Late-Night Headlines
Bloomberg:
- U.S. retail gasoline prices have peaked and won’t go higher during this year’s summer driving season, AAA said. The average price for regular gasoline won’t rise above the June 21 high of $2.693 a gallon, Geoff Sundstrom, a spokesman for AAA said today in an telephone interview. AAA, the nation’s biggest motoring organization, estimated after the Memorial Day holiday in May that summer prices would reach $2.75 a gallon. “When you see consumer confidence sliding again and no improvement on the job front, barring any major geopolitical or catastrophic event like a hurricane, it looks like prices have topped,” Sundstrom said. Sundstrom added that average prices this summer may fall as low as $2.50 a gallon.
- Iran’s state-run Fars news agency said a Newsweek magazine reporter who was detained last month has “confessed” that Western media helped stir unrest following the disputed June 12 presidential election. Newsweek said today it “strongly disputes” the allegations against Maziar Bahari and called for his immediate release. Iranian officials arrested Bahari, a Tehran-based journalist of Iranian-Canadian citizenship, about two weeks ago as the Iranian capital was rocked by daily protests over the officially declared victory of President Mahmoud Ahmadinejad.
- Officials made available $4 billion in the first release of funds under a $7.2 billion U.S. program to expand high-speed Internet service, Vice President Joe Biden said today. The program is part of the $787 billion stimulus package Congress passed in February.
- As General Motors Corp. prepares to sell its best assets to a streamlined new entity, the worst of what it owns will be auctioned off in bankruptcy court, including contaminated factory sites, parking lots in Flint, Michigan, and a nine-hole golf course in New Jersey.
- The European Central Bank will keep interest rates at a record low for more than a year and may yet need to expand its use of unconventional tools as it battles the worst recession since World War II, economists said.
- The U.S. doesn’t see any indication North Korea is poised to test-launch a long-range ballistic missile capable of landing near the Hawaiian Islands, according to four government officials. The officials, who are privy to information about North Korean launch preparations, said there are no signs of the work necessary to launch a long-range missile during the U.S. July 4 Independence Day celebration. The officials don’t rule out the firing of short- and medium-range missiles capable of reaching Japanese waters.
- Dow Chemical Co.(DOW), the largest U.S. chemical maker, is permanently closing three Louisiana factories that make ethylene and derivatives to meet cost-reduction targets following the acquisition of Rohm & Haas Co.
Wall Street Journal:
- President Barack Obama, after picking fights with rivals over health care during the election campaign, is signaling flexibility on many of his previous stances as he tries to put a health-care deal together. As a candidate, Mr. Obama criticized Democratic opponent Hillary Clinton for proposing that all Americans be required to get health insurance. Now he says he is open to the idea. He ran some 47,000 TV ads criticizing Republican candidate John McCain for wanting to tax employee health benefits and cut Medicare spending. Mr. Obama has now signaled openness to taxing such benefits, and has proposed his own Medicare cuts -- in both cases on a smaller scale. In addition, the White House isn't ruling out the possibility that families earning less than $250,000 a year might see higher taxes if they have generous health benefits that become subject to new taxes. During the campaign, Mr. Obama had vowed not to raise taxes on any families earning less than $250,000.
- Barclays PLC (BCS) plans to hire up to 200 high-end investment representatives over the next four years in a move to expand its new wealth management foothold in the Americas. Following the collapse of Lehman Brothers Holdings Inc. (LEHMQ) into bankruptcy, Barclays acquired Lehman's private investment management unit to gain a presence in the coveted U.S. market. Since then, the U.K. bank has recruited roughly 50 representatives - the firm's name for financial advisers. Nearly half of the new additions were top producers, who had an average annual production of roughly $2.9 million and managed more than $350 million in client assets.
- After several years of heavy losses, Bill Miller's diehard investors are breathing a tentative sigh of relief. The famous Legg Mason value investor, who stumbled so badly during the stock market turmoil of the past few years, is off to a much more promising 2009. Indeed, it's been the best first half for his mutual funds since 2003, when his 15-year streak of beating the Standard & Poor's 500 still had 2 1/2 more years to run. Mr. Miller's flagship Legg Mason Value Trust is up 15% through the halfway mark, about two percentage points ahead of the U.S. market overall. And his smaller, more flexible, and more volatile Legg Mason Opportunity Trust is up 33%.
- Business is back on Wall Street. If the good times continue to roll, lofty pay packages may be set for a comeback as well. Based on analysts' earnings forecasts for 2009, Goldman Sachs Group Inc.(GS) is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm's $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007, according to analyst estimates reviewed by The Wall Street Journal. the comeback in compensation so far this year shows how hard it is for Wall Street to break its old habits. Repaying last year's capital infusions from the government freed Goldman, Morgan Stanley and other big financial firms from curbs on compensation.
- Polo Ralph Lauren(RL) has reached a deal with the U.S. Olympic Committee to dress the American team at the Games in Vancouver this winter and in London in 2012, betting a blend of sports and patriotism will help propel its brand amid a falloff in consumer spending.
- The U.S. military launched a major operation in southern Afghanistan, an early test of the Obama administration's new strategy for beating back the resurgent Taliban and stabilizing the country in advance of this summer's presidential elections. Operation Khanjar, or "strike of the sword," began shortly after 1 a.m. local time when close to 4,000 Marines, backed by about 700 Afghan security personnel, moved by air and ground into villages in the Helmand River Valley, a major opium-producing region and Taliban stronghold. U.S. commanders said the forces would build an array of small patrol bases designed to forge closer ties with local people and better protect them from militants, borrowing an approach used in Iraq that is central to the administration's new counterinsurgency strategy for Afghanistan.
- The Obama administration announced a crackdown Wednesday on hundreds of companies suspected of employing illegal immigrants, signaling a shift in strategy: going after employers instead of workers. U.S. Immigration and Customs Enforcement, a unit of the Department of Homeland Security, said that it had begun an audit of 652 U.S. companies to verify whether their employees were eligible to work. Violations could lead to fines, as well as civil and criminal charges.
MarketWatch.com: Big pension and endowment funds that invest in commodities by modeling their exposure on popular indexes have increased their purchases of crude rapidly in recent months, an analysis of regulatory data shows. This stake has likely contributed to the doubling in oil prices this year, a swift advance that has brought the role of financial speculators back onto the radar of policy-makers -- some of whom say financial investments in commodities should be curbed. Passive investors increased their crude-oil holdings to the equivalent of more than 600 million barrels in June, up more than 30% from the end of last year, a MarketWatch analysis of Commodity Futures Trading Commission data and the most popular commodities indexes shows. The correlation between rising oil prices and increased index investment has reawakened calls to restrict the ability of financial investors to take large stakes in commodities. Unlike in past decades, though, shadowy hedge funds and secretive financiers aren't getting the major blame. Instead, it's long-term investors like California's biggest public-employee pension fund and Harvard University's endowment that have gradually widened to include assets beside stocks and bonds. "Institutional investors such as country funds and pension funds are basically pushing prices where they shouldn't go," said Steve Briese, author of "The Commitments of Traders Bible." On Tuesday, Rep. Peter DeFazio, D-Ore., introduced a bill that would give the CFTC new authority to prohibit "excessive speculation." CalPERS, the biggest U.S. public pension fund, now has about $600 million in commodities that track the 24-component S&P GSCI commodity index, one of the two most popular commodities indexes. Funds like CalPERS typically get their exposure to commodities by engaging in trades with big derivatives dealers such as J.P Morgan Chase & Co.(JPM) and Goldman Sachs Group(GS) . Trading between funds and dealers takes place over the counter and doesn't get reported to the futures regulator. At the peak of oil prices last year, index fund holdings in oil had surpassed 700 million barrels. They then slid to near 400 million barrels in December. Index holdings in oil have since rebounded. This analysis also shows that the dollar value of total commodity index investment rose more than 60% this year to above $140 billion. Mark Gilman, an analyst at research firm Benchmark Co., said the current oil-market environment has a "strong and almost eerie resemblance" to oil's boom during the first half of last year. He anticipates oil could fall again to the $40 to $50 level. "Recent history is likely to repeat itself with a sharp price decline," Gilman added.
CNBC.com: Google(GOOG) will to stick to its core business and continue developing technologies to monetize search, CEO Eric Schmidt told CNBC on Wednesday. Specifically, the company plans to expand its advertising expertise to television and mobile phones, which will serve as "primary drivers" of revenue over the next few years, Schmidt said.
NY Times:
- Last year, after the financial crisis, Morgan Stanley(MS) made a decision that its biggest rivals avoided: burned by the crisis, it would take far fewer risks in its trading. That decision is costing it — at least for now. Unlike earnings at Goldman Sachs and JPMorgan Chase, which quickly returned to profitability by taking on risk in trading for their customers, Morgan Stanley’s earnings from those operations are predicted to be less in the second quarter. As a result, these profits will not be high enough to offset some unusual charges and expenses, and Morgan Stanley is expected to post a loss for the quarter, while its Wall Street rivals post robust quarterly profits.
IBD:
- Cerner Corp. (CERN) has been enjoying strong vital signs for most of the decade, especially since recovering from a case of the blahs in 2003.
Politico:
- In the end, there’s only one person who really matters when it comes to getting a health care overhaul done this year – President Barack Obama – and he’s been maddeningly vague about what he can live with in a plan. So as Obama heads to Virginia for a health care town hall meeting Wednesday, POLITICO did a little imaginary spelunking in the caves of the presidential mind and came up with this take on what Obama might really be thinking when it comes to health care.
Rasmussen:
- Fifty-six percent (56%) of Americans say they are not willing to pay more in taxes and utility costs to generate cleaner energy and fight global warming. A new Rasmussen Reports national telephone survey, taken since the climate change bill was passed on Friday, finds that 21% of Americans are willing to pay $100 more per year for cleaner energy and to counter global warming. Only 14% are willing to pay more than that amount.
Vanity Fair:
- For years, administrators at Harvard University could throw money at anything that tickled their fancy. A new medical school building for $260 million? Sure. A massive, Robert A.M. Stern—designed addition to Harvard Law School? No problem. One of the most sweeping financial aid initiatives ever undertaken? Consider it done. Of course, that was before the money dried up. Now, Vanity Fair’s Nina Munk finds America’s oldest university suddenly at risk of not being able to keep the lights on. Over the past year, Harvard’s endowment has collapsed (it lost $8 billion between last July and October), its fundraising has declined, and its construction cranes have been idled. Gripped by the worst economic crisis in its history, Harvard is in trouble, and no one can decide who’s to blame.
Reuters:
- Many hedge fund investors burned by last year's market meltdown will likely demand a system of checks and balances in which outsiders keep a closer watch over assets, data released on Wednesday show. Pension funds, endowments and wealthy investors that have long funneled money into loosely regulated hedge funds will want to see more data detailing how their investments are valued and priced, researchers at State Street Corp found. One problem last year was that many hedge funds invested in illiquid securities where they were unable to exit quickly when investors asked for their money back. Many investors will also begin insisting on having outsiders such as State Street, the world's second-largest administrator for hedge funds, review positions.
- Auto seating supplier Lear Corp said on Wednesday it would file for Chapter 11 in a reorganization supported by key secured lenders and bondholders and had obtained $500 million in bankruptcy financing.
- Vice Foreign Minister He Yafei said on Thursday he had not heard about reports that China had requested a debate about global reserve currencies. Asked about the matter by a reporter during a news briefing, He said, "I have not heard that China has this request".
Financial Times:
- Governments around the world have continued to push up trade barriers in spite of high-profile pledges at the G20 summit and other forums to resist protectionism, according to a World Trade Organization report to be published on Thursday. Over the past three months, the WTO recorded 83 trade-restricting measures undertaken by 24 countries and the European Union – more than double the number of trade-liberalizing measures enacted during the same period. However, the report noted that the worst abuses had largely been contained.
TimesOnline:
- Long arm of the US taxman must be resisted.
Late Buy/Sell Recommendations
Deutsche Bank:
- Rated (CSCO) Buy.
Night Trading
Asia Ex-Japan Inv Grade CDS Index +2.26%.
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
Conference Calendar
Who’s Speaking? Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for June is estimated at -365K versus -345K in May.
- The Unemployment Rate for June is estimated to rise to 9.6% versus 9.4% in May.
- Average Hourly Earnings for June are estimated to rise .1% versus a .1% gain in May.
- Initial Jobless Claims for last week are estimated to fall to 615K versus 627K the prior week.
- Continuing Claims are estimated to rise to 6740K versus 6738K prior.
10:00 am EST
- Factory Orders for May are estimated to rise .9% versus a .7% gain in April.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
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