Stocks Slightly Higher into Final Hour on Short-Covering, Investor Performance Angst, Growth Stock Gains

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Mixed
  
• Volume: Light
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 16.51 +2.80%
  
• ISE Sentiment Index 94.0 -42.33%
  
• Total Put/Call 1.02 -6.42%
  
• NYSE Arms 1.18 -24.62%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 93.07 +2.29%
  
• European Financial Sector CDS Index 126.67 +7.49%
  
• Western Europe Sovereign Debt CDS Index 241.50 +5.54%
  
• Emerging Market CDS Index 209.31 +1.42%
  
• 2-Year Swap Spread 25.0 +1 bp
  
• TED Spread 24.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 267.0 -2 bps
  
• China Import Iron Ore Spot $168.70/Metric Tonne +.12%
  
• Citi US Economic Surprise Index -81.30 unch.
  
• 10-Year TIPS Spread 2.34% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -32 open in Japan
• DAX Futures: Indicating +26 open in Germany

Portfolio:

• Higher: On gains in my Retail, Medical, Biotech longs and Emerging Markets shorts
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 hugs the flat line despite emerging markets inflation fears, soaring eurozone debt angst, global growth concerns, more disappointing US economic data and recent equity gains. On the positive side, Software, Disk Drive, Computer Service, Medical Equipment, Hospital, Education and Road & Rail shares are especially strong, rising more than +.75%. Small-Caps and cyclicals are outperforming. (IYR) has traded well throughout the day again. Growth stock leaders continue to strongly outperform. Oil is falling -.2% and the UBS-Bloomberg Ag Spot Index is down -.4%. Weekly retail sales rose +3.8% last week versus a +3.5% gain the prior week. On the negative side, Homebuilding, I-Banking, Bank, Telecom, Semi, Steel, Energy, Oil Tanker and Coal shares are under pressure, falling more than -.75%. (XLF) has underperformed throughout the day again. Gold is up +.91%, Lumber is falling -3.3%, copper is down -.4% and Rice is up +1.8%. Rice futures are up +17.0% in 5 days. The US price for a gallon of gas is +.01/gallon today to $3.57/gallon. It is up .43/gallon in less than 5 months. The Spain sovereign cds is up +8.71% to 293.43 bps, the Greece sovereign cds is up +12.4% to 2,168.19 bps, the Ireland sovereign cds is gaining +13.5% to 837.78 bps, the Italy sovereign cds is up +12.5% to 218.67 bps, the Belgium sovereign cds is up +11.38% to 167.0 bps, the Portugal sovereign cds is up +18.34% to 917.24 bps and the UK sovereign cds is up +7.75% to 67.73 bps. Moreover, the Eurozone Investment Grade CDS Index is rising +5.98% to 84.42 bps. The Italy sovereign cds is breaking out technically. As well, the Portugal and Ireland sovereign cds are hitting new record highs. European contagion fears are intensifying today, which is a major negative. As well, the situations in emerging markets with rising inflation and slowing growth are worsening more than most investors perceive, in my opinion. Given the extent of the bad news over the last 2 days and recent sharp equity gains, stocks remain extraordinarily resilient. I suspect this is mainly the result of how badly many large hedge funds are lagging this year and how swiftly markets rebounded last week. However, the news needs to improve very soon for the bulls or a meaningful pullback is is in the offing. I expect US stocks to trade modestly lower from current levels into the close on soaring eurozone debt angst, emerging markets inflation fears, global growth worries, profit-taking, more shorting and financial sector pessimism.

Today's Headlines

Bloomberg:

• Portugal Cut to Junk by Moody's Roils Spain, Italy Bonds as Risk Remains. Portugal’s downgrade to junk status and wrangling over the role of investors in a new Greek bailout package fueled concern about the solvency of the region’s high- debt nations, sending their bonds tumbling. The extra yield investors demand to hold Portugal’s 10-year bonds over German bunds surged 148 basis points to a euro-era record 949 after Moody’s slashed yesterday its credit rating four levels to Ba2, below investment grade. The yield on Italy’s 10-year bond reached the highest in almost three years, while Ireland’s 2-year yield topped 15 percent for the first time. “It’s a reminder that the sovereign debt crisis does not end with Greece and that risks remain with other nations in addition to Greece,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York.
• Sovereign, Corporate Credit-Default Swap Indexes Rise in Europe. The cost of insuring against default on European sovereign and corporate debt rose for a third day, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 11 basis points to 240.5 at 8:30 a.m. in London. Swaps on Portugal soared 67 basis points to 838, the highest level in more than a week, according to CMA. Contracts on Greece climbed 38 basis points to 1,962, Ireland jumped 25 to 760 and Spain rose 11 to 288, while Italy increased 11 to 209 and Belgium was 8 higher at 159. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings increased 13 basis points to 409, the highest in a week, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 3.25 basis points to 109.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 8 basis points to 168 and the subordinated index climbed 12 to 298.
• Company Bond Window 'Slams Shut' on Portugal. Portugal’s downgrade to junk may stifle corporate bond sales in Europe, killing off a mini- revival in issuance spurred by investor optimism about Greece’s efforts to avoid default. “The primary window has almost slammed shut just as spectacularly as it had flung open,” said Suki Mann, senior credit strategist at Societe Generale SA in London.
• Stress Tests May Show 26 Rated Banks Need Aid, Moody's Estimates. European stress tests may show that 26 rated banks of the 91 lenders being examined by the European Banking Authority could need financial support, Moody's Investors Service said today.
• Ireland May Be Next to Face Junk After Portugal. Ireland’s credit rating may be cut to junk by Moody’s Investors Service after Portugal yesterday lost its investment grade rating, according to analysts. “If not re-entering the public funding markets has significance for a sovereign’s rating, then clearly if our view proves correct, then Ireland will suffer an imminent downgrade,” Cathal O’Leary, head of fixed income sales at Dublin-based NCB Stockbrokers, said in a note today. The yield on Irish two-year notes climbed 239 basis points to 15.27 percent as of 2:35 p.m. in London, the first time it has been above 15 percent. The downgrade of Portugal highlighted “contagion risks” for Ireland, Goodbody Stockbrokers said today.
• EU Seeks to Curb Big Three Rating Firms After Portugal Downgrade. European policy makers lashed out at rating companies after Moody’s Investors Service cut Portugal’s debt to junk, reviving calls to curtail their clout. German Finance Minister Wolfgang Schaeuble said the grip of the big three rating companies had to be broken when asked about Moody’s downgrade. “I have said before that we have to curb the influence of the rating agencies,” Schaeuble told reporters in Berlin today. There’s a need to “break up” the companies’ dominance, he said. European Commission President Jose Barroso said he “deeply” regrets the timing and magnitude of Portugal’s downgrade by Moody’s and said proposals for increasing regulation of the rating companies in Europe would come out this year.
• U.S. Housing Recovery Stymied by Government. The two women, who haven’t met, illustrate the deadlock crippling the U.S. housing market five years into the crash: While a record share of Americans want to buy homes, U.S. policies, often working at cross-purposes, are making it more difficult. Government-controlled Fannie Mae and Freddie Mac have boosted standards so high that some people previously considered prime borrowers no longer qualify. That’s limiting a real estate rebound that also has been damped by a state attorneys general probe into foreclosure practices and an Obama administration loan-modification program that has fallen short of expectations.
• China Raises Rates to Counter Inflation. China raised benchmark interest rates for the third time this year, adding to efforts to cool the world’s fastest-growing economy after inflation accelerated to the quickest pace since 2008. The one-year lending rate will increase to 6.56 percent from 6.31 percent tomorrow, the People’s Bank of China said on its website. The one-year deposit rate rises to 3.5 percent from 3.25 percent. A government report next week will show that China’s inflation accelerated to 6.2 percent in June, according to the median forecast in a Bloomberg News survey of economists. Consumer prices rose 5.5 percent in May, the most since July 2008, mainly driven by food costs. Standard & Poor’s has cut the outlook for the nation’s property developers to “negative” on the likelihood of slower sales and lower prices. Hazards for the economy also include power shortages, a credit squeeze for small and medium-sized companies, and signs export demand is weakening.
• China Faces 'Crisis' If Monetary Policy Lossened, Xie Says. China faces an “inevitable crisis” if the government loosens monetary policy in the second half of the year, according to Andy Xie, an independent economist. “The market consensus is that China will loosen in the second half,” Xie, formerly Morgan Stanley’s chief Asia economist in Hong Kong, said on Bloomberg Television today. Such a move could boost inflation and investors should “duck for cover” if that happens, he said.
• Corporate Yield Gap at Post-Lehman High on Curbs: China Credit. The premium investors demand to hold China's corporate bonds rather than sovereign debt rose to the highest level since Lehman Brothers Holdings Inc. failed as central bank policies curb economic growth and earnings. The gap between yields on 10-year bonds issued by top-rated companies and government securities widened 47 basis points this year to 173, hitting a 33-month high of 176 on July 1, Chinabond data show.
• Service Industries In U.S. Expanded Slower. Service industries in the U.S. expanded at a slower pace in June, a sign the economy cooled at the end of the first half of 2011. The Institute for Supply Management’s index of non- manufacturing businesses decreased to 53.3, less than projected, from 54.6 in May. Economists forecast the gauge would drop to 53.7, according to the median estimate in a Bloomberg News survey. The non-manufacturing survey’s measure of new orders decreased to 53.6 from 56.8 the prior month, today’s report showed. A gauge of order backlogs dropped to the lowest level this year. A measure of business activity eased to 53.4 from 53.6 in May. The group’s employment gauge was little changed at 54.1 in June after 54 a month earlier. The index of prices paid declined to 60.9 from 69.6.
• Announced U.S. Job Cuts Rose 5.3% in June, Challenger Says. Employers in the U.S. announced more job cuts in June than a year earlier, the first increase since February and a sign the labor market is struggling to improve. Planned firings rose 5.3 percent to 41,432 last month from June 2010, according to figures released today by Chicago-based Challenger, Gray & Christmas Inc. The figures are consistent with others indicating weaker demand in the first half of 2011 has prompted some companies to trim their workforces. Employers in June probably boosted payrolls at a pace that failed to reduce the jobless rate, according to a Bloomberg News survey before a report in two days. “The employment picture remains a bit cloudy,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “Hiring is coming in spurts and is not quite robust enough to make a significant dent in unemployment.”
• Danish Nurses Challenge Hedge Funds by Financing Windmills. Kirsten Gosvig’s pension fund bought a $485 million stake in Denmark’s largest offshore wind-power project, an investment that’s forecast to earn at least twice the average historical return of hedge funds. PKA Ltd., which manages retirement money for the 40-year- old nurse, will earn 7 percent to 9 percent a year on the Anholt wind farm. That’s the view of PensionDanmark, which joined PKA in the first investment ever by pension funds in an unbuilt wind park at sea. The return would beat the HFRX Global Hedge Fund Index’s 2.8 percent compounded annual gain in the last 10 years. Pension funds are sinking money into offshore projects that banks consider too risky as the payback depends on unproven gear that will be pummeled by gales and corrosive salt water in a 20- year lifetime.
• Risk of Fastest G-20 Inflation Sends Yields Higher: India Credit. Investors are driving up yields on India's bonds by the most since April as economists say there is a risk inflation may accelerate to the fastest among the Group of 20 nations. Wholesale-price increases will touch 10% by September, eight of 10 analysts surveyed by Bloomberg News predicted, while the other two said the rate will be higher than the 9% estimated by policy makers.
• Gold Gains for Second Day as Europe Debt Concerns Boost Demand for Haven. Gold rose for a second straight day as mounting government debt in Europe boosted demand for the precious metal as a haven. The euro declined against the dollar after Moody’s Investors Service cut Portugal’s credit rating to junk, renewing concerns another European nation will need a bailout. Gold fell in the previous two weeks as Greece avoided a default. “You’re getting a flight-to-quality fear coming in for gold,” said Adam Klopfenstein, a senior market strategist at broker Lind-Waldock in Chicago. “With the anxieties in Portugal and the ongoing debt-ceiling problems in the U.S., there are too many bullish cases for gold.”
• U.S. Farmland Boom May Peak on Rates After Five-Year Surge, Rabobank Says. A five-year bull market in U.S. farmland values may peak this year as interest rates increase and crop prices decline, Rabobank International said. Land costs may fall by as much as 15 percent in the next seven years, Sterling Liddell and Vernon Crowder, vice presidents at the bank, said in an interview. Gains in the past five years ranging from as much as from 70 percent in Nebraska to 20 percent in California were spurred by record grain and livestock prices and the lowest borrowing costs ever, Rabobank said in a report released today. “Margins are once again expected to diminish as increases in the volume of commodity production combine with higher input costs to squeeze profit margins,” the analysts said in the report. “The result should be a slowing in U.S. agricultural land value growth, accompanied by occasional sharp decreases.”
• Goldman(GS) Took Biggest Loan in Fed Program. Goldman Sachs & Co. borrowed $15 billion from the U.S. Federal Reserve on Dec. 9, 2008 -- the biggest single loan from a program whose details have been secret until today. The central bank released data for its so-called single- tranche open-market operations, which lent as much as $20 billion at a time between March 7, 2008, and Dec. 30, 2008, as confidence in credit markets collapsed. The data were released in response to a Freedom of Information Act request by Bloomberg News.

Wall Street Journal:

• Blackstone(BX) Super Sizes $15 Billion Fund. Blackstone Group’s new buyout fund already seemed huge last December, as the firm put the finishing touches on its much-anticipated launch. At $15 billion, the new fund was the largest since the financial crisis. But the buyout fund has seen enough interest that it is now sized at $16 billion, according to people close to the matter. And, though the people don’t expect it to grow much larger, it could come in at about $16.5 billion, making it one of the largest buyout funds on record.
• Salaries Sliding for Recent Law School Grads. Even for the lucky members of the law school class of 2010 who found jobs, their average salaries were 10 percent lower than those of their predecessors, a new report reveals.
• Emissions Plan May Hit Luxury Cars. The U.S. government's future fuel economy regulations could saddle auto makers with steep fines or bar the sale of certain models. Instead of fees ranging from $5 to hundreds of dollars a vehicle sold in the U.S., companies that violate government standards could get hit with penalties up to $25,000 a vehicle beginning in 2016.
  

CNBC.com:

• Hedge Fund Tax Advocates Are Fooling Themselves. Multiply $22 billion by 0.2 to arrive at a revenue number of $4.4 billion per year. (Which assumes that hedge fund managers would not take steps—such as restructuring their partnerships or moving them off-shore—to avoid the taxes.)
• Small Businesses Cut Jobs in June After Four-Month Gain. U.S. small business owners cut jobs in June, breaking a four-month streak of growth as employment was dragged down by cutbacks at construction firms, a survey released on Wednesday showed.

Business Insider:

• What You Saw Today Was Basically Europe's Worst Nightmare Playing Out.
• CNN Cancels Eliot Spitzer's Show.
• The 15 Fastest Growing Retailers In America.
• From Paradise to Slum: Shocking Facts About the NYC Wealth Gap.
• U.S. Warns Terrorists May Try to Surgically Implant Explosives in Humans to Blow Up Jets.
• The Latest on the Wage Inflation Mess Breaking Out All Over China.
• Credit Crisis in Brazil: Consumer Loan Rates Hit 47%, Defaults Soar.
  

Zero Hedge:

• Fed Releases Details on Secret $855 Billion Single-Tranche OMO Bailout Program: Just Another Foreign Bank Rescue Operation.

Reuters:

• Exclusive: Germany Puts Greek Bond Swap Back on Table. Germany has put a Greek bond swap back on the table as a model for private sector involvement in fresh aid for Athens, Deputy Finance Minister Joerg Asmussen told Reuters Insider TV on Wednesday. "The model put forward by some French banks is still a good base for discussions and we are currently working on this," Asmussen said in the interview, referring to a French proposal to roll over Greek debt. "But since rating agencies have signaled that they will consider modalities (such as) the French proposal as a selective default -- that means a rating event -- we can also put other options like a bond exchange on the table," he said, adding discussions would take place over the summer break.

MoneyWeek:

• What China's Bad Debt Problems Mean For You. Chinese news site Caixin reported that the company building toll roads in the Yunnan province in southwest China had failed to repay its debts. Income from toll roads fell short of hopes, meaning the company couldn’t repay the loans granted to it by various banks. In the end the local government bailed it out. But as one source told Caixin: “the issue has merely gone from [being] on the table to [being] under the table.” Why does this matter? Because it might be the tip of the iceberg.

Folha de S.Paulo:

• Brazil's government has offered cancer treatment to Venezuelan President Hugo Chavez.

Jiji Press:

• BOJ Expected to Lower Growth Forecast. The Bank of Japan is expected to lower its forecast for the country's economic growth for fiscal 2011 in light of the steep downturn following the March disaster, informed sources said Wednesday. The central bank is likely to cut its growth forecast for the year ending next March to a level below 0.5 pct from the previously estimated 0.6 pct, the sources said. The BOJ's Policy Board will review the forecast made in April at a two-day monetary policy meeting starting Monday.

Shanghai Daily:

• Shanghai Loses Its Edge to Competing Regions. SHANGHAI has lost ground in commercial activities due to fierce competition from other cities in China, the Shanghai Commission of Commerce said yesterday. Commission Chairman Sha Hailin said the strategically important sector is a "life and death issue to Shanghai in the next five years." Sha said "this sense of urgency" will help push Shanghai to maintain its position.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.60%)

Sector Underperformers:

• 1) Steel -1.41% 2) Oil Tankers -1.31% 3) Semis -1.32%

Stocks Falling on Unusual Volume:

• BCS, MRO, TI, STD, SBNY, OVTI, NWSA, ZAGG, AIXG, VECO, ATMI, PEGA, OPEN, VMED, NTGR, PTEN, CSH and WMS
  

Stocks With Unusual Put Option Activity:

• 1) ACN 2) EMC 3) TM 4) AXL 5) CNX
  

Stocks With Most Negative News Mentions:

• 1) OC 2) INTU 3) BBBB 4) NTCT 5) IPGP
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.01%)

Sector Outperformers:

• 1) Road & Rail +1.04% 2) Disk Drives +1.04% 3) Gold & Silver +.83%

Stocks Rising on Unusual Volume:

• REDF, EGO, TZOO, SLW, NGD, TSO, MEDH, SODA, JVA, KCI, LVB, VHC, IMGN, SZYM and SAVE
  

Stocks With Unusual Call Option Activity:

• 1) BX 2) EUO 3) XRX 4) RDN 5) VHC
  

Stocks With Most Positive News Mentions:

• 1) VZ 2) AXL 3) SAVE 4) TSO 5) WAG
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Stocks Slightly Lower into Final Hour on Rising Euirozone Debt Angst, Emerging Markets Inflation Fears, Rising Food/Energy Prices, Profit-Taking

Broad Market Tone:

• Advance/Decline Line: About Even
  
• Sector Performance: Mixed
  
• Volume: Light
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 16.16 +1.83%
  
• ISE Sentiment Index 97.0 +5.43%
  
• Total Put/Call 1.10 +23.60%
  
• NYSE Arms 1.48 +256.63%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.99 +2.12%
  
• European Financial Sector CDS Index 115.67 +2.82%
  
• Western Europe Sovereign Debt CDS Index 228.83 +.37%
  
• Emerging Market CDS Index 206.49 -3.21%
  
• 2-Year Swap Spread 24.0 unch.
  
• TED Spread 25.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -1 bps
  
• Yield Curve 269.0 -1 bp
  
• China Import Iron Ore Spot $168.50/Metric Tonne +.18%
  
• Citi US Economic Surprise Index -81.30 +3.9 points
  
• 10-Year TIPS Spread 2.35% -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +48 open in Japan
• DAX Futures: Indicating +27 open in Germany

Portfolio:

• Higher: On gains in my Retail, Biotech and Tech longs
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 moves to session highs despite rising food/energy prices, emerging markets inflation fears, global growth concerns, increasing eurozone debt angst and recent equity gains. On the positive side, Education, Restaurant, REIT, Internet, Paper, Ag, Oil Service and Coal shares are especially strong, rising more than +.75%. Small-Caps are outperforming. (IYR) has traded well throughout the day. Growth stock leaders are also strongly outperforming. Copper is rising +.87%. On the negative side, Alt Energy, Oil Tanker, Defense, Semi, Bank, I-Banking, Insurance, Homebuilding and Airline shares are under pressure, falling more than -.75%. (XLF) has underperformed throughout the day. Cyclicals are also relatively weak. Oil is rising +2.3%, gold is up +1.86%, the UBS-Bloomberg Ag Spot Index is gaining +1.36%, Lumber is falling -1.9% and Rice is up +2.55%. Rice futures are up +14.7% in 5 days. The US price for a gallon of gas is +.02/gallon today to $3.56/gallon. It is up .42/gallon in less than 5 months. The Spain sovereign cds is up +2.78% to 269.71 bps, the Italy sovereign cds is up +6.9% to 195.17 bps, the Belgium sovereign cds is up +3.2% to 150.0 bps, the Portugal sovereign cds is up +4.16% to 771.61 bps and the UK sovereign cds is up +2.09% to 62.86 bps. Moreover, the Eurozone Investment Grade CDS Index is rising +4.8% to 79.59 bps. European contagion fears are rising today on the downgrade of Portugal's debt by Moody's. It surprises me that this was surprising to traders, which is a negative. Stocks remain short-term overbought. However, given the mostly negative news over the holiday weekend, today's healthy consolidation of recent gains is a big positive. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering, better economic data and technical buying.

Today's Headlines

Bloomberg:

• Portugal Ratings Cut to Junk by Moody's. Portugal’s long-term government bond ratings were cut to Ba2, or junk, from Baa1 by Moody’s Investors Service. The outlook is negative. The reductions stem partly from “the growing risk that Portugal will require a second round of official financing before it can return to the private market,” Moody’s said today in a statement. There is also “the increasing possibility that private sector creditor participation will be required as a pre-condition,” the ratings company said. Portugal is the second country rated non-investment grade by Moody’s, joining Greece, after winning a 78 billion-euro ($113 billion) international bailout in May as the Iberian nation struggles to repair its finances. Concern that Portugal won’t be able to fully achieve its deficit-reduction target was also a reason for the cut, Moody’s said.
• EU Stress Tests on Banks 'Missing the Point,' Credit Suisse Analysts Say. European regulators’ stress tests on 91 of the region’s banks are in practice assessing government bailout systems rather than the lenders themselves, analysts at Credit Suisse Group AG (CSGN) said. “Although exercises looking at the sensitivity of individual banks are not wholly without value, they are largely missing the point,” analysts led by Daniel Davies wrote in a note to clients today. “Everyone can do arithmetic on balance sheets. The information that the markets need is whether there is a well-organized and well-capitalized structure in place to recapitalize the failures.” Five or six Spanish savings banks may fail the tests and need as much as 12 billion euros ($17.4 billion), the analysts said. That would require the Spanish bailout fund, known as FROB, to borrow additional money in the six months after the results, the analysts said. The fund has about 12 billion euros in cash, and can boost its capacity to about 99 billion euros.
• Orders to U.S. Factories Rose .8% in May. Orders placed with U.S. factories increased in May, indicating manufacturing may rebound from a slowdown in economic growth in the first half of 2011. Bookings for manufacturers’ goods rose 0.8 percent, less than forecast, after a revised 0.9 percent decline in April that was smaller than previously estimated, figures from the Commerce Department showed today in Washington. Demand for durable goods that are meant to last at least three years increased 2.1 percent, while unfilled orders climbed the most since September.
• Crude Oil Advances to Two-Week High on Signs of Growth in U.S. and China. Crude oil climbed to the highest price in more than two weeks on signs of economic growth in the U.S. and China, the world’s two biggest oil consumers. Oil rose as much as 2.2 percent as data showed orders placed with U.S. factories increased in May, indicating manufacturing may rebound from a slowdown. China’s services industries expanded at the second-fastest pace this year as new orders and employment climbed. “As long as we can see the economy growing, we are going to see more strength in oil,” said Carl Larry, director of energy derivatives and research with Blue Ocean Brokerage LLC in New York. “If we settle above $96, it could be a strong sign for bulls, and oil may rise to $100 this month.” Crude for August delivery gained $2.03, or 2.1 percent, to $96.97 a barrel at 12:36 p.m. on the New York Mercantile Exchange. Prices reached $97.04, the highest intraday level since June 15.
• Dollar Rises as China Inflation Concern Spurs Safety Demand; Euro Declines. The dollar advanced versus most of its major counterparts on speculation China’s efforts to tame inflation will cool growth and damp demand for riskier assets. The euro dropped for the first time in seven days versus the greenback after Moody’s Investors Service said banks rolling over Greek bonds into new securities may incur impairment charges. “We had this insipient risk recovery last week, and it has all of a sudden stalled,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “Moody’s has been in the news saying that the recent rollover plan constitutes a credit event. We thought Greece was taken off the table last week, and it’s still there, so that’s taken the steam out of the euro.” he dollar appreciated 0.6 percent to $1.4464 per euro at 11:42 a.m. in New York, from $1.4539 yesterday, when it touched $1.4578, the weakest level since June 9. China is likely to raise rates to combat consumer-price increases that may have reached 6.2 percent in June, said the Economic Information Daily, citing market estimates. That followed comments by the People’s Bank of China yesterday that the country still faces “large” inflationary pressure.
• Greece's Only Option Now is to Leave the Euro, Share's Jacomb Writes in FT. The motives for the European Union’s “rescue” of Greece are to preserve the euro and to prevent another banking crisis, but the policy won’t work, said Martin Jacomb, the chairman of Share Plc, a former chairman of Prudential Plc and a former director of the Bank of England. Writing in the Financial Times, Jacomb said the EU’s future depends on enabling its poorest members to become competitive again, and that requires a quite different approach. Greece can’t earn its way out of the mess it’s in, Jacomb said, because its adoption of the euro made it uncompetitive, and that will be the case as long as the euro remains its currency. Regaining competitiveness always involves a temporary reduction in labor costs and living standards, and the only way that can be accomplished with relative harmony is through currency devaluation, he argued. Therefore, dismantling the euro is the least painful course of action for Greece and for the EU, Jacomb concluded.
• Immucor(BLUD) to Be Bought by TPG Capital for $1.97 Billion. Immucor Inc. (BLUD), maker of blood- screening systems for transfusions, agreed to be acquired by TPG Capital for $27 a share in cash in a deal valued at $1.97 billion. The shares rose above the offer price. The per-share offer is 30 percent more than Immucor’s closing price on July 1, the last trading day before the deal was announced, the Norcross, Georgia-based company said in a statement today.
• National Oilwell(NOV) Will Buy Ameron(AMN) for $772 Million to Gain Fiberglass Pipes. National Oilwell Varco Inc. (NOV), the world’s largest provider of oilfield equipment, agreed to buy Ameron International Corp. (AMN) for about $772 million in cash, gaining access to its pipeline-production company. Holders of Ameron will receive $85 for each share they own, Houston-based National Oilwell said today in a statement. The companies’ boards have approved the transaction, which may close as soon as the fourth quarter. The price is a 28 percent premium to Ameron’s closing price on July 1.
• China Discusses Allowing SEC Probes. U.S. and Chinese officials will meet next week to discuss giving American securities regulators the right to investigate companies within China for the first time, said two Chinese officials with direct knowledge of the plans. Representatives from the Securities and Exchange Commission and the Public Company Accounting Oversight Board will meet with counterparts from the China Securities Regulatory Commission in Beijing from July 11 to 12, said the officials, who asked not to be named because the talks are private.

Wall Street Journal:

• Moody's Warns on China Debt. Moody's Investors Service said China's main government auditor may have understated banks' loans to local governments by half a trillion dollars, escalating the ratings firm's warnings that the scale of such loans could pose a threat to China's banking system.‬ In the absence of a clear plan to reduce local-government debt, Moody's views the credit outlook for Chinese banking system as potentially turning to negative, the ratings firm said Tuesday.‬
• Strauss-Kahn Sex Case Appears Headed to Dismissal. After airing doubts last week about the credibility of the woman who accused former International Monetary Fund chief Dominique Strauss-Kahn of sexual assault, prosecutors now are no longer certain there was a crime after examining lies by Mr. Strauss-Kahn's accuser, according to law enforcement officials.
• Moody's Warns Banks of Greek Bond Impairment Charges. Banks rolling over some of their Greek debt into new instruments may have to take impairment charges, Moody's Investors Service said Tuesday, in another setback for efforts to involve private bondholders in a new international bailout. Rival rating firm Standard & Poor's Corp. on Monday rocked plans to involve the private sector in giving Greece more time to work out its fiscal problems by saying a proposal being promoted by French banks would likely put the country in "selective default."
• Rare-Earth Prices Decline Within China. Prices within China for some rare-earth metals posted their first monthly drop this year, ahead of a decision by Beijing on its global export quota for the metals. Domestic prices of some of the elements were down at the start of this month as much as 7.2% from a month earlier, Australian miner Lynas Corp. said. The decline suggested that a rush to acquire the metals—a group of 17 elements used in applications such as high-performance magnets and LED phosphors, and in products including iPads and Prius cars—may have eased in recent weeks.
• BofA's(BAC) Mortgage-Bond Pact Draws Challenge. A group of bond investors said it plans to challenge in court last week's proposed $8.5 billion settlement by Bank of America Corp. with holders of mortgage-backed securities.
• New Financing Values Twitter As High As $7 Billion. Twitter Inc., the fast-growing Internet messaging service, is privately raising hundreds of millions of dollars in a new financing round that values the company at as high as $7 billion, said a person familiar with the matter. The move comes seven months after Twitter, which lets people broadcast and read messages called tweets, raised $200 million in a financing round led by Kleiner Perkins Caufield & Byers that valued the company at $3.7 billion.
  

CNBC.com

• Retailers Should See Strong Back-to-School Season.

Business Insider:

• Almost Half The Kids in Fukushima Have Thyroid Radiation Exposure.
• Casey Anthony Found Not Guilty of Killing Her Daughter.
• That World's Longest Bridge in China Was Such a Rush Job, It Already Has Safety Problems. These types of incidents are piling up. Also recently Chinese officials had egg on their face after a big high-speed rail project could not go as fast as planned. These shoddy investments have financial implications, since revenues from these projects (or expected economic benefit from them) are crucial to the health of those heavily indebted Chinese municipalities that suddenly everyone is talking about.
• As Its CDS Spreads Widen, Suddenly Everyone is Talking About China's Government Debt. (graph)
  

Zero Hedge:

• Summary June Hedge Fund Performance.

LA Times:

• Goldman Sachs(GS) Flexes Its Lobbying Muscle. The investment bank has bolstered its Washington presence significantly, turning a low-key lobbying operation into a sophisticated, high-powered enterprise led by a well-connected former congressional staffer, Michael Paese. Facing the wrath of the public and the government after the global financial crisis that hit three years ago, Wall Street titan Goldman Sachs Group Inc. has opened a new front for its aggressive business tactics — the nation's capital. Increased federal oversight and the threat to its lucrative investment bank business from investigations and pending regulations have led Goldman to bolster its Washington presence significantly, turning a low-key lobbying operation into a sophisticated, high-powered enterprise.
  

Washington Post:

• Global Race on to Match U.S. Drone Capabilities. At the most recent Zhuhai air show, the premier event for China’s aviation industry, crowds swarmed around a model of an armed, jet-propelled drone and marveled at the accompanying display of its purported martial prowess. In a video and map, the thin, sleek drone locates what appears to be a U.S. aircraft carrier group near an island with a striking resemblance to Taiwan and sends targeting information back to shore, triggering a devastating barrage of cruise missiles toward the formation of ships. Little is known about the actual abilities of the WJ-600 drone or the more than two dozen other Chinese models that were on display at Zhuhai in November. But the speed at which they have been developed highlights how U.S. military successes with drones have changed strategic thinking worldwide and spurred a global rush for unmanned aircraft.
• Mobile Payments to Triple to $670 Billion by 2015; Digital Goods Will Represent 40% of Transactions. Juniper Research is releasing a new study today that reports that the transaction value of mobile payments for digital and physical goods, money transfers and NFC (Near Field Communications) transactions will reach $670 billion by 2015, up from $240 billion this year. The top 3 regions for mobile payments (East Asia and China, Western Europe and North America) will represent 75% of the global mobile payment gross transaction value by 2015. Digital goods payments will account for nearly 40% of the market in 2015.

cnet News:

• iPhone 5 Order: 15 Million for Sept. Launch, Report Says.

Reuters:

• Netflix(NFLX) Expands Online Service to Latin America. Netflix Inc is expanding its online video service to 43 countries in Latin America and the Caribbean, sending its shares up more than 6 percent.
• Hedge Fund Giants Are Coming Up Small This Year.
• Euro Zone Growth Slows, Orders Dry Up - PMIs. European services growth slowed in June in the face of sluggish new orders and rising interest rates, giving firms less optimism about the year ahead, business surveys showed on Tuesday.

Handelsblatt:

• Forty percent of German investors see the Greek debt crisis spreading to Spain and Italy, citing a survey of almost 1,000 respondents conducted by the Frankfurt-based Sentix Institute.

Shanghai Daily:

• Slow Home Sales. BUYING sentiment for existing properties in Shanghai fell for the first time in four months in June as an uncertain market outlook kept more home seekers on sidelines, industry data showed yesterday. A total of 13,100 units, or 1.16 million square meters, of existing properties were sold across the city in June, a month-on-month decrease of 7.3 percent and 9.8 percent, Century 21 China Real Estate, operator of the city's largest estate chain in terms of outlet numbers, said in a report released yesterday. It was the first monthly loss registered since March, as more potential buyers, in fear of further tightening measures from the government in the second half, chose to take a wait-and-see attitude, said Huang Hetao, a Century 21 analyst.