Monday Watch

Weekend Headlines
Bloomberg:
- US stocks climbed for a third straight week, sending the S&P 500 Index and Dow Jones Industrial Average to records, after takeover speculation swept through the metals industry and companies announced $49 billion of share buybacks.
- The projected 7% increase in US tax revenue will help the US budget deficit shrink by 17% to about $205 billion for the fiscal year ending Sept. 30. As a result, the Treasury Department sold less securities from January through June than matured.
- China suspended imports of chicken and pork from Tyson Foods Inc.(TSN), the biggest US meat processor, and six other US companies, amid an intensifying dispute between the two countries over food safety.
- The LA Times’ cash flow fell 27% in the second quarter as advertising continued to decline. The result was “one of the worst quarters we have ever experienced,” Publisher David Hiller said. Sales slid 10%, led by a drop in ad pages that overwhelmed gains in Internet advertising and ad supplements, he wrote.
- Executives at the top US media companies attending this week’s annual Allen & Co. conference said they expect brisk merger-and-acquisition activity for the rest of the year.
- An unprecedented number of short sellers are attempting to exploit the uranium mania that prompted more than 12 mining companies to quintuple their share prices during the past four years.
- New Zealand’s annual inflation rate slowed to its lowest level in more than three years. Consumer prices rose 2% in the second quarter from a year earlier.
- China’s copper imports, the biggest in the world, fell 6.1% in June from May as rising prices made shipments of the metal unprofitable.
- Bank of Korea Governor Lee Seong Tae may increase interest rates for a second time this year to prevent money-supply growth from fueling bubbles in the stock and property markets, according to a survey of economists.

Wall Street Journal:
- Activist Investor Carl Icahn has a stake in Kraft Foods(KFT).
- The Teacher Retirement System of Texas plans to move one-third of its $112 billion in assets to hedge funds and real estate investments, citing the fund’s chief investment officer.
- More individual investors are rushing these days into the rough-and-tumble commodities pits, long considered a backwater of the investment world, as the prices of hard assets have boomed in recent years. But some are learning a hard lesson in the risks of these sometimes-volatile investments.
- As Dow Jones & Co.(DJ) continues to evaluate a bid from Rupert Murdoch's News Corp.(NWS/A), a key member of the controlling Bancroft family, Christopher Bancroft, has launched his own last-ditch, long-shot crusade to block the deal, according to people familiar with the matter.

NY Times:
- Vinod Gupta, founder of InfoUSA(IUSA), said he is no longer involved in the Democratic presidential campaign of US Senator Hillary Rodham Clinton after media attention to financial ties. He said the recent publicity surrounding the use of corporate aircraft to fly former President Clinton and Senator Clinton to events wasn’t “worth it.” A financial disclosure report filed in May by Bill Clinton showed he’d forfeited InfoUSA stock options potentially worth “several hundred thousand dollars.”
- North Korea said it shut down the Yongbyon nuclear reactor and allowed international inspectors back into the country, in an effort that may ease tensions with the US.
- NovaStar Financial(NFI), a subprime mortgage lender, may pursue a buyout as it seeks “strategic alternatives,” Gretchen Morgenson wrote.
- Online retailers were, for all the obvious reasons, the pioneers of Web advertising. When it comes to advertising on the mobile Web, though, they are treading carefully.

ABC News:
- A Taliban military commander says terrorist attacks are coming against the US that will dwarf the failed bombings in London and Glasgow, citing an interview.

MarketWatch.com:
- No irrational exuberance in sight. None of the stubborn optimism typically seen at market tops.
- Buyout for Macy’s(M)? The numbers add up. But management might not be able to stomach another LBO.

CNNMoney.com:
- The new Fortune global 500.
- Nine out of ten employers see higher competition for qualified graduates, according to a new survey. Why it pays to be a nerd. The students who made out the best were chemical engineers with an average salary 5.4% higher than last year, bringing their average to $59,361.

BusinessWeek.com:
- Broken China. Beijing can’t clean up the environment, rein in stock speculation, or police its companies. Why the mainland’s problems could keep it from becoming the next superpower.

Financial Times:
- China National Offshore Oil Corp., the nation’s largest offshore oil explorer, has won permission from Somalia’s government to explore for oil in the African country.
- News Corp.(NWS/A) will meet Dow Jones(DJ) directors this week in a session that could prove decisive in Rupert Murdoch’s pursuit of the media group and its crown jewel, the Wall Street Journal.
- The introduction of consumer-driven web 2.0 technologies into businesses is set to usher in a new phase of productivity growth that could surpass that achieved during the late-1990s internet boom, John Chambers, chairman and chief executive of Cisco Systems(CSCO), has forecast.

Observer:
- BHP Billiton(BHP) asked Merrill Lynch(MER) and JPMorgan(JPM) for advice on a possible bid for Alcoa(AA).

Sunday Times:
- Ford Motor(F) may sell Volvo Car Corp. for as much as $8 billion.

The Times:
- A group of shareholders of aluminum producer Alcoa Inc. is calling on the company to agree to a $50 billion takeover deal from either BHP Billiton(BHP) or Brazil’s Cia. Vale do Rio Doce.

Focus:
- Germany still has a long-term struggle with high unemployment that current economic growth can’t cure, Federal Labor Agency Chief Frank-Juergen Weise said.

China Business News:
- China’s consumer price index probably exceeded 3.8% in June, director of the Finance Study Center of Beijing Normal University.

Nihon Keizai:
- Honda Motor Co. will start operating a solar panel factory in October and organize 70 outlets to start nationwide sales of solar-generation systems.

Kuwait News Agency:
- Arab oil-producing countries earned $393.3 billion from selling crude in 2006, a 24% increase from the year before, as they benefited from higher international prices.

Etemade Meli:
- Iranian President Mahmoud Ahmadinejad lacks a “scientific basis” for his fiscal policies and may be losing a “unique opportunity” to improve economic and social problems, citing 57 economists who met him. The Iranian government has earned $120 billion in foreign currency in two years, bolstered by high energy prices. That makes it the richest government since the Islamic revolution of 1979, citing a letter from the Iranian economists. Policies benefiting people now may “leave behind heavy financial obligations for subsequent governments,” the letter said.

Weekend Recommendations
Barron's:
- Made positive comments on (SPWR), (EPG), (FTEK) and (PICO).
- Made negative comments on (COH).

Citigroup:
- Reiterated Buy on (MSFT), target $36.
- June appears to have been a strong month for Google Inc.(GOOG). Google’s year-over-year US search growth was 39.2%, the best we’ve seen since January. Google’s US share decreased 120 basis points month-over-month to 49.5%, down from last month’s record of 50.7% and breaking 11 months of gains. Excluding MSN Live Club, Google’s share increased 40 basis points month-over-month.
- Reiterated Buy on (INTC), raised target to $31.
- Reiterated Buy on (NTRI), target $96.
- Upgraded (NILE) to Buy, target $88.
- Reiterated Buy on (MRK), target $59.

Night Trading
Asian indices are unch. to +.25% on average.
S&P 500 futures -.17%.
NASDAQ 100 futures -.13%.

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Earnings of Note
Company/Estimate
- (SCHW)/.23
- (CGNX)/.11
- (ETN)/1.47
- (FOSL)/.20
- (JBHT)/.38
- (MAT)/.11
- (NVLS)/.44
- (GWW)/1.19

Upcoming Splits
- IOSP 2-for-1

Economic Releases
8:30 am EST
- Empire Manufacturing for July is estimated to fall to 18.0 versus a reading of 25.8 in June.

Today’s Other Potential Market Movers
- SEMICON West

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