Tuesday Watch

Weekend Headlines
Bloomberg:
- North Korea agreed to a year-end deadline to identify and dismantle its nuclear facilities, US Assistant Secretary of State Christopher Hill said.
- North Korea said the US agreed to remove the communist country from its list of state sponsors of terrorism and lift all economic sanctions, a claim the US declined to confirm.
- President Bush arrived in Iraq on an unannounced trip to an air base in the country’s Anbar province ahead of a progress report on the war that Congress is set to get next week.
- Mergers and acquisitions may set a worldwide record of more than $3.57 trillion before this year ends without a mega-deal from the kings of leveraged buyouts.
- Hurricane Felix plowed across the Caribbean on a course that’s forecast to push its 135 mph winds close to Honduras tomorrow, before the storm slams into Belize the following day.
- European stocks climbed for a fourth day, paced by banking shares, as investors worldwide gained confidence that markets will weather the fallout from losses in the US subprime mortgage market.
- Crude oil stalled near a four-week high in NY on signs Hurricane Felix may weaken and break up without threatening output in the Gulf of Mexico.
- Stephen Brown, professor of finance at NYU’s Stern School of Business says the “worst has passed” in the subprime crisis.
- Hugo Chavez’s economy is starting to unravel in the currency market. While Venezuela earns record proceeds from oil exports, consumers face shortages of meat, flour and cooking oil. Annual inflation has risen to 16%, the highest in Latin America, as President Chavez tripled government spending in four years.
- China doesn’t hold any US subprime debt among the country’s $1.33 trillion in foreign exchange reserves, said Wei Benhua, deputy director of the State Administration of Foreign Exchange.
- Australia’s biofuel production capacity is expected to double this year to more than 600 million liters, a consultant said.
- The US government may offer a “significant” food aid package to victims of a flood in North Korea last month, the State Department said.
- Switzerland is planning measures to lower energy consumption and fight global warming while easing the country’s reliance of foreign sources of energy, Transport and Environment Minister Moritz Leuenberger said.
- Aluminum fell the most in two weeks after inventories of the metal used in beverage cans and aircraft rose to a three-year high.
- European gasoline fell more than 5%, the largest one-day drop in three weeks, on the expectation demand for motor fuels will start to fall in the US and Europe as the summer vacation season ends.
- The US Commodity Futures Trading Commission has collected almost 3,000 pages of documents in connection with complaints regarding hedge fund manipulation of the metals market, according to Metals Bulletin.
- OPEC will keep production targets unchanged next quarter because the crude market is well-supplied, the oil ministers of members Algeria and Qatar said.
- China, the world’s second-biggest energy consumer, has “very serious” pollution problems and must strengthen the enforcement of environmental regulations, Vice Premier Zeng Peiyan told government officials.
- Merck’s(MRK) experimental niacin drug Cordaptive improved cholesterol levels with reduced facial flushing, a side effect that has limited use of the market leader, Abbott Labs’(ABT) Niaspan, researchers said.
- A Swedish study found no increased risk of death among patients getting drug-coated stents made by Boston Scientific(BSX) and Johnson & Johnson(JNJ), reversing an earlier finding.
- Eli Lilly’s(LLY) experimental schizophrenia drug, which may replace its top-selling Zyprexa was just as effective without causing patients to gain weight, according to a study.
- Global bond sales increased 31% in the second quarter to a record $1.09 trillion, driven by private-equity firms financing leveraged buyouts, according to the Bank of International Settlements.
- China Oilfield Services Ltd., the world’s best-performing oil and gas drilling stock this year, fell the most in more than two weeks in Hong Kong after Credit Suisse Group cut its rating, predicting slower earnings growth.
- The market fallout from the subprime mortgage slump is less severe than in 1998 after Russia’s default and the collapse of Long-Term Capital Management, the Bank for International Settlements said.
- Google Inc.(GOOG), trailing Baidu.com(BIDU) in China’s online search industry, plans to increase investments in content providers to win share in the world’s second-largest Internet market.

Wall Street Journal:
- General Motors(GM) is struggling to halt declining US sales, but it has a bright spot in the three large crossover vehicles it launched in the past year.
- Now, with millions of children – some as young as kindergartners – getting cellphones, the options are expanding for parents who want to set limits on their kids’ wireless activities as well.

NY Times:
- More R-rated movies are showing up on US airline flights, which aren’t governed by federal broadcast laws, prompting some parents, flight attendants and children’s advocacy groups to protest.
- Microsoft(MSFT) will this week begin offering free software to link the Windows operating system with free Internet-based services.
- Citigroup(C) Buys Parts of a Troubled Mortgage Lender.
- Bloomberg TV is largely an afterthought in a lucrative genre dominated by CNBC. That could be changing as the marketplace for television business news heats up.

Barron’s:
- Barron’s introduced a stock index that encompasses stocks of all sizes in every industry sand ranks them based on value and company fundamentals. The index, The Barron’s 400, was based on components on the DJ Wilshire 5000, then analyzed by MarketGrader, a Miami-based company that ranks stocks by a company’s growth profile, its profitability and stock valuation.

MarketWatch.com:
- Corporate insiders’ buying bodes well for the stock market.

CNNMoney.com:
- 8 ways to tame your brain.
- Unlocked iPhones Go On Sale Tomorrow.

Chicago Tribune:
- Presidential candidate Barack Obama has received the most campaign contributions from CEOs at the Chicago area’s 50 largest publicly traded companies.

Orange Country Register:
- California’s population of illegal immigrants is increasing at a slower pace than the nation as a whole.

Reuters:
- Federal Reserve Chairman Ben Bernanke soothed financial markets this week with a pledge at an annual mountain retreat to limit damage to the economy from financial turmoil and parried critics of his understated style by showing a keen grasp of current hazards.
- Wall Street upbeat on new breed of fuel cells.

AP:
- The US Army’s $20,000 signing bonus attracted more than 6,200 recruits since July and pushed the military branch closer to its recruitment goal of 80,000 for fiscal 2007.
- North Korea agreed to declare and disable all its nuclear facilities by the end of 2007, citing the US chief negotiator on the subject.
- The US “leads the world in labor productivity,” with the average employee producing $63,885 a year in wealth, citing a UN agency report.

Financial Times:
- Federal Reserve governor Frederic Mishkin set the stage for an aggressive monetary policy response by the US central bank to any fall in house prices in his presentation to the Jackson Hole symposium this weekend.
- August looks to be the worst month for hedge funds in seven years and is close to being the worst since 1998 as almost all hedge fund strategies have failed to perform.
- The private sector will find ways to structure debt arrangements that will ensure that most US homeowners facing big increases in their mortgage payments will stay in their homes, Ed Lazar, chairman of the White House council of economic advisers said.
- Financial stocks are trading at their cheapest levels on a book value basis in a decade.
- The Chinese military hacked into a Pentagon computer network in June in the most successful cyber attack on the US defense department, say American officials.
- One of Europe’s most senior investment bankers has forecast that the credit squeeze will ease over the next few months but warned that borrowers will not be able to enjoy the easy credit conditions of the past three years.

Financial Times Deutschland:
- The European Central Bank will leave its forecasts for economic growth and inflation in the 13-nation euro region “largely unchanged.”

Sunday Times:
- Qatar “could be willing” to buy Nasdaq Stock Market’s(NDAQ) one-third stake in London Stock Exchange for almost $2 billion.

Spiegel:
- Mohamed Elbaradei, the director-general of the IEA, said Iran has “last chance” to hold to a new pledge to roll back its nuclear plans.

Interfax:
- OAO Rosneft plans to raise oil output 36% to 2.8 million barrels a day within five years.
- Russia’s government may raise its forecast for economic growth in 2007 by the end of September, citing Economy Minister German Gref.

Commercial Times:
- Taiwan Semiconductor Manufacturing and United Microelectronics are expected to raise their fourth quarter shipments by 10% from the July-to-September period. The projected growth is higher than the 5% to 7% expansion estimated by institutional investors.

Weekend Recommendations
Barron's:
- Made positive comments on (GR).

Morgan Stanley:
- Reiterated Overweight on (FDX), target $124.

Night Trading
Asian indices are +.25% to +.50% on average.
S&P 500 futures -.13%.
NASDAQ 100 futures -.18%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (DBD)/.36
- (DCI)/.48
- (GES)/.34
- (NCS)/1.00

Upcoming Splits
- (MTW) 2-for-1
- (MDR) 2-for-1
- (NVDA) 3-for-2

Economic Releases
10:00 am EST
- ISM Manufacturing for August is estimated to fall to 53.0 from 53.8 in July.
- ISM Prices Paid for August is estimated to fall to 63.0 from 65.0 in July.
- Construction Spending for July is estimated unch. versus a -.3% decline in June.

Afternoon:
- Total Vehicle Sales for August are estimated to rise to 15.7M versus 15.5M in July.

Other Potential Market Movers
- The Keefe Bruyette Insurance Conference, Lehman Brothers Energy Conference, Citigroup Tech Conference and (DHR) analyst meeting could also impact trading today.

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