North American Investment Grade CDS Index 103.66 bps -.58%
European Financial Sector CDS Index 105.0 bps +5.53%
Western Europe Sovereign Debt CDS Index 112.0 bps -.60%
Emerging Market CDS Index 214.26 bps -1.42%
2-Year Swap Spread 17.0 unch.
TED Spread 32.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 240.0 +1 bp
China Import Iron Ore Spot $136.10/Metric Tonne +.74%
Citi US Economic Surprise Index -40.80 +.2 point
10-Year TIPS Spread 1.79% unch.
Overseas Futures:
Nikkei Futures: Indicating -10 open in Japan
DAX Futures: Indicating +21 open in Germany
Portfolio:
Slightly Higher: On gains in my Biotech and Retail long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and covered some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 reverses higher from morning losses on decent volume despite some earnings disappointments. On the positive side, Homebuilding, Insurance, Airline, I-Banking and Ag stocks are especially strong, rising 1.0%+. Small-cap shares are outperforming today. (XLF) has also outperformed throughout the day. The S&P GSCI Ag Spot Index is rising another +1.6% today. Copper also continues to trade well, rising another +1.36%. On the negative side, Food, Networking, Computer and Utility shares are under pressure, falling more than -1.0%. Tech and Consumer shares are underperforming. 3-Month Euro Libor is rising slightly again today. Overseas markets reacted well today to our afternoon weakness yesterday. I suspect tomorrow's economic reports will be mildly disappointing, however this should be mostly priced into stocks. Thus, we may see another afternoon surge in stocks after any morning weakness. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, short-covering, less economic fear and less financial sector pessimism.
Falling U.S. Mortgage Rates May Aid Economy Outside Housing. Mortgage rates for U.S. homes set a record low for the sixth straight week, potentially freeing up money for consumers to spend elsewhere. Investors seeking the relative safety of bonds backed by government-controlled home finance companies Fannie Mae and Freddie Mac drove the average rate for a 30-year fixed mortgage down to 4.54 percent in the week ended today from 4.56 percent last week, McLean, Virginia-based Freddie Mac said. The average 15-year rate was 4 percent, also a record in the data going back to 1971, the company said in a statement. “It’s not going to help out everybody but it will help,” said Dana Johnson, chief economist at Comerica Inc. in New York. “Lower rates are a mechanism by which the economy can strengthen over time.”
Well's Fargo's(WFC) Stumpf Sees New Costs for Customers. Wells Fargo & Co. Chief Executive Officer John Stumpf said customers, not just the bank, will bear the financial burden for U.S. regulations that cover services ranging from home loans to credit cards. “I can’t guarantee that we won’t pass on some of those costs,” Stumpf, 56, said in an interview at his San Francisco office. “We’ll try to tighten our belt and absorb some of the costs of compliance, but some costs may change and customers might pay for their financial services in new ways.” Stumpf’s comments add to evidence that new rules mean new expenses for consumers as banks make up for lost revenue and increased costs. JPMorgan Chase & Co. CEO Jamie Dimon said July 15 the legislation may translate into higher fees and credit- card rates, and Bank of America Corp.’s Brian T. Moynihan told shareholders a day later he’s looking for ways to soften the impact on annual revenue, which the lender said could be $2.3 billion. Wells Fargo, with the biggest U.S. branch network, is already passing on costs by charging for checking accounts and raising interest rates on credit cards and loans, said Richard Bove, a banking analyst at Rochdale Securities LLC. The bank ended free checking last month by adding a $5 monthly fee for customers who don’t meet certain conditions. “This bank does not intend to sit there and get nailed,” said Bove, who recently upgraded Wells Fargo shares to a “buy.” “Wells Fargo has moved well ahead of the crowd, and everyone will follow.”
Jobless Claims in U.S. Declined 11,000 Last Week to 457,000. The number of Americans filing first-time claims for unemployment insurance fell to 457,000 last week, a figure that signals the labor market will be slow to improve even as the economy grows. Initial jobless claims dropped by 11,000 in the week ended July 24 from a revised 468,000, Labor Department figures showed today in Washington. “The underlying pace of claims has not made any measurable improvement,” said Ellen Zentner, senior U.S. macro economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Businesses are investing in equipment but other than that there’s little impetus” for them to hire, she said. The four-week moving average of claims, a less-volatile measure, dropped to 452,500 last week, the lowest since May 8, from 457,000, today’s report showed. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3.6 percent in the week ended July 17 from 3.5 percent in the prior week.
Exxon(XOM) Profit Rises Most Since 2003 as Output Climbs. Exxon Mobil Corp. posted its biggest profit increase since 2003, exceeding analysts’ estimates, as rising production helped the largest U.S. oil company take advantage of gains in energy prices. Second-quarter net income jumped 91 percent to $7.56 billion, or $1.60 a share, from $3.95 billion, or 81 cents, a year earlier, Irving, Texas-based Exxon said today in a statement. Exxon and Royal Dutch Shell Plc, Europe’s biggest energy company, capitalized on jumps in oil and fuel prices by boosting production. Exxon’s output climbed 8.4 percent to the equivalent of 4 million barrels of oil a day.
Fed's Fisher Says Firms May Not React to More Accommodation. Federal Reserve Bank of Dallas President Richard Fisher said the U.S. economy faces a “slow slog” and further monetary accommodation may not help revive “dispirited” businesses. “As long as our economic players, businesses and consumers, are beset by unmanageable uncertainty, they will refrain from making decisions that provide the stuff of economic growth,” Fisher said in a speech today in San Antonio. The regional Fed chief, 61, said he expects growth below 3 percent for a “prolonged period,” buttressing the Fed’s Beige Book business survey yesterday which showed the recovery slowing in some areas over the past two months. Businesses “are increasingly distressed by the lack of consistent direction coming from Washington,” Fisher said. “They are confused and dispirited by random refereeing.” It’s possible “further monetary accommodation might make the situation worse” if the Fed is seen as “politically pliable” and “prone to substituting such accommodation for fiscal discipline.” Fisher reiterated his view that the Fed will not “monetize” the nation’s debt by effectively printing money to finance the shortfall, and said “neither inflation nor deflation will be tolerated” by policy makers. The banking industry “appears to be on a very slow mend,” and yet “uncertainty reigns,” he said.
North Korea Gets China Cooperation Deal After U.S. Sanctions. North Korea signed an economic and technical cooperation agreement with China today, a week after U.S. Secretary of State Hillary Clinton announced further trade sanctions to halt the regime’s nuclear-weapons program. Liu Hongcai, the Chinese ambassador to North Korea, and Ri Ryong Nam, the nation’s Minister of Foreign Trade, signed the agreement during a ceremony held in Pyongyang, according to the state-run Korean Central News Agency. China has so far refused to condemn North Korea for the attack on the Cheonan, which killed 46 South Korean sailors. China accounted for 79 percent of the North’s 2009 international trade, according to the Seoul-based Korea Trade-Investment Promotion Agency. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a July 2009 report by the New York-based Council on Foreign Relations.
Bunge(BG) Cuts Profit Forecast as Soybean Margins Shrink. Bunge Ltd., the world’s second- largest sugar trader, reduced its full-year earnings forecast after soybean-processing margins in the U.S. and South America shrank. The shares dropped the most in more than a year. Profit excluding some one-time items will be $3.25 to $3.50 a share this year, the White Plains, New York-based company said today in a statement. It had previously forecast earnings of $5.30 to $5.80, and analysts had projected $5.25, the average estimate in a Bloomberg survey. “The miss was broad-based across all segments, though agribusiness, sugar, and fertilizer were the clear underperformers,” Vincent Andrews, a New York-based analyst at Morgan Stanley, said in a report today. Bunge dropped $5.61, or 10 percent, to $48.36 at 9:30 a.m. in New York Stock Exchange composite trading, the biggest intraday percentage decline since April 23, 2009. The shares fell 15 percent this year through yesterday.
Volatility Trade Buffett Embraces Backfiring for Hedge Experts. A bullish stock market trade embraced by the smartest money is backfiring. And that has investors wondering if what Warren Buffett and Goldman Sachs Group Inc.(GS) know about derivatives is obsolete. Goldman Sachs, the world’s most profitable securities firm, reported losses from derivatives last quarter after selling insurance that protected clients against stock swings during the Standard & Poor’s 500 Index’s biggest retreat in more than a year. Buffett, the chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., underwrote $37 billion of the contracts since 2004, filings with the Securities and Exchange Commission show. The combination of hedging by insurance companies, tighter regulation of bank speculation and reluctance among securities firms to write derivatives known as variance swaps means speculators who sold them are now facing losses, according to Morgan Stanley and Societe Generale SA. Money-losing trades in both rising and falling markets show the hazards of the business for even Wall Street’s most sophisticated investors.
German Unemployment Fell for 13th Straight Month as Exports Boom. German unemployment fell for a 13th month in July as companies from Infineon Technologies AG to Deutsche Lufthansa AG benefit from the strengthening global economy. The number of people out of work declined a seasonally adjusted 20,000 to 3.21 million, the Federal Labor Agency in Nuremberg said today. That’s the lowest since November 2008. Unemployment was forecast to fall 20,000, according to the median of 34 estimates in a Bloomberg News survey. The adjusted jobless rate declined to 7.6 percent.
JPMorgan(JPM) to Open Full Saudi Branch in Emerging-Market Expansion. JPMorgan Chase & Co. plans to become the first U.S. bank to open a full-service commercial branch in Saudi Arabia this year, six years after Citigroup Inc. exited a venture in the world’s biggest oil exporter.
High-Frequency Trading Faces EU Probe, Regulator Says. High-frequency trading will be investigated by regulators to “better understand any risks,” Europe’s top market watchdog said in a report on proposed industry rules.
Bullard Urges FOMC Purchase Treasuries If Deflation Risk Grows. Federal Reserve Bank of St. Louis President James Bullard said the central bank should resume purchases of Treasury securities if the economy slows and prices fall rather than maintain a pledge to keep rates near zero. “‘The U.S. is closer to a Japanese-style outcome today than at any time in recent history,” Bullard said, warning in a research paper released today about the possibility of deflation. “A better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities.” “The most likely possibility from where we sit today is that the recovery will continue through the fall, inflation will start to move up and this issue will all go away,” Bullard said to reporters on a conference call today. “Suppose we get another negative shock, another surprise. We have to be prepared in that event to have a plan in place to do something.” Bullard, a voting member of the Federal Open Market Committee this year, said using Fed communications to pledge rates will stay near zero may prove to be detrimental. While some people say rates near zero will accelerate inflation, such an interest rate policy may also cause a broad-based decline in prices, he said. “Under current policy in the U.S., the reaction to a negative shock is perceived to be a promise to stay low for longer, which may be counterproductive because it may encourage a permanent, low nominal interest rate outcome,” he said in a paper released by the St. Louis Fed.
Evidence Ties Manning to Afghan Leaks. Investigators have found concrete evidence linking Pfc. Bradley Manning with the leak of classified Afghanistan war reports, a U.S. defense official said.
Redbox Parent Coinstar(CSTR) Explores Beauty Kiosk Business. Coinstar Inc. (CSTR) may try to do for makeup what its Redbox unit has done for movie DVDs. The DVD-vending and coin-counting machine maker is recruiting a vice-president-level manager to oversee a new venture in the beauty or cosmetics space.
U.S. Needs to Articulate Credible Fiscal Consolidation Plan - Moody's. The U.S. government needs to articulate clearly a credible plan to tackle its bulging debt profile in order to keep its triple-A credit rating, Moody's Investors Service's lead sovereign analyst for the country said Thursday. In contrast to the U.S., the credit health of Asian countries remains broadly positive and their resilience has been highlighted by Europe's debt crisis, which looks to have peaked, Steve Hess, senior credit officer in the sovereign risk group at Moody's told Dow Jones Newswires in an interview.
Comeback Heralded for Japanese Electronic Giants. Buoyed by a long-awaited turnaround in its television and video game businesses, Sony said Thursday it swung to a net profit of ¥25.7 billion, or $293.9 million, in the April-June quarter and raised its outlook for the full year. The company’s chief financial officer said it was time for Sony to “go on the offensive” amid signs that a global economic recovery was finally pulling Japan’s electronics giants out of a long slump.
Washington Post:
White House Proposal Would Ease FBI Access to Records of Individual's Internet Activity. The Obama administration is seeking to make it easier for the FBI to compel companies to turn over records of an individual's Internet activity without a court order if agents deem the information relevant to a terrorism or intelligence investigation. The administration wants to add just four words -- "electronic communication transactional records" -- to a list of items that the law says the FBI may demand without a judge's approval. Government lawyers say this category of information includes the addresses to which an Internet user sends e-mail; the times and dates e-mail was sent and received; and possibly a user's browser history. What officials portray as a technical clarification designed to remedy a legal ambiguity strikes industry lawyers and privacy advocates as an expansion of the power the government wields through so-called national security letters. These missives, which can be issued by an FBI field office on its own authority, require the recipient to provide the requested information and to keep the request secret. To critics, the move is another example of an administration retreating from campaign pledges to enhance civil liberties in relation to national security. The proposal is "incredibly bold, given the amount of electronic data the government is already getting," said Michelle Richardson, American Civil Liberties Union legislative counsel. The critics say its effect would be to greatly expand the amount and type of personal data the government can obtain without a court order. "You're bringing a big category of data -- records reflecting who someone is communicating with in the digital world, Web browsing history and potentially location information -- outside of judicial review," said Michael Sussmann, a Justice Department lawyer under President Bill Clinton who now represents Internet and other firms.
D.C. Area Jobless Rate Rises Again as Labor Force Grows. Unemployment in the Washington region rose to 6.4 percent in June from 6 percent the previous month, according to federal government data released Wednesday, highlighting the fragility of the recovery in the local labor market. The Bureau of Labor Statistics data contrasted with numbers it released last week on the District, Maryland and Virginia that showed their unemployment rates had dropped in June. The difference is attributable in part to Wednesday's data not taking in the entire states of Maryland and Virginia. At the same time, experts say the Washington area's relatively positive labor market has been drawing job seekers from outside the region faster than it has been adding jobs.
NYPost:
It's Not Personal. Uncle Sam Shuns Goldman(GS) Until It's Business. Goldman Sachs has become Uncle Sam's guilty little pleasure. When the cameras are rolling and the public is watching,and other public officials soundly reprimand or ignore CEO Lloyd Blankfein's gold-encrusted investment bank. That was the case in April when the Senate subcommittee raked the firm's executives over the coals and called their financial products "shi**y," "crap," and "junk." Then, earlier this month, Blankfein was one of just two major bank CEOs not invited to the FinReg bill signing. But behind closed doors and out of camera shot, Goldman is still considered the gold standard that the federal government turns to when it needs to raise billions in the markets or complete major transactions. In a second case, it was Goldman that won the plum assignment of handling the public offering of stock of taxpayer-owned insurer American International Group's sale of its Asian unit, AIA. What's more, Goldman scored that juicy, lucrative assignment after it was accused of being the biggest beneficiary of AIG's $182 billion government rescue by members of both parties on Capitol Hill. Uncle Sam also couldn't keep its hands off Goldman when it came to hiring a firm to lead the auction of the Residential Capital, the mortgage unit of the bailed-out and government owned GMAC. "They all articulate anger at the company, but they all do business there," said Dick Bove, an analyst at Rochdale Securities. That love-hate relationship was clear hours after the FinReg invitation diss when officials from the Obama administration -- away from the cam eras and public -- called Blankfein to apologize for not invit ing him to the historic signing event. Goldman's government jobs, including $13.5 billion in municipal bond deals, came as the firm was negotiating a settlement of the Securities and Exchange Commission's fraud case. It settled earlier this month, paying a $550 million fine.
The Washington Times:
OMB Nominee Got $900,000 After Citigroup(C) Bailout. President Obama's choice to be the government's chief budget officer received a bonus of more than $900,000 from Citigroup Inc. last year -- after the Wall Street firm for which he worked received a massive taxpayer bailout. The money was paid to Jacob Lew in January 2009, about two weeks before he joined the State Department as deputy secretary of state, according to a newly filed ethics form. The payout came on top of the already hefty $1.1 million Citigroup compensation package for 2008 that he reported last year.
HuffingtonPost:
Obama Mocks Polls But Spends More On Them($4.4M) Than Bush Did. During his daily press briefing on July 13, White House Press Secretary Robert Gibbs was peppered with questions about why the president's popularity numbers are in decline and his policy positions are so difficult to sell. ABC News's Jake Tapper sought reaction to the network's newest poll showing that 51 percent of respondents would rather have Republicans running Congress. CNN's Ed Henry wanted to know why, in that same poll, "six in 10 Americans have little or no faith in the President to make the right decisions." CBS's Chip Reid then pointed to his own network's poll showing that only 13 percent of respondents thought the president's economic programs had affected them personally. Exasperated, Gibbs deployed a classic rejoinder: mocking the polling-obsessed media culture.
Cable News Rating July 2010: Fox Dominates, MSNBC Tops CNN. Fox News continued its domination of cable news ratings in July. The network averaged 1.85 million viewers in primetime for the month--more than CNN, MSNBC and HLN combined. How did individual programs do? Below see the top 30 programs in cable news for July 2010.
Miami Herald:
Big Drop in U.S. Agricultural Sales to Cuba. U.S. agricultural exports to Cuba fell 35 percent in the first five months of this year compared with the same period in 2009, largely because of the island's shortage of hard currency, according to a recent report. The report by the U.S.-Cuba Trade and Economic Council, a New York-based group that monitors bilateral trade, showed U.S. sales to Cuba from January to May of this year hit $182 million, compared with $278 million for the same period last year. U.S. exports to Cuba already had seen a 24 percent drop in 2009 -- $528 million, compared with 2008, when they hit a record of $710 million, according to the report issued Tuesday.
Politico:
The Barack Obama-Nancy Pelosi Event. President Barack Obama’s endless summer of fundraising is heating up — with the addition of a big-money August house party to help out House Speaker Nancy Pelosi’s imperiled Democrats, POLITICO has learned. Obama plans to headline an Aug. 16 fundraiser for the Democratic Congressional Campaign Committee in Los Angeles — the first such appearance by the president on behalf of Pelosi since White House press secretary Robert Gibbs rankled House Democrats by suggesting they could lose their majority.
Reuters:
US Commercial Paper Market Grows for 3rd Week - Fed. The U.S. commercial paper market expanded for the third straight week, showing companies are able to use it to borrow as an alternative to tight bank lending, Federal Reserve data showed on Thursday.
Bild Zeitung:
20 Years after German reunification, labor costs in the eastern part of the country are still almost 28% lower than in the west.
China Business News:
China may face deflationary pressures in the second half of this year, citing Wang Ziaoguang, head of macroeconomic research under the National Development and Reform Commission. China's economic growth path may be "W-shaped," Wang said. The effects of China's property curbs should be seen in the first quarter of next year, Wang said.
Mortgage-Bond Spreads Surpass Lows Reached During Federal Reserve Buying. Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates reached record lows relative to 10-year Treasuries as investors search for higher returns amid limited refinancing by borrowers. Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds narrowed 0.02 percentage point to about 0.58 percentage point more than 10-year Treasuries as of 1:45 p.m. in New York, according to data compiled by Bloomberg. The gap reached 0.59 percentage point on March 29, two days before the Federal Reserve ended its buying of $1.25 trillion of so-called agency mortgage bonds.
Gross Calls Spending to Maintain Consumption a Waste. Pacific Investment Management Co.’s Bill Gross said deficit spending by governments that seek to maintain artificial levels of consumption “can be compared to flushing money down an economic toilet.” Without acceleration in population growth, developed countries finance more consumption to maintain economic growth, the world’s biggest bond-fund manager wrote in his August commentary today on Newport Beach, California-based Pimco’s website. Leveraged spending, he said, is not a substitute for demand created by people. “I will go so far as to say that not only growth but capitalism itself may be in part dependent on a growing population,” Gross wrote. “Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence.” Deficit spending will be unsuccessful in what Pimco calls the “new normal” because deleveraging, re-regulation and de- globalization produces structural headwinds that lead to slower growth and lower-than-average investment returns, Gross said. Japan is the modern-day example of what deleveraging in the face of a slowing and now negatively growing population can do, Gross said.
Pickens, Home Depot(HD) Beat Wind-Turbine Makers in Energy Measure. T. Boone Pickens, the billionaire energy hedge-fund manager, and Home Depot Inc., the largest U.S. home-improvement retailer, are winners in energy legislation that fails to help solar-panel and wind-turbine makers. The measure proposed yesterday by Senate Democrats would give Pickens victory in his lobbying campaign for more use of natural gas, providing $3.8 billion in rebates for cars and trucks powered by the fuel. Home Depot would benefit from provisions to channel $5 billion in rebates to homeowners who upgrade to more efficient appliances or add insulation that reduces energy use. The provisions were the main survivors among proposals to reshape U.S. energy use under the measure that would also set tougher rules for offshore drilling after BP Plc’s Gulf of Mexico oil spill, the worst in U.S. history. Absent from the measure were limits on carbon dioxide or requirements that utilities add solar and wind power to their portfolios.
CIC Sells Morgan Stanley Shares for Total of $396.5 Million in Past Week.China Investment Corp., the Chinese sovereign wealth fund that bought a 9.9 percent stake in Morgan Stanley in 2007, sold $132.8 million of shares in the investment bank yesterday, bringing the total amount sold in the last week to $396.5 million. CIC sold 4.88 million shares at a weighted average of $27.25 yesterday, the Beijing-based fund said in a regulatory filing. CIC still owns 161.6 million Morgan Stanley shares, according to the filing. The fund sold 14.6 million shares since July 21, the day Morgan Stanley jumped by the most in more than a year after reporting better-than-expected earnings.
Oliver Stone's Showtime Series Should be Canceled, Billionaire Saban Says. called on CBS Corp.’s Showtime Networks to cancel Billionaire Haim SabanOliver Stone’s planned “Secret History of America” documentary series after the filmmaker made remarks that were criticized as anti-Semitic. Saban, creator of the “Power Rangers” franchise and an investor in Univision Communications Inc., urged New York-based CBS to cancel the 10-hour series, his spokeswoman, Stephanie Pillersdorf, said today in an e-mail. “Anyone who works with this guy should be ashamed,” Saban, who is Jewish and a supporter of Israel, said in comments posted at HuffingtonPost.com and confirmed by Pillersdorf. “Oliver Stone should be given a helping hand --indeed, a vigorous shove -- into the land of forced retirement.”
Dendreon's(DNDN) Vaccine for Prostate Cancer Extends Life in Published Study. Dendreon Corp.’s prostate cancer vaccine, Provenge, extended lives by 4.1 months in a study published in the New England Journal of Medicine. The data, released previously, led to the drug’s U.S. approval in April. Provenge is the first drug designed to train the body’s immune system to fight cancer and is the most effective treatment for certain patients with advanced prostate tumors, said Philip Kantoff, a professor of medicine at Harvard Medical School and the study’s lead author.
Illinois Will Probably Raise Income-Tax Rate to 5%, Budget Director Says. Illinois, which is in its worst financial position ever, will raise the income-tax rate in January to address its deficit, Governor Pat Quinn’s budget director said. Lawmakers will likely increase the personal tax to 5 percent from 3 percent, generating $6 billion of new revenue, the budget director, David Vaught, said in an interview.
Avis Budget Offers $1.33 Billion for Dollar Thrifty. Avis Budget Group Inc.’s $1.33 billion offer for Dollar Thrifty Automotive Group Inc., which topped Hertz Global Holdings Inc.’s agreement to buy the rental- car company, may signal a bidding war is under way. The $46.50-a-share offer includes $39.25 in cash and 0.6543 of an Avis share for each Dollar Thrifty share, Parsippany, New Jersey-based Avis said yesterday in a statement. The proposal is 4.5 percent less than Dollar Thrifty’s closing price yesterday.
Vietnam's Debt Rating Lowered by Fitch on Foreign Borrowing, 'Weak' Banks. “Vietnam’s sovereign creditworthiness has deteriorated on the back of weaker external finances and rising external financing requirements amid an inconsistent macroeconomic policy framework,” Ai Ling Ngiam, a director in Fitch’s Asia Sovereign team, said in today’s release. She also cited a “weak banking system.”
Wall Street Journal:
Arizona Ruling Sparks Political Firestorm. A federal judge's decision to block the most controversial elements of Arizona's immigration law offered a fresh hot-button issue for the already heated political season. Jane Norton, a Republican candidate for the U.S. Senate in Colorado, had a hunch that by dinnertime Wednesday, conservative voters across the state would have heard about a federal judge blocking much of Arizona's immigration law. She had a hunch they would be angry.
Sanofi Likely to Make Formal Bid to Genzyme(GENZ) Board. Sanofi-Aventis SA is increasingly likely to make a formal takeover offer to Genzyme Corp.'s board, people familiar with the matter said, in an effort to win enough support among the U.S. biotechnology company's directors to secure a deal that could be valued at about $20 billion. There is growing expectation in both camps that the French pharmaceutical company will send a so-called "bear hug" letter to Genzyme, publicly detailing its proposal, these people said.
Americans Cut Back on Visits to Doctor. Insured Americans are using fewer medical services, raising questions about whether patients are consuming less health care as they pick up a greater share of the costs. The drop in usage is showing up as health-care companies report financial results. Insurers, lab-testing companies, hospitals and doctor-billing concerns say that patient visits, drug prescriptions and procedures were down in the second quarter from year-ago levels. "People just aren't using health-care like they have," said Wayne DeVeydt, WellPoint Inc.'s chief financial officer, in an interview Wednesday. "Utilization is lower than we expected, and it's unusual." Others say that consumers are beginning to forgo elective procedures like knee replacements. "We have a very weak economy and it's just a different environment for the elective parts of health care," said Paul Ginsburg, a health economist who runs the Center for Studying Health System Change and has been analyzing health-company earnings.
DirectTV(DTV) Plays Offense With NFL Ads. Satellite Provider Will Kick Off $100 Million Marketing Blitz to Boost Its Sunday Program Package. DirecTV Group Inc. is launching its biggest advertising campaign yet for its marquee property, NFL Sunday Ticket, as it faces mounting pressure from pay-television competitors increasingly offering rival NFL packages.
Kindle to Go 'Mass Market'. Amazon(AMZN) Digs in Heels by Introducing New, Cheaper Version of E-Book Reader.
Fannie Mae, Freddie Mac Still Too Big to Nail: Jonathan Weil. The White House says it’s finally ready to consider new ideas for what to do about Fannie Mae and Freddie Mac. Still absent from the government’s agenda is any serious effort to hold anyone accountable for their ruin or investigate why they collapsed.
Dodd, Frank Plan Congressional Hearings on Basel Bank-Capital Regulations. Christopher Dodd and Barney Frank, authors of the U.S. financial overhaul, plan hearings on the status of global talks to revise bank-capital standards amid worries that proposed rules are being watered down. “I am concerned the recent proposals out of Basel will result in weak and perhaps even nonbinding provisions that provide credit to banks for holding forms of capital that have little or no value in absorbing losses,” said Senator Ted Kaufman, Democrat of Delaware. “The financial reform bill includes only a promise of higher capital requirements for U.S. banks, which we were told were going to be negotiated on an international level.”
China's Stocks Rally Will Wane on Inflation Outlook, HSBC's Mahendran Says. HSBC Private Bank’s Arjuna Mahendran, who predicted a decline in China’s stocks in January, said the the country’s month-long equities rally may falter if the government isn’t able to boost the economy and contain inflation.“It’s not going to be an easy ride to regain losses,” said Mahendran, the head of investment strategy for Asia in Singapore at HSBC Private Bank, a unit of Europe’s largest bank overseeing $460 billion globally. “We might see some short-term gains on the index, but there could be reversals until the picture of overall inflation is clearer.”
Taxes: A Defining Issue.Barack Obama knows taxes define worldview. The GOP should offer voters an alternative.
Bloomberg Businessweek:
Barring BP(BP) From Drilling Would Cost U.S. Jobs, Company Says. BP Plc objected to proposed legislation that would bar the oil company from operating new drilling leases in U.S. waters, saying it could trigger job losses and threaten the nation’s energy security. A provision of the House bill may have a “drastic impact,” David Nagel, executive vice president of BP America, said in a July 28 letter to Democratic Speaker Nancy Pelosi of California and Republican Minority Leader John Boehner of Ohio. BP said it contributes “significantly” to U.S. oil output as the largest producer in the deep waters of the Gulf. “If this provision were to limit our ability to develop new and existing energy sources, it would harm the ongoing effort to increase America’s energy independence,” Nagel wrote. While BP supports stronger drilling regulation, it is concerned that the provision of the House measure “could have profound consequences for the Gulf Coast economy and jobs, and for the nation as a whole,” Nagel said in the letter.
CNBC:
SEC Investigates Trading in Anadarko Shares. Trading in shares of the oil and gas exploration company Anadarko Petroleum late this spring are under investigation by the Securities and Exchange Commission, according to someone familiar with the matter.
This Is Real: The White House Wants To Stimulate The Economy By Building More Cheap Housing. We must admit to being a tad perplexed by this post up at The White House blog: Affordable Housing in the Recovery Summer. That's right, apparently our central planners, in their infinite wisdom have decided that what the economy is really lacking right now is more cheap housing. Here's what Rosie Rios, the US Treasurer wrote:
Forbes:
Al-Qaeda's New Magazine. ''Inspire'' aims to turn Muslims in the Western world toward violent jihad. Can American publishers meet the challenge? So in case you missed it, al Qaeda has a brand new magazine. Yes, really. Just when publishing titans like Hearst and Conde Nast have closed the doors on classics such as Gourmet and O At Home and Newsweek struggles for its future, our friends at al Qaeda headquarters have come up with Inspire, an English-language, online publication aimed at turning Muslims in the English-speaking (Western) world toward violent jihad.
Bill Calls for Study Delinking Lake Michigan, Chicago River to Stall Asian Carp. A U.S. House water projects bill introduced Wednesday would require the Army Corps of Engineers to study separation of Lake Michigan from the Chicago River and the local canal system to prevent the migration of Asian carp and other invasive species. The bill, introduced by Rep. Jim Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, is expected to clear the panel Thursday and head to the full House for a vote soon. While many Midwest politicians have pushed the idea lately, separating the Great Lakes from the Mississippi River Basin has been highly controversial locally because it would disrupt industrial barge shipping and recreational boating in the Chicago area. The 108-page House bill contains hundreds of specific flood control and environmental projects across the country.
NASDAQ:
Viking Global Investors Suffers Bad 2Q, Large Redemptions. Viking Global Investors LP, a "Tiger Cub" hedge fund manager with $12.1 billion in assets under management as of June 30, suffered a bad second quarter with losses for both of its funds, according to its investor letter. Viking also has received large redemption requests when it offered a " liquidity option" to investors after its chief investment officer stepped down in the spring, the letter said. The letter, written by its Chief Executive O. Andreas Halvorsen and posted on website Dealbreaker.com, said its Viking Global Equities fund lost 5% and its Viking Long Fund lost 11.9% net in the second quarter, net of all fees on a composite basis. Gross external redemptions for Aug. 1 amounted to about 10.5% of capital in Viking Global Equities fund and about 13% for Viking Long Fund, as it offered investors a one-time liquidity option following the resignation of chief investment officer David Ott.
AppleInsider:
Apple's(AAPL) Newly Updated Mac Desktops Feature Only ATI Graphics. In this week's refresh of the Mac Pro and iMac lineup, Apple chose to only offer ATI graphics options in all configurations of the company's latest desktops. That's a change from last October, when the iMac line was redesigned, and buyers of the the 21.5-inch iMac had the option of integrated graphics via the Nvidia GeForce 9400M. The discrete graphics options available in last year's iMac line were all ATI cards. But with Tuesday's updates of the iMac and Mac Pro lines, ATI is now the sole graphics option on Apple's Mac desktop lineup. David Baumann, product manager for AMD's graphics division, which oversees the ATI graphics products, spoke with AppleInsider about the new lineup.
Rasmussen Reports:
28% Say U.S. Heading in Right Direction. Twenty-eight percent (28%) of Likely Voters say the country is heading in the right direction, according to a new Rasmussen Reports national telephone survey taken the week ending Sunday, July 25. Just over half (53%) of Democrats feel the country is heading in the right direction, but 91% of Republicans and 73% of voters not affiliated with either major party believe the country is heading down the wrong track. Sixty-seven percent (67%) of all voters say the country is heading down the wrong track, unchanged from last week.
Politico:
Rangel to Dems: Drop Me If You Must. Not even his colleagues know what Rangel will do Thursday, when the House ethics committee reveals what is expected to be a scathing slate of allegations of wrongdoing to open the congressional version of a trial. Rangel declined to comment on the specifics of his case, but his remarks suggest that he knows more calls for his resignation may be coming. Despite that possibility, he was prepared for a fight, according to some fellow black Democrats. There’s a lot riding on Rangel’s decisions — for him, his party and the integrity of the institution he has served in since 1971. “I think he’s going to have to go, maybe tomorrow,” said a member of the Congressional Black Caucus who asked not to be named.
USA Today:
Students Looking for Jobs Boost Metro Unemployment. The unemployment rate in about three-quarters of the nation's largest metro areas rose last month as nearly one million teenagers entered the work force looking for summer jobs. The Labor Department said Wednesday that the unemployment rate rose in 291 of 374 areas in June from May.
Getting a Grip on Government Debt.Continuous annual federal budget deficits have led to a big increase in the nation's overall debt. Explore this interactive to see:
AP:
Sarkozy Orders Illegal Roma Immigrants Expelled. French President Nicolas Sarkozy on Wednesday ordered authorities to expel Gypsy illegal immigrants and dismantle their camps, amid accusations that his government is acting racist in its treatment of the group known as Roma. Sarkozy called a government meeting Wednesday after Gypsies clashed with police this month following the shooting death of a youth fleeing officers in the Loire Valley. Sarkozy said those responsible for the clashes would be "severely punished" and ordered the government to expel all illegal Roma immigrants, almost all of whom have come from eastern Europe. He pushed for a change in France's immigration law to make such expulsion easier "for reasons of public order." He said illegal Gypsy camps "will be systematically evacuated," calling them sources of trafficking, exploitation of children and prostitution.
Reuters:
Downward pressure on the Chinese economy is increasing because of property market curbs, government debt vehicle controls, and carbon emission reduction efforts, citing Zhang Jianhua, the head of the People's Bank of China's research bureau.
Juniper(JNPR) To Be Key AT&T(T) Supplier, Details Due Thurs.Juniper Networks Inc (JNPR) said on Tuesday it will be named a key supplier to AT&T Inc's (T) network build-out, a move that could help it gain business with the country's top telecommunications carrier. Juniper will be chosen as a supplier for AT&T's IP (Internet Protocol), MPLS (Multi Protocol Label Switching), Ethernet and Evolved Packet Core domain, it said.
Akamai(AKAM) Profit and Cost Outlook Weigh on Shares. Akamai Technologies Inc's (AKAM) business outlook disappointed investors who expected greater profit from the growing popularity of online entertainment, sending the shares down 5 percent after-hours on Wednesday.
US Jobless Rate to Stay High-Ex Fed No.2. The United States will suffer high unemployment for some time as it slowlyrecovers from the deep recession that ended in 2009, a former second in command at the Federal Reserve said on Wednesday. "I see a very slow, uneven recovery. It will not be fast enough to put a dent in the painfully high unemployment rate for some time," Roger Ferguson, the Federal Reserve's vice chairman from 1999 to 2006, told Reuters after a speech in Cambridge, Massachusetts.
VistaPrint(VPRT) Sees Weak 2011; Shares Plunge. Vistaprint N.V., a provider of online printing and design services, posted weaker-than-expected quarterly revenue hurt by currency fluctuations and forecast 2011 results well short of the market consensus, sending it shares down 26 percent.
Financial Times:
Challenging Half at RAB Capital. RAB Capital, one of the worst-hit hedge fund managers during the financial crisis, said hopes of pushing ahead with its recovery had been dampened by a challenging first half to 2010. Revenues fell 14 per cent to £8.2m, the group’s pre-tax loss worsened to £3.3m from a loss of £2.7m the year before, and the group proposed to cut the interim dividend to 0.1p, against 0.6p a share last year. After two years of restructuring funds, disposals and cutting costs, assets under management fell to $1.26bn from $1.35bn in December. At RAB’s peak in 2007, RAB managed more than $7bn in assets until a wave of redemptions hit its funds.
Banks Plan for Loss of Eurozone Member. Banks have started early-stage planning to deal with the potential fallout on the derivatives and bond markets of a European country being forced to leave the euro. After having received queries by some banks about the impact of such an event, the body representing the swaps and derivatives industry last week contacted some of its members to form a group to consider what they may need to do if a eurozone state is ejected. One person close to the process said that because of the sensitivity of the issue only a small number of members, about 12, predominantly banks but also investors, had been approached. A spokeswoman for the International Swaps and Derivatives Association (ISDA) said the move expressed “no view as to the likelihood of such an event occurring”, but that the organisation had decided to establish a group to “explore the different scenarios in which a country may leave the eurozone and consider what legal and documentation issues could arise in each for the (over-the-counter) derivatives markets and what steps would be necessary in order to address them”.
iMarket News.com:
China PBOC Official Calls for Policy Adjustment Against Inflation. Inflation is the "main threat" to the Chinese economy in the current half of the year, and the central bank will need to adjust policies to drain interbank market liquidity and ease price pressures, a People's Bank of China official said Wednesday. Jiao Jinpu, a former central bank researcher and currently deputy-director of the bank's graduate school, told a forum here that the strength in M1 money supply growth seen during the first half will impact price indicators after a six month lag. "Money supply growth was a bit too fast," he said. "That money, will sooner or later translate into inflationary pressure." M1 growth ended the first half up 24.6% after hitting nearly 39% in January. Managing inflation will be the main challenge for monetary policy in the second half, Jiao said, though the broader policy picture will remain unchanged, with the government continuing with its moderately loose monetary policy stance. "The central bank needs to adjust its operations to drain excess liquidity and control inflation," Jiao said.
Shanghai Securities News:
China will keep its property market curbs in place after the policies successfully stemmed the rapid rise in home prices in some cities, said Liu Yingjie, head of the comprehensive department at the State Council Research Office.
Evening Recommendations Citigroup:
Reiterated Buy on (PX), raised target to $99.
Night Trading
Asian equity indices are -.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 117.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 113.5 +4.0 basis points.
Initial Jobless Claims for last week are estimated to fall to 460K versus 464K the prior week.
Continuing Claims are estimated to rise to 4500K versus 4487K prior.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Fisher speaking, $29 Billion 7-Year Treasury Note Auction, weekly EIA natural gas inventory report and the (MSFT) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology 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 75% net long heading into the day
North American Investment Grade CDS Index 104.26 bps +1.0%
European Financial Sector CDS Index 99.0 bps +2.54%
Western Europe Sovereign Debt CDS Index 112.0 bps -.70%
Emerging Market CDS Index 217.07 bps +1.75%
2-Year Swap Spread 17.0 -4 bps
TED Spread 33.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .15% +1 bp
Yield Curve 239.0 -2 bp
China Import Iron Ore Spot $135.10/Metric Tonne -.88%
Citi US Economic Surprise Index -41.10 -3.2 points
10-Year TIPS Spread 1.79% -1 bp
Overseas Futures:
Nikkei Futures: Indicating -90 open in Japan
DAX Futures: Indicating -2 open in Germany
Portfolio:
Lower: On losses in my Medical, Biotech and Technology long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges and added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows after failing to hold above its 200-day moving average. On the positive side, Gold, Ag, Telecom and Wireless stocks are holding up relatively well. The 2-year swap spread is falling to the lowest level since April 29th. After consolidating gains for the last 10 days, the S&P GSCI Ag Spot Index is breaking out again, rising +2.4% today. Copper also continues to trade well. The Shanghai Composite rose +2.3% last night and has been trading much better of late. On the negative side, Gaming, Homebuilding, HMO, Hospital, Biotech, Medical Equipment, Disk Drive, Semi, Computer, Paper and Oil Tanker shares are under meaningful pressure, falling more than -2.0%. Cyclical and small-cap shares are underperforming. Tech shares have been a bit heavy throughout the day. 3-Month Euro Libor is rising slightly again today. The US Muni CDS Index is rebounding +3.82%, which is also a negative. The Asia Ex-Japan High-Yield CDS Index is rising +4.08% today to 607.83 bps. This index has been trending higher lately, nearing its highest level since last November, even with global equity strength. The 10-year yield is falling -5 bps to session lows at 3.0%. I want to see how overseas market's react tonight/tomorrow morning to our afternoon weakness before further shifting market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on technical selling, more shorting, profit-taking and rising economic fear.
