Friday Watch

Late-Night Headlines
Bloomberg:
- Democratic presidential candidate John Edwards embraced the idea of raising taxes on the managers of private-equity firms and hedge funds.
- Advanced Medical Optics Inc.(EYE), a maker of eye-care and surgical products, bid $75 a share for rival Bausch & Lomb(BOL), topping an offer from private-equity firm Warburg Pincus LLC.
- Microsoft Corp.(MSFT) said it would expand its warranty coverage on its Xbox video-game console, a change that will result in expenses of as much as $1.15 billion.
- Newmont Mining(NEM) said it will close its merchant-banking segment and incur a $1.7 billion charge in the second quarter.
- SAC Capital Advisors LLC increased its stake in Six Flags Inc., the second-largest US theme-park operator, to 5.2%.

Wall Street Journal:
- US presidential candidate John Edwards is hiring two union workers from WakeUpWalMart.com, a watchdog group that has been a frequent critic of the world’s largest retailer.

NY Times:
- The US military in Iraq has teamed up with frustrated residents in the violent region of Diyala Province to combat insurgents from al Qaeda in Mesopotamia. Residents in the area have grown tired of the insurgents, who have killed scores of people, kidnapped for money, evicted people from their homes and implemented a strict form of Islamic law.

Financial Times:
- Microsoft Corp.(MSFT) and Yahoo! Inc. may change their privacy policies amid European Union concerns about the length of time Internet search firms can keep personal information.
- Swiss financial giant UBS AG, buffeted by a series of setbacks, including the costly blowup of an internal hedge fund, is removing CEO Peter Wuffli.
- US senators Hillary Rodham Clinton and Barack Obama have agreed to co-sponsor legislation to prod China to raise the value of its currency.
- Research In Motion(RIMM), the Canadian manufacturer of the BlackBerry family of wireless e-mail devices, plans to begin selling BlackBerry devices in key Chinese cities, including Beijing, Shanghai and Qingdao.

London-based Times:
- Royal Dutch Shell Plc is getting set to start its biggest Arctic Ocean exploration program in more than a decade, citing Malcolml Brinded, Shell’s head of exploration and production. The action could initiate a rush to one of the largest untapped energy reserves, the Beaufort Sea off the coast of Alaska, a region that contains 8 billion barrels of oil and almost 30 trillion cubic feet of gas.

Star:
- Global biodiesel output may increase 600% to more than 21 million tons a year by 2010 as governments encourage usage, and North America and Asia boost production, citing Rabobank International.

Shanghai Securities News:
- China Southern Fund Management and China Asset Management are among five local asset management firms that yesterday applied for permission to sell funds investing outside the mainland.

Late Buy/Sell Recommendations
Morgan Stanley:
- Upgraded Samsung to Overweight from Equal-weight, see 21% upside from current levels. Three consecutive years of core earnings declines for Samsung Electronics should reverse starting in 3Q07, led by seasonal demand improvements. The technical factors that have dragged on the share price for the past 18 months could be stabilizing. We think NAND and TFT-LCD industries are structurally stronger than DRAM. Seasonal demand improvement will give producers some flexibility in holding inventory to influence DRAM price increase soon. iPhone could continue to surprise on the upside, and buildup of competitors’ high-end phones should keep the NAND market stable for the rest of the year. We expect Samsung’s earnings to gradually improve into 2008.

Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.09%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- None of note

Upcoming Splits
- (CXW) 2-for-1
- (EME) 2-for-1

Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for June is estimated at 125K versus 157K in May.
- The Unemployment Rate for June is estimated at 4.5% versus 4.5% in May.
- Average Hourly Earnings for June are estimated to rise .3% versus a .3% gain in May.

Other Potential Market Movers
- The Fed’s Yellen speaking could also impact trading today.

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