Evening Headlines
Bloomberg:
- IBM(IBM) Bond Sale Signals Rally Strengthening as Ford Raised: Credit Markets. International Business Machines Corp. raised $1.5 billion at the lowest interest rate on record as the credit rally that began in June extended into August on investor confidence the economy won’t slip back into recession. “Even though the economy isn’t working to its fullest capacity, a lot of investors are feeling that if companies are capable of turning in decent earnings, then they’re able to manage themselves to this low-growth environment,” said Arthur Tetyevsky, chief U.S. credit strategist at Gleacher & Co. in New York. Borrowers sold $12.9 billion of U.S. corporate bonds yesterday, according to data compiled by Bloomberg. Citigroup Inc. issued $3 billion of notes, following July sales by Goldman Sachs Group Inc. and JPMorgan Chase & Co.
- Slowing steel demand in China, the world's largest consumer of the metal, led 40% of mills in the nation to cut output or put plants on maintenance, Luo Bingsheng, vice chairman of the China Iron & Steel Association said today.
- Greece Passes First Deficit-Reduction Test as Budget Challenges Increase. Greece’s austerity drive may pass its first test this week as a European Union-led mission prepares to dole out more rescue funds for a government trying to cut the euro-region’s second-biggest budget gap and weather a recession. In approving the second tranche of a three-year, 110 billion-euro ($145 billion) bailout, the EU and International Monetary Fund are likely praise Greece’s progress and say that more work is needed to lock in the gains, economists said. Greece is battling the highest inflation rate in the 27-nation EU, revenue is trailing targets and the EU and IMF forecast the economy will shrink as much as 4 percent this year. Prime Minister George Papandreou has raised taxes, cut wages and overhauled the state-run pension system, while braving months of strikes against the measures that helped shrink the budget gap by 45 percent in the first half. Sustaining the effort and qualifying for another 9 billion euros of EU-IMF funds will be complicated by a recession that has been deepened by his steps.
- Dendreon's(DNDN) $93,000 Cancer Drug Price Must Be Paid by U.S., Doctors Say. Dendreon Inc.’s $93,000 price tag for its Provenge prostate cancer treatment must be covered under the rules of the U.S. Medicare health plan, according to a letter submitted by the American Society of Clinical Oncology. The Centers for Medicare & Medicaid Services, the government agency that determines which treatments will be reimbursed, is required by the Social Security Act to pay for all cancer drugs approved by U.S. regulators, the cancer society said in a public letter submitted to the agency. Provenge won marketing rights in the U.S. in April, becoming the first drug designed to train the body’s immune system to fight cancer.
- MetLife(MET) Raises $3.15 Billion in Stock Sale for Acquisition of AIG(AIG) Business. MetLife Inc., the largest U.S. life insurer, raised $3.15 billion by selling shares below yesterday’s closing price to help pay for the acquisition of an American International Group Inc. business unit.
- Genzyme(GENZ) Said to Talk With Sanofi After Getting Buyout Bid. Genzyme Corp., the world’s largest maker of medicines for genetic diseases, has begun takeover talks with Sanofi-Aventis SA after receiving a proposal from the French drugmaker last weekend, according to a person with knowledge of the matter. The talks between Genzyme, of Cambridge, Massachusetts, and Paris-based Sanofi are ongoing, said the person, who declined to be identified because the discussions are private. Genzyme’s shareholders are looking for an offer above $80 per share, the person said. Genzyme rose as much as 2.5 percent in extended trading after the close of the Nasdaq Stock Market.
- Treasury Two-Year Yields Fall to Record on Bets Fed Plans to Spur Growth. Treasury two-year yields extended their decline to record lows as traders bet the Federal Reserve will introduce additional measures to keep borrowing costs low as soon as its next meeting on Aug. 10 to boost the economy. Ten-year notes rose, snapping a decline from yesterday, before a government report that analysts said will show personal income and spending cooled in June, a sign the economy is slowing. The London interbank offered rate, which banks pay for dollar loans, is tumbling partly because of speculation the Fed will start buying bonds again, Anthony Crescenzi of Pacific Investment Management Co. said in a report. “More and more people are looking for additional easing at the meeting,” said Tomohisa Fujiki, an interest-rate strategist at BNP Paribas Securities Japan Ltd. in Tokyo.
- Fed Mulls Symbolic Shift. Federal Reserve officials will consider a modest but symbolically important change in the management of their massive securities portfolio when they meet next week to ponder an economy that seems to be losing momentum. Officials to Consider Putting More Money Into Bond Market as Recovery Wavers. The issue: Whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead. Any change—only four months after the Fed ended its massive bond-buying program—would signal deepening concern about the economic outlook. If the Fed's forecast deteriorates significantly, it could also be a precursor to bigger efforts to pump money into the economy. Moving to stop the Fed's portfolio from shrinking would prevent monetary policy from slightly tightening in the face of a weakening recovery. The central bank's $2.3 trillion portfolio has nearly tripled in size since 2007. Buying new bonds with this stream of cash from maturing bonds—projected at about $200 billion by 2011—would show the public and markets that the Fed is seeking ways to support economic growth. It could also be a compromise that rival factions at the Fed support, as officials differ about whether and how to address a subpar recovery. Officials in the Fed's anti-inflation camp aren't convinced the economy is slowing significantly and are wary of taking new actions. Others are eager to consider new steps to address recent signs of a slowdown and persistent high unemployment. Fed officials aren't yet prepared to take the larger step of resuming large-scale purchases of mortgage-backed securities or U.S. Treasurys. But they are holding open that option if the economy deteriorates. Private forecasters generally expect real GDP to grow by an annual rate of about 2¾% in the second half of 2010. If the picture deteriorates and they forecast growth falling below 2%, the Fed would be more likely to act.
- Dual Role in Housing Deals Puts Spotlight on Deutsche(DB). Federal probes of the collapsed mortgage-bond boom are shedding light on how Wall Street firms sometimes created securities and sold them to one set of investors, while advising others to bet against them. One firm that was a major player in mortgage securities, Deutsche Bank AG, illustrates a pattern investigators are looking at. While creating and selling mortgage securities to some of its clients, the big German bank was not only advising other clients to bet the other way, but also sometimes doing so itself. A Deutsche trader helped create an index that made it easy to bet against housing, and the bank itself then used the index to do just that.
- Gold Miner Kinross(KGC) to Buy Red Back for $7 Billion. Gold miner Kinross Gold said it will buy the 91 percent of Red Back Mining that it does not already own for around $7 billion to create one of the world's largest gold miners.
- Upcoming 'Kill' Attempt Might Do the Trick Alone: BP(BP). After insisting for months that a pair of costly relief wells were the only surefire way to kill the oil leak at the bottom of the Gulf of Mexico, BP officials said Monday they may be able to do it just with lines running from a ship to the blown-out well a mile below.
Business Insider:
- Small Business Optimism Plunges: Firms See Lower Spending and More Layoffs Ahead. (graphs) The latest Wells Fargo/Gallup small business survey is out and it's UGLY. In keeping with other indications that the state of small business is very bad, the survey indicates a level of pessimism about future results that's worse even that during the worst of the crisis. What's more, small firms seem lower spending, lower cash flows, and lower headcount in the future.
- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest.
- US Treasury Projects a $13.9 Trillion Debt Balance at December 31, Anticipates Debt Ceiling Breach Some Time in February 2011.
- Senate to Vote on $27 Billion in Aid for Desperate States. Senate Democrats are once again trying to push through a bill that would send $27 billion to needy states.
- Leak Suspect Had Been Disciplined at Least Twice Before Arrest. The leading suspect in the leaking of thousands of military documents to WikiLeaks had been disciplined at least twice in the previous three years but maintained his security clearance.
- Report: Apple(AAPL) to Take Top Spot in Portable Computing Market Share. A new report suggests the iPad is behind Apple’s unprecedented growth in portable computers, defined as notebooks, netbooks, and tablets. Apple took third place in worldwide market share for the second quarter of 2010, and is on a trajectory to become number one as soon as the end of the year.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).
- Ethics Office Details Charges Against Maxine Waters. An independent ethics office accused Rep. Maxine Waters of violating House conflict-of-interest rules by intervening on behalf of a minority-owned bank in which her husband held $250,000 worth of stock, according to a report released Monday by the House ethics committee as part of its preparation for a "trial" of the California Democrat. The report, written in August 2009 by the Office of Congressional Ethics, became the basis of a full-scale investigation of Waters by the ethics committee. A special bipartisan investigative panel of the committee has found "substantial reason to believe" that Waters violated House rules. Waters, the No. 3 Democrat on the Financial Services Committee, has vehemently denied any wrongdoing. She is choosing to go to trial rather than admit violating ethics rules through a plea.
- House Subcommittee Chair Backs Comcast(CMCSA) - NBC Deal. A lawmaker who chairs the U.S. House of Representatives' communications subcommittee is urging regulators to approve Comcast Corp's purchase of a controlling stake in NBC Universal, as long as consumers still have access to a wide array of video programing.
- Reversal of Fortune as Falcone's Hedge Fund Drops. In the span of seven months, hedge fund manager Philip Falcone has gone from being one of the industry's better performers to one of its worst, according to new industry data. As of July 15, Falcone's Harbinger Capital Partners Offshore Fund I was down 10.7 percent, ranking the New York-based fund manager one of the industry's 20 worst performers, according to HSBC. Harbinger began the year with bang, with the offshore fund registering a 4.42 percent gain as of Jan. 15. And the fund was in positive territory up until a few weeks ago. Over the course of the year, the portfolio's assets under management have been nearly cut in half, falling from $6.7 billion to $3.8 billion as of mid-July. The firm also has a pool of hard-to-sell assets called a side-pocket with about $2 billion which lost roughly 14 percent in the first seven months of the year.It is not clear what has caused the big reversal of fortune at Harbinger. Several calls for comment to the firm were not immediately returned.
- Global Credit Conditions Improved in July - Kamakura. The number of companies globally that are at risk of defaulting on their debt fell again in July, continuing a global trend that has seen most companies improve their credit profile, risk management firm Kamakura Corp said on Monday.
- BlackBerry to Open Code for Security. Research in Motion Ltd.(RIMM) agreed for the first time to allow Indian security agencies to monitor its Blackberry services in a bid to avoid a government ban, citing telecom dept. documents. The company offered to share technical codes for corporate e-mail services and open access to all consumer e-mails within 15 days.
- China's central bank in October may increase the amount of reserves the nation's banks are required to keep, citing officials from the banking industry.
Citigroup:
- Reiterated Buy on (VRSN), lowered target to $36.
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 -10.0 basis points.
- Asia Pacific Sovereign CDS Index 111.0 -5.5 basis points.
- S&P 500 futures -.22%.
- NASDAQ 100 futures -.15%.
Earnings of Note
Company/Estimate
- (NYX)/.59
- (PFE)/.52
- (VNO)/1.06
- (MMC)/.44
- (ADM)/.52
- (COH)/.56
- (MA)/3.34
- (PG)/.73
- (DHI)/.16
- (BHI)/.43
- (CLX)/1.20
- (MRO).80
- (EMR)/.68
- (DOW)/.57
- (AMT)/.19
- (DUK)/.28
- (DISCA)/.43
- (CHK)/.69
- (AVB)/1.00
- (PBI)/.57
- (PCLN)/2.65
- (WFMI)/.37
- (APC)/.36
- (ERTS)/-.35
- (DNDN)/-.50
8:30 am EST
- Personal Income for June is estimated to rise +.2% versus a +.4% gain in May.
- Personal Spending for June is estimated to rise +.1% versus a +.2% gain in May.
- The PCE Core for June is estimated to rise +.1% versus a +.2% increase in May.
- Factory Orders for June are estimated to fall -.5% versus a -1.4% decline in May.
- Pending Home Sales for June are estimated to rise +4.0% versus a -30.0% decline in May.
- Total vehicle sales for July are estimated to rise to 11.6M versus 11.08M in June.
- None of note
- The weekly retail sales reports, ABC Consumer Confidence reading, (NATI) Investor Conference and the (GLW) Investor Luncheon could also impact trading today.
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