’t understand the logic in that -- accidents happen,” he said.
• BP Plc's(BP) oil spill in the Gulf of Mexico hasn't deterred the appetite for drilling in Asia Pacific, with rig use reaching an 18-year high in the region last month. 271 rigs are deployed on land and sea in Asia, the most since December 1991. "Oil companies are wary about the Gulf of Mexico after the drilling ban, and the Atlantic basin doesn't look good because of lower gas prices," said Tony Regan, a consultant in Singapore with Tri-Zen International Ltd. Explorers deployed 14% more rigs in Asia in June, compared with January of last year, as China, India, Australia and Indonesia opened up areas. The number of rigs in the Gulf of Mexico plunged to the lowest level in 16 years last week, Baker Hughes said.
  
• PC Shipments Grew 22% in Second Quarter, IDC Says. Global personal-computer shipments rose 22 percent in the second quarter, a sign consumer demand is picking up even amid lingering concerns about the pace of economic recovery, according to research firm IDC. Growth is being driven by the replacement of aging systems, the introduction of lower-cost machines and the fact that much of the world doesn’t own a computer, said Jay Chou, an analyst at IDC. The results allayed concerns that a rebound in technology spending might slow, partly because of the debt crisis in Europe.
• Americans Disapproving Obama Poised to Enable Republican Gains. Americans disapprove of U.S. President Barack Obama’s handling of almost every major issue and are deeply pessimistic about the nation’s direction, offering a bullish environment for Republicans in the November congressional elections. A majority or plurality disapproves of Obama’s management of the economy, health care, the budget deficit, the overhaul of financial market regulations and the oil spill in the Gulf of Mexico, according to a Bloomberg National Poll conducted July 9- 12. In addition, almost 6 in 10 respondents say the war in Afghanistan is a lost cause. Almost two-thirds say they feel the nation is headed in the wrong direction, an even more sour assessment than in March when 58 percent felt that way. Two-thirds of independent voters are pessimistic, while just 56 percent of Democrats offer a vote of confidence. “They don’t see any solutions in sight,” said J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey. “They have been hammered by the economy and there is a disconnect between the lives Americans are living and Washington. They seem to have lost hope.”
• Oil Falls After Federal Reserve's Outlook on Economy, Decline in Equities. Crude oil declined after the Federal Reserve’s assessment that the economic outlook has “softened” added to concerns a recovery in fuel demand may falter in the U.S., the biggest energy-consuming nation. “There are a growing number of indicators that point to a slowing U.S. economy,” said David Land, chief market analyst at CMC Markets Ltd. in Sydney. “The Federal Reserve’s revised assessment of the economy and weaker-than-expected retail sales figures put a dampener on things.” Crude oil for August delivery dropped as much as 48 cents, or 0.6 percent, to $76.56 a barrel in electronic trading on the New York Mercantile Exchange and was at $76.62 at 9:57 a.m. Sydney time. Fuel demand tumbled 4 percent to 18.8 million barrels a day, the lowest level since April 23, the Energy Department report showed. It was the biggest one-week decline since March. Refineries operated at 90.5 percent of capacity, the highest level since January 2008.
• IMF Says Japanese Fiscal Plans Need Specifics to be Credible. The International Monetary Fund said Japan’s plan to balance its budget in 10 years would be more credible if the government gave specifics on how it will boost revenue, including details on a sales tax increase. Prime Minister Naoto Kan’s fiscal strategy outlined last month “will only become fully credible once details of the necessary revenue measures are agreed on including the timing and scale of a consumption tax increase,” the IMF staff wrote in a supplement to its annual review of Japan’s economy.
• HIV Death Risk Reduced 75% With Early Antiretroviral Treatment, Study Says. Early treatment for HIV cuts patients’ risk of death by about 75 percent, according to a study in the New England Journal of Medicine.
• New York Fed Suggests Taxing the Rich to Counter State Deficits. Federal Reserve Bank of New York researchers said states facing budget deficits should consider temporarily raising income taxes on their wealthiest residents and relying more on sales taxes to make up the shortfalls. In a report issued today focusing on the recession’s impact on the budgets of New York and New Jersey, the Fed branch also recommended the states create “rainy day” funds to protect against future revenue gaps, plan in advance for spending cuts and reduce reliance on personal income taxes, which are affected by changes in the economy. “One approach to smoothing revenue streams is to reduce reliance on cyclically sensitive tax bases and raise revenues from less-volatile sources, notably sales taxes,” wrote Richard Deitz, Andrew Haughwout and Charles Steindel, the co-authors of the report. “Temporarily raising income taxes on high-income households during a downturn” would have the advantage of placing “a larger burden on households that are less liquidity- constrained,” they said.
• Florida, Texas Support Arizona's Immigration Law. Florida, Texas and seven other states filed a brief supporting Arizona’s immigration law aimed at cracking down on illegal migrants after the U.S. government sued to block enforcement of the law. Arizona’s statute doesn’t establish an immigration policy that would interfere with federal law, countering the U.S. argument, the states said in the filing today in federal court in Phoenix. The law isn’t an “obstacle” to Congress’ objectives, the states wrote. “The federal government seeks to negate this pre-existing power of the states to verify a person’s immigration status and similarly seeks to reject the assistance that the states can lawfully provide to the federal government,” the states wrote in the filing. Alabama, Michigan, Nebraska, Pennsylvania, South Carolina, South Dakota and Virginia, plus the territory of the Mariana Islands, also joined in today’s brief supporting Arizona.
• Obama Must Define Afghan War Goals, Senators Tell Holbrooke. Senators concerned about the direction of American efforts in Afghanistan said President Barack Obama and his officials need to define U.S. objectives there before a planned 2011 drawdown of troops. Republican and Democratic senators told Obama’s special envoy to Afghanistan and Pakistan, Richard Holbrooke, at a hearing yesterday that they don’t understand how progress on civilian projects is being measured or how they would back military aims. “We need a better definition of exactly what success is in Afghanistan,” said the Senate Foreign Relations Committee’s chairman, Senator John Kerry, a Democrat from Massachusetts. “We absolutely need to understand what the political situation is and how we get there.”
• North Korean Health System "Dire," Amnesty International Says. North Korea’s health care system is in a “dire state” where amputations are carried out without anesthesia, Amnesty International said in a report released today. “The Crumbling State of Health Care in North Korea” is based on interviews with North Koreans living abroad and health care workers who described the use of unsterilized needles. Problems of malnutrition exacerbate challenges for the state-run system in the face of epidemics, the report said.

Wall Street Journal:

• Harvey Golub Resigns as AIG(AIG) Chairman. Harvey Golub resigned Wednesday as chairman of American International Group Inc., citing tensions with the giant insurer's chief executive Robert Benmosche. The company said Robert "Steve" Miller, another board member, would replace him.
• Google(GOOG) Wins Omnicom(OMC) as Ally. Internet Firm Will Help New Partner Tap Ad Exchange in Return for Buying Commitment. Google Inc. plans to announce Thursday it has landed advertising company Omnicom Media Group as a partner in online display advertising, an area the Internet giant is seeking to bolster as it tries to expand its revenue beyond search ads. Under the deal, Omnicom, part of New York-based Omnicom Group Inc., is expected to spend hundreds of millions of dollars to buy display ads for its clients through Google over the next two years, said a person familiar with the situation. In return, Google will work with Omnicom to build a global "trading desk" that allows the company to buy display ads more easily on Google's ad exchange, an auction-like system that matches ad buyers and sellers to advertising space across large groups of websites.
• BP(BP) Moves to Test New Cap on Gulf Well. Procedure Is Cleared by Obama Administration Following Delay to Resolve Concerns It Could Lead to a Bigger Oil Leak
• Goldman(GS), SEC Discuss Catch-All Settlement. Goldman Sachs Group Inc. and the Securities and Exchange Commission recently held discussions about a possible settlement to simultaneously resolve the fraud lawsuit against Goldman and some of the agency's lower-profile probes of the Wall Street firm's mortgage department, according to people familiar with the situation. The settlement idea was floated by Goldman, which is eager to end the bad publicity swirling around the New York company ever since the SEC sued it in April over a collateralized debt obligation called Abacus 2007-AC1, these people said. Combining a settlement of the Abacus lawsuit with a resolution of related SEC probes could soothe Goldman clients and investors, while shielding the firm from the release of information that could be used against Goldman in private litigation. Goldman remains steadfast in the settlement talks that it wants to avoid ending the case with a civil-fraud charge, according to people familiar with the matter. Even if the SEC and Goldman agree to a deal, the company faces numerous civil lawsuits related to its activities during the mortgage bubble. In addition, criminal prosecutors are looking into whether Goldman or its employees committed securities fraud in connection with its mortgage trading, according to people familiar with the matter.
  
• Berwick: Bigger Than Kagan. If the American people want the health-care world Dr. Berwick wishes to give them, that's their choice. But they must be given that choice. Barack Obama's incredible "recess appointment" of Dr. Donald Berwick to head the Centers for Medicare and Medicaid Services (CMS) is probably the most significant domestic-policy personnel decision in a generation. It is more important to the direction of the country than Elena Kagan's nomination to the Supreme Court.
• Banks Gain in Rules Debate. The world's banks appear to be winning a reprieve from tough new capital requirements and curbs on risk-taking, as regulators and central bankers are moving toward less stringent rules than initially proposed.
• Lawmakers Consider Taxing Airlines' Fees. U.S. House Democrats criticized airlines Wednesday for increasingly charging for checked baggage, seat selection and other services, and indicated they are considering legislation to tax the revenue collected from the fees. Airlines are increasingly relying on ticket surcharges to offset spikes in fuel prices and overcome weak demand.
• Gadget Appetite Strains Suppliers. Manufacturers across Asia are scrambling to ramp up production of key components for electronics, as shortages have frustrated consumers and disrupted business for companies from Apple Inc. to Nissan Motor Co. Unexpectedly strong consumer appetite for gadgets like Apple's iPad and new smartphones from HTC Corp. has stretched the capabilities of some companies that make the memory chips, touch displays and other parts found in those devices. Auto sales, too, have snapped back, straining supplies of custom chips used in cars.
• Speaking Up for American Capitalism. Business has taken a pounding on Capitol Hill and at the White House and for the most part has remained silent. It's time to make our case.

Bloomberg Businessweek:

• China's Growth Eases to 10.3% in Second Quarter on Credit Curbs. China’s economic growth eased to 10.3 percent in the second quarter after the government succeeded in tempering credit expansion, investment spending and property speculation. The pace compares with an 11.9 percent gain in January- March from a year earlier. Inflation cooled to 2.9 percent in June, the statistics bureau also reported in Beijing today. Industrial output rose a less-than-estimated 13.7 percent. The Shanghai Composite Index, down 24 percent this year, rose 0.4 percent as of 10:15 a.m. local time. A leading economic index for China rose 0.8 percent to 145.8 in May, The Conference Board said today. The indicator signals “solid but less robust growth in the second half,” said Bill Adams, a Beijing-based economist for the research organization. China’s export gains may have prevented a deeper slowdown in GDP in the second quarter, a support that may wane as the nation’s currency strengthens, European policy makers implement budget cuts and America’s unemployment rate hovers above 9 percent. Urban fixed-asset investment gained 25.5 percent in the first six months of 2010 from a year earlier, the statistics bureau said in today’s statement. The pace compares with a 33.6 percent increase in the first half of 2009, when a 4 trillion yuan fiscal stimulus program was kicking in. The nation’s expansion will keep slowing, partly because comparisons will be with levels that rose steadily in 2009 as the economy recovered from the effects of the global financial crisis, analysts’ forecasts show. Fourth-quarter growth may be 8.5 percent, UBS AG says.

MarketWatch:

• Chinese Steel Mills Suffer Slumping Demand. Quarterly losses 'highly likely' for some, with steel prices to stay low: analysts. Chinese steel producers have a demand problem, and some analysts say they see little relief in sight, even if prices for iron ore ease. Falling demand, particularly in China, has cast a shadow over the sector, and Goldman Sachs has a tipped the problems to continue at least until the fourth quarter.

NY Times:

• Report Warns of Risks to China's Bank System. A week after the Agricultural Bank of China raised nearly $20 billion from global investors in one of the biggest stock offerings in history, analysts are warning about growing risks to China’s banking system. A report released on Wednesday by Fitch, the credit ratings agency, said Chinese banks were increasingly engaging in complex deals that hid the size and nature of their lending, obscuring hundreds of billions of dollars in loans and possibly even masking a coming wave of bad real estate and infrastructure loans. The report also said that Chinese regulators understated loan growth in the first half of the year, by 28 percent, or about $190 billion, and that many banks continued to secretly shift loans off the books, creating a “pervasive understatement of credit growth and credit exposure.” “The growing amount of credit moving out of the banking system through these channels is one of the most disconcerting trends we’ve seen in China in recent years,” Charlene Chu, a Beijing-based banking analyst at Fitch, said of the practice of repackaging loans and moving them off bank balance sheets. While China’s economy remains robust, the report is troubling because the country’s recovery has been fueled by aggressive lending and soaring property prices. Lending by state-run banks was one of China’s most aggressive forms of stimulus last year, but analysts constantly warned that banks could face the risk from overbuilding and nonperforming loans. Much of the lending through off-balance-sheet channels is fueled by trust companies, mostly privately owned, that are partnering with banks and engaging in complex deals that involve repackaging loans into investment products — akin to an informal type of securitization. The deals are essentially disguised loans, analysts say. Beijing has tried repeatedly to stop the practice, but analysts say that banks and trust companies have come up with innovative ways around the rules.

Business Insider:

• Here's Why Gaming Could Be Apple's(AAPL) Winning Ticket Into The Living Room.

Forbes:

• Consumer Stocks Poised to Bounce. As earnings roll in, analysts say improving consumer sentiment should help the sector brave the headwinds of high unemployment and a sluggish recovery.

The New Republic:

• The Senate Is Now in Play. Let’s look at the numbers. To retain control, Democrats need at least 50 seats. They start with 45 seats that are safe or not up for election this year, and there are three more races (NY, CT, and OR) that they are likely to win, for a total of 48. (The comparable number for Republicans is 41.) That leaves 11 seats in play. Here they are, along with the most recent survey results:

Crain's Chicago Business:

• Asian Carp Czar Will Fulfill Lawmakers' Wish to Monitor Fish. The Obama administration plans to name an Asian carp czar within a month to oversee state and federal efforts to keep the voracious fish from invading the Great Lakes ecosystem. U.S. Sen. Richard Durbin, D-Ill., announced the plan Wednesday after meeting with Nancy Sutley, who chairs the White House Council on Environmental Quality. “The appointment of a coordinated response commander will signal that the effort to prevent the Asian carp from entering Lake Michigan and establishing itself in the Great Lakes is a national priority,” said the senator, who called for the move in a letter to President Barack Obama last month. The announcement came hours before a Senate hearing on the federal response to the Asian carp threat, which has sparked calls from other Great Lakes politicians and environmentalists to shut the Chicago waterway system, whose man-made canals link the lake to the Mississippi River. While Mr. Durbin and others have called for an accelerated study of separating the two watersheds (Crain’s, July 5), companies that ship or depend on shipments of bulk goods through the canals would be tremendously disrupted by such a move. "There is no place for knee-jerk reactions, unfounded fear of implausible migrations or demonization of regulators who appropriately take a common-sense approach to a complex issue," Mark Biel, executive director of the Chemical Industry Council of Illinois, said in a statement. "I commend both the Illinois and Indiana Departments of Natural Resources for their scientific, calm reactions to these recent discoveries. Lawmakers in Washington would be well-served to follow this response and use science, not scare tactics, moving forward."

Politico:

• NBC, CBS Refuse Ground Zero Mosque Ad. CBS and NBC have refused to air a provocative ad that calls on Americans to oppose the building of a mosque two blocks from the World Trade Center site. The ad — which has about 100,000 views on YouTube — intersperses some of the most horrifying images from the Sept. 11 attacks with the sounds of Muslim prayer and images of Muslim militants. It focuses on what's become a divisive — and partisan — issue in New York state, the erection of a Muslim cultural center on Park Place, in the neighborhood near the fallen towers. "On Sept. 11, they declared war against us," the ad's narrator says. "And to celebrate that murder of 3,000 Americans, they want to build a monstrous 13-story mosque at ground zero."
  

Reuters:

• Lehman's Big JPMorgan(JPM) Case Set for Trial - In 2012. No one ever said the Lehman Brothers bankruptcy case would be easy, or quick. Lehman Brothers Holdings Inc's (LEHMQ.PK) lawsuit accusing JPMorgan Chase & Co (JPM.N) of siphoning billions of dollars and hastening its record bankruptcy is unlikely to be ready for trial before April 30, 2012, under a timetable approved Wednesday by U.S. Bankruptcy Judge James Peck in Manhattan. The May 26 lawsuit accused JPMorgan of using its "unparalleled" knowledge of Lehman's distress, as the main "clearing" bank for Lehman transactions with other parties, to extract $8.6 billion of collateral in the four business days ahead of Lehman's Sept. 15, 2008 bankruptcy. It said officials including JPMorgan Chief Executive Jamie Dimon took the collateral after learning from Federal Reserve Chairman Ben Bernanke and then-U.S. Treasury Secretary Henry Paulson the government would not bail Lehman out. Lehman said the bankruptcy estate and creditors deserve the collateral.
• Apple(AAPL) to Hold iPhone Press Conference Friday. Apple spokesman Steve Dowling said late on Wednesday the company would hold the event at 10 a.m. on Friday at its headquarters in Cupertino, California.

Financial Times:

• Banks' Mortgage Desks in Hiring Spree. Investment banks are once again hiring bankers to sell and trade mortgage-backed securities, the packages of loans that were at the heart of the financial crisis, reflecting a belief that the worst is over in the US housing market. Foreign banks have been particularly aggressive in hiring salesmen and traders of mortgage-backed securities to better compete with American rivals. UBS and Nomura, two banks that pulled out of the mortgage-backed securities market after suffering losses during the financial meltdown, have started to reassemble their US-based mortgage desks. Royal Bank of Scotland and BNP Paribas also are adding a significant number of employees to their mortgage teams. Carsten Kengeter, co-head of UBS’s investment bank, said the bank could not afford to ignore the US mortgage market but acknowledged the need to better manage risks.

The Australian:

• US Lenders Regain Their Appetite for Risky Business. AS US lenders struggle to recover from the financial crisis, signs of a dangerous new infatuation with risky borrowers is emerging. Take the case of Shirley Davis. The retired phone-company administrator who lives in Brooklyn, New York, is more than $US33,000 ($37,300) in debt, earns just $US2414 a month and filed for bankruptcy in June. Yet, just before that, she ripped open an envelope from Capital One Financial Corporation(COF), which pitched her a credit card even though it sued her in 2006 to recover $US4470 she owed on a different card from the bank. "At some point we lost you as a customer and we'd like to have you back," the letter said. Ms Davis, 66, said she was stunned. "Even I wouldn't give me a credit card at this point," she said. From credit cards to car loans to mortgages, the hunger for new business as the crisis ebbs is causing some financial institutions to weaken lending standards and woo borrowers who might not be able to pay.

China Securities Journal:

• Chinese central bank adviser Xia Bin said the nation's economic growth may slow by two to three percentage points in the second half from the first quarter.

Evening Recommendations
Piper Jaffray:

• Rated (RBCN) Overweight, target $39.

Susquehanna:

• Rated (JNS) Positive, target $13.
• Rated (TROW) Positive, target $59.
• Rated (BEN) Positive, target $116.
  

Night Trading

• Asian equity indices are -.50% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 125.0 +2.5 basis points.
• Asia Pacific Sovereign CDS Index 120.5 -.5 basis point.
  
• S&P 500 futures +.17%.
  
• NASDAQ 100 futures +.22%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WWW)/.33
• (JPM)/.71
• (FCS)/.31
• (PPG)/1.47
• (GOOG)/6.52
• (AMD)/.06
• (VMI)/1.04
• (JBHT)/.35

Economic Releases
8:30 am EST

• The Producer Price Index for June is estimated to fall -.1% versus a -.3% decline in May.
• The PPI Ex Food & Energy for June is estimated to rise +.1% versus a +.2% gain in May.
• Initial Jobless Claims for last week are estimated to fall to 445K versus 454K the prior week.
• Continuing Claims are estimated to rise to 4447K versus 4413K prior.
• Empire Manufacturing for July is estimated to fall to 18.0 versus a reading of 19.57 in June.

9:15 am EST

• Industrial Production for June is estimated to fall -.1% versus a +1.3% gain in May.
• Capacity Utilization for June is estimated at 74.1% versus 74.1% in May.
  

10:00 am EST

• Philly Fed for July is estimated to rise to 10.0 versus a reading of 8.0 in June.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Senate's hearing on nominations of Yellen/Raskin/Diamond, Fed's Duke speaking, Fed's Lacker speaking, weekly EIA natural gas inventory report, (PETD) analyst day and the (LYV) analyst meeting could also impact trading.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 100% net long heading into the day.

Stocks Slightly Lower into Final Hour on Profit-Taking, More Economic Pessimism, More Shorting

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 25.14 +2.36%
  
• ISE Sentiment Index 104.0 +22.35%
  
• Total Put/Call .94 +13.25%
  
• NYSE Arms 1.44 +172.59%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 108.50 bps -.85%
  
• European Financial Sector CDS Index 120.54 bps +2.36%
  
• Western Europe Sovereign Debt CDS Index 130.66 bps unch.
  
• Emerging Market CDS Index 240.96 bps +2.17%
  
• 2-Year Swap Spread 30.0 +1 bp
  
• TED Spread 38.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 244.0 -1 bp
  
• China Import Iron Ore Spot $117.60/Metric Tonne unch.
  
• Citi US Economic Surprise Index -25.3 +.7 point
  
• 10-Year TIPS Spread 1.85% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -15 open in Japan
• DAX Futures: Indicating -5 open in Germany

Portfolio:

• Higher: On gains in my Medical 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 holds onto recent sharp gains, but fails to respond positively to Intel's strong report and tech sector strength. On the positive side, HMO, Networking, Oil Tanker, Defense, Ag, Internet, Software, Computer and Disk Drive stocks are especially strong, rising .75%+. Tech and transport shares are outperforming. The US Muni CDS Index is falling another -3.74% to 218.04 bps, which is also a big positive. Singapore Electronics Exports rose +43.9% in June, the largest % gain since Bloomberg record keeping began in June 1998. The European Investment Grade CDS Index is falling another -2.17% to 108.0 bps. The S&P GSCI Ag Spot Index is breaking convincingly higher through its 200-day moving average, rising another +.93%. On the negative side, REIT, Homebuilding, Construction, Bank, Paper and Steel shares are under pressure, falling more than -1.0%. (XLF)/(IYR) have underperformed throughout the day. The 10-year yield is falling a bit too much, declining -7 basis points to session lows. The Spain sovereign cds is rising +3.5% to 217.10 bps. The market remains short-term overbought and will likely consolidate recent gains before an attempt to push up throw the S&P 500 200-day moving average occurs. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, tech sector optimism and less hostile political rhetoric.

Today's Headlines

Bloomberg:

• Intel, ASML Holding Spur Rally in Technology Stocks. Intel Corp.(INTC), the world’s biggest semiconductor maker, and ASML Holding NV, Europe’s largest manufacturer of chip machinery, triggered a rally in technology stocks after forecasting increased sales. A gauge of technology shares was the biggest gainer among the 19 industry groups in the Stoxx Europe 600 Index today, increasing 1.2 percent. ASML rose 3.1 percent in Amsterdam. STMicroelectronics NV and Infineon Technologies AG, Europe’s biggest chipmakers, climbed more than 2 percent. Intel and ASML are benefitting from increased demand as consumers and businesses resume spending after the recession. Companies including Samsung Electronics Co. are expanding factory lines to meet rising demand for personal-computer memory and chips used to store data in portable devices such as Apple Inc.’s iPhone. “Intel’s third-quarter sales guidance provides comfort with regard to end markets,” Amsterdam-based analyst Peter Olofsen at Kepler Capital Markets said today. “After that, Applied Materials Inc. and ASML showed that recovery in the equipment market is continuing as well, and that order intake is continuing to increase.” “When we look at the total picture, 2011 bodes very well for ASML,” Chief Financial Officer Peter Wennink said in a video interview on the company’s website. “Because it’s not a little hump that we’re currently seeing. We are seeing some structural drivers for growth in this industry.” Before Intel’s earnings report, investors were concerned that the industry had built up excess stockpiles of computer chips. Intel Chief Executive Officer Paul Otellini said yesterday that demand is strong enough to ward off a glut. “We are very comfortable with the level of inventory,” he said. Corporate customers are replacing their old desktop and notebook machines, spurring demand for chips, Intel said. At the same time, Internet businesses, such as Google Inc. and Facebook Inc., are ordering more servers for their data centers.
• Fed Officials Saw No Need for More Stimulus, Trimmed Forecasts. Federal Reserve officials saw no need to boost stimulus to the economy while trimming their forecasts for growth and noting that risks to the recovery had increased, minutes of their June meeting showed.“The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside,” minutes released today in Washington said. “The changes to the outlook were viewed as relatively modest and as not warranting policy accommodation beyond that already in place.”Slowing inflation, constrained household spending and contracting credit prompted Fed policy makers last month to restate a pledge to keep the benchmark lending rate at around zero for “an extended period,” the Fed’s statement showed. The minutes indicated that U.S. central bankers were concerned about lingering high unemployment and risks that inflation could decelerate further. If the outlook worsened, the committee would need to consider whether additional stimulus was appropriate, the minutes said. “Participants expected the pace of hiring to remain low for some time,” the minutes said. “The unemployment rate was generally expected to remain noticeably above its long-run sustainable level for several years, and participants expressed concern about the extended duration of unemployment spells for a large number of workers.”U.S. central bankers lowered their central tendency forecast for 2010 growth to a range of 3 percent to 3.5 percent versus 3.2 percent to 3.7 percent in April, the minutes show. They also trimmed their outlook for inflation this year to a range of 1.0 percent to 1.1 percent, down from 1.2 percent to 1.5 percent in April. Forecasts for unemployment were little changed, with the Fed expecting unemployment between 9.2 to 9.5 percent in 2010 versus 9.1 to 9.5 percent in April.
• Bond Risk Falls to Two-Month Low as Intel(INTC) Boosts Recovery Bets. The cost of insuring against losses on European corporate bonds fell to the lowest level in two months after record sales and earnings forecasts from Intel Corp. helped fuel bets the economic recovery is on track.The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings dropped 3.25 basis points to 112, the lowest since May 12, JPMorgan Chase & Co. prices show. “Intel results blew the gasket off, Greece placed its six- month paper successfully and cash remains keen to invest in credit,” said Greg Venizelos, a London-based analyst at BNP Paribas SA. “Credit spreads keep marching tighter.” Credit-default swaps on Greece declined 27 basis points to 784, the lowest level in a month, according to data provider CMA. Contracts on Portugal dropped 6.5 basis points to 272.5 and Spain fell 1 to 207. The cost of protecting European bank bonds from default fell on speculation results of stress tests due next week will reassure investors about their resilience to potential losses. The Markit iTraxx Financial Index of 25 banks and insurers dropped 4 basis points to 128, the lowest since May 18, and the subordinated index was 5 lower at 199. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 13 basis points to 505, the lowest since June 21, JPMorgan prices show.
• Commodity-Shipping Rates Extend Decline, Led by Larger Vessels. The Baltic Dry Index, a measure of commodity-shipping costs, fell for the 34th consecutive day, the longest decline in almost nine years, as rates plunged to hire larger iron ore carriers. Rents for capesize ships that haul iron ore to make steel fell 17 percent, the most since October 2008. Steel prices in China, the biggest iron-ore consumer, are likely to drop 10 percent for the rest of the year, JPMorgan Chase & Co. said in a note on July 12. Baoshan Iron & Steel Co., the biggest publicly traded steelmaker in China, cut steel prices for a second month. “Iron ore buying has really fallen off,” Peter Norfolk, research director at Freight Investor Services Ltd. in London, said by phone today. A “rapid increase in steel production has led to oversupply. It’s not taken long for increased steel output to overrun demand.” The Baltic Dry Index of rates on international trade routes fell 81 points, or 4.5 percent, to 1,709 points, according to the London-based Baltic Exchange. Rates have dropped everyday starting May 27, the longest retreat since Aug. 15, 2001. Chinese prices for 25 millimeter (1 inch) rebar, a steel product used to reinforce concrete, have fallen 2.6 percent this month while iron-ore stockpiles rose 4.8 percent, according to data from Antaike Information Development Co.
• Microsoft(MSFT) Says 12th Alleged Russian Spy Was Employee. Microsoft Corp. said the 12th alleged member of a Russian spy ring operating in the U.S. was an employee at the company’s Redmond, Washington, headquarters. The man, a Russian citizen in his early 20s named Alexey Karetnikov, worked for Microsoft as a software tester for about nine months, a spokeswoman for Microsoft in Moscow, who declined to be identified in line with company rules, said by e-mail today.
• U.S. Import Prices Declined in June by Most Since January 2009. Prices of goods imported into the U.S. fell in June by the most since January 2009, led by declines in costs of oil, business equipment and consumer goods. The 1.3 percent decline in the import price index was more than projected and followed a revised 0.5 percent drop in May, Labor Department figures showed today in Washington. “Deflation is still the dominant risk over the intermediate term,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Pricing power remains virtually non-existent. The global recovery has lost some momentum.”
• Baghdad Is Back on Map for Lufthansa, Business Jets. Iraq is transforming from a battleground into a focus for civil aviation as the collapse of its national airline and a decline in violent attacks attract international carriers and business-jet operators. Deutsche Lufthansa AG will begin flights to Baghdad on Sept. 30, helping to fill a void left by Iraqi Airways, which the government is dissolving to prevent Kuwait from seizing planes as compensation for 10 jetliners plundered by Saddam Hussein’s invading forces in 1990. Middle Eastern carriers have also begun services and charter company Royal Jet is flying twice a week from Abu Dhabi as attacks in Iraq fall to their lowest level since the 2003 U.S.-led liberation. “The constantly improving security situation combined with ongoing reconstruction and investment has created ideal conditions for private aviation into and out of the country,” John Morgan, Royal Jet’s vice president for commercial operations, said in an interview.
• BP(BP) Would Be Barred From New U.S. Leases in House Bill. BP Plc would be barred from new U.S. offshore leases to drill for oil or natural gas because of past safety violations under an amendment approved by a House panel. The House Natural Resources Committee adopted the amendment by voice vote today while considering legislation to toughen safety standards for offshore drilling after the BP spill in the Gulf of Mexico.
• Bailouts Failed to Aid Small U.S. Banks, Warren Says. Elizabeth Warren, who leads the congressional panel overseeing the Troubled Asset Relief Program, said U.S. taxpayer bailouts helped Wall Street and not small banks. TARP “worked really well for the Wall Street banks, but it didn’t work well for the rest of the banks in the system,” Warren said today on Bloomberg Television’s “In the Loop with Betty Liu.”
• U.S. Stock Bears Outnumber Bulls for First Time Since April '09. The level of bullish sentiment about the U.S. stock market fell below the level of bearishness for the first time since April 2009, according to a survey of newsletter writers. The proportion of bullish publications tracked by Investors Intelligence trailed bearish ones by 2.2 percentage points, declining to 32.6 percent, the lowest level since March 2009. Individuals’ optimism about equities also fell to its lowest level since March 2009, 21 percent, according to a survey last week by the American Association of Individual Investors.

Wall Street Journal:

• U.S. Business Groups Air Policy Concerns. Washington's major business groups plan a united front Wednesday in their confrontation with the Obama administration over economic policy, calling on the White House to cut taxes and curb its regulatory agenda. Business groups including the U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Businesses will air a list of concerns about government policy at a "Jobs for America Summit" at the Chamber's offices Wednesday. The Chamber will issue an open letter to President Barack Obama asking that the administration cut taxes, act on pledges to expand export markets, and streamline government rules, according to a copy of the letter obtained by The Wall Street Journal. Summit participants include legislators with leadership roles on business-related congressional committees, including Sen. Judd Gregg (R-N.H.); Sen. Mary Landrieu (D-La.); Rep. Melissa Bean (D-Ill.); and Rep. Paul Ryan (R-Wis.). Also attending from the administration side are Erskine Bowles, President Bill Clinton's chief of staff and former Wyoming Sen. Alan Simpson (R)—the two men co-chair Mr. Obama's National Commission on Fiscal Responsibility and Reform. "There's a lot more unanimity than you may have seen over the past year" among business leaders, particularly in their opposition to tax and regulatory policy, said Stan Anderson, executive director of the chamber's Campaign for Free Enterprise, which promotes its job-creation policies. In the letter, which was sent to the White House Tuesday, the chamber says this Congress has passed $700 billion in tax increases, and demands that all tax cuts passed in the previous decade be extended, including those to individual, estate, capital gains and alternative minimum taxes. "In one bold, swift move, this would substantially boost investor, business, and consumer confidence," the letter reads. To reduce the deficit, the chamber urges the government to trim entitlement spending, expand logging in national forests, and revive inactive leases on oil, gas, and shale reserves. It urges passage of free-trade agreements with South Korea, Colombia and Panama, estimating that 380,000 existing U.S. jobs will be lost to Canada and the European Union should they conclude agreements with the three nations before the U.S. does. On the regulatory front, "What we're looking at here is a tsunami of regulations coming online slowly because of legislation that has either been enacted or legislation that people expect in some form will be enacted," said Bruce Josten, the chamber's chief lobbyist. The letter points out that the Environmental Protection Agency is moving forward with 29 major economic rules (a major rule would have an impact on the economy of at least $100 million) and 173 major policy rules. Legislation overhauling financial-markets regulation now nearing passage in Congress would create more than 350 rule makings, 47 studies and 74 reports. "You can find in these numbers a principal reason why businesses are so reluctant to make investments," the letter reads.

CNBC:

• Home Sellers Slashing Prices, While Banks Mow the Lawn. That heady buzz from the home buyer tax credit is now turning into a grinding headache, as home sellers realize their very temporary, government-induced catbird seat has now fallen back to earth. As of July 1st, 24 percent of sellers on the market had cut their asking prices at least once, according to Trulia.com. That's up 9 percent from the previous month and represents about $27 billion worth of vanished national home equity (or home equity hopes).

MarketWatch:

• Has the iPhone Squashed the BlackBerry for Good? Commentary: Fewer buyers and lower satisfaction plague RIM(RIMM).

Business Insider:

• Smartphone Sales Are About to Explode and Apple(AAPL) and HTC Are On Top of the Pack. (5 graphs) The latest data and charts from ChangeWave research suggest that smartphone sales are set to explode -- thanks to a finally-recovering economy -- and that Apple and HTC are the two smartphone brands in highest demand. According to consumer interest and satisfaction surveys, RIM(RIMM) is tanking, Motorola(MOT) is slipping, and Palm(PALM) is dead.
• Cash-Strapped Illinois Announces Another Massive Bond Offering. Illinois Gov. Pat Quinn just announced a $900 million bond offering to fund infrastructure and schools. What's scary is that this last-minute offering is just another step along Illinois's massive debt binge. CNN:

Chicago Tribune:

• Socially Responsible Mutual Fund Cuts Out 'Too-Big-To-Fail' Banks. Are "too-big-to- fail" banks just as bad as tobacco growers and alcohol producers? A Chicago-based socially conscious mutual fund thinks so. Last week Appleseed Fund began tarring "too-big-to-fail" banks with the same brush as pornographers, weapons-makers and others when it changed its screening criteria to also exclude Citigroup(C), Goldman Sachs(GS), Morgan Stanley(MS), Bank of America(BA) and JPMorgan Chase(JPM) from its portfolio. "Given the failure of regulators to prevent the credit crisis and the subsequent failure of legislators to break up the massive and interconnected banks that helped create the crisis, it's incumbent on depositors and investors to vote with their wallets," co-portfolio manager Adam Strauss said. "Until the financial system is truly restructured," Appleseed won't invest in too-big-to-fail banks, choosing instead to invest in regional banks, community banks and credit unions, he said.

The Daily Beast:

• Why Financial Reform Will Fail.

FINalternatives:

• New York Governor Resurrects Hedge Fund Tax Plan. He was for it before he was against, and now New York Gov. David Paterson has again proposed a major tax hike on out-of-state hedge fund managers. Luckily for the hedge fund industry, the New York State Senate rejected Paterson’s “compromise” revenue bill—which would complete the state’s 105-day-late budget—out of hand.

Market Folly:

• Latest Hedge Fund Positioning: Exposure Monitor Report. Bank of America Merrill Lynch is out with the latest rendition of their hedge fund monitor report. Last week we took note that hedge funds had increased short exposure yet were still suffering poor performance. Long/short equity hedge funds continue to have low net long equity exposure at around 27% net long. This continues to be well below the historical average of 35-40%. L/S funds still slightly favor growth stocks over value at the moment. Market neutral funds, while as of late they've taken opposite positions of L/S funds, are now flat in terms of equity exposure. Global macro hedge funds on the other hand have reduced emerging markets exposure and covered their short position on US indices. Based on CFTC data, however, other hedge funds (large speculators) have added to their short positions in both the S&P and Russell 2000. Bank of America Merrill Lynch highlights two recent hedge fund portfolio moves of note. Firstly, they point out that hedgies are now in a crowded long in the Japanese Yen. Secondly, they highlight the net short position in Nasdaq futures that many speculators have put on. To see the latest hedge fund exposure levels, view the full monitor report from BofA embedded below:
  

ABC News:

• EU Fails to Reach Deal on Financial Supervision. Efforts to clinch a deal on the way banks, insurers and markets in the European Union are supervised failed on Wednesday and talks will resume in late August or early September, EU sources said. "Talks have not led to an agreement this morning. Negotiations have now been postponed until the end of August, early September," a European Parliament source said.

Huffington Post:

• Jack Lew: Obama's OMB Pick Oversaw Citigroup(C) Unit That Shorted Housing Market. President Barack Obama's choice to lead the White House budget office oversaw a Citigroup unit that profited off the housing collapse and financial crisis by investing in a hedge fund king who correctly predicted the eventual subprime meltdown and now finds himself involved in the center of the U.S. government's fraud case against Goldman Sachs. Jacob Lew, named Tuesday as Obama's nominee to lead the Office of Management and Budget to replace departing OMB chief Peter Orszag, served as chief operating officer of Citigroup Alternative Investments in 2008. He has served as a top aide to Secretary of State Hillary Clinton since the administration came into office. Though Lew is a longtime public servant who's spent nearly 30 years in various positions throughout government, it is his few years at Citi -- in particular the one year he spent at its then-$54 billion proprietary trading, hedge fund and private equity unit -- that's likely to raise the most eyebrows in the coming weeks as Lew faces a Senate confirmation hearing. Especially his unit's investments in a hedge fund that bet on the housing market to collapse -- a reality suffered by millions of American homeowners.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday 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).

Politico:

• Black Tea Partiers Rebut NAACP. Some African-American tea party candidates are displeased by a resolution that the NAACP approved on Tuesday calling the grass-roots conservative movement “racist.” “I have not experienced the charges of racism that the NAACP is touting,” Vernon Parker, an African-American tea party congressional candidate in Arizona, told POLITICO. Parker, former mayor of Paradise Valley, said that he has never felt out of place at a tea party rally because of the color of his skin. “When I go to tea party events, people don’t look at me any differently,” he said. “They didn’t judge me on the color of my skin, quite frankly, they judged me on my principles." "The NAACP should be concerned about bringing jobs to people in depressed areas,” he added, “not the tea party.”
• Time for Obama to Make Sacrifices by Tim Pawlenty.

AspenDailyNewsOnline:

• Hedge Fund Manager John Paulson Paid $24.5 Million for Aspen Home. Hedge fund manager John A. Paulson, president and founder of Paulson & Co., Inc. paid $24.5 million on June 22 for a luxurious home on eight acres off of McLain Flats Road just outside of Aspen, according to sources. The sources, who asked that their identity not be disclosed, said the 12,500-square-foot home at 460 Sunnyside Lane was purchased by Paulson, a billionaire who made a fortune in 2007 betting against the subprime mortgage sector. “Paulson’s winning’s were so enormous they seemed unreal, even cartoonish,” wrote Wall Street Journal reporter Greg Zuckerman in his 2009 book about Paulson, “The Greatest Trade Ever.” “His firm, Paulson and & Co., made $15 billion in 2007 … Paulson’s cut was nearly $4 billion, or more than $10 million a day.” Paulson, 54, was recently at the center of a lawsuit filed by the U.S. Securities and Exchange Commission against Goldman Sachs(GS).

Reuters:

• Clampdown Rumored as China "Twitter" Sites Down. Chinese social networking websites that provide Twitter-like services have suddenly reverted to testing mode and access has been spotty amid reports of a government clampdown. Although Twitter has been banned for more than a year in China, Chinese Internet companies have been quick to fill the void, providing microblogging services that allow users to post frequent updates and follow other posters. On Wednesday, NetEase.com Inc's microblog (t.163.com) was inaccessible. A notice said the site had been down since 7 p.m. on Tuesday and was under maintenance. Sohu.com Inc's microblog (t.sohu.com) was also shut down for more than a day earlier in the week and all Chinese "twitters" now display the notice "in testing mode." Company sources told Reuters that the developments were the result of tightened government controls over the new services. "Nobody will publicly announce the reason, but it is as obvious as a fly on a bald head," one source said, declining to be named because of the sensitivity of the matter. The Shanghai-based Oriental Morning Post cited unnamed "industry sources" as saying that the websites were under pressure from Chinese censors. News content on Chinese Internet websites is under intense government censorship, and online news editors with major Internet portals often receive dictats from the government on what can and cannot be published.
• Yum(YUM) Sees 'Very High Labor Inflation' in China.
• Iraqis, On Cusp of Building Boom, Repair Homes.
• Spain's Zapatero Pushes Austerity, Has Few Allies. Prime Minister Jose Luis Rodriguez Zapatero, facing opposition to tough spending cuts, urged lawmakers on Wednesday to back pension reforms and other austerity measures to lift Spain out of its economic crisis.

Financial Times:

• Richmond Fed Chief Opposes Bail-Outs. US regulators must let a large institution collapse without bailing out its creditors to convince markets that no bank is too big to fail, the president of the Federal Reserve Bank of Richmond said. Jeffrey Lacker told the Financial Times that markets must have clear expectations about how short-term creditors would be treated in a bank failure. “Ambiguity about that was just deadly over the past few years coming into this crisis,” he said.

Folha de S. Paulo:

• Petroleo Brasileiro SA(PBR) may buy oil reserves from Brazil's government for $7 to $9 a barrel, citing directors at the company. The administration of President Luiz Inacio Lula da Silva is concerned that Petrobras may have to further delay its planned share sale because of presidential elections in October.

Hurriyet:

• The United States is working to make it easier for Turkey to take military action against the Kurdistan Workers' Party, or PKK, in northern Iraq, citing James Jeffrey, ambassador to Ankara. U.S. authorities are working on ways to allow Turkey to strike at PKK bases in Iraq more rapidly and more often, Jeffrey said.