Late-Night Headlines
Bloomberg:
- Goldman Sachs Group Inc.(GS) and Morgan Stanley(MS) credit rallied after the U.S. Treasury said the lenders and eight other banks may buy back government shares, freeing them from oversight and pay curbs. Goldman Sachs’s $3.2 billion of 5.95 percent notes due in 2018 jumped 5.6 cents to a one-year high of 100.6 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Credit-default swaps on Morgan Stanley fell 11.5 basis points to 214.5 basis points, signaling an improvement in the perception of its credit, according to CMA DataVision in London. Credit-default swaps on Goldman Sachs fell 7.5 basis points to 137.5 basis points, according to CMA. Contracts on Citigroup Inc. declined 5 basis points to about 380, and Bank of America Corp. credit-default swaps dropped 15 basis points to 170 basis points.
- The U.S., the world’s largest corn producer, will harvest enough this marketing year to meet demand for feed, ethanol output and exports, U.S. Grains Council President Kenneth Hobbie said. “Will the U.S. have enough coarse grains to go around? The answer is yes,” Hobbie said at a conference in London organized by the International Grains Council today. “In the past two weeks, U.S. coarse grain producers got the job done.”
- Chesapeake Energy Corp., the second- largest producer of U.S. natural gas, and Southwestern Energy Co., the only company in the Standard & Poor’s 500 Energy Index to rise last year, say a bill in Congress threatens the technique that helped spur the domestic natural-gas boom in the past few years. Hydraulic fracturing would no longer be exempt from the Safe Drinking Water Act under a bill introduced today by U.S. Representatives Diana DeGette, Maurice Hinchey and Jared Polis, Democrats from Colorado, New York and Colorado, respectively. Companion legislation in the Senate was introduced by Senators Robert Casey, a Pennsylvania Democrat, and Charles Schumer, a Democrat from New York. The drilling method, which pumps one million gallons of water, 50,000 pounds of sand and chemicals into the ground at high pressure to fracture rock, would be in the U.S. Environmental Protection Agency’s jurisdiction should the bill pass. Production using hydraulic fracturing would almost come to a stop as the industry waits for the EPA to develop a system to handle millions of well permits, said Chris Tucker, a spokesman for Energy In Depth, a Washington-based energy coalition. Passage of the bill would mean drilling for so-called unconventional gas may plummet as much as 50 percent, according to a January study by the Energy Department’s Office of Fossil Energy. The bill would also be partly responsible for an annual 245 billion-cubic-foot drop in production, according to Energy In Depth. “We use a lot of water in whatever we do,” Southwestern Chief Executive Officer Steve Mueller said June 1 at a conference hosted by RBC Capital Markets. “From our perspective at our company, that’s one of the biggest issues out there, to make sure somebody in Washington doesn’t decide how you frack a well.” The bill could have a “significant impact” on the industry and Southwestern’s financial condition, the Houston- based company said in a regulatory filing. Legislative efforts to make permitting for hydraulic fracturing more stringent would have “an adverse effect” on operations, Chesapeake, based in Oklahoma City, said in a public filing. Hydraulic fracturing will be required for 60 to 80 percent of all the wells drilled in the U.S. over the next decade, said John Christiansen, a spokesman for The Woodlands, Texas-based Anadarko Petroleum Corp., the fourth-biggest producer of U.S. gas. “It’s already regulated by the states,” Christiansen said. “This is just another step that could stall development and end up impacting consumers by the amount they pay for their energy.” Hydraulic fracturing is “relatively far below the drinking-water level,” Jen Snyder, a principal at energy researcher Wood Mackenzie, said in a telephone interview.
- The U.S. Securities and Exchange Commission sued two California men on claims they ran an $80 million Ponzi scheme promising Korean-American investors annual returns of as much as 36 percent in foreign-currency trading. Peter Son, 37, and Jin K. Chung, 46, had about 500 investors in the United States, South Korea and Taiwan, the SEC said today in a civil suit filed at federal court in San Francisco.
- A U.S. bankruptcy judge approved the dropping of 789 Chrysler LLC car dealerships, a court filing showed. U.S. Bankruptcy Judge Arthur Gonzalez ruled today that the bankrupt car company’s plan to cut the dealerships is “an exercise of sound business judgment” and “appropriate and necessary under the circumstances.” A lawyer for a group of Chrysler dealers that sought to delay the company’s asset sale in May called it “unprecedented and improper.”
- Japan’s wholesale prices fell at the fastest pace in more than 22 years in May, adding to signs that deflation may take root in the world’s second-largest economy. Producer prices, the costs companies pay for energy and raw materials, tumbled 5.4 percent from a year earlier, the biggest slide since March 1987, the Bank of Japan said today in Tokyo.
- BHP Billiton Ltd., the world’s largest mining company, settled annual coking coal contract prices at about 58 percent less than 2008 as demand for the product used to make steel declines.
Wall Street Journal:
- The Obama administration is dropping its plan to cap salaries at firms receiving government bailout money, leaving them subject to congressionally imposed limits on bonuses, according to people familiar with the matter. The move is likely to end months of confusion on Wall Street about separate pay directives from the White House and Congress. The administration is expected to announce the compromise on Wednesday. In addition to standing behind the restrictions passed by Congress in February, the administration plans to push for broad changes in compensation practices across the financial-services industry, these people say.
- Oppenheimer & Co. is expanding its investment-banking group and is looking to hire five to 10 investment bankers over the next several months. Marshall Heinberg, head of investment banking, said Oppenheimer wants to add bankers to its roster and pick up displaced talent in the market.
- The European Central Bank expects further financial-sector weakness could help keep the euro-zone economy from expanding before the middle of next year, a top policy maker said in an interview. ECB officials believe the euro-zone recession could weaken the 16-nation bloc's strained banking system. "That is the reason why we are also cautious about the gradual recovery path in our scenario," said Yves Mersch, who sits on the ECB's 22-member Governing Council. In the interview, he said financial-sector weakness, which could push more European banks to fail, is "already penciled in" to policy makers' calculations. He suggested policy makers see their role shifting from actively shoring up the bloc's financial system and economy to monitoring the effect of measures they have taken.
- If imitation is the sincerest form of flattery, Imax Corp. should feel sincerely flattered. The steady stream of Hollywood films flowing through Imax theaters, combined with the development of a digital-projection system, have resulted in a large expansion of Imax's commercial-theater network in the last year. With many of the best locations off-limits due to exclusivity agreements between Imax and customers, some cinema chains have come up with their own large-format-style auditoriums.
- Texas elected officials Tuesday railed against federal efforts to curb global warming, claiming it would throttle the state's economy -- one of the few that generated job growth last year. State comptroller Susan Combs said that if passed, a landmark climate change bill winding its way through Congress could cost the state 164,000 jobs and shave some $25 billion per year, or 2%, off the state's total economic output. "Texas is the kitchen of the country. We cook up all of the products that are used elsewhere," said Ms. Combs, a Republican, referring to the state's large petrochemical and plastics industry. "The recipe for disaster is being cooked up in Washington D.C.," she added
- SEC Deluged by Support for Uptick Rule’s Return. If the Securities and Exchange Commission is seeking a consensus on its proposed measures to curb short selling of stocks, it has one. In the more than 800 letters the regulator has received since it put the proposal up for comment in April, investors, Mr. Adamson among them, are overwhelmingly calling for the return of the uptick rule, which restricts short selling when a stock's price moved downward in the most recent trade. It is seeking comment until June 19
CNBC.com:
The Supreme Court Tuesday evening, cleared the way for the U.S. government-backed sale of Chrysler to a group led by Italian carmaker Fiat, a victory for the bankrupt automaker and the Obama administration.
- The U.S. House of Representatives approved legislation on Tuesday intended to spur auto sales by providing consumers with up to $4 billion in cash vouchers to buy more fuel efficient vehicles. A similar proposal is working its way through the U.S. Senate where proponents continue to wrangle with political and procedural hurdles. President Barack Obama has urged Congress to quickly finalize the measure.
NY Times:
- In today’s recession-racked economy, penny-pinching is a national pastime. But people are still opening their wallets for smartphones. Sales of BlackBerrys, iPhones and other smartphone models are rising smartly and are projected to increase 25 percent this year, according to Gartner, a research business.
- The president of the Russian republic of Bashkortostan, who has hung on by his fingernails through repeated periods of friction with the Kremlin, pushed his luck last week when he gave a scathing interview to a Moscow newspaper, charging that Russia’s political institutions are “embarrassing to look at” and that the country "is walking away from the process of democratization."
- Don’t expect William A. Ackman to be appearing on any more episodes of “Squawk Box” any time soon. The outspoken hedge fund manger, who recently lost a high-profile proxy fight with Target, has decided to step away from the spotlight after receiving what he called “disappointing press,” including a highly critical article written by the New York Times financial columnist Joe Nocera.
- Fourteen months after being elevated to the governor’s job, David A. Paterson is deeply unpopular among New Yorkers, who doubt his ability to grapple with the state’s increasingly bleak economic situation, according to a poll by The New York Times, Cornell University and NY1 News. Voters have also taken a personal dislike to Mr. Paterson, who now is less popular in the state than his predecessor, Eliot Spitzer, who resigned in disgrace after being identified as the client of a prostitution ring. Only 21 percent of New York voters say they have a favorable view of Mr. Paterson. Seven in 10 respondents said he did not deserve to be elected in 2010.
IBD:
- He doesn't consider himself a bargain shopper. But he goes in for the deals he gets at the off-price Ross store. He says you can find the same brand-name clothes sold in department stores at Ross Stores (ROST) for a discount.
CNN:
- Two weeks change a lot in the oil markets. At the end of May CNNMoney.com ran a story asking if $60 oil will kill any economic recovery. 'No," most analysts said - consumers could shoulder $60 crude, and analysts didn't see prices going much higher. Now oil is touching $70 a barrel. Goldman Sachs recently said it sees crude at $85 by the year's end. With the economy still on life support, oil is drifting dangerously close to being the wet blanket at the recovery's party.
Rasmussen:
- Only 42% of those who currently own a General Motors car are even somewhat likely to buy a GM product for their next car. That figure includes just 30% who are Very Likely to do so. The latest Rasmussen Reports national telephone survey shows that 43% of current GM owners are not likely to buy another GM car, while 16% are not sure.
Politico:
- Sen. Ted Kennedy’s committee released a 615-page health care reform bill Tuesday, but left out the details for now on the most contentious issues, such as the public insurance option and the employer mandate. The Democratic bill from the Senate Health, Education, Labor and Pensions Committee includes some of the most liberal proposals under consideration on Capitol Hill – and was immediately met with deep skepticism from Republicans. “Unfortunately, the draft bill that Democrats released today is a partisan wish-list that will put us on the road to government-rationed health care,” said Sen. Mike Enzi (R-Wyo.), the ranking Republican on the HELP committee. “We’ve been meeting with Democrats for months to discuss health care reform, but from what I’ve seen in this proposal, it doesn’t look like they listened at all.”
Reuters:
- Google(GOOG) is looking to buy smaller technology companies to enhance its technology portfolio, Chief Executive Eric Schmidt said in an interview with the Fox Business network on Tuesday. Schmidt said Google plans to focus on the cloud, mobile, and open source distribution of software in the next year.
- Short interest on the Nasdaq and NYSE rose in late May, the exchanges said on Tuesday, suggesting bearish sentiment may be creeping back into the stock market after a three-month rally.
- A House of Representatives committee on Tuesday said it would subpoena the Federal Reserve to force the central bank to surrender documents regarding its role in Bank of America's takeover of Merrill Lynch last year. The subpoena comes two days before Bank of America Chief Executive Ken Lewis is set to testify before the House Oversight Committee, which is probing the transaction, what Lewis knew about Merrill's financial condition and potential regulatory pressure to complete the deal.
- The Obama administration and congressional Democrats got a clear view on Tuesday of the uphill political path they face in pushing for tighter regulation of U.S. banks and financial markets. With the economy showing some signs of recovery, Treasury Secretary Timothy Geithner told a Senate committee that President Barack Obama next week will unveil his long-awaited plan for sweeping financial regulation reform. Targeting not only banks and markets for change, but also executive pay, hedge funds and so-called "systemic risk" to the economy, the Obama plan has been evolving for six months. Some of its most ambitious proposals have softened amid aggressive lobbying by the financial services industry and intractable political realities in Congress.
- Leading Senate Democrats unveiled on Tuesday a plan to reshape U.S. healthcare that calls for sweeping insurance market reforms and prohibits insurers from denying coverage or charging more due to medical history. The measure also would require individuals to buy insurance, provide subsidies to help make coverage affordable and set up a new government plan to help provide medical coverage for the uninsured.
Financial Times:
- A top executive at SAP is set to outline a new strategy on Wednesday for delivering software over the internet, as the German software group struggles to respond to a market that poses a significant long-term threat to its business. The early pace in the market for on-demand software, also known as “software-as-a-service”, has been set by newcomers such as Salesforce.com, which normally charge a monthly subscription fee for customers to access their software over the internet.
Guardian:
- China is planning a vast increase in its use of wind and solar power over the next decade and believes it can match Europe by 2020, producing a fifth of its energy needs from renewable sources, a senior Chinese official said yesterday. Zhang Xiaoqiang, vice-chairman of China's national development and reform commission, told the Guardian that Beijing would easily surpass current 2020 targets for the use of wind and solar power and was now contemplating targets that were more than three times higher. In the current development plan, the goal for wind energy is 30 gigawatts. Zhang said the new goal could be 100GW by 2020. "Similarly, by 2020 the total installed capacity for solar power will be at least three times that of the original target [3GW]," Zhang said in an interview in London. China generates only 120 megawatts of its electricity from solar power, so the goal represents a 75-fold expansion in just over a decade. "We are now formulating a plan for development of renewable energy. We can be sure we will exceed the 15% target. We will at least reach 18%. Personally I think we could reach the target of having renewables provide 20% of total energy consumption."
CBC News:
- Lost in Apple Inc.'s unveiling Monday of the latest, faster version of its iPhone was the price cut of an older model to $99 US with a two-year contract with AT&T. The drop in price, announced at Apple's Worldwide Developers Conference in San Francisco, was expected, in one sense, as technology companies typically offer better deals on older models to get rid of excessive inventory and make way for pricier products, said Philip Redman, an analyst with Gartner. But in making a mobile handset with internet capabilities available for $99, Apple could also be signaling a shift in the mobile phone market, as smartphones move from a niche product to consumer mainstay.
Ming Pao Daily: China
China Securities Journal:
- China
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (URBN), raised estimates, boosted target to $27.
- Rated (DNDN) Buy, target $35.
- Reiterated Buy on (VZ), target $35..
- Reiterated Buy on (MCHP), target raised to $30.
Night Trading
Asia Ex-Japan Inv Grd CDS Index +.3%
S&P 500 futures +.13%.
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Global Commentary WSJ Intl Markets Performance Commodity Futures Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Earnings Calendar
Conference Calendar
Who’s Speaking? Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
Economic Releases
8:30 am EST
- The Trade Deficit for April is estimated to widen to -$29.0B versus -$27.6B in March.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +100,000 barrels versus a +2,866,000 barrel increase the prior week. Gasoline supplies are expected to rise by +750,000 barrels versus a -215,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,500,000 barrels versus +1,661,000 barrel gain the prior week. Finally, Refinery Utilization is expected to rise by +.2% versus a +1.15% gain the prior week.
2:00 pm EST
- The Monthly Budget Deficit for May is estimated to widen to -$181.0B versus -$165.9B in April.
- The Fed’s Beige Book
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are higher, boosted by commodity and financial stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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