Wednesday, June 15, 2011

Wednesday Watch

Posted by Gary .....at 12:57 AM

Evening Headlines

Bloomberg:
  • Euro-Area Accord on New Greek Aid May Be Delayed to July. Talks on a second Greek bailout may drag into July, casting doubt on a payment due early next month, as euro-area finance chiefs struggle to break a deadlock over how to enroll private investors in the rescue. The finance ministers failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new Greek aid package with European Central Bank warnings that such a move might constitute a default. With consensus elusive before the target date of a June 23-24 leaders’ summit, finance ministers will convene again on June 19 in Luxembourg, a day earlier than planned. “We have to proceed very cautiously,” Luxembourg Finance Minister Luc Frieden told reporters after an emergency meeting in Brussels today, adding that “very clearly we have to go into that direction” of a delay to next month on a new aid package from the European Union and the International Monetary Fund. “Several options -- from the IMF, as well as from the European Central Bank and from the European Commission -- still have to be studied.”
  • Moody's to Review French Banks. BNP Paribas SA, France’s biggest bank, and local rivals Societe Generale (GLE) SA and Credit Agricole SA (ACA) may have their credit ratings cut by Moody’s Investors Service because of their investments in Greece. Moody’s placed the three banks’ ratings on reviews that will focus on their holdings of Greek public and private debt “and the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” the ratings company said in a statement today. The move reflects Europe’s deepening debt crisis, centered on Greece, where bond yields touched a record for the euro area yesterday. The reviews of Credit Agricole and BNP Paribas (BNP) are unlikely to lead to downgrades of more than one notch, Moody’s said. Societe Generale’s debt and deposit ratings may be cut as much as two grades because of the “uplift it receives from systemic support, which is currently higher than average for the French banking system,” it said.
  • Euro Falls on EU Deadlock Over Greece. The euro weakened for the first time in three days against the dollar as European Union officials struggled to break a deadlock on a second Greek rescue plan. Australia’s dollar climbed after the Reserve Bank said interest- rate increases were needed, while oil and copper retreated. Europe’s 17-nation currency fell 0.2 percent to $1.4406 as of 12:38 p.m. in Tokyo. Australia’s dollar climbed 0.1 percent to $1.0692. Yields on 10-year Treasuries sank two basis points and Standard & Poor’s 500 Index futures declined 0.4 percent. The MSCI Asia Pacific Index slipped 0.3 percent and China’s Shanghai Composite Index dropped 0.5 percent. Crude decreased 0.3 percent in New York. Copper fell 0.2 percent in London.
  • SEC Probes Merrill Over Mortgage-Related Security, FT Says. The Securities and Exchange Commission is investigating Merrill Lynch’s sale of a mortgage- related security it created for Magnetar, an Illinois hedge fund, and the collateral manager involved in the deal, the Financial Times reported, citing people familiar with the matter that it didn’t identify. Bank of America Corp. (BAC), which acquired Merrill Lynch, declined to comment, according to the report. Bank of America spokesman Rick Simon didn’t immediately respond to a call by Bloomberg News for comment.
  • China PBOC Tells Bank to Stop Subprime, Faked Mortgage Loans. Banks must strengthen risk management in major areas and prevent declines in credit asset quality, according to a financial stability report posted on the Chinese central bank's website.
  • Inflation will remain a "key headwind" for the Indian economy, Goldman Sachs Group Inc. said in a report following faster-than-estimated wholesale prices data yesterday. The Reserve Bank of India will raise interest rates by 75 basis points by the end of the year, including a 25 basis point increase on June 16, Goldman Sachs analysts Vishal Vaibhaw and Tushar Poddar wrote in a report. The wholesale-price index rose 9.06% in May from a year earlier after an 8.66% jump in April.
  • Senate Rejects Bid to Kill Ethanol Tax Break. The U.S. Senate voted against eliminating a tax break and a tariff that support ethanol production, giving a temporary reprieve to corn farmers and defeating a coalition that included chicken breeders and environmental groups. The 40-59 tally left opponents of federal support for ethanol 20 votes short of the 60 votes needed to advance the measure. The amendment, attached to an economic development bill, wasn’t likely to become law. Advocates on both sides of the vote viewed it as a test that would shape the ethanol industry’s future. Farm state senators opposed the repeal effort and said they would support gradual changes.
  • Philippines to Go Ahead With Oil Rights Sale in Disputed South China Sea. The Philippines says oil blocks it plans to offer to international exploration companies later this month in the South China Sea are “well within” its territory, after tensions escalated over drilling rights in the area. Two of the 15 blocks the nation plans to offer lie within areas also claimed by China, according to a map it presented to the United Nations in 2009. China has repeatedly said it will oppose any attempt to drill for oil in waters where it claims jurisdiction. The Philippines and Vietnam have both protested Chinese harassment of oil survey vessels in the past two months. Disputes over the South China Sea have drawn in the U.S., which has a defense treaty with the Philippines and says that keeping the world’s busiest shipping lane open is of national strategic importance. Recent signs that China’s Southeast Asian neighbors are pushing ahead with attempts to unlock oil and gas reserves beneath the ocean floor have raised the risk of military standoffs in the region.
  • Pandora Raises $234.9 Million in IPO, Above Range. Pandora Media Inc., the online-radio company, raised $234.9 million in its initial public offering, pricing the shares above the marketed range as the appetite for Internet stocks continued following LinkedIn Corp.’s IPO. The Oakland, California-based company sold 14.7 million shares at $16 each, according to data compiled by Bloomberg, after offering them for $10 to $12. The shares will trade on the New York Stock Exchange under the symbol P.
  • Huntsman Money Made in China Challenges Obama Envoy's 2012 Hopes. The company also is fodder for opponents as Huntsman prepares to formally announce his Republican presidential bid next week. Huntsman Corp.’s revenue in China surged 57 percent from 2009 to 2010 during his ambassadorship, almost two decades after its entrance there, data compiled by Bloomberg shows. The company’s expansion in the world’s second-largest economy offers a target for rivals when U.S. unemployment is shaping the 2012 presidential race. “China has become a bigger and bigger issue in recent elections, especially exporting jobs to China,” said John Feehery, a Republican strategist in Washington who isn’t working with any of the presidential campaigns. “If I were an opposition researcher, I would have a field day with this.”
Wall Street Journal:
  • Boeing(BA), NLRB Clash Over Non-Union Plant. Lawyers for Boeing Co. and the National Labor Relations Board clashed Tuesday at a hearing on the board's allegations that the aircraft maker illegally shifted work from union plants in Washington state to a new non-union factory in South Carolina. The hearing, which dealt mostly with procedural issues, marked the start of what could be a lengthy and politically charged legal battle, unless Boeing and the company's machinists union, whose complaint sparked the board's inquiry, settle their differences.
  • Report to FCC Will Find LightSquared Interferes With GPS.
  • Wisconsin Union Law to Take Effect. The Wisconsin Supreme Court cleared the way Tuesday for the state's contentious collective-bargaining law to take effect, ruling 4-3 that a lower-court judge who put the measure on hold improperly interfered with the legislature. The decision limits Wisconsin's public employees to bargaining over their wages. Raises will be limited to the inflation rate unless voters approve larger increases. The law also requires public employees to contribute 5.8% of their salaries to their pensions and pay at least 12.6% of their health-care premiums.
  • The Obama Hiatus. The Administration takes a two-year holiday from its own agenda. President Obama's re-election machine is already running full bore, but has his entire Administration also decamped for the campaign trail? We ask because the towering ambitions of Mr. Obama's first two years have suddenly gone into abeyance in his third, apparently to be deferred until years five through eight. The White House is more or less conceding that it doesn't have a chance of winning a second term unless his major policies go on hiatus.
  • Democrats Choose Not to Punish Weiner.
CNBC:
  • Qantas Cuts $750 Million in Spending, to Cancel Orders. Australia's Qantas Airways will slash spending by A$700 million ($750 million) and plans to cancel aircraft orders as it battles waning demand, soaring fuel costs and investor displeasure with its shares trading near multi-year lows.
Business Insider:
Zero Hedge:
IBD:
CNNMoney:
  • Minnesota Prepares for Shutdown. If Gov. Mark Dayton and lawmakers don't agree on a budget by June 30, the state government is expected to shut down. The state moved one step closer to this outcome on Friday by sending layoff notices to much of the state workforce.
NY Times:
  • Pakistan Arrests C.I.A. Informants in Bin Laden Raid. Pakistan’s detention of five C.I.A. informants, including a Pakistani Army major who officials said copied the license plates of cars visiting Bin Laden’s compound in Abbottabad, Pakistan, in the weeks before the raid, is the latest evidence of the fractured relationship between the United States and Pakistan.
Rasmussen Reports:
Dawn.com:
  • US Panel Proposes 75% Aid for Pakistan Withheld. A US defence bill approved on Tuesday proposes withholding 75 per cent of the $1.1 billion aid to Pakistan for the next fiscal year until the Obama administration reports to Congress on how it would spend the money. The House Appropriations Committee also gave additional power to Congress to review US assistance to Pakistan. This would ensure that Islamabad cooperates with the Americans in the war against terror, as stipulated in the Kerry-Lugar-Berman bill. The committee unanimously approved an amendment to create an independent panel of experts to examine the Afghanistan-Pakistan situation. The review panel would include five Republicans and five Democrats, mirroring the Iraq Study Group. It would work with $1 million and deliver a report to lawmakers in 120 days, according to the amendment. Republican Congressman Frank Wolf, who proposed the amendment, said the panel would provide “fresh eyes” to “make sure we are looking at this as comprehensively as we can”.
USA Today:
  • Cyberattacks Disclosed as Federal Security Law Considered. The recent rash of disclosures about cyberspying comes as the White House is making its third attempt to push through a historic federal cybersecurity law. The timing is no coincidence, some cybersecurity analysts say. After two previous bills went nowhere, the White House needs to garner public support for a new law that could equip America for cyberwarfare. "The best way to do that is to get folks worried that we're under attack from some foreign state like China or North Korea," says Ed Adams, CEO of Security Innovation, which integrates security systems for government agencies. Recent disclosures of cyberattacks against the International Monetary Fund, Google and several defense contractors coincided with an unprecedented pronouncement last week by CIA Director Leon Panetta, who warned a U.S. Senate panel that the U.S. needs to take "defensive measures as well as aggressive measures" to win at cyberwarfare. The bill is gaining bipartisan support in Congress.
Reuters:
  • US Dept of Energy Offers $2 Billion in Loan Aid for 2 Solar Plants. The DOE offered the Mojave Solar Project, sponsored by Abengoa Solar Inc (ABG.MC), $1.2 billion in loan aid and the Genesis Solar Project, sponsored by NextEra Energy Resources, LLC (NEE.N), more than $680 million in loan aid.
  • Ohio Treasurer Asks for Probe on Forex Charges. Ohio on Tuesday became the latest U.S. state to question whether its public pension funds may have been cheated on currency transactions by custody banks. Ohio Treasurer Josh Mandel said that he has asked the state's attorney general, Mike DeWine, to investigate whether pensioners "have been exploited by custodial banks when conducting foreign currency exchanges." "I am concerned that the banks may have manipulated foreign currency trade prices in order to maximize the banks' profit, at the expense of Ohio public servants, businesses and taxpayers," Mandel wrote in a letter dated June 14.
Market News International:
  • S&P Cuts Outlook on China Property Developers. The following is the text of a release from Standard & Poor's issued Wednesday: "Credit conditions in China's real estate development sector have become increasingly challenging, leading Standard & Poor's Ratings Services to revise its industry outlook to negative from stable for that market. "We're likely to see more negative rating actions among Chinese developers in the next six to 12 months because tightened onshore credit conditions and increasingly restrictive government policy have deepened the market downturn," said Standard & Poor's credit analyst Bei Fu. "Any meaningful slippage in sales will significantly weaken the developers' cash flow protection measures amid higher leverage and stiff competition." "Property sales were satisfactory for many rated issuers in the first five months of this year, but we expect the sales momentum to slow as policy tightening starts to bite," said Ms. Fu. "We expect meaningful price adjustments in the second half of 2011. If sales volumes remain sluggish, developers' liquidity will quickly dry up, suggesting sporadic price discounting will likely intensify." Elsewhere in the region, Standard & Poor's believes that the soaring market in Hong Kong may be at risk of a sharp correction.
  • China Short-Term Rates Surge in Wake of Reserve Hike. China's seven-day bond repurchase agreement rate was fixed at 6.19% Wednesday, 200 basis points higher than the previous day's fixing, as a result of Tuesday's announcement of the sixth reserve requirement increase of the year.
Financial Times:
  • German-Backed Plan for Greek Debt May Require EU20 Billion. A German-backed plan to reschedule Greek debt may require euro-area governments to provide up to 20 Billion euros, citing a briefing paper that has been circulated by the European Commission. The extra funds may be needed to recapitalize Greek banks after a proposed extension on the maturities of Greek government bonds, which would be classified by rating agencies as a "selective default," the FT said. More funds may be required for emergency Greek bank liquidity if the European Central Bank refuses to accept downgraded bonds as collateral and ministers have been told all the Greek collateral might have to be replaced.
  • Demand Slowing in China, Says Glencore. Glencore has warned of a slowdown in demand for commodities from China and the US, the two most important consumers of raw materials, in its first public results since its $10bn (€6.9bn) flotation last month. Ivan Glasenberg, chief executive, said high prices and the Chinese government’s moves to curb inflation had damped demand, although he hoped any slowdown would be temporary. “We see a pullback in China and it will continue,” he said. “There are pullbacks in China from time to time when they see inflation is too high.” In the US, he said that there had been a “slight slowing down”, adding that this would “hopefully” be “a temporary pullback”.
  • Bank Chiefs' Pay Rises by 36%. Bank chiefs’ average pay in the US and Europe leapt 36 per cent last year to $9.7m, according to data compiled for the Financial Times, despite variable performance across the sector. Two of the industry’s biggest names – Jamie Dimon, the JPMorgan Chase chief executive, and Goldman Sachs’ Lloyd Blankfein – were paid more than 15 times their 2009 earnings. Mr Dimon received nearly $21m in 2010, topping the FT’s survey of the salary and bonus packages awarded to 15 top bankers. Mr Blankfein earned $14.1m, including a $5.4m cash bonus – up from $863,000 in 2009.
RTHK:
  • The Chinese government is "highly concerned" about inflation in Hong Kong and Macau, citing Wang Guangya, director of the Hong Kong and Macau Affairs Office of the State Council.
National Business Daily:
  • China may raise interest rates in late June or early July to fight inflation, citing Du Zhengzheng, a researcher with the Chinese Academy of Social Sciences. The country's consumer prices may gain about 6% in June, citing Du.
Oriental Morning Post:
  • Shanghai will limit electricity use in some of the city's malls and office buildings this summer as the municipality may have 1.6 million to 2 million kilowatts in power shortage, citing an executive of Shanghai Municipal Electric Power Co. Strict power-use limits will be imposed on industrial companies during peak time and restrictions will also apply to about 3,000 non-industrial companies for the first time. Malls and office buildings will be told to close completely if the temperature rises to more than 37 degrees Celsius.
China Daily:
  • Vietnam and the Philippines cannot justify their claims to the Nansha and Xisha islands in the South China Sea and should acknowledge China's sovereignty over them, Li Jinming, a professor at the Center for Southeast Asia Studies at Xiamen University, wrote in a commentary.
  • China may raise interest rates "in weeks, if not days" to prevent a surge in inflation, following yesterday's decision by the PBOC to increase the reserve requirement ratio at the nation's banks, according to an editorial in today's China Daily.
Evening Recommendations
Citigroup:
  • Reiterated Sell on (BBY), target $27.
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 113.50 -2.5 basis points.
  • Asia Pacific Sovereign CDS Index 117.0 -3.25 basis points.
  • S&P 500 futures -.35%.
  • NASDAQ 100 futures -.29%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (FNSR)/.33
  • (KFY)/.32
Economic Releases
8:30 am EST
  • The Consumer Price Index for May is estimated to rise +.1% versus a +.4% gain in April.
  • The CPI Ex Food & Energy for May is estimated to rise +.2% versus a +.2% gain in April.
  • Empire Manufacturing for June is estimated to rise to 12.0 versus 11.88 in May.
9:00 am EST
  • Net Long-term TIC Flows for April are estimated to rise to $35.0B versus $24.0B in March.
9:15 am EST
  • Industrial Production for May is estimated to rise +.2% versus unch. in April.
  • Capacity Utilization for May is estimated to rise to 77.0% versus 76.9% in April.
10:00 am EST
  • The NAHB Housing Market Index for June is estimated at 16.0 versus 16.0 in May.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,800,000 barrels versus a -4,845,000 barrel decline the prior week. Distillate supplies are estimated to rise by +1,000,000 barrels versus an +810,000 barrel gain the prior week. Gasoline inventories are expected to rise by +1,050,000 barrels versus a +2,209,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.2% versus a +1.2% gain the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly MBA mortgage applications report, (CIEN) analyst day, (MWV) investor day, (NSIT) analyst day and the (MKSI) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial 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.
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Tuesday, June 14, 2011

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Euro Bounce, Diminishing Global Growth Worries

Posted by Gary .....at 3:54 PM

Broad Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Every Sector Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 18.10 -7.70%
  • ISE Sentiment Index 168.0 +61.54%
  • Total Put/Call 1.04 -2.80%
  • NYSE Arms .60 -21.76%
Credit Investor Angst:
  • North American Investment Grade CDS Index 97.0 -1.77%
  • European Financial Sector CDS Index 115.50 -2.32%
  • Western Europe Sovereign Debt CDS Index 213.75 +1.02%
  • Emerging Market CDS Index 216.06 -2.95%
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 20.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% +1 bp
  • Yield Curve 265.0 +6 bps
  • China Import Iron Ore Spot $172.80/Metric Tonne +.29%
  • Citi US Economic Surprise Index -95.40 +1.2 points
  • 10-Year TIPS Spread 2.25% +7 bps
Overseas Futures:
  • Nikkei Futures: Indicating +78 open in Japan
  • DAX Futures: Indicating +9 open in Germany
Portfolio:
  • Higher: On gains in my Retail, Biotech, Medical and Tech sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, covered some of my (EEM) short and then added back to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns, rising energy prices and eurozone debt angst. On the positive side, Coal, Alt Energy, Oil Service, Computer, Disk Drive, Networking, Hospital, HMO and Construction shares are especially strong, rising more than +2.5%. Small-cap and cyclical shares are outperforming. The UBS-Bloomberg Ag Spot Index is declining -1.07% and copper is rising +3.13%. The 10-year yield is rising +11 bps to 3.09%, which is also a positive at this point. Weekly retail sales rose +3.7% this week versus a +4.2% gain the prior week and down from a +5.1% gain the first week of May. The Spain sovereign cds is down -3.95% to 272.5 bps, the Italy sovereign cds is down -4.5% to 169.33 bps, the Portugal sovereign cds is down -3.4% to 737.0 bps, the Belgium sovereign cds is down -3.0% to 149.17 bps and the UK sovereign cds is down -3.4% to 62.95 bps. On the negative side, Bank, Telecom, Computer Service, Utility and Paper shares are underperforming, rising less than +1.0%. (XLF) is relatively weak today. Oil is rising +2.2% and gold is gaining +.54%. The US price for a gallon of gas is unch. today at $3.70/gallon. It is up .56/gallon in less than 4 months. The Greece sovereign cds is gaining +1.04% to 1,606.67 bps, the Hungary sovereign cds is rising +1.6% to 253.29 bps and the Illinois municipal cds is rising +2.0% to 191.0 bps. The Greece sovereign cds is hitting another new record high again today. The Hang Seng Index was unable to rally overnight with the rest of Asia. The VIX is already plunging again, which remains a concern and volume is lackluster on today's advance. Investors appear to be cheering overnight data from emerging markets. However, this data makes me more worried about eventual hard landings in these key economies, not less. While the euro is bouncing and eurozone cds are coming in a bit, the situation remains tenuous. Stocks may continue to advance in the near-term, however a test of recent lows is likely over the coming weeks, unless there are material changes in the current headwinds that have recently weighed on equity prices. I expect US stocks to trade mixed-to-lower into the close from current levels on global growth worries, eurozone debt concerns, emerging markets inflation fears, rising Mideast unrest and rising energy prices.
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Today's Headlines

Posted by Gary .....at 3:03 PM

Bloomberg:
  • Greek Bailout Enters Homestretch as European Leaders Race to Avert Default. European finance chiefs are divided on how to involve private investors in a second bailout for Greece and stave off the euro area’s first sovereign default without running afoul of the European Central Bank. “You can’t leave the profits with the banks and make the taxpayers shoulder the losses,” Austrian Finance Minister Maria Fekter told reporters in Brussels today before an emergency meeting on Greece. “Ministers have different positions,” she said. “We’ll put them on the table and look at where the compromise lies.” Yields on 10-year Greek bonds touched 17.46 percent today, a record in the 17-nation euro-area’s history. The slump pushed the extra yield, or spread, that investors demand to hold the country’s 10-year bonds instead of similar maturity German bunds to a record. “Greece will default; it’s a question of when, rather than if,” said Vincent Truglia, managing director at New York-based Granite Springs Asset Management LLP and a former head of the sovereign risk unit at Moody’s. “It’s a basic solvency issue rather than a liquidity issue. Only a debt writedown will do.”
  • China Raises Reserve Ratio After Industrial Production Outpaces Estimates. China ordered lenders to set aside more cash as reserves after inflation accelerated to the fastest pace in almost three years in May and industrial production rose more than estimates. A half percentage point increase announced by the central bank today and effective June 20 will take the ratio to a record 21.5 percent for the biggest lenders. The move was hours after data showing the inflation rate climbed to 5.5 percent. Signs the world’s second-biggest economy is maintaining momentum after increases in borrowing costs and curbs on real estate may have encouraged policy makers to add to tightening measures. China’s interest-rate swaps surged and bonds slumped after the central bank announcement. Today’s reserve-ratio increase “was quite a surprise but the central bank may be concerned about rising inflation expectations,” said Lu Ting, a Hong Kong-based economist with Bank of America Merrill Lynch. “It may also indicate that there have been inflows of foreign exchange especially from the trade surplus which was above $10 billion in April and May.” Still, the pace of inflation remains the slowest of the so-called BRIC nations, with the latest data showing annual rates of 6.6 percent for Brazil, 9.6 percent for Russia and 9.1 percent for India. China’s peak this year may be “slightly above” 6 percent in June, Bank of America said. Food prices in China rose 11.7 percent in May from a year earlier as pork costs surged and vegetable prices rebounded late in the month, the statistics bureau said today. “Inflation pressure is still large,” Li Daokui, an academic adviser to the People’s Bank of China, said on his microblog today. “My personal view is that the policy focus should be on considering raising the deposit rate to adjust inflation expectations.” China’s producer prices rose a more-than-estimated 6.8 percent in May and non-food inflation accelerated to 2.9 percent, the fastest pace in at least six years, today’s data showed. Fixed-asset investment excluding rural households expanded 25.8 percent in the first five months of the year, up from 25.4 percent in January-through-April. The government is weighing the threat to growth from tightening measures against the danger that rising food and housing costs may fuel social instability. In March, Premier Wen Jiabao said a combination of inflation, corruption, and the gap between rich and poor could “even affect the government’s hold on power.”
  • China Inflation Heading for 6% Shows Danger for Wen Extending Rate Pause. China’s inflation pressures have yet to be contained by four interest-rate increases since September, underscoring the danger of any extended policy pause as bad weather threatens to further drive up food costs. “There’s still a long way to go” to contain prices, Shen Jianguang, chief economist for greater China at Mizuho Securities Asia Ltd. said in a Bloomberg Television interview. “We need to see a slowdown in the economy,” said Shen, who previously worked for International Monetary Fund. He predicts two more rate increases this year.
  • U.S. Retail Sales Fall on Weak Auto Demand. Sales at U.S. retailers fell less than projected in May, showing consumers were weathering elevated gasoline costs. The 0.2 percent decrease reported by the Commerce Department in Washington today compared with the median forecast for a 0.5 percent drop in a Bloomberg News survey of economists. Excluding the biggest slide in auto sales in more than a year, purchases climbed 0.3 percent.
  • U.S. Wholesale Prices Rose .2% on Plastics, Fuel, Textiles. Wholesale costs in the U.S. rose more than forecast in May, led by higher prices for fuel, plastics and the fastest rise in 30 years for apparel and textile costs. The costs of apparel and other fabricated textile products rose 1.0 percent in May, the fastest since 1.3 percent in April 1981. “Consumers don’t have the income to sustain the higher food and energy prices, so they’re going to cut back on spending elsewhere,” said economist Neil Dutta at Bank of America Merrill Lynch in New York after the report. “When you have five people competing for every job, wages are going to remain very weak, and that’s what ultimately drives inflation.” Compared with a year earlier, companies paid 7.3 percent more for goods last month, the fastest rise since September 2008.
  • Noyer Says Any Greek Default Would Mean Financing Whole Economy. European Central Bank Governing Council member Christian Noyer said any attempt by euro-area governments to adjust Greek debt that resulted in a default would mean financing the nation’s entire economy. “Our position is extremely simple: if there is a solution that avoids a risk of default, it seems suitable,” Noyer told journalists in Paris today. “If you can’t find it, it’s better to avoid touching the debt. If despite everything you try to reduce the debt and you provoke a risk of default, you’ll have to finance the entire Greek economy.”
  • India Inflation Quickens to 9.06%, Adding Pressure on Rates. India’s inflation exceeded analysts estimates, adding pressure on the central bank to extend the fastest round of interest-rate increases among Asia’s major economies. Bond yields and the rupee gained. The wholesale-price index rose 9.06 percent from a year earlier after an 8.66 percent jump in April, the commerce ministry said in a statement in New Delhi today. The median estimate of 22 economists in a Bloomberg News survey was for an 8.74 percent increase. The Indian economy may be “overheating” and further rate rises are warranted, Nouriel Roubini, co-founder and chairman of Roubini Global Economics LLC said yesterday, as well as calling for similar action in China. The Reserve Bank of India may boost borrowing costs June 16 for the 10th time since mid-March 2010, 15 of 17 economists in a Bloomberg News survey said. “Inflation is a big worry and policy makers’ objective would be to fight the price gains rather than worry about growth,” Samiran Chakraborty, Mumbai-based chief economist at Standard Chartered Plc, said before the report.
  • Saudi Aramco Said to Offer More Oil to Asia, Europe Refiners. Saudi Aramco, the world’s largest oil exporter, has offered additional crude supplies to customers in Asia and Europe, according to people at six refiners who received the proposals. The Dhahran-based company offered extra cargoes for delivery later this year.
  • U.K. Inflation Holds at Fastest Pace Since 2008; Weale Seeks Rate Increase. Consumer prices rose 4.5 percent in May from a year earlier, matching the increase recorded in April and the median forecast of 30 economists in a Bloomberg News survey, the Office for National Statistics said today in London.
  • Best Buy's(BBY) Profit Tops Analyst's Estimates After Smartphone Sales Increase. Best Buy Co., the world’s largest consumer electronics retailer, reported first-quarter profit that exceeded analysts’ forecasts, helped by rising demand for smartphones. Net income fell 12 percent to $136 million, or 35 cents a share, in the quarter ended May 28, the Richfield, Minnesota- based company said today in a statement. Analysts predicted 33 cents, the average estimate in a Bloomberg survey. The shares climbed the most in 15 months.
  • Nokia(NOK), Apple(AAPL) Reach Patent Deal, Settle Lawsuits. Nokia Oyj (NOK1V) won an almost two-year patent dispute with Apple Inc. (AAPL), in a settlement that awards a one-time payment and royalties to the Finnish handset maker. Nokia rose as much as 4.1 percent in Helsinki trading.
  • J.C. Penney(JCP) Names Apple(AAPL) Store Builder as New CEO.
  • Optimism of U.S. Chief Executives Fell in Second Quarter on Sales Outlook. Optimism among U.S. chief executive officers fell in the second quarter from a record high as fewer business leaders projected sales will climb, a survey showed. The Business Roundtable’s economic outlook index decreased to 109.9 for the April through June period from a 113 reading in the previous three months that was the highest in data going back to 2002, the Washington-based group said today.
  • Soros Says China Missed Window to Stem Prices. China has missed its opportunity to stem inflation and may now risk a hard landing, billionaire investor George Soros said. The world’s second-largest economy is in a “bit of a bubble,” Soros, 80, said today at a conference in Oslo. There are some signs that China is “losing control,” he said. China’s formula for steering its economy is “running out of steam,” Soros said, adding the country is seeing the beginnings of wage-price inflation. At the same time, efforts to restore growth in the U.S. and Europe have failed to address underlying imbalances and the global economy is not “out of the woods at all,” Soros said. Banks have “not been properly recapitalized” and “underlying imbalances have not been corrected,” he said. Recovery prospects are being hampered by the fact that the “authorities are not providing a solution,” he said. Soros said economic turmoil in the developed world is prompting him to turn to Africa, a region he called a “very attractive area to invest in,” adding he is “very much engaged” there.
Wall Street Journal:
  • Chinese Police Restore Order to Restive Town. The deployment of thousands of riot police armed with tear gas and shotguns appeared to have restored order to this southern Chinese town after days of severe rioting, but both migrant workers and a government think tank warned unrest could flare again if leaders fail to address migrants' concerns. This jeans-manufacturing center in the southern province of Guangdong, which accounts for about one third of China's exports, is the site of the latest in a wave of violent protests in urban areas over the last three weeks that is challenging the Communist Party's ability to control society.
  • Hedge Funds Shun Short-Selling as EU Regulations Loom - ISLA. Hedge funds are short-selling fewer stocks and securities amid continued uncertainty over coming European Union regulations, Kevin McNulty, chief executive of the International Securities Lending Association, said Tuesday. He told reporters at a briefing that the prospect for hedge funds of having to disclose their short positions publicly, and the knock-on consequences that can include other funds copying their strategies, has curtailed borrowing volume since the financial crisis, to around $1.8 trillion in outstanding borrowed securities, from around $4 trillion.
  • Nine Dragons Shares Hit as S&P Pulls Rating. Shares of a Hong Kong-listed packaging manufacturer controlled by one of China's richest entrepreneurs plunged after Standard & Poor's made the unusual decision to withdraw its long-term corporate credit rating for the company's debt, citing "insufficient access" to management. S&P's decision, which pushed shares of Nine Dragons Paper (Holdings) Ltd. 17.4% lower before trading was halted midafternoon, came amid heightened concerns over transparency and governance issues at some overseas-listed Chinese firms. In a statement, S&P referred to the company's "aggressive debt-funded growth appetite." Without sufficient access to management, the ratings firm "cannot fully understand the company's strategy and financial management or assess its future credit risks," it added.
  • Bernanke Calls for Debt Plan. Federal Reserve Chairman Ben Bernanke Tuesday renewed his call for politicians to come up with a plan to contain the growing U.S. public debt soon, but once again warned about the dangers of using the debt ceiling as a bargaining chip in the negotiations.
CNBC.com:
Business Insider:
Zero Hedge:
  • CFTC Delays Swaps Regulation by Another 6 Months to Comply With Wall Street Demands. One year after the passage of Dodd-Frank's provisions on swap regulation absolutely nothing has been implemented. And judging by the just announced yet another 6 month delay of rule implementation, it now appears pretty much certain that the $600 billion derivatives market will never be actually regulated, courtesy of conflicted interests at the CFTC.
CNN Money:
  • Exclusive: New Stock Rules Proposed. Private companies may be allowed to stay private longer. Congress may soon change the law that is compelling Facebook to go public in early 2012, Fortune has learned. Reps. David Schweikert (R-AZ) and Jim Himes (D-CT) are among those who plan to introduce a bill that would amend the Securities Exchange Act of 1934. According to a draft copy, it would:
njherald.com:
  • New Jersey Democrats Introduce Bill to Stop State From Killing Regional Greenhouse Gas Initiative. The effort to kill New Jersey's Global Warming Solutions Act and any involvement in the Regional Greenhouse Gas Initiative by the governor and Sussex County lawmakers was challenged Monday by House Democrats. Assembly Environment Chairman John F. McKeon, D-Essex and Assembly Utilities Chairman Upendra J. Chivukula, D-Middlesex introduced a resolution that would protect funding sources for clean energy and support New Jersey's membership in RGGI, a 10-state carbon emissions cap and trade program to reduce greenhouse gasses in the region 10 percent by 2018. State officials and business alliances are at odds with environmental groups and others over New Jersey's withdrawal from the multistate pact to reduce greenhouse gases blamed for global warming.
Financial Times:
RP Online:
  • Most German banks could withstand a Greek debt restructuring, Christoph Schmidt, an economic adviser to Chancellor Angela Merkel, said. A "soft restructuring" would do little to alleviate Greece's debt burden and sooner or later creditors, including the ECB, will have to write off part of their Greek sovereign debt, Schmidt said. Such a debt overhaul for Greece wouldn't necessarily trigger contagion to Ireland and Portugal.
Xinhua:
  • Beijing's average new home prices fell 4.8% in the first five months from a year earlier, citing the Beijing Municipal Commission of Housing and Urban-Rural Development.
Hexun.com:
  • China may raise rates this month because negative interest rates still persist, citing Zhu Baoliang, chief economist at the State Information Center.
Alrroya Aleqtissadiya:
  • Banks in the UAE had about $19 billion in bad loans at the end of April, citing the head of supervision and inspection at the central bank. Non-performing loans reached 6.67% of total loans and facilities provided by banks operating in the Gulf country at the end of April.
0 comments

Bear Radar

Posted by Gary .....at 2:31 PM

Style Underperformer:
  • Large-Cap Value (+1.28%)
Sector Underperformers:
  • 1) Utilities +.57% 2) Banks +..83% 3) Computer Services +.86%
Stocks Falling on Unusual Volume:
  • ANGO, SSRX, INSM, SIGA, PCRX, TNDM, RMTI, RBCN, STRA, DTG, KMP, FDS, EVR and NX
Stocks With Unusual Put Option Activity:
  • 1) JCP 2) SPWRA 3) BBY 4) EWT 5) CYH
Stocks With Most Negative News Mentions:
  • 1) SPWRA 2) AAP 3) WMT 4) JNPR 5) ACN
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:24 AM

Style Outperformer:
  • Small-Cap Growth (+1.90%)
Sector Outperformers:
  • 1) Coal +3.43% 2) HMOs +2.65% 3) Gaming +2.07%
Stocks Rising on Unusual Volume:
  • IVN, SI, TSL, LNC, CAR, BBBB, PHK, AOL, CBRL, SOLR, ZAGG, SINA, BBY, HTZ, ANV, CVI, ZAGG, SWI, MAS, TWI, CBL and MIC
Stocks With Unusual Call Option Activity:
  • 1) COV 2) CROX 3) CCK 4) DTG 5) K
Stocks With Most Positive News Mentions:
  • 1) GHM 2) HEI 3) PETD 4) WFR 5) APU
Charts:
0 comments

Tuesday Watch

Posted by Gary .....at 12:42 AM

Evening Headlines

Bloomberg:
  • China's Inflation Accelerates at Fastest Pace Since 2008. China’s inflation accelerated to 5.5 percent in May, the fastest pace in almost three years, and industrial output grew more than economists forecast. The annual gain in consumer prices matched the median estimate in a Bloomberg News survey of economists. Production rose 13.3 percent last month, the statistics bureau said in Beijing today. That compared with a median 13.1 percent forecast. “The central bank needs to persist with the inflation fight as price gains are proving stickier than previously thought,” Yao Wei, a Hong Kong-based economist with Societe Generale SA, said before today’s release. “Any let-up would see a rebound.” Yao sees inflation peaking at 6.5 percent this month before moderating. Producer prices jumped 6.8 percent in May, the statistics bureau said. Retail sales, which are boosted by inflation, rose 16.9 percent after a 17.1 percent gain in April. Fixed-asset investment excluding rural households expanded 25.8 percent in the first five months, compared with analysts’ 25.2 percent median forecast.
  • Fed's Fisher Reiterates Central Bank Has Done Enough to Help U.S. Economy. Federal Reserve Bank of Dallas President Richard Fisher reiterated his view that the central bank has done enough to support the U.S. economy and indicated he won’t support a third round of quantitative easing. “The worst outcome of all would be for the Fed to continue monetizing the debt,” Fisher, 62, said today during a speech in Dallas. “We’ve been doing that since November.” “We’ve done enough,” Fisher said in a speech to the Certified Financial Analysts Society of Dallas-Fort Worth. “I will not support our doing more.” Fisher said it’s “highly unlikely” that the yuan will displace the dollar as the world’s main reserve currency in a “reasonable time frame,” and that it will take a long time for the U.S. housing market to work off its excess inventory.
  • Crude Oil Declines for a Third Day in New York on Signals Demand Weakening. Oil declined for a third day in New York as signs that the global economy is slowing stoked speculation that fuel demand may falter. Prices dropped to a four-week low yesterday after government data showed China’s oil-product consumption slid 4 percent in May and Standard & Poor’s cut Greece’s credit rating to the lowest held by a country. Crude for July delivery declined as much as 52 cents to $96.78 a barrel in electronic trading on the New York Mercantile Exchange, and was at $96.85 at 9:49 a.m. Sydney time. The contract yesterday slid $1.99, or 2 percent, to $97.30, the lowest since May 17. Prices are 29 percent higher the past year.
  • Fannie Mae, Freddie Mac Remain Risks to Taxpayers, U.S. Regulator Reports. Fannie Mae and Freddie Mac, the mortgage companies operating under U.S. control, are improving their financial condition but remain a risk to taxpayers, the companies’ regulator reported. In its third annual report to Congress released today, the Federal Housing Finance Agency said improved underwriting on the loans that the companies package into mortgage-backed securities helped slow the agencies’ losses to $28 billion in 2010, from $93.6 billion a year earlier.
  • China's worst power shortage in seven years may trump policies to battle inflation, as the first government-approved electricity-rate increase on farmers and businesses since November 2009 gets passed along to consumers. "All these retailers who are now playing higher overheads will all of a sudden say, 'Yeah, we'll hike our prices,'" said Ben Simpfendorfer, Hong Kong-based publisher of China Insider, an online newsletter, and former chief China economist at Royal Bank of Scotland Group Plc.
  • Volcanic Ash Disrupts Air Travel. Flights across the Southern Hemisphere were disrupted as a cloud of volcanic ash from an eruption in southern Chile widened from Argentina to Australia. United Nations Secretary-General Ban Ki-moon’s plane was diverted from its planned landing today in Buenos Aires to the central province of Cordoba after the capital city closed its two biggest airports, canceling 144 flights by companies including Santiago-based Lan Airlines SA (LAN) and Qantas Airways Ltd. (QAN), Australia’s biggest carrier. “There are ashes throughout the first 9,000 meters of the atmosphere,” said Alejandro Tome, a spokesman at the Argentine civil aviation office, adding that the flight disruptions in the region were “unprecedented.”
  • Systemic Firms May Have to Restructure: FDIC. Systemically important financial institutions in the U.S. may have to simplify their business if they can’t provide viable plans for unwinding themselves in a crisis, a senior Federal Deposit Insurance Corp. official said. “Ultimately, a SIFI could be required to restructure its operations if it cannot demonstrate it is resolvable in an orderly manner under the Bankruptcy Code,” Michael Krimminger, the FDIC’s chief counsel, will tell a House Financial Services subcommittee tomorrow at a hearing in Washington.
  • Tepco Faces Radioactive Sludge Crisis. Tokyo Electric Power Co., which is struggling to contain the worst nuclear disaster in 25 years has another crisis on its hands: finding storage for enough radioactive sludge to fill an Olympic-sized swimming pool. The utility known as Tepco plans to start decontaminating millions of liters of water poured over melting reactors to keep them from exploding after the March 11 earthquake and tsunami knocked out cooling systems. By the end of the year it expects to have 2,000 cubic meters of highly radioactive sludge separated from the water, said Teruaki Kobayashi, a nuclear facility management official at Tepco. “We haven’t determined a final disposal site for the waste,” Kobayashi said in an interview yesterday.
  • IMF Rules Out Fischer as Candidate for Director. The International Monetary Fund said that French Finance Minister Christine Lagarde and Mexican central bank Governor Agustin Carstens are the two candidates to become managing director of the group. In an e-mailed statement, the Washington-based lender omitted mention of Israeli central bank chief Stanley Fischer, who had declared his candidacy last week.
  • Tepco Rises 24% After Short Sale, Margin Rule Changes. Tokyo Electric Power Co., which has lost about 90 percent of its value since the March 11 tsunami that crippled its Fukushima Dai-Ichi nuclear plant, gained the most since at least 1974 after the stock exchange clamped down on short-selling of the shares. The stock rose as much as 24 percent to 247 yen, the highest since June 3, and traded at 245 yen as of 12:47 p.m. in Tokyo.
  • Tea Party Favorite Bachmann Enters 2012 Race. U.S. Representative Michele Bachmann, a Minnesota Republican known for her uncompromising views and firebrand style, said today that she plans to run for the 2012 Republican presidential nomination.
Wall Street Journal:
  • Wave of Unrest Rocks China. Threats to Social Order Increasingly Hit Cities, Bringing Iron-Fist Response. A wave of violent unrest in urban areas of China over the past three weeks is testing the Communist Party's efforts to maintain control over an increasingly complex and fractious society, forcing it to repeatedly deploy its massive security forces to contain public anger over economic and political grievances. The simultaneous challenge to social order in several cities from the industrial north to the export-oriented south represents a new threat for China's leaders in the politically sensitive run-up to a once-a-decade leadership change next year, even though for now the violence doesn't appear to be coordinated. In the latest disturbance, armed police were struggling to restore order in a manufacturing town in southern China Monday after deploying tear gas and armored vehicles against hundreds of migrant workers who overturned police cars, smashed windows and torched government buildings there the night before. The protests, which began Friday night in Zengcheng, in the southern province of Guangdong, followed serious rioting in another city in central China last week, plus bomb attacks on government facilities in two other cities in the past three weeks, and ethnic unrest in the northern region of Inner Mongolia last month. The latest unrest involves violent protests from individuals and large crowds in China's cities, where public anger is growing over issues including corruption and police abuses. The recent violence has exposed the limits of the government's ability to control the urban population using a sophisticated array of tools from Internet censorship to surveillance—part of what party leaders refer to as "social management." Authorities have turned to displays of raw power, deploying paramilitary police and armored vehicles in at least three cities in as many weeks, to prevent the violence from spiraling further as protesters have repeatedly directed their anger at government buildings, often ostentatious symbols of power.
  • ECRI's Achuthan: Prolonged U.S. Slowdown Underway. The U.S. economy is “not yet” headed for a double-dip recession, but a sharp and prolonged downturn is underway and may make jobs growth even tougher to come by, an influential analyst said Monday. In an interview with The Wall Street Journal, Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute, said that over the last few months key indicators of long-term economic growth have all begun pointing in one direction: downward. “We’re talking about a cyclical turn that’s pronounced pervasive and persistent, not a one or two month affair,” Achuthan said. He added that the slowdown is likely to last a couple of quarters at least — even as he stopped short of calling it a formal recession, which is defined by two quarters of economic contraction. “This isn’t a story about one country driving [growth] down: China didn’t do this, and the U.S. didn’t’ do this,” he said. “It’s very big…and not something you can deny.” “The broad economy is going to slow alongside the industrial sector starting in the middle of this year, so in that sense it may feel like last year,” Achuthan said, adding that closely watched gauges of economic growth will all begin slowing at the same time. “It’s all going to be synchronized.” ECRI sees jobs growth as “slower” in the months to come, Achuthan says. “You’re not going to see the quarter of a million jobs [created] on average anytime soon,” the economist said, referring to the figure of employment growth that many analysts cite as a benchmark for sufficient growth in employment. “We’re going to get back into that 100 plus or minus range through the summer.”
  • GOP Candidates Run Against Regulation. Republican presidential hopefuls on Monday pressed for the dismantling of government regulations drawn up over 40 years, using a candidates' debate here to call for the scaling back or elimination of environmental, labor, financial and health-care rules. The seven candidates on stage at Saint Anselm College avoided challenging each other, a benefit for front-runner Mitt Romney, former governor of Massachusetts.
  • Forex Hedge Fund Assets Likely Shrink After May Losses - HFN. Losses at foreign-exchange-focused hedge funds in May might lead to further investor withdrawals from the funds, HedgeFund.net said Monday. The hedge-fund data provider, which tracks about 200 forex funds, said investors pulled $700 million from forex hedge funds in the nine months ended March 31, more than offsetting $580 million in asset appreciation during the period. It estimates a total $51.6 billion in hedge-fund assets were invested in forex strategies at the end of the first quarter. The outflow contrasted with a $110 billion inflow into other types of hedge funds in the nine months ended March 31, HFN said. May was a volatile month for investments in commodities and currencies. The U.S. dollar surged last month as investors dumped currencies of emerging economies and big commodity producers, reversing trades they had engaged in for months. The dollar's appreciation spooked many funds that had been betting against the currency. "Performance from FX strategies in April and May indicate the aggregated positions from the group were negative on the U.S. dollar," HFN said in a report. The correlation of monthly returns of forex strategies to an index measuring the U.S. dollar against a basket of currencies was -0.62 in the last two years.
  • Bank CDS Wider, Even as Stocks Rise. Financials are the best-performing sector in the market today, up more than 1%, but Tim Backshall at Capital Context points out that their credit indicators are telling a far different story. Their CDS spreads have been widening and bond yields rising all day, notes Mr. Backshall. According to Markit data, Bank of America and Citi’s one-year CDS spreads are up 3% each, Morgan Stanley’s is up about 4% and Goldman’s is up 1.5%. J.P. Morgan’s two-year spread is up 4.5%.
  • High Hopes at Miracle-Gro(SMG) in Medical Marijuana Field. Scotts Miracle-Gro Co. has long sold weed killer. Now, it's hoping to help people grow killer weed.
  • Is This the China Bubble Bursting? That sound you hear? It may be the deflating bubble in some Chinese stocks. The market scribblers at Standard & Poor’s crunched the numbers on Chinese Internet and solar companies with more than $100 million in market value. They found that on average, their collection of once-hot companies have lost half their value in the past year, after increasing in price by one-and-a-half-times over the past year. S&P wrote:
  • CIA Plans Yemen Drone Strikes. The Central Intelligence Agency is preparing to launch a secret program to kill al Qaeda militants in Yemen, where months of antigovernment protests, an armed revolt and the attempted assassination of the president have left a power vacuum, U.S. officials say.
  • Why ObamaCare Is Losing in the Courts. The government's lawyers keep changing their arguments as each one is exposed as constitutionally suspect.
  • Uncertainty Is Not The Problem by Clifford S. Asness. It's not the policies we don't know about that are retarding the economy. It's the bad policies we have. Many commentators blame our continuing economic woes on "uncertainty." They allege that recent and anticipated dramatic policy changes make business planning difficult, and that this is retarding growth and employment. This view is not wrong—but our main problem is not the uncertainty surrounding new policies. It is the policies.
CNBC:
  • US Phone Taps Convict Three More of Insider Trading.
  • Hackers Break Into U.S. Senate Computers. The U.S. Senate's website was hacked over the weekend, leading to a review of all of its websites, in the latest embarrassing breach of security to hit a major U.S.-based institution. The loosely organized hacker group Lulz Security broke into a public portion of the Senate website but did not reach behind a firewall into a more sensitive portion of the network, Martina Bradford, the deputy Senate sergeant at arms, said on Monday. Despite the breach, the Sergeant at Arms Office, which provides security for the Senate, said that the breach had not compromised any individual senator's information.
Business Insider:
Zero Hedge:
IBD:
Forbes:
LA Times:
  • Southern California Home Prices Continue to Dip in May. The median price falls 8.2% from a year earlier to $280,000, the region's 11th consecutive decline. Sales drop 17.4% to 18,394, a three-year low for May. Southern California's housing market weakened in May, with prices and sales dropping in all of the region's counties, providing further evidence of a sluggish spring shopping season.
Politico:
  • Poll: Only 1 in 4 Support Libya Mission. Just 26 percent of likely U.S. voters approve of continuing military action in Libya and 59 percent believe President Barack Obama should get congressional approval for the mission, according to a Rasmussen poll released Monday. The poll of 1,000 likely voters on Friday and Saturday found 42 percent oppose American action against Muammar Qadhafi, while 32 percent are undecided. The results represent a 12 percentage increase in support for a congressional authorization for the NATO-led Libya effort since a March Rasmussen poll.
Reuters:
  • Japan Big Manufacturers' Mood Worsens Sharply in Q2 - Govt. Big Japanese manufacturers grew more pessimistic about business conditions in the three months to June compared with the previous quarter, a survey showed on Tuesday, as the March earthquake and tsunami and subsequent nuclear crisis damaged confidence. The business survey index (BSI) of sentiment at large manufacturers stood at minus 23.3 in April-June, compared with minus 3.2 in January-March, according to the joint survey by the Ministry of Finance and the Economic and Social Research Institute, an arm of the Cabinet Office. The quarterly survey excludes some companies in the northeast directly hit by the March disaster.
Telegraph:
  • Rates Must Rise Even If Recovery Falters, Says Bank of England Policymaker Martin Weale. Interest rates should rise now to address soaring inflation even though doing so would hurt the already weak recovery, Bank of England policymaker Martin Weale has urged.
  • Duabai's Financial Crisis Laid Bare as 217 New Properties Axed. Dubai's total value of real estate transactions dropped to 119.4 billion dirhams (£20bn) last year compared with 152.9 billion dirhams in 2009. The property sector has been hit hard by the downturn, with projects worth billions of dollars put on hold or cancelled, while property prices slumped as much as 60pc. Land sales fell by 14.9pc in the last year, according to data from Dubai's Department of Land and Properties. The prospectus said only 129 projects have been completed since the beginning of 2009.

Kyodo News:
  • Japan's Fukushima prefecture will start distributing radiation-measuring equipment in September to about 34,000 schoolchildren under 15 years of age.
Financial News:
  • China should maintain its prudent monetary policy as rising production costs and power shortages indicate the economy is still "hot," citing a central bank adviser. The Asian nation should accelerate the pace of interest rate liberalization, the report said, citing Zhou Qiren, an adviser to the People's Bank of China.
China National Radio:
  • China may raise interest rates in late June or early July because of estimates for high consumer prices increases in June. The country's consumer price index may be 5.5% in May, citing market estimates.
China Daily:
  • China's food safety crisis is largely because of intentional contamination by producers and processors, citing Yu Jun, an official with the Food Safety Commission under the State Council.
Evening Recommendations
RBC Capital Markets:
  • Rated (MS) Underperform, target $24.
  • Rated (GS) Underperform, target $132.
Night Trading
  • Asian equity indices are unch. to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 116.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 120.25 +1.75 basis points.
  • S&P 500 futures +.64%.
  • NASDAQ 100 futures +.56%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (FDS)/.92
  • (BBY)/.33
  • (CLC)/.56
Economic Releases
7:30 am EST
  • The NFIB Small Business Optimism Index for May is estimated to fall to 90.5 versus 91.2 in April.
8:30 am EST
  • The Producer Price Index for May is estimated to rise +.1% versus a +.8% gain in April.
  • The PPI Ex Food & Energy for May is estimated to rise +.2% versus a +.3% gain in April.
  • Advance Retail Sales for May are estimated to fall -.5% versus a +.5% gain in April.
  • Retail Sales Less Autos for May are estimated to rise +.2% versus a +.6% gain in April.
  • Retail Sales Ex Auto & Gas for May are estimated to rise +.2% versus a +.2% gain in April.
10:00 am EST
  • Business Inventories for April are estimated to rise +.9% versus a +1.0% gain in March.
Upcoming Splits
  • (CSX) 3-for-1
  • (ALC) 2-for-1
Other Potential Market Movers
  • The Fed's Bernanke speaking on Debt Ceiling/Budget, weekly retail sales reports, William Blair Growth Stock Conference, Deutsche Bank Industrial/Basic Materials Conference, Deutsche Bank Consumer Conference, (CNC) investor day and the (SRZ) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by automaker and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
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