Evening Headlines
Bloomberg:
- Labor-Market Woes in U.S. Prompt Economists to Cut 2011 Growth Forecasts. The U.S. economy will slow more than previously estimated through next year as elevated unemployment tempers consumer spending and companies trim investment plans, economists polled by Bloomberg News said. The world’s largest economy will grow an average 2.5 percent in 2011, less than the 2.8 percent projected last month and slower than an estimated 2.7 percent this year, according to the median of 59 forecasts in the survey taken Sept. 1 through Sept. 9. Analysts also expect household purchases will cool and the jobless rate will hold above 9 percent.
- Carmakers Replace Subsidies With Incentives as Outlook, State Support Fade. Unemployment in the U.S. and government measures to cool China’s economy are damping demand in the world’s two largest car markets, weakening the outlook for the industry. U.S. auto sales in August were the worst for the month in 28 years, while China’s passenger-car deliveries to dealerships increased at the slowest pace in July since March 2009. Sales are faltering after governments withdrew stimulus measures that propped up sales in the U.S., China, Europe and Japan. The bleaker prognosis for sales may also hurt profitability as automakers including Toyota Motor Corp., General Motors Co. and Volkswagen AG are forced to offer higher incentives to lure customers. “The U.S. economy is looking downward, with high unemployment, mounting bankruptcies and other indicators that don’t paint a pretty picture,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc. in Tokyo. “In China, the government is putting on the brakes so that the overall economy won’t overheat.”
- Japan's Incubator Bank Plans to File for Bankruptcy Today, Regulator Says. Incubator Bank of Japan Ltd., whose former chairman was charged in August for impeding a financial regulator’s investigation, plans to file for bankruptcy protection today. The government will insure customers’ deposits up to 10 million yen ($119,000) plus interest, Financial Services Minister Shozaburo Jimi said in a faxed statement today. The closely held bank is preparing to file for bankruptcy, said a company spokesman who declined to be identified.
- Junk Bonds 'Best Bet' as Issuance Nears 2009 Record Level: Credit Markets. Global high-yield bond sales are poised to exceed 2009’s record issuance as the riskiest companies take advantage of plunging borrowing costs and investor demand for greater returns to refinance debt. Ally Financial Inc., the lender previously known as GMAC Inc., and the lending arm of Ford Motor Co. led $206.9 billion of speculative-grade debt sales in 2010 through today, compared with $208.1 billion for all of last year, according to data compiled by Bloomberg. Junk-rated companies are accelerating issuance amid rating upgrades and average borrowing costs that have plummeted from a high of 21.6 percent in 2009 to 8.4 percent as of today, according to Bank of America Merrill Lynch index data. Investors are snapping up the debt for returns that exceed those on investment-grade bonds, government securities and stocks for the year.
- Kan Unveils $11 Billion Stimulus Package to Boost Consumption, Employment. Japanese Prime Minister Naoto Kan unveiled details of his 920 billion yen ($11 billion) stimulus plan to boost consumption and create jobs as the yen’s advance to a 15-year high threatens the economic recovery.
- Trump Offers to Buy Proposed NYC Islamic Center Site. Donald J. Trump offered to purchase the site of the proposed Islamic community center near New York City’s Ground Zero for the price paid plus 25 percent. As part of the bid, any community center built would be located at least five blocks farther from the World Trade Center site, Trump said. “I am making this offer as a resident of New York and citizen of the United States, not because I think the location is a spectacular one (because it is not), but because it will end a very serious, inflammatory, and highly divisive situation,” Trump wrote in the letter to Hisham Elzanaty, a businessman who’s said he provided the majority of the financing for the two buildings where the center would be built.
- Bearish Bets on Agriculture Stocks Surge Before USDA Crop Report Tomorrow. Trading of bearish options on agricultural stocks jumped for a second day, reaching a four- month high, before the U.S. Department of Agriculture releases its monthly global supply and demand estimates tomorrow. Almost 5,300 options to sell the Market Vectors Agribusiness exchange-traded fund changed hands, 22 times the four-week average and 18 times the number of calls to buy.
- Crude Declines After Report Shows U.S. Petroleum Stockpiles at Record High. Crude oil fell after a government report showed that U.S. petroleum inventories climbed to the highest level since at least 1990. Stockpiles were 12 percent higher than the five-year average. Distillate stockpiles declined 388,000 barrels to 175 million. The decrease left supplies 24 percent above average, and near the 27-year high touched in the week ended Aug. 20. OPEC will reduce crude shipments by 0.6 percent this month as the global recovery slows and refiners conduct maintenance, Oil Movements said, the eighth weekly decline reported by the tanker-tracker. “We know there is still a significant crude overhang in the Atlantic basin,” Oil Movements founder Roy Mason said by phone from Halifax. “What’s happening now is western demand is dropping off. The scale of it is fairly unusual. It’s the kind of thing that would happen in the runup to a market downturn.” OPEC said today in a monthly report that global consumption may weaken during the rest of this year because of “the severity of the economic crisis and its prolonged impact on the world economy.”
- Fantasy Footballers Quit Jobs, Hide Office Leagues to Try for Championship.
- Obama Says Mexico's Drug Battle Not Comparable to Colombia's. President Barack Obama said Mexico’s battle against drug cartels isn’t comparable to Colombia’s fight against traffickers 20 years ago. “Mexico is a large and progressive democracy with a growing economy,” Obama said in an interview with La Opinion, a Spanish-language newspaper in Los Angeles. “As a result, you can’t compare what is happening in Mexico with what happened in Colombia 20 years ago.” Obama’s remarks contrasted with those made by Secretary of State Hillary Clinton, who said yesterday that escalating Mexican violence resembles the war of terror waged against the Colombian government two decades ago. Clinton said that in some cases Mexican drug cartels are “morphing into, making common cause, with what we would consider an insurgency.”
- UN Risks 'Huge Mistake' in Carbon-Trading Investigation: Energy Markets. A United Nations investigation into alleged improper claims for hydrofluorocarbon-pollution credits threatens to choke off investment in projects to curb emissions, according to Bill Clinton’s former adviser on global warming. UN regulators froze new credits as they began a probe on July 30 into allegations by CDM Watch, an environmental lobby group, that some plants emitting hydrofluorocarbons were unfairly exploiting the system. Should the inquiry lead to new limits on expected credits, investors would abandon the UN market, the world’s second-largest greenhouse-gas program, said Dirk Forrister, head of Clinton’s 1997 task force on climate. “There is a possibility of a retroactive change, and that would be a huge mistake,” said Forrister, now a managing director at Natsource LLC, a New York investment manager. “It might make it impossible to raise new money.”
- New York Islamic Site's Owner Says No Deal Has Been Reached to Move Center. The owner of the site of a proposed Islamic community center near the location of the Sept. 11 attacks in New York City said there is no agreement to build the project elsewhere. “It’s untrue that it’s being moved. The project will proceed as planned,” Sharif El-Gamal, owner of the property and CEO of Soho Properties LLC, said in a telephone interview. “What’s being reported in the media is a falsehood.”
- China Trade Unions Plan to Increase Role at Foreign Companies, Daily Says. The All China Federation of Trade Unions will work to increase the power of workers unions to negotiate wages at private and foreign companies in the nation, the China Daily reported today, citing Guo Chen, deputy division chief of the capacity building department of the federation. Strikes that affected production by Japanese automakers and suicides at Foxconn Technology Group’s factory in Shenzhen showed that their unions were “not efficient,” Guo was cited as saying. The federation aims for 90 percent of China’s companies to have unions by 2012, the newspaper reported, citing Guo.
- Copper Heads for First Weekly Drop in Four as China Delays Data. Copper extended yesterday’s slump, heading for the first weekly drop in four, as China brought forward the release of August economic data to Saturday, prompting speculation the results may disappoint investors. The metal for three-month delivery dropped as much as 1 percent to $7,480 a metric ton on the London Metal Exchange, and traded at $7,484.50 at 11:11 a.m. in Shanghai. “There’s lots of talk, ranging from the government probing inappropriate trading to possible rate hikes,” said Ren Gang, an analyst at Maike Futures Co., by phone from Shanghai. “It’s made people very cautious in wake of yesterday’s tumble.” China’s National Bureau of Statistics said yesterday it will release August economic indicators, including consumer prices and industrial output, on Saturday, instead of the initial scheduled Monday. “The statistics bureau has almost never reported data on weekends before,” said Chen Jianbo, a fixed-income analyst at BOC International (China) Ltd., adding that the change prompted speculation that the central bank may raise the deposit rate to combat inflation before the markets open on Monday. Commodity futures in China tumbled yesterday after a report said regulators may be investigating large positions in Shanghai rubber futures. “There is no official comment from the regulator, so people kept on guessing what happened,” Ren said.
- Karzai Divides Afghanistan in Reaching Out to Taliban. Afghan President Hamid Karzai's recent attempts to placate the Taliban haven't made him many new friends among the insurgents. But they have definitely alienated some crucial old friends: the country's ethnic minorities, who have been a linchpin of Mr. Karzai's American-backed government.
- Goolsbee to Chair Council of Economic Advisers. President Barack Obama will name Austan Goolsbee, a long-time adviser and an architect of his campaign's economic message, to be chairman of the White House Council of Economic Advisers at a White House press conference Friday, an administration official said Thursday night.
- SEC Homes In on Lehman, 'Funds of Funds'. Accounting Probe of Failed Bank Gains Momentum. The Securities and Exchange Commission's investigation into the collapse of Lehman Brothers Holdings Inc. is zeroing in on an accounting maneuver used to give the appearance that the company had reduced its debt levels, according to people familiar with the situation. Agency officials also are probing whether former Lehman executives failed to adequately mark down the value of the huge real-estate portfolio acquired in the securities firm's takeover of apartment developer Archstone-Smith Trust or to disclose the resulting losses to investors, these people said.
- Agency Examines Oversight Roles, Possible Conflicts of Advisory Firms. The Securities and Exchange Commission is examining whether firms that collect fees for funneling investors into hedge funds are properly overseeing client money and dealing with potential conflicts of interest, people familiar with the matter said. The inquiry has identified about a dozen investment-advisory firms for questioning but could expand, according to people familiar with the matter, making it one of the SEC's broadest examinations ever of funds of hedge funds and advisers specializing in hedge funds.
- Steelworkers Blast China on Subsides. The United Steelworkers filed a complaint with U.S. trade officials Thursday charging that China is unfairly subsidizing its clean-energy technology sector, presenting the White House with a potential political headache ahead of congressional elections in November. The union's 5,800-page brief asks U.S. Trade Representative Ron Kirk to take action against China's efforts to build its green-technology manufacturing, from compact fluorescent light bulbs to wind turbines. China has used "hundreds of billions of dollars in subsidies, performance requirements, preferential practices and other trade-illegal activities to advance its domination of the sector," the USW said in a statement.
- The Obama Heyday Is Over. With so many Democrats running against the president's agenda in the midterm, change will come in the next Congress, regardless of which party is in control.
- The Man Who Makes Your iPhone. Foxconn founder Terry Gou might be regarded as Henry Ford reincarnated if only a dozen of his workers hadn't killed themselves this year. An exclusive look inside a postmodern industrial empire.
- Growth to Halt in Second Half, Payroll-Tax Cut Needed: Roubini. With stimulus programs no longer boosting the economy, growth will come to a standstill for the remainder of 2010 and feel like a return to recession, economist Nouriel Roubini told CNBC. The head of Roubini Global Economics said a technical double-dip may not occur but that won't matter. The current consensus of meager gross domestic product growth won't even be matched, and that in itself will provide more trouble for the financial markets, he said.
- Texas Instruments(TXN) Narrows Quarterly Outlook. Texas Instruments, whose chips are used in products ranging from cars to cellphones, on Thursday narrowed its third-quarter earnings and revenue outlook but kept the mid-point of its forecast range. Shares of TI were more than 1 percent lower in after-hours trading Thursday.
- NatSemi(NSM) Shares Take Hit as Sales Outlook Disappoints. National Semiconductor posted better-than-expected quarterly net profit on Thursday but forecast sluggish sales in the following quarter. Shares of the semiconductor manufacturer, which ended regular New York trade at $12.90 a share, were down 5 percent in extended trading.
- Sales Fall Again for Game Makers - Is Worst Over? While August sales figures gave the video game industry yet another dose of bad news, at least Electronic Arts(ERTS) had something to smile about. Software sales for the industry as a whole fell 14 percent last month to $403.5 million, according to NPD Group. That’s the worst performance for the month in three years and more than twice as bad as what some analysts were expecting.
- Economy to Slow Further but Rebound Next Year: Bullard. The US economy will slow in the second half but return to more normal growth in the first half of 2011, James Bullard, president of the St. Louis Federal Reserve, told CNBC Thursday. “The consensus is developing in the forecast community that we’ve got a slower economy in second half of this year,” said Bullard, who is known to be an outspoken hawk on monetary policy. “But we will pick up in 2011, probably back to trend growth, or even better.”
- The Sky's The Limit As Business Warms Up To Cloud Computing. If you want Wall Street's verdict on cloud-based computing services, look no further than the stock surge Salesforce.com (CRM) enjoyed last month after it reported earnings.
- Obama's Plan To End Bush Tax Cuts Just Gave Democrats a Green Light To Support Them. Ever since Obama rejected an extension of tax cuts for the rich, Democrats have poured out in support of the tax cuts.
CNNMoney.com:
- Cotton Shortage = Pricey T-Shirts and Jeans. Attention T-shirt fans: Bag those deep discounts now because come January, stores could have you paying more for your favorite clothing.
- Homebuyer Tax Credit: 950,000 Must Repay. Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government. According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.
Rasmussen Reports:
- 62% Say No Matter How Bad Things Are, Congress Can Make Them Worse. Heading into the final weeks of the congressional election season, 62% of Likely U.S. Voters believe that no matter how bad things are, Congress can always make them worse. A new Rasmussen Reports national telephone survey finds that just 19% disagree.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-seven percent (47%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -24 (see trends).
- Florida Pastor 'Suspends' Quran Burning.
- Chamber Fall Campaign Rips Dems. The U.S. Chamber of Commerce has launched a national campaign to challenge congressional candidates to reject new spending, more regulation and higher taxes for business owners and high-income Americans. In a clear shot at President Barack Obama and Democrats across the board, the Chamber’s post-Labor Day political push will be a multipronged plan that includes online advertising, a new text-messaging campaign and 20 events at colleges across the country to stress the importance of a free-enterprise system.
- Credit Card Use Keeps Falling Amid Economic Uncertainty. Americans have sharply reduced their use of credit cards, and some analysts believe the trend will continue even after the economy has fully recovered. The Federal Reserve Board reported this week that credit card borrowing fell at a 6.3% annual rate in July. The last time borrowing with credit cards increased was in August 2008. Separately, a survey by Javelin Strategy & Research found that 56% of consumers used credit cards in 2009, down from 87% in 2007. Credit card usage could fall as low as 45% this year, the report said.
- Spanish Miners Block Roads to Demand Pay - Report. Spanish coalminers blocked roads on Thursday as they continued a two-week-old strike to demand wages they say are owed by their employers, state television reported. The Spanish coal industry has received government aid as it struggles to maintain profitability, with high costs making it uncompetitive compared with imported coal.
- Alaska Seeks to Overturn Delay in Arctic Drilling. The state of Alaska on Thursday filed a petition in federal court to overturn the Obama administration's moratorium on drilling in federal waters of the Arctic, even though Interior Department officials insist that no such formal moratorium exists.
- U.S. Chipmakers' Outlooks Stoke Economy Concerns. Chip makers National Semiconductor (NSM) and Texas Instruments Inc (TXN) on Thursday issued quarterly financial targets that stoked investors' worries about a sluggish economy. Both companies cited weak demand for personal computers and other devices that use microchips and National Semiconductor said consumers were not spending as much as expected. "We'd all like to believe that consumer spending is onward and upward but I don't think it is," National Semiconductor Chief Executive Donald Macleod told Reuters.
- High-Frequency Traders Battle to Make Big Returns. As debate unfolds in the US and Europe about the runaway growth of “high-frequency trading” a new question has arisen: is it really generating huge profits for the little-known groups that are driving it? Critics of high-frequency trading, which uses computers to trade in and out of assets faster than the blink of a human eye, argue that markets have benefited little from it. They worry about the pervasive use of algorithms to drive trades, a practice seen by many as contributing to the chaos of the “flash crash” in US share markets in May, when the Dow inexplicably tumbled hundreds of points in minutes only to rebound sharply. They suspect that some high-frequency strategies are designed to reap profits for traders at the expense of others in the markets. High-frequency trading groups have rejected such accusations, pointing out that, while there may be some traders who engage in questionable practices, the majority of companies provide useful liquidity and help to narrow bid-ask spreads for all investors. Such companies are all privately held and never reveal financial information. But it is possible to get a glimpse of how much of a money spinner high-frequency trading, or HFT, is from the annual report of Optiver, one of the largest players.
- Japan Alarm Over China's JGB Purchases. Japan has expressed concern about China’s recent sharp increase in purchases of Japanese government bonds in the latest of a series of sour notes in a traditionally tense bilateral relationship that both sides had worked hard to steady. China’s purchases of JGBs is an especially sensitive issue as it plays into anxieties in Japan about the strengthening yen and its impact on the economy. Tokyo and Beijing also clashed this week after Japanese authorities arrested the captain of a Chinese fishing boat in the disputed waters of the East China Sea. “There is something unnatural about the fact that China can buy Japanese government bonds while Japan cannot [buy Chinese bonds],” Yoshihiko Noda, the Japanese finance minister said.
- EU to Lift the Rock on Abusive High Finance. Michel Barnier, Europe's single market commissioner, has warned banks and hedge funds that Brussels plans to use its sweeping new powers over high finance to end abusive speculation and impose order on the City of London and other EU bourses. "We want to know who is doing what. The EU authorities are going to look at every product. They can restrict leverage, or in exceptional circumstances even ban a product temporarily," he said, speaking to The Daily Telegraph. "We need markets, and we need financial institutions that create value-added, but everyone has to answer for what they are doing. People taking crazy risks linked to crazy rewards have to be brought to their senses," he said.
- Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp.'s sales for the October to December period may fall about 10% from the previous three months on declining orders, citing officials in the semiconductor industry.
Citigroup:
- Reiterated Buy on (ALL), raised target to $35.
- Reiterated Buy on (MYL), target $23.
- Upgraded .
- Rated (RYL) Buy, target $20.
- Rated (TOL) Buy, target $22.
- Rated (LEN) Buy, target $20.
- Rated (SWK) Buy, target $68.
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 120.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 116.50 -1.0 basis point.
- S&P 500 futures -.13%.
- NASDAQ 100 futures -.12%.
Earnings of Note
Company/Estimate
- (LULU)/.24
- (BRC)/.48
10:00 am EST
- Wholesale Inventories for July are estimated to rise +.4% versus a +.1% gain in June.
- None of note
- The UBS Best of Americas Conference could also impact trading today.
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