North American Investment Grade CDS Index 103.25 bps -.24%
European Financial Sector CDS Index 111.83 bps -4.09%
Western Europe Sovereign Debt CDS Index 151.84 bps -.74%
Emerging Market CDS Index 249.77 bps -1.08%
2-Year Swap Spread 20.0 unch.
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .13% unch.
Yield Curve 223.0 +3 bps
China Import Iron Ore Spot $139.70/Metric Tonne -.21%
Citi US Economic Surprise Index -16.90 +.4 point
10-Year TIPS Spread 1.82% +7 bps
Overseas Futures:
Nikkei Futures: Indicating +26 open in Japan
DAX Futures: Indicating -1 open in Germany
Portfolio:
Slightly Higher: On gains in my Biotech, Retail and Medical long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 is trading near session highs despite tech sector weakness. On the positive side, Education, Oil Service and Defense shares are especially strong, rising 1.25%+. The 10-year yield is rising +4 bps to 2.80%. The Spain sovereign cds is dropping -3.22% to 226.90 bps. The total put/call is high at 1.25. On the negative side, Wireless, Semi, Computer, Steel, Utility, Alt Energy, Bank and Disk Drive shares are down on the day. Small-caps are underperforming. (XLF) has also underperformed throughout the day. Copper is falling -.97%. The Greece sovereign cds is rising +1.02% to 919.49 bps. Breadth is mediocre and volume is very light again today. Developing weakness in the tech sector is a concern. With much more economic data on tap and investors returning from vacation next week, a more clear picture of the market's health should develop. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, technical selling, eurozone bank worries and increasing terrorism fears ahead of 9/11.
Anglo Irish Bank Subordinated Credit Swaps Rise After Good, Bank Bank Split. Credit-default swaps tied to Anglo Irish Bank Corp.’s subordinated bonds rose, according to data provider CMA. Swaps protecting the riskier, subordinated debt of the nationalized lender climbed 43 basis points to 1,780 as of 4 p.m. in London, while contracts on its senior notes fell 13 basis points to 763, CMA prices show. Credit swaps on European government bonds rose, while contracts linked to the region’s corporate debt declined. The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated European companies fell 5.7 basis points to 477.2, the lowest level in a month and little changed in the past week, according to Markit Group Ltd. The cost of insuring financial company debt declined, with the Markit iTraxx Financial Index on the senior debt of 25 banks and insurers falling 6 basis points to 129.5 and the subordinated measure dropping 8 basis points to 193, JPMorgan Chase & Co. prices show. Default swaps to protect Ireland’s government debt rose 9 basis points to 385, according to CMA. The cost of insuring other European sovereign bonds also increased on speculation more governments will be forced to bail out their banking systems. Credit swaps linked to Greece’s bonds added 4 basis points to 893, swaps tied to Spanish debt climbed 2 basis points to 230, Italy rose 3 basis points to 206 and Portugal increased 5 basis points to 339, CMA prices show.
Crude Gains After U.S. Pipeline Shut. Oil rose the most in six weeks after a pipeline that carries Canadian crude to refineries in the U.S. Midwest was closed because of a leak. Futures increased as much as 3.1 percent after Enbridge Energy Partners LP shut its Line 6A, part of a system that can transport 670,000 barrels a day from Canada. “It’s all about Enbridge,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “It’s a big line, which supplies a bunch of refineries in the Midwest. Depending on how long it is shut, this could put a big-sized crimp on supplies in the region.”
Bullishness Surges After Hitting One-Year Low: Chart of the Day. The AAII bullish gauge, which measures data back to 1987, has only doubled in a two-week period eight other times, and this week’s move is the fifth-biggest increase for that timeframe. The largest was in July 2000, when the gauge increased to 65 percent from 26.7 percent.
NBC All Action, No Talk as Network Tries to Rebound. A year after its ratings debacle with comedian Jay Leno, NBC has changed course and will air prime-time shows from some of Hollywood’s most expensive producers when the new television season begins this month.
Commercial Property Losses Mount as Loan Services Triage Real Estate Debt. Monthly losses on commercial property debt bundled into bonds have doubled since April as loan specialists gave up trying to restructure smaller mortgages, Deutsche Bank AG data show. Average losses on loans packaged into U.S. commercial mortgage-backed securities totaled $501 million in August compared with $245 million in April, according to Harris Trifon, a Deutsche Bank analyst in New York who based the estimate on a three-month average. In August 2009, the number was $41 million. “It’s the beginning of a trend,” Trifon said in a telephone interview. “Given the sheer volume of loans in special servicing, there are going to be many loans that are liquidated.”
CBOE Asks SEC for Permission to List Options That Expire Within Single Day. CBOE Holdings Inc.(CBOE), operator of the largest U.S. options market, asked regulators for permission to become the nation’s first to list contracts that expire in as little as one day. The daily options would be linked to as many as 200 stocks, exchange-traded funds, exchange-traded notes and indexes, according to a filing with the Securities and Exchange Commission dated Aug. 24. The contracts may have terms of one, two, three or four days, the owner of the Chicago Board Options Exchange said.
Wall Street Journal:
Terror Threat More Diverse, Study Says. The terrorist threat faced by the U.S. nine years after the 2001 attacks on New York and Washington is far more difficult to detect but less likely to produce mass-casualty attacks, according to the former leaders of the 9/11 Commission.
New Corporate Tax Regime Part of EU Market Reform - Draft. The European Commission is planning to come forward with a proposal for a pan-European tax regime for corporations next year, according to a draft document seen by Dow Jones Newswires.
Bullard Fed Ready for Further Action if Necessary. A top Federal Reserve official said Friday the central bank has moved closer to providing additional support to the economy via new asset purchases, although he added he doesn’t expect that action to become necessary.
U.S. Sees Heightened Threat in Mexico. To Combat 'Narcoinsurgency,' Obama Administration Considers New Military and Intelligence Aid Against Drug Gangs.
Alpha Titans Says Hedge Funds Pulling Back From Uncertain Markets. Apparently, even the biggest hedge funds are sitting on the sidelines. The latest sign that hedge fund managers are pulling back from tumultuous investing waters comes in the form of an August letter to investors from Alpha Titans, a fund of hedge funds that invests in tops hedge funds such as SAC Capital, Paulson & Co., Citadel, DE Shaw and Bridgewater. "Many investors are resting on the sidelines with few hot performance numbers to chase," according to a copy of the letter obtained by The Post.
Capitol Hill Employees Owed $9.3 Million in Back Taxes Last Year, Data Show. Capitol Hill employees owed $9.3 million in overdue taxes at the end of last year, a sliver of the $1 billion owed by federal workers nationwide but one with potential political ramifications for members of Congress. The debt among Hill employees has risen at a faster rate than the overall tax debt on the government's books, according to Internal Revenue Service data. It comes at a time when some Republican members are pushing for the firings of government workers who owe the IRS and President Obama has urged a crackdown on delinquent government contractors.
Washington Times:
The Special-Interest President. Obama introduces new giveaways for Wall Street and Big Labor. On Tuesday, the Federal Housing Administration announced a "short refinance option" for underwater mortgages - that is, mortgages on which the amount that the homeowner owes is more than the house is worth. Under this new program, the government promises to guarantee what's left of the mortgage's face value after the mortgage holder agrees to write off 10 percent of the principal. For some big Wall Street financial houses, this could represent a major windfall. Some of these firms bought risky mortgages at huge discounts from their face value, often just 40 percent or 50 percent of the amount owed. Say a Wall Street firm paid $250,000 to take over a risky $500,000 mortgage. If the firm agrees to reduce the face value of what is owed by $50,000, the FHA will guarantee the mortgage. Thanks to the protection from default, the loan's value instantly increases from $250,000 to $450,000 - a $200,000 gift to the Wall Street mortgage holder. According to the Center for Responsive Politics, Wall Street giants Goldman Sachs(GS), Citigroup(C), JPMorgan Chase(JPM) and Morgan Stanley(MS) preferred Mr. Obama to Republican opponent John McCain by nearly 3 to 1.
Cadmium in Chinese Jewelry Raises Alarms. U.S. regulators have recalled more than 200,000 pieces of jewelry containing the metal, which can be toxic in high levels.
VIX Futures Contango Soars. Extreme contango readings are generally associated with turning points in stocks, which is why in the chart below, I have highlighted the two most extreme VIX futures contango readings.
61% Say Cutting Spending Will Create More Jobs Than Obama's New $50 Billion Stimulus Program. President Obama this week proposed a long-term federal jobs program with a $50 billion price tag, but 61% of U.S. voters say cutting government spending and deficits will do more to create jobs than the president's new program. A new Rasmussen Reports national telephone survey finds that just 28% think the president's jobs program is a better way to create new jobs.
Politico:
Just Don't Call it a 'Stimulus'. President Barack Obama has “no problem” with the idea that he’s trying to stimulate the economy. He’s just not quite willing to call his new economic proposals a stimulus. Obama repeatedly avoided using the word during his Friday news conference, using a grab bag of other terms to describe the $787 billion package that passed in 2009 and the White House’s fresh infrastructure spending proposal.
Asked by Chip Reid of CBS to explain why officials have tried to “avoid the word ‘stimulus’ like the plague,” Obama defended the first wave of recovery spending enacted last year.
Globe and Mail:
Pelosi Tells Canada She Dislikes Fossil Fuels. Nancy Pelosi educates herself about Canada’s oil sands, but makes clear her distaste for fossil fuel.Nancy Pelosi would like to see the United States buy less of what Canada is selling. At a luncheon at the U.S. ambassador’s Ottawa residence on Thursday, the powerful Speaker of the House of Representatives said she is committed to reducing her country’s dependence on fossil fuels – and that includes Canadian crude oil and natural gas. In a casual post-meal conversation with a group that included Laureen Harper, the wife of the Prime Minister, Ms. Pelosi remarked pointedly that she doesn’t like any “fossil” and doesn’t care whose it is or where it comes from. Canada is the largest source of imported fossil fuels into the United States.
Financial Times:
America's Public Servants Are Now Its Masters by Mort Zuckerman. There really are two Americas, but they are not captured by the standard class warfare speeches that dramatise the gulf between the rich and the poor. Of the new divisions, one is the gap between employed and unemployed that President Barack Obama seeks to close with yet another $50bn stimulus programme. Another is between workers in the private and public sectors. No guesses which are the more protected. A recent study by the Mayo Research Institute found that “private-sector workers were nearly three times more likely to be jobless than public-sector workers”.
Xinhua:
China's employment situation remains "very grave" with 24 million job-seeks for only 12 million openings, citing Yin Chengji, a Minister of Human Resources and Social Security spokesman. People looking for work include 6.3 million fresh graduates from universities and 6 million from high schools.
Labor-Market Woes in U.S. Prompt Economists to Cut 2011 Growth Forecasts. The U.S. economy will slow more than previously estimated through next year as elevated unemployment tempers consumer spending and companies trim investment plans, economists polled by Bloomberg News said. The world’s largest economy will grow an average 2.5 percent in 2011, less than the 2.8 percent projected last month and slower than an estimated 2.7 percent this year, according to the median of 59 forecasts in the survey taken Sept. 1 through Sept. 9. Analysts also expect household purchases will cool and the jobless rate will hold above 9 percent.
Carmakers Replace Subsidies With Incentives as Outlook, State Support Fade. Unemployment in the U.S. and government measures to cool China’s economy are damping demand in the world’s two largest car markets, weakening the outlook for the industry. U.S. auto sales in August were the worst for the month in 28 years, while China’s passenger-car deliveries to dealerships increased at the slowest pace in July since March 2009. Sales are faltering after governments withdrew stimulus measures that propped up sales in the U.S., China, Europe and Japan. The bleaker prognosis for sales may also hurt profitability as automakers including Toyota Motor Corp., General Motors Co. and Volkswagen AG are forced to offer higher incentives to lure customers. “The U.S. economy is looking downward, with high unemployment, mounting bankruptcies and other indicators that don’t paint a pretty picture,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc. in Tokyo. “In China, the government is putting on the brakes so that the overall economy won’t overheat.”
Japan's Incubator Bank Plans to File for Bankruptcy Today, Regulator Says. Incubator Bank of Japan Ltd., whose former chairman was charged in August for impeding a financial regulator’s investigation, plans to file for bankruptcy protection today. The government will insure customers’ deposits up to 10 million yen ($119,000) plus interest, Financial Services Minister Shozaburo Jimi said in a faxed statement today. The closely held bank is preparing to file for bankruptcy, said a company spokesman who declined to be identified.
Junk Bonds 'Best Bet' as Issuance Nears 2009 Record Level: Credit Markets. Global high-yield bond sales are poised to exceed 2009’s record issuance as the riskiest companies take advantage of plunging borrowing costs and investor demand for greater returns to refinance debt. Ally Financial Inc., the lender previously known as GMAC Inc., and the lending arm of Ford Motor Co. led $206.9 billion of speculative-grade debt sales in 2010 through today, compared with $208.1 billion for all of last year, according to data compiled by Bloomberg. Junk-rated companies are accelerating issuance amid rating upgrades and average borrowing costs that have plummeted from a high of 21.6 percent in 2009 to 8.4 percent as of today, according to Bank of America Merrill Lynch index data. Investors are snapping up the debt for returns that exceed those on investment-grade bonds, government securities and stocks for the year.
Trump Offers to Buy Proposed NYC Islamic Center Site. Donald J. Trump offered to purchase the site of the proposed Islamic community center near New York City’s Ground Zero for the price paid plus 25 percent. As part of the bid, any community center built would be located at least five blocks farther from the World Trade Center site, Trump said. “I am making this offer as a resident of New York and citizen of the United States, not because I think the location is a spectacular one (because it is not), but because it will end a very serious, inflammatory, and highly divisive situation,” Trump wrote in the letter to Hisham Elzanaty, a businessman who’s said he provided the majority of the financing for the two buildings where the center would be built.
Bearish Bets on Agriculture Stocks Surge Before USDA Crop Report Tomorrow. Trading of bearish options on agricultural stocks jumped for a second day, reaching a four- month high, before the U.S. Department of Agriculture releases its monthly global supply and demand estimates tomorrow. Almost 5,300 options to sell the Market Vectors Agribusiness exchange-traded fund changed hands, 22 times the four-week average and 18 times the number of calls to buy.
Crude Declines After Report Shows U.S. Petroleum Stockpiles at Record High. Crude oil fell after a government report showed that U.S. petroleum inventories climbed to the highest level since at least 1990. Stockpiles were 12 percent higher than the five-year average. Distillate stockpiles declined 388,000 barrels to 175 million. The decrease left supplies 24 percent above average, and near the 27-year high touched in the week ended Aug. 20. OPEC will reduce crude shipments by 0.6 percent this month as the global recovery slows and refiners conduct maintenance, Oil Movements said, the eighth weekly decline reported by the tanker-tracker. “We know there is still a significant crude overhang in the Atlantic basin,” Oil Movements founder Roy Mason said by phone from Halifax. “What’s happening now is western demand is dropping off. The scale of it is fairly unusual. It’s the kind of thing that would happen in the runup to a market downturn.” OPEC said today in a monthly report that global consumption may weaken during the rest of this year because of “the severity of the economic crisis and its prolonged impact on the world economy.”
Obama Says Mexico's Drug Battle Not Comparable to Colombia's. President Barack Obama said Mexico’s battle against drug cartels isn’t comparable to Colombia’s fight against traffickers 20 years ago. “Mexico is a large and progressive democracy with a growing economy,” Obama said in an interview with La Opinion, a Spanish-language newspaper in Los Angeles. “As a result, you can’t compare what is happening in Mexico with what happened in Colombia 20 years ago.” Obama’s remarks contrasted with those made by Secretary of State Hillary Clinton, who said yesterday that escalating Mexican violence resembles the war of terror waged against the Colombian government two decades ago. Clinton said that in some cases Mexican drug cartels are “morphing into, making common cause, with what we would consider an insurgency.”
UN Risks 'Huge Mistake' in Carbon-Trading Investigation: Energy Markets. A United Nations investigation into alleged improper claims for hydrofluorocarbon-pollution credits threatens to choke off investment in projects to curb emissions, according to Bill Clinton’s former adviser on global warming. UN regulators froze new credits as they began a probe on July 30 into allegations by CDM Watch, an environmental lobby group, that some plants emitting hydrofluorocarbons were unfairly exploiting the system. Should the inquiry lead to new limits on expected credits, investors would abandon the UN market, the world’s second-largest greenhouse-gas program, said Dirk Forrister, head of Clinton’s 1997 task force on climate. “There is a possibility of a retroactive change, and that would be a huge mistake,” said Forrister, now a managing director at Natsource LLC, a New York investment manager. “It might make it impossible to raise new money.”
New York Islamic Site's Owner Says No Deal Has Been Reached to Move Center. The owner of the site of a proposed Islamic community center near the location of the Sept. 11 attacks in New York City said there is no agreement to build the project elsewhere. “It’s untrue that it’s being moved. The project will proceed as planned,” Sharif El-Gamal, owner of the property and CEO of Soho Properties LLC, said in a telephone interview. “What’s being reported in the media is a falsehood.”
China Trade Unions Plan to Increase Role at Foreign Companies, Daily Says. The All China Federation of Trade Unions will work to increase the power of workers unions to negotiate wages at private and foreign companies in the nation, the China Daily reported today, citing Guo Chen, deputy division chief of the capacity building department of the federation. Strikes that affected production by Japanese automakers and suicides at Foxconn Technology Group’s factory in Shenzhen showed that their unions were “not efficient,” Guo was cited as saying. The federation aims for 90 percent of China’s companies to have unions by 2012, the newspaper reported, citing Guo.
Copper Heads for First Weekly Drop in Four as China Delays Data. Copper extended yesterday’s slump, heading for the first weekly drop in four, as China brought forward the release of August economic data to Saturday, prompting speculation the results may disappoint investors. The metal for three-month delivery dropped as much as 1 percent to $7,480 a metric ton on the London Metal Exchange, and traded at $7,484.50 at 11:11 a.m. in Shanghai. “There’s lots of talk, ranging from the government probing inappropriate trading to possible rate hikes,” said Ren Gang, an analyst at Maike Futures Co., by phone from Shanghai. “It’s made people very cautious in wake of yesterday’s tumble.” China’s National Bureau of Statistics said yesterday it will release August economic indicators, including consumer prices and industrial output, on Saturday, instead of the initial scheduled Monday. “The statistics bureau has almost never reported data on weekends before,” said Chen Jianbo, a fixed-income analyst at BOC International (China) Ltd., adding that the change prompted speculation that the central bank may raise the deposit rate to combat inflation before the markets open on Monday. Commodity futures in China tumbled yesterday after a report said regulators may be investigating large positions in Shanghai rubber futures. “There is no official comment from the regulator, so people kept on guessing what happened,” Ren said.
Wall Street Journal:
Karzai Divides Afghanistan in Reaching Out to Taliban. Afghan President Hamid Karzai's recent attempts to placate the Taliban haven't made him many new friends among the insurgents. But they have definitely alienated some crucial old friends: the country's ethnic minorities, who have been a linchpin of Mr. Karzai's American-backed government.
Goolsbee to Chair Council of Economic Advisers. President Barack Obama will name Austan Goolsbee, a long-time adviser and an architect of his campaign's economic message, to be chairman of the White House Council of Economic Advisers at a White House press conference Friday, an administration official said Thursday night.
SEC Homes In on Lehman, 'Funds of Funds'. Accounting Probe of Failed Bank Gains Momentum. The Securities and Exchange Commission's investigation into the collapse of Lehman Brothers Holdings Inc. is zeroing in on an accounting maneuver used to give the appearance that the company had reduced its debt levels, according to people familiar with the situation. Agency officials also are probing whether former Lehman executives failed to adequately mark down the value of the huge real-estate portfolio acquired in the securities firm's takeover of apartment developer Archstone-Smith Trust or to disclose the resulting losses to investors, these people said.
Agency Examines Oversight Roles, Possible Conflicts of Advisory Firms. The Securities and Exchange Commission is examining whether firms that collect fees for funneling investors into hedge funds are properly overseeing client money and dealing with potential conflicts of interest, people familiar with the matter said. The inquiry has identified about a dozen investment-advisory firms for questioning but could expand, according to people familiar with the matter, making it one of the SEC's broadest examinations ever of funds of hedge funds and advisers specializing in hedge funds.
Steelworkers Blast China on Subsides. The United Steelworkers filed a complaint with U.S. trade officials Thursday charging that China is unfairly subsidizing its clean-energy technology sector, presenting the White House with a potential political headache ahead of congressional elections in November. The union's 5,800-page brief asks U.S. Trade Representative Ron Kirk to take action against China's efforts to build its green-technology manufacturing, from compact fluorescent light bulbs to wind turbines. China has used "hundreds of billions of dollars in subsidies, performance requirements, preferential practices and other trade-illegal activities to advance its domination of the sector," the USW said in a statement.
The Obama Heyday Is Over. With so many Democrats running against the president's agenda in the midterm, change will come in the next Congress, regardless of which party is in control.
Bloomberg Businessweek:
The Man Who Makes Your iPhone. Foxconn founder Terry Gou might be regarded as Henry Ford reincarnated if only a dozen of his workers hadn't killed themselves this year. An exclusive look inside a postmodern industrial empire.
CNBC:
Growth to Halt in Second Half, Payroll-Tax Cut Needed: Roubini. With stimulus programs no longer boosting the economy, growth will come to a standstill for the remainder of 2010 and feel like a return to recession, economist Nouriel Roubini told CNBC. The head of Roubini Global Economics said a technical double-dip may not occur but that won't matter. The current consensus of meager gross domestic product growth won't even be matched, and that in itself will provide more trouble for the financial markets, he said.
Texas Instruments(TXN) Narrows Quarterly Outlook. Texas Instruments, whose chips are used in products ranging from cars to cellphones, on Thursday narrowed its third-quarter earnings and revenue outlook but kept the mid-point of its forecast range. Shares of TI were more than 1 percent lower in after-hours trading Thursday.
NatSemi(NSM) Shares Take Hit as Sales Outlook Disappoints. National Semiconductor posted better-than-expected quarterly net profit on Thursday but forecast sluggish sales in the following quarter. Shares of the semiconductor manufacturer, which ended regular New York trade at $12.90 a share, were down 5 percent in extended trading.
Sales Fall Again for Game Makers - Is Worst Over? While August sales figures gave the video game industry yet another dose of bad news, at least Electronic Arts(ERTS) had something to smile about. Software sales for the industry as a whole fell 14 percent last month to $403.5 million, according to NPD Group. That’s the worst performance for the month in three years and more than twice as bad as what some analysts were expecting.
Economy to Slow Further but Rebound Next Year: Bullard. The US economy will slow in the second half but return to more normal growth in the first half of 2011, James Bullard, president of the St. Louis Federal Reserve, told CNBC Thursday. “The consensus is developing in the forecast community that we’ve got a slower economy in second half of this year,” said Bullard, who is known to be an outspoken hawk on monetary policy. “But we will pick up in 2011, probably back to trend growth, or even better.”
Cotton Shortage = Pricey T-Shirts and Jeans. Attention T-shirt fans: Bag those deep discounts now because come January, stores could have you paying more for your favorite clothing.
Homebuyer Tax Credit: 950,000 Must Repay. Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government. According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.
62% Say No Matter How Bad Things Are, Congress Can Make Them Worse. Heading into the final weeks of the congressional election season, 62% of Likely U.S. Voters believe that no matter how bad things are, Congress can always make them worse. A new Rasmussen Reports national telephone survey finds that just 19% disagree.
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-seven percent (47%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -24 (see trends).
Chamber Fall Campaign Rips Dems. The U.S. Chamber of Commerce has launched a national campaign to challenge congressional candidates to reject new spending, more regulation and higher taxes for business owners and high-income Americans. In a clear shot at President Barack Obama and Democrats across the board, the Chamber’s post-Labor Day political push will be a multipronged plan that includes online advertising, a new text-messaging campaign and 20 events at colleges across the country to stress the importance of a free-enterprise system.
USA Today:
Credit Card Use Keeps Falling Amid Economic Uncertainty. Americans have sharply reduced their use of credit cards, and some analysts believe the trend will continue even after the economy has fully recovered. The Federal Reserve Board reported this week that credit card borrowing fell at a 6.3% annual rate in July. The last time borrowing with credit cards increased was in August 2008. Separately, a survey by Javelin Strategy & Research found that 56% of consumers used credit cards in 2009, down from 87% in 2007. Credit card usage could fall as low as 45% this year, the report said.
Reuters:
Spanish Miners Block Roads to Demand Pay - Report. Spanish coalminers blocked roads on Thursday as they continued a two-week-old strike to demand wages they say are owed by their employers, state television reported. The Spanish coal industry has received government aid as it struggles to maintain profitability, with high costs making it uncompetitive compared with imported coal.
Alaska Seeks to Overturn Delay in Arctic Drilling. The state of Alaska on Thursday filed a petition in federal court to overturn the Obama administration's moratorium on drilling in federal waters of the Arctic, even though Interior Department officials insist that no such formal moratorium exists.
U.S. Chipmakers' Outlooks Stoke Economy Concerns. Chip makers National Semiconductor (NSM) and Texas Instruments Inc (TXN) on Thursday issued quarterly financial targets that stoked investors' worries about a sluggish economy. Both companies cited weak demand for personal computers and other devices that use microchips and National Semiconductor said consumers were not spending as much as expected. "We'd all like to believe that consumer spending is onward and upward but I don't think it is," National Semiconductor Chief Executive Donald Macleod told Reuters.
Financial Times:
High-Frequency Traders Battle to Make Big Returns. As debate unfolds in the US and Europe about the runaway growth of “high-frequency trading” a new question has arisen: is it really generating huge profits for the little-known groups that are driving it? Critics of high-frequency trading, which uses computers to trade in and out of assets faster than the blink of a human eye, argue that markets have benefited little from it. They worry about the pervasive use of algorithms to drive trades, a practice seen by many as contributing to the chaos of the “flash crash” in US share markets in May, when the Dow inexplicably tumbled hundreds of points in minutes only to rebound sharply. They suspect that some high-frequency strategies are designed to reap profits for traders at the expense of others in the markets. High-frequency trading groups have rejected such accusations, pointing out that, while there may be some traders who engage in questionable practices, the majority of companies provide useful liquidity and help to narrow bid-ask spreads for all investors. Such companies are all privately held and never reveal financial information. But it is possible to get a glimpse of how much of a money spinner high-frequency trading, or HFT, is from the annual report of Optiver, one of the largest players.
Japan Alarm Over China's JGB Purchases. Japan has expressed concern about China’s recent sharp increase in purchases of Japanese government bonds in the latest of a series of sour notes in a traditionally tense bilateral relationship that both sides had worked hard to steady. China’s purchases of JGBs is an especially sensitive issue as it plays into anxieties in Japan about the strengthening yen and its impact on the economy. Tokyo and Beijing also clashed this week after Japanese authorities arrested the captain of a Chinese fishing boat in the disputed waters of the East China Sea. “There is something unnatural about the fact that China can buy Japanese government bonds while Japan cannot [buy Chinese bonds],” Yoshihiko Noda, the Japanese finance minister said.
Telegraph:
EU to Lift the Rock on Abusive High Finance. Michel Barnier, Europe's single market commissioner, has warned banks and hedge funds that Brussels plans to use its sweeping new powers over high finance to end abusive speculation and impose order on the City of London and other EU bourses. "We want to know who is doing what. The EU authorities are going to look at every product. They can restrict leverage, or in exceptional circumstances even ban a product temporarily," he said, speaking to The Daily Telegraph. "We need markets, and we need financial institutions that create value-added, but everyone has to answer for what they are doing. People taking crazy risks linked to crazy rewards have to be brought to their senses," he said.
Economic Daily News:
Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp.'s sales for the October to December period may fall about 10% from the previous three months on declining orders, citing officials in the semiconductor industry.
Evening Recommendations Citigroup:
Reiterated Buy on (ALL), raised target to $35.
Reiterated Buy on (MYL), target $23.
Upgraded .
Keybanc:
Rated (RYL) Buy, target $20.
Rated (TOL) Buy, target $22.
Rated (LEN) Buy, target $20.
Rated (SWK) Buy, target $68.
Night Trading
Asian equity indices are -.50% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 120.0 -1.0 basis point.
Asia Pacific Sovereign CDS Index 116.50 -1.0 basis point.
Wholesale Inventories for July are estimated to rise +.4% versus a +.1% gain in June.
Upcoming Splits
None of note
Other Potential Market Movers
The UBS Best of Americas Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 103.50 bps -2.04%
European Financial Sector CDS Index 117.50 bps -2.76%
Western Europe Sovereign Debt CDS Index 153.0 bps -.87%
Emerging Market CDS Index 253.63 bps -.69%
2-Year Swap Spread 20.0 +1 bp
TED Spread 16.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .13% +1 bp
Yield Curve 220.0 +6 bps
China Import Iron Ore Spot $140.0/Metric Tonne -1.27%
Citi US Economic Surprise Index -17.30 +13.0 points
10-Year TIPS Spread 1.75% +8 bps
Overseas Futures:
Nikkei Futures: Indicating +37 open in Japan
DAX Futures: Indicating -35 open in Germany
Portfolio:
Higher: On gains in my Tech, Biotech and Medical 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 mildly bullish as the S&P 500 is trading modestly higher despite eurozone bank worries and a -1.44% decline in Shanghai overnight. On the positive side, Education, HMO, Hospital, Drug, I-Banking, Bank, Telecom and Internet shares are especially strong, rising 1.0%+. (XLF) is outperforming. The S&P GSCI Ag Spot Index is rising another +1.85%. Lumber is jumping another +4.57% today. Moreover, the 10-year yield is rising +10 bps to 2.76%. The European Investment Grade CDS Index is dropping -4.16% to 98.33 bps and the UK sovereign cds is dropping -4.42% to 73.15 bps. On the negative side, Restaurant, Airline, REIT, Gold, Defense and Coal shares are under pressure, falling more than .75%. Small-caps and cyclicals are underperforming. (IYR) has been heavy throughout the day. Copper is falling -1.64%. The Portugal sovereign cds is rising +1.66% to 327.16 bps and the Ireland sovereign cds is rising +1.03% to 373.05 bps. The AAII % Bulls surged to 43.87 this week, while the % Bears dropped to 31.61, which is also a negative. The Citi Asia Pacific Economic Surprise Index has fallen from +68 on July 1 to a new 52-week low of -5.3 today. Shanghai copper inventories have risen +23.79% over the last five days. The Shanghai Composite is having trouble getting through meaningful technical resistance. Breadth is poor today and volume very light. I suspect we could see some mild weakness in stocks tomorrow ahead of the weekend. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, technical selling, eurozone bank worries and increasing terrorism fears ahead of 9/11.
