Evening Headlines
Bloomberg:
- Default by U.S. Can Be Avoided Until September, Silvia Says. The U.S. government can avoid a default for at least a month after the Aug. 2 deadline to lift the debt ceiling set by the Treasury Department, said John Silvia, chief economist at Wells Fargo Securities LLC. “The Federal Reserve and the Treasury can work together to generate enough cash probably for the next two or three months to avoid any kind of automatic default on the Treasury debt,” Silvia, who is based in Charlotte, North Carolina, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “There’s a way of getting around this issue for at least another month or two.”
- Greece Says It's Working With IMF, Hasn't Requested for More Financial Aid. Greek Finance Minister Evangelos Venizelos said his country is working with the International Monetary Fund on “procedural issues” regarding financing, while a debt official said the nation hasn’t made an additional loan request to the international lender. “Our goal is to return to positive growth and create primary surpluses by 2012,” Venizelos said during a speech in Washington yesterday. “Together we will succeed in rebuilding our country, restoring its fiscal independence and achieving the competitive position Greece deserves in the international market.” Greece’s credit rating was cut three steps by Moody’s Investors Service, which said the European Union’s rescue for the debt-laden nation will cause substantial losses for investors and amount to a default.
- FHA May Be Next in Line for Bailout: Delisle and Papagianis. The nationwide decline in house prices has created a vacuum in the U.S. mortgage market. Private financing for home loans has all but dried up and the U.S. government is now guaranteeing almost every new mortgage. Fannie Mae and Freddie Mac have received most of the media’s attention, but policy makers need to focus on the third leg of the housing- support stool: the Federal Housing Administration. The FHA has some major accounting problems. Left unaddressed, they could spook the markets, lead the FHA to seek a federal cash infusion and further enrage taxpayers. These outcomes can be avoided -- but only if policy makers are more transparent about the risks involved in guaranteeing mortgages. As private-financing options have disappeared, the role of the FHA has grown. Its market share has increased to about 30 percent today from 3-4 percent in 2007. That’s because the agency is now practically the only game in town, accepting borrowers with down payments of as low as 3.5 percent. As the last few years have made clear, sizable down payments -- or “skin in the game” -- are the key to avoiding defaults in the near term and to achieving a stable housing market in the long term.
- China's high-speed train crash three days ago may become a "turning point" for the nation's growth model, as it spurs a slowdown in infrastructure spending, Citigroup Inc. said. "Authorities may choose intentionally to slow GDP growth gradually but firmly to 7-8% in following years and spend more time to fix the problems created by artificial fast growth," Minggao Shen, an analyst at Citigroup, wrote. The accident will slow the pace of investment "at least in the near term" in subways, bridges and roads as well as in high-speed rail, which would affect demand for commodities, according to the note.
- Radiation Driving Japan Corn Cargo to Quarter-Century Low: Freight Markets. Japan, the world’s biggest corn importer, may buy the fewest cargoes in a quarter century as concern about radiation-tainted meat curbs livestock production.
- Crash Seen Giving 'Zero' Chance to China Train Exports. Chinese rail suppliers, who helped build the world’s largest bullet-train network in less than a decade, may struggle to sell equipment overseas after two locomotives collided, killing at least 39 people. Trainmakers CSR Corp. and China CNR Corp., builders including China Railway Construction Corp. and parts makers such as Zhuzhou CSR Times Electric Co., have targeted markets including the U.S. and Europe, touting experience gained from construction of the nation’s domestic network. The fatal crash, near Wenzhou on July 23, may undermine their sales pitches. “Their chances of selling high-speed trains are zero,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion in assets. “I don’t think they can ever get confidence back.”
- China's Stocks May Extend Worst Drop in 6 Months, UBS Says. China’s benchmark stock index may extend the biggest drop in six months and sink below this year’s low as slowing economic growth spurs analysts to reduce their earnings estimates by as much as 46 percent, according to UBS AG. A high-speed train crash may hurt profit growth for the nation’s two biggest trainmakers, said Chen Li, Shanghai-based head of China equity strategy at UBS. Analysts may cut their 2011 earnings growth forecasts for non-financial companies to as low as 15 percent from the current 28 percent, he said. The Chinese central bank is unlikely to ease its tighter monetary policies and may keep on raising interest rates to tame inflation that reached a three-year high last month, Chen said. “Investors’ expectations that tightening policies will be relaxed have been completely dashed after the government reiterated that current policies will remain in place,” Chen said in a telephone interview yesterday. The direction of economic controls shouldn’t change in the second half and will focus on curbing rapid price gains, China Central Television reported July 22, citing Premier Wen Jiabao.
- Obama Warns of Default Risk. With Congress deadlocked a week before the government runs out of cash to pay its bills, President Barack Obama warned Monday in his starkest terms yet that the U.S. is on the brink of a default that could trigger an economic upheaval.
- Live Blog: The U.S. Debt Battle.
- Crunch Time at Thomson Reuters. The family that controls Thomson Reuters Corp. has grown impatient with the company's performance and pressed for a recent shake-up, putting pressure on Chief Executive Tom Glocer to pull off a turnaround, according to people familiar with the matter.
- Big Fine in Metals Case. The former head trader at a hedge-fund giant settled regulatory allegations that he systematically attempted to manipulate prices of platinum and palladium, a sign that commodities regulators are intensifying efforts to crack down on manipulation in the futures markets. Christopher Pia—former head trader at hedge fund Moore Capital and a major player at the fund for 18 years—agreed to pay $1 million to settle civil allegations by the Commodity Futures Trading Commission, the regulator said in a release Monday.
- NFL and Players Agree on New Deal.
- The Latest Job Killer From the EPA. The agency's ozone rule will be the most expensive in history—and isn't required by law.
- A Leadership Default. The Obama Presidency has been unprecedented in many ways, and last night we saw another startling illustration: A President using a national TV address from the White House to call out his political opposition as unreasonable and radical and blame them as the sole reason for the "stalemate" over spending and the national debt. We've watched dozens of these speeches over the years, and this was more like a DNC fund-raiser than an Oval Office address. Though President Obama referred to the need to compromise, his idea of compromise was to call on the public to overwhelm Republicans with demands to raise taxes. He demeaned the GOP for protecting, in his poll-tested language, "millionaires and billionaires," for favoring "corporate jet owners and oil companies" over seniors on Medicare, and "hedge fund managers" over "their secretaries." While he invoked Ronald Reagan, the Gipper would never have used such rhetoric about his opposition on an issue of national moment.
- Greece Still Faces High Debt to GDP Ratio: IIF"s Dallara. Even after billions in debt forgiveness and a massive second bailout, Greece still faces a debt to GDP ratio of at least 100 percent, Charles Dallara, managing director of the Institute for International Finance, told CNBC in an exclusive interview Monday.
- Netflix(NFLX) Bracing for Slowdown in Subscriber Growth; Shares Skid. Netflix is bracing for a slowdown in its subscriber growth amid changes in the online video subscription service that will raise rates by as much as 60 percent for many customers.
- Jefferson County Could Decide Thursday Whether To File For Largest-Ever Muni Bankruptcy. Officials in Jefferson County, Alabama could decide as soon as Thursday whether they will file for the largest municipal bankruptcy in U.S. history.
- GE(GE) Moves Healthcare Division's X-Ray Unit Headquarters To China. President Obama and Jeffrey Immelt are likely to face flak, since Obama appointed Immelt the top outside economic adviser and charged him with running a jobs-focused panel to help bring the U.S. economy back on track. GE came under scrutiny earlier this year after The New York Times reported the company did not pay any taxes in 2010. It has since been reported that GE had not finished its tax filing, and that the company expected to pay taxes. Immelt has also been criticized for employing 36,000 more people abroad, than in the U.S. and cutting 34,000 American jobs after becoming CEO, according to The Huffington Post.
WeeklyStandard:
- Is Obamacare the Source of Obama's Approval Woes? As of today, President Obama’s approval rating is only 42 percent in Gallup, while Rasmussen’s Presidential Approval Index shows that only 23 percent of likely voters “strongly approve” of Obama’s performance as president, compared to 44 percent who “strongly disapprove” — matching the highest “strongly disapprove” tally in Rasmussen’s index since November.
- Harry Reid's Debt Ceiling Plan Faces Tough Odds. Senate Majority Leader Harry Reid’s new budget proposal to raise the national debt ceiling faces tough odds in his chamber, even with a White House endorsement. The Nevada Democrat’s proposal includes each party’s sacred cow: no revenue increases for Republicans, and no cuts to Social Security, Medicare or Medicaid for Democrats. But the bill calls for $1 trillion in savings from winding down the wars in Iraq and Afghanistan — a provision that Republicans, and even a Democratic caucus member, dismissed as a budgetary gimmick since the Pentagon already had planned to cut military spending through the troop drawdown. “I don’t think it’s a real cut,” Sen. Joe Lieberman (I-Conn.) told POLITICO, though he didn’t rule out supporting the plan. “It’s like a bookkeeping cut. It goes to an artificially high [Congressional Budget Office] number to just what we assume will be a reduction in overseas contingencies fund because we’re drawing our troops out of Iraq and Afghanistan.” Sen. Marco Rubio (R-Fla.) called it a “terrible plan” that “does not solve our problem.” And Sen. John Cornyn (R-Texas) pointed to the $1 trillion in savings from Iraq and Afghanistan and said, “I don’t know how you call that a savings.”
USA Today:
- Texas Bucks National Unemployment Trend. Move to Texas. Finding work may not be quite that simple, but it sure seems that way. While the nation's job growth has limped along since the economic recovery began two years ago, the Lone Star State is enlarging payrolls in Texas-size fashion. From June 2009 to June 2011 the state added 262,000 jobs, or half the USA's 524,000 payroll gains, according to the Federal Reserve Bank of Dallas and the Bureau of Labor Statistics.
- Broadcom(BRCM) Results Beat Street Stock Leaps. Wireless chipmaker Broadcom (BRCM.O) gave a rosier-than-expected outlook for its revenues, dispelling worries about a tepid economy and high inventories and giving a hefty boost to its shares.
- Fed Should Raise Rates From Near Zero - Hoenig.
- European authorities may promote solar power in Greece as part of the country's aid package, quoting Guenther Oettinger, European Commissioner for energy, as saying in an interview.
- Asustek Computer Inc. expects third-quarter revenue to increase 30% from a year earlier, citing Kevin Lin, general sales manager of the company.
- China's high-speed train crash may lead to a rating downgrade for railway ministry bonds, citing a market participant. Liabilities for the Ministry of Railway may increase further as its spends tens of billion yuan each year on train and equipment purchases, the central bank-run paper reported, citing Zhao Jian, a professor at Beijing Jiaotong University.
- Shanghai has tightened rules for home purchases by non-residents.
Citigroup:
- Reiterated Buy on (ETN), boosted estimates, raised target to $67.
- Reiterated Buy on (NFLX), lowered estimates, target $300.
- Upgraded (VCLK) to Overweight from Underweight, target $23.
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 117.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 118.25 +1.75 basis points.
- S&P 500 futures +.17%.
- NASDAQ 100 futures +.18%.
Earnings of Note
Company/Estimate
- (LMT)/1.94
- (WDR)/.57
- (WPI)/1.00
- (NOV)/1.00
- (RSH)/.37
- (CPLA)/.90
- (SPG)/1.58
- (BIIB)/1.37
- (AMLN)/-.21
- (JBLU)/.09
- (CEVA)/.17
- (TROW)/.77
- (CSL)/.91
- (GRA)/.89
- (F)/.61
- (EK)/-.67
- (UA)/.08
- (RF)/.00
- (HSY)/.55
- (WAT)/1.14
- (CMI)/2.01
- (MMM)/1.59
- (UPS)/1.04
- (PCAR)/.69
- (ITW)/1.02
- (AVY)/.77
- (AKS)/.50
- (GILD)/.99
- (CHRW)/.69
- (SLG)/1.03
- (JNPR)/.33
- (ERTS)/-.40
- (LZ)/3.05
- (DWA)/.41
- (AMZN)/.34
- (LVS)/.44
- (PNRA)/1.17
- (IGT)/.22
- (JLL)/1.12
- (ILMN)/.37
- (LLTC)/.55
- (NSC)/1.29
- (BWLD)/.60
- (VLO)/1.45
- (OXY)/2.17
- (DPZ)/.36
- (AMG)/1.65
- (LXK)/1.03
9:00 am EST
- The S&P/CS 20 City MoM% SA for for May is estimated unch. versus a -.09% decline in April.
- Consumer Confidence for July is estimated to fall to 56.0 versus a reading of 58.5 in June.
- Richmond Fed Manufacturing for July is estimated to rise to 5.0 versus 3.0 in June.
- New Home Sales for June is estimated to rise to 320K versus 319K in May.
- (CLH) 2-for-1
- The 2-Year Treasury Note Auction, 1-Year T-Bill Auction and the weekly retail sales reports could also impact trading today.