What We’re Reading

by CC May 26, 2011 8:43 am • Commentary

S&P Futures:

1316.5    -0.10

Last Updated: 08:34:55 AM


Thursday’s Economic Calendar (Seeking Alpha)

  • Notable earnings before Thursday’s open: BIG, HNZ, SNE, TD, TIF, VIP
  • Notable earnings after Thursday’s close: MRVL, OVTI



The U.S. economy grew at a 1.8 percent annual rate in the first quarter, less than forecast, reflecting a smaller gain in consumer spending than previously calculated.

The revised rise in gross domestic product was the same as estimated last month and compared with a 3.1 percent gain in the prior quarter, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 2.2 percent increase.


World stocks rose from a two-month low on Thursday while the euro hit a one-week peak versus the dollar, helped by a report on China’s possible interest in “bailout” bonds for Portugal.

Asian stocks rose 1.7 percent and Wall Street was set for a firmer open after ending a three-day losing streak on Wednesday. This encouraged investors to buy the euro and risky assets, although uncertainty over whether Greece would need to restructure its debt capped gains.


“For the United States, the euro is a big concern,” said Nicolas Véron, a senior fellow at Bruegel, an economics research institute in Brussels, and a visiting fellow at the Peterson Institute in Washington. “The Americans want to avoid systemic instability.”

Seeking Alpha

Fitch, S&P less pessimistic on possible impact of Greek default. In contrast to Moody’s warnings about the effect of a Greek debt restructure on other European countries, Fitch and S&P seem less gloomy. Fitch said even a 50% haircut for bondholders would not deplete enough capital at German banks to cause a ratings change. “The worst consequence…for German and other European banks would be a sharp increase in general capital market and creditor risk aversion,” Fitch said. S&P said a Greek restructuring would not trigger a chain reaction resulting in the automatic downgrade of Ireland. And while the ECB has been firmly against Greece defaulting, the bank’s rules leave more scope for a restructuring than its rhetoric suggests.


Sales of distressed U.S. homes fell in the first quarter as demand remained weak, but they still made up about 28 percent of total sales, the highest amount in a year, a RealtyTrac report said Thursday.

Sales of homes owned by banks or in some stage of foreclosure totaled 158,434, down 16.5 percent from the fourth quarter and 35.8 percent from the first quarter of 2010.

Of that total, 107,143 were bank-owned sales and 51,291 were in default or scheduled for auction.

Distressed sales accounted for 27.5 percent of all residential sales, ticking up from 27 percent in the fourth quarter of last year, the report said.

It was the highest percentage of sales since the first quarter of 2010.


Greenlight Capital Inc. President David Einhorn called for Microsoft Corp. (MSFT)’s board to replace Chief Executive Officer Steve Ballmer, saying the software maker suffers from “Charlie Brown management.”

Ballmer is weighing on the company’s share price, Einhorn said yesterday at the Ira Sohn Investment Conference in New York. Even so, he recommended Microsoft shares because the stock trades at a “remarkable discount” to the Standard & Poor’s 500 Index while the business outperforms the average S&P company. Microsoft is Greenlight’s eighth-biggest U.S. stock holding.


Bonus: Only in D.C.

An increase in severe weather events in the US in recent years has depleted FEMA emergency funds. (NPR)

This spring, tornadoes in the Midwest and the Southeast plus flooding along the Mississippi River are adding up to major expenses for the federal government, which is asked to provide emergency aid to states and localities….

…The Federal Emergency Management Agency is pumping out millions of dollars in emergency assistance — nearly $150 million for individuals in storm-ravaged communities so far this year, officials say. State requests are still pending…

Where is the new money going to come from? A program intended to combat climate change. (CNN)

“FEMA is projecting that under the best-case scenario, the disaster relief fund will essentially run dry before the end of the fiscal year,” Aderholt said in a statement after his committee approved the bill…

…Under House rules, any increases for one agency’s budget must be offset with cuts to another program. To pay for the boost to FEMA’s budget, the committee cut money from a Department of Energy program that promotes the development of energy-efficient vehicles.