South Miami has agreed to settle the charges. The city will retain an independent third-party consultant to oversee its policies, procedures, and internal controls for municipal bond disclosures.

South Miami had originally sought financing to develop a public parking garage. Where thing went awry was that the project ultimately became a mixed-use retail and public parking structure to be developed by a for-profit developer. Annual certifications made by South Miami to the FMLC from 2003 to 2009 incorrectly stated that South Miami was in compliance with the terms of the loan agreements.

The city ended up settling with the IRS by paying $260,345 and defeasing a portion of the two prior bond offerings at a cost of $1.16 million. Due to the payment and settlement, bondholders were not financially harmed and they’re not required to include any interest from the bonds in their gross incomes.

The SEC said,

“An SEC investigation found that the city of 11,000 residents located in Miami-Dade County borrowed approximately $12 million in two pooled, conduit bond offerings through the Florida Municipal Loan Council (FMLC). South Miami’s participation in those offerings enabled it to borrow funds at advantageous tax-exempt rates. The city represented that the project was eligible for tax-exempt financing in various documents for the second offering that were relied upon by bond counsel in rendering its tax opinion. However, South Miami failed to disclose that it had actually jeopardized the tax-exempt status of both bond offerings by impermissibly loaning proceeds from the first offering to a private developer and restructuring a lease agreement prior to the second offering.”

FULL SEC CHARGE

The U.S. dollar index is trading up 0.55% today, now at 84.3240. The GSCI commodity index is down 0.6% at 631.02. WTI crude oil closed down 2%, at $94.28 a barrel on the first day of trading the July contract and following another large rise in U.S. gasoline inventories. Brent crude trades down 1.4% at $102.51 a barrel. Natural gas is down 0.1% today at about $4.19 per million BTUs. Gold settled down 0.6% today at $1,370.10.

The unofficial closing bells put the DJIA down about 80 points to 15,307.56 (-0.52%), the NASDAQ fell nearly 39 points (-1.11%) to 3,463.30, and the S&P 500 fell -0.83% or nearly 14 points to 1,655.35.

There were a several analyst upgrades and downgrades today, including:

• SodaStream International Ltd (NASDAQ: SODA) cut to ‘neutral’ at J.P. Morgan;
• Carnival Corp. (NYSE: CCL) cut to ‘neutral’ at HSBC;
• Bristol-Myers Squibb Co. (NYSE: BMY) raised to ‘buy’ at Citigroup;
• Monster Beverage Corp. (NASDAQ: MNST) started as ‘outperform’ at BMO Capital Markets; and
• Popular Inc. (NASDAQ: BPOP) started as ‘outperform’ at Wells Fargo.

Earnings reports since markets closed last night have resulted in some price changes for reporting companies as of the last half hour of trading today:

• Intuit Inc. (NASDAQ: INTU) is up 0.4% at $58.14;
• NetApp Inc. (NASDAQ: NTAP) is up 1.2% at $37.05;
• American Eagle Outfitters Inc. (NYSE: AEO) is up 1% at $20.51;
• Lowe’s Companies Inc. (NYSE: LOW) is up 0.6% at $42.71 after posting a new 52-week high of $43.84 earlier today;
• Staples Inc. (NASDAQ: SPLS) is up 2% at $15.05 after posting a new 52-week high of $15.50 earlier today;;
• Target Corp. (NYSE: TGT) is down 4.6% at $67.96; and
• Toll Brothers Inc. (NYSE: TOL) is up 2.8% at $37.00 after posting a new 52-week high of $39.25 earlier today.

Before markets open tomorrow morning we are scheduled to hear earnings from DryShips Inc. (NASDAQ: DRYS), Hewlett-Packard Co. (NYSE: HPQ), L Brands Inc. (NYSE: LTD), PetSmart Inc. (NASDAQ: PETM), SeaWorld Entertainment Inc. (NYSE: SEAS), Workday Inc. (NYSE: WDAY), Dollar Tree Inc. (NASDAQ: DLTR), GameStop Corp. (NYSE: GME), Ralph Lauren Corp. (NYSE: RL), and Stein Mart Inc. (NASDAQ: SMRT).

Some standouts among heavily traded stocks today include:

MannKind Corp. (NASDAQ: MNKD) is up 15.1% at $6.17 after posting a new 52-week high of $6.54 earlier today. The biopharmaceuticals firm was touted as a likely takeover target.

Pfizer Inc. (NYSE: PFE) is up 1.7% at $29.26. The drugmaker said it plans to sell its majority holding in animal drug spinoff Zoetis Inc. (NYSE: ZTS).

Suntech Power Holdings Co. Ltd. (NYSE: STP) is down 22.9% at $0.99. The solar energy PV maker has sold one of its projects to another company at a steep discount, and the local government of Wuxi province, where Suntech has its main manufacturing plant, has filed a $2.5 billion claim against the company on behalf of more than 500 creditors.

Stay tuned for Thursday. St. Louis Fed President James Bullard is giving a speech. We have also noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – New claims for unemployment benefits
• 8:58 a.m. – Flash PMI manufacturing index
• 9:00 a.m. – FHFA house price index
• 10:00 a.m. – New home sales
• 10:30 a.m. – EIA weekly natural gas storage report
• 11:00 a.m. – Kansas City Fed manufacturing index
• 1:00 p.m. – Treasury Inflation-Protected Securities (TIPS) auction
• 4:30 p.m. – Fed balance sheet and money supply

It is interesting to see that officials are open to reducing bond purchasing at the June meeting if there is evidence of strong and sustainable growth. A problem is that officials disagree on what evidence would really indicate that there is sufficient underlying growth that would remain if the bond buying was tapered. The minutes also showed that labor markets have improved since last September. That jobs market is what many Fed members want to see improving.

What you have is evidence that Fed officials are starting to think that the bond buying aspect of quantitative easing may not be helping that much. That being said, there is really only one dissenting voice among the voting members of the FOMC.

The markets have continued looking for a reason to sell off and that is what they have done. The S&P 500 is now down 8 ponts at 1,660 after having been over 1,680 this morning. The DJIA is now down about 30 points at 15,356 after having been challenged 15,550 earlier.

FULL FOMC MINUTES

The one dissenting vote is Esther George and the minutes said,

“Ms. George dissented because she continued to view monetary policy as overly accommodative and therefore as posing risks to the long-term sustainable growth of the economy. She expressed concern that the stance of policy might be fostering imbalances and excessive risk-taking in some financial markets and institutions, and she cited the potential for the Committee’s ongoing asset purchases to complicate the future conduct of policy, raise uncertainty, and affect future inflation expectations. Accordingly, Ms. George preferred to signal a near-term tapering of asset purchases, which would begin to move policy toward a more appropriate stance.”

Now we have seen that the 10-year U.S. Treasury Note has suddenly gone back up over 2.00%. In fact, the last move was up about basis points for a 2.01% yield. The 30-year Treasury Bond is also up about 7 basis points to 3.20%. Over the last month we have now seen 10-year rates rise 22 basis points and 30-year rates rise by 25 basis points.

If you go back before this move to see higher rates earlier in 2013, the last time that the 10-year Treasury Note was up over 2.00% was March 15 and that cycle high yield was 2.09%.

Now go back to the 30-year Long Bond yield at 3.20%. The move here is less dramatic but we are now challenging yield highs going back to March as well when it looked as though the Treasury Long Bond was going to break above 3.30%.

We also have seen two Fed presidents try to tone down some of the fears that bond buying would either end rapidly or that the tapering effect would come rapidly. Right now it seems as though the investing community is trying to brace for that day of less bond buying and perhaps even higher interest rates ahead of time.

As a reminder for Long Bond owners: a rapid rise of 100 basis points on the 30-year Treasury Bond will cause a loss of more than 15% in face value. In short, a 100 basis point rise wipes out roughly five years worth of annual coupon payments.

Some key takeaways are that Immelt said the U.S. economy is getting a little better every day. GE Capital was shown to have ended the first quarter of 2013 with $402 billion in assets, and the goal is to get those assets down to $300 billion to $350 billion by the end of 2014. GE sees the U.S. at 45% of its industrial revenue, 35% for its growth markets, followed by 20% for Japan and Europe.

GE said that there is no change in the framework projected in 2013. The company has taken heat for not growing in total, but cutting GE Capital down in size is the reason here. 2013 industrial segment revenue in 2013 is expected to be 2% to 6% organic growth, while GE Capital revenues are projected to be -5% to flat in 2013. Earnings growth in the industrial segment is put at double-digit growth. GE also expects to return about $18 billion worth of cash back to its shareholders.

IMMELT’S FULL PRESENTATION HERE

Whatever the expectations are, GE is continuing on its recovery path. Shares just hit a post-recession high and 52-week high of $24.13 on the day, and the current gain is 1.8% to $24.08, against a consensus analyst price target of $25.40. GE still outyields most DJIA components and conglomerates with a 3.2% dividend for its common stock.

Total gasoline inventories increased by 3 million barrels last week and are now near the upper limit of the five-year average range. Total motor gasoline supplied averaged 8.5 million barrels a day over the past four weeks — a drop of about 3.3% compared with the same period a year ago.

Distillate inventories fell by 1.1 million barrels last week and remain in the lower half of the average range. Distillate product supplied averaged 3.8 million barrels a day over the past four weeks, up about 2.5% when compared with the same period last year. Distillate production totaled 4.8 million barrels a day last week, higher by 200,000 barrels compared with the prior week.

The American Petroleum Institute last night reported an inventory build of 532,000 barrels in crude supplies last week, together with an increase of 3 million barrels in gasoline supplies and a rise of 459,000 barrels in distillate supplies. Platts estimated a decline of 1.2 million barrels in crude inventories, a drop of 200,000 barrels in gasoline inventories, and a rise of 1.1 million barrels in distillate inventories.

Crude prices were down about 0.4% before the EIA report at around $95.80 a barrel and slid to around $95.00, down 1.2%, shortly after the report was released.

For the past week, crude imports averaged more than 8.1 million barrels a day, up about 507,000 barrels a day from the previous week. Refineries were running at 87.3% of capacity, with daily input of 15.2 million barrels a day, about 4,000 barrels a day less than the previous week.

The steep rise in gasoline inventories has not be reflected in pump prices. According to gasbuddy.com, a gallon of regular gasoline averages about $3.69 today, compared with $3.61 a week ago and $3.50 a month ago. This week marks the second consecutive week for a substantial boost in gasoline inventories, and we would expect the price to drop. Perhaps anticipated demand for the coming holiday weekend is propping up gasoline prices. It is about the only explanation we can imagine.

The United States Oil ETF (NYSEMKT: USO) is down 1.2%, at $33.70 in a 52-week range of $29.02 to $37.17.

The United States Gasoline ETF (NYSEMKT: UGA) is down 1.1%, at $55.82, in a 52-week range of $45.13 to $65.86.

The United States Brent Oil ETF (NYSEMKT: BNO) is down 0.9%, at $78.18 in a 52-week range of $63.00 to $88.71.

Housing inventory rose again in April, up 11.9% to 2.16 million homes, which is equal to a supply of 5.2 months, compared with a 4.7-month supply in March. Listed inventory is down 13.6% year-over-year, when there was a 6.6 month supply available.

According to the NAR, the national median existing home price in April was $192,800, up 11% compared with April 2012 and the 14th consecutive month to see a price gain. The last time housing prices went on such a string of price increases was the period between April 2005 and May 2006.

NAR’s chief economist said:

Buyer traffic is 31 percent stronger than a year ago, but sales are running only about 10 percent higher. It’s become quite clear that the only way to tame price growth to a manageable, healthy pace is higher levels of new home construction.

Foreclosed and short sales accounted for 18% of April sales, down from 21% of March sales, and below the 28% share in April 2012. Foreclosures sold at an average 16% discount to the April median price, while short sales sold at a discount of 14%. Both discounts increased slightly month-over-month.

Existing, non-distressed homes were on the market for an average of 44 days, while foreclosed homes were on the market for an average of 43 days and short sales took a median of 73 days to sell.

Higher selling prices and higher interest on mortgage loans are combining to slow existing home sales. The inventory numbers, however, continue to look solid. As long as inventory does not fall dramatically, existing home sales should continue to improve slowly.

Lowe’s also revised guidance for the full year. The company now expects revenues to rise by 4% year-over-year, which is 0.5% higher than the company’s estimate at the end of the fourth quarter of 2012. That implies revenues of around $52.54 billion for the year, compared with a consensus estimate of $52.38 billion. EPS guidance was reaffirmed at $2.05, below the consensus estimate of $2.08.

The company’s CEO said:

Cooler than normal temperatures and greater precipitation resulted in a delayed spring selling season which impacted our results in exterior categories. While overall performance in the month of March was particularly soft, April improved significantly and we have maintained that positive momentum through the first few weeks of May.

Competitor Home Depot Inc. (NYSE: HD) reported results yesterday, and the company posted a new 52-week high based both on its results and its improved forecast. Lowe’s is not likely to follow suit today.

Lowe’s same-store sales in the first quarter fell 0.7%, but the company improved its gross margins from 34.7% a year ago to 34.8% this year.

Shares are down about 2.5% in premarket trading, at $41.40 in a 52-week range of $24.76 to $43.55. Thomson Reuters had a consensus analyst price target of around $41.60 before today’s results were announced.

On a GAAP basis, Target’s diluted EPS for the quarter totaled $0.77, which excludes a loss of $0.41 per share related to early repayment of debt, a loss of $0.24 related to the company’s Canadian segment and a one-time gain of $0.36 related to the sale of the store’s consumer credit card receivables portfolio.

For the second quarter, Target guided adjusted EPS at $1.09 to $1.19. For the full year the company expects to post adjusted EPS of $4.70 to $4.90, a significant drop from the previous guidance of $4.85 to $5.05. The consensus estimates call for second-quarter EPS of $1.06 and full-year EPS of $5.54.

The company’s CEO said:

Target’s first quarter earnings were below expectations as a result of softer-than-expected sales, particularly in apparel and other seasonal and weather-sensitive categories. While we are disappointed in our first quarter performance, we remain confident in our strategy, and we continue to invest in initiatives, including Canada, our digital channels and CityTarget, that will drive Target’s long-term growth.

At the end of the fourth quarter of 2012, Target had forecast EPS for the first quarter at $1.10 to $1.20. The consensus estimate at the time was $1.05, which dropped by 17% over the course of the first quarter. The CEO’s disappointment is not as bad as it could have been.

Same-store sales fell by 0.6% in the first quarter, compared with a gain of 5.3% in the same period a year ago. The number of transactions was also down by 1.9%, though the average transaction amount rose by 1.3%. In the first quarter a year ago, transactions were up 2% and the average transaction amount was 3.2% higher.

Gross margins in the United States rose 0.5% year-over-year in the quarter to 30.7%. Gross margin in the company’s Canadian segment totaled 33%.

Shares are down 2.3% in premarket trading, at $69.60 in a 52-week range of $54.93 to $71.91. Thomson Reuters had a consensus analyst price target of around $73.05 before today’s results were announced.

The 50 largest hedge funds increased their equity exposure by over 5% in Q 1 2013 This quarter, Boeing Co. was the favorite allocation of the funds. The stock experienced $1.6 billion in inflows, which amounted to nearly 250% of its Q4 value in the funds’ aggregate portfolio. Boeing’s shares are up 28.2% year to date (“YTD”), compared to 15.7% for the S&P 500. However, the largest dollar value increase in equity exposure arose from the January IPO of Norwegian Cruise Line Holdings Ltd which was backed in part by Apollo Global Management LP. It’s also interesting to note that though the funds sold some exposure in Google Inc. (Cl A), the technology company was present of the majority (62%) of the fifty hedge funds portfolios. This distinction was previously held by Apple. Two quarters ago, Apple was held by just as widely as Google and it was the largest equity holding of nearly one fourth of the funds. However, by Q1 2013, Apple was held by only 40% of the funds with only four carrying it as the top stock holding.

While the top 50 hedge fund managers largely increased their exposure to equities, the funds also made significant reductions to their stakes in two successful stocks in 2013: News Corp. (Cl A) and American International Group Inc. The funds reduced their holding in News Corp by 20.3% and the stock represented the largest individual equity sale in three of the fifty hedge funds. In addition, the funds reduced their exposure to AIG by 16.2%. With these sales, fund investors seem to be predicting a slowdown or reversal for these two issues, as AIG and News Corp have had very similar YTD returns as Boeing in 2013: 27.2% and 28.8%, respectively.

Shares of Apple Inc. (NASDAQ: AAPL) are fractionally higher in premarket trading, and Google Inc. (NASDAQ: GOOG) is down fractionally. Boeing Co. (NYSE: BA), News Corp. (NASDAQ: NWSA) and American International Group Inc. (NYSE: AIG) are thus far inactive.