“In the business world, the rearview mirror is always clearer than the windshield”. Warren Buffett

1. ISM services-sector index rises to 53.3% in August — The Institute for Supply Management stated its service-sector index rose to 53.3% in August from 52.7% in July. Economists surveyed by MarketWatch expected the services index to drop to 51.0%.
2. 25 German MPs rebel in prelim European Financial Stability Facility votes — twenty-five lawmakers from Germany’s ruling coalition refused to back a draft law that would boost the powers of the euro zone’s rescue mechanism, underscoring the risk that Chancellor Angela Merkel might fail to secure a conservative majority for the measure.
3. New York subpoenas investors in Goldman securities — New York prosecutors investigating Goldman Sachs (GS) over its mortgage bonds have reportedly subpoenaed Morgan Stanley (MS), hedge funds and other parties that invested in the securities.
4. ECB, Bank of England on hold — The European Central Bank left its key lending rate unchanged at 1.5%; the Bank of England also left its key interest rate on hold at 0.5% and kept its quantitative-easing program on pause.
5. Obama outlines $447B program to reduce unemployment — President Obama unveiled a $447B plan to bring down unemployment, including $240B in payroll tax relief, $49B for extending unemployment insurance, and $50B for transport infrastructure.
6. BofA mulls plan to axe 40,000 jobs — just as President Obama looks to create jobs, Bank of America (BAC) is considering a plan to slash 40,000 positions over a number of years, The Wall Street Journal reported.

The week ahead — Economic data from Econoday.com:

“Markets can remain irrational a lot longer than you or I can remain solvent.” — John Maynard Keynes.

1. Yoshihiko Noda to be Japan’s new prime minister — Finance Minister and fiscal conservative Yoshihiko Noda will replace Naoto Kan as Japan’s next prime minister after beating Trade Minister Banri Kaieda in a run-off vote for the leadership of the ruling Democratic Party.
2. Obama to choose Alan Krueger to top economic post — Barack Obama today plans to nominate Princeton University’s Alan Krueger to replace Austan Goolsbee as Chairman of the White House Council of Economic Advisers.
3. China Widens Reserve Ratio to Limit Inflation — China broadened the base of reserves it requires commercial lenders to deposit with the central bank to control liquidity and limit inflation, economists said.
4. QE3 expectations rise after FOMC minutes — expectations for more bond buying have increased after the minutes from the FOMC’s August 9 meeting showed that some policy makers were in favor of the move in order to help spur the economy, for which the Fed painted a gloomy picture.
5. The U.S. government sued to block Deutsche Telekom’s $39 billion sale to AT&T Inc of T-Mobile USA — the U.S. government citing concerns it will harm competition in the wireless market and lead to higher prices.
6. IMF pours further doubt on strength of EU banks — an IMF analysis shows that marking the sovereign bonds of six highly indebted eurozone countries to market would reduce the tangible common equity of EU banks by about €200B ($287B), or 10%-12%. The countries concerned are the usual suspects of Ireland, Greece, Portugal, Italy and Spain plus Belgium.
7. UAW workers OK strike option — in advance of a contract expiration on September 14, UAW workers in Detroit have voted to give union leaders the option of calling a strike against Ford (F).
8. U.S. said ready to sue big banks over mortgages — a federal U.S. agency is ready to sue more than a dozen major banks, arguing that they misrepresented the quality of mortgage securities they put together and sold in the run-up to the bursting of the housing bubble, according to a published report. The suits are aimed at Bank of America Corp., Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Deutsche Bank AG and others, the report said, citing three unidentified individuals briefed on the matter.
9. Bullish Sentiment Up Again — According to AAII’s weekly poll of investor sentiment, bullish sentiment rose to 38.62% in the latest week. This represents the fourth straight week where bullish sentiment has improved. Chart courtesy from the Bespoke Investment Group.

The week ahead — Economic data from Econoday.com:

“I measure what’s going on, and I adapt to it. I try to get my ego out of the way. The market is smarter than I am so I bend.” — Martin Zweig

1. Merkel again rejects eurobonds– — Angela Merkel reiterated her opposition to eurobonds despite increasing pressure within the EU and among investors, saying they are “not the answer” to solve the eurozone’s debt crisis.
2. Euro Zone Services Growth Eases, Factories Contract — The euro zone’s dominant service sector was effectively stagnant this month after two years of growth while manufacturing activity, which drove a large part of the economic recovery in the bloc, shrank for the first time since September 2009. The PMI for the manufacturing sector slid to 49.7—its first sub-50 reading since September 2009.
3. U.S. May Back Refinance Plan for Mortgages — the White House is reportedly considering a proposal to allow millions of homeowners with government-backed mortgages to refinance their loans at today’s lower interest rates of about 4%. The move could save borrowers an estimated $85B a year and it wouldn’t need congressional approval. However, it could face opposition from regulators and investors in bonds tied to the mortgages.
4. Bullish Sentiment increases for the 3rd straight week — below is the chart courtesy from the Bespoke Investment Group.

5. Greece sets minimum take-up rate for debt swap plan — Greece said last Friday it would not go ahead with a debt swap crucial to its second bailout if private sector holders of less than 90 percent of the bonds participate, failing to satisfy its international partners.

The week ahead — Economic data from Econoday.com:

“To me, the “tape” is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!” — Martin Zweigs

1. S&P Backs French Triple-A Rating — Standard & Poor’s Corp. confirmed France’s triple-A rating and stable outlook for the country, dispelling investor fears that the top-notch grade of the euro zone’s second-largest economy may be at risk.
2. S.E.C. Files Were Illegally Destroyed — An enforcement lawyer at the Securities and Exchange Commission says that the agency illegally destroyed files and documents related to thousands of early-stage investigations over the last 20 years, according to information released Wednesday by Congressional investigators.
3. DOJ probes S&P for inproper ratings –the Justice Department is reportedly investigating whether S&P improperly rated dozens of mortgage securities in the lead-up to the financial crisis.
4. U.S. regulators step up oversight of EU banks — The NY Fed is reportedly demanding more information from big European banks about whether their U.S. units have the ability to fund themselves.
5. Spain to unveil more austerity — Spain announced further austerity measures in a bid to fend off debt market attacks but avoid the kind of drastic cuts that could damage the ruling Socialists’ chances in November’s general election.
The government is expected to unveil savings of around 5 billion euros ($7 billion) by front-loading tax payments from large businesses and cutting drug costs for regional governments with a new bill on generic medicines.

The week ahead — Economic data from Econoday.com:

“I sell Euphoria and buy Panic. Gapping to the upside is “euphoria”, while gapping on the downside is “panic”. Jim Rogers.

1. S&P downgrades Fannie, Freddie to AA+ from AAA
2. Top largest point drops for the Dow Jones Industrial Averages — according to the WSJ

3. China inflation growth poses dilemma for central bank — China inflation rose 6.5% in July, beating forecast and hitting its highest level in three years.
4. Swiss take more measures against strong francs — The Swiss National Bank said last Wednesday it was taking additional measures against the strength of the franc after the rise in risk aversion on global markets “further intensified the overvaluation of the Swiss franc in the last few days.”
5. Six Republicans named to ‘super committee’ — Republican congressional leaders named six members of their party to a newly created “super committee” charged with finding $1.2 trillion in deficit reductions over the next 10 years.
6. Fed: Low rates to stay till at least mid-2013 — The Federal Reserve expressed much more concern about the economic outlook and said it would hold interest rates at ultralow levels “at least” through mid-2013, the first time the central bank put a time frame on their duration.
7. Four European countries impose short-selling ban — Belgium, Italy and Spain round out the other countries that will impose or extend existing short-selling bans beginning Friday, according to a statement from the European Securities and Marketing Authority late Thursday. The ESMA coordinates securities and trading rules among European Union member states.

The week ahead — Economic data from Econoday.com:

“Risk comes from not knowing what you’re doing” Warren Buffett

1. S&P Rating Downgrades US rating from AAA to AA+ — S&P lowered the U.S. long-term rating one level to AA+ after markets closed on Aug. 5 while keeping the outlook at “negative” as the New York-based ratings company becomes less confident that Congress will end Bush-era tax cuts or tackle entitlements. Below is the chart courtesy from Standard & Poor.

2. Factory activity slows across the world — hopes for global economic growth have taken a dent after factory activity in China and Europe decelerated in July and contracted in the U.K. Eurozone PMI fell to 50.4 from 52 in June, its lowest level since September 2009. New orders, an indicator for future prospects, contracted with a fall to 47.6. China’s official PMI dropped to 50.7 from 50.9 previously
3. DOJ intensifies Nortel patent investigation — the Justice Department is intensifying a probe into whether the six companies that recently bought $4.5B in patents from Nortel could use the IP to unfairly hinder smartphones that operate Android (GOOG).
4. EU not considering rescue plans for Italy, Spain — The European Union has no plans to provide rescue loans to Italy and Spain, despite the rising borrowing costs facing these countries, a European Commission spokeswoman said last Tuesday.
5. Swiss central bank battles to halt franc’s rise — The Swiss National Bank was pulled into Europe’s sovereign-debt crisis Wednesday, cutting its key lending rate to zero and taking other steps short of outright intervention in the foreign-exchange market to halt the Swiss franc’s rise to record levels versus the beleaguered euro.
6. Moody’s and Fitch affirm U.S. rating — with the Senate passing the debt deal and President Obama signing it into law, Moody’s and Fitch have confirmed the U.S. will keep its AAA rating. However, both said more deficit-reduction measures are needed and Moody’s assigned a negative outlook.
7. Bank of Japan expands asset purchases — The Bank of Japan boosted its asset-purchasing program on Thursday at a policy setting meeting that was cut short following the nation’s intervention to weaken the yen. The Bank of Japan raised its total asset-purchase program to approximately 50 trillion yen ($630 billion), from ¥40 trillion previously.
8. Dow Theory generates sell signal — both the Industrials and Transports hit new lows this week; Thus, generate the dreaded sell signal.

The week ahead — Economic data from Econoday.com:

“THE STOCK MARKET IS A NO-CALLED-STRIKE GAME. YOU DON’T HAVE TO SWING AT EVERYTHING – YOU CAN WAIT FOR YOUR PITCH. THE PROBLEM WHEN YOU’RE A MONEY MANAGER IS THAT YOUR FANS KEEP YELLING, ‘SWING, YOU BUM!’” — Warren Buffet

1. Moody’s cuts Greece to just above default — Moody’s has cut Greece’s ratings three notches to Ca and left it just one notch above default, which the agency said is “virtually 100%” likely to occur.
2. Iran, China discuss barter system — Iran and China are reportedly in negotiations about using a barter system to allow the latter to pay for up to $30B of oil debt with goods and services. The talks come as U.S. sanctions have made it extremely difficult to conduct dollar-denominated business with Iran.
3. India hikes key interest rate more than expected — The Reserve Bank of India on Tuesday hiked its key lending interest rate by a larger-than-expected half percentage point to 8%, as it tries to tame what it says are mostly demand-led inflation pressures. The move marked the 11th time the central bank has hiked interest rates since March 2010.
4. House panel probes Treasury over S&P rating — a House oversight panel is examining whether the Treasury tried to inappropriately influence S&P before it revised its outlook on the U.S.’s debt rating to negative in April.
5. Jefferson County weighs bankruptcy decision — the County Commission in Jefferson, Alabama, is close to file for the biggest municipal bankruptcy in U.S. history. The county has proposed that creditors including JPMorgan (JPM), which holds most of the bonds, agree to reduce the debt to about $2B.
6. Boehner pulls debt bill — Republican John Boehner postponed a House vote on his debt-reduction bill following his failure to overcome a rebellion within GOP ranks.
7. EU puts Spain on review for downgrade, bond yields rise — Greece’s second bailout and EU measures to prevent contagion may now be acting as a catalyst for the crisis spreading after Moody’s early today put Spain’s government-bond ratings on review for a possible downgrade from AA2.
8. GDP climbed at a 1.3 percent annual rate in 2Q, following a 0.4 percent gain in the first quarter — the figure was less than previously estimated. The median forecast of economists surveyed was for a 1.8 percent increase.
9. US Debt Holders ($14.3 Trillion) — below is the chart depicting U.S. debt holders courtesy from Congressional Quarterly.

The week ahead — Economic data from Econoday.com:

“Only when the tide goes out do you discover who’s been swimming naked” — Warren Buffett

1. Debt Deal Search Intensifies — as the debt talks continue to go nowhere, President Obama has accepted that a grand $4T plan is out of reach. The most likely option now appears to be a Senate-hatched plan to let Obama raise the debt ceiling by $2.4T in three increments but to give the House “ownership” of the program so that it has a better chance of passing.
2. Gang of six plan offers hope — politicians from both sides have given varying endorsement to a revived $3.75T deficit-reduction plan from a bipartisan group of senators. The “gang of six” proposes immediate spending cuts of $500B and to raise $1.2T in revenues through ending tax breaks, but they also envision tax cuts of $1.5T through broad reform.
3. Fed planning for debt default — the Fed and the Treasury have been preparing for a U.S. default, FOMC voting member Charles Plosser said. Some of the planning is operational and some policy related, such as whether the Fed could treat Treasurys as collateral for loans.
4. Euro leaders agree on easing lending for Greece — The new aid plan for Greece, tagged at 109 billion euros ($157 billion), counts on participation from private investors, who would agree to swap their Greek bonds for longer maturities. The European Union estimated a private-sector contribution of around 50 billion euros when counting a debt buyback that’s still not fully formed.
5. Senate rejects House budget-cutting plan — the Senate rejected a House-passed plan that would raise the U.S. debt ceiling and make deep cuts in government spending. Senators voted 51-46 to kill further consideration of the House bill, which would also require passage of a balanced budget amendment.
6. Bullish sentiment rises to 39.9 — according to the latest figure from the AAII. Below is the chart courtesy from the Bespoke Investment Group.

The week ahead — Economic data from Econoday.com:

“The worse a situation becomes the less it takes to turn it around, the bigger the upside.” — George Soros

1. News Corp. contagion spreading — U.K. MPs have been listening to police testimony about the hacking scandal at News Corp. (NWSA), which has widened to include other problematic practices and spread to The Sun and The Times newspapers.
2. China economic growth slows to 9.5% — China’s economy expanded a fraction faster than expected in the April-to-June quarter, while other data released last Wednesday suggested domestic conditions remain relatively upbeat, even as concerns spread over the resilience of the global economy.
3. Moody’s downgrades Ireland to “junk” — Moody’s Investors Service on Tuesday lowered Ireland’s foreign- and local-currency government bond ratings by one notch to non-investment grade of Ba1 from Baa3.
4. Moody’s Investors Service put the U.S. credit rating on review for possible downgrade — Moody’s has become the first ratings agency to place the U.S.’s AAA rating on review for a possible downgrade, citing the “rising possibility” that the $14.29T borrowing limit won’t be raised.

The week ahead — Economic data from Econoday.com:

“Markets are constantly in a state of uncertainty and flux and money is make by discounting the obvious and betting on the unexpected” — George Soros

1. NY AG probes life insurers — New York AG Eric Schneiderman issued subpoenas to at least nine life insurers in an investigation into payouts for deceased customers, sources say, as the scrutiny of the industry grows. The insurers include MetLife (MET), Genworth Financial (GNW), Manulife Financial (MFC) and Prudential (PRU).
2. Moody’s: China’s bank ratings threatened on muni debt — Moody’s may go negative on its outlook for China’s banking system after it identified $540B of loan exposure to local governments beyond the $1.6T discovered by a national audit.
3. China raises interest rates — People’s Bank of China hikes lending and deposit rates by 0.25%, the third such tightening seen this year.
4. Portugal downgrade stokes contagion fears — a downgrade of Portugal’s credit rating to junk status put fears of another adverse turn in the euro-zone’s long-running debt crisis back on display.
5. ECB delivers rate hike — The European Central Bank delivered its second rate hike in three months, as expected, lifting its refi rate to 1.5% from 1.25% as investors seek clues on the pace of further moves and the central bank’s response to the euro zone’s ongoing debt crisis.
6. IMF to OK €3B tranche for Greece — the IMF is set to approve today transferring just over €3B ($4.3B) in loans to Greece to help it avoid a default, and is expected to discuss whether a second bailout should be dependent on private sector participation.
7. Deal could end ethanol tax break — a bipartisan trio of senators, including two from ethanol-producing states, agreed to repeal the $6B/year ethanol tax credit by the end of July. The deal, which must now be passed by Congress, could raise costs for ethanol blenders such as Valero Energy (VLO) and Marathon Oil (MRO), although it’s unlikely to reduce demand for corn.

The week ahead — Economic data from Econoday.com: