Tuesday Watch

Late-Night Headlines
Bloomberg:
- HSBC Holdings Plc will expand faster in the Americas and Asia than in the lender’s home base of Europe over the coming 10 years.
- Adults ages 18 to 26 spend 12.2 hours a week surfing the Web, compared with 10.6 hours watching TV, according to a survey published today by Forrester, a Cambridge, Mass.-based market researcher.

AP:
- Cingular Wireless, the largest US mobile-phone services provider, plans to charge about 4.7 million subscribers with older phones an extra $5 a month starting in September. The move is part of Cingular’s plan to get users to purchase new handsets and devote its network to one type of signal.

Digitimes:
- Dell Inc.(DELL) will begin selling notebook computers equipped with Advanced Micro Devices(AMD) processor chips as early as October.

Haaretz:
- Israel’s Cabinet approved expanding the army’s land offensive against Hezbollah bases in southern Lebanon.

Xinhua News Agency:
- China ordered online games to include user registration systems by the fourth quarter this year to prevent children from spending too much time on them.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are unch. to +.25% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated -.16%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (ASF)/.34
- (ATK)/1.06
- (MDRX)/.16
- (AQNT)/.11
- (ADM)/.52
- (CKFR)/.41
- (CNA)/.86
- (COH)/.29
- (CSC)/.61
- (EK)/.22
- (EDS)/.16
- (ERTS)/-.24
- (EMR)/1.16
- (EOP)/.17
- (HLT)/.34
- (IACI)/.29
- (IP)/.33
- (LTR)/.79
- (MRO)/3.57
- (MLM)/1.65
- (MAS)/.67
- (GAS)/.40
- (PZZA)/.33
- (PH)/1.50
- (PDE)/.37
- (Q)/.05
- (SIRI)/-.15
- (PCU)/3.09
- (JOE)/.26
- (SBL)/.11
- (TXU)/1.35
- (VLO)/2.95
- (VZ)/.62
- (VNO)/.52
- (WTW)/.59
- (WYNN)/.05
- (XEL)/.21

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Personal Income for June is estimated to rise .6% versus a .4% gain in May.
- Personal Spending for June is estimated to rise .4% versus a .4% gain in May.
- The PCE Core for June is estimated to rise .2% versus a .2% gain in May.

10:00 am EST
- Construction Spending for June is estimated to rise .1% versus a .4% decline in May.
- ISM Manufacturing for July is estimated to fall to 53.5 versus a reading of 53.8 in June.
- ISM Prices Paid for July is estimated to fall to 75.2 versus a reading of 76.5 in June.
- Pending Home Sales for June are estimated to fall .5% versus a 1.3% gain in May.

Afternoon:
- Total Vehicle Sales for July are estimated to rise to 16.7M versus 16.3M in June.
- Domestic Vehicle Sales for July are estimated to rise to 13.0M versus 12.6M in June.

BOTTOM LINE: Asian indices are mostly higher, boosted by pharmaceutical stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Mostly Lower on Profit-taking and Higher Energy Prices

Indices
S&P 500 1,276.66 -.15%
DJIA 11,185.68 -.30%
NASDAQ 2,091.47 -.13%
Russell 2000 700.56 +.08%
Wilshire 5000 12,780.76 -.06%
S&P Barra Growth 587.65 -.21%
S&P Barra Value 687.69 -.09%
Morgan Stanley Consumer 616.98 -.72%
Morgan Stanley Cyclical 781.26 +.23%
Morgan Stanley Technology 467.23 -.28%
Transports 4,381.99 -.75%
Utilities 433.42 -.37%
Put/Call .81 -7.95%
NYSE Arms 1.15 +23.52%
Volatility(VIX) 14.95 +4.33%
ISE Sentiment 99.0 +3.13%
US Dollar 85.28 -.12%
CRB 349.83 +1.75%

Futures Spot Prices
Crude Oil 74.51 +.15%
Unleaded Gasoline 221.85 +.30%
Natural Gas 8.24 +.41%
Heating Oil 204.75 +.49%
Gold 648.80 +.31%
Base Metals 231.15 +3.11%
Copper 358.80 +.50%
10-year US Treasury Yield 4.97% -.20%

Leading Sectors
Coal +3.50%
Oil Service +2.74%
HMOs +1.82%

Lagging Sectors
Wireless -.77%
Homebuilders -.78%
Airlines -2.98%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Prime Minister Olmert said Israel hasn’t called a cease-fire in Lebanon and won’t do so until the threat form the Hezbollah Islamic fundamentalist organization has ended.
- Two Fed officials said the economic outlook may justify a break from two years of consecutive interest-rate increases, signalijng policy makers could leave the main US rate unchanged next week.
- Jon Wood, a former UBS AG trader who helped the Zurich-based bank earn $2.4 billion over a six-year span, raised more than $3 billion for a hedge fund he plans to open in September.
- Whole Foods Market(WFMI) said third-quarter profit rose 33%, lifted by sales of prepared foods. Shares dropped on lower-than-expected same-store sales growth.

Boston Globe:
- Lobster dealers are being encouraged to add identification tags to Maine lobsters to protect consumers from “imposter lobster” caught elsewhere.

San Jose Mercury News:
- Google(GOOG) and Yahoo!(YHOO), along with other Internet firms, have made agreements to compensate US news organizations for their content and help direct more traffic to their Web sites.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Medical longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was slightly negative today as the advance/decline line finished about even, sector performance was mixed and volume was below average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was neutral given last week's gains, the rise in energy prices and Fed comments. Trading was slow and sloppy throughout the day. It is a big positive, however, that last week's gains in both stocks and bonds held. Cyclicals and small-caps outperformed today on improving sentiment regarding the recent economic slowdown. The consumer non-cyclical industry had the greatest amount of net insider buying last week in the S&P 500. Insiders bought $738,547,767 worth of stock and sold $109,416,113 worth. This is the largest net insider buying I have seen in this industry in a long time.

Stocks Modestly Lower into Final Hour on Healthy Profit-taking and Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, almost every sector is rising and volume is light. As I suspected a few weeks ago, earnings have actually provided an upside catalyst for the major averages. Despite bear calls that second-quarter reports would show an imminent severe economic downturn was on the horizon, earnings have once again exceeded estimates. Moreover, guidance has been relatively strong with expectations of another double-digit profit gain in the third quarter. Recent economic data also show few signs of anything other than a “soft-landing” for U.S. economic growth. I suspect another wave of short-covering will commence in the near term on any pullback in energy prices, the Aug. 8 Fed meeting or improvements in the Middle Eastern situation. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, increased Fed “pause” speculation, lower long-term rates and bargain-hunting.

Today's Headlines

Bloomberg:
- US Secretary of State Condoleezza Rice, wrapping up several days of Middle East mediation, said a cease-fire and political settlement between Israel and Hezbollah is achievable this week.
- Teck Cominco Ltd., the world’s largest zinc miner, revised its unsolicited offer for Inco Ltd. in an attempt to rebuff a competing bid from Phelps Dodge(PD) and create North America’s biggest mining company.
- Federal Reserve Bank of St. Louis President William Poole said he’s undecided on whether the central bank should raise interest rates at its next meeting in eight days.
- US drug regulators are prepared to clear over-the-counter sales of an emergency contractive, Barr Pharmaceuticals’(BRL) Plan B pill.
- Natural Gas rallied to its second biggest gain this year as a heat wave moved from the Midwest to the Northeast, spurring utilities to increase electric power.
- Gasoline futures fell for a third session on expectations demand will decline as the summer driving season winds down.

Wall Street Journal:
- Verizon Wireless(VZ) plans to release a cell-phone with a music player that has a similar design to Apple Computer’s(AAPL) iPod.
- US electricity users will be encouraged to join energy conservation programs as the power network strains under record use levels.
- Wind-power technology is becoming an attractive, low-risk, high-yield investment for pension funds.
- The Fed’s policy rate is “in a vicinity that is roughly appropriate” to temper inflation pressures without choking off economic growth, San Francisco Fed President Janet Yellen said.

NY Times:
- The US Homeland Security Department has tightened enforcement of immigration laws, bringing charges against suspected violators.
- About 13% of US men aged 30-55 aren’t working today, up from 5% in the 1960s. Most of the men not working are former blue-collar workers with a high-school education at most, adding that they’re turning down jobs they think are beneath them. About 73% of women between ages 30-54 have jobs, up from 45% in the mid-60s.
- Former Apple Computer(AAPL) engineer Steve Perlman will introduce today a camera system that adds photorealistic three-dimensional effects to digital entertainment.
- Washington Post and several other daily newspaper companies have hired Inform.com, an online news aggregator, to scan news and blog sites and post links to content related to news stories, even from competitors, on each newspaper’s Web site.
- US Airways Group’s financial success since its merger last year with America West has led some airline executives and investors to discuss the possibility of more mergers.

Economic Information Daily:
- China needs a stronger currency to stop the economy from growing too fast and fueling inflation, citing a researcher at Beijing-based Chinese Academy of Social Sciences.

Gulf News:
- Rising oil prices have increased the six Gulf Cooperation Council member states’ reserves by almost $70 billion, or 93%, in five years, citing a report by the World Bank.

Donya-e-eqtesad:
- Iran signed a contract with China Petroleum & Chemical, known as Sinopec, to increase the capacity of the Islamic republic’s Arak refinery.

Chicago PMI Still Strong, Prices Paid Falls

- The Chicago Purchasing Manager Index for July rose to 57.9 versus estimates of 56.0 and a reading of 56.5 in June.

BOTTOM LINE: Manufacturing in the Chicago area this month unexpectedly accelerated as businesses expanded production to meet demand, Bloomberg said. The prices paid component of the index fell to 86.8 from 89 the prior month. The new orders component of the index rose to 60 from 57.2 the prior month. The employment gauge rose to 50.5 from 50.4 in June. I continue to expect manufacturing to decelerate modestly from current levels over the intermediate-term.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Monday Watch

Weekend Headlines
Bloomberg:
- Israel suspended air strikes in southern Lebanon for 48 ours while it investigates the bombing yesterday of the Lebanese town of Qana that killed at least 54 people.
- The House voted to boost the minimum wage in Republican-backed legislation that also cuts $310 billion in taxes.
- One person was killed and five were wounded by gunfire at the Jewish Federation Building in downtown Seattle. The suspect told building staff members before he began shooting that he was “a Muslim American” who was “angry at Israel.”
- US 10-year Treasuries rose for a fifth straight week, pushing yields below 5%, as reports showing the US economy slowed fueled speculation the Fed will stop raising interest rates next month.
- Wal-Mart Stores(WMT) said July same-store sales in the US rose about 2.4% versus estimates of a 1-3% gain.
- The NY Times endorsed Ned Lamont over three-term US Senator Joe Lieberman in Connecticut’s Aug. 8 Democratic primary, criticizing the incumbent for a “warped version of bipartisanship,” including support of President Bush on national security issues.
- Nanotech is luring bankers and venture capitalists with promise of a $1 trillion market.
- SanDisk(SNDK), the world’s largest maker of memory cards for portable electronics, agreed to buy M-Systems Flash(FLSH) for about $1.3 billion in stock to add storage products for mobile phones.
- Crude oil traded near a one-week low in NY on signs of slowing global growth and as Israel called a temporary halt to air strikes in Lebanon.

Barron’s:
- China’s expanding economy ay stumble amid concerns about an aging population, lax environmental protections and increasing corruption.

NY Times:
- Apple Computer(AAPL) won some intellectual property protections from French judges, who declared unconstitutional a law to force companies to make online music playable on any device.
- A federal grand jury is investigating the leak of classified information about US intelligence programs and subpoenaed a former National Security Agency employee.
- Netgear Inc.(NTGR) and three other manufacturers will begin shipping wireless fidelity, or Wi-Fi, phones in September that are compatible with Skype Technologies SA’s Internet calling service.
- The two major US political parties, Democrats and Republicans, are now more divided over the Iraq War than their members ever were during the Vietnam War, citing pollsters. 75% of Republicans in the latest NY Times/CBS poll supported the war in Iraq, while only 24% of Democrats did.
- Larry Sonsini and his law firm, Wilson Sopnsini Goodrich & Rosati, represented “just under 50%” of the Silicon Valley companies implicated in the probe of backdating stock options.

Time Magazine:
- Senator John McCain’s son has joined the Marine Corps and could be sent to Iraq.

Washington Post:
- The Bush administration is waging a fight against bioterrorism by authorizing realistic tests of some of the pathogens and tactics that might be used in an attack.
- US Senate Majority Leader Frist needs to line up 60 votes to overcome Democrats’ threats of a filibuster over reducing the death tax.

The Economist:
- High-tech entrepreneurs recently unveiled a sporty electric car.

Crain’s Chicago Business:
- US automobile insurers such as Allstate Corp.(ALL) and State Farm Insurance Cos. have seen accident claims drop for four straight years, helping them achieve record profits. Insurance companies are baffled by the decline. The advance several possible reasons: Cars are safer, the baby-boom generation has reached the safest driving age, 45-64, or drivers aren’t filing claims for “fender-benders.”

LA Times Times:
- Viacom’s Paramount Pictures unit told Washington lawmakers this spring that director Oliver Stone’s film on the 9/11 terrorist attacks, “World Trade Center,” doesn’t promote conspiracy theories.

Financial Express:
- Property prices in India may drop 10% over an unspecified period as demand slows, citing officials from three property developers.

Spiegel:
- BASF CEO Hambrecht said the economic outlook for the remainder of the year is “very positive” and business in its markets around the world is “good.” The head of the world’s biggest chemical maker said he’s “fairly certain” the price of oil will decline as investments in the industry start to pay off.

Neue Zuercher Zeitung:
- The situation in Iraq is “not as bad as it’s portrayed,” and the number of car bombings has declined since last year, citing Iraqi President Jalal Talabani. The number of car bombs in Baghdad has gone down from an average of 14/day last year to 2-4/day this year.

The Globe and Mail:
- Grupo Mexico SA may bid for Phelps Dodge(PD), complicating Phelps Dodge’s bid for Inco Ltd.(N).

Kydo News:
- The United States told Japan that North Korea’s long-range Taepodong-2 missile, test-fired on July 5, disintegrated within 1.5 Km of the launch pad, flying far less than Japan had estimated.

AFP:
- The head of Iran’s Revolutionary Guards urged his troops to prepare “to get even” with Israel and the US.

China Securities Journal:
- Short selling and margin trading on the Shanghai Stock Exchange may reach up to $1.5 billion when a trial program starts on Aug. 1.

Weekend Recommendations
Barron's:
- Had positive comments on (EP), (DNR), (RRC), (TTEK) and (COH).

Night Trading
Asian indices are unch. to +1.0% on average.
S&P 500 indicated -.09%
NASDAQ 100 indicated -.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (AG)/.55
- (AVP)/.35
- (CELL)/.16
- (CMG)/.25
- (CMVT)/.19
- (EXC)/.80
- (FRE)/1.17
- (HUM)/.35
- (ISSX)/.22
- (IRBT)/-.20
- (JNPR)/.19
- (MET)/1.14
- (TSN)/-.03
- (VMC)/1.28
- (WFMI)/.34

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Chicago Purchasing Manager for July is estimated to fall to 56.0 versus a reading of 56.5 in June.

BOTTOM LINE: Asian Indices are higher, boosted by technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

There are several economic reports of note and a number of significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - Chicago Purchasing Manager

Tues. - Personal Income, Personal Spending, PCE Core, Construction Spending, ISM Manufacturing, ISM Prices Paid, Pending Home Sales, Total Vehicle Sales

Wed. - ADP Employment Change

Thur. - Initial Jobless Claims, Continuing Claims, Factory Orders, ISM Non-Manufacturing

Fri. - Change in Non-farm Payrolls, Unemployment Rate, Change in Manufacturing Payrolls, Average Hourly Earnings

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - Avon Products(AVP), Chipotle Mexican Grill(CMG), Comverse Technologies(CMVT), Exelon Corp.(EXC), Freddie Mac(FRE), Humana(HUM), Juniper Networks(JNPR), Metlife Inc.(MET), Tyson Foods(TSN), Vulcan Materials(VMC), Whole Foods Market(WFMI)

Tues. - Administaff(ASF), Alliant Techsystems(ATK), Archer-Daniels-Midland(ADM), CAN Financial(CAN), Coach Inc.(COH), Computer Sciences(CSC), Eastman Kodak(EK), Electronic Data Systems(EDS), Electronic Arts(ERTS), Emerson Electric(EMR), Equity Office Properties(EOP), Hilton Hotels(HLT), IAC/InterActiveCorp(IACI), International Paper(IP), Loews Corp.(LTR), Marathon Oil(MRO), Pappa John’s(PZZA), Sirius Satellite(SIRI), Southern Copper(PCU), St Joe(JOE), TXU Corp.(TXU), Valero Energy(VLO), Verizon Communications(VZ), Vornado Realty(VNO), Wynn Resorts(WYNN)

Wed. - Allergan(AGN), Alltel(AT), Cigna(CI), Clorox(CLX), Devon Energy(DVN), Dolby Labs(DLB), Expedia(EXPE), GlobalSantaFe(GSF), Infospace(INSP), Las Vegas Sands(LVS), Mastercard(MA), Netease.com(NTES), PG&E Corp.(PCG), Procter & Gamble(PG), Starbucks(SBUX), Time Warner(TWX)

Thur. - Activistion(ATVI), Altera Corp.(ALTR), Cardinal Health(CAH), Cephalon(CEPH), CVS Corp.(CVS), DreamWorks(DWA), Duke Energy(DUK), El Paso Corp.(EP), Kerr McGee(KMG), MGM Mirage(MGM), Noble Energy(NBL), OfficeMax(OMX), Patterson-UTI(PTEN), Sabre Holdings(TSG), Sina Corp.(SINA), Sprint Nextel(S), Transocean(RIG), Tyco Intl.(TYC), Univision(UVN), Williams Cos(WMB)

Fri. - Crown Castle(CCI), Maxim Integrated(MXIM), Medco Health Solutions(MHS), Occidental Petroleum(OXY)

Other events that have market-moving potential this week include:

Mon. - None of note

Tue. - None of note

Wed. - CSFB Electrical Equipment Conference

Thur. - CIBC Wireless 1-on-1 Conference, CSFB Electrical Equipment Conference

Fri. - CSFB Electrical Equipment Confernce

BOTTOM LINE: I expect US stocks to finish the week modestly higher on mostly positive earnings reports, increased speculation for a Fed “pause”, a calming in Middle Eastern tensions, short-covering and bargain hunting. My trading indicators are still giving mostly bearish signals and the Portfolio is 100% net long heading into the week.

Chart of Interest

Bottom Line: Notwithstanding the current bout of modest cyclical inflation, the secular trend of disinflation is still in tact.

Market Week in Review

S&P 500 1,278.55 +3.09%*



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was very bullish. The advance/decline line rose sharply, almost every sector gained and volume was above average on the week. Measures of investor anxiety were mostly lower. The AAII % Bulls rose to 34.88% this week from 23.85% the prior week. This reading is still below average levels. The AAII % Bears fell to 43.02% from 57.80% the prior week. This reading is still above average levels. Moreover, the 10-week moving average of the % Bears is 46.04%. It has been this high only 1 other time since record-keeping began in 1987, the significant market bottom during the 1990 recession and Gulf War. It never even reached current levels during the depths of one of the greatest stock market collapses in US history during 2002. Many other measures of investor sentiment are still near levels associated with meaningful market bottoms.

The average 30-year mortgage rate fell 8 basis points to 6.72%, which is 151 basis points above all-time lows set in June 2003. I still believe housing is in the process of slowing to more healthy sustainable levels. Mortgage rates have likely begun an intermediate-term move lower, which should help stabilize housing over the next few months.

The benchmark 10-year T-note yield fell 5 basis points on the week as economic data were mixed, oil prices declined and the Fed made dovish comments in its Beige Book report. Inflation concerns have likely peaked for the year as investors continue to anticipate slower economic growth, unit labor costs remain subdued and the mania for commodities continues to reverse course.

The EIA reported this week that gasoline supplies fell more than expectations as refinery utilization declined. Unleaded Gasoline futures fell and are now 23.3% below September 2005 highs even as refinery utilization remains below normal as a result of the hurricanes last year, some Gulf of Mexico oil production remains shut-in and fears over future production disruptions persist. According to TradeSports.com, the percent chance of a US and/or Israeli strike on Iran this year has fallen to 19.8% from 36% late last year. I continue to believe the elevated level of gas prices related to crude oil production disruption speculation will further dampen fuel demand over the coming months, sending gas prices back to reasonable levels.

US oil inventories are at 7-year highs. Since December 2003, global oil demand is down 1.19%, while global supplies have increased 5.19%. Moreover, worldwide inventories are poised to begin increasing at an accelerated rate over the next year. I continue to believe oil is priced at extremely elevated levels on fear and record speculation by investment funds, not fundamentals. Escalating violence in the Middle East and the onslaught of hurricane season will likely lead to a major top in oil over the next couple of months as demand destruction further accelerates. As the fear premium in oil dissipates back to more reasonable levels, global growth slows and supplies continue to rise, crude oil should head meaningfully lower over the intermediate-term.

Natural gas inventories fell more than expectations this week. Supplies are now 21.6% above the 5-year average, a high level for this time of year, even as some daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged 54.1% since December 2005 highs. At this time last year, 5 tropical storms and 3 hurricanes had already threatened Gulf of Mexico production. There is now some evidence of a pick-up in industrial demand for the commodity. Natural gas has likely made an intermediate-term bottom before moving to new cycle lows in December or January.

Gold rose on the week on Middle East tensions, US dollar weakness and dovish Fed commentary. The US Dollar fell on a dovish Fed Beige Book report and increased speculation for a Fed pause. I continue to believe the Fed is done hiking rates for this cycle.

Technology and commodity stocks outperformed for the week as worries over an imminent recession faded and most earnings exceeded estimates. Profit growth for the second quarter is coming in at about 12%. This would mark the 16th straight quarter of double-digit profit growth, the best streak since recording keeping began in 1936. Despite a 71.0% total return for the S&P 500 since the October 2002 bottom, its forward p/e has contracted relentlessly and now stands at a very reasonable 14.7. The average US stock, as measured by the Value Line Geometric Index(VGY), is down .6% this year. The Russell 2000 Index is still up 4.7% year-to-date, notwithstanding the recent correction.

In my opinion, the current pullback is still providing longer-term investors very attractive opportunities in many stocks that have been punished indiscriminately. In my entire investment career, I have never seen the best “growth” companies in the world priced as cheaply as they are now relative to the broad market. By contrast, “value” stocks are quite expensive in many cases. Moreover, the most overvalued economically sensitive and emerging market stocks should continue to underperform over the intermediate-term as the manias for those shares subside. I continue to believe a chain reaction of events has begun that will eventually result in a substantial increase in demand for US stocks.

In my opinion, the market is still factoring in way too much bad news at current levels. Problematic inflation, substantially higher long-term rates, a significant US dollar decline, a “hard-landing” in housing, a plunge in consumer spending and ever higher oil prices appear to be mostly factored into stock prices at this point. I view any one of these as unlikely and the occurrence of all as highly unlikely.

Over the coming months, an end to the Fed rate hikes, lower commodity prices, decelerating inflation readings, lower long-term rates, increased consumer confidence, rising demand for US stocks and the realization that economic growth is only slowing to around average levels should provide the catalysts for another substantial push higher in the major averages through year-end as p/e multiples begin to expand. I still believe the S&P 500 will return a total of around 15% for the year. The ECRI Weekly Leading Index fell this week and is forecasting healthy, but decelerating, US economic activity.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,278.55 +3.09%
DJIA 11,219.70 +3.23%
NASDAQ 2,094.14 +3.65%
Russell 2000 700.03 +4.18%
Wilshire 5000 12,789.01 +3.22%
S&P Barra Growth 588.87 +2.92%
S&P Barra Value 688.30 +3.25%
Morgan Stanley Consumer 621.43 +2.07%
Morgan Stanley Cyclical 779.46 +2.51%
Morgan Stanley Technology 468.53 +3.85%
Transports 4,414.90 -.93%
Utilities 435.02 +1.63%
S&P Emerging Markets 804.05 +2.81%
S&P 500 Cum A/D Line 6,587.0 +13.0%
Bloomberg Oil % Bulls 45.0 -10.0%
CFTC Oil Large Speculative Longs 185,092 -4.0%
Put/Call .88 -29.60%
NYSE Arms .93 -48.62%
Volatility(VIX) 14.33 -17.64%
ISE Sentiment 96.0 -23.20%
AAII % Bulls 34.88 +46.25%
AAII % Bears 43.02 -25.57%
US Dollar 85.38 -.64%
CRB 343.83 +1.24%
ECRI Weekly Leading Index 136.30 -.44%

Futures Spot Prices
Crude Oil 73.36 -2.38%
Unleaded Gasoline 222.40 -3.93%
Natural Gas 7.24 +7.58%
Heating Oil 194.65 -1.19%
Gold 646.40 +3.42%
Base Metals 224.18 +5.53%
Copper 355.40 +5.15%
10-year US Treasury Yield 4.98% -1.19%
Average 30-year Mortgage Rate 6.72% -1.18%

Leading Sectors
Oil Service +8.36%
Telecom +7.75%
Semis +7.10%
Steel +6.74%
Computer Hardware +6.25%

Lagging Sectors
Broadcasting +.81%
Foods +.29%
Hospitals -1.46%
Gaming -2.35%
HMOs -5.22%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

Stocks Sharply Higher into Final Hour as Long-term Rates Fall

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Internet longs, Retail longs and Biotech longs. I added to my (PWR) long and covered my remaining (IWM) and (QQQQ) hedges today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Many are suggesting that recent stock gains are just a function of increased speculation that the Fed is done. The Fed is only done if inflation fears have peaked, which I believe to be the case. The 10-year yield, the best predictor of future inflation, would not be falling if inflation fears were rising. Other Fed pause speculation periods were accompanied by higher long-term rates as investors anticipated a pickup in growth and inflation. This is an "inflation has peaked" rally, which has meaningful longer-term consequences that are overwhelmingly positive for U.S. stocks. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, mostly positive earnings reports, lower long-term rates, lower energy prices and bargain-hunting.

Today's Headlines

Bloomberg:
- Crude oil is falling after a government report showed that US economic growth slowed and China said it planned to implement new energy pricing measures to increase efficiency.
- General Motors(GM), the best performing stock in the Dow Jones Industrial Average, would tie a 22-year record for consecutive daily gains with an increase today.
- Treasuries are rising, pushing yields on 10-year notes below 5% on declining inflation worries and increased speculation for a Fed “pause.”
- Bank of America(BAC) is on the brink of overtaking Citigroup as the world’s.

Wall Street Journal:
- Israeli and Lebanese bloggers are providing live updates, comment and links to each other across the firing lines. The dialogue marks a breakthrough in communications between residents of the two countries, who until now had no phone connections and little ability to talk to each other.
- General Motors’(GM) rising share price has caused hedge funds to lose money, as traders incorrectly bet against the carmaker turning around its losses.
- US conservatives trying to hold down taxes are expanding a campaign to impose spending limits on state legislatures.
- Hedge funds could receive more money from pension funds if the US Congress passes the pension bill currently before it. A little-noticed provision in the bill would change existing law, which states that if hedge funds obtain more than 25% of their total assets from pension funds they become fiduciaries, with resulting restrictions and increased scrutiny. It the bill is passed in its present form, public-employee or foreign pension plans would no longer be counted in the capped amount, thus allowing funds to accept unlimited amounts from them.

NY Times:
- About 60% of likely car buyers now say fuel economy is a priority, compared with 22% of prospective buyers in 2002.

Central People’s Radio:
- China will change how it prices energy products to reflect the resource scarcity in the country. Officials hope a reformed pricing mechanism for energy will raise efficiency.

Growoth Slows, Wages Rise, Consumer Confidence Beats Estimates

- Advance 2Q GDP rose 2.5% versus estimates of 3.0% and a 5.6% gain in 1Q.
- Advance 2Q Personal Consumption rose 2.5% versus estimates of a 2.1% increase and a 4.8% gain in 1Q.
- Advance 2Q GDP Price Index rose 3.3% versus estimates of a 3.5% increase and a 3.3% gain in 1Q.
- Advance 2Q Core PCE rose 2.9% versus estimates of a 2.9% gain and a 2.1% increase in 1Q.
- The 2Q Employment Cost Index rose .9% versus estimates of a .8% increase and a .6% gain in 1Q.
- The Final Univ. of Mich. Consumer Confidence Index rose to 84.7 versus estimates of 83.0 and prior estimates of 83.0.

BOTTOM LINE: The US economy grew at a 2.5% annual rate last quarter, less than half the pace of the previous three months, as companies and consumers reined in spending, Bloomberg said. A separate report from the Labor Dept. showed wages rose by the most in three years. Business Fixed Investment, which includes spending on commercial construction as well as equipment and software, increased at a 2.7% annual rate in the second quarter after a 13.7% gain in the first quarter. I continue to believe the Fed is done hiking rates for this cycle and that inflation fears have peaked. The 10-year T-note, the best predictor of future inflation, is rallying on this report.

Confidence among US consumers came in above estimates this month despite higher gas prices, a stock market correction and increased violence in the Middle East, Bloomberg reported. I expect Consumer Confidence to make new cycle highs over the intermediate-term as gas prices fall, stocks rise, inflation decelerates, mortgage rates fall, housing stabilizes and the job market remains healthy.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Friday Watch

Late-Night Headlines
Bloomberg:
- Shares of Sony Corp.(SNE) rose after the company posted profit that exceeded analyst estimates, helped by higher sales of Bravia televisions and Cyber-shot digital cameras.
- Shares of Sohu.com(SOHU), China’s third-biggest Internet portal, plunged 8.4% after the company forecast third-quarter sales that may miss analysts’ estimates.
- Japan’s consumer prices climbed for an eighth month and the prospect of finding a job rose to a 14-year high, supporting economists’ expectations that the central bank may increase interest rates for a second straight time this year.

Financial Times:
- The US government is to step up its prosecution of cartels, with executives involved at increased risk of extradition, citing an interview with Thomas Barnett, who heads the US Department of Justice’s antitrust division.

Colorado Gazette:
- A Colorado man serving a life sentence for murdering a teenage girl has told authorities he is responsible for 48 deaths across the US and overseas, a claim which, if true, would make him one of the more prolific serial killers in history.

AP:
- Left-wing anti-war protester Cindy Sheehan bought five acres of land in Crawford, Texas, near President Bush’s ranch. Sheehan purchased the property with some of the insurance money she received from the death of her son, Specialist Casey Sheehan.

Guardian:
- Google Inc.(GOOG) is the fastest growing brand in the world, citing an annual survey by brand consultants Interbrand.

Late Buy/Sell Recommendations
Goldman Sachs:
- Cut (ACH) to Underperform.
- Cut (WBMD) to Underperform, target $40.

Business Week:
- Shares of Bally Technologies(BYI), the second-largest maker of slot and lottery machines, may climb, and the company may be bought after it completes late securities filings, citing David Bain of Merriman Curhan Ford.

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated -.03%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (ALEX)/.49
- (AMT)/.02
- (AXL)/.35
- (ANDE)/.71
- (ADRX)/.18
- (ATW)/.72
- (BHI)/.98
- (BDX)/.79
- (CRDN)/1.05
- (CVX)/2.21
- (CEG)/.46
- (CVH)/.82
- (DLB)/.13
- (FPL)/.74
- (GPN)/.38
- (IDXX)/.63
- (IR)/.95
- (ITT)/.77
- (MSTR)/1.19
- (MGAM)/.02
- (ODP)/.40
- (OSTK)/.86
- (WMI)/.43

Upcoming Splits
- (MON) 2-for-1

Economic Releases
8:30 am EST
- Advance 2Q GDP is estimated to rise 3.0% versus a 5.6% gain in 1Q.
- Advance 2Q GDP Price Index is estimated to rise 3.5% versus a 3.1% gain in 1Q.
- Advance 2Q Personal Consumption is estimated to rise 2.1% versus a 5.1% gain in 1Q.
- Advance 2Q PCE Core is estimated to rise 2.9% versus a 2.0% increase in 1Q.
- 2Q Employment Cost Index is estimated to rise .8% versus a .6% gain in 1Q.

9:45 am EST
- Final Univ. of Mich. Consumer Confidence for July is estimated at 83.0 versus a prior estimated of 83.0

BOTTOM LINE: Asian indices are mixed, as gains by technology stocks are being offset by losses in real estate stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Mostly Lower on Profit-taking and Lingering Economic Worries

Indices
S&P 500 1,263.20 -.41%
DJIA 11,100.43 -.02%
NASDAQ 2,054.47 -.77%
Russell 2000 685.69 -1.26%
Wilshire 5000 12,626.31 -.56%
S&P Barra Growth 582.01 -.45%
S&P Barra Value 679.81 -.37%
Morgan Stanley Consumer 616.26 -.12%
Morgan Stanley Cyclical 767.62 -.88%
Morgan Stanley Technology 459.05 -.21%
Transports 4,305.46 -1.36%
Utilities 432.59 -.75%
Put/Call 1.04 -1.89%
NYSE Arms 1.11 +4.15%
Volatility(VIX) 15.0 +2.60%
ISE Sentiment 124.0 -25.75%
US Dollar 85.86 unch.
CRB 344.38 +.71%

Futures Spot Prices
Crude Oil 74.57 +.04%
Unleaded Gasoline 229.60 -.01%
Natural Gas 7.04 +2.25%
Heating Oil 198.80 +.42%
Gold 645.50 unch.
Base Metals 220.57 +.59%
Copper 348.00 +.04%
10-year US Treasury Yield 5.03% +.12%

Leading Sectors
I-Banks +1.08%
Semis +1.07%
Telecom +.88%

Lagging Sectors
Gold & Silver -2.93%
Networking -3.68%
HMOs -5.19%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- McAfee(MFE) said second-quarter profit fell 25% because of stock-option expenses. Sales gained 13%.
- Genesis Microchip(GNSS), a world leader in the development of image processing technologies for flat-panel TVs, monitors and other consumer display products, today announced its financial results for the first quarter of fiscal year 2007.

BOTTOM LINE: The Portfolio finished lower today on losses in my Medical longs, Networking longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bearish with the major averages and breadth finishing well off session highs. On the positive side, the bears were unable to gain significant downside traction. My intraday measures of investor angst were above average throughout the day. The 10-year held recent gains despite the mostly positive economic data. Tomorrow's GDP report will likely further increase speculation for a Fed pause.

Stocks Mostly Lower into Final Hour on Profit-taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Networking longs and Biotech longs. I added to my (ISRG) and (BBY) longs and to my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is above average. The AAII percentage of Bulls rose to 34.88% this week from 23.85% the prior week. This reading is still at below average levels. The AAII percentage of Bears fell to 43.02% this week from 57.80% the prior week. This reading is still at above average levels. Moreover, the 10-week moving average of the % Bears is 46.04%. The 10-week moving-average of % Bears has been this high only 1 other time since record-keeping began in 1987, the significant market bottom during the 1990 recession and Gulf War. It never even reached current levels during the depths of one of the greatest stock market collapses in US history during 2002. I continue to believe overall investor sentiment toward U.S. stocks remains at levels associated with meaningful market bottoms. I expect US stocks to trade modestly higher into the close from current levels on short-covering, mostly positive earnings reports and bargain-hunting.

Today's Headlines

Bloomberg:
- The Chicago Board Options Exchange will join with four securities firms to establish an exchange to trade equity securities early next year.
- Prime Minister Olmert decided today against widening Israeli military operations in southern Lebanon.
- Time Warner’s(TWX) board may approve as early as today a plan to give away its AOL service to high-speed Internet users in an attempt to revive the ailing unit.

Wall Street Journal:
- Five telecom equipment makers will announce today network technology that will enable service providers to bring in combined telephone, television and Internet features more quickly.
- Friendster, a Web company that brings people together and that’s losing users to competitors such as MySpace.com, may sue its peers for alleged patent violation.
- Shares of Automatic Data Processing(ADP) are considered cheap by some analysts as the company tries to recover form two embarrassments.
- The town of Monroe, Oregon, is getting Internet protocol television delivered over phone lines, a service that uses high speed connections to deliver video programming.
- Vanguard Group said it’s adopting consumer security systems made by RSA Security(RSAS) and popular with banks to protect its customers from fraud.
- US exchange-traded funds, worth $325 billion in May, are confusing investors by multiplying too quickly and becoming excessively specialized.
- The proportion of US employers offering benefits for workers who care for elderly relatives has risen to a quarter.

USA Today:
- The city of Portland, Oregon, is a leading proponent of so-called eco-friendly or “green” construction that seeks to use natural materials and promotes energy efficiency.

Philadelphia Inquirer:
- The Pennsylvania Turnpike Commission will be the first client for Duet, a software program by Microsoft(MSFT) and SAP AG(SAP), which will cost $30 million and take 30 months to implement.

AP:
- Palestinian Authority President Abbas said an “imminent solution” may be found for the release of an Israeli soldier who was kidnapped last month by Hamas.

Financial Times:
- Reuters Plc(RTRSY) could entice investors as a possible recovery story, though it’s far from being a growth stock.

Durable Goods Orders Healthy, Job Market Strong, New Home Sales Fall

- Durable Goods Orders for June rose 3.1% versus estimates of a 2.0% gain and an upwardly revised .3% increase in May.
- Durables Ex Transports for June rose 1.0% versus estimates of a .7% increase and an upwardly revised 1.5% gain in May.
- Initial Jobless Claims for last week fell to 298K versus estimates of 310K and 305K the prior week.
- Continuing Claims fell to 2475K versus estimates of 2458K and 2498K prior.
- New Home Sales for June fell to 1131K versus estimates of 1150K and 1166K in May.

BOTTOM LINE: Orders for US-made durable goods rose more than forecast in June, pointing to momentum in manufacturing that’s likely to keep the economy growing, Bloomberg reported. Orders for computers and electronics rose 3.4% versus a 2.1% decline in May. Communications equipment orders surged 8.3% versus a 6.6% gain the prior month. Bookings for non-defense capital goods excluding aircraft, a gauge of future business spending, rose .4% versus a 1.3% gain the prior month. I continue to believe manufacturing is decelerating, but will remain healthy as companies rebuild record low inventories.

The number of US workers filing first-time applications for state jobless benefits fell unexpectedly to 298,000 last week, a sign the labor market remains strong, Bloomberg said. The four-week moving average fell to 312,750 from 317,000 the prior week. The unemployment rate for those eligible for benefits, which tracks the US unemployment rate, remained at 1.9%. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Americans bought slightly fewer new homes than expected in June, Bloomberg reported. The median price rose 2.3% from a year ago to $231,300. The number of unsold homes increased to a 6.1-month supply at the June sales pace versus 5.9 months in May. Sales fell 11.3% in the Northeast, 7.9% in the Midwest and 6% in the South. They rose 8.2% in the West. I continue to believe housing is slowing to more healthy and sustainable levels and that mortgage rates have peaked for the intermediate-term.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- Hezbollah’s expanded arsenal of guided missiles and rockets is drawing Israeli forces into an increasingly deadly ground war in southern Lebanon as they attempt to locate and destroy the hidden weapons.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.25% to +1.0% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.02%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (AET)/.63
- (AYE)/.17
- (AEP)/.54
- (APCC)/.17
- (APC)/1.27
- (APA)/1.99
- (BZH)/2.35
- (AN)/.43
- (BSX)/.17
- (BMY)/.32
- (CA)/.13
- (CELG)/.10
- (CEN)/.22
- (CHK)/.72
- (CMCSA)/.20
- (CNX)/.63
- (CMI)/3.48
- (DECK)/.05
- (DRIV)/.37
- (DOW)/1.13
- (XOM)/1.64
- (FFIV)/.51
- (FO)/1.50
- (GRMN)/.94
- (GNW)/.68
- (HET)/1.02
- (K)/.65
- (KMG)/1.11
- (KLAC)/.58
- (LLL)/1.21
- (MEE)/.45
- (MBI)/1.43
- (MFE)/.31
- (MCK)/.62
- (NEM)/.46
- (NOC)/1.08
- (OMX)/.13
- (RTN)/.62
- (RCL)/.53
- (SOHU)/.18
- (STA)/1.29
- (HOT)/.59
- (TLAB)/.14
- (THQI)/-.20
- (TDW)/1.10
- (WEN)/.53
- (XMSR)/-.67

Upcoming Splits
- (MON) 2-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for June are estimated to rise 2.0% versus a .2% decline in May.
- Durables Ex Transportation for June are estimated to rise .7% versus a .8% increase in May.
- Initial Jobless Claims for last week are estimated to rise to 310K versus 304K the prior week.
- Continuing Claims are estimated to fall to 2458K versus 2505K prior.

10:00 am EST
- New Home Sales for June are estimated to fall to 1150K versus 1234K in May.

BOTTOM LINE: Asian indices are higher, boosted by exporting stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Finish Slightly Lower on Afternoon Rebound

Indices
S&P 500 1,268.40 -.04%
DJIA 11,102.51 -.01%
NASDAQ 2,070.46 -.17%
Russell 2000 694.45 -.43%
Wilshire 5000 12,697.41 -.05%
S&P Barra Growth 584.62 -.09%
S&P Barra Value 682.36 +.02%
Morgan Stanley Consumer 617.03 -.43%
Morgan Stanley Cyclical 774.47 -.89%
Morgan Stanley Technology 460.00 -.37%
Transports 4,364.72 -2.75%
Utilities 435.85 +.49%
Put/Call 1.06 +58.21%
NYSE Arms 1.07 +36.48%
Volatility(VIX) 14.62 -1.55%
ISE Sentiment 167.00 +25.56%
US Dollar 85.89 -.87%
CRB 341.95 +.36%

Futures Spot Prices
Crude Oil 73.98 +.05%
Unleaded Gasoline 229.50 -.05%
Natural Gas 6.90 +.26%
Heating Oil 196.25 +.14%
Gold 636.00 +.20%
Base Metals 219.27 -1.23%
Copper 343.50 -.42%
10-year US Treasury Yield 5.02% -.68%

Leading Sectors
Oil Service +2.74%
Energy +1.88%
Telecom +1.46%

Lagging Sectors
Restaurants -1.74%
Retail -1.94%
Gaming -2.79%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Economic growth slowed across the US in the past month, while consumer-price and wage increases were “modest” on balance, the Beige Book showed.
- Lawmakers will finish work on legislation overhauling the private US pension system this afternoon, Senate Majority Leader Frist said.
- Treasuries rose for the first time in four days after the Beige Book showed economic growth slowed in the past month, prompting traders to reduce bets for another interest rate increase next month.

CNBC:
- Raymond James Financial(RJF) CEO James said that money management offers more opportunities for acquisitions.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Medical longs, Semi longs and Commodity shorts. I added (SII), (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bullish. The Nasdaq reversed 17 points from the morning lows, despite Fed commentary suggesting weaker economic growth. Energy prices reversed all of today's gains into the afternoon. I want to see the market’s reaction to tomorrow’s economic data before further shifting market exposure.

Stocks High into Final Hour on Dovish Fed Beige Book Commentary

BOTTOM LINE: The Portfolio is unchanged into the final hour as gains in my Computer longs, Networking longs and Biotech longs are offsetting losses in my Semi longs and Commodity shorts. I added to my (CYMI) and (UARM) longs and took profits in a trading long today, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, most sectors are gaining and volume is above average. The Fed's Beige Book report was dovish. I still believe the Fed is done for this cycle. The 10-year is rallying on the report with the yield falling 4 basis points to 5.02%. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, dovish Fed commentary, lower long-term rates and positive earnings reports.

Today's Headlines

Bloomberg:
- Blackstone Group LP is exploring a bid for HCA Inc., the US hospital chain that agreed two days ago to be acquired for $21.3 billion.
- GlaxoSmithKline(GSK) may submit its pandemic flu vaccine to regulators within months after a low-dose treatment protected most people who received it in tests.
- The House of Representatives will vote this week on legislation that combines a reduced estate tax with a measure renewing two-dozen expired breaks for business including a research credit.
- Google(GOOG) will disclose to advertisers the number of clicks on ads that it deems are invalid to assuage concerns over “click fraud.”
- NYC ended fiscal 2006 on June 30 with a record $6.1 billion surplus as Wall Street profits and surging real estate values boosted tax revenue, State Comptroller Hevesi said.
- The SEC will require companies to disclose the timing and price of options awarded to executives to end abuses.

Wall Street Journal:
- Hundreds of US soldiers in Iraq and Afghanistan, along with veterans of service in those countries, have started Blogs because they say mainstream media are out of touch with events. JP Borda, who started a Web log during his National Guard deployment in Afghanistan in 2004, organized a Web site, http://Milblogging.com, to classify blogs by country, military branch and subject matter.
- US dock workers are thriving, with average salaries of as much as $120,000 a year as trade through US ports surges.
- Google(GOOG) and other US companies are struggling to find technical talent, prompting renewed debate about restrictions on visas and the need to direct students to careers in math and science.
- Wells Fargo(WFC) and other insurance and financial services companies are driving a commercial real estate and job boom in Des Moines, Iowa.
- The US government plans to pay $1.75 billion in grants so disabled people receiving Medicaid can be cared for at home rather than in institutions.

NY Post:
- Akin Gump Strauss Hauer & Feld has agreed to pay more than $100 a square foot to lease 203,000 square fee in New York, the highest rent ever paid in the city for such a large space.

AP:
- A bill to create a national Internet database to alert law enforcement and community officials where convicted sex offenders live and work passed the House of Representatives and was sent to President Bush for his signature.
- An Israeli general said his country’s military operation in Lebanon will go on several more weeks.

NY Times:
- Goldman Sachs’(GS) private equity business earned $675 million before taxes last year, more than half of which was from investment banking fees on its own transactions, citing Sanford C Bernstein.
- TiVo Inc.(TIVO) is starting a research service that will sell data to advertisers describing how its 4.4 million customers use digital video recorders to skip commercials.

Washington Post:
- Some US aviation trade bodies and manufacturers have started recruiting programs for pilots, because pilot-numbers have fallen by a quarter in the past 25 years.

London-based Times:
- Novation LLC, a Texas-based hospital purchasing group, is negotiating a $7.4 billion buying contract for Britain’s National Health Service as the UK government moves to greater privatization.

CCTV:
- China should take more measures to slow economic growth in the second half as land supply, credit and fixed-asset investment continue to grow too quickly, Premier Wen Jiabao said.

Economic Releases

- None of note

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- STMicroelectronics NV(STM), Europe’s largest maker of semiconductors, said second-quarter profit rose more than 600% on higher demand for mobile-phone chips and savings from outsourcing jobs and production to Asia.
- China, France, Russia, the UK and US are close to an agreement on a UN resolution giving Iran about 30 days to stop enriching uranium or face economic penalties, US and French envoys said.

Fox News:
- The US has told Israel that it has 10-14 days to complete “a strategic blow,” against Hezbollah, citing an unidentified senior Israeli Foreign Ministry official.

DigiTimes:
- Microsoft Corp.(MSFT) plans to cut the price of its Xbox 360 video-game console by a quarter ahead of the release of Sony’s(SNE) PlayStation 3 consoles.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.07%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (AMG)/1.29
- (AKAM)/.18
- (ATI)/1.13
- (ABK)/1.74
- (BUD)/.76
- (BIDU)/.18
- (BIIB)/.49
- (BDK)/1.99
- (BA)/-.22
- (BOB)/.14
- (COP)/2.81
- (DO)/1.23
- (ESRX)/.73
- (FAF)/1.09
- (GM)/.55
- (ISRG)/.40
- (JNY)/.41
- (KMB)/.94
- (LIZ)/.45
- (LPX)/.46
- (LU)/.03
- (MSO)/-.16
- (WFR)/.42
- (MNST)/.30
- (MYL)/.28
- (NSC)/.92
- (PFCB)/.30
- (PD)/4.17
- (PX)/.71
- (PHM)/.90
- (RJF)/.45
- (REY)/2.06
- (COL)/.69
- (RUTH)/.19
- (SEE)/.72
- (SYMC)/.21
- (TEX)/1.07
- (TBL)/-.20
- (TSCO)/1.01
- (TRID)/.19
- (UARM)/.02
- (VAR)/.43
- (ZMH)/.82

Upcoming Splits
- (MDU) 3-for-2

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 500,000 barrels. Gasoline supplies are expected to remain unchanged. Distillate inventories are expected to rise 1,500,000 barrels. Finally, Refinery Utilization is expected to rise .5%.

2:00 pm EST
- Fed’s Beige Book

BOTTOM LINE: Asian indices are mixed, as gains in automakers are offsetting losses in financial stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Highs on Lower Energy Prices, Positive Earnings, Short-covering and Bargain Hunting

Indices
S&P 500 1,268.88 +.63%
DJIA 11,103.71 +.48%
NASDAQ 2,073.90 +.58%
Russell 2000 697.44 +.97%
Wilshire 5000 12,704.13 +.74%
S&P Barra Growth 585.17 +.56%
S&P Barra Value 682.24 +.71%
Morgan Stanley Consumer 619.68 +.49%
Morgan Stanley Cyclical 781.40 +1.12%
Morgan Stanley Technology 461.69 +.15%
Transports 4,488.29 -1.76%
Utilities 433.73 +.39%
Put/Call .67 unch.
NYSE Arms .78 +49.14%
Volatility(VIX) 14.85 -.87%
ISE Sentiment 133.00 -2.92%
US Dollar 86.66 +.37%
CRB 340.74 -.57%

Futures Spot Prices
Crude Oil 73.84 +.12%
Unleaded Gasoline 228.55 +.03%
Natural Gas 6.42 +.23%
Heating Oil 195.04 +.33%
Gold 619.00 +.16%
Base Metals 222.01 +2.87%
Copper 346.10 unch.
10-year US Treasury Yield 5.06% +.36%

Leading Sectors
Steel +4.16%
Oil Service +3.37%
Telecom +2.31%

Lagging Sectors
Gaming +.08%
Hospitals -.19%
Broadcasting -.39%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Oppenheimer:
- Rated (LTM) Buy, target $50.

Afternoon/Evening Headlines
Bloomberg:
- The US dollar gained the most in more than a week against the euro and yen after a report showed US consumer confidence unexpectedly rose in July.
- Crude oil fell a $1.40/bbl. on speculation that the conflict between Israel and Hezbollah won’t spread in the Middle East.
- Amazon.com(AMZN) said second-quarter profit fell after it increased spending on technology and content and lost a lawsuit filed by former partner Toys “R” Us.
- Hewlett-Packard(HPQ) agreed to buy Mercury Interactive(MERQ) for about $4.5 billion.
- Corning Inc.(GLW) said second-quarter profit more than tripled, however the shares dropped after the company’s forecast fell short.

CNBC:
- Dow Chemical’s(DOW) CEO said the economy is roboust.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Biotech longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was slightly above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bullish. The Johnson Redbook same-store sales index rose 2.6% year over year last week vs. a 2.9% rise the prior week. The long-term average is again of around 2.8%. I continue to see little evidence that a significant decline in consumer spending is beginning, even as investors continue to price this into stocks. I still expect retail sales to stabilize around current average levels over the intermediate term.

Stocks Rising into Final Hour on Falling Energy Prices, Positive Earnings and Short-covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Networking longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is about average. I expect more dovish comments from Fed members over the near term to provide the catalyst for another push higher in stocks. A calming of tensions in the Middle East, lower oil prices and positive earnings reports are also potential catalysts. I continue to believe the bears have overreached by a large extent during this correction. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, positive earnings reports and lower energy prices.