Late-Night Headlines
Bloomberg:
- Senator Edward Kennedy’s plan to expand health-care coverage would cost about $1 trillion over 10 years and provide coverage to about 16 million more people, according to a preliminary analysis by the Congressional Budget Office. The report today said about 39 million people would be able to buy health coverage through insurance “exchanges,” while the number of people getting coverage from employers and other sources would fall by 23 million. The nonpartisan CBO said its initial analysis of the measure, introduced by Kennedy last week, is not a complete cost estimate because it focused only on the proposal’s major provisions. The analysis also doesn’t include the effects of expanding coverage for low-income Americans, which could be included in the proposal later. In the House, Ways and Means Committee Chairman Charles Rangel, a New York Democrat, said last week that legislation being crafted by Democrats will cost more than $1 trillion over a decade. That cost would include $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid, said Rangel.
- The cost of protecting U.S. corporate bonds from default rose the most in more than a month as global stock and credit markets slumped. Credit-default swaps on Citigroup Inc. and Bank of America Corp. jumped to a one-month high, signaling a deterioration in the perception of credit quality, according to CMA DataVision in London. Benchmark credit derivative indexes in the U.S. and Europe jumped the most since May. The cost of protecting European banks from default jumped as Moody’s Investors Service cut the ratings of 25 Spanish lenders because of the “speed and depth of the deterioration of the Spanish economy and the impact on banks’ balance sheets.” The cost of protecting European bank bonds from default also rose, with the Markit iTraxx Financial index of 25 European banks and insurers jumping 5.5 basis points to 113.5 basis points and the subordinated index up 13 basis points at 203 basis points, according to CMA.
- Coal exports from Australia ’s Newcastle The volume shipped in the week ended 7 am local time yesterday fell to 1.8 million metric tons from 2.17 million tons a week earlier, Newcastle Port Corp. said today on its Web site. A total of 33 ships, waiting to load 3.2 million tons of coal, were lined up outside the port, down from 37 last week. Coal ships waited 11.1 days to load coal, up from 10.7 days a week earlier, Newcastle Port
- Cotton prices fell the most allowed on ICE Futures U.S. in New York as a rallying dollar boosted the cost of supplies from the U.S., the world’s largest exporter, and reduced the appeal of commodities as an inflation hedge. Cotton futures for December delivery fell the exchange’s 3- cent limit, or 4.9 percent, to 58.22 cents a pound. The decline was the steepest since Jan. 12. “Commodity traders are caught between a mindset of, ‘Do I play the inflation side or watch demand destruction?’” Egli said. “You have a lack of buyers.”
- The Obama administration’s revamp of U.S. banking and market regulations may be stalled into next year as Congress and the president set health-care reform and climate control as domestic priorities.
- Citigroup Inc. Chief Executive Officer Vikram Pandit said he expects a lower growth rate for the U.S. economy as it goes through an “adjustment” period. “There is a clear trade-off between saving more and stimulating the economy in the short term to achieve stability,” Pandit, 52, said in prepared remarks for a keynote address today at the Detroit Economic Club’s National Summit.
Citigroup, the recipient of $45 billion in government funds, has itself to blame for its financial woes, Pandit said.
- European Central Bank council member Ewald Nowotny warned against raising interest rates and ending emergency policy measures too soon, saying the top priority must be to revive economic growth in the euro region. “I’d warn against a premature exit strategy,” Nowotny, who heads Austria’s central bank, said at a conference in Vienna late yesterday. “We are still in a crisis. The primary goal should be to restore economic growth as fast as possible.”
- The Senate’s energy legislation is likely to stall if it is combined with a pending climate measure, Alaska Republican Lisa Murkowski said. Murkowski said combining the two bills might doom the energy measure, sacrificing the emission cuts that are included in it. The Senate plan would mandate renewable electricity use and establish a so-called green bank that would fund energy projects with low emissions. Mixing the two measures “is not a good thing for our energy bill,” Murkowski said. “If we were not to pass a cap- and-trade bill this year and we were to pass an energy bill we would actually be doing something positive when it comes to what we are emitting.” Senate Majority Leader Harry Reid, a Nevada Democrat, has said he may try to move energy and climate legislation in one bill. Senator Barbara Boxer, the California Democrat who leads the Environment and Public Works Committee, said last week that her panel may consider a climate measure in early August. The House Energy and Commerce Committee approved energy and climate provisions in a single measure on May 21. California Democratic Representative Henry Waxman, the panel’s chairman, said he wants to pass it in the full House this month. Waxman’s panel approved creating a cap-and-trade system to control greenhouse-gas emissions. Murkowski said the worst recession since World War II is the wrong time to consider a climate bill that may increase energy costs for consumers. The Senate Energy and Natural Resources Committee plans to vote on the energy measure by June 17.
Wall Street Journal:
- The Obama administration's proposed revamp of financial-sector regulation relies on a high-risk strategy that pins much of the plan's success or failure on the president himself. The exhaustive series of meetings and nitty-gritty debates that forged the comprehensive plan -- to be presented to Congress Wednesday -- contrasts with the way the administration has approached other priorities, such as health care and energy policy. In those cases, the White House has left the many details to be filled in by Congress. The different approaches reflect how some of the administration's most senior officials are personally invested in the finance overhaul, worried that political tinkering by lawmakers could undermine their goals.
- The largest demonstration here since the Iranian Revolution ended in gunfire Monday, after hundreds of thousands of protesters thronged a central square and Iran's ruling cleric ordered an investigation into allegations of fraud in the presidential election. Supreme Leader Ayatollah Ali Khamenei's call hedged his previous strong backing of the result of Friday's vote. It appeared to be in response to two days and nights of violent protests here, and suggested growing unease among the clerics who sit atop Iran's complex power structure. In the past few days, a number of senior clerics have met with Mr. Khamenei or written to him, urging him to intervene, according to a series of public letters from the clerics. One grand ayatollah, one of the highest-ranking clerics, issued a religious order demanding his followers not cooperate with President Mahmoud Ahmadinejad's government.
- Senate Republicans are trying to fire up more debate about the quality of the projects funded by the federal stimulus plan, calling out proposals to spend $16 million on scarcely used rural bridges in Wisconsin and $3.4 million for "eco-passage" wildlife crossings in Florida. These and other uses of federal stimulus money will be targeted in a report to be released Tuesday by the Republican staff of the Senate's Permanent Subcommittee on Investigations.
- Fidelity Investments intends to begin charging financial advisers when the firm refers wealthy, or "high net worth," clients to them.
- Spain may take stakes in some of the country's ailing savings banks as a way of strengthening their capital bases and allow them to survive a deepening economic downturn, Spanish Finance Minister Elena Salgado said Monday. The state would, if necessary, use part of a EUR9 billion aid fund to purchase securities called "cuotas participativas" and would remain as a partial owner of these lenders during a transition period, Salgado said. Salgado, speaking at a conference in Santander, northern Spain, said consolidation and sector restructuring is inevitable, as loan defaults jump on the back of soaring unemployment and an oversized exposure to the troubled local real estate sector. "As the crisis passes, there will be fewer entities," Salgado said. "The reality is that the concentration of risk (in the real estate sector) has been excessive," she added. The Socialist-government is preparing a bank rescue fund that would be used to intervene and clean up insolvent lenders, as well as to boost the solvency of weak but still solvent banks.
- While many Chinese state resources companies are looking abroad for natural resources, China Shenhua Energy Co., the country's biggest coal producer by market value, expects sharp growth at home and isn't feeling pressure to chase deals overseas. Shenhua is focusing on doubling its annual coal output capacity to 400 million metric tons by 2014, getting a tailwind from Beijing's push to consolidate coal reserves in the hands of just a few big miners.
CNBC.com: It sure was a ridiculous promise. Especially for a president who, unflinchingly, proposes spending an extra $1.5 trillion on new healthcare efforts and hundreds of billions more on new green initiatives—on top of $787 billion in stimulus that ain't stimulating yet. The president's silly promise forces him to strain to devise massive tax increases that can be called by another name, or alternately to find small, invisible revenue increases in the nooks and crannies of our economy. The One Fell Swoop tax in this scheme would be a new tax on employer health benefits—which could slap new payments on 163 million people covered by employer plans. By some estimates this could raise $2.3 trillion over 10 years, more than enough to cover Obama-care. The problem: half of all people with health coverage at work earn less than $75,000, the Cato Institute says.
- Interest rates on US 30-year fixed-rate mortgages fell to 5.52 percent late Monday after hovering at 5.67 percent on Friday, according to real estate Web site Zillow.com. That is down sharply from a week earlier when the mortgage rate was around 5.72 percent, according to Zillow Mortgage Marketplace. The lower rates reflect a fall in yields on US government bonds, which are linked to the mortgage market. The rate, however, is sharply higher than the roughly 5.00 percent level seen at the end of May and at the beginning of this year, Zillow said. The move higher in mortgage rates recently collapsed home loan refinancing activity.
NY Times:
- The Obama administration will order the Navy to hail and request permission to inspect North Korean ships at sea suspected of carrying arms or nuclear technology, but would not forcibly seek to board them, senior administration officials said Monday. The new effort to intercept North Korean ships, and track them to their next port if they refuse inspection, is part of what the officials they described as “vigorous enforcement.”
IBD:
- NVE Corp. (NVEC) is a small company with tiny products and big profits. The suburban Minneapolis company makes sensors and couplers that go into pacemakers, hearing aids, factory automation equipment and memory chips.
CNNMoney.com:
- California became the first state to see gas prices top $3 a gallon since October, according to a daily survey of gas prices. The national average price for a gallon of gas rose 0.6 cent Monday to $2.669, according to motorist group AAA. Prices have been steadily climbing higher since April 29 and are up 63% from the start of the year.
Financial Times:
- Hedge funds and managers of other alternative investment funds sold to professional investors will face a heavier compliance burden under proposed European Union rules than the already regulated retail fund sector, institutional investors are warning top officials in Brussels. This regulatory burden could “far outweigh any benefits” and “cannot be right”, UK and Dutch institutional investors have told Charlie McCreevy, EU internal market commissioner, in a letter sent on Monday. The letter, seen by the Financial Times, is significant because it is the first time the views of institutional investors, who are some of the hedge funds’ biggest customers, have been heard in the heated debate over the EU’s controversial proposals for regulating the hedge fund and private equity sectors.
South China Morning Post: Billionaire financier George Soros has praised the Hong Kong government for thwarting his attempts to undermine the local currency and stock market in 1998 but maintained he had every right to do so.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (NKE), boosted target to $65.
KeyBanc
- Rated (MAT) Buy, target $20.
Sanford C. Bernstein
- Raised (AMGN) to Outperform.
Night Trading
Asia Ex-Japan Inv Grd CDS Index -1.28%.
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Global Commentary WSJ Intl Markets Performance Commodity Futures Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Earnings Calendar
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Who’s Speaking? Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (FDS).72
- (BBY).34
- (ADBE)/.35
Economic Releases
8:30 am EST
- The Producer Price Index for May is estimated to rise .6% versus a .3% increase in April.
- The PPI Ex Food & Energy for May is estimated to rise .1% versus a .1% gain.
- Housing Starts for May are estimated to rise to 485K versus 458K in April.
- Building Permits for May are estimated to rise to 508K versus 4498K in April.
9:15 am EST
- Industrial Production for May is estimated to fall 1.0% versus a .5% decline in April.
- Capacity Utilization for May is estimated at 68.4% versus 69.1% in April.
Upcoming Splits
Other Potential Market Movers
Fed’s Warsh speaking, (NVDA) analyst day and the
BOTTOM LINE: Asian indices are lower, weighed down by commodity and automaker stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
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