Today's Headlines

Bloomberg:

• Fed Favors Exit Strategy of Raising Rates. Federal Reserve policy makers began to coalesce last month on a strategy to reverse record monetary stimulus by first ending their reinvestment policy and later raising interest rates and selling assets. Almost all officials agreed that the “first step toward normalization” should be ceasing reinvestment of principal payments on mortgage debt that began in August, the Federal Open Market Committee said in records of its April 26-27 session, released today in Washington. A majority preferred to sell the Fed’s securities after raising short-term interest rates, and most wanted to put asset sales on a preannounced schedule while using federal-funds rate increases as an “active tool.” The talks over the exit strategy don’t mean that tightening “would necessarily begin soon,” the report said. Policy makers agreed that the Fed’s securities portfolio, set to reach $2.6 trillion next month, would be shrunk “over the intermediate term” and return to “essentially only Treasury securities,” the minutes said. Some of the 10 voting FOMC members said that “there would need to be a significant change in the economic outlook, or the risks to that outlook, before another program of asset purchases would be warranted.” Another “few” members saw the “increase in inflation risks as suggesting that economic conditions might well evolve in a way that would warrant the Committee taking steps toward less-accommodative policy sooner than currently anticipated,” the report said.
• Oil Climbs Above $100 After Report Shows Unexpected Drop in U.S. Supplies. Crude oil climbed above $100 a barrel in New York after an Energy Department report showed an unexpected drop in U.S. inventories as refineries bolstered operating rates and imports declined. Oil advanced as much as 3.5 percent after the department said supplies fell 15,000 barrels to 370.3 million last week.
• Commodities Gain Most in a Week as Drought, Low Stockpiles May Curb Supply. Commodities gained the most in a week as drought in Europe and the U.S., lower energy stockpiles and crop delays in Brazil revived speculation of reduced supplies. The Standard & Poor’s GSCI Index of 24 raw materials gained 3 percent to 692.76 as of 5:47 p.m. in London, the biggest advance since May 9. Copper rose 2.8 percent, crude oil climbed 3.8 percent, wheat gained 5.8 percent and raw sugar jumped 3.6 percent.
• Silver May Drop 16% After Breaking 100-Day: Technical Analysis. Silver, which has plunged 33% since reaching a 31-year high last month, will drop another 16% by the end of the year, according to technical analysis by CommoditiesXpress LLC, a unit of MF Global.
• TEPCO Misleading Public Over Nuclear Crisis. Tokyo Electric Power Co. has made misleading statements about when it will stabilize its nuclear reactors crippled by the March 11 earthquake and tsunami, said Tetsuo Ito, head of the Atomic Energy Research Institute at Kinki University in western Japan. The company, known as Tepco, yesterday reiterated the schedule on its so-called road map announced a month ago to achieve cold shutdown of the three radiation-leaking reactors as early as October. Setting a timetable without knowing the condition of the reactor cores doesn’t make sense, Ito said in a phone interview from Osaka. “Only after understanding what’s going on inside the buildings and reactors, will it be clear what parts of the timetable are achievable,” Ito said. “Devising a road map without that will give the public a false sense of security.”
• Greek Debt Restructuring Would Jeopardize Rest of Europe, Bini Smaghi Says. European Central Bank Executive Board member Lorenzo Bini Smaghi rejected any debt restructuring for nations such as Greece as it would “jeopardize all of Europe.” A debt restructuring, whether “hard or soft,” would require a recapitalization of banks, which would be hard to carry out in a country that has defaulted, Bini Smaghi said in a speech in Milan today. “The state of public finances in Greece, Ireland and Portugal represents the biggest challenge of the coming years,” he said. “Time has been lost talking about how to come up with a way to reduce the debt, but if we accept this we’ll jeopardize all of Europe. A solution for reducing debt but not paying for it will not work.”
• Fisher Sells More Than $1 Billion of Emerging Stock ETFs in Contrarian Bet. Billionaire Kenneth Fisher said a surge in investor optimism toward developing nations spurred his money-management firm to sell more than $1 billion of emerging- market exchange-traded funds last quarter. Fisher Investments sold 20.6 million shares of the iShares MSCI Emerging Markets Index fund and about 2 million shares of the Vanguard MSCI Emerging Markets ETF, according to regulatory filings. The Woodside, California-based firm, which had held more than 20 million shares in the iShares fund since at least September 2008, cut its stake by 99 percent and was the top seller among more than 400 investors that reduced holdings in the period ended March 31, data compiled by Bloomberg show. “This is about sentiment having gotten too ebullient, too sanguine,” Fisher, who oversees about $44 billion as chief executive officer of Fisher Investments, said in a phone interview yesterday. “Things that lead a bull market early on reach a period at some point, which we think is about now, where they start to run out of steam.”
• Fed's Bullard Sees Europe Debt Crisis as Top Risk to U.S. Economic Outlook. Federal Reserve Bank of St. Louis President James Bullard said the European sovereign-debt crisis has surpassed rising oil prices to become the biggest risk to the economic outlook in the U.S. “I would have said oil a few weeks ago, but now with those prices retreating, just sitting here today, I’m a little more worried about Europe than anything else,” Bullard said today in an interview at Bloomberg’s global headquarters in New York.
• Apple(AAPL) iPad's 'Buzz Saw' Success Cuts Into PC Sales. The iPad is wreaking havoc on the personal-computer market. Hewlett-Packard Co. (HPQ)’s consumer PC sales plunged 23 percent last quarter, and the company lopped $1 billion off its annual sales forecast. And while rival Dell Inc. (DELL) beat analysts’ estimates because of corporate demand, its sales to consumers slumped 7.5 percent. More than 70 million tablets like the Apple Inc. (AAPL) iPad will be sold in 2011, a total that will balloon to 246 million in three years, Jefferies & Co. said yesterday. “You’re walking into a buzz saw,” Jane Snorek, a senior research analyst at Nuveen Asset Management in Milwaukee, said of the iPad. Her firm manages more than $200 billion in assets. “The tablet is going to replace at least the home computer.”

Wall Street Journal:

• With $4 Gas, More Folks Skip the Trip. Americans living paycheck to paycheck are looking at the gas gauge before they run their errands, and that's hurting big retail chains such as Wal-Mart Stores Inc. and Lowe's Cos. "Our customers are consolidating trips due to higher gas prices," said Wal-Mart U.S. head Bill Simon during the retailer's earnings conference call Tuesday. "One in five Wal-Mart moms list gasoline as a top expense behind housing and car payments."
• Check Out The Future of Shopping. A device that looks like a smartphone is making supermarket shoppers—and stores—happier. Perched on the handle of the shopping cart, it scans grocery items as the customer adds them to the cart. Shoppers like it because it helps avoid an interminable wait at the cashier. Retailers like it because the device encourages shoppers to buy more.
• Deere's(DE) Earnings Rise 65%. Deere & Co.'s fiscal-second-quarter earnings surged 65%, and the company raised its sales and profit forecasts for the year, as favorable market conditions for farm commodities continues to drive demand for farm machinery. Deere beat expectations for the quarter as farmers around the world responded to high crop prices by stepping up their purchases of tractors and harvesting combines. But the company's margin on farm machinery weakened, despite a big increase in sales.
• LinkedIn IPO Sizzles.
• The IRS Gets Political. The taxman goes after campaign donors.

CNBC.com:

• China Economic 'Facade' Starts to Show Cracks. China's economy is showing real signs of weakening, particularly in real estate, and even could tip into a recession, hedge fund manager Jim Chanos told CNBC. "The cracks are spreading in the facade," he said. "You're seeing real estate firms shutter, sales offices closed down. Some of the engine behind the boom is at least beginning to sputter." At least on the surface, the biggest perceived problem with China has been inflation.

Business Insider:

• The Best Quotes From Q1 Hedge Fund Letters: Kleinheinz Capital, Omega, And Passport.
• Meet The $2 Billion NYSE Company, Whose CEO Has a Vendetta Against America. There's a new Chinese video game called Glorious Mission that pits the Chinese army against America. In the game, you get to kill American soldiers. It turns out the game is made by a $2 billion NYSE-listed company: Giant Interactive. And there seems to be a pattern.
• The Man Who Wrote The Book on This Economy Demolishes Bernanke's QE2 "Gamble".

Zero Hedge:

• Libya Redux As US Escalates Syrian Showdown: Freezes Assets of President Bashar al-Assad.
• Another Chinese Fraud? Absaroka Capital Initiates Coverage of Yongue International(YONG) With a $1 Price Target.
  

New York Times:

• Rules for Employees Put the S.E.C. in the Hot Seat. The Securities and Exchange Commission is feeling more heat in Washington. As it prepares final rules on whistle-blowers in an effort to encourage corporate employees to disclose wrongdoing at their own companies, the agency has come under renewed criticism in Congress over how it handles its own employees, who often leave for jobs at private law firms and financial companies. Questions continue to arise about whether S.E.C. officials show favoritism as they look for their next jobs.

TheStreet.com:

• Tiger Global Grows Bullish on Netflix(NFLX), Apple(AAPL).

Seeking Alpha:

• Top Retail Picks by Fund Gurus Concentrated in the Sector.

CSA Agency:

• More than half of French people think that Dominique Strauss-Kahn is the victim of a plot, according to an opinion poll carred out by the CSA Agency. 57% replied that there was a plot against Strauss-Kahn while 35% said that this wasn't the case. The survey was carried out on May 16 by telephone with a sample of 1,007 people, CSA said.

The Financial Express:

• Worst Performer Among BRIC, Indian Bonds to Extend Drop on Spiraling Fuel Prices. Indian bonds, the worst performers among Bric nations, may extend declines as the biggest increase in gasoline prices in three years threatens to accelerate inflation, banks and primary dealers say. Yields on 10-year government debt will rise 10 basis points, or 0.10 percentage point, by June 30 to 8.40%, the highest level since October 2008, according to the median estimate of nine analysts in a survey.