Friday Watch

Late-Night Headlines
Bloomberg:
- Bill Gross, manager of the world’s largest bond fund, said he’s buying debt of financial companies including Goldman Sachs(GS) and Merrill Lynch(MER).
- Thomas Evans, CEO of Bankrate Inc. said he sees expansion in ‘prime’ mortgage market and that the recent credit crisis “hasn’t had any impact” on business.
- China’s stocks are rising, heading for the biggest weekly gain since the benchmark index was introduced in April 2005.
- Sunscreens should be required to carry new ratings letting consumers compare for the first time how well the products guard against a form of skin-damaging ultraviolet rays, US regulators said.
- Whole Foods(WFMI) may proceed with its $565 million takeover of rival Wild Oats(OATS) after an appeals court rejected federal regulators’ attempt to block the transactions.
- Nintendo Co. extended the lead of its Wii video-game console over Sony Corp.’s(SNE) PlayStation 3 and Microsoft’s Xbox 360, with stores selling 425,000 players in the US in July.

Wall Street Journal:
- A number of quant funds, which use statistical models to find winning trading strategies, reported heavy losses this month. In many cases, the managers pointed their fingers at other quantitative hedge funds, essentially saying they all owned many of the same stocks and their models told them all to sell at the same time, driving down the share prices, hurting everyone in the process.

MarketWatch.com:
- Contrarian-minded fund manager taps eBay(EBAY), Yahoo!(YHOO), Genzyme(GENZ).
- Global sales of wireless phones increased more than 17% in the second quarter, fueled primarily by demand in developing markets, according to a widely followed industry report.

Briefing.com:
- Bank of America(BAC) can’t convert its $2 billion investment in Countrywide Financial(CFC) into common stock, the Office of the Comptroller of the Currency said in its letter approving the investment. According to credit default swap traders, the cost of credit protection on CFC fell to $200,000 from $330,000 on the news. That brings the credit default swap close to levels last seen at the start of the month, before CFC ran into trouble securing short-term funding.

NY Times:
- Subprime Fallout Could Help Venture Capitalists.
- The Congressional Budget Office said today that key signals on the severity of a crisis in the mortgage debt markets had so far been “quite muted,” but forecast short-term market turbulence.

CNNMoney.com:
- Apple’s surprise weapon: Computers.

USA Today:
- Mortgage rates drop amid recent Fed action.

Financial Times:
- China’s exports of aluminum, steel soar.

Reuters:
- The record earnings bonanza US refiners enjoyed in the first half of 2007 may be winding down as weaker margins hit profits this quarter and next.
- Wal-Mart Stores(WMT) said on Thursday it was asking suppliers to resubmit testing documentation for the toys its sells after Mattel’s(MAT) recall this month of millions of Chinese-made toys.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (GME), target raised to $57.50.
- Reiterated Buy on (HUM), target $88.

Business Week:
- Arena Pharmaceuticals’(ARNA) review of its new obesity drug is showing positive results, which could double the company’s share price in the next year, according to Patrick Moriarty of Fortis Securities.

CSFB:
- Gartner released final 2Q PC results yesterday, showing worldwide PC units growing a robust 13% y/y, above the 12% indicated in its preliminary release, with both notebook and desktop unit growth accelerating from last quarter’s levels to 31% and 5% from 29% and 1%, respectively. More importantly, Gartner provided PC revenues for 2Q, which showed PC ASPs actually posting a slightly y/y gain of .2% in the quarter and worldwide revenues growing a solid 14% y/y. The improving PC revenue environment is among the least followed stores in technology this year, but its implications are far reaching, likely driving improved revenue growth and margin expansion across the PC supply chain. It is easy to dismiss the recently improved profitability at PC OEMs to one time component related benefits, but in reality, the improvement goes beyond this, with a positive mix driven by Vista and improving demand in mature geographies, and in particular, corporations, which should have legs over the next 2 years. We believe both DELL and HPQ will be significant beneficiaries of these dynamics and we would be buyers of both stocks at current levels.

Night Trading
Asian Indices are -1.0% to -.50% on average.
S&P 500 futures +%.
NASDAQ 100 futures +%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
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Before the Bell CNBC Video(bottom right)
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Economic Preview/Calendar
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Earnings of Note
Company/EPS Estimate
- (ANN)/.48
- (BKC)/.27
- (HNZ)/.55
- (HPOL)/.04

Upcoming Splits
- (NE) 2-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for July are estimated to rise 1.0% versus a 1.3% gain in June.
- Durables Ex Transports for July are estimated to rise .6% versus a -1.0% decline inn June.

10:00 am EST
- New Home Sales for July are estimated to fall to 820K versus 834K in June.

Other Potential Market Movers
- None of note

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