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Bigger Brother; Goldilocks Rally; Bearing Bonds

Chairman and vice chairman of the U.S. Senate Select Committee on Intelligence, Sen. Dianne Feinstein (D-Calif.), left, and Sen. Saxby Chambliss (R-Ga.) speak to members of the media. According to reports, the NSA has collected phone data, under a provision of the Patriot Act, of Verizon customers in the U.S.
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Chairman and vice chairman of the U.S. Senate Select Committee on Intelligence, Sen. Dianne Feinstein (D-Calif.), left, and Sen. Saxby Chambliss (R-Ga.) speak to members of the media. According to reports, the NSA has collected phone data, under a provision of the Patriot Act, of Verizon customers in the U.S.

Big Brother, Part 2

Notes:

Just a day after it was revealed that the government is monitoring certain data of Verizon customers, news breaks that Big Brother is at it again. This time, the news is that the government has enlisted nine of the biggest U.S. technology companies to help it spy on people in a program called PRISM.

Named in the monitoring program, in order of their inclusion date, are Microsoft (added in September 2007), Yahoo, Google, Facebook, PalTalk, YouTube, Skype, AOL and Apple (added in October). PRISM allows the FBI access to the central servers of each company, where it can see your emails, photos, video and even listened to audio, such as a phone call. Apple's response to the revelation sums up those of the other eight companies: "We have never heard of PRISM."

Of course, the National Security Agency has monitored Web and phone data for years. And PRISM apparently is limited to non-U.S. citizens. But the subject rightfully makes people jittery enough for President Barack Obama to chime in with a defense of the government's data-collection and surveillance program.

Quotes:

"These are programs that have been authorized by (a) broad bipartisan majority repeatedly since 2006. I think at the outset it's important to understand that your duly elected representatives have been consistently informed on exactly what we're doing. Nobody is listening to your telephone calls."—President Obama

'Goldilocks' Jobs Report

Notes:

Friday's pivotal employment report didn't disappoint. The economy added 175,000 jobs in May, which means that private employers hired at a slow but steady pace despite higher taxes and government spending cuts. So much for a June swoon?

Sure, unemployment was up a tick to 7.6 percent (from 7.5 percent in April), the Labor Department said, but that isn't bad news because it represents more people returning to the work force after giving up.

The numbers were precisely what the market wanted; some improvement but not so much that taper talk would again dominate the discussion. Shares shot up.

But not so fast; there was some speculation that the jobs number could be a bit too good and that the Fed could use them and favorable July payroll numbers to justify setting a tapering course at its July 30-31 meeting.

Even former Federal Reserve Chairman Alan Greenspan chimed in, saying that the central bank should taper now, even if the economy isn't ready.

No matter, the White House wasted no time in crowing about the good news.

Quotes:
"I think this is a 'Goldilocks' number. The reason stocks, Ibelieve, are rallying this morning is people were positioned conservatively ahead of this. They were worried about an outsized number and what you've got was just about right. It was in line with expectations. It was strong enough to mitigate concerns about the economy slipping back too much, and it wasn't nearly strong enough to push the Fed off of their current path."— Russ Koesterich of BlackRock

"Today's report shows that the economy is continuing to recover. There's a lot more work to be done given how many jobs were lost during the great recession. We've added another 175,000 jobs and businesses have added jobs for a total of 7 million in that period so 're headed in the right direction and we're looking for ways to speed the recovery."— Alan Krueger, chairman of the White House Council of Economic Advisers

"The sooner we come to grips with this excessive level of assets on the balance sheet of the Federal Reserve—that everybody agrees is excessive—the better. There is a general presumption that we can wait indefinitely and make judgments on when we're going to move. I'm not sure the market will allow us to do that."—Alan Greenspan

All Eyes on Bonds

Notes:

Now that the market isn't fretting so much about the Fed tapering its bond buying program anytime soon (at least for Friday, that is), market watchers are monitoring another metric: bond yields.

In the near term, Jim Cramer said that if we can get bond yields to 2.1 percent, we could see a stock market rally. And Alan Greenspan, taking the long view of U.S. economic health, said that bond prices need to fall (meaning yields must rise) for the economy to normalize.

Quotes:

"I'm beginning to care less about tapering and just watching the 10-year [Treasury note]. Yesterday we had this great rally […] because the 10-year interest rate ticked down just a teeny-weeny and the Euro got stronger or people could say the dollar got weak. I just care about the 10-year because now we've discovered that when the 10-year goes down in yield, people come in and they buy Toll Brothers and Whirlpool and a bunch of banks that are levered mortgages. If we can get rates to be at 2.01 [percent] we can have a very big rally."—Jim Cramer

"Bond prices have got to fall. Long-term rates have got to rise. The problem, which is going to confront us, is we haven't a clue as to how rapidly that's going to happen. And we must be prepared for a much more rapid rise than is now contemplated in the general economic outlook. We're still well below the [rate] level we normally ought to be at this stage. The consequence of that is that when the bond market begins to move we may not be able to control it as well as we'd like to. And that has a lot of ramifications with respect to all sorts of markets."—Alan Greenspan

IRS Misfire Points to Targeting

Notes:

An errant email two years ago from an IRS worker in Cincinnati alerted agency supervisors in Washington to extra scrutiny of conservative groups a year earlier than originally thought.

Quotes:

"I see the government doing bad stuff again. I see people scrambling for plausible deniability. Where are the champions of freedom in Washington? Where is the Democratic Party?"—T.J. Rodgers, CEO of Cypress Semiconductor

Apple's Big Bet?

Notes:

Apple needed some good news. Its shares were down almost 3 percent for much of the week, it was in the headlines after losing a round in its ongoing patent battle with Samsung and it was in the red for much of a day that saw big gains in all the major indexes.

Meanwhile, investors wait eagerly for some word about its newest product innovations. Good thing they might have an answer heading into next week's World Wide Developers Conference. On top of the music-streaming service company watchers were expecting, there is speculation that the company will open up its apps platform for Apple TV leading up to the launch of an actual Apple television.

Whether it was the new products or the rising tide of favorable jobs number, Apple shares turned on a dime and shot up as much as 3 percent Friday afternoon.

Quotes:

"I talked about how low expectations are. It could be like the employment number; the expectation is so low, why not take a gamble on it and go long into the conference?"—Stephen Weiss of Short Hills Capital

_ By Doug Cubberley, Special to CNBC.com

Market Insider with Patti Domm