Wednesday Watch

Late-Night Headlines
Bloomberg:
- Derivative indexes based on subprime mortgages made last year have fallen too low, with investors estimating more losses than there likely will be, Wachovia Corp.(WB) analyst Glenn Schultz said.
- Major Arab allies of the US cautioned today against a rapid troop withdrawal from Iraq that could shake the region, Defense Secretary Robert Gates and Secretary of State Condoleezza Rice said in Egypt.
- Drivers in California, the most-populous US state, used less gasoline in April than the same month a year earlier as average pump prices rose, a state agency said.
- South Korea’s exports grew at the fastest pace in six months in July amid surging demand for cars, semiconductors and mobile phones.
- Rupert Murdoch’s News Corp.(NWS/A) agreed to buy Dow Jones(DJ) for $60 a share, gaining control of the Wall Street Journal and ending the Bancroft family’s 105 years of stewardship, according to two people with knowledge of the transaction.
- Bear Stearns(BSC), manager of two hedge funds that collapsed last month, halted redemptions from a third fund after a slump in credit markets prompted investors to demand their money back.
- The UN Security Council voted to create a peacekeeping mission in the Darfur region of Sudan in an attempt to end a conflict that has killed at least 200,000 people and provoked worldwide protests.
- Citigroup(C), JPMorgan Chase(JPM) and four more banks won’t back out of an agreement to finance the $32 billion takeover of TXU Corp.(TXU) if they fail to sell debt issued in the deal to investors.
- US Treasury Secretary Henry Paulson said legislation to force China to raise the value of its currency is the “wrong approach” and risks provoking a protectionist reaction from other countries.

Wall Street Journal:
- Marathon Oil(MRO) offered to purchase Western Oil Sands for $5.45 billion, which would give the Houston company a foothold in Canada’s massive heavy-oil deposits and deepen ties between the northern Alberta oil reserves and US refineries.

NY Times:
- The FCC moved cautiously Tuesday toward creating a more open national wireless broadband network, handing a partial victory to Google(GOOG), which was pushing for more competition in cellphone sevices.

Financial Times:
- The world’s biggest oil producers have boosted their search for oil and gas to one of the highest levels in two decades as prices on Tuesday neared record highs of more than $78 a barrel.

Daily Telegraph:
- Dow Chemical Co.(DOW), the largest US chemical maker, is considering bidding for Imperial Chemical Industries Plc.

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (DV) to Buy, target $40.
- The head of natural gas purchasing at a large chemical company supported our observation that industrial demand continues to decline. Recent installation of high efficiency burners is helping his company reduce natural gas consumption. Many opportunities to conserve remain and efforts are ongoing. In one example, the savings can be significant according to a leading supplier, potentially reducing natural gas use by 25-40% with the most advanced burners that use oxygen. Recently, a decline in industrial demand has shaved 1-1.5% off of natural gas consumption in the US versus a year ago. While migration of US manufacturing in the chemical and metals industries has been a significant source of demand destruction in the past, we think that conservation is likely to drive long-term demand destruction.

Night Trading
Asian Indices are -1.50% to -.75% on average.
S&P 500 futures -.77%.
NASDAQ 100 futures -.55%.

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Earnings of Note
Company/EPS Estimate
- (ASF)/.39
- (AGN)/.51
- (AT)/.71
- (APPB)/.31
- (BEC)/.75
- (BYD)/.47
- (CA)/.23
- (CI)/.88
- (CTSH)/.53
- (CSC)/.71
- (DVN)/1.47
- (DLB)/.21
- (D)/.99
- (EDS)/.25
- (ERTS)/-.35
- (GRMN)/.74
- (GIVN)/.09
- (GSF)/1.58
- (IVGN)/.76
- (JNY)/.31
- (KFT)/.47
- (LVS)/.25
- (MSO)/-.09
- (MTZ)/.23
- (MA)/1.31
- (MCO)/.69
- (NBL)/1.19
- (OII)/.71
- (OMX)/.32
- (OC)/.27
- (PH)/1.77
- (PRU)/1.72
- (Q)/.15
- (SOHU)/.18
- (SPW)/1.16
- (SBUX)/.21
- (TK)/.82
- (THQI)/-.26
- (TWX)/.20
- (RIG)/1.72
- (DIS)/.55
- (WCW)/.70

Upcoming Splits
- (SJR) 2-for-1

Economic Releases
10:00 am EST
- Pending Home Sales for June are estimated to fall .5% versus a 3.5% decline in May.
- ISM Manufacturing for July is estimated to fall to 55.3 versus a reading of 56.0 in June.
- ISM Prices Paid for July is estimated to fall to 67.0 versus 68.0 in June.
- Total Vehicle Sales for July is estimated to rise to 16.0M versus 15.6M in June.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -1,125,000 barrels. Gasoline supplies are expected to rise by 125,000 barrels. Distillate inventories are expected to rise by 1,325,000 barrels. Finally, refinery utilization is expected to rise by .3%.

Other Potential Market Movers
- The Bank of England Policy Meeting, Keefe Bruyette & Woods Community Bank Conference, Challenger Job Cuts, ADP Employment Change and weekly MBA Mortgage Applications report could also impact trading today.

BOTTOM LINE: Asian indices are lower, pressured by technology and financial stocks in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.