Tuesday Watch

Late-Night Headlines
Bloomberg:
- Corn fell the maximum permitted by the Chicago Board of Trade and wheat dropped the most in 13 weeks after the government said US farmers planted more of both crops than previously expected.
- Hogs fell to a two-month low after a government report showed the U.S. herd on June 1 was the largest for that date since at least 1964, signaling ample supplies for pork processors.
- Venezuelan President Hugo Chavez was personally involved in covering up his nation's role in an Argentine election scandal, according to an FBI statement by a Venezuelan witness who may testify at a criminal trial in Miami.
- David Bensimon, managing director at Polar Pacific, says oil prices are ‘peaking’. (video)
- Confidence among Japan's largest manufacturers fell to a four-year low and companies expect earnings to decline for the first time since the 2001 recession.
- The Bank of Korea said inflation will accelerate to the fastest pace in a decade this year, propelled by record fuel and food prices that will also hinder household spending and business investment.

Wall Street Journal:
- Banks are increasingly turning to the credit-default “swap” market to price rainy-day loans they offer to big corporate customers.

MarketWatch.com:
- Paying back need-based federal student loans will get easier starting Tuesday as interest rates take their first dip in a series of declines that will eventually cut rates in half.

CNBC.com:
- The dramatic rise in oil prices is a bubble, famous turnaround investor Wilbur Ross told CNBC Monday, noting that there is no apparent supply problem with crude. "Remember when oil went to $70 a barrel in the so-called 'Arab Oil Crisis,' there was a shortage. There were lines at gas stations, talking about rationing. There isn't a line at any gas station anywhere in the world, so there's clearly not a physical shortage," he said. The U.S. Energy Information Administration revised down U.S. April oil demand by 863,000 barrels per day (bpd) to 19.77 million bpd — 3.9 percent below year-ago levels — as surging fuel costs erode demand in the world's top consumer.

BusinessWeek.com:
- Commodities: The Tipping Point? Some players may think the boom in energy, metals and food is rewriting the rules of investing. Don’t bet your portfolio on it. pension funds, hedge funds, and individuals began to pour money into the commodities market, first in a trickle, then in a steady stream, and now in a torrent. One favored vehicle: exchange-traded funds (ETFs) that track a broad array of commodities. According to TrimTabs Investment Research, more than $38 billion is now held in commodity ETFs, up more than 30% in the past five months.
- As appealing as it may be to hipsters, the iPhone 3G was designed with business users in mind as well. Software developers are all too happy to design applications for business. Salesforce.com (CRM) was part of Apple's(AAPL) initial software development kit launch in March. The iPhone and its applications will have "huge ramifications for how people conduct business," says Chuck Dietrich, vice-president of Salesforce Mobile. "The ability to run sophisticated applications on a handheld will change how people conduct life and business." Salesforce will have a version of its customer relationship management software available for the new iPhone, though it hasn't said when or at what price.

IBD:
- Varian Medical(VAR) Cuts Radiation Treatment Time.

USA Today.com:
- Ex-Intel head Grove: Electric transportation ‘has to be done’

EE Times:
- National Semiconductor(NSM) has entered the photovoltaic market with new technology designed to increase the overall energy output of solar electric power generating systems.

Reuters:
- JPMorgan Chase & Co (JPM) reigned supreme across global debt and equity underwriting for the last quarter.
- The Iraqi government sued dozens of companies, including oil giant Chevron Corp.(CVX), for more than $10 billion on Monday, saying they paid kickbacks to former Iraqi leader Saddam Hussein's government under the U.N. oil-for-food program.

China Securities Journal:
- China’s 2008 economic growth may slow to 10.3% from 11.9% in 2007, citing Fan Jianping, chief economist with a government research institute. Inflation is unlikely to be less than 7% this year, citing Fan.

Japan Times:
- The Group of Eight leaders will agree at their summit next week on a new initiative to expand civilian use of atomic power to curb global warming with the principles of ensuring nonproliferation, safety and nuclear security, according to a draft of a postsummit statement.

Late Buy/Sell Recommendations
Morgan Stanley:
- Rated (LEH) Overweight.
- Rated (GS) Overweight.
- Rated (TROW) Underweight.
- Rated (BEN) Overweight.

Keefe, Bruyette and Woods:
- Upgraded (CMA) to Outperform, target $32.

Night Trading
Asian Indices are -1.25% to +.25% on average.
S&P 500 futures +.30%.
NASDAQ 100 futures +.27%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
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Before the Bell CNBC Video(bottom right)
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Top 25 Stories
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Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (MSM)/.78
- (STZ)/.32
- (OSK)/1.13
- (SCHN)/1.87
- (SMSC)/.21
- (APOL)/.77

Upcoming Splits
- (PDO) 5-for-4

Economic Releases
10:00 am EST
- ISM Manufacturing for June is estimated to fall to 48.5 from 49.6 the prior month.
- ISM Prices Paid for June is estimated at 87.0 versus 87.0 the prior month.
- Construction Spending for May is estimated to fall .6% versus a .4% decline in April.

Afternoon:
- Total Vehicle Sales for June are estimated to fall to 14.0M versus 14.3M in May.

Other Potential Market Movers
- The weekly retail sales report, (TDG) analyst day and (CPB) analyst presentation could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Near Session Lows, Weighed Down by Homebuilding, Insurance, Financial, Technology Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
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Market Wrap CNBC Video(bottom right)
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GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
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In Play

Stocks Mostly Lower into Final Hour on Financial Sector Rumors

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Alternative Energy longs, Biotech longs and Software longs. I covered all of my (IWM/QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is slightly lower, sector performance is mostly positive and volume is about average. Investor anxiety is above-average. Today’s overall market action is mildly bearish. The VIX is rising .26% and remains above average at 23.50. The ISE Sentiment Index is low at 92.0 and the total put/call is above average at 1.02. Finally, the NYSE Arms has been running around average most of the day and is currently .94. The Euro Financial Sector Credit Default Swap Index is falling 5.42% today to 91.11 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is falling 1.5% today to 662.97, which is also a positive. The TED spread is falling 7.03% to 1.05. The heavily-shorted (XLF) is attempting to trim losses into the final hour despite more negative rumors regarding Lehman Brothers(LEH). One of my longs, (ILMN), is hitting another new all-time high today. The stock is up 48.4% for the year and is 116.6% higher over the last 12 months. The shares are extended again near-term, but I still see substantial upside over the intermediate-to-long-term from current levels. Nikkei futures indicate an +125 open in Japan and DAX futures indicate an +63 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, better economic data, quarter-end window dressing and bargain-hunting.

Today's Headlines

Bloomberg:
- Wheat plunged the most in 10 weeks after a government report showed US growers seeded more acres with spring crops to take advantage of prices that rallied to a record this year.
- Commodities Signal Bubble Bursting as First-Half Ends.

Wall Street Journal:
- Nearly four years after Merck & Co.(MRK) yanked the painkiller Vioxx off the market, beleaguered pharmaceutical-industry executives say they are facing a tough new regulatory climate that is altering the landscape of drug development. Over the past 16 months, Schering-Plough Corp.(SGP) CEO Fred Hassan and his top scientists have pulled the plug on two drug-development projects – one for obesity and the other for cholesterol – that had the potential to produce big sellers. And they’re considering scrapping a third.
- China’s Export Machine Threatened by Rising Costs. Orders Drop, Shops Idle in Sweater City; Losing Wal-Mart(WMT).
- The US Federal Aviation Administration gave the country’s airlines high marks for complying with maintenance standards, citing a study to be completed today. FAA inspectors found an “exceptionally high” level of compliance with the agency’s standards. Spot checks of maintenance jobs found compliance levels exceeding 99% and there were no cases of carriers deliberately trying to hide information from inspectors.

Lloyd’s List:
- New orders fro capsize commodity carriers fell 55% in the second quarter because of concern that too many vessels are being built, citing Francois Cadiou, a broker at Barry Rogliano Salles. Fifty-three such vessels were ordered in the second quarter compared with 117 a year earlier and 650 for all of last year. Orders will probably drop by half this year.

Reuters:
- Iraq will open six oil fields and two gas fields to international companies for long-term development contracts, citing the country’s Oil Minister Hussain al-Shahristani. Iraq has pre-qualified 41 US, European and Asian companies to participate in the licensing round.

Die Welt:
- The European Union plans to enable patients to seek and reclaim costs for medical treatment outside their home country, citing a confidential paper by Health Commissioner Androulla Vassiliou. Reimbursement rates in the country of residence will apply under the rules set to be approved July 2. Patients are to cover the difference if the cost of treatment is more expensive abroad.

Bear Radar

Style Underperformer:

Small-cap Value -.37%

Sector Underperformers:

Alternative Energy irlind (-1.91%), Insurance (-1.66%) and Homebuilders (-1.62%)

Stocks Falling on Unusual Volume:

MXWL, XL, WB, VLY, OSBC, MYGN, LPHI, PCLN, CRDN and DV

Stocks With Unusual Put Option Activity:

1) HMY 2) TSN 3) LLTC 4) WMB 5) AEO

Chicago Purchasing Manager Report Rises

- The Chicago Purchasing Manager report for June rose to 49.6 versus estimates of 48.0 and a reading of 49.1 in May.

BOTTOM LINE: A measure of US business activity for June unexpectedly rose, Bloomberg reported. Foreign demand for US goods continues to help buffer the manufacturing sector from a more pronounced slowdown. The trade deficit during 1Q was the lowest since 3Q 2002, which contributed .8 percentage point to overall US growth of 1.0%. The New Orders component fell to 52.0 from 56.1 in May. The Employment component of the index rose to 46.7 from 41.2 in May. The Inventory component of the index rose to 50.5 from 42.2 the prior month. The Prices Paid component fell to 85.5 from 87.5 in May. I expect the Chicago PMI to remain around current levels in July. The US dollar is rising .2% and the 10-year yield is gaining 2 basis points to 3.98% on today’s reports. The TED spread is down 11 basis points to 1.02 and the Euro Financial Sector CDS Index is falling 5.4% to 91.11, which are also positives.

Bull Radar

Style Outperformer:

Large-cap Growth (+.37%)

Sector Outperformers:

Energy (+2.27%), Road & Rail (+2.18%) and Telecom (+1.75%)

Stocks Rising on Unusual Volume:

FTE, CLF, IVN, GDP, PDO, VOD, NVS, PBR, BP, RADN, SAN, EIG, HBC, NNDS, DMRC, ILMN, AVCT, GMXR, AREX, MEND, JRCC, NVEC, RBCAA, AFAM, BOLT, FSYS, SCHN, OSIS, SMTS, CLNE, GTLS, Y, HRB, RBN and DR

Stocks With Unusual Call Option Activity:

1) HMY 2) CPN 3) MYGN 4) F 5) HK

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
Exchange Volume vs. Average
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Real-Time Intraday Quote/Chart
Dow Jones Hedge Fund Indexes

Monday Watch

Weekend Headlines
Bloomberg:
- Commodities are heading for their best first half in 35 years. The next six months may not be as rewarding because record prices for oil, copper and a dozen other raw materials may crimp consumption and encourage growth in supply. Investors also may shift away from commodities as an alternative to dollar assets as they expect the U.S. currency to rebound. (video)
- Wheat fell the most in three weeks after the International Grains Council raised its global production forecast. The world's wheat farmers will harvest 658 metric million tons in the year ending June 30, 2009, up from 608 million this year, the council said yesterday. That marked a 1.2 percent increase from the group's forecast on May 30. Stockpiles will rise 20 percent to 143 million tons, the council said.
- The Senate's top banking legislators told the Federal Reserve and Securities and Exchange Commission to hold off on enacting a deal to oversee Wall Street, concerned that regulators are proceeding without consulting Congress.
- A lunch date with billionaire investor Warren Buffett was sold to a Chinese hedge-fund manager yesterday for more than $2.1 million during an online auction, more than tripling last year's record of $650,100.
- Asian currencies, led by South Korea's won, declined this week as overseas investors increased sales of local shares following the biggest loss in U.S. stocks in almost three weeks.
- Hedge fund manager Jim Rogers told investors not to give up on Chinese shares after the country’s stock index plunged almost 50% just this year. Rogers said he hasn’t sold any of his holdings.
- European government bonds posted the biggest weekly advance in four months as sinking equity markets, surging oil prices and renewed concern over credit-market writedowns drove investors to the safest assets. Futures trading also showed investors reduced bets of further rate increases by the ECB. The implied yield on the December Euribor contract fell to 5.18 percent yesterday from 5.30 percent on June 20.
- OPEC President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar's decline and political conflicts.
- President George W. Bush called on the United Nations to impose an international arms embargo on Zimbabwe and a travel ban on officials from Robert Mugabe’s regime after a presidential run-off denounced by western leaders.
- BG Group Plc, the UK’s third-largest oil and gas producer, said global oil prices are too high to be sustained. “There is a good deal of speculative anxiety because of geopolitical effects, holding the price up,” said BG CEO Frank Chapman. Prices are up 38% this quarter, heading for the biggest three-month gain since January-March 1999, when oil traded between $11 and $17. “We’re screening projects still down as far as $30 a barrel. We think around the mid-fifties is a price that could be sustained if you take away all of the anxiety,” Chapman said.
- A near-doubling of Russia’s minimum wage starting next year will not spur inflation significantly, Prime Minister Vladimir Putin said. Russia must tackle accelerating inflation to sustain the pace of economic growth, the World Bank and the International Monetary Fund said June 2. Inflation in Russia, the world's biggest oil and gas exporter, reached an annual 15.1 percent in May, the highest level in more than five years, amid record fuel prices.
- South Korean manufacturers' confidence fell to the lowest in three years as energy and commodity costs squeeze profits amid a global economic slowdown.
- Indonesia's central bank may raise its benchmark interest rate for a third straight month to slow inflation that is forecast to reach a 21-month high in June.
- Qatari inflation is likely to stay about 13.75 percent this year as food and oil prices remain high, said central bank Governor Sheikh Abdullah Bin Saud al- Thani.

Wall Street Journal:
- Hedge Fund Ospraie Gets Physical In Bid to Fine-Tune Commodity Bets. Watching sugar prices surge this year has given Dwight Anderson fits. Though the world’s sugar supply is up, speculators have plowed money into the widely traded commodity. This has turned on its head lessons Mr. Anderson learned in two decades of investing – and has eaten into the returns of his hedge-fund firm, Ospraie Management LLC. His predicament illustrates the upside-down world of commodities these days, where the intersection of food and finance is causing clashes. Investors, farmers and regulators are hotly debating whether unprecedented speculation is driving up food prices. And with legislators pointing fingers at commodities traders, Congress is studying new curbs on agricultural investing. Now, Ospraie is looking to get a leg up. In a bid to get an inside look into what is moving commodities markets, the firm closed this week on a $2.8 billion purchase of ConAgra Foods Inc.'s commodities-trading unit. The deal makes Ospraie one of the largest U.S. operators of grain elevators, which buy grain from farmers and sell it up the food chain. "What's going on right now is about crowd psychology, not fundamentals," Arthur Samberg said. "Ospraie is doing the right thing. It will pay off over the long run." Critics contend that by owning all of these assets investors can artificially inflate prices by sitting on inventory.
- Lehman Brothers(LEH) and US credit manager Aladdin Capital are each raising $3 billion funds to back small hedge fund managers in the hope of capitalizing on the worst dislocation in the industry for a decade.

MarketWatch.com:
- California Governor Arnold Schwarzenegger said Sunday he believes his state will shake off its housing troubles by next year.
- Now’s the time to buy and hold. Investors may be seeing the "peak of negativity" in the markets these days, and that's exactly why buy-and-hold types should be on the lookout for opportunities, T. Rowe Price's chief investment officer said on Friday.
- International portfolios lag US in quarter for the first time in three years. The bruising second-quarter and first half of the year has international stock-fund managers increasingly seeking solace in the energy and commodity sectors, which are one of the only games in town right now, despite signs that these parts of the market are frothy. International funds including global-stock funds fell 2.1% in the period versus an 11.9% tumble in the first quarter, according to preliminary data through June 26 from fund-tracker Lipper Inc. That compares to a 0.60% gain and a 9.7% decline, respectively, for diversified U.S. stock funds.
- Fund manager favors Priceline(PCLN), Trimble Navigation(TRMB), Nintendo(NTDOY).
- Oil pain will be greater in Asia. The damage from $140-a-barrel oil will be much greater in developing economies like China’s and India’s than in the West. Analysts have begun to flag a worrying deterioration in government balance sheets as fuel subsidies and high oil prices lead to swelling fuel tax surcharges.

NY Times:
- Intel’s(INTC) Dominance Is Challenged by a Low-Power Upstart. Intel, might do well to be alarmed by the computer chips being designed by Qualcomm(QCOM), a maker of chips for cellphones.
- Google(GOOG) is experimenting with a new method of distributing original material on the Web, and some Hollywood film financiers are betting millions that the company will succeed.

Washington Post:
- Rising fuel prices are putting a pinch on the world's oldest profession. Nevada brothels that cater to long-haul truckers are offering gas cards and other promotions after seeing business decline as much as 25 percent from a year ago, industry officials said.

Business Week:
- GMAT Cheating Controversy Grows. The number of students caught up is now more than 6,000, and the testing company talks about who could have their scores canceled.

Computerworld:
- Talks between Apple Inc.(AAPL) and China's largest mobile provider are back on track according to reports Friday, putting the American company closer to selling the iPhone in the world's biggest market.

Oil & Gas Journal:
- Brazil will at least triple its oil reserves by exploring the new Tupi offshore area, and will use the future revenues on healthcare and education for the country, according to Brazilian President Luiz Ignacio Lula da Silva. Lula said he has changed his mind and won't seek membership for Brazil in the Organization of Petroleum Exporting Countries. "I'm under no illusion that Brazil will join OPEC," he said. "I used to be, but am no longer." Instead, Lula expressed confidence in his country's transformation into a major producer of petroleum and exporter of petroleum products.

USA Today:
- Wal-Mart(WMT) to revamp its logo.
- As CEO pay in Europe rises, so does talk of curbing it.

Forbes:
- Top 25 Best Countries for Business.
- America’s Highest-Paying Blue-Collar Jobs.

Reuters:
- Steel tycoon Lakshmi Mittal has joined the board of directors of Goldman Sachs Group(GS).

Economist.com:
- The US may drop a tariff on Brazilian ethanol. But the industry is still the victim of much misplaced criticism.

Financial Times:
- Several Asian countries are looking at spending billions of dollars on shares to support plunging stock markets in a move likely to be welcomed by global investors who fear emerging markets may be about to suffer further dramatic falls. The development follows a 13 per cent fall this year in the MSCI Asia Pacific index, which looks as though it will end the month on Monday with its worst first-half performance since 1992, when it sank by 23 per cent as the Japanese economic bubble deflated.
- Citigroup(C) is planning to overhaul its bonus system for hundreds of top managers in an effort to increase co-operation and minimize in-fighting among the disparate parts of the sprawling financial services conglomerate.

TimesOnline:
- OIL-PRODUCING nations are getting a double benefit from the soaring price of crude, according to experts. Not only are revenues booming, but their sovereign-wealth funds have been pumping money into commodity index futures, helping to boost the price. Stephen Briese, editor of Commitmentsoftraders.org, and an expert in commodity-futures trading, said there was $230 billion (£115 billion) of investment in commodity-index futures, some of which came from sovereign wealth funds. “The CFTC has abrogated its responsibility under the Commodity Exchange Act, which says it shall establish speculative-trading limits to prevent excess speculation,” he said. “Instead, it is systematically eliminating trading limits.”

Guardian:
- As we suffer, City speculators are moving in for the kill. As the credit crunch deepens and prices spiral upwards the antics of the hedge fund managers are making our lives even worse.
- Foreign sovereign wealth investors are targeting London’s hedge fund industry as they seek to boost returns on their vast savings, much of it generated from trade with the west in oil and other commodities.

Auto Motor und Sport:
- Volkswagen AG’s management board will decide where to build a US plant on July 8. Locations in Alabama and Tennessee are the frontrunners for a VW factory. The investment will total about $790 million and would allow the carmaker to begin production in 2010.

El Pais:
- Spanish Prime Minister Jose Luis Rodriguez Zapatero said the European Central Bank should take a “flexible” view of price increases because they aren’t a sign the euro-region economy is growing too quickly. He repeated criticism of ECB President Jean-Claude Trichet’s announcement that the central bank may raise rates next week. Signaling that the bank may raise interest rates ahead of time “produces disquiet,” Zapatero said. “The effect is almost as if it had been two rate increases. The US Fed has pursued a different policy, and over the medium term we will see which was correct.”

WirtschaftsWoche:
- Chancellor Angela Merkel and US Treasury Secretary Henry Paulson will discuss how to curb speculation in energy markets at a meeting in Berlin on July 1. Both governments seek to tighten regulation to increase transparency in energy markets. Merkel and Paulson will also discuss how industrialized countries can help emerging economies such as China and India reduce their energy consumption.

Business Timesonline:
- The worst of the financial crisis is over and markets should start settling from the second half of this year, the head of France’s biggest listed bank, BNP Paribas, told Italy’s La Repubblica newspaper.

International Herald Tribune:
- Pricey oil makes geothermal projects more attractive for Indonesia and the Philippines.

The Economic Times:
- Rising crude prices and inflation could impede India’s growth this year. While the economy may growth less than 8% in the short-term, it will rebound in the medium term, according to Planning Commission deputy chairman Montek Singh Ahluwalia.

Weekend Recommendations
Barron's:
- Made positive comments on (PBR), (LGCY), (NLY) and (NOK).
- Made negative comments on (MVL) and (C).

Citigroup:
- Reiterated Buy on (GOOG), target $630. Our #1 Internet Long Recommendation – Based on the results of proprietary research into GOOG’s near-/medium-/long-term outlooks and on what presents itself as a highly favorable Risk-Reward outlook we are making GOOG our #1 choice for Top Picks Live – Citi’s dynamic list of stocks to buy or sell today. Based on extensive channel checks, we believe that GOOG’s Q2 results are well on track to meet our estimates. Key channel themes include: continued marketing budget shifts to Search, continued pricing growth, and continued market share gains by Google. We believe that the 12 month outlook for the “PC Search” industry remains robust. Among the key themes: over 50% of marketers view Search as the highest ROI advertising channel. We continue to believe GOOG has significant long-term option value with mobile search and display advertising.
- Reiterated Buy on (CELG), raised estimates, target $79.

Night Trading
Asian indices are -.25% to +.50% on avg.
S&P 500 futures +.27%.
NASDAQ 100 futures +.21%.

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
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/Estimate
- (RBN)/.58
- (HRB)/2.04

Upcoming Splits
- (PDO) 5-for-4

Economic Releases
9:45 am EST
- The Chicago Purchasing Manager report for June is estimated to fall to 48.0 versus a reading of 49.1 in May.

Other Potential Market Movers
- The NAPM-Milwaukee report could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by commodity and financial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for the Weekly Economic Preview by MarketWatch.

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

Economic reports for the week include:

Mon. – Chicago Purchasing Manager, NAPM-Milwaukee

Tues. – Total Vehicle Sales, ISM Manufacturing, ISM Prices Paid, Construction Spending, weekly retail sales

Wed. – Challenger Job Cuts, ADP Employment Change, Factory Orders, weekly EIA energy inventory data report, weekly MBA Mortgage Applications report

Thur. – Change in Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, Initial Jobless Claims, ISM Non-Manufacturing Composite

Fri. – US markets closed

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

Mon. – H&R Block(HRB)

Tues. – Oshkosh Corp.(OSK), Constellation Brands(STZ), Schnitzer Steel(SCHN), Apollo Group(APOL)

Wed. – Family Dollar(FDO), Acuity Brands(AYI)

Thur. – None of note

Fri. – US markets closed

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

Mon. – None of note

Tue. – (TDG) analyst day, (CPB) analyst presentation

Wed. – None of note

Thur. – None of note

Fri. – US markets closed

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, less economic pessimism, a bounce in emerging market shares, a bounce in financial stocks, bargain-hunting and short-covering. My trading indicators are giving mostly bearish signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,278.38 -3.0%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,278.38 -3.0%
DJIA 11,346.51 -4.19%
NASDAQ 2,315.63 -3.76%
Russell 2000 698.14 -3.80%
Wilshire 5000 13,019.88 -3.13%
Russell 1000 Growth 553.92 -3.01%
Russell 1000 Value 676.23 -3.21%
Morgan Stanley Consumer 648.60 -2.93%
Morgan Stanley Cyclical 859.97 -5.42%
Morgan Stanley Technology 559.64 -3.97%
Transports 4,909.12 -5.49%
Utilities 506.99 -2.29%
MSCI Emerging Markets 135.20 -2.69 %

Sentiment/Internals
NYSE Cumulative A/D Line 47,110 -8.26%
Bloomberg New Highs-Lows Index -1099 -67.8%
Bloomberg Crude Oil % Bulls 38.0 +31.03%
CFTC Oil Large Speculative Longs 211,137 +3.6%
Total Put/Call 1.11 -13.95%
OEX Put/Call 1.0 -30.07%
ISE Sentiment 112.0 +47.37%
NYSE Arms .90 -33.82%
Volatility(VIX) 23.44 +2.49%
G7 Currency Volatility (VXY) 10.11 +2.02%
Smart Money Flow Index 8,081.35 -3.55%
AAII % Bulls 31.25 -5.25%
AAII % Bears 52.27 +14.28%

Futures Spot Prices
Crude Oil 140.21 +4.08%
Reformulated Gasoline 350.12 +2.19%
Natural Gas 13.20 +.63%
Heating Oil 390.66 +3.69%
Gold 931.30 +3.16%
Base Metals 246.92 -.38%
Copper 387.80 +1.28%
Agriculture 483.47 +3.0%

Economy
10-year US Treasury Yield 3.97% -20 basis points
10-year TIPS Spread 2.53% +3 basis points
TED Spread 1.13 +18 basis points
N. Amer. Investment Grade Credit Default Swap Index 141.57 +17.97%
Emerging Markets Credit Default Swap Index 255.43 +7.05%
Citi US Economic Surprise Index +7.50 -39.0%
Fed Fund Futures 24.7% chance of 25 hike, 75.3% chance of no move on 8/5
Iraqi 2028 Govt Bonds 72.54 -1.18%
4-Wk MA of Jobless Claims 378,300 +.6%
Average 30-year Mortgage Rate 6.45% +3 basis points
Weekly Mortgage Applications 461,300 -9.26%
Weekly Retail Sales +2.4%
Nationwide Gas $4.07/gallon -.01/gallon.
US Cooling Demand Next 7 Days 5.0% above normal
ECRI Weekly Leading Economic Index 131.70 -.68%
US Dollar Index 72.36 -.92%
Baltic Dry Index 9,599 +1.81%
CRB Index 464.40 +1.98%

Best Performing Style
Large-cap Growth -3.02%

Worst Performing Style
Small-cap Value -4.47%

Leading Sectors
Oil Service +3.21%
Energy 1.31%
Drugs +.83%
Hospitals -.65%
Medical Equipment -.80%

Lagging Sectors
I-Banks -5.60%
Wireless -6.48%
Alternative Energy -7.58%
Airlines -10.52%
Gaming -11.40%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Surging Oil, Rising Credit Market Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Gaming longs and ETF hedges. I covered some of my (IWM/QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is about average. Investor anxiety is above-average. Today’s overall market action is neutral. The VIX is falling .5% and remains above average at 23.82. The ISE Sentiment Index is below average at 116.0 and the total put/call is very high at 1.18. Finally, the NYSE Arms has been running around average most of the day and is currently .98. The Euro Financial Sector Credit Default Swap Index is rising 2.72% today to 96.58 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is rising 13.5% today to 141.57, which is also a negative. The TED spread is rising 2.91% to 1.12. I still believe given record short interest, recent steep stock declines, high investor angst, quarter-end on Monday and the market’s technically oversold state, a very sharp rally will materialize soon. The heavily shorted financials are attempting a recovery, despite more negative news. Any upside traction in this sector should light a match under the broad market. A number of market leading stocks have been trading much better today and a number of sectors are rising despite losses in the major averages. Commodity, medical, road & rail, hospital, construction, hmo, drug, biotech and defense shares are all higher for the day. Nikkei futures indicate a +5 open in Japan and DAX futures indicate an +56 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, better economic data, quarter-end window dressing and bargain-hunting.

Personal Income Surges, Spending Jumps, Core Inflation Tame, Confidence Depressed

- Personal Income for May rose 1.9% versus estimates of a .4% gain and an upwardly revised .3% increase in April.

- Personal Spending for May rose .8% versus estimates of a .7% gain and an upwardly revised .4% increase in April.

- The PCE Core for May rose .1% versus estimates of a .2% increase and a .1% gain in April.

- Final Univ. of Mich. Consumer Confidence for June was 56.4 versus estimates of 56.7 and prior estimates of 56.7.

BOTTOM LINE: US consumer spending rose more than forecast in May as tax rebates drove the biggest gain in incomes in almost three years, Bloomberg reported. This data indicates that 2Q GDP will accelerate from 1Q’s 1.0% rate. Americans used their stimulus checks to buy electronics, clothes and furniture, according to the data. Economists at Morgan Stanley estimated 2Q growth at 1.6%, up from a prior estimate of a .8% gain. Disposable income, or the money left over after taxes, surged 5.7%, the most since May 1975. The US savings rate jumped to 5%, the highest since March 1995. About $70.8 billion worth of tax rebate checks were distributed through June 20, which leaves about $37 billion left to hit. The core PCE, the Fed’s preferred gauge of inflation, rose 2.1% year-over year versus the 20-year average of 2.4% and down from 2.5% in February of last year. I expect incomes and spending to exceed estimates again for June and core inflation to remain tame. The US Dollar Index is .08% lower and the 10-year yield is declining 3 basis points on today’s reports. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 2.55%, which is around the average for the last four years. This is also still down 13 basis points from 2.68% on March 13^th.

Bull Radar

Style Outperformer:

Large-cap Growth (+.04%)

Sector Outperformers:

Oil Service (+1.11%), Energy (+.89%) and Road & Rail (+.62%)

Stocks Rising on Unusual Volume:

GRS, HMY, SWC, KWK, PDO, BBL, AGU, HES, ASMI, CYMI, DLB, ANDE, HUSA, UMBF, NUVA, WTFC, GOLD, AAUK, ASTE, ATPG, NCTY, PAAS, FSYS, BABY, SHLD, DBTK, AREX, TSCO, AZZ, ACN and NAVZ

Stocks With Unusual Call Option Activity:

1) CFC 2) AEO 3) TWX 4) GLW 5) GW

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
Exchange Volume vs. Average
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Real-Time Intraday Quote/Chart
Dow Jones Hedge Fund Indexes

Friday Watch

Late-Night Headlines
Bloomberg:
- Asian stocks fell, putting the region’s benchmark index on course for its worst first half since 1992, on concern accelerating inflation and rising fuel prices will erode economic growth and profits.
- Corporate bond sales in dollars, euros and yen by Asian companies have plunged 60% this year, as rising inflation and slowing economic growth douse credit demand.
- New Zealand's economy contracted last quarter, putting the nation on the brink of its first recession in 10 years as soaring credit costs damp domestic demand and a drought crimps exports.
- Crude oil fell in NY, retreating from the record $140.39 a barrel reached yesterday, as the US House of Representatives approved a bill aimed at curbing excessive energy-market speculation. The bill, which passed 402-19, would require the Commodity Futures Trading Commission to consider using position limits, or constraints on the size of the stake each speculative investor can own, and raising margin requirements, the amount of money required to trade. The vote came after the record was set. Prices veered 43.4 percent from the 30- day average yesterday, the highest volatility in 16 months, according to Bloomberg data. Emergency powers have been invoked four times since the CFTC was formed in 1976.
- The number of travelers over the US Fourth of July holiday will decline for the first time this decade after gasoline rose to a record, AAA said.
- Apple’s(AAPL) iPhone Retains Allure Among Early Buyers. Bradley Wilson was one of thousands who lined up to buy the iPhone the day it went on sale in June 2007. He’s ready to camp out again next month when Apple Inc.(AAPL) starts selling a faster, cheaper model.
- President Luiz Inacio Lula da Silva said Brazil will at least triple its oil reserves by exploring a new offshore area that includes the Western Hemisphere’s largest discovery since 1976.
- Federal Reserve officials are reviewing regulations that limit investment firms’ stakes in banks in an effort to channel more capital into the US banking system.
- Record oil prices are “a blessing in disguise” for Asian economies and currencies as high transport costs will coerce the region to become less reliant on exports and more on local demand, Morgan Stanley said.

Wall Street Journal:
- Carlyle Group and other private-equity firms are “ready and willing” to invest in struggling financial institutions and face regulatory hurdles, Carlyle’s Olivier Sarkozy and Randal Quarles wrote. Buyout firms have more than $400 billion to invest.
- An inquiry into drug industry pricing by the European Union investigators is expanding. Trading firms and drug wholesalers were sent questionnaires in recent weeks asking about distribution methods used by drugmakers and whether they are blocking competitors.

CNBC.com:
- An investor has sued a Greenwich hedge fund management firm, accusing its operators of siphoning off money and enriching themselves at the expense of investors. Westerly Capital sued Windmill Management LLC, manager of SageCrest hedge fund, and operators Alan and Philip Milton and Richard Weyand in Stamford Superior Court earlier this month.

BusinessWeek.com:
- ICANN, the nonprofit that oversees Net addresses, has approved an unlimited number of new suffixes in a move that could help business.

CNNMoney.com:
- Fed up with record gas prices, drivers often scapegoat big oil companies for high prices at the pump, but in a recent survey, more Americans directed their scorn towards Washington lawmakers. According to a Consumer Reports Auto Pulse Survey released Thursday, 77% of consumers said the root of high gas prices lies with the government's failure to implement an effective energy policy.

AP:
- FPL Group Inc.(FPL), the biggest US operator of wind-power facilities, plans a $2 billion wind farm in North Dakota. It would be built on 250 square miles in Oliver and Morton counties and involve some 667 wind turbines.
- A recent AP-Yahoo poll, conducted by Knowledge Networks, found only 53% of Democrats who favored Hillary Clinton for the nomination two months ago now back Barack Obama for president. 23% plan to vote for Republican John McCain, 16% are undecided, 5% plan to vote for Ralph Nader and 3% plan to vote for someone else. The poll also found that choosing Clinton as No. 2 would appear to be a wash for Obama's candidacy. Overall, 28 percent said they would be more likely to vote for the Democratic ticket if Clinton were the nominee, 25 percent said they would be more likely to vote for the Republican ticket if Clinton were the nominee, and 47 percent said it wouldn't make much difference.

Reuters:
- Inflation has firms rethinking Made in China.
- US Senate blocks Medicare bill with HMO cuts. By one vote, Senate Republicans on Thursday blocked a bill to shave billions of dollars from health plans that contract with the federal Medicare program and avert a pay cut for doctors. On a 59-40 count, mostly Democratic backers fell shy of the 60 needed to clear a procedural roadblock and move towards final congressional passage of the measure earlier approved by the House of Representatives.

Financial Times:
- Verizon Communications(VZ) has stepped up the pressure on Vodafone to sell out of Verizon Wireless, their mobile joint venture, saying that the second largest US telecom company intends to be “the hunter” in future industry consolidation.

Daily Telegraph:
- Gordon Brown has vowed to break Britain’s dependence on oil and to convert the country to a greener way of life. He promised to drive through changes aimed at replacing the old fossil fuels - coal, gas and oil - with 21st century clean and renewable technologies. An estimated £100 billion will be spent over the next 12 years converting to a low carbon economy involving a 10-fold increase in power generation from renewable sources.

Late Buy/Sell Recommendations
CSFB:
- Rated (RIMM) Underperform, target $100.
- Reiterated Outperform on (BAM), target $40.
- Rated (MOT) Underperform, target $7.50.
- Rated (QCOM) Outperform, target $60.

Night Trading
Asian Indices are -3.0% to -1.0% on average.
S&P 500 futures +.25%.
NASDAQ 100 futures +.21%.

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

Earnings of Note
Company/EPS Estimate
- (KBH)/-.94
- (AZZ)/.54
- (SCS)/.22

Upcoming Splits
- (PDO) 5-for-4

Economic Releases
8:30 am EST
- Personal Income for May is estimated to rise .4% versus a .2% gain in April.
- Personal Spending for May is estimated to rise .7% versus a .2% gain in April.
- The PCE Core for May is estimated to rise .2% versus a .1% gain in April.

10:00 am EST
- Final Univ. of Mich. Consumer Confidence for June is estimated at 56.7 versus 56.7 in May.

Other Potential Market Movers
- The UBS Global Insurance Conference and JPMorgan Global Tobacco Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by automaker and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish at Session Lows, Weighed Down by Financial, Homebuilding, Technology, Airline, Gaming Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
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GuruFocus.com
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After-hours Commentary
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In Play

Stocks Sharply Lower into Final Hour on Surge in Commodity Prices, Global Growth Concerns

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Alternative Energy longs, Computer longs and Gaming longs. I added to my (IWM/QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 50% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is falling and volume is above average. Investor anxiety is high. Today’s overall market action is very bearish. The VIX is rising 11.7% and remains above average at 23.60. The ISE Sentiment Index is low at 99.0 and the total put/call is high at 1.11. Finally, the NYSE Arms has been running very high most of the day and is currently 2.02. The Euro Financial Sector Credit Default Swap Index is rising 8.03% today to 93.93 basis points. This index is still up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. However, the North American Investment Grade Credit Default Swap Index is falling 4.2% today to 125.42, which is a positive. The TED spread is rising 6.3% to 1.08. Given record short interest, recent steep stock declines, high investor angst, quarter-end on Monday and the market’s technically oversold state, I suspect a very sharp rally will materialize sometime soon. However, the average Friday has seen the S&P 500 decline -.6% on avg. so far this year and emerging markets are likely to be weak tonight. Thus, a meaningful rally won’t likely materialize until late tomorrow or Monday. Nikkei futures indicate a -270 open in Japan and DAX futures indicate an +15 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain-hunting.