Friday, August 27, 2010

Friday Watch


Evening Headlines

Bloomberg:

  • Wal-Mart(WMT) Bonds Rising, IOUs Falling Signal Weaker Economy: Credit Markets. Wal-Mart Stores Inc. bonds are rallying and short-term business borrowing is falling the most in three months in a sign credit markets are increasingly concerned that the economic recovery is stumbling. Bonds from Wal-Mart gained 3.98 percent this month, the most of the 50 biggest issuers in Bank of America Merrill Lynch’s Global Broad Market Industrial index, which has gained 2.28 percent. Commercial paper outstanding fell $23.7 billion in the week ended Aug. 25, the biggest drop since the period ended May 19, according to the Federal Reserve.
  • HP(HPQ) Tops Dell's(DELL) 3Par(PAR) Bid Again, Offering $1.8 Billion. Hewlett-Packard Co., waging a bidding war with Dell Inc., said it would pay $1.8 billion for 3Par Inc. -- about $200 million more than a Dell offer from earlier today. HP’s price of $27 a share in cash marks the second time HP has outbid Dell, which originally agreed to buy 3Par on Aug. 16 for about $1.15 billion, or $18 a share. The latest price is 11 percent more than Dell’s last bid of $24.30 a share, or about $1.6 billion, an offer 3Par accepted this morning.
  • RIM(RIMM) Falls to 17-Month Low as India BlackBerry Service Ban Looms.
  • China Begs, Borrows, Steals American Know-How: Peter Navarro. China’s fourth-largest steel producer, government-owned Anshan Iron & Steel Group, wants to buy a stake in the U.S. Steel Development Co. The plan is to build five new mills, with the first adding 120 jobs to one of America’s most economically depressed states, Mississippi. What could be wrong with that? Plenty, says a bipartisan group of 50 members of Congress. They are demanding an investigation by the Obama administration on economic and national-security grounds.
  • Japan's Consumer Prices Slide, Adding to Risk of Slower Growth. Japan’s consumer prices fell for a 17th month and household spending rose less than forecast, driving stocks lower on concern that the nation’s economic recovery is faltering.
  • Gold Demand to Soar in Vietnam as 'Shelter' From Devaluations, Stock Slump. Gold demand in Vietnam, which consumes more of the precious metal per head than India and China, is set to surge as the third devaluation in the past year and a stock-market slump combine to spur sales.
  • Investors Pull $7.1 Billion From Stock Funds Globally, Buy Emerging Bonds. Investors withdrew a net $7.1 billion from global-tracked equity funds in the week to Aug. 25 and put some $5.2 billion into bond funds amid concern economies in the U.S. and Europe are losing momentum, EPFR Global said.

Wall Street Journal:
  • Report Finds Debt Wall May Be Falling. The wall of debt maturities on the horizon may not be as insurmountable at it seemed a few months ago, according to a new report from investment bank Morgan Joseph LLC. Many expected that the amount of corporate debt coming due could spark another round of restructurings as soon as next year if demand for refinancing outstrips available credit. But the report released this week found that the threat may be pushed back by a few years, if not eliminated.
  • ArcSight(ARST) Puts Itself on Block. Security software maker ArcSight Inc. put itself on the auction block and potential bidders, including Oracle Corp.(ORCL) and Hewlett-Packard Co.(HPQ), could pay up to $1.5 billion for the company, people familiar with the matter said. The Cupertino, Calif., company has been quietly shopping itself to a handful of big technology suppliers interested in its software, these people said. In addition to Oracle and H-P, EMC Corp, International Business Machines Corp. and CA Inc., are prospective bidders, they said.
  • UAW Fund Picks BlackRock(BLK), State Street(STT) to Manage $6 Billion. An independent health-care trust for retired auto workers will place $6 billion in the hands of two investment firms, one of the first steps in the trust's move to shift part of its billions of dollars into more-passive investing. The Retiree Medical Benefits Trust for the United Auto Workers union will divide the $6 billion equally between Boston-based State Street Corp. and BlackRock Inc. of New York, according to Eric Henry, the trust's chief investment officer.
  • Time for Obama to Pull a Clinton by Douglas E. Schoen. When I met with the president in early 1995, I warned him he would not be re-elected unless he changed his reputation. As campaign season heats up—for the midterms, of course, as well as for 2012—President Obama is pursuing a strategy that is bound to fail. To secure his political future, he needs to change his approach in the way that Bill Clinton did halfway through his first term. I first met with Mr. Clinton privately in early 1995, after the Republicans gained control of Congress for the first time since 1954. I warned him that he could not be re-elected in 1996 unless he turned around his administration's reputation: from one of big-spending liberalism (represented by his attempt to massively overhaul the health-care system) to one of fiscal discipline and economic growth. Mr. Clinton did just that, and now Mr. Obama must do the same—and quickly.
Bloomberg Businessweek:
CNBC:
Business Insider:
Zero Hedge:
CNNMoney:
The Detroit News:
  • House Democrat Wants GM to Use Female, Minority-Owned Banks in IPO. A House Democrat wants General Motors to explain why it isn't using any female or minority-owned underwriters for its planned public offering this fall. Rep. Maxine Waters, D-Calif., said in a letter released today to Treasury Secretary Timothy Geithner and Securities and Exchange Commission chair Mary Schapiro that she is concerned that the sale of the first chunk of the government's 61 percent stake in GM won't include any female or minority-owned underwriters.
Washington Post:
  • Why Another Fiscal Stimulus Won't Do by Mohamed A. El-Erian. The great hope a few months ago was for a "recovery summer," with the economy responding favorably to various policy initiatives. Yet the recovery has lost momentum, and while the end of the year will not be as gut-wrenching as the final 3 1/2 months of 2008, when the global economy suffered a cardiac arrest, it will be as consequential in affecting the welfare of millions of people.
LA Times:
ProPublica:
  • Banks' Self-Dealing Super-Charged Financial Crisis. Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history. Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses: They created fake demand. A ProPublica analysis shows for the first time the extent to which banks -- primarily Merrill Lynch, but also Citigroup, UBS and others -- bought their own products and cranked up an assembly line that otherwise should have flagged. The products they were buying and selling were at the heart of the 2008 meltdown -- collections of mortgage bonds known as collateralized debt obligations, or CDOs.
Rasmussen Reports:
People's Daily:
  • The world shouldn't expect China to take on international responsibilities equal to being the world's second largest economy as it exceeds the nation's capabilities, citing Pei Changhong, a researcher from the Chinese Academy of Social Sciences.
Oriental Morning Post:
  • Chinese central bank adviser Xia Bin said the nation's new bank lending in 2011 won't fall below the 7.5 trillion yuan target set for this year. The nation will in the second half strictly adhere to its 7.5 trillion yuan target for new lending this year, Xia said. China should maintain its property control measures, Xia said.
Evening Recommendations
Citigroup:
  • Rated (GSIC) Buy, target $29.
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 133.0 +3.0 basis points.
  • Asia Pacific Sovereign CDS Index 122.50 -.5 basis point.
  • S&P 500 futures +.27%.
  • NASDAQ 100 futures +16%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (TIF)/.52
  • (FRO)/.67
Economic Releases
8:30 am EST
  • 2Q GDP is estimated to rise +1.4% versus a prior estimate of a +2.4% gain.
  • 2Q Personal Consumption is estimated to rise +1.6% versus a prior estimate of a +1.6% gain.
  • 2Q GDP Price Index is estimated to rise +1.8% versus a prior estimate of a +1.8% increase.
  • 2Q Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.1% rise.
9:55 am EST
  • Final Univ. of Mich. Consumer Confidence for July is estimated at 69.6 versus a prior estimate of 69.6.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • Fed Chairman Bernanke's speech could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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