USA Stocks: Worst week in 2011

Stocks ended Friday's session sharply lower, posting their worst weekly performance in more than a year, as investors grow increasingly worried that Washington may not reach a deal to raise the debt ceiling before the deadline.

At the preliminary close, the Dow Jones industrial average (INDU) fell 97 points, or 0.8%, to close at 12,143. Friday's selling was broad, with 28 out of the Dow's 30 members trading in the red. The blue chips were led lower by shares of drug maker Merck (MRK, Fortune 500) and technology company Hewlett-Packard (HPQ, Fortune 500).

For the week, the Dow sunk 4.2% -- its worst weekly performance since June 2010.

The S&P 500 (SPX) traded down 8 points, or 0.7%, to 1,292; and the Nasdaq Composite (COMP) lost 10 points, or 0.4%, to 2,756. The S&P 500 dropped 3.6% and the Nasdaq lost 3.9% for the week.

Along with the debt ceiling, investors had to work through a disappointing government report showing the U.S. economy grew at a 1.3% annual rate in the second quarter. The data was far worse than expected.

"The GDP number was nothing short of a disaster and worse," said Dave Rovelli, managing

director of US equity trading at Canaccord Adams. "We went from little growth to no growth."

The Triple-A debt club

America's Debt Crisis: Investors remained unnerved after House Speaker John Boehner delayed a vote late Thursday on his plan to raise the debt ceiling. However, after the initial delay, Boehner's bill now has the votes to pass the House. Republican leadership apparently agreed to attach a balanced budget amendment to Boehner's bill to help court the Tea Party.

The market's fear factor -- the CBOE Market Volatility Index (VIX), commonly called the VIX -- jumped up 8.2% in part on both the GDP and debt ceiling news. That's still below 30, which denotes high fear in the marketplace, but the index has shot up more than 46% in just the past five days.

"People are just crossing their fingers that these morons in Congress will get a deal done by Monday," Rovelli added.

But even if Boehner's plan does pass the House, Senate Majority Leader Harry Reid has promised the Democratic-controlled Senate will block it, and President Obama re-emphasized on Friday that he would veto it.

But investors are mostly positive that a deal will get done.

"There's enough ideas in all the bills that have passed in the House and the Senate, that we can cobble something together that everyone can agree to," Orlando said.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.83% from 2.95% late Thursday.

Short-term Treasuries saw moderate selling on Friday, as investors pulled money out of securities that would likely be the first affected by a government default. The yield one-month T-bill was up to 0.18% from 0.15% Thursday.

Currencies and commodities: The dollar strengthened against the euro and British pound, but weakened against the Japanese yen.

Oil for September delivery fell $1.74, or 1.8%, to $95.70 a barrel.

Gold futures for August delivery jumped $14.90, or 0.9%, to $1,628.30 an ounce. Earlier in the session, gold hit an intraday record of $1,634.90 an ounce.

Companies: Drugmaker Merck (MRK, Fortune 500) said it plans reduce its workforce by 12% to 13% from 2009 levels by the end of 2015, as the next phase of a restructuring program. Shares fell 2%

Shares of Newell Rubbermaid (NWL, Fortune 500) rose 8% after the company said it earned 46

cents a share in the second quarter, beating forecasts by four cents. The household products company also lowered its full-year guidance, citing higher commodity costs and weaker sales.

Shares of online travel site Expedia (EXPE) jumped 9%, after the company reported better-than-expected earnings.

Economy: The Chicago purchasing managers index fell to a reading of 58.8 in July. Economists had expected a reading of 58, according to Briefing.com. The level still indicates an expansion in the region's manufacturing activity.

World markets: European stocks fell moderately on Friday. Britain's FTSE 100 lost 1%, the DAX in Germany was off 0.4% and France's CAC 40 slid 0.9%.

In a widening of Europe's debt crisis, Moody's said it may downgrade Spanish debt. The credit rating agency said that while the country's sovereign rating was being placed under review, any downgrade would most likely be "limited to one notch."

Asian markets ended lower. The Shanghai Composite edged down 0.3%, the Hang Seng in Hong Kong fell 0.6% and Japan's Nikkei declined 0.7%

Who would follow Geithner?

Timothy Geithner said Thursday that he plans to stay on as Treasury Secretary for the foreseeable future. But that hasn't stopped speculation about who might take his place later this year.

Sources told CNN and other news outlets Thursday that Geithner is considering leaving the Obama administration later this year, once negotiations on raising the government's debt ceiling and cutting the budget deficit are complete.

Geithner's family is moving back to the New York suburbs where they lived before he took office so his son can finish high school there. And as the head of Treasury through the worst financial crisis in a generation, and the last key member of President Obama's original economic team still on the job, a desire to leave wouldn't be a shock.

Geithner tried to tamp down the reports of his imminent departure when speaking in Chicago Thursday by saying he wasn't planning on leaving anytime soon.

Still, economists and Washington experts were already talking about who might take over the high-profile job.

Near the top of the list is current White House Chief of Staff Bill Daley, a close Obama confidant and someone who was brought in at least partly because of his good relationship with the business community.

Before taking the job in the administration earlier this year, Daley had been an executive at JPMorgan Chase (JPM, Fortune 500). He also served as Secretary of Commerce in the second term of the Clinton Administration.

Also at the top of many lists is Erskine Bowles, the Democratic co-chairman of the president's bipartisan commission on cutting the budget deficit. Bowles, who had served as White House Chief of Staff in the Clinton administration, would be an relatively easy pick to get confirmed given the budget cutting emphasis in Congress today, according some experts.

But when contacted Friday, Bowles, 65, appeared to take himself out of running for the job, saying that he is not interested in any full-time job at this point in his career.

"I am looking forward to being useful in part-time endeavors," he said.

Investment banker Roger Altman is another name that has been mentioned, but his name has surfaced for previous openings on the Obama economic team without ever getting tapped for a position.

And White House Budget Director Jacob Lew, who has been central to negotiations on the debt ceiling and deficit reduction, is another name suggested by experts.

Jamie Dimon, chairman and CEO of JPMorgan Chase, who is often described as "Obama's favorite banker" is another prominent name mentioned. A spokesman for the nation's second largest bank holding company had no comment on whether his boss would be interested in the job.

Greg Valliere, chief political strategist, Potomac Research Group, said he doesn't think it'll be a good idea for Obama to pick someone from Wall Street, given the government help banking giants like JPMorgan -- along with rivals likeCitigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) -- received during the crisis three years ago.

"I just think that Wall Street is not the way they would go. It could be an albatross for this administration," said Valliere. "And having him berating [Federal Reserve Chairman Ben] Bernanke in public three weeks ago certainly didn't help his case."

Valliere said that he thinks Obama should try to go with a high-profile Treasury Secretary outside of banking and Washington -- someone like Berkshire Hathaway (BRKA, Fortune 500) Chairman Warren Buffett, an earlier supporter of Obama four years ago, or New York Mayor Michael Bloomberg.

"I think he should do something bold and swing for the fences. I think Mike Bloomberg would be an electrifying pick," he said. "The only problem is that he could stray from the reservation on the message. But he's an entrepreneur who knows about creating jobs."

Bloomberg has denied interest in an administration post in the past, and has said he intends to complete his term as mayor which runs through 2013. A spokesman in the mayor's press office declined to comment Friday.

But the political reality is that it might be impossible to get any replacement for Geithner confirmed by the Senate in the year before a presidential election, said Jaret Seiberg, a research analyst at MF Global Inc.'s Washington Research Group.

Seiberg pointed out that 44 Republican senators have vowed not to confirm any nominee to head the new Consumer Financial Protection Bureau because they want the new agency's powers substantially trimmed. The same political battle could lead that group to block a Treasury nominee as well, he said. Even Alexander Hamilton would have trouble getting confirmed today, he said.

"The problem is there is no ideal candidate out there," said Seiberg. "I think it's a Herculean task to get anyone through the Senate right now. That's why at the end of the day, we're likely to have Geithner stay in place."

Valliere said if confirmation becomes the major hurdle to a new Treasury chief, he could see Secretary of State Hillary Clinton moving over to Treasury, with Sen. John Kerry taking her spot at State. Past and current senators have an easier time winning confirmation than do outsiders, he said. And he said that the Treasury job has become a diplomatic job as much as a finance job in the current interconnected global economy

Stock Rally due to Manufacturing Report

Stocks went into rally mode Friday, following a stronger-than-expected report on the nation's manufacturing sector.

After starting the day barely changed, the Dow Jones industrial average (INDU) gained 115 points, or 0.9%, after the manufacturing data was released. 3M (MMM, Fortune 500), Alcoa (AA, Fortune 500) and Caterpillar (CAT, Fortune 500) were the biggest gainers on the blue chip index.

The S&P 500 (SPX) added 10 points, or 0.8%; and the Nasdaq composite (COMP) gained 22 points, or 0.8%.

The Institute of Supply Management's manufacturing index jumped to 55.3 in June -- well above the 51.1 that economists had expected.

"Investors thought the economy would continue to be fairly weak through the summer, but the Chicago PMI number yesterday and the national manufacturing data this morning caused a huge swing in investor sentiment," said Michael Sheldon, chief market strategist at RDM Financial Group.

A strong manufacturing sector will help drive economic growth and corporate profits, he added.

Volume is expected to be light as many market participants head out for the holiday weekend. U.S. markets are closed Monday in observance of Independence Day.

Market outlook: More turbulence ahead

Stocks ended the first half of the year solidly higher Thursday, following a turbulent six months. Regional manufacturing data helped fuel Thursday's rally.

Economy: The University of Michigan consumer sentiment survey for June fell to a reading of 71.5, slightly below the initial reading of 71.8.

Construction spending fell 0.6% in May, after rising 0.4% the prior month. Economist were expecting spending to hold steady in May.

Companies: University of Phoenix operator Apollo Group Inc. (APOL, Fortune 500) was the best performing stock on the S&P 500 and Nasdaq. Shares of the education company jumped more than 7%, after it reported better-than-expected third-quarter earnings late Thursday.

Major auto makers including General Motors (GM, Fortune 500), Toyota (TM) and Ford (F, Fortune 500) are scheduled to report their May sales figures starting around 11 a.m. ET. Shares of Ford were up 0.3% in morning trading.

Meanwhile, shares of Eastman Kodak (EK, Fortune 500) slid 14%, a day after the company received a mixed ruling on the company's patent infringement suit against Apple (AAPL, Fortune 500) and Research in Motion (RIMM).

Cablevision (CVC, Fortune 500) spun off AMC Networks (AMCX), known for popular hits like Mad Men. AMC started trading on the Nasdaq Friday under the ticker "AMCX." Shares fell 8% on the news. Cablevision shareholders are getting one share of AMC Networks for every four shares of Cablevision.

World markets: European stocks were mostly higher in afternoon trading. Britain's FTSE 100 rose 0.3%, the DAX in Germany rose 0.1% and France's CAC 40 was flat.

Asian markets ended the session mixed. The Shanghai Composite ticked down 0.1%, while the Hang Seng in Hong Kong soared 1.5% and Japan's Nikkei added 0.5%.

Currencies and commodities: The dollar rose against the euro, the Japanese yen and the British pound.

Don't fear the commodities bear

Oil for August delivery slipped $1.02 to $94.40 a barrel.

Gas prices snapped a 27-day streak of declines Friday. The price of regular unleaded gasoline increased nine tenths of a cent to $3.550 a gallon, according to motorist group AAA.

Gold futures for August delivery fell $17.40 to $1,485.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged higher, pushing the yield down to 3.14% from 3.16% late Thursday

Tim Geithner considering leaving White House

Tim Geithner is considering leaving his post as Secretary of the Treasury after a deal to raise the debt ceiling is reached, a source familiar with the discussion told CNN Thursday.

Geithner is the lone remaining member of President Obama's original economic team.

Asked by former President Bill Clinton on Thursday at a Clinton Global Initiative event about his future plans, Geithner said he would be doing his job "for the foreseeable future."

A Treasury official said that Geithner will not make any decisions while he's focused on negotiations over the debt limit and deficit reduction.

Another source familiar with the discussions between Geithner and the White House said it could be a while before Geithner's ultimate departure. "You have to have somebody lined up for the job -- you can't just leave," this source said. "And there's a relative scarcity of people who would fit the bill."

Obama nominated Geithner to be the 75th Secretary of the Treasury, and the Senate confirmed him on Jan. 26, 2009.

Geithner went on to spearhead the administration's response to the financial crisis that threatened to unravel economic growth around the globe.

That response included a bailout of the U.S. auto industry, a massive economic stimulus package and a landmark Wall Street reform effort. So-called stress tests of the nation's largest banks in early 2009 also helped shore up confidence in financial markets.

Geithner's first days in the administration were not without stumbles, as markets met his efforts to support the banking industry with skepticism, and giant bonuses paid to executives at bailed-out insurer AIG sparked public outrage.

But Geithner emerged as one of the strongest voices on Obama's economic team.

"I think he has done a great job in a backbreaking position," Clinton said Thursday.

Another member of Obama's original team, Council of Economic Advisers chairman Austan Goolsbee, has said he will leave the administration in August to return to the University of Chicago.

That leaves the administration with two holes to fill in the months leading into the 2012 presidential race, where the economy is expected to be issue No. 1.

National Economic Council director Lawrence Summers, and Office of Management director Peter Orszag left the administration last year. Christina Romer, the original chair of the Council of Economic Advisers, has also left.

Before joining the administration, Geithner held the top post at the Federal Reserve Bank of New York, where he played a crucial advisory role during the financial crisis of 2008.

Before joining the Fed, he held posts at the IMF and worked in the Clinton administration Treasury Department.

Stocks end the first half with a bang

Stocks ended the first half of the year solidly higher Thursday, as investors put a turbulent six months behind them.

All three major indexes rallied for the fourth day in a row, helped by a strong economic report on business activity in the Midwest and the latest positive developments out of Greece.

The Dow Jones industrial average (INDU) added 153 points, or 1.3%, led by Intel (INTC, Fortune 500), Caterpillar (CAT, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500). Shares of all three companies rose about 3%.

The S&P 500 (SPX) rose 13 points, or 1%, and the Nasdaq composite (COMP) gained 33 points, or 1.2%. First Solar (FSLR) and eBay (EBAY, Fortune 500) were among the best performing stocks on both indexes.

All three major indexes reached the mid-year mark on a high note. The Dow is up more than 7% while the S&P and Nasdaq are up 5%.

Meanwhile, Wall Street's most widely cited measure of volatility and fear, the VIX (VIX), has dropped nearly 7% during the first six months of the year.

Interactive: A stormy year for stocks

The second quarter has been difficult, however. Stocks struggled over the past two months amid jitters about Europe's sovereign debt problems and an economic slowdown in the United States.

The Dow ended the quarter up 0.8%, while the S&P 500 and Nasdaq finished about 0.3% lower. That quarterly performance was the worst in a year for all three indexes.

Economy: The Chicago purchasing managers index, which measures business activity in the Midwest, jumped to 61.1 in June from 56.6 the prior month. Economists were expecting the measure to slip to 54.

"Based on the series of poor economic reports we've had the last several weeks, expectations were low, so this was a nice surprise," said Joseph Saluzzi, co-head of equity trading at Themis Trading.

Don't fear the commodities bear

Strong regional data is especially welcome news ahead of the national Institute for Supply Management manufacturing index due Friday, but it's only one data point, Saluzzi cautioned.

Adding to the welcome news, Greece voted in favor of implementing the austerity measures approved on Wednesday. The measures aim to keep the debt-ridden country from defaulting.

But as anti-government protests grow worse, some investors worry that Greece's problems are far from over.

There's still a lot to sort out with Greece and we're not out of the woods yet," Saluzzi said. "There are a lot of major global economic concerns, and I think markets will be choppy for the rest of the summer."

The Labor Department reported that weekly jobless claims edged down slightly in the latest week, but fell short of economists' expectations for a bigger drop.

Currencies and commodities: The dollar fell against the euro, the British pound and the Japanese yen.

Oil for August delivery rose 65 cents to settle at $95.42 a barrel.

Gold futures for August delivery slipped $7.60 to settle at $1,502.80 an ounce.

10-year yield at one-month high

Bonds: The price on the benchmark 10-year U.S. Treasury edged down, pushing the yield up to 3.16% from 3.11% late Wednesday.

Companies: Shares of eBay (EBAY, Fortune 500), which owns PayPal, jumped more than 4% a day after the Federal Reserve imposed caps on debit card swipe fees that weren't as high as expected.

Shares of the First Solar (FSLR) gained more than 2%, after the company won $4.5 billion in loan guarantees from the Department of Energy.

World markets: European stocks ended higher. Britain's FTSE 100 gained 1.5%, the DAX in Germany added 1.1% and France's CAC 40 rose 1.5%.

Asian markets also ended the session higher. The Shanghai Composite jumped 1.2%, the Hang Seng in Hong Kong gained 1.5% and Japan's Nikkei rose 0.2%

Fuel price hikes brighten market outlook: Brokers

The government's decision last week to raise prices of diesel, kerosene and cooking gas has brightened prospects of Indian equities . The move has sparked hopes among investors, fretting over the impact of paralysis in policy-making on India's economic growth, that the government may be serious about pushing ahead the next wave of economic reforms, said broking firms.

"The government's decision to hike retail fuel prices in spite of the decline in crude oil prices suggest the government is shaking off its decision-making inertia," said Parul J Saini, strategist, Royal Bank of Scotland. "This should be a positive catalyst for the Indian equity markets," said Saini, in a report.

The Sensex has gained over 5% in the past four trading days. The government announced decision to increase petroleum product prices on Friday evening.

"The move is also a powerful signal to markets that the government is still able to make difficult decisions, in the light of a stalled reform process," said Tushar Poddar and Vishal Vaibhaw of Goldman Sachs. "This move, along with global oil prices coming off and monsoons on track, are positive signs for the economy and for the equity market," they said, in a report.

Analysts perceive India's discussion paper last week, questioning the need for equity caps for foreign direct investment (FDI), as the government's intent to streamline the country's FDI policy.

Investors are hoping that the fuel price increases will result in inflation peaking out over the next few months and signal the end of policy rate tightening by the Reserve Bank of India. Analysts estimate wholesale price inflation will surge 70-100 basis points from 9.06% in May because of higher fuel and cooking has prices.

"From a medium-term perspective, we see the hike in fuel prices as a positive step to incentivise Indian households and companies to ration energy demand, but the near-term inflationary impact," said Sonal Varma and Aman Mohunta of Nomura India, in a report. Economists warn, however, the India's fiscal deficit could widen as the cut in excise and customs duties on diesel and cooking gas will more than offset the benefit of price increases to the government's finances.

"Lower revenue collection owing to slower GDP growth, smaller-than-budgeted disinvestment proceeds, and higher expenditure could potentially push the deficit to 5.8% of GDP, hurting market sentiment, unless the government seeks other ways to raise revenues," said Standard Chartered economists led by Anubhuti Sahay, in a report. India is targeting a fiscal deficit of 5.1% of GDP for 2011-12. Brokers said higher-than-estimated fiscal deficit, especially when the economy is slowing, may not go down well with foreign investors.

Indian markets may underperform in near term

In an interview with ET Now, Manishi Raychaudhuri, MD & HoR, BNP Paribas Securities, shares his views on their latest strategy report and talks about the market. Excerpts:

If I look at your latest strategy report and if I look at the fine print there, you have slashed your Sensex target for the year, you expect Indian markets to underperform and according to your report, there are high inflationary concerns which currently could hit Indian economy going forward. So, rather a bearish report?

You did not ask me a question, but I would still summarise what we have tried to say. In the near term, the Indian market is likely to underperform and by near term, I really mean about maybe 3-4 months, possibly till the October-December quarter. And yes, we have cut the Sensex target because there were a couple of variables on which we went wrong. We were clearly anticipating peaking out of inflation by some time in March-April, which did not happen. Inflation turned out to be a lot more stickier than we had anticipated and as a consequence, even the end to the RBI's tightening cycle, which we were expecting some time in the first quarter of this year, it now seems to be prolonged to sometime in the July-September quarter, maybe till around September.

So to that extent, we actually expect the RBI to tighten about twice more, maybe 25 basis points each. And to have the desired effect on inflationary expectations, it should perhaps be done in rapid fire succession in July and then again in September, which could obviously lead to some degree of underperformance. On top of that, we must not also forget that earnings estimates have been declining.

Our own EPS estimates for Sensex have declined about 4% since the beginning of the year, and we think that there could be another 3-4% downside to the Sensex EPS estimate for fiscal 2012-2013. Combined that with the valuations of India, which compared to India's own history or somewhere in the middle of the road, somewhere close to just lower than the average, but compared to Asia ex Japan and compared to China, they are at about 25-30% premium, which means that valuation premium has to compress.

This is our hypothesis behind arguing that in the near term there could be some underperformance by India. Having said that, I must also argue that by the time, we are in the last quarter of this year, some of these macroeconomic headwinds would be behind us. If the market does come down to a valuation level of close to maybe 12.5-13 times one year forward, that would be the right time to load into the high beta stocks among private banks, infrastructure and autos.

But what's your call, the prognosis is generally once inflation peaks out, the market bottoms out and since that process is now elongated with the recent fuel price hike, inflation is not going to becoming down in any hurry. So what's your call on banks and the entire rate sensitive basket? Would you be a buyer?

First of all, yes, inflation has been elongated. The longevity of high inflation is possibly till about September-October. Till then WPI inflation would remain in the present range that we are seeing that maybe in the range of 8.5-9.5%. Secondly manufactured product inflation, which has been increasing now over last 2-3 months, will be possibly on an upswing till about September-October. After that, the effect of recent decline in commodity prices would begin to catch in and possibly manufactured product inflation would be peaking out by sometime in October.

Now as a consequence, we are kind of neutralist, we are kind of fence-sitters on the rate sensitive pack. Now here again it is essentially stock-specific weight which add up to the sector weight. So we are neutral on both banks and automobiles. In banks, we prefer the private sector banks. In fact, we have closely about 25% weight on the banking sector as a whole and out of that, about 80% of that is in the private sector banks with much smaller weight on the public sector banks. Because we think the private sector banks have relatively lower concern about asset quality and among them the high CASA banks, which have a very strong liability franchise or possibly those, which would be able to weather the storm of net interest margin compression a lot better than the sector average. We are also neutral on the auto space where we have actually cut down weight significantly. We only have the consumer autos in the portfolio, the companies that are engaged in two wheelers and the passenger cars not so much in the commercial vehicle space.

Given the way how commodity prices have corrected in last 10-15 days, is that not a positive but more like a short-term negative for Indian markets because that will also hit earnings and profitability for commodity companies?

Yeah. Paradoxically it is a positive for Indian economy, but perhaps in the short-term a negative for the Indian markets because that's the peculiar structure of the Indian equity market. While the economy tends to benefit from commodity price decline, both metals and oil because we are large importers and as a consequence, both fiscal deficit and current account deficit tends to decline. But if you look at the equity market, close to about 30-35% of earnings stream is somehow related to the global commodity prices, be it in metals, oil or petrochemicals. So paradoxically the commodity market declining tends to lead to some underperformance of Indian equities. This is something that we had seen in 2008 as well. The oil and metal prices came down so sharply by late 2008 and early 2009 that the Indian equity market faltered and it fell by almost 60% from the peak, but actually the economy was not doing all that badly at that time.

What's your call on ONGC post the latest news from Cairn and Vedanta and how it may be beneficiary to companies like ONGC?

We think that there are signs of the Cairn-Vedanta deal getting finalised now. We think it is positive for ONGC. So for ONGC, essentially two positives have kind of got coupled in a matter of a couple of days both the government's decision to increase the oil and other oil product prices. And the possibility of the Cairn-Vedanta deal getting finalized. So we are actually positive on ONGC after these two developments.

Give two high conviction investment ideas?

I would suggest that under the current circumstances, No. 1, one should stick to the consumption theme because pretty much everything, be it income stability or the government's programmes, seems to be supporting consumption a lot more than supporting investments. As a consequence, I would recommend Bajaj Auto under the current scenario. The stock has underperformed because of the concerns relating to the longevity of the DEPB scheme, but we think the fundamentals of that company are much stronger. So Bajaj Auto would obviously be one of the choices at this point.

I would also in a similar vein recommend Bharti, Bharti Tele-Ventures, because revenues in the telecom space are becoming a lot more visible and stable. On top of that, the domestic pricing war scenario, which we had encountered a few months back, seems to have almost come to an end and as a consequence, the revenue growth and earnings growth of the companies are getting more linked to subscription, the number of new subscribers and so on. So the telecom space and the two wheeler space look good under the current circumstances.

Why Bharti now? The stock has already appreciated by 52% in last one year.

First of all I must say that we have had Bharti in the portfolio not now but for quite some time, almost for more than a year. We have captured a significant part of the upside. Having said that even after this upside, Bharti remains one of the best cash generators in this business. Bharti remains a stock where the earnings stream and revenue stream are possibly visible. Under the present circumstances where you have a degree of uncertainty about capex and the investments, it is possibly better to look at the consumption-orientated stocks. So in the present uncertain phase of the market as long as this continues, stocks of this type, of the kind that Bharti represents, would possibly continue to be outperformers.

Congress moves forward on free trade deals

The Senate will officially take up three trade deals and a scaled-back version of a jobs retraining program for laid-off workers on Thursday.

Senate negotiators will have to start pounding out the details of the trade deals, as well as

funding for the jobs retraining program -- whose funding ran dry in February.

"This was truly a bipartisan negotiation on all sides ... we think this is a strong package that reflected the different priorities," said one senior administration official on a call with reporters Tuesday.

But final passage on all the measures is not a done deal. Republican support depends on how closely the trade deals and jobs retraining program are linked together.

Republicans want to vote on the trade pacts, and have agreed to consider the new compromise that would extend the jobs retraining program, according to congressional aides. But they refuse to have the issues stuck together on the same bill, in a way that would prevent them from making changes to the jobs retraining program.

"I would strongly urge the Administration to re-think this action, and urge them to send up all three pending trade agreements without delay -- and without extraneous poison pills included," said Senate Minority Leader Mitch McConnell in a statement Tuesday.

If Congress were to pass the trade pacts without the jobs retraining program, President Obama would face a tough choice as he had previously said he couldn't have one without the other.

At issue is the Trade Adjustment Assistance program, which got a big funding boost with the 2009 economic Recovery Act.

The program gives unemployed workers financial help and job training when employers move jobs overseas. White House officials had previously said that more than 435,000 workers would be eligible for the program if it were reinstated. But Republicans have said they are concerned about funding such stimulus programs, because of the big deficits the nation faces.

A White House official outlined a compromise made on the program, saying it would be scaled back. He added that it wouldn't add to the deficit, thanks to cuts in unemployment insurance; and due to a new proposal that would penalize tax preparers who have "bad records," claiming tax credits for those who don't qualify.

But the White House couldn't give a final tab on Tuesday for the scaled back Trade Adjustment Assistance program.

An additional roadblock is that even though House Ways and Means Chairman Rep. David Camp was involved in the compromise, it's unclear whether even a scaled-back version could pass the GOP-controlled House

"We're pleased the President may finally send us the three job-creating trade agreements we've requested, but we have long said that TAA -- even this scaled-back version -- should be dealt with separately from the trade agreements," said Brendan Buck, spokesman for House Speaker John Boehner.

The one thing many congressional Republicans and Democrats can agree on is wanting to pass the trade deals to help boost the U.S. economy, particularly since some say the treaties could add as many as 250,000 jobs.

Despite Obama's effort to tie the trade pacts to something the unions want, the AFL-CIO and other labor groups continue to oppose the treaties -- which they say don't do enough to protect workers' rights.

But business groups from the U.S. Chamber of Commerce to the Business Roundtable applauded the move forward.

"With our economic recovery stalling, the time is now for Congress to act on these deals," said Thomas J. Donohue, president and CEO of the U.S. Chamber. "We simply cannot afford to put American jobs at risk any longer."

Experts See Action Packed Week For Bourses

After the last week's rally that saw key market index Sensex regaining 18,000 level, investors expect strong domestic trends to take the market further up, experts said.

"Stock market may witness some action with an added dose of volatility due to the F&O expiry. With July 1st falling on the last trading day, the markets will also closely watch data on auto and cement sales, besides economic statistics on trade and manufacturing," IIFL - India Private Clients Head of Research Amar Ambani said.

During the past week, the BSE key index Sensex went up by 370.15 points, or 2 per cent to end the week at 18,240.68. The Sensex surged by over 500 points on Friday on the back of sharp dip in global crude oil prices and firm overseas cues.

Analysts opined that global events will continue to have some bearing on local sentiment. Greece and the US economy will remain in focus and the Chinese manufacturing PMI data will also be on the investors' radar.

The government on Friday decided to increase diesel price by Rs 3 per litre, domestic LPG by Rs 50 per cylinder and kerosene by Rs 2 per litre, while slashing customs and excise duties on crude oil and products.

Market analysts said that government policy on fuel price hike will influence the market trend, and added that the hike in diesel and LPG prices will be well received by the markets.

"We expect the rally may continue after the fall in crude oil price and recovery in the global market. Many frontline and mid-cap stocks are trading at an attractive valuation with a few weeks left to first quarter FY12 quarterly result announcement.

"Improvement in monsoon is also an important factor that will influence the market trend," Motilal Oswal Securities Associate VP Sr Analyst -Technical-Equities Parag Doctor said.

Oil prices fell on Thursday after International Energy Agency decided to release 60 million barrels of crude, giving global economy relief from high energy costs.

The New York crude on Friday tumbled nearly 5 per cent to about USD 90 a barrel, while Brent Crude plunged USD 7 to about USD 107 a barrel.

Some experts were of the opinion that markets will open slight higher on Monday, but profit-booking can bring down some of the gains.

USA Release Oil From Strategic Reserve

The U.S. Department of Energy said it will release 30 million barrels of oil from the Strategic National Reserve to alleviate Libyan oil supply disruptions, in the midst of already-plummeting oil prices.

The U.S. release is part of a 60 million barrel increase in supply announced Thursday by the International Energy Agency, which includes the U.S. as one of its 28 member nations, "in response to the ongoing disruption of oil supplies from Libya."

The U.S. Energy Department said the reserve is at the "historically high level" of 727 million barrels.

"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," said Energy Secretary Steven Chu. "As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary."

Meanwhile, Libya is still locked in civil war, as rebels aided by NATO airstrikes try to unseat Mohammar Gadhafi.

Oil prices fell more than 4.5% Thursday, as investors signaled disappointment over a bummer of a speech by Fed chief Ben Bernanke.

Oil prices plunged $4.71 to $90.89 per barrel. Prices edged down about 1.5% in Wednesday's session following Bernanke's speech.

Federal Reserve Chairman Bernanke issued a gloomy forecast of the economy on Tuesday, triggering a stock decline of 0.7% on Wall Street.

"Bernanke's statement about the 'slowing pace of recovery' was the key to this down move," said Dan Dicker, former oil trader and author of "Oil's Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy."

Fed Reserve gloomy on economy

In particular, he highlighted the stagnant job market and the potential impact of the Greek fiscal crisis. He projected that unemployment would "come down very painfully and slowly."

Dicker said that oil prices were also "under pressure from growth slowdowns."

Tom Kloza, chief oil analyst for the Oil Price Information Service, said the increasing value of the U.S. dollar is also "putting downward pressure on oil."

He also said, "The oil futures markets is dominated by the huge institutional money managers who move tens of millions of dollars moment by moment in and out of positions in crude. Since about 3 p.m. yesterday [Wednesday] afternoon, they have been liquidating their long positions."

US equity markets end mixed amid Greece debt woes

The US equity markets ended mixed in thin & choppy session amid Greece's ongoing debt woes and ahead of the quadruple witching today as better than estimated housing starts and jobless claims tempered concerns of a economic slowdown.

The Dow Jones Industrial Average gained 64.25 points or 0.54%, to close at 11,961.52 and S&P 500 Index rose 2.22 points or 0.18%, to end at 1,267.64. However, NASDAQ Composite fell 7.76 points or 0.29%, to finish at 2,623.70.

Richard Ross, technical analyst, Auerbach Grayson said, "All of our work continues to suggest that the S&P remains vulnerable to an extension of the decline down to 1150 level, on a sector level, on an intra-market level, on a macro level - all signs point to lower levels in the S&P 500."
On economic data front, there was some better-than-expected news. Housing starts rose more than expected and permits for future construction touched a five month high in May. New applications for jobless benefits fell to 414,000 in the latest week from an upwardly revised 430,000 in the week before.

The US current account deficit increased in the first quarter on strong imports. The deficit represented 3.2% of US gross domestic product.

In economic data to watch out for, the consumer sentiment index for June is expected to deliver a slight rise. Consensus figures depict a rise from 74.3 for May to 74.5.

European markets fell to a three-month low as political instability in Greece added on to the investor worries over the country's acute debt issues. France's CAC fell 0.4% and Britain's FTSE lost 0.76%. Germany's DAX was flat.

Meanwhile the Greek state television says prime minister, George Papandreaou will announce his new cabinet line up today. The PM's plan to form a new government yesterday fell into disarray after two key party members resigned citing disagreements with his economic policy.
There was some reassurances from the EU's top economic official Ollie Rehn. Rehn said that the next tranche of aid about 12 billion euros will be released early next month.

In the currency space, the euro pared its decline against the dollar after reaching a three-week low amid speculation that an agreement between the European Union and the International Monetary Fund may allow Greece to avoid a debt default.

In commodities, oil gains for a second day after reports showed that US housing starts rose more than forecast in May and fewer Americans filed applications for unemployment benefit, signaling fuel demand may increase.
Copper declines for a second straight day, weighed down by economic recovery fears reflected in weak manufacturing growth in the United States and a deteriorating debt situation in Greece.