LATEST:- U.S. Markets Wrap: Stocks, Treasuries Rise on Improved Outlook

By Dakin Campbell and Matt Townsend

July 20 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index to its highest level since November, as a gauge of economic indicators topped projections and speculation grew that CIT Group Inc. will avoid bankruptcy. Treasuries rose and the dollar fell.

Caterpillar Inc. and Alcoa Inc. rallied at least 3.7 percent as the Conference Board’s gauge of the economic outlook increased for a third straight month. CIT Group jumped 79 percent as a person briefed on the board’s deliberations said the lender has reached a financing agreement with bondholders. Federal Reserve Chairman Ben S. Bernanke may outline his strategy tomorrow for exiting history’s biggest monetary expansion in testimony to Congress.

“Given the general weakness of the economy and concerns over corporate profitability going into the second quarter, reports to date have been a pleasant surprise,” said Dean Gulis, part of a group that manages $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. “This week it’s going to continue to rally. The worm has turned a little bit. People are feeling better about the economy.”

The S&P 500 added 1.1 percent to 951.13 at 4:05 p.m. in New York, above its best close since Nov. 5. The Dow Jones Industrial Average rallied 104.21 points, or 1.2 percent, to 8,848.15, erasing its loss for the year and closing at a six- month high. Treasuries rose, pushing yields down from the highest levels in almost four weeks, amid speculation Bernanke may ease inflation concerns. The dollar dropped to a six-week low against the euro.

Industry Groups

All 10 industry groups in the S&P 500 rose today, led by consumer, commodity and industrial shares. Goldman Sachs Group Inc. boosted its forecast for the index, saying improving earnings will spur the steepest second-half rally since 1982. The bank raised its year-end target for the S&P 500 to 1,060, a 15 percent increase from its projection of 940 on June 30.

Earnings topped analysts’ estimates by an average of 15 percent for S&P 500 companies that reported quarterly results since July 8, according to data compiled by Bloomberg, with 35 out of 43, or 81 percent, beating estimates.

Ten-year note yields fell the most in six days before the central bank chairman’s semiannual economic report to lawmakers at 10 a.m. tomorrow in Washington. U.S. debt fell earlier and stocks rose as CIT, seeking to stave off bankruptcy, was said to be offered financing from bondholders, damping demand for the safety of government debt.

Testimony

“The focus of Treasuries is on Bernanke’s testimony,” said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee. “We are caught in a summertime range trade. The general feeling is that he will say things are getting better, but make no mention of when the economy will do a full turn.”

The 10-year note’s yield fell four basis points, or 0.04 percentage point, to 3.61 percent at 5:03 p.m. in New York, according to BGCantor Market Data. It earlier touched 3.72 percent, the highest level since June 23. The price of the 3.125 percent security maturing in May 2019 rose 11/32, or $3.44 per $1,000 face amount, to 96 1/32.

The dollar fell while the yen slid as the possibility of a CIT debt restructuring encouraged higher-yield demand. The U.S. currency declined 0.8 percent to $1.4234 per euro at 5:03 p.m. in New York, from $1.4102 on July 17. It reached $1.4249, the weakest level since June 5. The yen depreciated 0.9 percent to 134.11 per euro from 132.85 after trading at 134.76, the weakest level since July 3. Japan’s currency traded at 94.22 versus the dollar, compared with 94.19.

‘Risk Assets’

“People are looking for risk assets, not with a lot of conviction, but with equities there is some appetite,” said Brian Kim, a foreign-exchange strategist in Stamford, Connecticut, at UBS AG, the world’s second-largest currency trader. “They’re leaning away from safe havens, and the dollar and yen kind of suffered.”

The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, touched 78.799, the weakest level since June 3. The index, which reached the highest in almost three years on March 4 and the lowest in 2009 on June 2, traded in a range of about 1.5 points above or below 80 since the beginning of last month.

Crude oil rose for a fourth day. The commodity advanced after a measure of economic indicators signaled that the worst of the recession is over. The Conference Board’s gauge of the outlook for the next three to six months increased 0.7 percent, more than forecast, and climbed three straight months for the first time since 2004.

‘A New High’

“We’ve reached a new high on the back of the weak dollar and equity market strength,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “There’s increased optimism and some earnings are better than expected.”

Crude oil for August delivery rose 48 cents, or 0.8 percent, to $64.04 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices reached $64.90, the highest since July 7. Oil has gained 44 percent this year.

Gold climbed to a five-week high as a weaker dollar and higher oil prices boosted the metal’s appeal as an alternative investment and a hedge against inflation.

Gold futures for August delivery gained $11.30, or 1.2 percent, to $948.80 an ounce on the New York Mercantile Exchange’s Comex division. Earlier, the price reached $955.40, the highest for a most-active contract since June 12.

“Gold is moving up today due to the lower U.S. dollar,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis.

LATEST:- CREDIT MARKETS: Goldman Earnings Boost Market; CIT Stabilizes

   By Kellie Geressy-Nilsen
  Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Credit markets were lifted Tuesday as Goldman Sachs Group Inc. (GS) beat analysts' estimates for second-quarter earnings, helping to give a much-needed boost to the battered bank and finance sector.

Goldman posted record profits - reporting second-quarter earnings of $3.44 billion, 65% higher than last year's $2.06 billion. The better-than-expected results inspired investors and helped to buoy financial bonds and cut the cost to protect them.

Goldman credit default swaps were down sharply following the second-quarter results, quoted at 142 basis points, down from 150 basis points prior. CDS levels on other finanicals were also down, according to Phoenix Partners Group.

And risk premiums on Goldman's outstanding non-guaranteed bank debt narrowed by as many as 10 basis points, according to one bond trader.

Earnings reports from Citigroup (C), JPMorgan Chase (JPM) and Bank of America Merrill Lynch (BAC) are expected later this week.

Meanwhile, CIT Group Inc. (CIT) may be getting some aid from the federal government, but a decision on whether or not the lender will be spared from bankruptcy filing is still pending.

And despite a concrete decision by the government pertaining to aid, some think that a bankruptcy of CIT isn't imminent. Goldman Sachs analysts Louise Pitt and Joseph Schatz write that restructuring of its existing capital and debt structure is a priority which could lead to government aid. But even if CIT is able to carry out initiatives to boost its near-term liquidity, the analysts are still concerned over the viability of CIT from a longer-term funding and profitability perspective compared with larger, better-rated domestic banks.

Also Tuesday, the U.S. Department of Justice announced it had opened an investigation into the complex market for credit default swaps - a sector of the market that was a major contributor to the credit crisis.

Market Group Holdings Ltd. received a request from the DOJ's antitrust division for information relating to price transparency in the credit derivatives and related markets, according to one person familiar with the inquiry.

"We will work with the Department to provide any information requested of us," Markit said in a statement. Markit buys and distributes some news feeds from Dow Jones Newswires.

Still, credit derivative markets showed little reaction to news of the probe.

   Corporates See Moderate Activity

The high-grade corporate bond market was relatively quiet on Tuesday, as the focus remained on earnings reports.

CareFusion Corp., was in the market with a benchmark-sized three-part bond offering that included three-, five- and 10-year senior notes. Deutsche Bank, Goldman Sachs and UBS served as active bookrunners for the issue. CareFusion is set to become public from the planned spinoff of Cardinal Health's clinical and medical products businesses.

And the benchmark high-grade credit derivatives index, the Markit CDX North America Investment Grade derivatives IG12 index, was last quoted 3.5 basis points narrower on the day to 139 basis points, according to Phoenix Partners Group.

The high-yield market was generally flat, with activity again dominated by CIT Group Inc. (CIT). Several CIT issues stabilized and traded slightly higher on the day, after falling in previous days, amid reports that CIT remains in talks with the government about receiving some sort of federal aid.

Several market participants said they anticipate some sort of debt exchange offer may be in CIT's future, citing a similar offer by GMAC that reduced that company's debt burden before the government stepped in with assistance.

The cost of protection on CIT's senior bonds via credit-default swaps fell initially Tuesday, to 37 points upfront from 41 late Monday, but rose again later to 40 points upfront, according to Phoenix Partners Group, which noted that trading in the CDS was limited. That means it now costs about $4 million plus a $500,000 annual fee to insure $10 million of CIT bonds for five years.

   Commercial MBS Index Hit

Bonds backed by commercial mortgages were hit Tuesday after Standard & Poor's downgraded several CMBS issues.

The CMBX Series 5, the most recent derivatives index based on bonds backed by commercial mortgages, was down by three points to 72 cents on the dollar, according to Derrick Wulf, a senior portfolio manager at Dwight Asset Management in Burlington, Vt.

S&P cut several of these securities because of a recent change in its rating methodology.

   Mortgages and Agency Debt

Mortgages pulled back after widening earlier in the day, says John Sim of JPMorgan. According to Sim, the current coupon spread over a blend of 5-year and 10-year Treasurys narrowed about half a point to 145 basis points.

Spreads widened out even further in Agency market afternoon trading, according to Tradeweb, amid a sell-off and correspondingly rising rates in the Treasury market.

Short-term paper continued to be the hardest hit, but 5-year, 7-year and 10-year paper followed suit.

Agency spreads had narrowed into the low single digits, before the widening this week. Fannie Mae 1.375% 2-year notes were recently quoted 4 basis points wider at 8 basis points/5.3 basis points bid/offer, according to Tradeweb.

   Treasurys

Treasury prices fell again Tuesday as investors, cheered by stronger-than-forecast retail-sales data and upbeat earnings from Goldman Sachs, moved away from the relative safety of the government bond market.

Data that showed an unexpected hefty boost in producer prices also gave investors pause about heading into Treasurys, especially longer-term ones. Higher inflation hurts long-dated Treasurys as rising prices eat into fixed returns. The day's losses built on weakness Monday, when Treasurys fell as stocks rose.

Selling has put the brakes on the rebound Treasurys were making over the past month, which had pushed the 10-year note's yield down more than 50 basis points after pushing up to 4% in early June.

In afternoon trade Tuesday, the 10-year note was off 28/32 to yield 3.46%. The 10-year was yielding 3.30% on Friday. The 30-year bond was in the worst shape, down by 2 to 4.36%. The two-year note was down 2/32 to yield 0.94%. Bond yields move inversely to prices.

- By Kellie Geressy-Nilsen; Dow Jones Newswires; (212) 416-2225; kellie.geressy@dowjones.com

LATEST:-U.S. Stocks Fall, S&P 500 Completes Fourth Straight Weekly Loss

July 10 (Bloomberg) -- U.S. stocks dropped, sending the Standard & Poor’s 500 Index to a fourth straight weekly loss, as a deeper-than-estimated slide in consumer confidence added to concern the economic recovery will be delayed.

CIT Group Inc., the century-old lender that trades in the bond market as if it may fail, slid 18 percent on concern the Federal Deposit Insurance Corp. won’t guarantee its bond sales. Chevron Corp. helped lead the Dow Jones Industrial Average lower as oil completed its worst weekly drop since January and the company said the weaker dollar was slashing profit. Technology shares rose, limiting the market’s slide, following analyst upgrades of Yahoo! Inc. and MEMC Electronic Materials Inc.

“We’re finding out that the economy is not recovering in any significant way at all,” said Christian Thwaites, president and chief executive officer of Sentinel Investments in Montpelier, Vermont, which manages $19 billion. “The market is still relatively expensive on a current earnings basis.”

The S&P 500 slipped 0.4 percent to 879.13 at 4:08 p.m. in New York and lost 1.9 percent over the past five days, capping its longest weekly losing streak since March. The Dow declined 36.65, or 0.5 percent, to 8,146.52. Less than 7 billion shares changed hands on all U.S. exchanges, the slowest trading day since Jan. 2. Equities extended their declines as the Reuters/University of Michigan index of consumer confidence trailed economist estimates.

Recession Concern

The S&P 500 has dropped more than 7.1 percent since June 12 on concern its rebound of as much as 40 percent since March outpaced prospects for a recovery from the longest slump in profits on record. The index is trading for about 14 times its companies’ earnings over the past 12 months, compared with about 10 times on March 9, the day the gauge slid to a 12-year low.

The worst recession in half a century may be prolonged because consumers see few signs that job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.

The U.S. needs another stimulus package because President Barack Obama’s initial $787 billion plan hasn’t been implemented fast enough, according to Shiller. Roubini, the economics professor at New York University who predicted the financial crisis, said the recession will likely continue for six months as companies struggle to pay their creditors.

The economy shrank 5.5 percent in the first quarter and 6.3 percent in the fourth quarter of 2008, the worst six months since 1958, according to data compiled by Bloomberg.

Analysts estimate profits of S&P 500 companies fell 35 percent last quarter from a year earlier after plunging 33 percent in the first quarter, Bloomberg data show. They forecast a 21 percent year-on-year drop in the third quarter.

Chevron’s Slide

Chevron declined 2.7 percent to $61.40. The second-biggest U.S. energy producer said the falling dollar slashed overseas profit from oil and natural-gas wells by almost $7 million a day during April and May, more than double the impact of currency fluctuations during the second quarter of 2008.

Crude oil fell 0.9 percent to $59.89 a barrel in New York, the lowest settlement in almost two months, on concern a prolonged global recession will sap demand for energy. Crude plunged 10 percent this week.

CIT Group tumbled 18 percent to $1.53. The Federal Deposit Insurance Corp. is unwilling to guarantee the company’s bond sales because the commercial lender’s credit quality is worsening, according to people familiar with the regulator’s thinking.

Technology Outperforms

Technology companies added 0.4 percent as a group, the best performance among 10 industries in the S&P 500. MEMC Electronic Materials rose 3 percent to $16.61. The maker of silicon wafers for solar modules and semiconductors was raised to “buy” from “hold” at Citigroup Inc., which said the company is “starting to reap meaningful cost reductions.”

Yahoo gained 2.6 percent to $14.93. The owner of the world’s second-most-used Internet search engine was raised to “market weight” from “underweight” by Thomas Weisel Partners analyst Christa Quarles.

SanDisk Corp. increased 3.2 percent to $14.47. Morgan Stanley lifted its 2010 earnings-per-share estimate for the biggest maker of flash-memory cards and said the company’s 2009 loss was likely to be narrower than it previously estimated.

Dell Inc. rose 0.5 percent to $13.22. Goldman Sachs upgraded the world’s second-biggest maker of personal computers to “conviction buy” from “neutral.” Goldman raised its rating on the computer-hardware industry to “attractive” from “neutral,” saying “downward estimate revisions are mostly behind us” and “we see greater upside than downside to estimates into the seasonally stronger second half of the year and in 2010.”

Faster Growth Forecast

The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey showed.

Growth will average 1.5 percent in the July-to-December period, compared with last month’s 1.2 percent projection, according to the median of 57 forecasts in the survey taken from July 2 to July 8. The jobless rate will exceed 10 percent early next year and average 9.8 percent for 2010.

IBM fell 1.2 percent to $100.83. The world’s biggest computer-services provider was downgraded to “neutral” from “buy” at Goldman Sachs, which said investors will “shift their focus from earnings resiliency in a period of soft demand to companies with greater operating leverage and higher top-line growth as tech spending improves.”

LATEST:- More and better human resource needed in Islamic Finance: Dr. Ishrat

KARACHI: Former Governor, State Bank of Pakistan, Dr Ishrat Hussain has said there is a need to invest in creation of a pool of bankers conversant with Islamic banking in order to help the sector grow faster.

Speaking at the inaugural session of Islamic Capital Conference on Wednesday, he said there is a shortage of human resources in Pakistan with expertise in Islamic banking.

He further said there was need for standardisation of Islamic banking products, in absence of which, the cost of transactions would rise substantially because of requirement of fatwa for every transaction.

Increased penetration in rural areas: Number of borrowers from banks, which rose to 5.5 million from one million during the last eight years, could easily double if Islamic banks take measures to penetrate in the rural areas, shanty towns in urban centres, mandi towns, comprising of small and medium enterprises, small farmers and self-employed persons, he said.

Access to agriculture credit, SME financing, low cost housing finance, etc. will relax the credit constraint these individuals and businesses face today in expanding their business or investing in productivity or building assets, he said.

He said most of the conventional banks’ presence is limited to metropolitan areas and big cities. Large rural areas and mandi towns have a large untapped client base waiting for Islamic financial products to become accessible and available to them.

“Islamic banks can spread their geographical presence by locating their branches or other delivery channels in these potentially attractive but underserved areas and use IT tools and alliances with post offices, and other distribution outlets to develop a cost-effective business model,” he said.

He said rural areas in Pakistan are a reliable and sustainable pool for mobilising low cost deposits, which can provide a stable source of funding for Islamic banks that will not only cover their extra costs but also give them a competitive edge.

“Ijara products for agriculture implements, tube-wells, processing and dairy equipment, cold storage, warehousing, transport, etc. will be highly popular in these areas,” he said.

Extra precautions: He said Islamic banks had to take extra precautions and safeguards to ensure that they meet the exhaustive requirements to be Shariah compliant. “The perception that Islamic banks are simply mimicking conventional finance products is not going to go well with the large illiterate and uneducated population that forms the bulk of the future client base for Islamic banks,” he said. “This requires that the clients of Islamic banking must have business that should be socially beneficial for the society creating real wealth and adding value to the economy rather than making paper transactions.”

He said commingling of funds and even a semblance of contamination with non-Shariah compliant products and services should be scrupulously avoided. “The Islamic banks must ensure that funds are directed towards identifiable and acceptable productive activities,” he said.

He said there was a huge demand for Islamic capital in Pakistan and Bangladesh, but there was limited supply. Conversely, there was huge amount of Islamic capital in the GCC countries, but the demand was thin, he said.

Wall Street set to fall on recovery caution, oil

EW YORK (Reuters) – Wall Street was poised to fall nearly 1 percent at the open on Monday, weighed by worries about the potential strength and timing of an economic recovery as a slump in oil prices was set to pressure energy shares.

Oil touched a five-week low and fell to around $64 a barrel as investors remained cautious over the prospects of a speedy global economic turnaround in the wake of last week's grim U.S. jobs data. Shares of Exxon Mobil (XOM.N) were down 1.7 percent at $67.30 in premarket trade.

Although the weaker oil prices bode well for recession-weary consumers, strong commodity prices have been viewed as a signal the global economy is stabilizing.

Last week's much weaker-than-expected jobs data weighed heavily on the market as investors questioned what the economic recovery will look like and when improvement will be seen.

The S&P 500 is up 32.5 percent from March's 12-year lows after a rally spurred by bets the economy will show signs of recovery later in the year. The market run-up has stalled of late as investors have become more cautious and booked some profits.

Market-watchers were also focusing on the start of earnings season, which kicks off with Alcoa Inc (AA.N) this week.

"A little bit of fear factor is back into the marketplace," said Peter Cardillo, chief market economist at Avalon Partners in New York.

"The unemployment report was not a good report, and it does cast some doubt, but I don't think it reverses the trend (of stabilization)," he said.

Investors will take in the latest data with a look at the services sector as the Institute for Supply Management releases its June nonmanufacturing index at 10:00 a.m. EDT.

Economists' median forecast in a Reuters poll call for a nonmanufacturing index reading of 46.0, below the 50 mark which divides expansion from contraction but up from May's reading of 44.0.

S&P 500 futures fell 7.5 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures slid 57 points, and Nasdaq 100 futures lost 7 points.

A U.S. judge on Sunday approved General Motors Corp's (GMGMQ.PK) bankruptcy sale in a move that will allow the company's most profitable assets to exit bankruptcy protection under government ownership.

Over the weekend, Vice President Joe Biden said the White House does not favor another stimulus package now, though he said that when the current administration came into office, it misread how bad the economy was.

Stocks tumbled on Thursday, driving the S&P 500 down to its third-straight weekly loss after data showed a slide in June non-farm payrolls. U.S. markets were closed on Friday for the Independence Day holiday.

(Editing by Padraic Cassidy)

LATEST:-Crude Oil Trades Near $71, Snapping Four Weeks of Increases

By Christian Schmollinger

June 19 (Bloomberg) -- Crude oil snapped four weeks of gains, trading little changed near $71 a barrel in New York, as fuel demand remained weak even as data showed that the global economy may be recovering from the recession.

Oil traded in a $3 range this week after rising 28 percent in the previous four. The index of U.S. leading economic indicators rose in May, the U.S. Commerce Department said yesterday. Petroleum products demand in the U.S., the world’s largest energy user, fell 6 percent over the past four weeks to June 12 from a year ago, the Energy Department said June 17.

“The available data do show that the world is no longer dropping off a cliff,” said Victor Shum, a senior principal at Purvin & Gertz Inc. in Singapore. “The concern is that if you look at oil demand, it hasn’t really turned a corner.”

Crude oil for July delivery was at $71.55 a barrel, up 18 cents, in electronic trading on the New York Mercantile Exchange at 2:43 p.m. Singapore time. Prices have risen 60 percent this year and reached a seven-month high of $73.23 on June 11. Oil prices are poised to fall 0.7 percent this week.

The July contract expires June 22. The more-active August contract was at $72.09 a barrel, up 18 cents, at 2:44 p.m. Singapore time.

Inflation Hedge

Investors have pushed oil higher by buying contracts as an inflation hedge to offset a decline in the dollar.

“We’ve moved quite high at a time the international economy is in a recession,” said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. “Oil prices at $70 are at a solid level.”

Oil has gained 56 percent since April 20 as the dollar index, a measure of the greenback’s value against six other currencies, has had a 6.9 percent drop. The euro has fallen 0.7 percent against the U.S. currency this week.

Crude futures may fall next week on speculation U.S. fuel stockpiles will increase as the recession and rising prices sap consumption, according to a Bloomberg News survey.

Fourteen of 32 analysts surveyed, or 44 percent, said futures will decline through June 26. Thirteen respondents, or 41 percent, forecast that the market will be little changed and five said prices will climb. Last week, 49 percent of analysts said oil would increase.

OPEC Output

Goldman Sachs Group Inc. analysts said yesterday that while some short-term “liquidation risk” is evident in oil markets, they expect “an improvement in fundamentals to begin to take hold in the next several months,” pushing prices to $85 a barrel before the end of the year.

Oil prices at $70 a barrel are satisfactory for producers and consumers, Organization of Petroleum Exporting Countries President JOSE told reporters in Luanda, Angola. Vasconcelos, who’s also the country’s oil minister, said the gain in oil prices is a positive sign for the world economy.

The 12-member group will trim shipments 0.2 percent in the four weeks ended July 2, according to consultant Oil Movements. OPEC will reduce exports in the period to 22.78 million barrels a day, from 22.82 million in the month ended June 6, the Halifax, England-based tanker-tracker said today.

Brent crude for August settlement was at $71.24 a barrel, up 18 cents, on London’s ICE Futures Europe exchange at 2:43 p.m. Singapore time.

Last Updated: June 19, 2009 02:46 EDT