Today's Headlines

Bloomberg:

• Italy's Debt May Swell as Austerity Chokes Growth: Euro Credit. Italy’s austerity drive, enacted in exchange for European Central Bank bond purchases driving down borrowing costs, may backfire as it chokes the economic growth needed to ease Europe’s second-biggest debt burden. Prime Minister Silvio Berlusconi’s Cabinet approved 45.5 billion euros ($66 billion) in deficit reductions in Rome on Aug. 12, the nation’s second austerity package in a month, to balance the budget in 2013 and convince investors that Italy can trim debt of about 120 percent of gross domestic product. That’s the biggest ratio in Europe after Greece, whose fiscal woes sparked the sovereign crisis last year. While the back-to-back packages aim to eliminate Italy’s budget gap, spending cuts and tax increases risk damaging the economy at a time when the global recovery is stumbling. The measures, already in effect, require parliamentary approval that starts today as Senate committees review the law before both houses vote in September. “There are clear downside risks to growth emanating from such a sharp fiscal tightening profile, which could tip Italy’s fragile economy into a recession,” said Vladimir Pillonca, an economist at Societe Generale SA in London. That could “weaken revenue growth and undermine the ongoing fiscal adjustment” in the face of other challenges, such as “shocks to risk premiums and/or interest rates.”
  
• Bank Debt Risk Surges to Record After Merkel Rejects Euro Bond. The cost of insuring European bank debt surged after German Chancellor Angela Merkel rejected a common euro-area bond, stoking concern the region’s deficit crisis will worsen. The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 banks and insurers climbed seven basis points to 242, according to JPMorgan Chase & Co. at 3 p.m. in London, after earlier reaching an all-time high 248.5 based on closing prices. The subordinated index jumped 21 to 430. Swaps on sovereign debt rose for a fifth day after Merkel said joint euro bonds would require European Union treaty changes that would “take years” and might run afoul of the Germany constitution. The Markit SovX Western Europe Index of swaps linked to the debt of 15 governments widened 3 basis points to 292 basis points. The cost of insuring company bonds also rose, with the Markit iTraxx Crossover Index of credit-default swaps on 40 companies with mostly high-yield credit ratings up 5 basis points to 675. The Markit iTraxx Europe index of 125 companies with investment-grade ratings widened 4 basis points to 160 basis points.
  
• Hedge Funds Boost Bullish Bets on Agriculture After Heat Wave. Speculators increased bullish bets on agricultural commodities by the most in a month after a U.S. heat wave increased speculation crops were damaged, adding to mounting concern that global supply will fall short of demand. Hedge funds and other speculators raised their net-long positions across 11 agricultural futures and options by 6.7 percent to 675,561 contracts in the week through Aug. 16, U.S. Commodity Futures Trading Commission data show. Bets on soybeans rose 25 percent and those on corn 9.6 percent. Wagers that wheat prices will decline were cut by the most in a month. Combined global stockpiles of rice, corn and wheat will drop 2.5 percent by the end of the harvests, to the lowest in five years, the U.S. Department of Agriculture estimates.
• Austria wouldn't have "massive benefits" if the euro area issued joint bonds, and it is doubtful whether they would have the highest credit rating, the head of Austria's debt agency was quoted as saying.
• Avoid Securitized-Debt Risk on Chance of 2008 Repeat, Bank of America Says. Investors should avoid taking risk in all categories of U.S. securitized debt because American and European policy makers may damage financial markets as they respond to a slowing economy and government deficits, according to Bank of America Merrill Lynch analysts.
• Gold Seen Heading for Biggest Annual Gain in 32 Years on Flight to Safety. Gold may climb the most in more than three decades this year as investors and central banks boost their holdings on concern that global economic growth may stall amid a worsening sovereign-debt crisis in the U.S. and Europe. Gold for immediate delivery may reach $2,000 an ounce by the yearend, extending this year’s gain to 41 percent, according to the median forecast in a Bloomberg survey of 13 traders and analysts at a conference in Kovalam in South India on Aug. 20. That would be the most since the 127 percent surge in 1979, according to Bloomberg data. The metal is set for an 11th year of gains as holdings in exchange-traded products reached a record on Aug. 8 and central banks are adding to their reserves for the first time in a generation.
• Prostitutes Flood Vallejo After City Slashes Police. When Ruth Rooney moved in 2005 to a two-bedroom house in Vallejo, California, near Napa Valley’s famed wineries, the historic St. Vincent’s Hill neighborhood attracted young professionals and there were few vacancies. Things began to change in 2008 after Vallejo, a city of about 116,000 that had lost its biggest employer, the U.S. Navy’s Mare Island shipyard, filed for bankruptcy, said Rooney, a 54-year-old marketing consultant. “I see prostitutes, pimps and drug dealers out my front window,” Rooney said in a telephone interview Aug. 5. “There’s two on the corner right now.” Her property value has dropped 70 percent in six years, she said.
• SPDR Gold(GLD) Wrests ETF Crown From S&P 500 Fund as Turmoil Reigns. Gold reached a new milestone in its role as an investment and haven, with the leading exchange- traded fund that tracks bullion surpassing its equities counterpart as the biggest ETF by market value. SPDR Gold Trust’s market capitalization rose to $76.7 billion on Aug. 19, according to the most recent data compiled by Bloomberg, as the metal topped $1,881 an ounce for the first time. SPDR S&P 500 ETF Trust (SPY), which has been the industry’s largest exchange-traded fund since 1993, stood at $74.4 billion, now 3.1 percent smaller. At the start of the year, the Standard & Poor’s 500 Index-tracking ETF was 56 percent larger.
• All Latin America GDP Growth Forecasts Cut Except Chile by Morgan Stanley. Morgan Stanley cut its forecast for Latin American economic growth this year and next, saying the region is “unlikely to be spared” from a global slowdown. The region’s economies will expand 3.6 percent next year from a previous forecast of 4.6 percent, as slower growth in Europe and the U.S. takes its toll on demand for the region’s commodities, Morgan Stanley’s chief Latin America economist, Gray Newman, said in an e-mailed report.
• BofA(BAC) Drops Most in S&P on China Construction Stake. Bank of America Corp. (BAC) led decliners in the Standard & Poor’s 500 Index after China Construction Bank Corp. said the U.S. lender will keep at least half its stake, spurring new debate on the American firm’s capital plans. Bank of America slipped 30 cents, or 4.3 percent, to $6.67 at 12:59 p.m. in New York Stock Exchange composite trading and sold for as little as $6.51. The lender, the biggest in the U.S., agreed to retain at least half its 10 percent holding, China Construction President Zhang Jianguo told reporters in Hong Kong. Some analysts, including Charles Peabody of Portales Partners LLC, had estimated the Charlotte, North Carolina-based bank would divest all of its shares.

Wall Street Journal:

• Tripoli Jubilant, Jittery Amid Pockets of Resistance. Libyan Insurgents Push to Heart of the Capital; Battles at Gadhafi's Compound.
• World Bank: Ready to Help Libya. As rebels entered the center of Tripoli in what could be their final battle with the regime of Col. Moammar Gadhafi, a senior World Bank official said the bank is ready to offer a new regime financial support if asked.
• Libya Oil Production Seen Staying Off Line. Key members of the Organization of the Petroleum Exporting Countries are in a holding pattern as the endgame in Libya unfolds.
• Mortgage Delinquencies Increase. The number of American households that fell behind on their mortgages increased slightly in the second quarter from the previous quarter, according to a survey released Monday, an unwelcome sign for the U.S. economy.
• Hurricane Hits Puerto Rico, Heads Toward U.S. Puerto Ricans awoke to flooded and debris-strewn streets Monday following the overnight passage of Hurricane Irene, which next took aim at the Dominican Republic on a path that could bring the storm to the U.S. by the end of the week.

CNBC.com:

• Chicago Fed Activity Index Improves in July. The Chi Fed's National Activity Index narrowed to negative 0.06 in July, following a revised negative 0.38 in June. But the three-month moving average, which provides a more consistent picture of national economic growth compared to the more volatile monthly index, increased to negative 0.29 from negative 0.54.
• Spending Cuts, Not Tax Hikes, Best For Deficit: NABE. The majority of economists surveyed by the National Association for Business Economics believe that the federal deficit should be reduced only or primarily through spending cuts. The survey out Monday found that 56 percent of the NABE members surveyed felt that way, while 37 percent said they favor equal parts spending cuts and tax increases. The remaining 7 percent believe it should be done only or mostly through tax increases. As for how to reduce the deficit, nearly 40 percent said the best way would be to contain Medicare and Medicaid costs. Nearly a quarter recommended overhauling the tax system and simplifying tax rates and exemptions. About 15 percent said the government should enact tough spending caps and cut discretionary spending.
• US Becomes Food-Stamp Nation, But Is It Sustainable?
• Greek Collateral Deals Put Bailout at Risk: Moody's. Euro zone states seeking collateral for aid to Greece should think again if they want its bailout to stay on track, a rating agency said, as one of them said it would only press for such guarantees as a last resort.
• Consumer Confidence Hits New Low, May Be Weaker. U.S. consumer confidence has fallen further after weeks of intensified economic concerns and broad stock market declines, and Conference Board data due later this month could be even weaker than current projections suggest, Consumer Edge Research said on Monday.

Business Insider:

• Maxine Waters: "The Tea Party Can Go Straight To Hell".
• Social Security Fund Could Run Out By 2017.
• In Pictures: The Fall of Tripoli.
• Wells Fargo Economists On Why It Still Makes Sense To Get A College Education.
• Taleb: Moral Hazard for Banks Has Never Been Greater.
• Chinese Military Slips Up and Broadcasts Cyberwar Campaign Against U.S. Targets.
  

Zero Hedge:

• The Squid: A Federally (Tax Payer) Insured Hedge Fund Paying Fat Bonuses That Can't Trade In Volatile Markets.
• European Liquidity Summarized In One Chart.
• Bank of America(BAC) CDS Hits Escape Velocity. (graph)
  

cnet:

• Tablet Shipments to Near 250 Million in 2017. Tablet shipments are set to explode in the coming years, a new study from research firm In-Stat has found. According to the company's estimates, worldwide tablet shipments will approach 250 million units in 2017. The firm says iOS and Android will secure over 90 percent of the tablet space between them, while Windows will come in a "distant third."
  

CNN Money:

• Fears of Credit Freeze Grow in Europe. The sovereign debt problems in Europe have roiled financial markets around the world. With little relief in sight, investors are growing worried about the possibility of a credit crunch similar to the one that gripped the international banking system three years ago. "We're seeing signs of it starting already," said Patrick Bolton, a professor of finance at Columbia University. "The mechanism and the players are different but there's a very similar dynamic to what we saw in 2008."

FINalternatives:

• Icahn Makes $120 Million on Falling S&P. Icahn Capital turned a handsome $120 million profit last week on a $2 billion bet against the stock market, Bloomberg News reports. The giant hedge on his stock bets helped to offset losses on such investments as Clorox Co., which the veteran buyout artist is seeking to buy for $10.2 billion, and pharmaceutical company Forest Laboratories. Icahn boosted his borrowing by more than half to cover collateral for his bet against the Standard & Poor's 500 Index. His funds built the short position with derivatives with a face value in excess of $2 billion. The S&P proceeded to drop by 6% over the week, earning Icahn a paper profit of $120 million.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 20% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -24 (see trends).
• 55% Favor Repeal of Health Care Law. 55% at least somewhat favor repeal of the national health care law, including 44% who Strongly Favor it. Thirty-eight percent (38%) at least somewhat oppose repeal, including 27% who are Strongly Opposed.

Financial Times:

• Cash Crisis Drives USPS Towards Insolvency.

Telegraph:

• Bundesbank Questions Legality of EU Bail-Outs. Germany's Bundesbank has issued a blistering critique of EU bail-out policies, warning that the eurozone is drifting towards a debt union without "democratic legitimacy" or treaty backing.
• UK Household Finances are 'Worse Than During Height of Recession". Household budgets are deteriorating at a faster rate than during the height of the recession in early 2009, according to an analysis of consumers' finances.

Nikkei:

• Interview: Fed's Bullard Against Prolonging Zero-Rate Policy. The current monetary policy in the U.S. should not be extended with an eye on the calendar, but adjusted based on the state of the economy, Federal Reserve Bank of St. Louis President James Bullard told The Nikkei in a recent interview. The head of the St. Louis branch does not have a vote on the policy-setting Federal Open Market Committee this year. Edited excerpts from the interview follow.

Arabian Business:

• UAE Property Companies Shunned by Investors. United Arab Emirates’ property developers and contractors may struggle to tap the bond market until a glut of homes that’s weighing on prices is sold off.

Bear Radar

Style Underperformer:

• Mid-Cap Value (+.29%)

Sector Underperformers:

• 1) Coal -1.50% 2) Gaming -.91% 3) Hospitals -.89%

Stocks Falling on Unusual Volume:

• YZC, CRMT, MWIV, SAFM, MKTX, WPPGY, LNCR, SGI, CREE, SLXP, IRBT, RDWR, LCAPA, MNRO, PTRY, AREX, JAZZ, NTAP, ROSE, HAIN, SONO, SAM, GTU, SGEN, HFC and UPL
  

Stocks With Unusual Put Option Activity:

• 1) WDC 2) LEN 3) MOO 4) GM 5) NOK
  

Stocks With Most Negative News Mentions:

• 1) RAI 2) IPI 3) ETN 4) IR 5) BAC
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.09%)

Sector Outperformers:

• 1) Gold & Silver +3.29% 2) Airlines +1.69% 3) Computer Services +1.49%

Stocks Rising on Unusual Volume:

• PAAS, EXK, E, TI, COLB, TOT, NGD, TZOO, CTSH, PANL, CTXS, HPQ, NDN, PUK and SUP
  

Stocks With Unusual Call Option Activity:

• 1) SNE 2) SLM 3) SYMC 4) UCO 5) DTG
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) WLK 3) IRBT 4) GOOG 5) MANT
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Monday Watch

Weekend Headlines
Bloomberg:

• Merkel Says She'll Resist Pressure for Euro Bonds. German Chancellor Angela Merkel attempted to shut the door on common euro-area bonds as a means to solve the debt crisis, saying that she won’t let financial markets dictate policy. Joint euro bonds would require European Union treaty changes that would “take years” and might run afoul of Germany’s constitution, Merkel said. While common borrowing might arrive at some point in the “distant future,” bringing in euro bonds at this time would further undermine economic stability and so they “are not the answer right now.” “At this time -- we’re in a dramatic crisis -- euro bonds are precisely the wrong answer,” Merkel said in an interview with ZDF television in Berlin yesterday. “They lead us into a debt union, not a stability union. Each country has to take its own steps to reduce its debt.” Merkel has stepped up her opposition to euro bonds since returning from her summer vacation last week, making resistance to common European borrowing a campaign theme of Sept. 4 elections in her home state of Mecklenburg-Western Pomerania. “Politicians can’t and won’t simply run after the markets,” Merkel said in the chancellery interview, her first since returning from a three-week summer break. “The markets want to force us to do certain things. That we won’t do. Politicians have to make sure that we’re unassailable, that we can make policy for the people.” Merkel’s stance risks bringing her into conflict with the European Commission, the European Union’s executive body, which said Aug. 19 that it may present draft legislation on joint euro-area bonds after completing a feasibility report.
• Qaddafi's 42-Year Rule Crumbling: NATO. Libyan rebels said they captured two of Muammar Qaddafi’s sons as they swept through the capital Tripoli in a drive to force Qaddafi out after 42 years of near- absolute power. Qaddafi’s forces offered little resistance and celebrations broke out in the center of the city. Regime spokesman, Moussa Ibrahim said Qaddafi was ready to negotiate with Mustafa Abdel Jalil, the head of the rebel council, and asked for an immediate cease-fire. Anders Fogh Rasmussen, secretary-general of the North Atlantic Treaty Organization, which has backed the rebels with aerial bombing since March, said in an online statement that the “regime is clearly crumbling” and “the sooner Qaddafi realizes that he cannot win the battle against his own people, the better.”
• Van Rompuy Opposes Common Bonds Until Euro-Region Budgets Converge Further. European Union President Herman Van Rompuy ruled out issuing common bonds as a cure for the debt crisis, saying any joint borrowing should wait until European economies and budgets are better aligned. With three countries drawing financial aid and national debts ranging from 6.6 percent of gross domestic product in Estonia to 142.8 percent in Greece, this is the wrong time to set up a single borrowing agency, Van Rompuy, 63, said in an interview broadcast on Belgium’s RTBF radio today. “We could have euro bonds on the day when there is genuine budgetary convergence, the day when everyone is in balance or virtually in balance,” he said. Van Rompuy sided with Germany and France in damping down the euro bond debate, saying the answer to the crisis lies in executing plans like last month’s decision to give more flexibility to the bloc’s 440 billion-euro rescue fund. He urged governments to quickly ratify the plan so the fund can buy bonds in the secondary market.
  
• Schaeuble Says Common Bonds Would Create 'Inflation Community'. The euro region would become an “inflation community” if member countries decide to sell bonds jointly without unifying their fiscal policies, German Finance Minister Wolfgang Schaeuble said today. “Unless there is a single financial policy in the euro area, there won’t be a single rate of interest” on debt sold, Schaeuble said at the finance ministry in Berlin. Selling common bonds with a single interest rate would spark inflation and destabilize the currency as long as the euro area doesn’t have a single budget policy, Schaeuble said in his first public engagement since returning from a summer break.
• Spain Confident EU Won't Need to Buy Its Bonds, Salgado Says. Finance Minister Elena Salgado said she’s confident Spain’s deficit-reduction efforts will restore investor trust and end the need for European authorities to support the nation’s bonds. Even though the global slowdown threatens the country’s growth target for this year, the government’s commitment to cutting the region’s third-biggest deficit will shore up demand for its bonds, she said. “I don’t take it for granted” the euro-region’s rescue fund will have to backstop Spain’s debt when it takes over bond-buying from the European Central Bank after September. “The position of the Spanish government is to continue with the reforms and the austerity programs,” Salgado, 62, said in an interview in Madrid on Aug. 19. “We trust the markets will give us that vote of confidence so that by our own means we will be capable of stabilizing the Spanish debt market.”
• Wall Street Aristocracy Got $1.2 Trillion in Fed Secret Loans. Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits. By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret. Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. “These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.” It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees. The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default. The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg. The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.
• Hedge Funds Buying Corn to Silver to Soy as Commodities Tumble. The rout that drove commodities to a nine-month low is proving irresistible to speculators anticipating that even slowing economic growth will cause shortages of raw materials. While mounting concern about the economy wiped more than $8 trillion off the value of global equities in four weeks, Commodity Futures Trading Commission data show hedge funds and other speculators increased bullish commodity bets by 2.5 percent in the week ended Aug. 16, the most in a month. Net-long positions, or bets on higher prices, held by speculators in 18 commodities rose to more than 1 million futures and options in the week through Aug. 16, according to the CFTC in Washington.
• Deutsche Bank(DB) Says Four Employees, Securities Unit Indicted in South Korea. Four Deutsche Bank AG (DBK) employees and its South Korean brokerage face a trial at a South Korean court after they were charged by prosecutors for causing a one-day rout in stocks in November that wiped off $27 billion in value.
• Jackson Hole Bankers Reflect on QE2 Amid Pressure for Stimulus. Chairman Ben S. Bernanke has big shoes to fill this week when he speaks at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming: His own.
• China Developers Turning to Informal Loans Amid Tight Credit: Credit Suisse. - Some developers are willing to take out 6-month loan from informal market at annualized rate of 36% in order to complete their projects, CS says, citing a contact in property guarantee business. - Jan. - July actual amount of funds available for investment only up 23.1% vs. 33.6% rise in property investment, CS says, citing NDRC economists. - Property developers raise most funds in informal markets. - Developers delay payment to suppliers on fund tightening. - Current strong property investment may become unsustainable this year if sales don't improve.

Wall Street Journal:

• Rebels Sweep Into Tripoli. Libyan Insurgents Push to Heart of Capital, Gadhafi Son Captured. Libyan rebels poured into Tripoli on Sunday after seizing a nearby military base, as fears of a bloody battle largely gave way to scenes of jubilant opposition fighters surging into the city's center and meeting little resistance from Col. Moammar Gadhafi's defenses.
• Live Blog: Libyan Rebels Pour Into Tripoli.
  
• My Response To Buffet and Obama by Harvey Golub.Before you ask for more tax money from me, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely.
• As Investors Get Bit, States Feel Pain. State-budget officials from around the U.S. were huddled in Utah earlier this month for an annual meeting when someone glanced at a BlackBerry and announced that the Dow Jones Industrial Average had fallen 500 points. "It was one of the worst moments of the week," said Scott Pattison, executive director of the National Association of State Budget Officers.
• Foreclosure Talks Snag on Bank Liability. Efforts to reach a settlement that would end the long-running probe of foreclosure practices are snagged over whether banks will get broad legal immunity from state officials for mortgage-related claims. Federal and state officials are seeking penalties of $20 billion to $25 billion from Bank of America Corp., J.P. Morgan Chase & Co. and other financial firms under investigation since last fall. The banks are pushing hard for a deal, but they have insisted on a wide-ranging legal release from state attorneys general.
• Business Economists Split On U.S. Fiscal Tightening. Business economists are split on whether more austerity or more stimulus is the best path forward for U.S. fiscal policy, according to a new survey, highlighting the dilemma facing policy makers eager to shore up the nation’s economy and long-term fiscal position. The National Association for Business Economics said roughly 49% of the economists surveyed in late July and early August favor a more restrictive fiscal path forward over the next two years, while 37% chose the other direction, supporting more efforts to stimulate the economy through fiscal measures. More than seven in 10 economists who took part in the survey said they expect fiscal policy will be tightened regardless of whether that is the best approach.

Marketwatch.com:

• Germany Forced to Make a Choice: Us or Them? Commentary: Berlin's moment of truth: Stable money or one Europe?

CNBC:

• Stock Market Begins to Feed Economic Fear.
• China Paper Warns of Impact From Euro Crisis 'Black Death'. The "Black Death" of debt crisis across the Euro zone will hurt China by sapping demand for exports, although Beijing's relatively small holdings of euro assets will limit any damage to foreign exchange reserves, the nation's top official newspaper said on Monday. The bleak diagnosis for the euro's prospects appeared in the overseas edition of the People's Daily, the top newspaper of China's ruling Communist Party, in a commentary by a former central bank official and an economist for the state-owned China Development Bank. Although the commentary in the People's Daily does not reflect a definitive view from China's top leaders, it suggests that the euro zone's successive crises have stirred anxiety and debate in Beijing about the impact on China.
• Layoffs Sweep Wall Street, Along With Low Morale.
  

Business Insider:

• Libyan Rebels Take Tripoli, Qaddafi's Whereabouts Unknown.
• Must Read: Victor Shih and Carl Walter On The Chinese Banking System.
  

Zero Hedge:

• Goldman's(GS) Jim O'Neill: "2008 All Over Again?"
• Greece Avoids Bank Run By Last Minute Bail Out Of Proton Bank.
  

NY Times:

• Laser Advances in Nuclear Fuel Stir Terror Fear. Scientists have long sought easier ways to make the costly material known as enriched uranium — the fuel of nuclear reactors and bombs, now produced only in giant industrial plants. One idea, a half-century old, has been to do it with nothing more substantial than lasers and their rays of concentrated light. This futuristic approach has always proved too expensive and difficult for anything but laboratory experimentation. Until now.
• Large Zone Near Japanese Reactors to Be Off Limits. Broad areas around the stricken Fukushima Daiichi nuclear plant could soon be declared uninhabitable, perhaps for decades, after a government survey found radioactive contamination that far exceeded safe levels, several major media outlets said Monday.

Forbes:

• Warren Buffett Beware: Beijing Trashes Its "Garbage" Green Cars. Powerful Chinese bureaucrats are now fighting over the future of China’s green-car industry, with the National Development and Reform Commission and the Ministry of Industry and Information Technology squaring off in public.

LA Times:

• Grocery Union Vote Backs Strike at Ralphs, Vons and Albertsons. Members of a union that represents 62,000 grocery workers at Vons, Ralphs and Albertsons supermarkets in Southern California voted overwhelmingly to authorize a strike if an agreement on a new contract can't be reached.
• Advertisers Start Using Facial Recognition to Tailor Pitches. Once the stuff of science fiction and high-tech crime fighting, facial recognition technology has become one of the newest tools in marketing, even though privacy concerns abound.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).

Politico:

• Will Ritzy Vacation Trip Obama Up? President Barack Obama is keeping a low profile on the isle of liberal affluence that is Martha’s Vineyard — hoping to avoid the grapes of political wrath in 2012.

USA Today:

• Stunted Corn Crop Could Lead to Higher Food Prices. Smaller-than-expected corn harvests are likely to keep corn prices elevated into next year, economists say, driving up retail food prices. That could further dampen consumer spending in an economy hobbled by high unemployment and modest wage increases.

Reuters:

• Obama Says He Will Be Judged in 2012 Over Economy. U.S. President Barack Obama said on Sunday he expects to be judged in the 2012 election over his governance of the American economy, which he said was still not growing fast enough. "For me to argue, look, we've actually made the right decisions, things would have been much worse has we not made those decisions -- that's not that satisfying if you don't have a job right now," Obama told CBS in an interview taped last week and aired during his annual vacation in Martha's Vineyard, an island near Boston. "I understand that and I expect to be judged a year from now on whether or not things have continued to get better," he said.

Financial Times:

• Senator's Leak Sparks Commodities Debate. A US senator’s public release of confidential data on energy traders has sparked debate over how much should be disclosed about commodity markets, where positions are usually a closely guarded secret. Last week Bernie Sanders, a Vermont independent, leaked and later posted on his website lists of trading positions in oil, natural gas and other commodity markets as part of a campaign to force a clampdown on commodity speculation.

Independent on Sunday:

• ICAP Plc, a UK interdealer broker, will leave the UK if the European Union endorses Franco-German plans for a tax on financial transactions, citing an interview with chief executive, Michael Spencer. Spencer added that it would be "economic suicide" if the UK agreed to the tax and said it would "destroy the city of London," the newspaper reported.

Sky News:

• The Financial Services Authority increased scrutiny of "major" Euro-Area banks operating in the U.K. on concern they may struggle to secure enough funding to meet financial obligations amid declining stock markets. The U.K. regulator has been in daily conversations with some of the largest banks. It's also seeking more detailed and more frequent information about the banks' funding and liquidity positions, the report said.

BBC:

• US Senators Call for Extradition of Lockerbie Bomber. Two US senators have demanded the extradition of the Lockerbie bomber from Libya, on the second anniversary of his release from prison in Scotland. Terminally-ill Abdelbasset al Megrahi was freed by Scottish ministers on compassionate grounds. New Jersey senators Robert Menendez and Frank Lautenberg want the rebel-led transitional Libyan government to send Megrahi to the US. Megrahi was jailed in 2001 for the plane bombing in 1988. He returned home to Tripoli following his release from Greenock Prison, after medical experts said he may only have three months to live.

Der Spiegel:

• The German Finance Ministry calculates that common euro bonds would cost Germany billions of euros as interest rates increase. Higher interest payments would cost as much as $3.6 billion in the first year and double in the second, finance ministry said. In the tenth year, the extra costs would reach 20 billion euors to 25 billion euros.

Wirtschaftswoche:

• Horst Seehofer, head of the CSU party that's in a governing coalition with German Chancellor Angela Merkel's party, said he opposes issuing common euro bonds, citing an interview with the minister. While the CSU "turned a blind eye" to bond repurchases by the European Central Bank, it won't take the next step towards the collectivization of debt, Seehofer said.

Euro am Sonntag:

• Christoph Schmidt, a member of German Chancellor Angela Merkel's council of economic advisers, rejected the idea of issuing common euro bonds because they would bring short-term relief and create long-term problems, citing an interview with the economist. The governments of countries in crisis need external pressure to help push through the correct economic measures, Schmidt said. Join euro bonds would cost Germany's taxpayers a "two-digit billion sum," Schmidt said.

Bild am Sonntag:

• Germany Economy Minister Philipp Roesler ruled out issuing euro bonds as long as the current coalition government is in power, citing an interview with the minister. Selling the bonds would lead to higher interest rates in Germany and threaten the country's economic growth, citing Roesler.

Passauer Neue Presse:

• Volker Bouffier, premier of the German state of Hesse and a member of Chancellor Angela Merkel's party, said his support of a planned financial transaction tax depends on the levy also being applied in the U.K. The tax may threaten more than 70,000 jobs in Frankfurt, which is located in Hesse, citing an interview with the lawmaker.

Handelsblatt:

• Hans-Werner Sinn, head of the Munich-based Ifo economic institute, rejected common euro bonds as a way of supporting countries in crisis. Pooling debt doesn't make the burden smaller and there is no alternative to everyone paying their own debt, Sinn wrote.

La Stampa:

• Umberto Bossi, leader of Italy's governing coalition-member Northern League party, said he won't consider any changes to the country's pension system. Bossi, speaking in Alzano Lombardo, near Bergamo, said he told Prime Minister Silvio Berlusconi in a phone call not to touch pensions and that "we'll find another way," he newspaper reported.

Le Figaro:

• French Prime Minister Francois Fillon called for national unity as the country faces the euro area's debt crisis in comments published today. "In the face of all the challenges, I call for unity and the sense of responsibility of all the parties," Fillon wrote in an editorial. Harlem Desir, the interim Socialist Party leader, rejected his call for unity. Fillon, "with his editorial, is trying to impart to the French a lesson of economy by Mr. Bankruptcy," Desir said in a statement posted on the Socialist Party's Web site today. He "is the head of a government and of a majority that have led France to bankruptcy."
  

Il Sole 24 Ore:

• European rules on carbon dioxide emissions may undermine the finances of airlines, citing Alitalia SpA CEO Rocco Sabelli. The rules may increase costs for Alitalia by as much as $115.2 million over three years starting in 2012 depending on the price of European carbon permits, Sabelli said.

Il Messaggero:

• The wealth tax included in the Italian austerity package in "madness," Emma Marcegaglia, head of employers association Confindustria, said in an interview. The plan has to be adjusted to stimulate growth, gathering resources from pensions and through an increase in VAT, Marcegaglia said, adding that a reduction in public spending is also needed.

Sydney Morning Herald:

• Gold Surges to Record High on Economic Woes. Spot gold surged 1.4 per cent to an all-time high on Monday, setting the 10th record so far this month, as fears of another US recession and euro zone's debt crisis continued to send nervous investors to the safety of bullion. Spot gold struck an all-time high above $US1878 an ounce, after staging its biggest weekly gain in two-and-a-half years last week. It recently stood at $US1871.85. US gold jumped 1.6 per cent to a record high of $US1881.90, and eased to $US1875.50.

Korea Herald:

• Korea Sovereign Risk Rises, Credit Default Swap Shows. Investors see South Korea’s bond and stock markets still highly vulnerable to external shocks despite improved economic fundamentals, data showed on Sunday. The country’s cost of insuring eight-year sovereign debt shot up to a nine-month high Friday to 122 basis points, the highest level since Nov. 30 last year when the North’s attack on Yeonpyeong Island sent the figure soaring to 129 basis points.

Asian Investor:

• Hedge Funds Under Pressure to Manage Collateral Risk. New regulatory requirements will press asset managers to reduce collateral risk, says Citi.

Kyodo News:

• Japanese economy and trade minister Banri Kaieda says coordinated yen intervention was a possible course of action this morning.

Caijing:

• The risks of China's so-called shadow banking system are controllable, China Citic Bank Corp. Vice President Cao Tong said today. Regulators should control the amount of leverage allowed in the system, Tong said. Market risk can spread quickly because shadow banks deal with commercial banks as their counterparties and base prices on the market, he said.

Sina.com:

• The sovereign debt crisis in Europe caused by the 2007 global financial meltdown is still evolving with the outlooks for sovereign debt in Japan and U.S. are also worrying, said Wu Xiaoling, a former deputy China central bank governor.
• China still has room to use quantitative tools to control inflation, Fan Gang, a former academic adviser to the country's central bank said today. The central bank could issue more bills, a tool that has not been adequately used by the bank, Fan, a former member of the People's Bank of China's monetary policy committee, said in Beijing. China must continue to sterilize the foreign-exchange inflow to control the amount of money, said Fan, now the head of the National Economic Research Institute of the China Reform Foundation.
  

Financial News:

• China should raise deposit rates and keep lending rates unchanged to eliminate current negative rates and improve inflation expectations, the Financial News newspaper said in a commentary attributed to Yang Ziqiang. The country should continue increasing banks' reserve requirements and conducting open market operations to control liquidity.

Press TV:

• Russia offered to cooperate with Iran on building new nuclear power plants in the Middle Eastern country, citing Fereydoun Abbasi, the chairman of the Iranian Atomic Energy Organization.

Weekend Recommendations
Barron's:

• Made negative comments on (SAFM).
  

Night Trading

• Asian indices are -1.25% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 154.0 +.5 basis point.
• Asia Pacific Sovereign CDS Index 146.50 -4.75 basis points.
• FTSE-100 futures -.91%.
  
• S&P 500 futures -.12%.
• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STP)/.18
• (FMCN)/.38
• (PWRD)/.61
  

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for July is estimated to fall to -.48 versus a reading of -.46 in June.

Upcoming Splits

• (RYN) 3-for-2
  

Other Potential Market Movers

• The 2Q Mortgage Delinquencies report, 2Q MBA Mortgage Foreclosures report and the 3 & 6 Month Treasury Bill Auctions could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as US tax hike worries, financial sector pessimism, rising eurozone debt angst, global growth concerns and emerging market inflation fears offset short-covering, bargain-hunting and buyout/buyback speculation. My intermediate-term trading indicators are giving mostly bearish signals and the Portfolio is 50% net long heading into the week.

Weekly Scoreboard*

Indices

• S&P 500 1,123.53 -4.69%
  
• DJIA 10,817.65 -4.0%
  
• NASDAQ 2,341.84 -6.62%
  
• Russell 2000 651.70 -6.57%
  
• Wilshire 5000 11,638.66 -5.07%
  
• Russell 1000 Growth 520.79 -5.88%
  
• Russell 1000 Value 559.34 -4.03%
  
• Morgan Stanley Consumer 675.70 -2.12%
  
• Morgan Stanley Cyclical 792.50 -10.07%
• Morgan Stanley Technology 534.16 -8.10%
  
• Transports 4,221.60 -8.67%
  
• Utilities 416.67 +1.33%
  
• MSCI Emerging Markets 40.02 -2.29%
  
• Lyxor L/S Equity Long Bias Index 970.85 +1.44%
  
• Lyxor L/S Equity Variable Bias Index 870.66 +1.07%
  
• Lyxor L/S Equity Short Bias Index 633.56 -1.94%
  

Sentiment/Internals

• NYSE Cumulative A/D Line 116,392 -2.27%
  
• Bloomberg New Highs-Lows Index -969 -411
  
• Bloomberg Crude Oil % Bulls 29.0 -29.27%
  
• CFTC Oil Net Speculative Position 131,234 -3.30%
  
• CFTC Oil Total Open Interest 1,533,021 -.73%
  
• Total Put/Call 1.31 +20.18%
  
• OEX Put/Call .83 -41.55%
  
• ISE Sentiment 70.0 -27.08%
  
• NYSE Arms 1.77 +53.91%
  
• Volatility(VIX) 43.05 +18.40%
• G7 Currency Volatility (VXY) 13.04 -3.26%
  
• Smart Money Flow Index 9,767.36 +.12%
  
• Money Mkt Mutual Fund Assets $2.631 Trillion +.40%
  
• AAII % Bulls 35.56 +6.37%
  
• AAII % Bears 39.82 -11.08%

Futures Spot Prices

• CRB Index 329.47 +.90%
  
• Crude Oil 82.26 -3.56%
  
• Reformulated Gasoline 284.12 +.86%
  
• Natural Gas 3.94 -3.09%
  
• Heating Oil 290.45 -.03%
  
• Gold 1,852.20 +5.89%
  
• Bloomberg Base Metals 235.82 -1.62%
  
• Copper 400.25 -.43%
  
• US No. 1 Heavy Melt Scrap Steel 420.0 USD/Ton unch.
  
• China Hot Rolled Domestic Steel Sheet 4,836 Yuan/Ton +.25%
  
• UBS-Bloomberg Agriculture 1,761.15 +4.35%
  

Economy

• ECRI Weekly Leading Economic Index Growth Rate -.10% -180 basis points
  
• S&P 500 EPS Estimates 1 Year Mean 96.46 +.28%
  
• Citi US Economic Surprise Index -82.50 -3.4 points
  
• Fed Fund Futures imply 36.0% chance of no change, 64.0% chance of 25 basis point cut on 8/9
• US Dollar Index 74.0 -.75%
  
• Yield Curve 187.0 -20 basis points
  
• 10-Year US Treasury Yield 2.06% -20 basis points
  
• Federal Reserve's Balance Sheet $2.842 Trillion -.51%
  
• U.S. Sovereign Debt Credit Default Swap 47.50 -9.52%
• Illinois Municipal Debt Credit Default Swap 236.0 +1.22%
  
• Western Europe Sovereign Debt Credit Default Swap Index 296.17 +.34%
• Emerging Markets Sovereign Debt CDS Index 223.33 -5.4%
• Saudi Sovereign Debt Credit Default Swap 105.20 -.20%
• Iraqi 2028 Government Bonds 89.47 +4.46%
• China Blended Corporate Spread Index 597.0 +14 basis points
  
• 10-Year TIPS Spread 2.02% -22 basis points
  
• TED Spread 30.0 +2 basis points
• 3-Month Euribor/OIS Spread 68.0 +1 basis point
  
• N. America Investment Grade Credit Default Swap Index 118.70 +3.62%
  
• Euro Financial Sector Credit Default Swap Index 212.81 +7.56%
  
• Emerging Markets Credit Default Swap Index 276.08 +.02%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 281.0 +59 basis points
  
• M1 Money Supply $2.096 Trillion -.12%
  
• Business Loans 658.90 +.43%
  
• 4-Week Moving Average of Jobless Claims 402,500 -.90%
  
• Continuing Claims Unemployment Rate 2.9% unch.
  
• Average 30-Year Mortgage Rate 4.15% -17 basis points
  
• Weekly Mortgage Applications 716.40 +4.13%
  
• Bloomberg Consumer Comfort -48.3 +.8 point
  
• Weekly Retail Sales +4.80% unch.
  
• Nationwide Gas $3.58/gallon -.03/gallon
  
• U.S. Cooling Demand Next 7 Days 26.0% above normal
• Baltic Dry Index 1,462 +13.60%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 35.0 unch.
  
• Rail Freight Carloads 235,598 +.01%
  

Best Performing Style

• Large-Cap Value -4.03%

Worst Performing Style

• Small-Cap Growth -7.65%

Leading Sectors

• Gold & Silver +1.88%
  
• Tobacco +1.66%
• Utilities +1.33%
  
• Telecom -.09%
• Drugs -.64%

Lagging Sectors

• Oil Service -9.53%
• Internet -10.30%
  
• Networking -10.47%
• Alternative Energy -10.63%
  
• Computer Hardware -12.13%

Weekly High-Volume Stock Gainers (4)

• MMI, RLRN, PPDI and MKTX
  

Weekly High-Volume Stock Losers (7)

• SGK, IRBT, IVR, CHS, IDCC, BCSI and HPQ
  

Weekly Charts
ETFs

• High-Volume Gainers
• High-Volume Losers

Stocks

• High-Volume Gainers
• High-Volume Losers
  

*5-Day Change