S&P 500 1,552.50 +1.44%*

Click here for What a Week by TheStreet.com.

BOTTOM LINE: Overall, last week's market performance was very bullish as the Dow, S&P 500 and Russell made new all-time closing highs. The NYSE cumulative advance/decline line rose, most sectors gained and volume was above average on the week. Measures of investor anxiety finished the week around average levels, despite the exceptional gains in stocks. The AAII percentage of bulls fell to 43.64% this week from 43.84% the prior week. This reading is at average levels. The AAII percentage of bears fell to 30.0% this week from 32.88% the prior week. This reading is also at average levels. These subdued readings come even as the DJIA is just off one of its most prolific winning streaks in history and hit a new all-time high Friday.

Moreover, the 10-week moving average of the percentage of bears is currently at 38.1%, a very high level. The 10-week moving average of the percentage of bears peaked at 43.0% at the major bear-market low during 2002. The 50-week moving average of the percentage of bears is currently 36.3%, an elevated level seen during only two other periods since tracking began in the 1980s. Those periods were October 1990-July 1991 and March-May 2003, both of which were near major stock market bottoms. The extreme readings in the 50-week moving average of the percentage of bears during those periods peaked at 41.6% on Jan. 31, 1991, and 38.1% on April 10, 2003. We are still very close to eclipsing the peak in bearish sentiment during the 2000-2003 market meltdown, which is astonishing considering the macro backdrop now and then.

I continue to believe that steadfastly high bearish sentiment in many quarters is mind-boggling for the following reasons:

· the 29.4% rise in the S&P 500 in a little over a year;

· the 111.5% gain (17.0% annualized) for the S&P 500 since the 2002 major bear market lows;

· a recent new record high for the NYSE cumulative advance/decline line;

· all market-caps and styles are participating;

· one of the best August/September/October market runs in U.S. history;

· the U.S. economy is accelerating with little chance of a Fed rate hike as most measures of inflation remain below long-term average rates; and

· we are in the early stages of what is historically a very strong period for U.S. equities after a midterm election.

As well, despite recent gains, the forward P/E on the S&P 500 is a very reasonable 16.5, right near where it began the year, due to the historic run of double-digit profit growth increases and better-than-expected earnings guidance in the first quarter. The S&P P/E multiple has contracted for three consecutive years. It has only contracted four consecutive years two times since 1905. Each point of multiple expansion is equivalent to a 6.6% gain in the S&P 500. I strongly suspect we will finally see expansion this year. The many bears still remain stunningly complacent, in my opinion.

As I have said many times over the past year, it seems every pullback is seen as a major top by the bears, and every move higher is just another shorting/selling opportunity. I see few signs of capitulation by the bears, and their ranks remain historically crowded given recent gains. Even most bulls seem to want the market to decline to redeploy cash they raised in anticipation of a meaningful correction. I still sense very few investors believe that the market has meaningful upside from current levels and are positioned accordingly. Investment manager performance anxiety is now likely elevated.

As well, there are many other indicators registering high levels of investor anxiety. The Yale School of Management Crash Confidence Index is showing the individual is currently the most concerned about a stock market crash since November 2002, right near the trough of one of the worst bear markets in U.S. history and the record-setting low for the index going back to 1989. The ISE Sentiment Index hit a low 101.0 on Thursday. The CBOE total put/call ratio 10-week moving average is currently 0.97, an above-average level.

Large speculators are the most net short the S&P 500 futures since June 2004, which corresponds with a recent Greenwich Associates hedge fund manager sentiment survey that registered 12% bulls, the lowest since 2004. SentimenTrader's All-Index, All-Product Dollar-Weighted Stochastic is at an extreme 99.2. Readings at or above 80 are historically followed by a 13.6% gain in the S&P 500 89% of the time on average over the next 12 months. Moreover, NYSE short interest has gone parabolic, soaring 30% the last four months, the largest four-month percentage jump on record, to another new all-time high. As well, Nasdaq short interest has surged an astonishing 30.2% over the last four months, also the largest four-month percentage increase on record, and also a new record high. Furthermore, public short interest continues to soar to record levels as odd-lot short sales recently spiked. This other chart from sentimenTrader.com shows U.S. stock mutual funds have seen outflows for most of the last year, according to AMG Data Services. The percentage of U.S. mutual fund assets in domestic stocks is still the lowest since at least 1984, when record-keeping began.

There has been an historic explosion of hedge funds created with absolute return, low correlation or negative correlation U.S. stock strategies that directly benefit from the perception of a stagnant or declining U.S. stock market and economy. One example is the equity Market Neutral hedge fund strategy, which has seen a massive infusion of capital since the bursting of the bubble in 2000, but has only returned an annualized 2.63% since June 2003 vs. a 14.0% annualized return for the S&P 500 over the same timeframe. The immense popularity of the market neutral strategy and other low-correlation U.S. stock strategies have been a huge contributing factor to the record explosion in short interest on the exchanges. How long will institutional and high net worth investors pay high fees for this type of risk-adjusted return and what will happen when they pull out and move into more positively correlated U.S. stock strategies?

As well, commodity funds, which typically have a low or negative correlation with stocks, have been created in record numbers. The Dow Jones-AIG Commodity Index has only returned 9.7% annualized over the last three years and 2.9% over the last year, during one of the greatest commodity manias in history, vs. a 12.2% annualized return for the S&P 500 over the same period. It seems to me many of the managers of these types of funds are all over major media outlets with their negative spin and pessimism. Moreover, many funds that directly benefit from a stagnant U.S. economy and stock market are becoming much more active politically.

Consumer confidence in the northern part of the country, where most major investment funds and media outlets are located, remains depressed near the 2000-2003 major bear market lows. A short-sighted, day-trading, pessimistic mentality has thoroughly permeated the investment landscape. Research boutiques with a negative bias have sprung up to cater to these many new funds that help pump air into the current U.S. "negativity bubble." In my opinion, only in a negativity bubble could numerous investors and analysts seriously suggest that the overwhelmingly pessimistic press is too optimistic.

Given the current historic pessimism with the DJIA at record highs, I suppose the many with a bearish agenda will only be happy when every last U.S. investor, reader and viewer are permanently driven away from stocks. Permabears, or "fearleaders," are still more widely followed than ever, despite the market's triple-digit percentage gain from the major bear-market lows. At this major market bottom, permabulls, or "cheerleaders," had been shunned and chastised for a couple of years. Wall Street analysts have made the fewest buy calls on stocks this year since Bloomberg began tracking in 1997. Buy calls have been trending lower for over a year, despite the huge rally in stocks.

According to TickerSense.com, investment blogger sentiment remains pessimistic at 36.0% bears vs. 32.0% bulls. The UltraShort QQQ ProShares (QID) continue to see soaring volume. There is still a very high wall of worry for stocks to climb substantially from current levels as the public and many professionals remain very skeptical of this bull market and continue to trade with one foot out the door.

I still believe this is a direct result of the strong belief by the “herd” that the U.S. is in a long-term trading range, or secular bear environment, notwithstanding recent outsized gains. There is overwhelming evidence that overall investment sentiment regarding U.S. stocks has never been this poor in history, with the Dow at an all-time high. I still expect the herd to finally begin to embrace the current bull market this year, which should result in another substantial move higher in the major averages. I still expect the S&P 500 to return a total of around 17% for the year, however this projection is looking conservative at this point.

It's hard to believe that, after the bombardment of pessimism, depression comparisons and crash calls that occurred in March, the average U.S. stock is still doing very well this year. The Value Line Geometric Index, the best gauge of the broad market, is 10.8% higher year-to-date. Moreover, it is interesting to note that mid-cap “growth” stocks are sporting a gaudy 15.6% gain already this year, which is the best of any equity style. Notwithstanding the extreme pessimism for U.S. stocks by many investors, corporate insider activity is closer to levels normally associated with market bottoms than tops. Based on the action over the last few months, even more cash has piled up on the sidelines as money market funds reported this week that assets set another record.

I continue to believe that a significant portion of this cash will be deployed into true growth companies as their outperformance vs. value stocks gains steam throughout the year. I am already seeing signs that this is starting to happen. As well, Chinese investors may be a new source of demand for U.S. stocks. There is massive bull firepower on the sidelines at a time when the supply of U.S. stocks is still shrinking, which makes for a lethally bullish combination. I still believe the coming bullish shift in long-term sentiment with respect to U.S. stocks will result in the "mother of all short-covering rallies."

The average 30-year mortgage rate rose 10 basis points this week to 6.73%, which is 7 basis points below July 2006 highs. There is still mounting evidence that the worst of the housing downturn is over, despite recent worries over sub-prime lending, and that sales activity is stabilizing at relatively high levels. Even after the recent slowdown, existing home sales are still 10.3% above the peak during the late-90s stock market bubble. About 14% of total mortgage loans are sub-prime. Of those 14%, another 13.77% are delinquent. Thus, only about 2% of total mortgage loans outstanding are currently problematic. I still don’t believe sub-prime woes are nearly large enough or will become large enough to meaningfully impact the prime market and bring down the U.S. economy. Furthermore, US economic growth likely accelerated substantially last quarter to a 3%+ rate.

The Fed’s Bernanke said recently that the prime market is still strong and that he sees no spillover from the sub-prime problems. As well, the Fed’s Poole said recently that, “there is no danger to the economy from sub-prime loan defaults.” There are just too many other positives that outweigh this negative. Treasury Secretary Paulson reiterated his belief that all the signs he looks at lead him to conclude housing is near or at the bottom. The Fed’s Warsh said this week that sub-prime losses “aren’t posing systemic risk problems.” Moreover, the Fed’s Hoenig, Lacker, and Plosser all made positive comments recently regarding the prospects for the US housing market.

Mortgage applications rose 1.1% this week and continue to trend higher with the rising stock market and healthy job market. Furthermore, home purchase applications jumped 3.8% this week and the 10-week moving average of purchase applications is at the highest level in 17 months. The Mortgage Bankers Association reiterated recently that the US housing market will “fully regain its footing” by year-end. Finally, the House Price Index actually rose .5% in the first quarter, despite recent worries.

The Housing Sector Index(HGX) has risen 16.6% from July 2006 lows. Moreover, rumors surfaced this week that billionaire investor Warren Buffett is accumulating a large stake in homebuilder Hovnanian Enterprises(HOV). The Case-Shiller home price futures have improved and are now projecting only a 1.8% decline in the average home price through November, up from projections of a 4.0% decline 4 months ago. Considering the median house has appreciated over 50% during just the last few years with record high US home ownership, this would be considered a “soft landing.” Furthermore, the Case-Shiller Home Price Index is 127.3% higher over the last decade.

I continue to believe the many U.S. stock market bears are exaggerating, in every media outlet possible, the overall impact of housing on the economy in hopes of scaring investors, consumers and the government into a panicked state, thus making the problems worse than would otherwise be the case. Some large funds are benefiting greatly from the sub-prime housing pain. Housing activity and home equity extractions had been slowing substantially for over 2 years and the negative effects were mostly offset by many other very positive aspects of the US economy.

Home values are more important than stock prices to the average American, but the median home has barely declined in value after a historic run-up, while the S&P 500 has risen 29.4% over the last year and 111.5% since the Oct. 4, 2002 major bear market low. Americans’ median net worth is hitting new record high levels as a result, a fact that is generally ignored or minimized by the record number of stock market participants that feel it is in their financial and/or political interests to paint a bleak picture of America.

Moreover, unemployment is low by historic standards, interest rates are low, inflation is below average rates and wages are rising at above-average rates. The economy has created about 2 million jobs in the last year. As well, the Monster Employment Index just recently hit another record high in May. The 50-week moving average of initial jobless claims has been lower during only two other periods since the 70s. Finally, the unemployment rate is a historically low 4.5%, down from 5.1% in September 2005, notwithstanding fewer real estate-related jobs and significant auto production cutbacks. The unemployment rate’s current 12-month average is 4.6%. It has only been lower during two other periods since the mid-50s.

The Consumer Price Index for May rose 2.7% year-over-year, down from a 4.7% increase in September of 2005. This is below the 20-year average of 3.1%. Moreover, the CPI has only been lower during four other periods since the mid-1960s. Most other measures of inflation are still below long-term average rates. The Fed’s preferred inflation gauge, the PCE Core, rose 1.9% year-over-year in May versus the 20-year average of 2.5% and is now within the Fed’s comfort zone. Furthermore, most measures of Americans’ income growth are now almost twice the rate of inflation. Americans’ Average Hourly Earnings rose 3.9% year-over-year in June, substantially above the 3.2% 20-year average. The 11-month moving-average of Americans’ Average Hourly Earnings is currently 4.04%. 1998 was the only year during the 90s expansion that it exceeded current levels.

The benchmark 10-year T-note yield fell 8 basis points for the week on less hawkish Fed commentary and sub-prime worries. According to Intrade.com, the chances of a US recession beginning this year have plummeted to 9.2% from 35% in January. In my opinion, many investors’ lingering fears over an economic “hard landing” still seem misplaced. The housing slowdown and auto-production cutbacks impacted manufacturing greatly over the last year, but those drags on growth are subsiding.

For all of 2006, US GDP growth was an above-average 3.2%, notwithstanding housing and manufacturing headwinds. Moreover, many gauges of manufacturing activity have improved meaningfully over the last couple of months. The 4-month average of Factory Orders is at the highest level since late 2005. The Chicago PMI has exceeded a booming 60 three of the last four months. Finally, the ISM Manufacturing index has registered expansion for five consecutive months and at 56.0 is currently above the 20-year average of 52.4.

While the drag from housing is subsiding, housing activity will not add to economic growth in any meaningful way this year as homebuilders continue to work down inventories and sales stabilize at lower, but still relatively high by historic standards, levels. As I said during the 1Q slowdown, I expect a smaller GDP deflator, inventory rebuilding, rising auto production, increased business spending and a still healthy service sector to boost US economic growth back to around 3% on average through year-end.

Manufacturing accounts for roughly 12% of US economic growth, while consumer spending accounts for about 70% of growth. U.S. GDP growth came in at a sluggish 1.1% and 0.7% during the first two quarters of 1995. During May 1995, the ISM Manufacturing Index fell below 50, which signals a contraction in activity. It stayed below 50, reaching a low of 45.5, until August 1996. During that period, the S&P 500 soared 31% as its P/E multiple expanded from 16.0 to 17.2. This was well before the stock market bubble began to inflate. As well, manufacturing was more important to overall US economic growth at that time. Stocks can and will rise as P/E multiples expand, even with more average economic and earnings growth.

Weekly retail sales rose 1.4% last week vs. a 1.6% gain the prior week. The job market remains healthy, overall housing has improved modestly, wage growth has accelerated, stocks are substantially higher and inflation has decelerated to below average rates. These positives continue to more than offset the negatives from housing and high gas prices. Consumer confidence jumped this month by the most since October of last year. Finally, I expect both main measures of consumer confidence to make new cycle highs over the intermediate-term as energy prices fall significantly, unemployment remains historically low, wages continue to substantially outpace inflation, stocks rise further, home sales stabilize at relatively high levels, inflation decelerates more and interest rates head back down. This should also help boost consumer spending back to above average rates this fall.

Just take a look at commodity charts, gauges of commodity sentiment and inflows into commodity-related funds over the last couple of years. Net assets invested in the Goldman Sachs Commodity Index rose to almost $70 billion in 2006 from $15 billion in 2003. There has been a historic mania for commodities by investment funds that has pushed prices significantly higher than where the fundamentals dictate. That mania is now in the early stages of unwinding. The CRB Commodities Index, the main source of inflation fears has declined -8.7% over the last 12 months and -11.0% from May 2006 highs despite a historic flood of capital into commodity-related funds and numerous potential upside catalysts. This year oil plunged $12/bbl. over the first 18 days of trading at the beginning of the year. Last year, oil rose $2.05/bbl. on the first trading day of the year and $7.40/bbl. through the first three weeks of trading as commodity funds, flush with new capital, drove futures prices higher.

I suspect, given the average commodity hedge fund fell around double-digits last year as the CRB Index dropped -7.4% and that the average commodity hedge fund is just marginally higher this year, that many funds are seeing significant redemptions. Recent reports have indicated that institutional investors are switching from commodity funds that trade energy futures to hedge funds that buy energy-related equities. The commodity mania has also pumped air into the current US “negativity bubble.” Talk of runaway inflation, drought, world wars, global warming, a US dollar collapse, recession/depression and global pandemics, to name a few, has been fueled by the mania for commodities. In my opinion, that is why it is so easy for most to believe that US housing was in a bubble, but then act shocked when commodities plunge. I continue to believe inflation fears have peaked for this cycle as global economic growth slows to more average levels, the US dollar firms, unit labor costs remain subdued and the mania for commodities continues to reverse course.

The EIA reported this week that gasoline supplies rose more than expectations even as refineries remain very slow to come back online after a recent historical rash of “outages.” Refinery utilization is currently 90.2%, a 15-year low for this time of the year and below levels seen in the same week of 2006 after the historic hurricanes in 2005 destroyed energy infrastructure in the Gulf of Mexico. Furthermore, notwithstanding complaints from refiners that they have not been allowed to build a new refinery in over three decades, refiners actually killed plans within the last year to increase production by 500.000 barrels per day due to worries over “future gasoline demand” and “high costs.”

Gasoline futures fell for the week as supplies rose even with extraordinarily low refinery utilization. Gasoline futures are still down 23.5% from September 2005 highs. The gasoline crack spread fell this week, but remains near levels seen during hurricane Katrina’s aftermath. It is interesting to note that crack spreads peaked last August right before oil plunged $28/bbl. in less than six months. It is also interesting to note that commercial hedgers, historically the “smart money”, are the most net short oil they have been in at least seven years, notwithstanding the recent historic spike in crack spreads, which is highly unusual. Temporary refinery “outages” are still helping to prop up the entire energy complex. However, the very elevated level of current gas prices will only further dampen global fuel demand, sending gas prices substantially lower over the intermediate-term.

The 10-week moving-average of US oil inventories is now near a 10-year high, as well. Oil consumption in the 30 OECD countries fell last year for the first time in over two decades, while global economic growth boomed 5.3%. Global demand destruction is pervasive. Over the last three years, global oil demand is only up 2.4%, despite the strongest global growth in almost three decades, while global supplies have increased 5.0%, according to the Energy Intelligence Group. The EIA recently forecast that bio-fuels should rise to the equivalent of more than five million barrels of crude oil production a day within four years. As well, Energy Secretary Bodman said the US will likely remove tariffs to boost bio-fuel imports, which should reduce fears over a potential corn shortage over the long-term. Sugar, which was touted as “the new oil” by several well-known commodity bulls, has collapsed -50.0% since February of last year.

As well, worldwide oil inventories are poised to begin increasing at an accelerated rate over the next year. There is a very fine line in the crude oil market between perceptions of "significantly supply constrained" and "massive oversupply." One of the main reasons I believe OPEC has been slow to actually meet their pledged cuts has been the fear of losing market share to non-OPEC countries. Moreover, OPEC needs lower prices badly to prevent any further long-term demand destruction. I continue to believe oil is priced at elevated levels on record speculation by investment funds, not the fundamentals.

The Amaranth Advisors hedge fund blow-up last year was a prime example of the extent to which many investment funds have been speculating on ever higher energy prices through futures contracts, thus driving the price of the underlying commodity to absurd levels for consumers and businesses. This is considered “paper demand”, which is not real demand for the underlying commodity. Amaranth, a multi-strategy hedge fund, lost about $6.5 billion of its $9.5 billion under management in less than two months speculating mostly on higher natural gas prices. I continue to believe a number of other funds will experience similar fates over the coming months after managers “pressed their bets” in hopes of making up for recent poor performance, which will pressure energy prices as these funds unwind their leveraged long positions to meet rising investor redemptions over the intermediate-term. Moreover, the same rampant speculation that has driven the commodity mania will work against energy as downside speculation increases and drives down prices even further than the fundamentals would otherwise dictate.

Cambridge Energy Research, one of the most respected energy research firms in the world, put out a report late last year that drills gaping holes in the belief by most investors of imminent "peak oil" production. Cambridge said that its analysis indicates that the remaining global oil base is actually 3.74 trillion barrels, three times greater than "peak oil" theory proponents say and that the "peak oil" theory is based on faulty analysis. The substantial contango that had existed in energy futures, which encouraged hoarding, has begun to meaningfully reverse as more investors are coming to the realization that the "peak oil" theory is hugely flawed, global crude storage tanks fill and expectations for a further deceleration in Chinese/US demand rise. December 2014 crude oil futures are now $1/bbl. below the current spot price.

Global crude oil storage capacity utilization is running around 98%. OPEC production cuts have resulted in a complete technical breakdown in crude futures, despite the recent move higher. Spare production capacity, which had been one of the main sources of angst among the many oil bulls, rises with each OPEC cut. As well, demand destruction which is already pervasive globally will only intensify over the coming years as many more alternative energy projects now in the pipeline come to the fore. Moreover, many Americans feel as though they are helping fund terrorism or hurting the environment every time they fill up their gas tanks. I do not believe we will ever again see the demand for gas-guzzling vehicles that we saw in recent years, even if gas prices plunge further from current levels, as I expect. If OPEC actually implements all their announced production cuts, with oil still at very high levels and decelerating global growth, it will only further deepen resentment towards the cartel and result in even greater long-term demand destruction.

I continue to believe oil made a major top last year during the period of historic euphoria surrounding the commodity with prices above $70/bbl. and calls for $100/bbl. oil commonplace. Even during the peak of anxiety in the recent Iranian/UK hostage stand-off, oil only rose about $6/bbl., despite renewed calls from numerous traders, analysts and pundits for $100+/bbl. oil. A large double-top technical formation is likely now forming in the commodity. Falling demand growth for oil in emerging market economies, an explosion in alternatives, rising global spare production capacity, increasing global refining capacity, the complete debunking of the hugely flawed "peak oil" theory, a firmer U.S. dollar, less demand for gas guzzling vehicles, accelerating non-OPEC production, a further reversal of the "contango" in the futures market, a smaller risk premium and essentially full global storage should provide the catalysts for oil to fall to $40-$45/bbl. later this year. I fully expect oil to test $20-$25/bbl. within the next three years as the historic investment fund speculation that has been propping up the commodity reverses course as fundamentals deteriorate further.

Natural gas inventories rose more than expectations this week. However, prices for the commodity increased even with supplies now 16.6% above the 5-year average and near all-time high levels for this time of year. Furthermore, the EIA recently projected global liquefied natural gas production to soar this year, with the US poised to see a 34.5% surge in imports and another 38.5% increase in 2008. Natural gas prices have collapsed -57.8% since December 2005 highs. Notwithstanding this severe decline, natural gas anywhere near current prices is still ridiculous with absolute inventories poised to hit new records this year. The long-term average price of natural gas is $4.63 with inventories much lower than current levels.

Gold rose modestly on the week as concerns over emerging markets’ demand continued to subside and the dollar declined. Perceptions of emerging market demand for the metal seem to be the greatest determinant of prices at this point. Copper rose on more US economic optimism and short-covering, despite an 11% surge in Shanghai copper inventories. Copper is now -12.0% lower from the euphoric highs set last year. I continue to believe the recent bounce in copper has run its course and any substantial rallies from current levels should be sold. Natural gas, oil, gold and copper all look both fundamentally and technically weak longer-term. The US dollar fell for the week on increasing downside speculation, less hawkish Fed commentary and sub-prime worries.

I continue to believe there is very little chance of another Fed rate hike anytime soon, notwithstanding the recent acceleration in economic activity. An eventual rate cut is still more likely this year as inflation continues to decelerate substantially. The recent rise in mortgage rates will likely mute the rebound in housing and prevent the overall economy from growing too fast. As well, the substantial inventory rebuilding that took place last quarter will likely subside this quarter.

The US budget deficit is now 1.5% of GDP, well below the 40-year average of 2.3% of GDP. As well, the trade deficit has been trending lower over the last nine months. I continue to believe foreign investors’ demand for US securities will remain strong. Recent data shows a meaningful up-tick in international investors’ demand for US stocks. Energy stocks outperformed for the week on more US economic optimism, higher oil prices and stock buyback announcements. Airline stocks underperformed on the rise in energy prices and negative analyst commentary.

Current US stock prices are still providing longer-term investors very attractive opportunities, in my opinion. In my entire investment career, I have never seen many of the best “growth” companies in the world priced as cheaply as they are now relative to the broad market. By contrast, “value” stocks are quite expensive in many cases. A CSFB report late last year confirmed this view. The report concluded that on a price-to-cash flow basis growth stocks are cheaper than value stocks for the first time since at least 1977. Almost the entire decline in the S&P 500’s p/e, since the stock market bubble burst in 2000, is attributable to growth stock multiple contraction. Many “value” investors point to the still “low” price/earnings ratios of commodity stocks, notwithstanding their historic price runs over the last few years. However, commodity equities always appear the “cheapest” right before significant price declines. I do no believe that “it is different this time.” I still expect the most overvalued economically sensitive and emerging market stocks to underperform over the intermediate-term as the manias for those shares subside as global growth slows to more average rates.

The emerging markets’ mania, which has mainly been the by-product of the commodity mania, is likely nearing an end, as well. The Financial Times reported recently that China's pollution problem is rapidly worsening on their soaring investments in energy-intensive industries. According to the FT, China now accounts for almost half of the world's flat glass and cement production, more than one-third of steel output and 28% of global aluminum production.

In my opinion, China is building for the sake of building, such as the world's largest mall, to promote the appearance of even more exceptional growth than would otherwise be the case. Massive overcapacity is being created in China. This is giving a false sense of demand for most of the world's commodities. This is the main reason why I believe long-term interest rates remain exceptionally low. I continue to believe when the manias for emerging markets and commodities end, the mild bout of inflation we have experienced globally will turn into a mild bout of deflation. The iShares Lehman 20+ Year Treasury Bond (TLT) remains a core long position for me as I firmly believe the secular trend of disinflation remains in tact.

The Shanghai Composite’s recent performance mirror’s that of the Nasdaq during the late 90s bubble. I am also keeping a close eye on the Vietnam Stock Index(VNINDEX), which has dwarfed the Nasdaq’s meteoric rise in the late 90s, rocketing 308.0% higher over the last 24 months. It is 35.9% higher just this year. The bursting of these bubbles, may well signal the end of the mania for all emerging market stocks. I continue to believe a chain reaction of events has already begun that will result in a substantial increase in demand for US equities by global portfolio managers.

S&P 500 profits have risen at double-digit rates for 19 consecutive quarters, the best streak since recording keeping began in 1936. Moreover, second quarter estimates are for a conservative 4.4% increase, which should be handily exceeded once again. Notwithstanding a 111.5% total return(which is equivalent to a 17.0% average annual return) for the S&P 500 since the October 2002 bottom, its forward p/e has contracted relentlessly and now stands at a very reasonable 16.5. The 20-year average p/e for the S&P 500 is 23.0.

In my opinion, the US stock market continues to factor in way too much bad news at current levels. One of the characteristics of the current US “negativity bubble” is that most potential positives are undermined, downplayed or completely ignored, while almost every potential negative is exaggerated, trumpeted, obsessed over and promptly priced in to stock prices. “Irrational pessimism” by investors has resulted in a dramatic decrease in the supply of stock. Moreover, booming merger and acquisition activity and giant corporate stock buybacks are also greatly constricting supply. Many commodity funds, which have received a historic flood of capital inflows over the last few years are now seeing redemptions as the CRB Index continues to languish, while the S&P 500 flourishes. Some of this capital will likely find its way back to US stocks. As well, money market funds are brimming with record amounts of cash. As I said above, there is massive bull firepower available on the sidelines for US equities at a time when the supply of stock has contracted.

A recent Citigroup report said that the total value of U.S. shares dropped last year, despite rising stock prices, by the most in 22 years. Last year, supply contracted, but demand for U.S. equities was muted. Despite recent stock gains US stock mutual funds are still seeing outflows. Keeping the public excessively pessimistic on U.S. stocks has been one of the many bears’ main weapons. However, I still suspect accelerating demand for U.S. stocks, combined with shrinking supply, will make for a lethally bullish combination over the intermediate-term.

Considering the overwhelming majority of investment funds failed to meet the S&P 500's 15.8% return last year, I suspect most portfolio managers have a very low threshold of pain this year for falling substantially behind their benchmark once again. Investment manager performance anxiety is likely quite elevated already this year as the major averages are on pace to exceed last year’s gains. The fact that last year the US economy withstood one of the sharpest downturns in the housing market in history and economic growth never dipped below 2% and averaged 3.2% illustrates the underlying strength of the US economy as a whole. While significant inventory de-stocking led to a mid-cycle slowdown, I suspect inventory rebuilding to added to economic growth last quarter, helping to boost growth substantially higher than the sluggish pace of the first quarter. Growth this quarter is likely to decelerate back slightly to below trend as the effects of the recent surge in mortgage rates take hold and inventory rebuilding subsides. However, above trend growth is likely again in 4Q.

I continue to believe the historically extreme readings in many gauges of investor angst during the last few months indicated the US market was cleansing itself of “weak hands” at an extraordinarily rapid rate. Buyout/merger speculation, a stronger US dollar, lower commodity prices, election cycle strength, decelerating inflation readings, a pick-up in consumer spending, lower long-term rates, increased consumer/investor confidence, short-covering, investment manager performance anxiety, rising demand for US stocks and the realization that economic growth is poised to rise around average rates over the intermediate-term should provide the catalysts for another substantial push higher in the major averages as p/e multiples expand significantly. I still expect the S&P 500 to return a total of about 17% for the year. However, this prediction is looking conservative at this point. "Growth" stocks are now leading the broad market higher. Mid-cap “growth” stocks are this year’s best-performing style, sporting a gaudy 15.6% return so far this year. The Russell 1000 Growth iShares(IWF) will likely rise a total of 25% for the year and continue to outperform over the long-run. Finally, the ECRI Weekly Leading Index rose to another new cycle high this week and is forecasting healthy US economic activity. The 10-week moving average of the ECRI Weekly Leading Index also hit a new cycle high, while the Future Inflation Gauge is declining at a -2.7% rate.

Indices
S&P 500 1,552.50 +1.44%
DJIA 13,907.25 +2.17%
NASDAQ 2,707.0 +1.52%
Russell 2000 855.77 +.41%
Wilshire 5000 15,653.83 +1.28%
Russell 1000 Growth 618.21 +1.48%
Russell 1000 Value 883.01 +1.31%
Morgan Stanley Consumer 744.70 +1.22%
Morgan Stanley Cyclical 1,125.0 +2.22%
Morgan Stanley Technology 649.46 +1.92%
Transports 5,369.68 +2.65%
Utilities 515.50 +2.05%
MSCI Emerging Markets 142.21 +3.37%

Sentiment/Internals
NYSE Cumulative A/D Line 77,872 +.42%
Bloomberg New Highs-Lows Index +697 +24.24%
Bloomberg Crude Oil % Bulls 36.0 -18.9%
CFTC Oil Large Speculative Longs 249,045 +9.51%
Total Put/Call .93 +8.1%
NYSE Arms .71 +14.52%
Volatility(VIX) 15.15 +2.92%
ISE Sentiment 181.0 +29.29%
AAII % Bulls 43.64 -.46%
AAII % Bears 30.0 -8.76%

Futures Spot Prices
Crude Oil 73.93 +1.59%
Reformulated Gasoline 222.48 -3.69%
Natural Gas 6.66 +3.64%
Heating Oil 211.06 +.71%
Gold 667.30 +1.78%
Base Metals 256.75 -.40%
Copper 359.30 +.07%

Economy
10-year US Treasury Yield 5.10% -8 basis points
4-Wk MA of Jobless Claims 317,800 -.5%
Average 30-year Mortgage Rate 6.73% +10 basis points
Weekly Mortgage Applications 626.20 +1.10%
Weekly Retail Sales +1.40%
Nationwide Gas $3.05/gallon +.09/gallon
US Cooling Demand Next 7 Days 8.0% above normal
ECRI Weekly Leading Economic Index 143.90 +.70%
US Dollar Index 80.58 -1.09%
CRB Index 325.09 +1.32%

Leading Sectors
Energy +3.67%
Internet +3.66%
Steel +3.58%
Wireless +2.45%
Networking +2.41%

Lagging Sectors
Oil Service -.63%
Gaming -.75%
REITs -.75%
Tobacco -1.30%
Airlines -2.64%

One-Week High-Volume Gainers
One-Week High-Volume Losers

BOTTOM LINE: The Portfolio is higher into the final hour on gains in Retail longs, Computer longs, Internet longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mixed today as the advance/decline line is slightly lower, most sectors are gaining and volume is about average. Asian equities followed U.S. shares sharply higher overnight. Korea's KOSPI is now up 37% year-to-date, surpassing Vietnam and closing in rapidly on Shanghai’s y-t-d performance. The potential denuclearization of the Korean peninsula has barely been mentioned in the press here, however. The VIX is still hovering around 15, meaningfully higher than during other recent market record surges. USA Today has a survey out today that bodes quite well for continued strong sales of Apple’s(AAPL) iPhone and future versions. The chief strategy officer of the firm conducting the survey said the findings are "pretty much off the charts."

The survey was of 1,000 cell phone users from July 6-10. Here is a summary:

• 90% of 200 owners said they were "extremely" or "very" satisfied with their phone.
• 85% said they are "extremely" or "very" likely to recommend the device to others.
• The high cost of the iPhone was the No. 1 reason consumers interested in the iPhone did not buy one.
• Owners did say Apple (AAPL) could improve some things. Longer battery life, faster Internet speed and more internal memory were common requests. The lack of a physical keyboard was way down the list of wishes.
• 30% of iPhone buyers were first-time AAPL customers.
• 40% of iPhone buyers said it was their first iPod.
• 50% of iPhone buyers switched from another carrier to AT&T (T).
• Of those 50%, 35% paid an average of $167 to break a contract with another carrier.
• 25% of new iPhone buyers that switched from another carrier came from Verizon (VZ).
• iPhone owners expect to pay about $35 more in monthly service fees compared with their previous cell phones.

Bloomberg:
- Lehman Brothers Holdings(LEH) said the worst of the global credit market rout caused by the US subprime mortgage slump is over.
- Win Thin, a currency strategist at Brown Brothers Harriman said he is a “Long-term US dollar bull.”
- Bank of America(BAC), the second-largest US bank, said the slump in global credit markets caused by subprime mortgage defaults is overstated and investors should buy corporate debt.
- Crude oil rose to an 11-month high in NY and London after a pipeline “shutdown” and “maintenance” work reduced North Sea Brent oil production.
- Democratic presidential candidate Hillary Rodham Clinton is backing efforts to boost taxes for managers of private-equity firms and hedge funds.
- Shares of Baker Hughes(BHI), the world’s third-largest oilfield-services provider, fell more than 5% after the company said second-quarter profit was less than analysts expected because of a slowdown in drilling in Canada and higher tax rates and costs.
- Hovnanian Enterprises Inc.(HOV) shares jumped the most since December 2004, leading homebuilders higher, on speculation Warren Buffett’s Berkshire Hathaway(BRK/A) may buy a stake in the company.
- General Electric(GE) said second-quarter profit rose 12% on sales of power-plant turbines, jet engines and commercial loans outside the US.
- President Bush said US help in rebuilding Iraq can lead to a more stable government and pave the way toward resolving sectarian disputes. “Grassroots efforts to improve services, to improve the economy, to encourage local government are all aimed at enhancing this concept of reconciliation from the bottom up,” Bush said.
- Christie’s Intl., the world’s largest art seller, said auctions rose almost 30% on premium prices for Warhols and an influx of new buyers.
- Alcoa(AA) shares may be valued as high as $59 if the world’s second-largest aluminum company is taken over, according to a CSFB report.
- The US is urging China’s central bank to buy more mortgage-backed securities after a surge in defaults by risky borrowers eroded demand for such instruments. US Dept. of Housing and Urban Development Secretary Jackson is in Beijing to persuade the Chinese central bank to buy more securities from Ginnie Mae, a mortgage assoc. under the Housing Dept.
- San Francisco Mayor Gavin Newsom is running for re-election virtually unopposed, more popular than ever, after admitting to having an affair with a top aide’s wife and entering an alcohol-treatment program.
- Gasoline futures are falling for the third day on rising inventories and after failing to break through a technical level.
- Copper inventories in Shanghai surged 11% this week.

Wall Street Journal:
- Pearson Plc’s Financial Times newspaper and CNBC, the US-based business news television channel, are in talks to share news to attract more online readers.
- Dealers for the four automakers with the biggest US sales will urge members of Congress next week to back “soft” fuel-economy proposals.
- Empirica Capital LLC founder and author Nassim Nicholas Taleb is helping start Universa Investments LP, a California-based hedge fund raising more than $1 billion for a special fund based on ideas in his investment books.
- The US NASD and the NYSE agreed to change the name of a new joint regulatory body after the first choice offended some Muslims, citing NASD spokesman Howard Schloss. Originally titled the Securities Industry Regulatory Authority, or SIRA, the body started receiving complaints from Muslims who said SIRA sounded similar to an Arabic word which refers to biographies of the Prophet Muhammad. The new enforcement unit will now be known as the Financial Industry Regulatory Authority, or FINRA.

NY Times:
- US imports will be more widely inspected and violators of safety regulators will face stiffer penalties under rules being crafted by the US Consumer Product Safety Commission.
- Al Gore, promoter of last weekend’s Live Earth concerts, is sponsoring a contest to raise awareness of climate change through television and Web ad “ecospots.” “Since we face a true planetary emergency, we have to give the planet a PR agent,” Gore, who plans to raise millions of dollars to place the ads, said.

Washington Post:
- Barr Pharmaceuticals Inc.(BRL) has seen sales of its Plan B morning-after pill double since the US FDA approved the pill’s use without prescription last August.

Chicago Tribune:
- Mark Cuban, the billionaire owner of the NBA’s Dallas Mavericks, has submitted an application to buy Major League Baseball’s Chicago Cubs.

AP:
- The $1.9 billion renovation of the headquarters of the United Nations in New York is at least $148 million over budget even before construction has begun, auditors said.

Guardian:
- European spending on Internet advertising will probably double in the next five years, from 7.5 billion euros last year to more than 16 billion euros in 2012, citing a forecast by Forrester, a US research company.

AFP:
- Iran will let United Nations inspectors visit a reactor under construction that could produce plutonium, citing the UN’s IAEA.

Business Report:
- The global supply of platinum may rise by 67% over the next five years as miners of the metal expand their operations, citing a study by Investec Securities.

El Nacional:
- Venezuelan President Hugo Chavez’s plans to amend the country’s constitution will include the elimination of term limits. Chavez’s proposal would allow the president to seek re-election every six years.

Valor Economico:
- Goldman Sachs Group(GS) may buy a stake in a group of Brazilian sugar and ethanol mills that are merging to form the country’s second-largest cane processor.

- The Import Price Index for June rose 1.0% versus estimates of a .7% increase and an upwardly revised 1.1% gain in May.

- Advance Retail Sales for June fell .9% versus estimates of a .1% decline and an upwardly revised 1.5% increase in May.

- Retail Sales Less Autos for June fell .4% versus estimates of a .2% increase and an upwardly revised 1.6% gain in May.

- Preliminary Univ. of Mich. Consumer Confidence for July rose to 92.4 versus estimates of 86.0 and a reading of 85.3 in June.

- Business Inventories for May rose .5% versus estimates of a .3% increase and a .4% gain in April.

BOTTOM LINE: Prices of goods imported into the US rose for a fifth straight month in June on higher fuel costs, Bloomberg reported. Prices excluding petroleum rose .2%. The cost of imported capital goods increased .2% last month, the first gain this year, while falling .1% from a year earlier. Costs for imported consumer goods excluding autos were unch. for the third consecutive month. I expect import prices to head meaningfully lower during the fourth quarter as energy prices fall substantially.

Retail Sales in the US fell in June, Bloomberg reported. Filling station sales fell 1.1% last month after a 4.1% increase the prior month. A drop in gas prices towards the end of June contributed to the decline. I still expect retail sales to accelerate from below-average levels to above-average levels this fall as stocks rise further, housing sales stabilize at relatively high levels, unemployment remains low, wages continue to substantially outpace inflation, interest rates head back down, energy prices fall substantially, inflation decelerates further and consumer sentiment improves.

Confidence among US consumers unexpectedly jumped the most since October this month, helped by an unemployment rate close to its lowest in six years and gains in incomes, Bloomberg said. Rising confidence bodes well for predictions that consumer spending will accelerate from a second-quarter trough. Rising stock prices are also boosting confidence. The S&P 500 hit a new record on July 12. The Expectations component of the index, which is a gauge of future spending, jumped to 83.9 from 74.7 the prior month. The Current Conditions component increased to 105.7 from 101.9 the prior month. Consumers said they expect inflation to rise 3.3% in 12 months, down from 3.4% the prior month. I continue to believe both main measures of consumer sentiment will hit new cycle highs over the intermediate-term for the above-mentioned reasons.

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Late-Night Headlines
Bloomberg:
- Federal Realty Investment Trust(FRT) shares had the biggest rise in more than 13 years on a report the developer and manager of shopping centers may be a takeover target.
- Shares of Samsung Electronics, Asia’s largest maker of chips, mobile phones and flat screens, rose after a newspaper reported billionaire investor Carl Icahn may be planning a hostile bid.
- Amaranth Advisors LLC, the hedge fund that collapsed in September after losing $6.6 billion on energy trades, and JPMorgan Chase(JPM) were sued by a natural gas trader who accused the fund of market manipulation.
- Third Point LLC, the activist hedge fund firm run by Daniel Loeb that oversees more than $5 billion, bought a 7.2% stake in Atmel Corp.(ATML).
- Energizer Holdings(ENR) agreed to acquire Playtex Products for about $1.2 billion in cash, adding consumer products such as the Banana Boat sunscreen line.
- Democratic presidential candidate Barrack Obama supports legislation to raise the tax rate for publicly traded private-equity and hedge funds, an aide said today.
- Issuance of subprime mortgage securities fell 41% last quarter from a year earlier to $74 billion, while sales of so-called Alt A home-loans bonds fell 2.7% to $100.9 billion, newsletter Inside MBS & ABS said.
- General Electric(GE) plans to sell its three-year-old US subprime mortgage unit, the company said in an e-mail to employees.
- Roche Holding AG signaled it may raise its $3 billion hostile takeover bid for US diagnostics maker Ventana Medical Systems(VMSI) after the offer was rejected yesterday.
- The House of Representatives voted to require the withdrawal of US troops from Iraq, defying President Bush’s veto threat and his request today for time to allow the new war strategy to succeed.

Wall Street Journal:
- Nordstrom Inc.(JWN) is close to selling its Faconnable line to M! Group for more than $200 million.

Reuters:
- Intercontinental Exchange(ICE), an electronic energy market which lost a bidding war this week to buy the Chicago Board of Trade(BOT), is open to acquiring another exchange or becoming a takeover target itself, citing Chairman Jeffrey Sprecher.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BKD), target raised to $65.
- Reiterated Buy on (PAYX), target raised to $50.

Business Week:
- Zoltek Companies’(ZOLT) profit will rise because of demand for the carbon-fiber components it makes for wind turbines. Michael Carboy of Signal Hill Capital Group expects profit to reach .72 a share in 2007 and $1.60 in 2008, up from 13 cents in 2006.
- Ziopharm Oncology(ZIOP) is trying to get approval to treat cancer with organic arsenic, and its shares could rise fourfold in the process. Griffin Securities’ Chrystyna Bedrij rates the stock a “buy” and said the stock could rise to $20 a share within a year based on the company’s trials on its arsenic drug.
- Arbitron Inc.(ARB) shares could rise 40% if the NY-based provider of radio and audience ratings uses its free cash flow to buy back shares, citing Mark Boyar, president of Boyar Asset Management.

Night Trading
Asian Indices are +.75% to +1.50% on average.
S&P 500 indicated +.03%.
NASDAQ 100 indicated +.07%.

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
- (GE)/.52

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Import Price Index for June is estimated to rise .7% versus a .9% gain in May.
- Advance Retail Sales for June are estimated to fall .1% versus a 1.4% increase in May.
- Retail Sales Less Autos for June are estimated to rise .2% versus a 1.3% gain in May.

10:00 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for July is estimated to rise to 86.0 versus a reading of 85.3 in June.
- Business Inventories for May are estimated to rise .3% versus a .4% gain in April.

Other Potential Market Movers
- The BMO Capital Markets Media/Comm./Tech Conference could also impact trading today.

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Bloomberg:
- Rio Tinto Group(RTP) agreed to buy Alcan Inc.(AL) for $38.1 billion, overwhelming a hostile bid by Alcoa Inc.(AA).
- Gasoline futures fell for a second day after a report that BP Plc(BP) began starting up a unit at its Whiting, Indiana, refinery.
- Natural gas futures in NY are falling after an EIA report showed inventories rose more than estimates as demand waned and moderate weather reduced electricity needs for cooling. Supplies are on pace to exceed record highs later this year.
- The yen fell to a record low against the euro as rallying global stocks signaled investors were taking on risky bets, including so-called carry trades.
- Merck(MRK) may pay as much as $1.1 billion to Ariad Pharmaceuticals for a late-stage treatment for cancer.
- India’s industrial production growth slowed for a second month in May as the highest interest rates in five years crimped demand and currency gains weakened exports.
- Wal-Mart Stores(WMT) said June sales at US stores open at least a year rose 2.4% versus estimates of a .8% gain despite high gas prices and housing problems.
- Nintendo said its top-selling Wii video-game console may be in short supply this holiday season in the US as the bulk of sales concentrates at the end of the year.
- Activist investor William Ackman has accumulated a stake of more than 5% in Target Corp.(TGT), the second-biggest US discount retailer, a person with direct knowledge of his plans said.
- Economists raised forecasts for US second-quarter growth to 3.6% from 3.2% after this morning’s trade report showed US exports hit another record high.

Wall Street Journal:
- Nokia Oyj(NOK) will put a Skype Internet phone service link on one of its phones for the first time.
- US railroad shares have risen more than 20% this year as investors have joined Warren Buffett, Carl Icahn and hedge funds such as Atticus Capital LLC and Jana Partners LLC on the train.

NY Times:
- President Bush’s report to Congress on Iraq security will show progress on almost half the 18 benchmarks set by US lawmakers. There have been declines in civilian casualties and deaths from car and truck bombs, the report says. The White House report will say improvements are still needed in the performance of Iraq’s security forces and government.
- United Parcel Service Inc.(UPS) is spending more than $1 billion a year on research to find faster ways of delivery.

National Post:
- BP Plc(BP), Europe’s second-largest oil company, recognized Canada’s oil sands for the first time in its annual tally of reserves. Acknowledgement that the oil sands hold 163.5 billion barrels of undeveloped reserves in BP’s Statistical Review of World Energy report is a change from the past, when it ignored Alberta’s oil deposits, citing Mark Finley, BP’s head of energy analysis.

AP:
- Google Inc.(GOOG) plans to integrate different Web sites to provide mapping information for gas prices, home prices and other applications.

Tagesspiegel:
- Apple Inc.’s(AAPL) iPhone has attracted more than 1,000 enquiries a day in Germany, months before the combination music player and mobile phone is slated to go on sale in the country.

-The Trade Deficit for May came in at -$60.0B versus estimates of -$60.0B and -%58.7B in April.

- Initial Jobless Claims for last week fell to 308K versus estimates of 315K and 320K the prior week.

BOTTOM LINE: The US trade deficit widened in May as a jump in imported oil costs outpaced record exports, Bloomberg reported. Record US exports were boosted by strong civilian aircraft sales and stronger electrical equipment sales. Imports of industrial supplies, which include crude oil, jumped by $2.4 billion to $52.6 billion, reflecting record purchases from OPEC. I continue to believe the trade deficit will improve modestly over the intermediate-term as lower commodity prices more than offset faster US growth coupled with decelerating global growth.

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Late-Night Headlines
Bloomberg:
- North Korea will start shutting down its nuclear facilities from “early next week,” the head of the UN atomic agency said today.
- Lady Bird Johnson, widow of former President Lyndon Baines Johnson, has passed away at the age of 94.
- Copper prices fell for a third day in Asia on concern that China may be oversupplied.
- Michael Darda, chief economist at MKM Partners LP, sees demand “bottoming” in the US housing market.
- Yunnan Copper Industry, China’s third-largest producer of the metal, said it started output at a smelter in the northern city of Chifeng in Inner Mongolia with capacity of 100,000 tons a year.
- Shares of Western Mining Co., China’s second-largest maker of lead concentrate, more than doubled on their Shanghai debut after investors ordered more than 200 times the stock offered.
- South Korea’s central bank raised its benchmark interest rate for the first time in a year on concern record lending to small companies may spur inflation.
- Australia’s unemployment rate rose in June as employers added fewer jobs than economists expected after some of the nation’s largest companies fired workers to pare rising wage costs.

Wall Street Journal:
- News Corp.(NWS/A) Chairman Rupert Murdoch may be growing frustrated with negotiations to buy Dow Jones(DJ) because the company’s controlling shareholders “keep changing their minds.”
- Hewlett-Packard(HPQ) has developed a system for cosmetic companies to match people’s skin tones to make-up.

Chicago Tribune:
- Al Qaeda’s deputy leader threatened a jittery Britain on Tuesday with more attacks, accusing London of defying the Islamic world by honoring novelist Salman Rushdie.

USA Today:
- A man thought to be al-Qaeda’s second in command called for revenge after Pakistani troops cleared militants from Islamabad’s Red Mosque, citing an Internet video. “Your salvation is only through jihad,” or holy war, a voice said to be that of Ayman al-Zawahiri said on the tape.

Financial Times:
- The London Stock Exchange is preparing to introduce a market for private equity, property and hedge funds. To be called the Specialist Fund Market, the exchange will be announced today.
- President Bush on Wednesday predicted that the US budget deficit would drop to less than half its 2004 peak by the end of the current fiscal year but warned Democrats against loosening constraints on federal spending.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (SNDK). NAND’s unfolding inflection(the most powerful in semis and more robust than we expected three months ago) argues for more aggressive estimates and share appreciation expectations. We increase our (SNDK) target to $62 from $52 for 20% upside and see catalysts including: 1) positive street 2H07/2008 revisions, 2) bullish 2H07 contract pricing, 3) new product activity (Apple, others), and 4) 3Q share price seasonality (averages +13% monthly from July through Sept., suggesting upside to $65-$70.
- Reiterated Buy on (WWW), target $33.
- Reiterated Buy on (MU), target $17.

Night Trading
Asian Indices are +.50% to +1.25% on average.
S&P 500 indicated +.20%.
NASDAQ 100 indicated +.06%.

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
- (CBSH)/.76
- (ESIO)/.23
- (FAST)/.39
- (FLE)/-.31
- (MAR)/.53
- (PGR)/.45
- (TXI)/1.05

Upcoming Splits
- (TPL) 5-for-1

Economic Releases
8:30 am EST
- The Trade Deficit for May is estimated to widen to -$60.0B versus -$58.5B in April.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 318K the prior week.
- Continuing Claims are estimated to fall to 2500K versus 2569K prior.

2:00 pm EST
- The Monthly Budget Surplus for June is estimated to rise to $27.7B versus $20.5B in May.

Other Potential Market Movers
- The Fed’s Yellen speaking, Fed’s Kroszner speaking, ICSC June Chain Store Sales, (MU) Analyst Conference, weekly EIA natural gas inventory data, Pacific Growth Equities Cardiology Conference, BMO Capital Markets Media/Comm./Tech Conference, CE Unterberg Towbin Emerging Growth Conference and CIBC Consumer Growth Conference could also impact trading today.

Indices
S&P 500 1,518.76 +.57%
DJIA 13,577.87 +.56%
NASDAQ 2,651.79 +.48%
Russell 2000 839.97 +.30%
Wilshire 5000 15,331.39 +.52%
Russell 1000 Growth 606.61 +.54%
Russell 1000 Value 863.51 +.59%
Morgan Stanley Consumer 729.85 +.65%
Morgan Stanley Cyclical 1,096.22 +1.0%
Morgan Stanley Technology 636.87 +.54%
Transports 5,287.51 +1.72%
Utilities 503.01 +.50%
MSCI Emerging Markets 138.13 +.25%

Sentiment/Internals
Total Put/Call .92 -7.07%
NYSE Arms .64 -65.52%
Volatility(VIX) 16.64 -5.29%
ISE Sentiment 136.0 -13.38%

Futures Spot Prices
Crude Oil 72.47 -.47%
Reformulated Gasoline 229.60 -3.10%
Natural Gas 6.59 -1.63%
Heating Oil 209.65 -1.29%
Gold 662.10 -.36%
Base Metals 258.84 +.80%
Copper 360.70 -.08%

Economy
10-year US Treasury Yield 5.08% +6 basis points
US Dollar 80.79 -.09%
CRB Index 322.87 -.05%

Leading Sectors
Wireless +1.15%
Steel +1.15%
Internet +.95%

Lagging Sectors
Gold -.35%
REITs -.41%
Oil Service -.82%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Deutsche Bank:
- Rated (DLB) Buy, target $42.

Afternoon/Evening Headlines
Bloomberg:
- Fremont General(FMT) will halt foreclosures in Massachusetts for 90 days, state Attorney General Martha Coakley announced.
- Gasoline futures fell the most in more than a month, declining 3.0%, after a US Energy Dept. supply report today showed inventories rose more than expected despite lower-than-expected refinery utilization with oil inventories near decade highs.
- Motorola Inc.(MOT) said sales missed its forecasts for the third time this year after losing customers to rivals such as Nokia(NOK) and Apple Inc.(AAPL). The stock fell .20 in after-hours trading.
- Genentech Inc.(DNA) said second-quarter profit rose 41%, driven by the cancer drugs Avastin and Rituxin. The stock was flat in after-hours trading.
- Yum! Brands(YUM) said second-quarter profit rose 12% on higher sales in China, its fastest-growing market. The stock was flat in after-hours trading.
- The US budget deficit will narrow to $205 billion this year, the lowest in five years.
- Congressional proposals to raise taxes on the profits of managers of hedge funds and buyout firms may stifle US entrepreneurship and hurt the economy, the Treasury Dept. said, as Senate and House panels held hearings on the taxation and regulation of the industy.
- SLM Corp.(SLM), known as Sallie Mae, was told by the group planning to acquire the company that pending legislation in the US House may scuttle the deal. The shares fell 10% on the news.

Bloomberg:
- The SEC’s top market-regulation official said Bear Stearns(BSC) probably will sell assets and reduce leverage in an “orderly fashion” at its two hedge funds that almost collapsed last month.
- The House Financial Services Committee will draft legislation requiring US hedge funds to keep copies of trading data.
- The US Treasury Dept.’s top domestic-finance official and a Federal Reserve governor said investor losses from subprime-mortgage delinquencies aren’t posting broader risks to the financial system.
- The SEC adopted new rules ensuring it can sue hedge funds for misleading investors, following a court ruling that put in doubt the regulator’s authority over the $1.6 trillion industry.
- Financial advisers’ pessimism about US stocks grew by the most since 2004 last week, according to a survey by Investors Intelligence, amid lingering concern the slump in housing will reduce corporate profit.
- Yahoo! Inc.(YHOO) lost the battle with Google Inc.(GOOG) in searching the Internet and now may have jeopardized its lead in display advertisements.

Wall Street Journal:
- Nuance Communications(NUAN) is poised to prosper from the widening use of speech-recognition technologies.
- Express Scripts(ESRX) became one of the first US companies to put its headquarters on a college campus by installing offices at the Univ. of Missouri in St. Louis. The university’s willingness to allow a corporation to move on to its premises underscores an effort by colleges located in urban areas to spur economic development and reclaim declining neighborhoods.
- Liz Claiborne(LIZ) plans selling or licensing 16 of its 36 brands as part of a plan to cut back after a slump in department-store sales.
- A SEC proposal to require shareholders who want to nominate candidates to corporate boards to own at least 5% of shares has been deemed too stringent by critics.

NY Times:
- NY State Governor Eliot Spitzer has asked two administration officials to draft a plan for providing all state residents with universal health coverage. The program would be phased in over several years and could cost $3 billion to $6 billion annually.

NY Daily News:
- Serious crime on the NYC subway has fallen to its lowest level since 1990 because of police surveillance and a restriction on walking and riding between train cars.

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Late-Night Headlines
Bloomberg:
- The Australian dollar dropped the most in two weeks against the yen as a drop in US stocks prompted investor to pare investments funded by loans in the Japanese currency.
- Democratic senators moved today to cut off funding for VP Dick Cheney’s office next fiscal year as part of a dispute over rules for handling sensitive documents.
- Pakistan must unite to defeat extremism, Prime Minister Shaukat Aziz said after an army raid on the capital’s Red Mosque left more than 50 militants dead.
- Bear Stearns(BSC) said one of the firm’s two hedge funds that flirted with collapse last month has since cut its debt in half to $600 million after finding buyers for more assets.
- Gerdau Ameristeel Corp., the US unit of Brazilian steelmaker Gerdau SA, will buy Chaparral Steel(CHAP) for $4.22 billion in cash to expand in North America. Chaparral shareholders will receive $86 a share. The stock closed trading yesterday at $75.69.

Wall Street Journal:
- The potential sale of the Wall Street Journal to News Corp.(NWS/A) has drawn together a pair of investors who had made separate proposals to keep the newspaper independent.
- Wal-Mart Stores(WMT) will be able to build supercenters in San Diego after city officials voted to override an ordinance designed to block the stores.
- Many Chinese corporations are putting piles of cash into local stocks, fueling the bull market and their own profits. But the enthusiasm in corporate boardrooms for stock investing creates the potential for a nasty fallout if the market turns sour.

Chosun Ilbo:
- South Korea may sign a formal peace agreement with North Korea and agreed to an inter-Korean summit because President Roh Moo Hyun sees progress is being made on denuclearization by the government in Pyongyang.

Shanghai Securities News:
- China’s central bank may raise interest rates twice more this year, with the first coming as soon as this month, according to a Bank of China research report.

Late Buy/Sell Recommendations
Citigroup:
- CY2Q global telecom equipment capital spending should be up more than 10% sequentially with roughly 25% increases in North America and Europe offsetting a seasonally normal 11% decline in Asia-Pacific. This overall capex increase should support generally solid results for the sector. Out Top Picks are Ciena(CIEN) and Finisar(FNSR).

Night Trading
Asian Indices are -1.0% to -.50% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.13%.

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
- (AIR)/.41
- (CHAP)/1.37
- (DNA)/.72
- (RECN)/.31
- (RT)/.47
- (WWW)/.28
- (YUM)/.36

Upcoming Splits
- (TPL) 5-for-1

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -50,000 barrels versus a 3,151,000 barrel build the prior week. Gasoline supplies are expected to rise by 825,000 barrels versus a 1,851,000 barrel build the prior week. Distillate inventories are estimated to rise by 900,000 barrels versus a 1,162,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to rise by .4% versus a .6% increase the prior week.

Other Potential Market Movers
- The Fed’s Plosser speaking, Fed’s Warsh speaking, weekly MBA Mortgage Applications report, (MSFT) financial analyst briefing at E3, (LIZ) analyst meeting, CE Unterberg Towbin Emerging Growth Conference and CIBC Consumer Growth Conference could also impact trading today.

Indices
S&P 500 1,510.12 -1.42%
DJIA 13,501.70 -1.09%
NASDAQ 2,639.16 -1.16%
Russell 2000 837.48 -1.85%
Wilshire 5000 15,251.64 -1.42%
Russell 1000 Growth 602.35 -1.18%
Russell 1000 Value 858.48 -1.63%
Morgan Stanley Consumer 725.12 -1.29%
Morgan Stanley Cyclical 1,085.34 -1.73%
Morgan Stanley Technology 633.48 -.86%
Transports 5,198.15 -1.54%
Utilities 500.49 -1.18%
MSCI Emerging Markets 137.70 -1.08%

Sentiment/Internals
Total Put/Call .99 +22.22%
NYSE Arms 1.87 +64.50%
Volatility(VIX) 17.57 +15.90%
ISE Sentiment 157.0 -8.0%

Futures Spot Prices
Crude Oil 72.65 +.64%
Reformulated Gasoline 236.05 +.68%
Natural Gas 6.68 +4.26%
Heating Oil 211.84 +1.22%
Gold 664.50 +.30%
Base Metals 256.77 -1.38%
Copper 359.80 -.87%

Economy
10-year US Treasury Yield 5.02% -12 basis points
US Dollar 80.82 -.75%
CRB Index 323.04 +.56%

Leading Sectors
Computer Hardware -.63%
Alternative Energy -.79%
Drugs -.87%

Lagging Sectors
Homebuilders -2.65%
Retail -2.66%
I-Banks -2.88%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Bank of America:
- Rated (RPM) Buy, target $27.
- Rated (USG) Sell, target $42.

Afternoon/Evening Headlines
Bloomberg:
- Palestinian Authority President Mahmoud Abbas accused Hamas of allowing al-Qaeda into the Gaza Strip.
- Emerging-market bonds fell after Moody’s Investors Service lowered the credit ratings on $5.2 billion of bonds backed by subprime mortgages and S&P said it may cut ratings on $12 billion of the securities.
- Nasdaq Stock Market(NDAQ) gained approval for a new rule that will allow companies that it lures from rival exchanges to keep their three-letter trading symbols.
- Continental Resources(CLR) announced that it entered into fixed-price swap contracts covering 10,000 barrels of oil per day for the period from August 2007 through April 2008. During each month of the contract, Continental will get $72.90/bbl. and will pay counterparties the average of the NYMEX crude oil futures contract settlement prices for such month.

Financial Times:
- BHP Billiton(BHP) probably won’t team up with a private equity firm and bid for Alcoa Inc.(AA) and is in no rush to bid for Alcan(AL).

Die Welt:
- Adidas AG expects to have a “record year” in 2008 as the European soccer championship boosts sales, citing CEO Herbert Hainer.

Bloomberg:
- Hedge funds are short-selling S&P 500 futures by the most in three years, a Merrill Lynch analyst said. Short positions have reached “crowded levels” and “we view this as a contrary indicator and readings continue to be bullish for stocks.”
- Paulson & Co., the hedge-fund firm that tripled its assets in the past year with bets on the decline in subprime mortgages, returned 40% in its largest credit fund in June. The Paulson Credit Opportunities Funds soared 129% this year through June 30. Paulson, whose assets have increased to $15 billion from $4.7 billion in July 2006, speculated that securities based on home loans to US borrowers with poor credit histories would drop in value as defaults increased.
- Oil is rising above $73/bbl. in NY for the first time since August as speculators increase bets to record levels on further refinery “problems.”
- Copper is falling in NY after a report showed imports declined in China, the world’s largest consumer of the metal.
- A plunge in the price of sugar and the need to cut output costs will likely help drive mergers in Australia’s cane industry, Maryborough Sugar Factory Ltd. said.
- Nickel declined in London to the lowest in almost six months as rising stockpiles of the metal indicated a slowdown in demand growth.
- Federal Reserve Chairman Ben S. Bernanke said unexpected changes in inflation today are much more likely to be transitory than before 1980s and that energy price rise only leads to inflation if expectations rise, wage price spiral ensues.
- US treasuries advanced the most in more than a week after Standard & Poor’s said it may cut credit ratings on $12 billion of bonds backed by subprime mortgages and Fed chairman Bernanke’s speech was more dovish than expected.
- China executed its former chief drug regulator for taking bribes in a crackdown on fake medicine, a warning that the country intends to deal sternly with corruption.
- Apple Inc.(AAPL) may introduce a model of its iPhone this year that is 50% cheaper than the handsets that went on sale in the US last month, JPMorgan analyst Kevin Chang said.

Wall Street Journal:
- Dell Inc.(DELL) started an advertising campaign based on colors to boost sales, which have fallen since 2005.
- Short-sellers are targeting credit-ratings firm Moody’s Corp.(MCO).
- Exxon Mobil Corp.(XOM) and Enbridge’s pipelines, which used to carry Venezuelan and Mexican oil to the US, have been reversed to import Canadian oil after political instability in Latin America threatened US supplies.
- Linear Technology(LLTC), whose chips are used by Cisco Systems(CSCO) and Apple Inc.(AAPL), has found a profitable niche making unglamorous chips for a market where competition is limited and margins are high.

NY Times:
- Ryan Crocker, the US ambassador to Iraq, said violence in the country will increase if American troops are withdrawn. A US troop reduction may bring violence that results in thousands of deaths and heightened conflict with Iraq’s oil-producing neighbors.
- Scientific groups around the world are developing robotic devices designed to help stroke patients regain function in impaired limbs.

Lloyd’s List:
- A sea-traffic control system similar to that used for aviation should be introduced to cut accidents involving merchant ships, Circuit Court Judge Jon Newman said.

AP:
- Users of TiVo Inc.(TIVO) digital video recorders can, from today, order movies from Amazon.com Inc.(AMZN) over their television sets.
- Nielsen/Net Ratings plans to drop online measurements based on page views and start recording how long people stay on Web sites.
- Al-Qaeda’s second in command, Ayman al-Zawahiri, issued an audiotape in which the group threatens to attack the UK in retaliation for honoring novelist Salman Rushdie with a knighthood.

USA Today:
- FCC Chairman Kevin Martin plans new broadband rules to let consumers bypass a carrier’s pre-packaged wireless service and choose the mobile device and software they want.

Financial Times:
- Markit Group, the financial data provider, plans to offer real-time prices for credit-default swaps, citing Kevin Gould, head of data.

Nottingham Evening Post:
- Bank of England policy maker John Gieve said higher interest rates may be slowing segments of the UK economy.

Nepszabadsag:
- Hungarian Environment Minister Gabor Fodor opened the country’s first bioethanol station, with as many as 50 more planned for this year.

Le Monde:
- OPEC needs to raise output and could do this “discreetly” in the coming months, Claude Mandil, executive director of the International Energy Agency said. Oil prices are “worrying” and “catastrophic” for consumers in developing countries who have to spend a greater proportion of their disposable income on energy.

AFP:
- A man convicted of adultery was stoned to death in Iran earlier this month., citing judiciary spokesman Alireza Jamshidi.

Haaretz:
- Comverse Technology(CMVT) is up for sale after its board instructed management to liquidate the company and its subsidiaries.

- Wholesale Inventories for May rose .5% versus estimates of a .4% gain and a .3% increase in April.

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Late-Night Headlines
Bloomberg:
- Shares of Cedar Fair LP(FUN) rose the most in 20 months after a report said the third-largest US theme-park operator hired Bear Stearns(BSC) to seek a buyer that will agree to keep the management team.
- Ford Motor(F) said it will team up with Southern California Edison to help develop rechargeable batteries for future plug-in vehicles.
- There is no evidence Turkey has massed troops on its border with Iraq, a Pentagon spokesman said.

NY Times:
- One of the suspects in the failed terror attempt in Glasgow, Scotland, worked as an aeronautical engineer for an Indian company that designs parts for Boeing Co.(BA) and Airbus SAS.

Financial Times:
- Chuck Prince, CEO of Citigroup(C), said turmoil in the US subprime-mortgage market is not so big a risk that it would slow down the company’s lending.

Commercial Times:
- Lee Chang Yung Chemical Industry Corp. plans to spend $1.6 billion over the next three years on alternative energy projects such as the production of methanol, ethanol and polysilicon.

Korea Economic Daily:
- SK Telecom Co. plans to acquire Sprint Nextel Corp.(S), the third-largest US mobile phone services business.

Bisnis Indonesia:
- At least 49 companies have received approval from Indonesia’s Investment Coordinating Board for plants that make biofuels.

Xinhua News Agency:
- The membership of China’s ruling Communist Party rose last year by 2.64 million to 72.39 million people.

Late Buy/Sell Recommendations
Citigroup:
- Financial players have now firmly moved ahead of refining as the main near-term driver of oil prices accounting for over $10 of the move higher since the start of the year versus over $7 for refining. Open interest increased 4% last week to a record 1.5 mm, while net speculators also reached an all-time high. We remain of the view that ex transitory factors, the upcoming shift to winter gasoline and restart of several major refineries are events that need to pass before adopting a more bullish stance on oil.
- Reiterated Buy on (GGC), target $23.
- Upgraded (DTV) to Buy, raised target to $30.

Citigroup:
- Rated (URBN) Underweight, target $18.
- Rated (ANF) Underweight, target $62.

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated unch.

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
- (AYI)/.88
- (CHTT)/.77
- (ETP)/.69
- (ETE)/.34
- (GBX)/.45
- (HELE)/.30
- (PBG)/.63

Upcoming Splits
- (FTK) 2-for-1
- (TPL) 5-for-1

Economic Releases
10:00 am EST
- Wholesale Inventories for May are estimated to rise .4% versus a .3% gain in April.

Other Potential Market Movers
- The Fed’s Bernanke speaking, weekly retail sales reports, E3, CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference, Roth Capital Semi Conference and Kaufman Brothers Defense Tech Conference could also impact trading today.

Indices
S&P 500 1,531.85 +.09%
DJIA 13,649.97 +.28%
NASDAQ 2,670.02 +.13%
Russell 2000 853.24 +.11%
Wilshire 5000 15,471.17 +.10%
Russell 1000 Growth 609.55 +.06%
Russell 1000 Value 872.69 +.13%
Morgan Stanley Consumer 734.60 -.15%
Morgan Stanley Cyclical 1,104.40 +.35%
Morgan Stanley Technology 638.97 +.27%
Transports 5,279.32 +.92%
Utilities 506.46 +.26%
MSCI Emerging Markets 139.20 +1.16%

Sentiment/Internals
Total Put/Call .81 -5.81%
NYSE Arms 1.13 +82.11%
Volatility(VIX) 15.16 +2.99%
ISE Sentiment 171.0 +25.0%

Futures Spot Prices
Crude Oil 72.05 -1.04%
Reformulated Gasoline 234.50 +1.53%
Natural Gas 6.41 -.56%
Heating Oil 209.10 -.20%
Gold 662.30 +1.15%
Base Metals 260.37 +1.01%
Copper 362.40 +.82%

Economy
10-year US Treasury Yield 5.14% -4 basis points
US Dollar 81.45 -.01%
CRB Index 321.23 +.12%

Leading Sectors
Alternative Energy +3.86%
Engineering&Construction +1.47%
Biotech +.70%

Lagging Sectors
Restaurants -.72%
Computer Hardware -.81%
Homebuilders -1.23%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Bank of America:
- Rated (CVA) Buy, target $30.

Oppenheimer:
- Rated (SQNM) Buy, target $8.

BMO Capital:
- Rated (QLGC) Outperform, target $21.

Afternoon/Evening Headlines
Bloomberg:
- Alcoa Inc.(AA), bidding to require rival Alcan(AL) in a hostile takeover, said second-quarter profit fell 3.9% as costs for shutdowns at two US smelters eroded the benefit of rising prices. The shares fell .56 in after-hours trading to $41.79.
- Shares of Akamai Technologies(AKAM) will replace Biomet(BMET) in the S&P 500. The stock rose 4.6% in after-hours trading.
- The Cheesecake Factory(CAKE) reported total revenues increase approximately 15.7% in the second quarter. The stock rose 4.5% in after-hours trading.
- WD-40 Company(WDFC) reported net sales for the third quarter increased 6.2% over the third quarter of last year. The stock fell 10.3% in after-hours trading.

AP:
- The head of the US National Hurricane Center was reassigned after more than 20 of the center’s employees called for his ouster.

Reuters:
- Hedge fund Moore Capital Management LLC has taken a 5.08% stake in US home builder Beazer Home USA(BZH), according to a regulatory filing on Monday.

Bloomberg:
- Iranian drivers won’t have the right to buy gasoline at a higher price if they want to consume more than their monthly allowance, President Mahmoud Ahmadinejad said.
- Jerry Speyer, president and CEO of Tishman Speyer Properties LP, the owner of NY’s Rockefeller Center and Frankfurt’s Messeturm, see an “uptick” in new home purchases in the US.
- Google(GOOG) agreed to buy closely held Postini Inc. for $625 million, adding e-mail security services to its programs for small businesses.
- Carl Icahn raised his bid for Lear Corp.(LEA) by 3.5% to $2.9 billion after opposition from stockholders and investor advisory firms.
- Johnson & Johnson(JNJ) will begin a $10 billion share repurchase program, its largest ever.
- Michael Berger, a former US hedge fund manager who fled NY in 2002 after his conviction in a $400 million securities fraud, was captured by Austrian federal police.
- Just when a majority of analysts say Bristol-Myers Squibb(BMY) has done about all it can for shareholders, new medicines for diabetes and cancer, together with takeover speculation, may keep the stock rising.
- Sony Corp.(SNE) cut the price of the PlayStation 3 in the US by $100, or 17%, after sales trailed Nintendo’s Wii and Microsoft’s(MSFT) Xbox 360.
- Shares of First Solar(FSLR) soared as much as 19% after the maker of solar power modules announced five contracts that may be worth $1.28 billion.
- Global fuel markets may see slower gains in prices by next year, as refinery capacity, energy efficiency and use of biofuels grows, increasing the supply of fuel, the IEA said.
- Corn is falling another 2.1% on speculation that cool, wet weather will bolster the US crop.
- Crude oil is falling .52/bbl. as some analysts and traders speculated recent gains were unjustified as inventories of the fuel in the US are near decade highs.

Wall Street Journal:
- Apollo Management LP, a US buyout firm, increased its offer for Utah-based chemical maker Huntsman Corp.(HUN) by 75 cents a share to $28.
- Hundreds of US hedge-fund advisers have ended their registrations with the SEC a year after a US appeals court invalidated a registration requirement.
- US educators say the restraint and seclusion of students with behavioral problems has come under scrutiny as schools are pressured to include such students in normal classes. An administrative-law judge ruled in March that a local school district violated federal law by educating an autistic student prone to aggressive behavior in excessively restrictive settings.
- Maintaining the detention facility at Guantanamo Bay, Cuba, is justifiable and necessary, and there are no feasible alternatives, David Rivkin and Lee Casey wrote. Closing the center also would allow al-Qaeda to further its cause by taking advantage of Western sensibilities, public opinion and legal rules, the two former Justice Dept. officials said.

NY Times:
- NY will have more than 100 cameras monitoring cars in Lower Manhattan by the end of the year as part of an anti-terrorism surveillance program modeled on one in London.
- US voters believe the presidential campaign has ramped up too quickly, as candidates vie for their attention and money, citing dozens of interviews.
- The Wall Street Journal may reduce news staff within a few months if Rupert Murdoch’s $5 billion bid to buy Dow Jones(DJ) fails, citing senior editors and a member of management.

NY Post:
- Streets throughout NY will soon be paved using recycled materials as part of environmental plans announced by the city’s transportation commissioner.

Chronicle of Higher Education:
- The US may face a shortage of 24,000 doctors and almost a million nurses by 2020, as medical schools aren’t turning out enough graduates to balance expected retirements, citing a report by PricewaterhouseCoopers’ Health Research Institute.

Independent:
- Virgin Atlantic Airways will buy eight more Boeing(BA) 787 Dreamliner jets, bringing the total to 23.

Securities Times:
- China should let the yuan trade in a more unpredictable and volatile fashion to fight speculators’ bets that the currency will keep rising, citing a report by government economists.

Xinhua News:
- China’s Internet users may increase spending 32% in 2007 to $48 billion, citing a report by the China Internet Network Information Center.

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Weekend Headlines
Bloomberg:
- Australia warned its nationals that there was a “very high” threat of terrorist attacks in Indonesia, including on the popular tourist resort island of Bali, and that attacks could be “imminent.”
- KBR Inc.(KBR) won a $2.85 billion contract to build Algeria’s largest liquefied natural gas plant, according to Sonatrach, the state oil company of the North African state.
- Roger Federer beat Rafael Nadal to become the first player since Bjorn Borg in 1980 to win five straight Wimbledon tennis titles.
- China’s yuan is rising at the fastest pace since the nation’s central bank abandoned its link to the dollar in 2005, and US lawmakers still aren’t satisfied.
- Boeing Co.(BA) today unveils its 787 Dreamliner at an event hosted by former television news anchor Tom Brokaw before 15,000 people and broadcast live by satellite in nine languages.
- There are an estimated 25 billion barrels of oil in the Kurdish-controlled region of Iraq and 10 billion more around the city Kirkuk.
- Japan’s machinery orders, a key indicator of corporate spending plans, rose for a second month in May, supporting the central bank’s case that interest rates need to increase.
- The yen fell to a record low against the euro and a 16-year low against the Australian dollar as signs of stronger global growth gave investors more confidence to buy higher-yielding assets with money borrowed in Japan.
- French President Nicolas Sarkozy has a message for European finance ministers and central bankers criticizing his plans to revive France’s economy: Back off.

Wall Street Journal:
- Washington state drivers now pay 36 cents in taxes for each gallon of gasoline after an increase of about 6% in the tax, the most of any in the nation, citing a survey.
- John Riccitiello, who became CEO of Electronic Arts(ERTS) in April, said video-game makers need to draw an audience beyond hard-core players.
- Intercontinental Exchange(ICE) won’t raise its bid to acquire the Chicago Board of Trade(BOT).
- Clearinghouse Faulted On Short-Selling Abuse; Finding the Naked Truth.
- As negotiations with News Corp.(NWS/A) continue, Dow Jones(DJ) is making one last push to find other possible buyers for itself, according to people familiar with the matter.

NY Times:
- Representative John Dingell, chairman of the US House Energy and Commerce Committee, said he plans to introduce a bill proposing a “carbon tax” to spur change in the use of fossil fuels.
- Sears(SHLD) Responds to Its Critics With a Call for Patience.
- Snack-food makers including PepsiCo’s(PEP) Frito-Lay and Campbell Soup’s(CPB) Pepperidge Farm are rolling out smaller, more profitable packages of chips, cookies and crackers as their popularity balloons.
- Residents on the Massachusetts island of Nantucket are seeking approval to spend at least $25 million of their own money to replenish the beach and help save 300-year-old homes from erosion.

iLounge:
- All Things iPhone: Add-Ons and Third-Party Software.

Washington Post:
- US Senate Majority Leader Harry Reid has assured Democrats who oppose the Iraq war that they will have a chance to vote on anti-war amendments when the Senate debates Defense Department spending legislation next week.
- The Federal Reserve will “probably” cut interest rates by the end of the year as the housing slump weighs on the economy, according to Bill Gross, manager of the world’s biggest bond fund.

MarketWatch.com:
- Gilead Sciences(GILD) is one of those rare companies that appears to be in a position to do some good for the world, while at the same time keep investors happy with high earnings and a strong stock performance.
- Betting on ‘bio-refineries’ to harvest new fuels. Worried that corn can’t fill up gas tanks? Make way for cellulosic ethanol.

Chicago Tribune:
- The vacancy rate for suburban office space around Chicago fell to 18.5% at the end of June from 19.6% six months ago, citing an analyst report.

Crain’s Chicago Business:
- Madison Dearborn Partners LLC CEO John Canning wants to raise $10.5 billion to create the private-equity firm’s largest fund.

Financial Times:
- AT&T(T), the largest US phone company, will offer its first municipal wireless Internet service in Riverside, California.
- Institutional Investor’s list of the top 20 rising hedge fund stars.
- The New York Mercantile Exchange(NMX) on Monday will call for it main rival in energy derivatives trading, the Intercontinental Exchange(ICE), to be brought under the full jurisdiction of federal regulators amid growing concern over light regulation in the rapidly growing over-the-counter markets.
- A Chinese city where residents recently held mass protests against a planned chemicals plant is preparing to tighten controls on the internet and force users to use their real names when posting messages on local websites.
- Hedge funds and private equity have one big thing in common. Both charge whopping fees – typically 2% of assets under management and 20% of investment profits. Otherwise, the differences are huge.
- The UK government will not soften its stance on Iran’s nuclear ambitions and may take steps to toughen sanctions on the country, according to British Foreign Secretary David Miliband.
- News Corp.(NWS/A) has set up a video-gaming league that will debut tomorrow on DIRECTV satellite television in the US, citing Eric Shanks, executive vp of DIRECTV Entertainment.

Financial Mail of Sunday:
- Virgin Media Inc.(VMED), a UK pay-television operator, was offered for sale by bankers to Comcast Corp.(CMCSA), the world’s largest cable television provider, and DirecTV Group(DTV), the largest US satellite-tv provider.

Sunday Telegraph:
- The UK will face a threat from terrorists for as long as 15 years, Admiral Sir Alan West, the minister for security, said in an interview.

Sunday Times:
- Ford Motor(F) set July 19 as a deadline for indicative bids for its Jaguar and Land Rover units in the UK.

AFP:
- The Great Wall of China and India’s Taj Mahal were named as two of the seven new wonders of the world by nearly 100 million voters taking part in a poll.

Focus:
- Volkswagen AG is considering building a US factory, citing an interview with CEO Winterkorn.

National Business Daily:
- Research In Motion(RIMM) received orders for 5,000 Blackberry e-mail phones from foreign companies based in China.

People’s Daily:
- China’s consumer price index may reach 3% in the first six months of 2007 from a year ago.

Shanghai Daily:
- China needs “decisive” measures to rein in excessive demand and control inflation pressures as its M2 growth has understated the speed of monetary expansion, according to the latest report by Goldman Sachs(GS).

Weekend Recommendations
Barron's:
- Made positive comments on (GILD) and (ITW).
- Made negative comments on (SONO).

Citigroup:
- Reiterated Buy on (MU), (SNDK) and (CELG).

Night Trading
Asian indices are +.50% to +1.0% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated unch.

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
- (AGIL)/.03
- (AA)/.80
- (SCHN)/1.07
- (WDFC)/.46

Upcoming Splits
- (FTK) 2-for-1
- (TPL) 5-for-1

Economic Releases
3:00 pm EST
- Consumer Credit for May is estimated to rise to $7.0 billion from $2.6 billion in April.

Other Potential Market Movers
- The (TTWO) conference call could also impact trading on Monday.

Click here for The Week Ahead by Reuters.

Click here for Stocks in Focus for Monday by MarketWatch.com.

There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Consumer Credit

Tues. – Wholesale Inventories, weekly retail sales reports

Wed. – Weekly EIA energy inventory data, weekly MBA Mortgage Applications report

Thur. – Trade Balance, Initial Jobless Claims, ICSC Chain Store Sales, Monthly Budget Statement

Fri. – Import Price Index, Advance Retail Sales, Univ. of Mich. Consumer Confidence, Business Inventories

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Alcoa Inc.(AA), Schnitzer Steel(SCHN), WD-40(WDFC)

Tues. – Acuity Brands(AYI), Audiovox Corp.(VOXX), Biomet(BMET), Chattem(CHTT), Emmis Communications(EMMS), Greenbrier(GBX), Helen of Troy(HELE), Pepsi Bottling(PBG)

Wed. – AAR Corp.(AIR), Chaparral Steel(CHAP), Genentech(DNA), Resources Connection(RECN), Ruby Tuesday(RT), Wolverine World Wide(WWW), Yum! Brands(YUM)

Thur. – Fastenal(FAST), Fleetwood Enterprices(FLE), M&T Bank(MTB), Marriott(MAR), Progressive Corp.(PGR), Texas Industries(TXI)

Fri. – General Electric(GE)

Other events that have market-moving potential this week include:

Mon. – (TTWO) Conference Call

Tue. – CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference, Roth Capital Semi Conference, Kaufman Defense Technology Conference

Wed. – The Fed’s Plosser speaking, (LIZ) analyst meeting, (MSFT) financial analyst briefing, CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference

Thur. – The Fed’s Yellen speaking, (MU) analyst conference, Pacific Growth Cardiology Conference, CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference, BMO Capital Media/Comm/Tech Conference

Fri. – None of note