Thursday, April 28, 2011

Today's Headlines


  • U.S. Economy's Growth Cools in First Quarter to 1.8% Annual Rate. Gross domestic product rose at a 1.8 percent annual rate from January through March after a 3.1 percent pace in the final three months of 2010, the Commerce Department said today in Washington. Economists projected 2 percent growth, according to the median estimate in a Bloomberg News survey. Household purchases, which account for about 70 percent of the economy, rose at a 2.7 percent pace last quarter after a 4 percent gain in the final three months of 2010. The increase in consumer spending from January through March compared with a 2 percent median forecast in the Bloomberg survey. Purchases added 1.91 percentage points to growth. Spending on equipment and software climbed at an 11.6 percent annual rate last quarter, up from 7.7 percent the previous three months.
  • Pending Sales of Existing Homes in U.S. Increase 5.1%, More Than Estimated. The number of Americans signing contracts to buy previously owned homes rose more than forecast in March, a sign the industry that triggered the recession may begin to stabilize. The index of pending home resales climbed 5.1 percent after a revised 0.7 percent increase the prior month, the National Association of Realtors said today in Washington. The median forecast in a Bloomberg News survey called for a 1.5 percent rise. An improving job market, falling home prices and low borrowing costs may help to attract more buyers in coming months.
  • Initial Jobless Claims in U.S. Increase to Three-Month High. Jobless claims increased by 25,000 to 429,000 in the week ended April 23, the most since late January, Labor Department figures showed today in Washington. The four-week moving average, a less volatile measure than the weekly figures, rose to 408,500 last week from 399,250 the prior week. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.9 percent from 3 percent the prior week, today’s report showed.
  • Taiwan Semiconductor's(TSM) Profit Beats Estimates on Smartphone, Tablet Demand. Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of chips, posted first-quarter profit that beat analysts’ estimates after demand for smartphones and tablets drove sales of pricier chips. TSMC, whose clients include Qualcomm Inc. (QCOM) and Nvidia Corp. (NVDA), widened its profit margins as smartphones and tablets boosted demand for more-advanced chips. The March 11 Japan earthquake “probably has some impact” on second-quarter demand, and may “snap back” after the situation improves, Chairman Morris Chang said today.
  • Buy Bullish JPMorgan(JPM), Wells Fargo Options, Morgan Stanley(MS) Says. Investors should buy bullish JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) options because profits will increase amid strengthening consumer credit, Morgan Stanley said. Christopher Metli and Sivan Mahadevan, derivatives strategists at Morgan Stanley, recommended buying JPMorgan’s July $47 call while selling a July $50 call, a strategy known as a call spread. The shares rose 0.8 percent to $45.50 yesterday. The strategists also recommended October $31-$35 call spreads on Wells Fargo, which added 1.4 percent to $29.27.
  • China may raise interest rates as early as a public holiday on May 2 to counter rising prices, Credit Suisse Group AG said. "Rate hikes, in our view, are likely to be a major weapon, along with exchange rate appreciation, for the central bank to tighten," CSFB economist Tao Dong wrote. "The most likely timing could be May 2."
  • Grantham Sees 25% Chance That China May 'Stumble' by Next Year. Jeremy Grantham said there is a 25 percent chance that China, the world’s second-largest economy, will “stumble” by next year over imbalances such as too much capital spending, an overheating real estate market or accelerating inflation. “You could have a financial stumble, a housing stumble, a stumble from rebalancing of capital spending, or any combination thereof,” Grantham, chief investment officer of Grantham Mayo Van Otterloo & Co., said in an April 26 interview in Boston. China’s economic growth may “slow to considerably less” than the 9.7 percent pace reported for the first quarter, Grantham said. The cost of insuring Chinese bank bonds against default rose more than that for lenders in Russia and India this month. “If the housing market takes a break, you have a lot of banking losses,” Grantham said in the interview. “They’ve made a lot of loans that look incredibly suspicious.” Grantham says his views on China’s economy are less grim than those of his colleague Edward Chancellor, who since last year has said that the nation has displayed symptoms of a “great speculative mania.” Hedge-fund manager Jim Chanos, who was among the first investors to predict Enron Corp.’s collapse, said last month that the property bubble in China is “as big or bigger than what we saw in the West” when compared with the size of the economy. In an April 25 letter to investors, Grantham said that a decline in China’s economy would hurt the commodity markets. If a Chinese decline were accompanied by better-than-expected weather globally, then “it will very probably break the commodity markets en masse,” he wrote in the letter. “If the weather and China syndromes strike together, it will surely produce the second ‘once in a lifetime’ event in three years,” Grantham wrote.
  • U.S. Airline Surcharges Set Record at $420 as Oil Prices Climb. United Continental Holdings Inc. (UAL), Delta Air Lines Inc. (DAL) and rival U.S. carriers added a record $420 in fuel surcharges to round-trip European fares as soaring oil prices propelled first-quarter losses. Across the industry, surcharges are as much as 50 percent greater than those put in place when fuel prices reached a record three years ago, according to air-travel website Jet fuel has become airlines’ biggest operating expense, surpassing labor and climbing to an average $2.96 a gallon from January through March, up 41 percent from a year earlier.
  • Brazilian Central Bank Sees a 'Prolonged' Cycle of Interest Rate Increases. Brazil’s central bank said it will raise interest rates at a slower pace for a longer period than initially planned as the country’s inflation outlook worsens, according to the minutes of its April 19-20 meeting.
  • Exxon(XOM) Profit Surges Amid Consumer Discontent Over Higher Gasoline Prices. Exxon Mobil Corp. (XOM), the world’s largest company by market value, posted its largest profit in almost three years as soaring gasoline prices fueled discontent among consumers and policymakers. With U.S. motorists paying the most for gasoline since prices reached a record $4.11 a gallon in the summer of 2008, Exxon said today that its first-quarter net income jumped 69 percent to $10.7 billion.
Wall Street Journal:
  • Deadly Tornadoes Slam South, Killing Hundreds. One of the most powerful storm systems to hit the South in years killed nearly 250 people, injured hundreds more, destroyed property and downed trees from Mississippi to North Carolina over the past two days. Hundreds of homes were flattened by more than 100 tornadoes, according to the National Weather Service.
  • Magical and Revolutionary White Color Could Spike iPhone Sales By as Much as 1.5 Million Per Quarter.
  • Inspector General Investigating US Education Dept. Over Rules - Source. The U.S. Department of Education's Office of Inspector General has launched a probe into possible influence by short-sellers on the Education Department's recent rulemaking process, according to a person familiar with the matter. In November, Sen. Richard Burr (R., N.C.) and Sen. Tom Coburn (R., Okla.) sent a letter asking the OIG to look into possible ties between the department and investors who were selling short the stock of various for-profit companies. Correspondence between the parties, which include FrontPoint Partners's Steve Eisman, had been released by the department after Citizens for Responsibility and Ethics in Washington, a watchdog group known as CREW, filed requests under the Freedom of Information Act. Additionally, lobbying groups supporting the for-profit colleges have alleged the Education Department leaked early copies of the rules to outside organizations and people with financial interests in the industry. Eisman, the hedge fund portfolio manager famous for his bearish bet on the mortgage industry, likened for-profit schools to sub-prime mortgages at an investor conference in May. He sent a copy of that presentation to the Education Department, according to documents released by CREW, and repeated many of the criticisms in front of a Senate committee hearing in June.
  • NATO Strikes Forces Near Misrata Amid Reports of Rebel Deaths. NATO said its warplanes attacked combat vehicles near the besieged Libyan port city of Misrata yesterday, following reports that one of its strikes killed rebel fighters battling Muammar Qaddafi’s forces in the area. The North Atlantic Treaty Organization can’t confirm the strike yesterday 10 miles (16 kilometers) southeast of the port hit rebels, an alliance official said. Twelve rebels were killed in a strike carried out as part of the alliance’s air campaign, the Associated Press reported, citing a doctor in the city. NATO “deeply regrets” any loss of life, said the official by telephone from Brussels who declined to be identified in accordance with alliance policy. A deadly strike on rebel forces would be the third of its kind since the campaign began.
  • U.S. ITC Votes to Impose Duties on Aluminum Goods From China. U.S. makers of most aluminum products are being harmed by imports from China, the U.S. International Trade Commission ruled in a decision that will lead to tariffs on those items. The final ruling today sets antidumping duties of about 33 percent and countervailing duties for subsidies that will be as much as 374 percent on importers from China. The products, used for construction and incorporated into window and door frames, accounted for $503 million of imports from China last year.
  • Gold Settles Above $1,531 as Dollar Wilts; Silver Soars. Gold settled at a fresh record high above $1,531 on Thursday, while silver soared to an all-time high, as a falling dollar and signs that the Federal Reserve would maintain a loose monetary policy boosted precious metals' appeal as a hedge against inflation and economic uncertainty. Silver briefly climbed to within a whisker of $50 an ounce, eclipsing the peak hit when Texan brothers William Hebert and Nelson Bunker Hunt sought to corner the silver market three decades ago. The metal later pulled back on technical selling.
Business Insider:
Zero Hedge:
New York Times:
  • Solar Panels Rise Pole by Pole, Followed by Gasps of 'Eyesore'. Like a massive Christo project but without the advance publicity, installations have been popping up across New Jersey for about a year now, courtesy of New Jersey’s largest utility, the Public Service Electric and Gas Company. Unlike other solar projects tucked away on roofs or in industrial areas, the utility is mounting 200,000 individual panels in neighborhoods throughout its service area, covering nearly three-quarters of the state.
Fox Business:
  • Portugal Bailout Terms Seen Ready in Days: Source. A package of conditions for Portugal to meet in return for a bailout from Europe and the IMF should be ready within days, a source said Thursday as ministers voiced confidence the negotiations were on track. European Commission and IMF officials have been in Portugal since mid-April, poring over the heavily indebted country's public accounts to come up with measures in return for a bailout that is expected to reach about 80 billion euros.
  • Gen-Probe(GPRO) Hires Morgan Stanley to Seek Buyer - Sources. Diagnostic-test maker Gen-Probe Inc (GPRO.O) hired Morgan Stanley (MS.N) to seek a possible buyer for the company, sources familiar with the situation said on Thursday. Gen-Probe stock was up 13.8 percent to $79.85 in Thursday afternoon trading after news of the potential sale was first reported by Bloomberg.
  • Biggest Changes in NYSE Short Interest. Short interest on the New York Stock Exchange rose 3.4 percent in early April compared with the last half of March, according to information released by the exchange this week.
  • US Seasonally Adjusted CP Market Rises in Week - Fed. The U.S. seasonally adjusted commercial paper market rose for a second consecutive week in the latest week, pointing to growing credit demand to fund payrolls and inventories, Federal Reserve data showed on Thursday.

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