Wednesday, June 27, 2012

Wednesday Watch

Posted by Gary .....at 12:29 AM

Evening Headlines
Bloomberg:
  • Draghi May Enter Twilight Zone Where Bernanke Fears to Tread. European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve. While cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower. Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15. “The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.” Should Draghi elect to cut the deposit rate to zero or lower, he’ll be entering territory few policy makers have dared to venture. Sweden’s Riksbank in July 2009 became the world’s first central bank to charge financial institutions for the money they deposited with it overnight. The Fed rejected cutting its deposit rate from 0.25 percent last year. With Europe’s debt crisis damping inflation pressures and curbing growth, the ECB may feel the benefits outweigh the negatives.
  • German Parliament to Meet to Vote on Spain Bailout, Bild Reports. The German parliament will probably hold a special meeting on July 6, its first extraordinary session on the debt crisis, to vote on Spain’s request for a bailout, the Bild Zeitung newspaper reported, citing unidentified coalition lawmakers. Germany has to approve a so-called memorandum of understanding on Spain’s bailout petition, the newspaper said in a pre-release of an article to be published today. The parliament may meet again a week later to decide on Cyprus’s request for aid, the newspaper said.
  • Mario Monti and the Limits of Technocracy. When Mario Monti was appointed -- not elected -- prime minister of Italy in November, most Italians saw him as a welcome respite from the flamboyant, bankrupt leadership of Silvio Berlusconi. With the economy headed for collapse, technocratic leadership and a break from politics as usual were exactly what they wanted. So they thought. Now, opinion polls put Monti’s approval rating at slightly more than 30 percent, down from more than 70 percent at the start of his tenure. The country’s media are disenchanted. Monti has failed to produce the miracle that Italy was hoping for, offering only painful remedies for years of misgovernment. It turns out that politics matter, and technocrats aren’t much good at politics.
  • Monti Plays Italian Politics in Labor-Law Overhaul: Euro Credit. Italian Prime Minister Mario Monti, seeking to bridge European differences over how to end the region's debt crisis, is pushing a labor market overhaul at home that has divided his allies and sapped his support. The law, designed to revive Italy's economy by making it easier for distressed companies to fire workers, will pass parliament today ahead of tomorrow's European Union summit in Brussels. Italy's 10-year bond yield, at more than 6%, has jumped 30 basis points since June 9 when Spain became the fourth euro-region country to seek aid. "In the European scenario, Monti is doing very well said Tommaso Nannicini, a professor of political economy at Bocconi University in Milan. "However, on the domestic side he looks more and more incapable of keeping together his majority and gives the impression of a lack of political action."
  • No Second-Half Rally for China’s Stocks, Top Fund Manager Says. China’s economy will probably stay in the “doldrums” in coming months, preventing a second-half rally for the nation’s equities, according to the country’s best-performing fund manager. The government will do just enough to prevent the world’s second-biggest economy from slowing further instead of taking more aggressive measures to boost growth, Yu Guang of Invesco Great Wall Fund Management Co. in Shenzhen, said in an e-mailed interview on June 21. Property, auto and household-appliance stocks may outperform even as the overall market stalls, said Yu, whose Core Competitiveness Fund has returned 25 percent this year, ranking it first among 714 China-based mutual funds, according to data compiled by Bloomberg as of June 25.
  • SEC Said to Authorize Lawsuit Against Philip Falcone. Philip Falcone, the billionaire founder of Harbinger Capital Partners LLC, faces a lawsuit from U.S. regulators as soon as this week over claims he improperly borrowed client money from his hedge fund to pay his taxes, according to two people familiar with the matter.
  • Russia Must Drop Assad Before Talks, U.S. Official Says. A meeting of world powers to discuss ending the conflict in Syria won’t happen unless Russia first agrees that Syrian President Bashar al-Assad must be replaced, a U.S. State Department official said. United Nations Special Envoy Kofi Annan is seeking to convene a June 30 gathering in Geneva to persuade major powers and neighboring states to support a political transition to end the Syrian conflict, which has claimed more than 10,000 lives, according to human rights groups.
  • Coal Set for Worst Rout Since Post-Lehman Slump: Energy Markets. Coal for power stations is headed for its worst quarter in more than three years as China's slowing economy tempers demand for electricity amid brimming stockpiles and increased shipments into Asia. Thermal coal at the Australian port of Newcastle, the benchmark price for Asia, cost $83.1 a metric ton as of June 22, down 20% this quarter, according to IHS McCloskey, a coal-data provider.
Wall Street Journal:
  • Expanded Oil Drilling Helps U.S.Wean Itself From Mideast. America will halve its reliance on Middle East oil by the end of this decade and could end it completely by 2035 due to declining demand and the rapid growth of new petroleum sources in the Western Hemisphere, energy analysts now anticipate. The shift, a result of technological advances that are unlocking new sources of oil in shale-rock formations, oil sands and deep beneath the ocean floor, carries profound consequences for the U.S. economy and energy security. A good portion of this surprising bounty comes from the widespread use of hydraulic fracturing.
  • Has Peak Oil Peaked? Remember the days when a threatened hurricane and news of Syria downing a Turkish jet would send oil prices spiking? Peak oil, the Malthusian scenario whereby global oil-supply growth has reached its limit, appears to have, er, peaked. Oil prices aren't responding to the usual stimuli.
  • Down and Out in Stockton. The latest city to confront bankruptcy and how it got there.
MarketWatch:
 Business Insider:
 Zero Hedge:
 CNBC:
  • Germany's Credit Rating Slashed by Egan-Jones. Credit ratings agency Egan-Jones on Tuesday downgraded its credit rating for Germany to "A+" with a negative outlook from "AA-," noting the need to watch for fallout should Greece exit the euro zone. Whether or not Greece or other euro-zone members exit the monetary union, Germany will be left with "massive" additional, uncollectible receivables, Egan-Jones said in a statement.
  • Spain Considers Sweeping Tax Hikes to Please EU. Spain is considering raising consumer, energy and property taxes, the government said on Tuesday, as it struggles to reduce a public deficit that may have already exceeded one of its budgeted ceilings for the full year.
  • US Judge Issues Injunction on Samsung Galaxy Tab Sales. A U.S. judge on Tuesday granted Apple's bid to stop Samsung Electronics from selling its Galaxy Tab 10.1 tablet in the United States, giving the iPhone maker a significant win in the global smartphone and tablet patent wars.

IBD:

NY Times:

  • Spanish Officials Hailed Banks as Crisis Built. As Spain edged closer to a real estate and banking crisis that led to its recent bank bailout, Spanish financial leaders in influential positions mostly played down concerns that something might go terribly wrong.
Forbes:
  • Brazil's 'Sub Prime' Defaults Rising. It doesn’t matter that Brazil’s benchmark interest rates are at historic lows, last year’s push by the government to extend debt payments for car loans brought in a rash of “subprime” borrowers. Now the banks, from Itau Unibanco (ITUB) to Bradesco (BBD) are paying the price for miscalculating the safety of those new car loans. The default rate on consumer and corporate loans over 90 days late rose 0.1 percentage points to a total of 6 percent, the Central Bank of Brazil said Tuesday, marking the highest ever default rate since the bank starting monitoring it in June 2000. While the default rate is not rising quickly, it is not falling either, as the Central Bank had hoped to see in their latest report. That’s the overall number. Car loans are the worst of the lot. Defaults on auto loans increased 0.2 percentage points to a total of 6.1 percent in May. Auto loan default rates are up 2.5 percent over the last 12 months, the highest out of all the consumer credit monitoring by the Central Bank.
Reuters:
 Financial Times:
  • Monti lashes out at Germany ahead of summit. Mario Monti has set the stage for a tough fight with Germany at the EU summit this week, insisting that he will continue to push Italy’s proposal to use eurozone bailout funds in an attempt to stabilise financial markets. Italy’s technocratic prime minister’s frustration with Germany surfaced in a combative speech to parliament, saying he would not go to Brussels to “rubber-stamp” pre-written documents and was ready to extend the two-day summit until Sunday night if needed to reach agreements before markets reopen on Monday.
Telegraph:

Sueddeutsche Zeitung:
  • Weidmann Says Bids to Cheat Treaty Undermine Euro. "Crafty" attempts to "cheat" one's way past EU treaties by quick introduction of euro-area liability such as euro bonds, deposit insurance, joint debt fund undermine confidence in monetary union, Bundesbank President Jens Weidmann wrote. Attempts to first take what should be a final step of ever close integration threatens monetary union. It is "irritating" that some govts openly push for central banks to clean up fiscal problems and solve difficulties by printing money, he said. The central bank mandate is to maintain price stability; financing govt debt is forbidden.
Yonhap News Agency:
  • Global PC Sales May Fall Up To 10% in Q3: Report. Global sales of personal computers (PCs) may drop as much as 10 percent in the third quarter from a year earlier due to weakening demand, according to a Forbes report known in Seoul on Wednesday. PC sales could fall around 5-10 percent in the July-September period from the previous year as PC giants such as Dell(DELL) and Hewlett-Packard(HPQ) continue to suffer softening demand, according to a recent Forbes report that cites Jefferies & Company Inc. analyst Peter Misek.
China Business News:
  • Shanghai Bans Non-Local Singles From Buying Homes. Single residents without Shanghai registration, so-called hukou, are no longer allowed to buy property in the city, citing several district real estate trading centers. The ban has yet to spread to the whole city, but started 2 weeks ago in districts including Huangpu, Jingan, Yangpu and Baoshan. The ban was also confirmed by unidentified developers.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 186.0 -1.5 basis points.
  • Asia Pacific Sovereign CDS Index 151.25 +1.75 basis points.
  • FTSE-100 futures +.37%.
  • S&P 500 futures -.01%.
  • NASDAQ 100 futures +.08%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (CMC)/.37
  • (GIS)/.59
  • (LEN)/.16
  • (MKC)/.60
  • (MON)/1.58
  • (PAYX)/.34
Economic Releases
8:30 am EST
  • Durable Goods Orders for May are estimated to rise +.5% versus a +.2% gain in April.
  • Durables Ex Transports for May are estimated to rise +.7% versus a -.6% decline in April.
  • Cap Goods Orders Non-defense Ex Air for May are estimated to rise +1.9% versus a -1.9% decline in April.
10:00 am EST
  • Pending Home Sales for May are estimated to rise +1.5% versus a -5.5% decline in April.

10:30 am EST

  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,300,000 barrels versus a +2,861,000 barrel gain the prior week. Distillate inventories are expected to rise by +1,225,000 barrels versus a +1,156,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,000,000 barrels versus a +943,000 barrel gain the prior week. Finally, Refinery Utilization is estimated unch. versus a -.1% decline the prior week.

Upcoming Splits

  • (DLTR) 2-for-1

Other Potential Market Movers

  • The 5Y T-Note auction, weekly MBA mortgage applications report, CSFB Basic Materials Conference, (TDG) analyst day and the (BWS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and consumer 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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Tuesday, June 26, 2012

Stocks Bouncing into Final Hour on Quarter-End Window Dressing, Euro Bounce, Short-Covering, Bargain-Hunting

Posted by Gary .....at 4:05 PM

Broad Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 19.50 -4.32%
  • ISE Sentiment Index 88.0 +15.79%
  • Total Put/Call .97 -15.65%
  • NYSE Arms .92 -62.12%
Credit Investor Angst:
  • North American Investment Grade CDS Index 119.22 -.25%
  • European Financial Sector CDS Index 291.52 +.32%
  • Western Europe Sovereign Debt CDS Index 299.33 +.53%
  • Emerging Market CDS Index 297.97 -.81%
  • 2-Year Swap Spread 23.25 -.25 basis point
  • TED Spread 37.50 -1 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -58.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .09% +1 basis point
  • Yield Curve 133.0 +2 basis points
  • China Import Iron Ore Spot $135.40/Metric Tonne -1.24%
  • Citi US Economic Surprise Index -62.20 -.6 point
  • 10-Year TIPS Spread 2.08 +1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating +33 open in Japan
  • DAX Futures: Indicating +34 open in Germany
Portfolio:
  • Slightly Higher: On gains in my tech, retail and biotech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite rising Eurozone debt angst, diminished global central bank stimulus hopes and rising global growth fears. On the positive side, Education, Homebuilding, Ag, Retail and Steel shares are especially strong, rising more than +1.25%. Cyclical shares are mildly outperforming. Gold is falling -.8%. The Saudi sovereign cds is down -2.4% to 128.96 bps. On the negative side, Defense, Coal, Alt Energy, Computer Service, Gaming, Medical, Networking and Disk Drive shares are lower-to-flat on the day. The UBS-Bloomberg Ag Spot Index is rising another +1.2%. Major Asian indices were mostly lower, led down by a -.81% decline in Japan. Major European indices were lower, led down by a -1.4% decline in Spain. Spanish stocks are now down -2.5% in 5 days and down -23.8% ytd. The Bloomberg European Bank/Financial Services Index fell -1.0%. The Germany sovereign cds rose +.43% to 101.25 bps, the France sovereign cds gained +1.3% to 200.66 bps, the Spain sovereign cds rose +2.3% to 595.01 bps and the Italy sovereign cds is up +3.0% to 545.01 bps. The Spain 10Y Yld rose +3.5% to 6.87% and the Italian/German 10Y Yld Spread gained +2.9% to 467.69 bps. Weekly retail sales have decelerated to a sluggish rate at +2.3%, which is the slowest since the week of April 5th of last year. US Rail/Trucking Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to late-Aug. levels. Lumber is -12.0% since its March 1st high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -55.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -25.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +130.0% ytd. The CRB Commodities Index is now technically in a bear market, having declined -25.9% since May 2nd of last year. Overall, credit gauge deterioration remains a big worry as most key sovereign cds remain technically strong. The euro currency, oil, lumber and copper all continue to trade very poorly given global central bank stimulus hopes, eurozone debt crisis "solution" hopes and this year's equity rally. As well, the 10Y continues to trade too well as the yield is rising just +3 bps today to 1.63%. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The Citi Eurozone Economic Surprise Index is plunging another -18.80 points today to -94.6 points, which is the lowest since early-Sept. of last year. The “solutions” for the European debt crisis I still hear being bandied about are only bigger kick-the-cans that will eventually lead to an even bigger catastrophe as Germany is engulfed, in my opinion. Moreover, investors are ignoring today's comments from Merkel, which seem to be very damaging for the hopes of another big kick-the-can. Some key economies in the region are likely accelerating their contractions right now based on recent data. The European debt crisis is really beginning to bite emerging market economies now, which will also further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. The "US fiscal cliff "will likely become more and more of a focus for investors as the year progresses. Finally, the upcoming earnings season could prove more challenging than usual for big multi-nationals given US dollar strength and the precipitous declines in some key parts of the global economy during the quarter. I still believe there is too much uncertainty on the horizon to conclude a durable stock market low is in place. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade modestly lower into the close from current levels on rising eurozone debt angst, diminished global central bank stimulus hopes, rising global growth fears and more shorting.
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Today's Headlines

Posted by Gary .....at 2:58 PM

Bloomberg:
  • Spain Poised for a Cut to Junk as Default Swaps Near Records. Spain is poised for a downgrade to junk by Moody’s Investors Service, according to investors who sent the cost of default insurance for the nation’s biggest banks and companies close to record highs. Credit-default swaps on Banco Santander SA, the country’s biggest bank, jumped 23 percent this quarter to 454 basis points, compared with an all-time high of 474 in November. Banco Bilbao Vizcaya Argentaria SA rose 26 percent to 477, approaching May’s record 516, while phone company Telefonica SA surged 70 percent to a record 540 basis points. Moody’s downgraded 28 Spanish banks yesterday including a two-step cut for Banco Santander and a three-level reduction for BBVA, a week after it lowered Spain’s rating to Baa3, on the cusp of junk. The country remains on review for another cut by New York-based Moody’s after it sought a 100 billion-euro ($125 billion) international bailout for its banks and on speculation losses from its real estate industry will worsen. “There’s more to come if Moody’s downgrades the sovereign as we expect in the next few weeks,” said Suki Mann, a credit analyst at Societe Generale SA in London. “A one-notch move to Ba1 will likely see all the country’s banking system in junk territory, with the possible exception of Santander.”
  • Italian, Spanish Notes Slide on Debt Sales. Italian notes had the biggest two- day drop in seven months, and Spanish securities slid, after borrowing costs rose at debt sales. Spain’s bonds led losses in the euro area after Moody’s Investors Service downgraded 28 Spanish banks and Bundesbank President Jens Weidmann said there can be no pooling of issuance in Europe until governments agree to give up their fiscal sovereignty. German bunds slipped before European Union leaders meet in two days about the crisis. The European Central Bank said Cypriot bonds have become ineligible as collateral in refinancing operations. “Demand is subdued, even for shorter-dated paper,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. The EU summit will probably be “a bit disappointing and for that reason we’d expect lower bund yields,” he said. The yield on Italian two-year notes climbed 35 basis points, or 0.35 percentage point, to 4.68 percent at 4:41 p.m. London time. The 88 basis-point increase in yields in the past two days is the biggest jump since Nov. 9. The 3 percent security due April 2014 tumbled 0.57, or 5.70 euros per 1,000- euro ($1,247) face amount, to 97.28. Similar-maturity Spanish yields were 36 basis points higher at 5.21 percent, adding to yesterday’s 42-basis point increase.
  • Hollande Reality Makes French Debt Less Attractive. During his first two weeks in office, President Francois Hollande saw French borrowing costs go in one direction, and that was down. Not anymore. The yield on the French benchmark 10-year bond advanced to 2.63 percent at 4:00 p.m. in Paris, up from a euro-era low of 2.071 percent on June 1. It was as high as 2.902 percent on May 15, when Hollande took office. The rate is at risk of rising further with French banks vulnerable to the region’s debt-ridden nations as economic growth stalls.
  • King is Pessimistic on Euro Crisis as Global Economy Teeters. Bank of England Governor Mervyn King said his vote for more stimulus this month reflected his worries about a deteriorating global economic outlook at a time when he’s pessimistic that Europe’s debt crisis can be resolved. “What’s concerned me in the last several months, and why I voted for easing in policy, is the worsening in the position in Asia and other emerging markets,” King told lawmakers in London today. Another reason is that “my colleagues in the U.S. are more concerned than they were at the beginning of the year about what’s happening in the American economy. It’s not a comfortable position,” he said. “I’m very struck by how much has changed” since the bank published forecasts on May 16, King said. “I am pessimistic, and I am particularly concerned because for two years now we’ve seen the situation in the euro area get worse, the problems have been pushed down the road.”
  • Chemicals Flash U.S. Economic Slump Warning: Chart of the Day. Slowing production of chemicals from caustic soda to polyvinyl chloride is signaling a drop in U.S. industrial output and greater risk that the economy may slip back into a recession, American Chemistry Council data show. The CHART OF THE DAY shows the Chemical Activity Barometer trailing behind the Federal Reserve’s Industrial Production index by the most since March 2009, when the U.S. was still in the longest and deepest recession since the Great Depression. The gauge tracks chemical production and prices, hours worked at producers, manufacturing output, building permits, and share prices for companies including Dow Chemical Co. (DOW) and DuPont Co.
  • Oil Declines for Second Day, Erasing Earlier 0.6% Gain. Oil fell for a second day, heading for the biggest quarterly decline in more than three years, as concern increased that Europe won’t solve its debt crisis and U.S. consumer confidence declined to a five-month low. Prices traded below $80 for a fourth day as borrowing costs for Spain and Italy neared a three-month high after German Chancellor Angela Merkel was said to have criticized a European proposal to reshape the euro zone. The New York-based Conference Board reported consumer confidence slid for a fourth month. “There is a lot of uncertainty in the market not just on the economic side but also on the fundamental side,” said Jacob Correll, a Louisville, Kentucky-based analyst at Summit Energy Inc., which manages more than $20 billion in companies’ annual energy spending. “Nothing that’s been done so far in Europe is really giving the market a lot of confidence.” Oil for August delivery fell 61 cents, or 0.8 percent, to $78.60 a barrel at 11:30 a.m. on the New York Mercantile Exchange. Prices have fallen 24 percent this quarter, the biggest drop since the final three months of 2008. Brent crude for August settlement rose 49 cents, or 0.5 percent, to $91.50 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium to West Texas Intermediate widened for the third straight day, rising to $12.90 from yesterday’s $11.80.
  • Home Prices in U.S. Cities Fall at Slowest Pace Since ’10. Residential real estate prices fell in April at the slowest pace in more than a year, adding to signs the U.S. housing market was firming. The S&P/Case-Shiller index of property values in 20 cities dropped 1.9 percent in April from the same month in 2011, the smallest decline since November 2010, after decreasing 2.6 percent in the year ended March, the group said today in New York. The median forecast of 28 economists in a Bloomberg News survey projected a 2.5 percent drop.
  • Consumer Confidence In U.S. Declines To A Five-Month Low. Confidence among U.S. consumers dropped in June for a fourth consecutive month as mounting concern over jobs and incomes dimmed the outlook for spending. The Conference Board’s sentiment index fell to 62, a five- month low, from a revised 64.4 in May, figures from the New York-based private research group showed today. Another report showed home prices were stabilizing. The slide in confidence raises the risk that the slowdown in hiring revealed by last month’s jobs report will cause households to retrench, restraining the spending that accounts for about 70 percent of the economy. The weak labor market is overshadowing the benefit of the lowest gasoline prices in five months, one reason why companies like Ford Motor Co. (F) are keeping an eye on attitudes. “The employment situation continues to weigh on consumer minds,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who correctly forecast the confidence index. “Usually consumers react to falling gasoline prices by increasing their spending, but this time around it looks like they’re a little bit cautious.” The Conference Board’s confidence gauge reflected growing concern about the short-term outlook. The gauge of expectations for the next six months fell to 72.3, the lowest level since November, from 77.3 a month earlier. The share of respondents in the Conference Board’s survey that expected more jobs to become available in the next six months declined to 14.1, the lowest this year, from 15.4 the previous month. The proportion projecting an increase in incomes dropped to 14.8 percent from 15.7 percent.
  • EPA Greenhouse-Gas Rules Upheld By U.S. Appeals Court. The U.S. Environmental Protection Agency’s limits on industrial emissions of greenhouse gases including carbon dioxide were upheld by a federal appeals court. A three-judge panel of the U.S. Court of Appeals in Washington ruled today that the EPA’s interpretation of the Clean Air Act was “unambiguously correct” and that the opponents don’t have the legal right to challenge the so-called timing and tailoring rules. The panel considered challenges to the agency’s finding that greenhouse gases are pollutants that endanger human health and to rules determining when states and industries must comply with regulations curtailing their use. Companies such as Massey Energy Co., business groups including the U.S. Chamber of Commerce and states led by Texas and Virginia sought to stop the agency through more than 60 lawsuits. Some argued that the EPA relied on biased data from outside scientists.
  • Bond Traders Shunning Freddie Means Taxpayers Lose: Mortgages. The bond market is telling Freddie Mac it’s not wanted even as taxpayers support two similar mortgage-finance companies. Securities it guarantees are hovering near record low prices relative to the debt of its larger rival Fannie Mae. That’s forcing Freddie Mac to rebate lenders that package loans into its bonds to compensate them for investors paying less for the debt, according to its disclosures and people familiar with its Market-Adjusted Pricing program. Banks slice off part of homeowner payments to buy its insurance. Freddie Mac still competes with Fannie Mae even now that they’re both 80 percent owned by the government after their 2008 bailouts. Expenses from the program may reach about $750 million annually, according to JPMorgan Chase & Co. analysts.
  • A surplus of the largest oil tankers competing to load crude at Persian Gulf ports reached a six-month high on slowing demand to charter ships, a Bloomberg News survey showed. There are 14% more VLCCs available for hire over the next 30 days than there are likely cargoes, according to a Bloomberg survey of seven shipbrokers and owners today. That's 4 percentage points more than the prior week. In terms of the monthly average, the surplus was the highest in June since December, according to a Bloomberg index.
  • Biggest U.S. Banks Curb Loans as Regional Firms Fill Gap. The biggest U.S. banks are extending less credit amid a faltering economic recovery as regional lenders step in to fill the gap. Total loans at the four largest U.S. banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C) and Wells Fargo & Co. (WFC) -- fell 4.9 percent to $3.04 trillion in the first quarter from the same period in 2010, according to data compiled by Bloomberg. Lending by the 17 smallest of the 24 firms in the KBW Bank Index (BKX) increased 9.8 percent to $1.27 trillion.
Wall Street Journal:
  • Banks Preparing For The End. Some of the biggest banks are being asked to submit by July 1 road maps for how they can be quickly and cleanly liquidated, but a top regulator said he doesn't back using the so-called living-will process to break them up. Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp., also doesn't think that the new regulatory process will end "too big to fail"—the expectation that the government will bail out faltering financial firms rather than risk the damage their failure would inflict on the system.
  • Spain: Jan-May Government Budget Deficit Widens to 3.4% of GDP. Spain's central government budget deficit widened to 3.4% of gross domestic product in the first five months of the year, the country's budget ministry said Tuesday. The figure compares with a deficit of 2.4% of GDP in the January-April period, Deputy Budget Minister Marta Fernandez Curras said at a press conference, blaming the larger deficit on Spain's poor economic performance during the period, as well as earlier transfers of funds to regions than seen last year. Fernandez Curras said the government expects an improvement in the economy in coming months, which should have a positive impact on fiscal efforts. Last year, the budget deficit through May was at 2.6% of GDP. In the five-month period, Spain's central government revenue dropped by 0.1%, while expenses were up 12%, due to a lower contribution from the value-added tax, as well as the accelerated transfers to regions, respectively.
MarketWatch:
  • EU's Fiscal Union Road Map Gets Cool Reception. A document outlining a path to tighter fiscal integration across the euro zone and a European banking union got a cool reception from Germany and economists on Tuesday as European leaders prepare for a summit meeting later this week.

CNBC.com:

Business Insider:

Zero Hedge:

New York Times:

Market Folly:

Reuters:

  • German govt, states agree solar incentive cuts-MPs. Germany's government and federal states have agreed cuts to incentives for the solar power industry after a weeks-long dispute, under which incentives will be capped for installed capacity of 52 gigawatts (GW), parliamentary sources said.
  • Merkel: no EU total debt liability in my life: sources. "I don't see total debt liability as long as I live," Merkel was quoted as telling members of parliament from the Free Democrats (FDP), junior partners in her centre-right coalition, by sources who took part in the meeting. German Chancellor Angela Merkel was quoted as telling a meeting of one of the parties in her coalition on Tuesday that she does not think Europe will have shared total debt liability in her lifetime. The chancellor also said there would be no shared liability of debt in Germany either, days after her government agreed plans with federal states to issue joint "Deutschland bonds". Merkel has warned against focusing on proposals for shared debt liability - such as the eurobonds favored by France's new Socialist leader Francois Hollande - and other "easy" solutions to the euro zone crisis at this week's European Union summit. She said in a speech on Monday that sharing debt liability within the 17-nation single currency area would be "economically wrong and counterproductive".
  • US gasoline demand down on uncertain outlook-MasterCard(MA). U.S. gasoline demand fell last week as an uncertain economic outlook forced motorists to cut back on non-essential driving, MasterCard's SpendingPulse report showed on Tuesday. Demand fell by 3.5 percent in the week to June 22 compared with the same week a year ago, MasterCard data showed. Week-over-week gasoline consumption was flat over the last two weeks. Gasoline sold for $3.48 a gallon last week, down 10 cents from two weeks ago and 3.9 percent lower than during the comparable week last year. The four-week moving average for demand fell for the 66th consecutive week, down 3.2 percent from a year earlier.
  • Romney Would Get Tough on China - Portman. Republican presidential candidate Mitt Romney would move aggressively to open up more foreign markets for U.S. exports, while getting tougher with China on its trade and currency practices, Senator Rob Portman said on Tuesday. The potential Romney vice presidential running mate said President Barack Obama has allowed the United States to fall "behind in a very significant way (on trade) because we are not engaging in opening up markets virtually anywhere.
  • Brazil loan defaults hit record high as borrowing costs fall. Loan delinquencies at Brazilian banks rose to a record in May in a sign that a slowdown is hitting Latin America's largest economy despite its strong jobs market and aggressive cuts in borrowing costs. Loans in arrears for 90 days or more, the most widely followed gauge of bank defaults, rose to the equivalent of 6 percent of outstanding loans in May, compared with a revised 5.9 percent the prior month, the central bank said on Tuesday. The so-called default ratio had risen in April. The level is the highest for the default ratio since the central bank began keeping records of this gauge in June 2000. Despite efforts by consumers to refinance credit at lower interest rates, especially auto loans, the pace at which delinquency rates are increasing has continued to grow since last year.
  • OECD Raises Red Flag on US Long-Term Unemployment. The lengthy spells many Americans are spending without work risk leaving a lasting scar of higher unemployment on the U.S. economy and training programs are needed to avert the damage, the OECD said on Tuesday. The warning from the Organization for Economic Cooperation and Development comes against the backdrop of stalled U.S. jobs growth and an uptick in the unemployment rate in May. In a report on the U.S. economy, the Paris-based OECD estimated the unemployment rate which the economy could sustain without generating inflation at 6. 1 percent, up from 5.7 percent in 2007. In May, the rate stood at 8.2 percent.
  • Spain Considers Eliminating Property Tax Breaks. Spain is considering eliminating tax breaks on housing and raising petrol tax, the Treasury Secretary Marta Fernandez Curras said on Tuesday. "This is one of the options, one of the recommendations, by the European Union which is under consideration," she said.
  • Solar Production Glut to Persist to 2015 - Study. Solar panel manufacturers face three more years of tough conditions until the market shuts down excess production capacity, according to a new report issued on Tuesday by renewable power consultancy GTM Research. Production capacity for photovoltaic solar panels this year stands at 59 gigawatts, about double the 30 gigawatts expected to be sold into the global market, according to GTM analyst Shyam Mehta. About 21 gigawatts of the current production is expected to be retired by 2015 as panel prices continue their steep declines, GTM said.

Telegraph:

MNI News:

  • China may not ease controls on the property market until the next administration is in office, citing a person close to the National Development and Reform Commission. The economic conditions don't warrant easing, the person said.

Handelsblatt:

  • German Family Businesses Don't Back Merkel on Euro. Angela Merkel's current strategy is leading into an "abyss," Brun-Hagen Hennerkes, a board member of Germany's Foundation for Family Businesses, said. It is endangering Germany's national wealth even more, Hennerkes said. Hans-Peter Keitel, who heads Germany's BDI industrial employers association, was wrong to back Merkel without consulting members, Family Businesses Association head Lutz Goebel said.

Efe:

  • The Spanish government is studying a possible increase in sales tax following a recommendation from the European Commission. The standard sales tax rate is 18%. Competition Commissioner Joaquin Almunia said yesterday that complying with commission recommendations is obligatory for Spain.

Jyllands-Posten:

  • Denmark remains in the grips of a credit crunch as the country's banking industry continues to be plagued by losses that erode earnings, Business Minister Ole Sohn said.
Xinhua:
  • China's latest revision to the draft budget law removed amendments easing restrictions on local government issuing bonds. An article allowing local governments to sells bonds within an approved quota was removed in the second reading of the bill and a ban on local governments issuing bonds was reinstated.
Shanghai Securities News:
  • The sales of road pavers and bulldozers in China fell 30% last month because demand weakened on decreasing infrastructure projects, citing industry website China Construction Machinery Business Online. Sales of loaders fell by 26% and excavators decreased by 24% in May from a year earlier.
1 comments

Bear Radar

Posted by Gary .....at 1:34 PM

Style Underperformer:
  • Small-Cap Value +.15%
Sector Underperformers:
  • 1) Coal -3.34% 2) Gold & Silver -1.97% 3) Computer Services -.82%
Stocks Falling on Unusual Volume:
  • SNTA, AEM, EXK, WFT, DXPE, VLTR, PCYC, MEOH, VCLK, TSLA, CSTR, APKT, CGNX, FARO, SAFM, GEVA, GOLD, NDSN, SINA, HOG and RBN
Stocks With Unusual Put Option Activity:
  • 1) NWSA 2) EMR 3) KBH 4) NOK 5) HRB
Stocks With Most Negative News Mentions:
  • 1) DOW 2) VCLK 3) CTSH 4) GS 5) WFC
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:38 AM

Style Outperformer:
  • Mid-Cap Growth +.03%
Sector Outperformers:
  • 1) Education +4.56% 2) Homebuilding +1.71% 3) Ag +1.09%
Stocks Rising on Unusual Volume:
  • APOL, FUL, NWSA, SAH, DV, MOS, PGI, ROSG and STX
Stocks With Unusual Call Option Activity:
  • 1) APOL 2) KWK 3) ESI 4) SQNM 5) NWSA
Stocks With Most Positive News Mentions:
  • 1) CELG 2) PKT 3) RIMM 4) BA 5) LMT
Charts:
0 comments

Tuesday Watch

Posted by Gary .....at 12:36 AM

Evening Headlines
Bloomberg:
  • Moody’s Downgrades 28 Spanish Banks on Sovereign Risk. Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s largest lenders, were downgraded by Moody’s Investors Service because of the country’s sovereign debt and souring real-estate loans. At least a dozen lenders were lowered to junk status, Moody’s said yesterday in a statement. The ratings company downgraded six banks by four levels and 10 by three grades with the rest getting one- and two-tier declines. “In Spain you have a combination of a significant sovereign-debt burden coupled with a collapsing real estate market,” said Bruce Simon, chief investment officer at Los Angeles-based City National Bank, which manages $14 billion in client assets and doesn’t own debt issued by the lenders. “That’s doubling the pressure on Spanish banks.” The lenders are facing the “reduced creditworthiness” of the nation as well as the “expectation that exposures to commercial real estate (CRE) will likely cause higher losses, which might increase the likelihood that these banks will require external support,” the ratings firm said in its statement.
  • German Lawmakers to Meet in July on Spain, Rheinische Post Says. German lawmakers will probably extend their current session into July to vote on Spain’s request for European Union aid to its banks, the Rheinische Post said, citing Hermann Otto Solms, the deputy president of the lower house of parliament, or Bundestag. The aim is to hold the vote by July 9, the newspaper reported in an e-mailed article to appear in tomorrow’s edition. Without emergency business, the Bundestag’s summer recess is due to start June 30, according to the chamber’s official schedule.
  • Libor Guardians Said to Resist Changes to Broken Rate. The U.K. bankers and regulators charged with reviewing Libor in the wake of regulatory probes are resisting calls to overhaul the rate because structural changes risk invalidating trillions of dollars of contracts. The group, established by the British Bankers’ Association in March after probes into allegations that traders rigged the London interbank offered rate, may propose a code of conduct for banks and impose greater scrutiny of Libor’s correlation with other financial data over time, according to three people with knowledge of the discussions who asked not to be identified because the talks are private. It won’t propose structural changes such as basing the rate on actual trades or taking away oversight of the benchmark from the BBA, the people said.
  • Shipping Bears Ascendant as Fleet Growth Swamps Cargoes: Freight. Shipping analysts are getting more bearish on the outlook for rates to haul iron ore and coal as China, the biggest consumer of both commodities, grows at the slowest pace in three years at a time of record fleet expansion. Capesizes, each holding about 180,000 metric tons of cargo, will earn an average of $11,709 a day in 2012, the lowest in at least 14 years, the median of 10 analyst estimates compiled by Bloomberg shows. They predicted $15,000 in a December survey. The fleet will expand 13 percent this year, compared with a 4 percent advance in cargo volumes, according to London-based Clarkson Plc (CKN), the world’s biggest shipbroker. Rates tumbled 85 percent since the start of January, more than for any other type of commodity carrier, as everyone from the World Bank to the Federal Reserve cut growth estimates. China, which imports more iron ore than all other nations combined, is expanding at the slowest pace since 2009 and the 17-nation euro region returned to recession this quarter, the median of 16 economist forecasts shows. “China’s growth hasn’t been as good as some people had hoped,” said Rahul Kapoor, a Singapore-based analyst at RS Platou Markets AS, who cut his 2012 forecast to $10,000 from $13,000 in December. “That’s being compounded by rather negative demand for iron ore in Europe. Fleet growth has also been huge and above most people’s expectations.”
  • Princeton’s Blinder Says Fed Has Weak Weapons for Growth. Princeton University economist Alan Blinder said remaining options for Federal Reserve policy probably won’t provide a powerful boost to the U.S. economy. “The basic problem for the Fed is it’s used all the heavy artillery a long time ago and it’s down to relatively weak weapons,” Blinder, a former Fed vice chairman, said in an interview today on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “Even a full-scale QE3 in mortgage-backed securities is not that powerful a weapon these days with mortgage rates as low as they are” and impediments to the market, including borrowers who can’t refinance because their mortgage is larger than their home’s value, he said. The Fed, seeking to cut borrowing costs, has bought $2.3 trillion of securities in two rounds of quantitative easing, or QE.
  • Syria Knew Identify of Jet Before Shooting, Turkey Says. Syrian forces knew the identity of a Turkish military jet before shooting it down over international airspace, according to Turkey’s ambassador to the United Nations. “Radio communication among Syrian authorities clearly demonstrates that the Syrian units were fully aware of the circumstances and the fact that the aircraft belonged to Turkey,” Ertugrul Apakan, Turkey’s representative to the UN said in a letter to Secretary General Ban Ki-Moon obtained yesterday. Syrian forces also shot at a Turkish rescue plane sent to look for the downed pilots, even after Turkey “established coordination with the Syrian authorities,” according to the letter. Turkey’s latest allegations about last week’s events off the coast of Syria further raised tensions ahead of a North Atlantic Treaty Organization meeting on the incident today in Brussels.
  • SodaStream(SODA) Plans to Enter U.S. Grocery, Drug Stores in 2014. SodaStream International Ltd. (SODA) plans to bring its do-it-yourself soda machines to U.S. drugstores and supermarkets in 2014 as the Israeli company looks to expand sales and household usage in the world’s No. 1 beverage market. “We will do it in 2014,” Chief Executive Officer Daniel Birnbaum said in a phone interview yesterday. “We will test a bit next year but it’s too early. There is a temptation to do it now but we have to make sure that when we enter retailers we provide enough velocity to justify the shelf space.”
  • Swine Flu Deaths May Have Been 15 Times Higher Than Reported. The 2009 swine flu pandemic may have killed 15 times more people globally than reported at the time, according to the first study to estimate the death toll. The H1N1 influenza virus probably killed about 284,500 people worldwide, compared with 18,500 deaths reported to the World Health Organization, researchers from the U.S. Centers for Disease Control and Prevention wrote in the journal Lancet Infectious Diseases today. More than half the deaths may have been in southeast Asia and Africa, compared with 12 percent of officially reported fatalities, the authors wrote.
  • Congress Said to Delay Automatic Budget Cuts Until March. Republican and Democratic congressional leaders are weighing whether to delay automatic federal spending cuts until March 2013, according to a House aide and industry officials who were briefed on the discussions. The $1.2 trillion in automatic spending cuts over a decade, half of which would affect the Defense Department, are scheduled to begin in January 2013. At the same time, lawmakers must decide what to do about Bush-era tax reductions scheduled to expire at the end of the year. Leaders in both chambers are discussing whether to propose a catch-all bill that would delay the automatic cuts, fund the government through March or later and temporarily extend the George W. Bush-era tax cuts and other tax laws, said the House aide and industry officials, who asked to speak on condition of anonymity. “It is being seriously considered as one of the options and there is no doubt about that,” Steve Bell, the senior director of the Economic Policy Project at the Bipartisan Policy Center, said in an interview.
Wall Street Journal:
  • Default Coverage Costs More as Crisis Touches Berlin. Credit-default swaps on Germany, hitherto the safest of safe havens, have come under the gun as fears over the creditworthiness of Europe's strongest economy finally take root. The slow climb of German bund yields may have grabbed the headlines, but analysts point out that CDS rates—the cost of insuring a country's debt against default—also provide a telling measure of sentiment. The risk of German taxpayers having to foot the bill for their European neighbors has long been acknowledged. Likewise, the Continent's powerhouse defaulting on its debt is seen as a nearly impossible event. Nevertheless, growing calls from France, Italy and Spain for a permanent solution to the two-year-long crisis, such as arrangements for stronger governments to back the borrowings of weaker nations, are now beginning to affect its CDS rate, analysts say. Since the start of March, the cost of insuring $10 million of German debt against default for five years has risen from around $75,000 a year to around $101,000 a year Monday. By contrast, CDS on $10 million of U.K. debt cost around $70,000 a year, and only around $50,000 a year for U.S. debt. Christopher Clark, a credit strategist for ICAP, said pressure from the markets is mounting on Berlin. "There is a growing sense that Germany's balance sheet might have to be put on the line. The growing momentum for building a comprehensive solution to the crisis, which will inevitably lean on German credit, has taken some of the shine off German bunds and CDS spreads lately," Mr. Clark said. "The CDS market was the first market to react, most likely because it [is] not affected by flight-to-quality flows and can therefore be seen as a more responsive indicator on how the market perceives underlying risk." Strategists for Dutch bank ING Groep NV say, Germany's views won't stop a wide array of euro-saving "remedies" being discussed at the meeting in Brussels on Thursday and Friday. Unsurprisingly, each of the proposals would have a negative effect on Germany's perceived creditworthiness. Germany has already contributed to the permanent ESM fund, but it is still on the hook for a share of any losses the fund incurs. Both funds appear increasingly likely to be drawn upon. If Madrid loses access to the markets, supporting Spain's financing needs would cost the bailout funds €250 billion, ING economists say. But if Italy, which planned to borrow €440 billion in 2012 alone, falls under pressure, then the combined bailout funds would certainly be overwhelmed. "There is no rescue mechanism in place that could cater for an Italian bailout," ING analysts Alessandro Giansanti and Padhraic Garvey said in a note to clients.
  • Court Splits on Arizona Law. Justices Rein In Law Aimed at Curbing Illegal Immigrants but Allow Police Checks. The Supreme Court struck down the harshest parts of an Arizona law targeting illegal immigrants, ruling the state interfered with congressional authority over U.S. borders, but it let stand a requirement that police check the immigration status of people they stop for traffic or other offenses.
  • Chinese Target U.S. Homes. Lennar Corp. (LEN), one of the U.S.'s largest home builders, is in talks with the China Development Bank for approximately $1.7 billion in capital to jump-start two long-delayed San Francisco projects that would transform two former naval bases into large-scale housing developments, according to people familiar with the discussions.
  • New Japan Defense Chief to Boost Security of Southwest Waters. Japan's new defense minister said the government is preparing to enhance its air and sea defense capabilities to protect islands and waters in the nation's southwest, part of the broad swath of the western Pacific where China has increased its maritime activities in recent years. "Japan has 6,800 islands, and territory that stretches over 3,300 kilometers [2,000 miles]; it's necessary to have troops at its southwestern end to beef up our warning and surveillance capability," Satoshi Morimoto told The Wall Street Journal on Monday in his first interview with a non-Japanese news organization since he took office this month.
  • News Corp.(NWSA) Mulls Splitting in Two. News Corp. NWSA -1.35%is considering splitting into two companies, separating its publishing assets from its entertainment businesses, say people familiar with the situation. The split would carve off News Corp.'s film and television businesses, including 20th Century Fox film studio, Fox broadcast network and Fox News channel from its newspapers, book publishing assets and education businesses. News Corp.'s publishing assets include The Wall Street Journal, the Times of London and the Australian newspaper, as well as HarperCollins book publishing. If a separation occurs, the publishing company would be far smaller than the entertainment company.
  • Weber Sees Euro Zone Surviving Crisis Intact. This week's long-anticipated European Union summit will fail to deliver a lasting solution to the euro-zone's economic and financial woes, according to former German central banker Axel Weber. In an interview with The Wall Street Journal, Mr. Weber, a former president of the Deutsche Bundesbank and former member of the European Central Bank's governing council, tamped expectations among some investors of a decisive deal at the meeting of European leaders Thursday and Friday in Brussels. "This is another policy meeting," Mr. Weber, who is now chairman of the Swiss bankUBS AG, said.
MarketWatch:
 Business Insider:
 Zero Hedge:
 CNBC:
  • Asia Hedge Funds Ditch Short-Selling for Long-Only Game. Some of Asia's oldest hedge funds are ditching short-selling as investors pull out of the strategy on concerns that bearish bets are failing to pay off and not worth the hefty fees they bring. The move from the traditional hedge fund structure to long only investing is part of the growing shake-out of Asia's $124 billion industry, and is a potential blow to the investment banks supporting the sector.

IBD:

NY Times:

Forbes:
  • Is Your Hedge Fund Style "Drifting"? Quick, Catch It! Hedge fund style “drift” is said to occur when a hedge fund manager strays from their stated investment strategy. The term used to be an esoteric one, used only by professional hedge fund analysts. However, “drifting” is a problem that is lately coming into view more by regulators and in litigation by disgruntled investors.
CNN:
  • Government Wants More People On Food Stamps. More than one in seven Americans are on food stamps, but the federal government wants even more people to sign up for the safety net program. The U.S. Department of Agriculture has been running radio ads for the past four months encouraging those eligible to enroll. The campaign is targeted at the elderly, working poor, the unemployed and Hispanics. The department is spending between $2.5 million and $3 million on paid spots, and free public service announcements are also airing. The campaign can be heard in California, Texas, North Carolina, South Carolina, Ohio, and the New York metro area.
Rasmussen Reports:
Reuters:
 Financial Times:
  • EU Could Rewrite Eurozone Budgets. The European Union would gain far-reaching powers to rewrite national budgets for eurozone countries that breach debt and deficit rules under proposals likely to be discussed at a summit this week, according to a draft report seen by the Financial Times. The proposals are part of an ambitious plan to turn the eurozone into a closer fiscal union, giving Brussels more powers to serve like a finance ministry for all 17 members of the currency union. They are contained in a report to be presented at the summit, which will also outline plans for a banking union and political union.
Les Echos:
  • France plans to freeze spending for three years from 2013 through 2015, excluding debt and pension payments, citing a statement to the cabinet by Prime Minister Jean-Marc Ayrault. Spending is to be frozen in absolute terms without taking into account inflation.
Globe and Mail:
  • Moody's Warns on Canadian Mortgage Debt. The federal government’s attempt to cool the housing market “may have come too late” to prevent a harsh landing for residential real estate, Moody’s Investors Service is warning. After Finance Minister Jim Flaherty announced last week that Ottawa is tightening the rules on government-backed mortgages to keep the housing market from overheating, Moody’s said it is concerned the efforts may not be enough. High levels of household debt in Canada have left consumers with little flexibility to adapt to shifting markets, the credit rating agency said.

The Hindu Business Line:
  • Government Allows Crude Oil Imports Thru Iranian Tankers. The Government has decided to allow public sector oil companies to import crude oil from Iran by Iranian tankers for a period of six months from July 1. This follows the representation made by the Petroleum Ministry following the European insures’ decision to deny cover to vessels carrying Iranian cargo from next month. Indian tankers are insured with the European protection and indemnity (P&I) clubs and therefore they will not be able to carry Iranian crude oil from July 1, unless they are able to get alternative insurance cover. A Shipping Ministry official confirmed that local refiners are allowed to import oil from Iran on c.i.f. basis for six months or till the European Union lifts its sanctions against Iran.
Xinhua:
  • China's central government will sell bonds on behalf of local governments, citing the revised draft for the budget law. Local government's can't currently issue debt directly.
Evening Recommendations
Piper Jaffray:
  • Rated (TITN) Overweight, target $35.
Raymond James:
  • Raised (ETH) to Strong Buy, target $26.
  • D0wngraded (GEOY) to Underperform.
Night Trading
  • Asian equity indices are -1.0% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 187.5 +7.0 basis points.
  • Asia Pacific Sovereign CDS Index 149.50 +3.75 basis points.
  • FTSE-100 futures +.03%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.22%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (RBN)/.90
  • (AVAV)/.72
  • (HRB)/2.07
Economic Releases
9:00 am EST
  • The S&P/CS Home Price Composite 20 City YoY Index for April is estimated to fall -2.5% versus a -2.57% decline in March.
10:00 am EST
  • Consumer Confidence for June is estimated to fall to 63.0 versus 64.9 in May.

Upcoming Splits

  • (DLTR) 2-for-1

Other Potential Market Movers

  • The Spanish Bill/Italian Bond auctions, German inflation data, 2Y T-Note auction, Richmond Fed Manufacturing Index for June, weekly retail sales reports, (NTAP) analyst day, (DG) investor meeting, (SMSC) analyst day and the Oppenheimer Consumer Conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
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