Tuesday Watch

Late-Night Headlines
Bloomberg:
- US stocks rallied the most in four years, led by financial companies, on speculation the government will take steps to limit losses in mortgage lending.
- Shares of mortgage insurer Radian Group(RDN) rebounded from a 23% loss earlier in the day to post their first gain in more than three weeks on the prospects the US government will act to limit mortgage lending losses.
- The yen traded near its lowest in more than a week against the euro on speculation a rally in US stocks will give traders confidence to resume borrowing in Japan to finance investment overseas.
- Steve Wynn turned to Kazuo Okada when the gambling magnate needed cash to fund his namesake Las Vegas casino in 2000. Now, Okada could be the ace up Wynn’s sleeve in the Japanese businessman’s home market.
- Goldman Sachs’(GS) Global Alpha hedge fund fell almost 12% in the two weeks ended Aug. 3, bringing this year’s decline to 16% after losses in stocks and bonds.
- Addison Armstrong, director of market research at TFS Energy LLC, sees the subprime mortgage crisis as a risk to oil prices.
- British-led scientists have developed a new technology that might eventually enable motorists to use wheat, as well as corn, for biofuels.
- Shares of Trend Micro Inc. rose by their daily limit after the world’s biggest Internet security provider beat its profit forecast in the second quarter. Shares of the Tokyo-based company gained 14%.

MarketWatch.com:
- With the initial hoopla over the iPhone finally dying down, Apple Inc.(AAPL) will try to draw some attention back to its flagship Macintosh computer line this week, which has quietly been gaining share in the PC market.

USA Today:
- More good news for drivers came Monday as the wholesale price fell below $2 a gallon for the first time in more than four months.

Financial Times:
- Robert Nardelli will receive a $1 annual salary as CEO of Chrysler LLC.
- China ‘breaks promises’ on media.
- US and Iranian officials held talks in Baghdad on Monday as a security sub-committee set up two weeks ago met for the first time.

London-based Times:
- Hedge funds suffered their worst returns in at least four years at the end of last month after a storm of market shocks hit many investment strategies.

Reuters:
- Banks including JPMorgan Chase(JPM), Bank of America(BAC) and HSBC might be interested in buying Bear Stearns(BSC) at the right price, but there would be real obstacles to a deal happening anytime soon, analysts said.

China Business News:
- China’s consumer prices may have risen by more than 5% in July from a year earlier, citing a survey from domestic brokerages.

Late Buy/Sell Recommendations
Citigroup:
- We believe that back-to-school(B2S) 2007 sales will be moderately strong and expect the season to get off to a good start for Broadline retailers due to earlier shopping amongst consumers(24% of consumers have started shopping vs. 12% last year according to the CIR/ICSC survey) and cooler weather in August vs. last year. Additionally, we believe inventories are in good shape for the B2S season despite heavy clearance merchandise in July as a result of weaker sales in June. We believe that a stable employment market, personal income growth and strong consumer confidence should be enough to offset the other negative pressures on consumer spending for the B2S season.
- Upgraded (BKC) to Buy, target $28.
- Reiterated Buy on (NILE), target $88.

Night Trading
Asian Indices are +.25% to +1.25% on average.
S&P 500 futures -.08%.
NASDAQ 100 futures unch.

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Earnings of Note
Company/EPS Estimate
- (AES)/.21
- (MDRX)/.13
- (ATW)/1.00
- (CAR)/.28
- (BBG)/.18
- (SAM)/.58
- (CHD)/.59
- (CSCO)/.35
- (DF)/.30
- (DUK)/.20
- (EP)/.23
- (EMR)/.69
- (EXPD)/.30
- (FLR)/.94
- (FTO)/1.64
- (GTRC)/.39
- (HET)/.98
- (HEW)/.29
- (IFF)/.76
- (ISE)/.44
- (IPG)/.10
- (KG)/.46
- (MVSN)/.21
- (MMC)/.36
- (MLM)/2.00
- (MVL)/.38
- (MDR)/.93
- (TAP)/1.72
- (ONXX)/-.33
- (PZZA)/.35
- (PCG)/.66
- (PCLN)/.89
- (TSO)/3.14
- (TIE)/.40
- (TRID)/.25
- (TXU)/1.19
- (TYC)/.48
- (WMG)/-.08
- (WMS)/.28

Upcoming Splits
- (HCSG) 3-for-2

Economic Releases
8:30 am EST
- Preliminary 2Q Non-farm Productivity is estimated to rise 2.0% versus a 1.0% gain in 1Q.
- Preliminary 2Q Unit Labor Costs are estimated to rise 1.8% versus a 1.8% gain in 1Q.

2:15 pm EST
- The Fed is expected to leave the benchmark Fed Funds rate at 5.25%.

3:00 pm EST
- Consumer Credit for June is expected to fall to $5.8 billion versus $12.9 billion in May.

Other Potential Market Movers
- The weekly retail sales reports, RBC Technology Conference, CIBC Enterprise Software Conference, Canaccord Adams Global Growth Conference and Pacific Crest Tech Leadership Forum could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and 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.