Wednesday Watch

Late-Night Headlines
Bloomberg:
- Federal Reserve Bank of Richmond President Jeffrey Lacker told Reuters he would support a cut in interest rates if financial turmoil led to a slowing in economic growth and inflation, while cautioning that outcome is “unclear.”
- Credit Suisse Group analyst Susan Roth Katzke lifted her estimates for Goldman Sachs Group’s(GS) third-quarter and full-year profit because she expects gains in fixed-income trading to more than offset losses on loans. She reiterated her Outperform rating and $250-$275 target.
- Asian stocks rose to a four-week high after Deutsche Bank said financial markets are stabilizing and a report showed global chip sales are climbing.
- Hedge funds in the US might leave the country if subjected to burdensome regulation, according to research by the Federal Reserve Bank of New York.
- Mattel Inc.(MAT) recalled about 848,000 Chinese-made Barbie and Fisher-Price products whose paint may contain excessive levels of lead, its third recall in the past five weeks.
- The yen fell for a fourth day against the Australian dollar as a rally in global stocks gave traders confidence to resume buying higher-yielding investments funded by loans in Japan.
- Australia’s central bank kept its benchmark interest rate unchanged at an 11-year high as Governor Glenn Stevens waits to see if an increase last month is enough to curb inflation.
- Palm Inc.(PALM) canceled plans to sell a portable computer as the company refocuses on mobile phones.

Wall Street Journal:
- Microsoft Corp.(MSFT) failed to make its Office software file format an international standard, losing a closely watched vote that reflects the software titan’s broader battles in Europe and around the world.

MarketWatch.com:
- Market-timing editors more bearish, which is a bullish sign.

Financial Times:
- Two competing efforts at creating benchmark futures contracts on Middle East crude oil have attracted limited investor interest, citing traders. Trading volume in the contracts fell in August and may not recover notably after the summer holiday period.

Late Buy/Sell Recommendations
Citigroup:
- Rated (DPZ) Buy, target $22.
- Reiterated Buy on (OI), target $48.
- Small-cap/Mid-cap banks derive 70%-80% of revenue from net interest income, and have low exposure to consumer lending and minimal exposure to non-traditional residential mortgage. With expected Fed rate cuts and wider spreads/fewer refis on CRE loans, plus higher losses in consumer lending, this should result in better credit quality and EPS growth than expected.
- Day 1 of the Tech Conference featured 3 electronics manufacturing services companies. Notebook demand appears strong, distribution inventory levels appear lean and EMS inventory levels are recently better aligned. Wednesday presenting companies include (PLXS), (SANM), (AVT), (FLEX), (CLS), (APH) and (ARW). Thursday presenting companies include (MOLX), (VSH) and (AVX).
- Upgraded (VCLK) to Buy, target $25.

CSFB:
- (ISIL) pre-announced upside to C3Q guidance. This is another data point supporting PC strength. While the company attributed the positive announcement to broad-based growth, we believe that strength is being primarily driven by the computing segment(25% of total sales), specifically new platform roll-outs at Intel(INTC). This is consistent with our view that the current robust PC market will provide a positive tailwind in 2H07 for semiconductor companies with exposure to the computing end market. In addition to (INTC) and (AMD) on the MPU side, analog companies within our coverage universe that will likewise benefit include (TXN), (MXIM), (ONNN), (FCS) and (MCRL).

Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 futures -.30%.
NASDAQ 100 futures -.15%.

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/EPS Estimate
- (ABM)/.31
- (ADCT)/.23
- (CASY)/.47
- (DSW)/.30
- (JCG)/.29
- (MATK)/.18
- (SCMR)/.03

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

Economic Releases
10:00 am EST
- Pending Home Sales for July are estimated to fall 2.0% versus a 5.0% gain in June.

2:00 pm EST
- The Fed’s Beige Book Report.

Other Potential Market Movers
- The Keefe Bruyette & Woods Insurance Conference, Thomas Weisel Healthcare Conference, CSFB Biotech Conference, Kaufman Brothers Investor Conference, Citigroup Tech Conference, Lehman Brothers Energy Conference, Goldman Sachs Global Retailing Conference, the Lehman Brothers Consumer Conference, weekly retail sales reports, weekly MBA mortgage applications report, Challenger Job Cuts, ADP Employment Change, BOE policy meeting, (DHR) analyst meeting, (USB) investor day, (JAVA) analyst meeting and (CSCO) analyst meeting 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 mixed. The Portfolio is 100% net long heading into the day.