Evening Headlines
Bloomberg:
- Junk Bonds Make New Run at Par in 'Bubblelicious' Rally: Credit Markets. Junk bonds are closing in on par for the second time this year as fixed-income investors bet recent signs of economic weakness won’t be enough to derail corporate profits and the ability of the neediest borrowers to repay debt. High-yield bonds rose to 98.99 cents on the dollar today after falling as low as 94.47 cents on May 25, according to Bank of America Merrill Lynch index data. In the prior rally, the debt climbed to 99.67 cents on April 30. Prices last rose to par in June 2007, just before credit markets began to seize up as losses on subprime mortgages spread. Investors are pouring money into bond funds at the fastest pace in 15 months as defaults slow and on signs the Federal Reserve won’t raise its target interest rate from a record low. High-yield funds had $2.8 billion of inflows in July, the most since April 2009, and have received $3.6 billion in cash this year, Bank of America Merrill Lynch analysts wrote Aug. 2 in a report. Junk bonds yield 8.492 percent, according to the bank’s U.S. High Yield Master II index.
- ACLU Says It Sued Geithner Over Lawyer Licensing for Terrorism Suspects. The American Civil Liberties Union said it sued U.S. Treasury Secretary Timothy Geithner over licensing for lawyers seeking to represent terrorism suspects including those allegedly marked for death by the CIA. The ACLU claims the Treasury Department regulation improperly inhibits the right to legal counsel for U.S. citizens accused of having terrorism ties, some of whom it said the government seeks to kill. “Targeting individuals for execution who are suspected of crimes but have not been convicted,” without due process or disclosed standards, “poses the risk that the government will erroneously target the wrong people,” the group said today in a statement announcing the filing. A copy of the lawsuit, which isn’t available from court records, was provided by the ACLU. The group is joined in the suit by the New York-based Center for Constitutional Rights.
- California Democrats Seek Higher Income Tax, Oil Levy. The plan from Democrats in the state Legislature would bring in $1.8 billion by increasing income-tax rates 1 percentage point on all but the wealthiest Californians. It would cut spending by $8 billion and raise $1.5 billion by increasing vehicle-registration fees, $600 million by taxing oil wells and $2 billion by suspending corporate tax breaks.
- Kindergarten Attacker Kills at Least Four Children in Shandong, China. A Chinese man stabbed kindergarten children and teachers in the eastern province of Shandong, killing at least four children, citing locals. The attacker, who also injured 12 other children and teachers, broke into the kindergarten in the city of Zibo at about 4:30 p.m. local time. He then turned himself in to police.
- Priceline.com(PCLN) Rises After Forecasts Top Estimates. Priceline.com Inc., the second- biggest online travel agency, rose 16 percent in extended trading after its second-quarter earnings and third-quarter forecast topped analysts’ estimates. Excluding some costs, earnings will be at least $4.78 a share, the Norwalk, Connecticut-based company said today in a statement. That compares with the $4.18 predicted on average by analysts surveyed by Bloomberg. “Guidance is well above expectations,” said Imran Khan, an analyst at JPMorgan Chase & Co. in New York. He rates the shares “overweight.” Priceline.com climbed $37.44 to $268.11 in extended trading. The shares, up 5.6 percent this year, had risen $3.29, or 1.5 percent, to $230.67 at 4 p.m. New York time in Nasdaq Stock Market trading.
- Pimco's Worah: Deflation 'Extremely Unlikely'. A senior fund manager at bond-fund giant Pacific Investment Management Co. said Tuesday it is "extremely unlikely" the U.S. could see Japan-like deflation given that the Federal Reserve has the tools to combat a downward spiral in consumer prices.
- Foreclosed On - By the U.S. With Bear Stearns Assets, Fed Balances Preserving Investment and Helping Borrowers. James Currell is struggling to prevent his Minnesota home from being foreclosed. But his lender isn't a bank. It is the U.S. government. The Federal Reserve Bank of New York is facing the prospect of foreclosing on a number of properties in the coming months, from homes to commercial buildings, a result of a souring mortgage portfolio it took over when it helped bail out Bear Stearns in 2008.
- Trading Slows at Futures Exchanges. The biggest futures-exchange operators saw trading activity decline in July from prior-month levels as a seasonal slowdown in volumes was exacerbated by reduced market volatility. CME Group Inc.(CME) and IntercontinentalExchange Inc.(ICE) on Tuesday reported double-digit dips in average contract volume from June.
- Mortgage, Treasury Traders Say 'No Thanks' To More Fed Help. Even if the Federal Reserve were willing to spend $200 billion buying Treasury and mortgage bonds to try to stimulate the economy, as officials have hinted, participants in the markets for those securities say "please stay away." Continued government intervention isn't needed to keep markets healthy, as it was in the depths of the crisis, they say, and they worry that more aid at this point may fail to stimulate growth--and, conversely, spur concerns about a weak economy.
- Lehman Makes Its Next Property Gamble. Firm Puts More Cash Into Existing Deals, a Risky Strategy Whose Success Depends on Real-Estate Values Going Higher. Lehman Brothers Holdings Inc., brought down in part by its huge property investments, is doubling down on some of its existing deals in a bet that commercial property markets are near bottom. Since the investment bank's collapse in September 2008, the firm overseeing Lehman's bankruptcy has reinvested more than $1 billion in apartments, office buildings and other commercial property already owned or financed by Lehman. Those properties, located from Austin, Texas, to New York to Washington, faced varying levels of distress. Lehman also has spent nearly $1 billion to pay off partners and creditors and reach other settlements that resulted in the return of real-estate assets to the firm. By piling more cash into these deals, executives at Alvarez & Marsal, the advisory firm overseeing Lehman's bankruptcy proceedings, are hoping to salvage the maximum amount from the $14.4 billion of commercial real estate on the bank's books.
- Coming Soon to City, Wi-Fi on the Go. Livery cars are on the verge of becoming roaming wireless-Internet transmitters under a New York venture capitalist's plan to broaden web access.
- Barnes & Noble(BKS) on Block. Bookseller Explores Options, Pressured by Low Stock Price and Digital Onslaught.
- Tech Gadgets Steal Sales From Appliances, Clothes. Americans are spending more on electronics like iPads and flat-screen televisions and less on durable goods like furniture, washing machines and lawn mowers, according to government data released Tuesday.
- Work Shooting Kills Nine. Driver at Connecticut Beer Distributor Faced Dismissal Before Morning Rampage.
- ObamaCare and the Constitution - An Update. A federal court denies the government's motion to dismiss the challenge. Last November, a reporter asked House Speaker Nancy Pelosi if it was constitutional for Congress to require Americans to buy health insurance. Ms. Pelosi responded, "Are you serious?" On Monday, U.S. District Judge Henry Hudson got serious. He denied Health and Human Services Secretary Kathleen Sebelius's motion to dismiss a lawsuit brought by the state of Virginia challenging the new health law. His ruling stated that it is far from certain Congress has the authority to compel Americans to buy insurance and penalize those who don't.
- Fed Is Unlikely to Take Major Steps to Boost US Economy. Markets might be getting ahead of themselves in anticipating some bold new moves from the Federal Reserve to combat the weakening economy.
- Saudi Arabia to Block BlackBerry Service on Friday.
- Fear Empty Flats in China's Property Bubble. Commentary: Even worse than price bubble of vacant flats. How many flats in China are sitting empty? The media recently floated a story -- denied by power companies -- that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people.
- 5 Things Obama Could Do To Jumpstart Economic Recovery.
- Is Bernanke About To Start Playing Head Games With The Market?
- Finally! New York Finalizes Budget With New Taxes On Clothes, But No Hit To Hedge Funds.
- California Plans $2.2 Billion In IOUs In Second Month Without Budget.
- No Oil on the Beach. No Tourists, Either. Tourists have been acting like the beaches of the Florida Panhandle are covered by oil, and for communities like Destin, their absence hurts. About the only thing on Destin's beaches at the end of July was "June grass," harmless green algae that washes up in Gulf waters every year. And a sunbather here and there. Very few sunbathers. Very few people, in fact.
Examiner.com:
- Motorola(MOT) and Verizon(VZ) to Release 10-Inch Android Tablet with FiOS TV Integration This Autumn. According to a report, Motorola and Verizon are working together to develop an Android tablet that will allow users to watch television through Verizon's FiOS digital pay-television service. The device could launch in the U.S. as early as this autumn. Potential specifications are as follows:
- California Pension Fund Knew About High Bell Salaries But Didn't Stop Them, Memo Shows. Officials at California’s state pension fund became aware four years ago of the exorbitant pay raises being given to administrators in the city of Bell and did nothing to stop them, according to an internal memo obtained by The Times. The memo, which pension staff sent to board members today, shows that the California Public Employees’ Retirement System granted an exemption to its rules in 2006 so the Bell city manager could get a 47% pay hike and still receive a full pension on his salary. The pension system learned of the salary hike during the course of an audit and informed Bell officials that the exemption would be needed.
- New ID Theft Targets Kids' Social Security Numbers. The latest form of identity theft doesn't depend on stealing your Social Security number. Now thieves are targeting your kid's number long before the little one even has a bank account. Hundreds of online businesses are using computers to find dormant Social Security numbers — usually those assigned to children who don't use them — then selling those numbers under another name to help people establish phony credit and run up huge debts they will never pay off. Authorities say the scheme could pose a new threat to the nation's credit system.
- Stark's Town Hall Answer Goes Viral. Faced with angry constituents at a recent town hall meeting in his California district, Democratic Rep. Pete Stark gave an answer about federal power that has spread rapidly throughout the conservative blogosphere: "The federal government … can do most anything in this country." A woman sitting in the front row at the July 24 event pressed Stark about his vote in favor of health care reform, the passage of which she called “unconstitutional.” She called into question Stark’s characterization of health care as a “right,” noting that “such a right is actually beyond the power of the federal government to confer.” The woman concluded by asking, “How can legislation such as this be constitutional when it seems to be in direct conflict with the 13th amendment? … And … if this legislation is constitutional, what limitations are there on the federal government’s ability to tell us how to run our private lives?” “I think there are very few constitutional limits that would prevent the federal government from rules that could affect your private life,” Stark replied.
- Senate Democrats Punt on Spill Bill. Senate Democrats on Tuesday punted their oil spill response bill to next month, but the extra time doesn’t guarantee the measure will pass — far from it. The delay virtually ensures that strategists from both parties will use the congressional recess to hone their plans, talking points and poison-pill amendments for any floor debate, all with an eye toward the midterm elections.
- Missouri Votes to Block US Health Insurance Law. Missouri voters on Tuesday rejected the new U.S. healthcare bill, approving a measure that would forbid the federal government from penalizing people who do not buy health insurance. With 78 percent of precincts reporting, 72.6 percent of voters supported the Health Care Freedom Act, also known as Proposition C, while 27.4 percent rejected it. In approving the measure, Missouri won a victory in a series of planned assaults around the country against the sweeping reform, which was a major part of President Barack Obama's domestic agenda and became law in March. "Proposition C will be a boon to other states that are trying to repeal the individual mandate," said American Legislative Exchange Council task force director Christie Herrera. "Having that grassroots groundswell will give political courage to lawmakers."
- Dendreon(DNDN) Says Cancer Vaccine Launch Going Well. Dendreon Corp (DNDN) said on Tuesday that more than 500 prescriptions for its new prostate cancer vaccine Provenge have already been written, and its shares rose nearly 5 percent.
- North Korea has advanced the placement of long-range SA-5 missiles toward the border with South Korea in the past few months, citing South Korean military officials. The missiles have a range of about 250 kilometers.
Citigroup:
- Reiterated Buy on (LEA), raised estimates, boosted target to $102.
- Reiterated Buy on (PCLN), target $325.
- Reiterated Buy on (DOW), target $34.
- Asian equity indices are -1.0% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 111.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 108.0 -3.0 basis points.
- S&P 500 futures -.25%.
- NASDAQ 100 futures -.16%.
Earnings of Note
Company/Estimate
- (PWR)/.19
- (PHM)/-.01
- (TWX)/.46
- (TRW)/1.07
- (OC)/.59
- (CAM)/.54
- (ICE)/1.41
- (EP)/.20
- (RL)/.90
- (KCP)/.03
- (NWSA)/.20
- (ALL)/.68
- (CECO)/.62
- (PRU)/1.31
- (HIG)/.71
- (MUR)/1.20
- (CAR)/.18
- (IPI)/.13
- (SPW)/.40
- (ONXX)/-.09
8:15 am EST
- The ADP Employment Change for July is estimated at 30K versus 13K in June.
- The ISM Non-Manufacturing Composite for July is estimated to fall to 53.0 versus 53.8 in June.
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,650,000 barrels versus a +7,308,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,000,000 barrels versus a +91,000 barrel increase the prior week. Distillate inventories are expected to rise by +1,000,000 barrels versus a +938,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a -.9% decline the prior week.
- None of note
- The Challenger Job Cuts report for July, weekly MBA mortgage applications report and the (AXP) Semi-Annual Financial Community Meeting could also impact trading today.