Wednesday Watch

Late-Night Headlines
Bloomberg:
- Derivative indexes based on subprime mortgages made last year have fallen too low, with investors estimating more losses than there likely will be, Wachovia Corp.(WB) analyst Glenn Schultz said.
- Major Arab allies of the US cautioned today against a rapid troop withdrawal from Iraq that could shake the region, Defense Secretary Robert Gates and Secretary of State Condoleezza Rice said in Egypt.
- Drivers in California, the most-populous US state, used less gasoline in April than the same month a year earlier as average pump prices rose, a state agency said.
- South Korea’s exports grew at the fastest pace in six months in July amid surging demand for cars, semiconductors and mobile phones.
- Rupert Murdoch’s News Corp.(NWS/A) agreed to buy Dow Jones(DJ) for $60 a share, gaining control of the Wall Street Journal and ending the Bancroft family’s 105 years of stewardship, according to two people with knowledge of the transaction.
- Bear Stearns(BSC), manager of two hedge funds that collapsed last month, halted redemptions from a third fund after a slump in credit markets prompted investors to demand their money back.
- The UN Security Council voted to create a peacekeeping mission in the Darfur region of Sudan in an attempt to end a conflict that has killed at least 200,000 people and provoked worldwide protests.
- Citigroup(C), JPMorgan Chase(JPM) and four more banks won’t back out of an agreement to finance the $32 billion takeover of TXU Corp.(TXU) if they fail to sell debt issued in the deal to investors.
- US Treasury Secretary Henry Paulson said legislation to force China to raise the value of its currency is the “wrong approach” and risks provoking a protectionist reaction from other countries.

Wall Street Journal:
- Marathon Oil(MRO) offered to purchase Western Oil Sands for $5.45 billion, which would give the Houston company a foothold in Canada’s massive heavy-oil deposits and deepen ties between the northern Alberta oil reserves and US refineries.

NY Times:
- The FCC moved cautiously Tuesday toward creating a more open national wireless broadband network, handing a partial victory to Google(GOOG), which was pushing for more competition in cellphone sevices.

Financial Times:
- The world’s biggest oil producers have boosted their search for oil and gas to one of the highest levels in two decades as prices on Tuesday neared record highs of more than $78 a barrel.

Daily Telegraph:
- Dow Chemical Co.(DOW), the largest US chemical maker, is considering bidding for Imperial Chemical Industries Plc.

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (DV) to Buy, target $40.
- The head of natural gas purchasing at a large chemical company supported our observation that industrial demand continues to decline. Recent installation of high efficiency burners is helping his company reduce natural gas consumption. Many opportunities to conserve remain and efforts are ongoing. In one example, the savings can be significant according to a leading supplier, potentially reducing natural gas use by 25-40% with the most advanced burners that use oxygen. Recently, a decline in industrial demand has shaved 1-1.5% off of natural gas consumption in the US versus a year ago. While migration of US manufacturing in the chemical and metals industries has been a significant source of demand destruction in the past, we think that conservation is likely to drive long-term demand destruction.

Night Trading
Asian Indices are -1.50% to -.75% on average.
S&P 500 futures -.77%.
NASDAQ 100 futures -.55%.

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Earnings of Note
Company/EPS Estimate
- (ASF)/.39
- (AGN)/.51
- (AT)/.71
- (APPB)/.31
- (BEC)/.75
- (BYD)/.47
- (CA)/.23
- (CI)/.88
- (CTSH)/.53
- (CSC)/.71
- (DVN)/1.47
- (DLB)/.21
- (D)/.99
- (EDS)/.25
- (ERTS)/-.35
- (GRMN)/.74
- (GIVN)/.09
- (GSF)/1.58
- (IVGN)/.76
- (JNY)/.31
- (KFT)/.47
- (LVS)/.25
- (MSO)/-.09
- (MTZ)/.23
- (MA)/1.31
- (MCO)/.69
- (NBL)/1.19
- (OII)/.71
- (OMX)/.32
- (OC)/.27
- (PH)/1.77
- (PRU)/1.72
- (Q)/.15
- (SOHU)/.18
- (SPW)/1.16
- (SBUX)/.21
- (TK)/.82
- (THQI)/-.26
- (TWX)/.20
- (RIG)/1.72
- (DIS)/.55
- (WCW)/.70

Upcoming Splits
- (SJR) 2-for-1

Economic Releases
10:00 am EST
- Pending Home Sales for June are estimated to fall .5% versus a 3.5% decline in May.
- ISM Manufacturing for July is estimated to fall to 55.3 versus a reading of 56.0 in June.
- ISM Prices Paid for July is estimated to fall to 67.0 versus 68.0 in June.
- Total Vehicle Sales for July is estimated to rise to 16.0M versus 15.6M in June.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -1,125,000 barrels. Gasoline supplies are expected to rise by 125,000 barrels. Distillate inventories are expected to rise by 1,325,000 barrels. Finally, refinery utilization is expected to rise by .3%.

Other Potential Market Movers
- The Bank of England Policy Meeting, Keefe Bruyette & Woods Community Bank Conference, Challenger Job Cuts, ADP Employment Change and weekly MBA Mortgage Applications report could also impact trading today.

BOTTOM LINE: Asian indices are lower, pressured by technology and financial stocks in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Finish at Session Lows on Credit Fears and Rise in Oil

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Stocks Mildly Lower into Final Hour on Lingering Credit Fears and Rise in Energy Prices

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Computer longs and I-Banking longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is neutral today as the advance/decline line is neutral, sector performance is mixed and volume is very heavy. My intraday gauge of investor angst is at an elevated level. LoopRumors.com is reporting that today's rumor that Apple (AAPL) is scaling back production of the iPhone is unfounded. The other rumor floating around that iPod production is being cut is also likely unfounded, according to Piper Jaffray. The Piper analyst also thinks that if an iPod production cut is occurring, it may be a sign of a new version coming, which is a positive. I continue to believe that AAPL will move much higher longer term and view any near-term pullbacks as just another buying opportunity. Heavily shorted Under Armour (UA), one of my longs, is soaring 15% to a new record high on a very positive earnings report. As I have said before, I have never seen more reckless shorting in my life. Numerous stocks with 10%+ of the float short have risen by stunning amounts over the last year. As I have said before, I think the days of throwing short darts at stocks with high P/Es and hitting a bull's-eye with little in the way of downside catalysts are over as the “growth style” continues to significantly outperform the “value style.” Weekly retail sales came in with a 2.8% gain for the second straight week. This is up from a weekly average of 0.1% gains from mid-April through mid-May and up from a 1.4% gain earlier this month. I still expect retail sales to head back above average levels this fall as energy prices fall, stocks rise, the job market remains healthy, inflation decelerates to low levels and housing fears subside. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, more economic optimism and short-covering.

Today's Headlines

Bloomberg:
- Crude oil is rising above $78 a barrel in NY, nearing a record, on historic investment fund speculation.
- American Home Mortgage Investment(AHM) said it’s unable to fund new loans and may have to liquidate assets.
- The Fed’s Poole said last week’s slump in benchmark US stock indexes was a “typical market upset.” “The market understands, I believe, that the Fed will act in due time if and when evidence accumulates that action would be appropriate,” he said.
- Democratic NY Governor Eliot Spitzer rejected a state senator’s request to appoint a special prosecutor with power to compel sworn testimony in an investigation of allegations the governor’s aides used state police to gather information on a political rival.
- The risk of owning corporate bonds fell by the most in at least three years after GMAC LLC’s mortgage unit posted improved results and Citadel Investment Group LLC bought the assets of a failed hedge fund.

Wall Street Journal:
- US Republican presidential candidate Rudy Giuliani plans to propose a tax deduction of as much as $15,000 per family to purchase health-insurance, citing Giuliani.
- Deutsche Bank AG and Commerzbank AG plan to cut most of their business ties to Iran after increased US pressure on companies to end links to the Middle Eastern nation because of its nuclear policy.
- Some investors may want to bet that pending mergers and acquisitions will be completed because some deals are being discounted on concerns that restricted financing will jeopardize the transactions.
- Bancroft family members controlling 32% of Dow Jones(DJ) favor a sale to News Corp.(NWS/A), likely giving Rupert Murdoch enough support to complete a takeover.

NY Times:
- Builders of new nuclear plants in the US may be eligible for billion of dollars in loan guarantees during the next two years under a one-sentence provision included in the energy bill recently approved by the Senate.
- Liz Claiborne(LIZ) CEO William McComb is trying to reduce the company’s dependence on department stores such as Macy’s in a strategy that may result in the company opening thousands of its own stores.

AFP:
- French President Nicolas Sarkozy outlined cuts in health-care reimbursements paid by the national welfare system during a hospital visit today in Dax, Southern France. The money saved will be shifted to fund research into cancer, Alzheimer disease, and hospice care, the president said.

Xinhua News Agency:
- North Korea cooperated with United Nations inspectors after shutting down its Yongbyon nuclear reactor, citing Adel Tolba, head of the UN monitoring team.

Personal Incomes Rise, Spending Decelerates, Inflation Tame, Purchasing Manager Declines, Consumer Confidence Surges to Cycle Highs

- Personal Income for June rose .4% versus estimates of a .5% gain and a .4% increase in May.

- Personal Spending for June rose .1% versus estimates of a .1% increase and an upwardly revised .6% increase in May.

- The PCE Core for June rose .1% versus estimates of a .2% increase and a .1% gain prior.

- The 2Q Employment Cost Index rose .9% versus estimates of a .9% gain and a .8% increase in 1Q.

- The Chicago Purchasing Manager Index for July fell to 53.4 versus estimates of 58.4 and a reading of 60.2 in June.

- Consumer Confidence rose to 112.6 in July versus estimates of 105.0 and an upwardly revised 105.3 in June.

- Construction Spending for June fell .3% versus estimates of a .2% rise and an upwardly revised 1.1% gain in May.

BOTTOM LINE: Personal spending in the US increase in June, while a gauge of inflation rose less than forecast, suggesting price pressures are easing, Bloomberg reported. While personal spending decelerated, it is rising around average rates over the last three months. As well, personal income growth continues to trend above long-term average rates. The core PCE, the Fed’s favorite inflation gauge, rose just 1.9% year-over-year. This is the smallest increase since March 2004 and within the Fed’s comfort zone of 1-2%. As I have steadfastly said over the past couple of years, I believe we have experienced a mild cyclical uptick in inflation of late, but the secular trend of disinflation remains firmly in tact.

Employment Costs in the US rose at a faster pace in the second quarter as companies spent more on employee benefits, Bloomberg said. Companies are offering better benefit packages to retain skilled employees at a time when the jobless rate has hovered near a six-year low. Strength in the job market has continued to boost consumer spending even as gas prices stay high. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

A measure of US business activity fell more than forecast in July, Bloomberg reported. The New Orders component of the index fell to 53.4 versus 65.7 the prior month. The Inventories component fell to 55.1 versus 55.9 the prior month. The Prices Paid component rose to 73.1 versus 68.1 the prior month. This gauge had been at very strong levels over the last few months. I suspect it will bounce higher next month.

Consumer confidence in the US soared to a new cycle high in July, spurred by job and income growth and lower gas prices, Bloomberg reported. The Present Conditions component of the index rose to 139.2 from 129.9 the prior month. The Expectations component for the next six months rose to 94.8 versus 88.8 the prior month. The percentage of people saying jobs are plentiful rose to 30.5%, the highest since August 2001, from 27.6% the prior month. The proportion of consumers that said jobs are hard to get fell to 18.4% from 20.5% the prior month. The proportion of Americans that think business conditions are poor is only 14.4%, down from 16.1% the prior month. Those planning to buy an automobile rose to 7.2% versus 6% of consumers the prior month. Consumers in the Central Northeast region are now the lone bastion of extreme pessimism. Confidence in the Central Northeast region came in at a depressed 76.80, notwithstanding recent stock gains, near the level seen at the major bear market lows during 2002. As I forecast early in the year, this measure of confidence reached a new cycle high. I suspect the other main gauge of consumer sentiment will hit a new cycle high this fall as energy prices falling meaningfully, inflation decelerates to low rates, interest rates remain low, housing fears subside, stocks rise further, wage growth continues to substantially outpace inflation and unemployment remains historically low.

Spending on US construction projects unexpectedly fell last month as cutbacks in residential construction surpassed gains in non-residential projects, Bloomberg said. The prior month was revised higher. Private residential construction fell .7%, the 16^th consecutive decline. Non-residential construction rose .1% and was up 14% from year-ago levels. The drag from housing has been diminishing since reaching a 25-year high of 1.3 percentage points of GDP during the third quarter of last year. I continue to believe construction will remain muted over the intermediate-term as homebuilders work down inventories.

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- Billionaire investors Nelson Peltz said he might pay as much as $41 a share for hamburger chain Wendy’s Intl.(WEN).
- Japan’s households increased spending for a sixth month in June and the jobless rate fell, suggesting consumer spending will help extend the economy’s longest postwar expansion.
- The yen fell for a second day against the euro as a rebound in US stocks gave investors confidence to buy higher-yielding assets funded by loans in Japan.
- Nicolas Sarkozy is rolling out the welcome mat for thousands of rich French people who fled one of Europe’s most onerous tax regimes. Few may heed his call.
- The US aims to reach agreements with China on food and drug safety by December as a US delegation started the first of a series of talks with the Chinese government in Beijing.
- Confidence among South Korean manufacturers for August increased for the first time in four months, suggesting companies may ramp up production and spur growth in Asia’s third-largest economy.
- MySpace.com co-founder Brad Greenspan made a new proposal to invest $600 million in cash and stock in three joint ventures with Dow Jones(DJ) and said he has received interest from five “credible” investor groups.
- Northrop Grumman Corp.(NOC) won satellite system-modification work from the US Air Force valued at as much as $2.34 billion.
- Smoking one marijuana joint has the same detrimental effects as smoking as many as five cigarettes, a study said.

Wall Street Journal:
- Marathon Asset Management LLC is starting a new fund that will buy mortgage-related assets in an effort to capitalize on problems in the sub-prime lending market. Marathon, a $9 billion hedge-fund focuses on debt markets, will start taking orders from investors for the Marathon Distressed Sub-Prime Fund in August, citing a letter sent to clients by Marathon President Bruce Richards.
- With deal-related financing markets in disarray, private-equity buyouts are being delayed around the world, giving corporate buyers an advantage over the cash-rich private-equity firms for the first time in years.
- News Corp.(NWS/A) and Dow Jones(DJ) edged closer to a final agreement on the sale of the publisher to the media giant late yesterday, as Dow Jones negotiated on an unusual deal for the company to cover advisory fees for its majority owners, the Bancrofts, in exchange for some holdout family members supporting the deal.

MarketWatch.com:
- Commentary: Why gold didn't profit more from the stock market's difficulties.

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (CE) to Buy, target $45.
- Reiterated Buy on (CBG), target $47.
- Downgraded (RSH) to Sell, target $20.
- Reiterated Buy on (WMB), target raised to $40.
- Reiterated Buy on (HUM), target $88.
- Reiterated Buy on (AXP), target $78. We believe the recent weakness in AXP’s shares, which appears driven by broader market concerns about credit is significantly overdone. We believe the macro economic environment should continue to support AXP’s above average growth and returns. Citi’s economists/strategists are sanguine about the broader economy and view the high-end consumer as a source of relative strength. We see AXP’s premium brand, products, and customers as key drivers of its premium pricing relative to its network competitors over the foreseeable future. AXP’s pricing power is supported by its rewards programs and network partnerships. We think the market’s recent valuation of AXP’s shares(15 times our 2008 EPS estimate) significantly overestimates the company’s exposure to broader market credit issues and significantly underestimates the benefits of its positioning, strategy and processing-heavy mix of business.
- Added (WB), (EMN) and (JWN) to Recommended List; Removed (JCP).

Morgan Stanley:
- Reiterated Buy on (VZ), target raised to $45.

Night Trading
Asian Indices are unch. to +1.25% on average.
S&P 500 futures +.02%.
NASDAQ 100 futures -.11%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (AG)/.52
- (AEP)/.57
- (ADP)/.36
- (AVP)/.45
- (BEAV)/.38
- (BWLD)/.22
- (CBS)/.51
- (CEPH)/1.01
- (CMG)/.45
- (COH)/.41
- (CVH)/.95
- (DBD)/.37
- (DWA)/.33
- (FSLR)/.03
- (GM)/1.10
- (GMR)/.40
- (HLT)/.33
- (IACI)/.33
- (IMCL)/.31
- (LIZ)/.24
- (MRO)/2.14
- (MAS)/.47
- (MET)/1.33
- (NCR)/.58
- (NMX)/.58
- (PPC)/.62
- (RUTH)/.24
- (SAF)/1.54
- (SGR)/-.01
- (JOE)/.16
- (UA)/.03
- (VLO)/3.75

Upcoming Splits
- (SJR) 2-for-1

Economic Releases
8:30 am EST
- Personal Income for June is estimated to rise .5% versus a .4% gain in May.
- Personal Spending for June is estimated to rise .1% versus a .5% gain in May.
- The PCE Core for June is estimated to rise .2% versus a .1% rise in May.
- The 2Q Employment Cost Index is estimated to rise .9% versus a .8% gain in 1Q.

9:45 am EST
- The Chicago Purchasing Manager Index for July is estimated to fall to 58.4 versus 60.2 in June.

10:00 am EST
- Consumer Confidence for July is estimated to rise to 105.0 versus 103.9 in June.
- Construction Spending for June is estimated to rise .2% versus a .9% gain in May.

Other Potential Market Movers
- The Keefe Bruyette & Woods Community Bank Conference, S&P/CS Home Price Composite, weekly retail sales reports and (LSI) Analyst Day could also impact trading today.

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

Stocks Finish Near Session Highs on Diminished Credit Fears, Bargain-Hunting, Short-Covering

Indices
S&P 500 1,473.91 +1.03%
DJIA 13,358.31 +.70%
NASDAQ 2,583.28 +.82%
Russell 2000 784.23 +.82%
Wilshire 5000 14,806.47 +.97%
Russell 1000 Growth 593.15 +1.08%
Russell 1000 Value 827.26 +.97%
Morgan Stanley Consumer 707.93 +.78%
Morgan Stanley Cyclical 1,046.76 +2.03%
Morgan Stanley Technology 639.23 +.89%
Transports 5,094.67 +1.10%
Utilities 478.42 +.76%
MSCI Emerging Markets 134.99 +1.49%

Sentiment/Internals
Total Put/Call 1.15 -11.54%
NYSE Arms .55 -60.02%
Volatility(VIX) 20.87 -13.65%
ISE Sentiment 133.0 +.76%

Futures Spot Prices
Crude Oil 76.69 -.43%
Reformulated Gasoline 208.56 -.77%
Natural Gas 6.54 +5.2%
Heating Oil 206.55 -.37%
Gold 676.80 +.67%
Base Metals 252.50 -.46%
Copper 358.90 +1.18%

Economy
10-year US Treasury Yield 4.80% +4 basis points
US Dollar 80.85 -.12%
CRB Index 320.99 +.43%

Leading Sectors
Alternative Energy +3.03%
Engineering & Construction +2.81%
Steel +2.08%

Lagging Sectors
Tobacco -.39%
Computer Services -.47%
Biotech -.81%

Evening Review
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In Play

Afternoon Recommendations
Piper Jaffray:
- Upgraded (VCLK) to Outperform.

Afternoon/Evening Headlines
Bloomberg:
- US stocks rebounded after the worst two-day skid since 2003 after Wall Street’s biggest securities firms, led by Citigroup(C), Goldman Sachs(GS) and Bank of America(BAC), said the sell-off made banks, homebuilders and retailers relative bargains.
- Sun Microsystems(SUNW), the world’s fourth largest maker of server computers, reported net income of $329 million, exceeding analysts’ estimates. The shares surged 9.8% in after-hours trading.
- Banks led by Bank of America(BAC) agreed to provide as much as $21 billion of debt financing to fund Blackstone Group’s(BX) leveraged buyout of Hilton Hotels(HLT), the second-largest US hotel chain.
- Treasuries declined the most in two weeks as US stocks rebounded, suggesting investors were becoming more comfortable with risk after last week’s global equity sell-off.
- CB Richard Ellis(CBG) today reported second quarter revenue increased 64.9% and raised 2007 guidance. The shares jumped 9.4% in after-hours trading.
- Ethanol in Chicago fell to a three-week low on concern there is an oversupply of the grain-based additive and as gasoline declined.
- The average US pump price for regular gasoline fell 8.2 cents to $2.88 a gallon in the week ended today, the government said.

BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, I-Banking longs, Semi longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished mildly higher, most sectors rose and volume was heavy. Measures of investor anxiety were above average into the close. Today's overall market action was bullish. Many quality growth stocks posted gains substantially above those in the major averages once again. These stocks held up much better during the sell-off and are now leading to the upside. This is significant and continues to be ignored. Cyclicals were also outperformers today as extreme economic pessimism subsided slightly. The 10-year yield rose 4 basis points, finishing near session highs, as well. Recent worries over the advance/decline line seem overdone to me. The NYSE cumulative advance/decline line isn't even below its 50-week moving average yet, which is where it has found support a couple of times over the last five years since the 100% gain in the S&P 500 began. The CBOE total put/call finished at an above average 1.15. My intraday gauge of investor angst also finished at an above-average level, despite today's gains. I still suspect we will see some gains in Asia and Europe before the open tomorrow here that could further boost U.S. stocks. It is quite telling, in my opinion, that once again insider selling was very muted last week and remains near levels more associated with market bottoms than market tops. Why aren't I-banking execs selling if they know their firms' or clients' problems will lead to a systemic crisis that will result in a negative economic event? In fact, the banking, investment and savings/loan sectors saw the greatest insider buying last week. This is a key development that is also being ignored.

Stocks Surging into Final Hour on Bargain-Hunting, Short-Covering, Diminished Credit Fears

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Medical longs, Semi longs and Retail longs. I covered my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is higher, most sectors are rising and volume is heavy. My intraday gauge of investor angst is at an above-average level. I continue to believe recent credit fears are way overdone. We have been hearing for a couple of years now that a recession was imminent as consumer spending plunged as a result of housing. Second-quarter GDP came in at a very healthy 3.4%. As well, the core PCE showed a substantial deceleration, even with $70 oil. Inflation readings are already below long-term average rates. If oil falls meaningfully from current levels, as I suspect, inflation readings will actually reach low rates. Even if stocks stabilize and begin moving higher over the coming weeks, as I expect, I do not believe the 10-year yield will move anywhere near the 5.32% seen six weeks ago as a result of the substantial deceleration in inflation I foresee. As well, GDP growth should average around 3% through year-end, which will provide a very positive backdrop for investing as earnings continue to exceed estimates. I also see the Nasdaq outperforming the other major averages as growth stocks, specifically technology growth stocks, lead the broad market substantially higher. Growth stock outperformance last week was incredible, which will likely result in more large investors increasing exposure to these types of stocks that can grow meaningfully, even if global growth slows from recent booming levels. Again today, many quality growth stocks I monitor are posting huge gains, substantially outperforming the major averages. As well, several indicators I monitor are exceeding the extreme levels seen at the March market lows. Odd-lot short-selling soared last week, easily eclipsing levels seen during the previous fear spike in March. As well, the CBOE total put/call surged near March levels, and NYSE Advancing-Declining Volume surpassed March levels last week. Finally, the Rydex Nova/Ursa Ratio and NYSE Ticks exceeded levels seen during the March lows. These are several of the indicators I follow that are around levels normally associated with meaningful market bottoms. While there could be more near-term turbulence, I still expect stocks to rise substantially from current levels as credit/housing fears subside, interest rates remain low, M&A activity surges into the fall, energy prices fall meaningfully, inflation decelerates further, consumer/investor sentiment rises, consumer spending accelerates, the U.S. dollar firms, earnings continue to exceed estimates, unemployment remains historically low, wages continue to substantially outpace inflation, and technology spending accelerates. I still expect the S&P 500 to return about 17% for the year. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, diminishing credit fears and short-covering.

Today's Headlines

Bloomberg:
- Citadel Investment Group LLC took over Sowood Capital Management’s credit holdings after the Boston-based hedge-fund manager suffered losses on corporate bonds and loans.
- Morgan Stanley’s(MS) credit rating was raised one level to AA- from A+ by S&P, which said improvements in the firm’s “competitive position” will enable it to ride out market declines.
- HSBC Holdings(HBC), the world’s fourth-largest bank and one of the first to warn of sub-prime problems, said first-half profit rose 25%, beating analysts’ estimates.
- Gasoline futures fell again before a weekly Energy Dept. supply report that may show a second consecutive inventory increase during the heart of driving season.
- Rupert Murdoch’s News Corp.(NWS/A) said it is “highly unlikely” to proceed with a $5 billion bid for Dow Jones(DJ) without more support from the publisher’s controlling Bancroft family. Dow Jones shares plunged as much as 9.1%.
- China’s government curbed bank lending for a sixth time this year to cool the economy after the fastest expansion since 1994.

Wall Street Journal:
- The US Pension Protection Act of 2006, which allows automatic enrollment of workers into 401(k) retirement plans, will greatly expand the pool of investors, Charles Schwab, CEO at Charles Schwab(SCHW) said.
- The Sierra Club notified Target Corp.(TGT), Dollar General(DG) and RC2 Corp.(RCRC) and seven other US companies they are required to file reports with the US Environmental Protection Agency over lead contamination in toys and other products from China.
- Global energy shares may not be a good place for investors seeking to weather a clampdown on credit because the industry’s profit may have peaked.
- LS9 Inc., a renewable petroleum company based in Silicon Valley, California, maintains it has developed a new way to extract energy from plant sugars.
- Goldman Sachs(GS) is boosting the size of a corporate debt fund it is starting to $20 billion take advantage of the turmoil in credit markets.
- Whirlpool Corp.(WHR) is using cardboard, Styrofoam and computers to eliminate dents, dings and scrapes that add millions to production costs annually.

Forbes.com:
- Gasoline prices could decline by 2010 amid a “potential oversupply” of oil products, even though US refining capacity will be expanded less than previously thought, according to a new report by Edinburgh, Scotland-based consultancy Wood Mackenzie LTD.

NY Post:
- NY Democratic Governor Eliot Spitzer’s administration prevented investigators from questioning two top aides in a probe of the governor’s use of state police to collect records on a political rival.

Financial News:
- World issuance of investment-grade bonds is at nearly a three-year low, citing Thomson Financial.

Economic Releases

- None of note

Links of Interest

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

Moday Watch

Weekend Headlines
Bloomberg:
- Investors are preparing to snap up shares of telephone, health-care and computer companies after last week’s $2.1 trillion global stock market rout left US equities the cheapest in 16 years.
- Schroder, ABN, Wells Load Up on Stocks in Worst Rout Since 2002.
- Barclays Plc shares may rise this week after reports that ABN Amro Holding NV’s board will withdraw its support for a bid from the UK’s third-largest bank.
- Doosan Infracore Co., South Korea's largest construction-equipment maker, said it signed an agreement to buy a unit of Ingersoll-Rand Co. for $4.9 billion to expand its overseas business.
- New York state voters say Democratic Governor Eliot Spitzer should testify under oath about how much he knew of his staff’s actions to use state police in an effort to spy on a political opponent, according to a WNBC/Marist poll.
- Iraq won its first Asian Cup soccer title by beating three-time champion Saudi Arabia 1-0 in today’s final in Indonesia.
- US Treasury Secretary Henry Paulson, rejecting claims from Congress that he’s too soft on China, said negotiations rather than sanctions have led to a faster appreciation of the yuan.
- Automakers are embracing legislation in the US House that would raise fuel-economy standards, abandoning years of resistance because of concerns they might otherwise be forced to accept even tougher measures.
- Japan’s industrial production increased in June, ending the worst manufacturing slump in almost two years and easing concern that growth in the world’s second-largest economy may falter. Higher overseas demand is driving profits at Toshiba Corp. and Toyota Motor and encouraging them to make more chips and cars.

Wall Street Journal:
- Investors wondering what to do after the past week’s stock-market turbulence shouldn’t be throwing in the towel. Fast-growing big companies could be poised to move higher in coming months.
- A rice research institute in the Philippines, which helped boost Indian crop yields beginning in the 1960s, is once again trying to develop new varieties adaptable to drought.
- The turmoil in the credit markets is beginning to wound some high-profile hedge-fund managers – but it’s prompting others to swoop in an snap up some beaten-down assets.
- Some Hard-Hit Cities See Signs of a Housing Market Turnaround.

NY Times:
- A senior member of the Bancroft family, which controls Dow Jones(DJ), has changed his mind and now supports selling the company to News Corp.(NWS/A).
- Hedge-fund firm Sowood Capital, founded by a former Harvard Management manager, is down about 10% this year after bond losses stemming from subprime mortgage turmoil.
- When it comes to making asset allocation decisions in your portfolio, it is best not to be dogmatic. That is the conclusion of a new study, which found that investors are likely to do better over the long term by resisting the advice of those who take extreme positions about how much of their portfolios should be allocated among the various assets classes.
- After years of being accused by Western nations of making only token gestures to fight fake goods and months of complaints about the safety of its exports, China is taking extraordinary steps to change its image.
- Microsoft is beset with competition from all sides, unlike any it has seen in decades, and Bill Gates, who co-founded the company 32 years ago, still intends to step away next year as planned.
- Facebook, the online social network, has stolen some of MySpace’s momentum with users and the news media. Now, it is being subjected to the same accusations that it does not do enough to keep sexual predators off its site.

TheStreet.com:
- Seven Reasons to Be Bullish Now.

MarketWatch.com:
- Despite Thursday, top market timing newsletters remain bullish.

- Duo of Google and Sprint could put AT&T in a headlock.

AP:
- Google Inc. may install by September a system to prevent copyright-infringing videos from being posted on its YouTube Web site, citing company lawyer Phillip Beck.
- EBay Inc.(EBAY) may use its “buy it now” feature even though the US Supreme Court ruled its infringed upon MercExchange’s patent, citing US District Judge Jerome Friedman.

LA Times:
- Walt Disney(DIS) dropped its plan to sell wine named after the Disney-Pixar movie “Ratatouille” at Costco Wholesale Corp.(COST) stores because of complaints from California winemakers and concerns over underage drinking, citing company spokesman Gary Foster.

CNNMoney.com:
- Is sourcing in China worth it? Businesses weigh the costs and benefits, in the wake of product recalls and bans.

Boston Globe:
- ‘Aesthetic medicine’ firms hope vanity has its price.
- Boston’s Brigham and Women’s Hospital plans to let a group of surgeons provide partial face transplants to patients with disfigured features.

NY Post:
- Tom Cruise’s United Artists movie studio and Merrill Lynch(MER) may complete a $500 million film-financing agreement by mid-August.

San Jose Mercury News:
- More than half of all babies born in California were delivered by Latina mothers in 2004 and the state could have an Hispanic majority by 2050, citing demographers and its own research.

Seattle Times:
- Microsoft Corp.(MSFT) co-founder Paul Allen is funding more documentary films, including one on climate change, adding to 20 movies financed by his production company.

Reuters:
- The technology company Google Inc.(GOOG) is the biggest gainer in Interbrand’s annual ranking of the top 100 Global Brands.(video)
- US average retail gasoline prices fell 17 cents per gallon over the past two weeks as Midwest refiners recovered from recent “difficulties” and produced more gas, an industry analyst said.

Financial Times:
- China’s steelmakers received more than $52 billion of government subsidies over the past decade, enabling them to sell products cheaper than international rivals, citing a report commissioned by the American Iron and Steel Institute.
- Carlos Ghosn, Nissan Motor’s CEO, said he will continue to seek an alliance with one of the three US domestic automakers.

Daily Telegraph:
- China and the other emerging giants have started to use their colossal reserves to buy Western companies.

The Times:
- Goldman Sachs(GS) is planning to launch a $10 billion hedge fund, which for the first time will be run by its own proprietary traders.

Spiegel:
- Deutsche Bank AG, Germany’s largest bank, will stop its business in Iran.

IMF Survey Magazine:
- Global Growth Seen at 5.2% in 2007.

Weekend Recommendations
Barron's:
- Made positive comments on (CME), (DD), (INAP), (HD), (GRMN) and (IBKR).
- Made negative comments on (REDF) and (AMZN).

Citigroup:
- Reiterated Buy on (MSFT), target $36.
- Upgraded (VECO) to Buy, target $25.

Night Trading
Asian indices are -1.0% to -.25% on average.
S&P 500 futures +.08%.
NASDAQ 100 futures 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
- (ACV)/.24
- (APC)/.77
- (ANDW)/.17
- (ADM)/.58
- (CBG)/.42
- (CNA)/1.09
- (FPL)/.80
- (HUM)/1.28
- (JAH)/.57
- (LTR)/.98
- (MNST)/.34
- (OSIP)/.27
- (PBI)/.70
- (PPS)/.04
- (RSH)/.25
- (SUNW)/.05
- (TSN)/.24
- (VZ)/.59
- (VMC)/1.46

Upcoming Splits
- (SJR) 2-for-1

Economic Releases
- None of note

Today’s Other Potential Market Movers
- None of note

BOTTOM LINE: Asian indices are lower, weighed down by automaker and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Economic Preview by MarketWatch.com.

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

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

Economic reports for the week include:

Mon. – None of note

Tues. – Personal Income, Personal Spending, PCE Deflator, 2Q Employment Cost Index, S&P/CS Composite Home Price Index, Chicago Purchasing Manager, Consumer Confidence, Construction Spending, weekly retail sales

Wed. – Weekly MBA Mortgage Applications report, weekly EIA energy inventory report, Challenger Job Cuts, ADP Employment Change, Pending Home Sales, ISM Manufacturing, ISM Prices Paid, Total Vehicle Sales

Thur. – Initial Jobless Claims, Factory Orders

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, ISM Non-Manufacturing

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

Mon. – Anadarko Petroleum(APC), Andrew Corp.(ANDW), Archer-Daniels-Midland(ADM), CB Richard Ellis(CBG), CNA Financial(CNA), Humana(HUM), Loews Corp.(LTR), Monster Worldwide(MNST), Pitney Bowes(PBI), Post Properties(PPS), RadioShack(RSH), Tyson Foods(TSN), Verizon Communications(VZ), Vulcan Materials(VMC)

Tues. – Automatic Data Processing(ADP), Avon Products(AVP), Buffalo Wild Wings(BWLD), Cephalon(CEPH), Chipotle Mexican Grill(CMG), Coach Inc.(COH), Diebold(DBD), DreamWorks(DWA), General Motors(GM), Hilton Hotels(HLT), IAC/InterActiveCorp.(IACI), ImClone Systems(IMCL), Liz Claiborne(LIZ), Marathon Oil(MRO), Masco Corp.(MAS), MetLife Inc.(MET), Nymex Holdings(NMX), Ruth’s Chris(RUTH), Safeco(SAF), Shaw Group(SGR), St. Joe(JOE), Under Armour(UA), Valero Energy(VLO), WebMD Health(WBMD), Whole Foods(WFMI)

Wed. – Administaff(ASF), Alltel Corp.(AT), Applebees(APPB), Boyd Gaming(BYD), CA Inc.(CA), Cigna(CI), Computer Sciences(CSC), Devon Energy(DVN), Dolby Labs(DLB), Dominion Resources(D), Electronic Arts(ERTS), Garmin(GRMN), Given Imaging(GIVN), GlobalSanataFe(GSF), Kraft(KFT), Martha Stewart(MSO), Mastercard(MA), OfficeMax(OMX), Prudential Financial(PRU), Starbucks(SBUX), Time Warner(TWX), Transocean(RIG), Walt Disney(DIS), Wynn Resorts(WYNN)

Thur. – Barnes Group(B), Clorox(CLX), Eastman Kodak(EK), Expedia(EXPE), Intl. Rectifier(IRF), International Paper(IP), Lear(LEA), MGM Mirage(MGM), Newmont Mining(NEM), NYSE Euronext(NYX), Rowan Cos(RDC), Starwood Hotels(HOT), Timberland(TBL)

Fri. – Armor Holdings(AH), Procter & Gamble(PG), Weyerhaeuser(WY)

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

Mon. – None of note

Tue. – Keefe, Bruyette & Woods Community Bank Investor Conference, (LSI) Analyst Day

Wed. – Keefe, Bruyette & Woods Community Bank Investor Conference, BOE Policy Meeting

Thur. – CIBC Communication Tech Conference, ThinkEquity Partners ThinkBIG Conference, BOE Policy Meeting, ECB Policy Meeting

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on better-than-expected earnings reports, mostly positive economic data, bargain-hunting, lower energy prices and short-covering. My trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,458.95 -4.90%*

Click here for What a Week by TheStreet.com.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,458.95 -4.90%
DJIA 13,265.47 -4.22%
NASDAQ 2,562.24 -4.66%
Russell 2000 777.83 -7.0%
Wilshire 5000 14,663.63 -5.14%
Russell 1000 Growth 591.22 -3.79%
Russell 1000 Value 825.97 -4.78%
Morgan Stanley Consumer 707.25 -3.19%
Morgan Stanley Cyclical 1,033.69 -6.87%
Morgan Stanley Technology 637.95 -2.33%
Transports 5,039.17 -5.98%
Utilities 474.79 -7.24%
MSCI Emerging Markets 133.14 -5.80%

Sentiment/Internals
NYSE Cumulative A/D Line 68,092 -10.50%
Bloomberg New Highs-Lows Index -1056 -340.0%
Bloomberg Crude Oil % Bulls 35.0 -3.9%
CFTC Oil Large Speculative Longs 252,944 +2.5%
Total Put/Call 1.3 +5.7%
NYSE Arms 1.37 -35.98%
Volatility(VIX) 24.17 +42.60%
ISE Sentiment 132.0 unch.
AAII % Bulls 44.2 +5.8%
AAII % Bears 36.8 +.4%

Futures Spot Prices
Crude Oil 76.96 +1.84%
Reformulated Gasoline 211.25 -2.29%
Natural Gas 6.23 -4.83%
Heating Oil 207.32 -.95%
Gold 673.0 -3.64%
Base Metals 253.66 -5.1%
Copper 354.60 -4.46%

Economy
10-year US Treasury Yield 4.76% -19 basis points
4-Wk MA of Jobless Claims 308,500 -1.3%
Average 30-year Mortgage Rate 6.69% - 4 basis points
Weekly Mortgage Applications 609.0 -3.6%
Weekly Retail Sales +2.80%
Nationwide Gas $3.92/gallon -.08/gallon
US Cooling Demand Next 7 Days 12.0% above normal
ECRI Weekly Leading Economic Index 143.70 -.14%
US Dollar Index 81.0 +.82%
CRB Index 319.61 -1.49%

Best Performing Style
Large-Cap Growth -3.79%

Worst Performing Style
Small-Cap Value -6.64%

Leading Sectors
Telecom -.67%
Computer Services -1.57%
HMOs -1.67%
Defense -1.96%
Internet -2.30%

Lagging Sectors
Papers -8.65%
Gold -9.0%
Engineering & Construction -9.2%
Homebuilders -9.7%
Coal -10.4%

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

*5-Day Change

Stocks Lower into Final Hour as Lingering Credit Worries Offset Positive Economic Data

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Medical longs and Retail longs. I added slightly to my (GILD), (UA) and (PWR) longs, covered my (IWM)/(QQQQ) hedges and took some profits in my (EEM) short today, thus leaving the Portfolio 100% net long. The overall tone of the market is negative today as the advance/decline line is lower, most sectors are declining and volume is very heavy. My intraday gauge of investor angst is at an elevated level. Money market funds saw inflows of $12.57 billion, reaching another record high of $2.54 trillion. Recent market action makes me more convinced than ever that the secular trend of disinflation is still firmly intact. It is interesting to note the Baltic Dry Index hit another new high yesterday. As well, U.S. rail carload traffic has been trending higher since bottoming in February. The gasoline crack spread is dropping another 7.5% today. It has now collapsed 72.4% from May highs. I still expect oil to start a meaningful decline over the next month, and I plan to further increase my energy short exposure over the coming weeks. I can't stress enough how important the shift is away from “value” stocks and into “growth” stocks over the last two days. It is massive, and I barely hear it mentioned. If you are in a broad array of quality growth stocks, you very well may be even over the last two days, with the broad market down meaningfully. I believe this year marks the beginning of a shift toward the “growth style” that will last for years. There are literally hundreds of growth stocks I monitor up over 1% today with the DJIA down 100. Google (GOOG), my largest long position, is 7 points higher. I still view this stock as egregiously undervalued relative to other high-quality growth stocks and its Internet peers. If the major U.S. averages are able to close around current levels or higher, I wouldn't be surprised to see a sharp rally in Asia on Sunday night and Europe Monday morning, given how oversold those indices have become. Many are even more oversold than the U.S. averages. A sharp rally overseas would likely lead to strength here in the U.S. on Monday. I plan to finish the day 100% net long. I expect US stocks to trade higher into the close from current levels on bargain-hunting, lower long-term rates, more economic optimism and short-covering.

GDP Surges Above Trend, Inflation Decelerates Meaningfully, Confidence Rises

- Advance 2Q GDP rose 3.4% versus estimates of a 3.2% gain and a .6% increase in 1Q.

- Advance 2Q Personal Consumption rose 1.3% versus estimates of a 1.5% gain and a 3.7% increase in 1Q.

- Advance 2Q GDP Price Index rose 2.7% versus estimates of a 3.4% increase and a 4.2% gain in 1Q.

- Advance 2Q Core PCE is estimated to rise 1.4% versus estimates of a 1.4% increase and a 2.4% rise in 1Q.

- Final July Univ. of Mich. Consumer Confidence came in at 90.4 versus estimates of 91.2 and a prior estimate of 92.4.

BOTTOM LINE: The US economy grew more than forecast last quarter, propelled by rising exports, commercials construction and government spending, Bloomberg said. The 3.4% gain in GDP was the best showing in more than a year. The Advance 2Q PCE Core, the Fed’s favorite gauge of inflation, rose only 1.4%, a meaningful decline from first quarter and the smallest increase in four years, even with oil in the $70s. Fed policy makers, including Bernanke, have said they prefer for the core pce to rise between 1-2%. Business Fixed Investment, which includes spending on commercial construction as well as equipment and software, rose at an 8.1% annual rate versus a 2.1% rate in 1Q. As I forecast back in March, when talk of an imminent recession was all the rage, growth came in above trend this quarter. I suspect growth will average around 3% for the remainder of the year as this quarter comes in slightly below trend and fourth quarter comes in slightly above trend. As well, inflation measures should continue to decelerate meaningfully, thus providing a very positive backdrop for stocks.

Confidence among US consumers rose in July as gasoline prices dropped from record highs and the labor market continued to show strength, Bloomberg said. The final index of confidence rose to 90.4 from 85.3 in June. The current conditions component of the index rose to 104.5 from 101.9 the prior month. The average price of a gallon of regular gas has fallen from $3.23 on May 23 to $2.92/gallon yesterday. I continue to believe both main gauges of consumer sentiment will reach new cycle highs over the intermediate-term as stocks rise further, gas prices fall meaningfully, inflation decelerates further, housing-related fears subside, wages continue to substantially outpace inflation and unemployment remains historically low.

Links of Interest

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

Friday Watch

Late-Night Headlines
Bloomberg:
- Shares of AU Optronics Corp.(AUO), Taiwan’s largest marker of liquid-crystal displays, rose after the company reported a 33-fold jump in profit, beating analysts’ estimates, after prices for computer and TV screens increased.
- One measure of the US money supply rose by $14.2 billion in the week that ended July 16, according to Federal Reserve statistics released in Washington. That left M2 growing at an annual rate of 6.2% for the past 52 weeks, above the target of 5% the Fed once set for maximum growth.
- Crocs(CROX), the maker of a colorful line of casual shoes, said second-quarter profit tripled as sales of its namesakes footwear and accessories climbed. The stock surged 15% in after-hours trading.
- Deckers Outdoor(DECK) reported second quarter sales increased 26.4%. The stock rose 9.4% in after-hours trading.
- The New York State Ethics Commission will investigate actions by Democratic Governor Eliot Spitzer’s staff to pressure state police to compile travel records on Senate Majority Leader Joseph Bruno.
- Bear Stearns(BSC) took control of debt securities held by one of its failed hedge funds to control their sale and guard against “further price declines.”
- US Treasury Secretary Henry Paulson said the decline in the subprime mortgage market reflects a reassessment of risk that doesn’t pose a threat to the economy. “I don’t think it poses any threat to the overall economy,” Paulson, a former CEO of Goldman Sachs(GS), said.
- Japan’s consumer prices declined for a fifth month, undermining the central bank’s case that inflation will take hold and interest rates need to be raised.
- Intel Corp.(INTC) broke antitrust laws by giving illegal rebates to computer makers to wrest sales away from rival Advanced Micro Devices(AMD), European regulators said.
- The yen fell from a three-month high against the US dollar on concern sliding Japanese stocks and declining consumer prices will cause the central bank to delay raising interest rates in coming months.

Wall Street Journal:
- The US government said China boosted transfers of sensitive military technology to Iran, harming efforts to pressure the Islamic Republic to abandon its nuclear program.
- The Federal Regulatory Commission accused collapsed hedge fund Amaranth Advisors LLC and two former traders of manipulating the US natural gas market early last year.
- Wireless provider Sprint Nextel Corp.(S) said it would include a range of Google Inc.’s(GOOG) Web and communications applications on its coming “WiMax” mobile devices, a boost for Sprint as it rolls out the new technology and a breakthrough for Google in the US wireless industry.

Business Week:
- Americans spend $41 billion a year on their pets, more than what they shell out for movies, video games and recorded music combined, citing research firm Packaged Facts.

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (JWN) to Buy, target $58.
- Reiterated Buy on (RTN), target $68.
- Reiterated Buy on (GT), target $45.
- Reiterated Buy on (BWA), target $100.
- Upgraded (NLY) to Buy, target $16.

Business Week:
- Shares of Starbucks Corp.(SBUX) will probably emerge from a slump after hitting bottom last month. McAdams Wright Ragen’s Dan Gelman said the stock could climb 57% to $44 in the next 12 months.

Night Trading
Asian Indices are -2.25% to -1.5% on average.
S&P 500 futures +.32%.
NASDAQ 100 futures +.12%.

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
- (AXL)/.61
- (BHI)/1.10
- (CVX)/2.28
- (CCU)/.45
- (CEG)/.73
- (FO)/1.44
- (IDXX)/.84
- (IR)/.95
- (ITT)/.90
- (MHS)/.78
- (MSTR)/1.20

Upcoming Splits
- (DIOD) 3-for-2
- (GMCR) 3-for-1

Economic Releases
8:30 am EST
- Advance 2Q GDP is estimated to rise 3.2% versus a .7% gain in 1Q.
- Advance 2Q Personal Consumption is estimated to rise 1.5% versus a 4.2% gain in 1Q.
- Advance 2Q GDP Price Index is estimated to rise 3.4% versus a 4.2% gain in 1Q.
- Advance 2Q Core PCE is estimated to rise 1.4% versus a 2.4% gain in 1Q.

10:00 am EST
- Final Univ. of Mich. Consumer Confidence for July is estimated at 91.2 versus a prior estimate of 92.4.

Other Potential Market Movers
- The Morgan Keegan Insurance Conference could also impact trading today.

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