Tuesday Watch

Late-Night Headlines
Bloomberg:
- Brazil's growth in consumer spending will slow more than the country's gross domestic product as interest rates rise, hurting sales of everything from automobiles to shoes, Itau Corretora de Valores SA said. ``Personal consumption could fall at twice the rate of GDP between 2008 and 2009, which could lead to a greater deceleration in sales than envisioned,'' Itau analyst Ricardo Fernandez wrote in a note to clients.
- Wheat from Australia, forecast to be the world's third-largest shipper of the grain, is expected to return to the global market in 2008 after two years of drought, helping to ease prices, Malayan Flour Mills Bhd. said. Wheat output in Australia is forecast to rebound to 23.7 million metric tons this harvest, from last year's drought-reduced crop of about 13 million tons. ``The current prospect of a huge crop in the northern hemisphere, as well as improved weather conditions in Australia, will lead to an overall improvement in the global wheat supply and result in lower and affordable wheat prices for both producers and consumers,'' Teh said. ``This will bring food inflation to a more reasonable level.''
- U.S. motorists, paying record prices for gasoline, drove less for a seventh consecutive month in May, pointing toward the first annual drop in road travel since 1980. Vehicle-miles traveled on all U.S. roads fell 3.7 percent in May from a year earlier, the Federal Highway Administration said in a report today. The seven-month slide is the longest streak since 1979, agency spokesman Doug Hecox said.
- Amgen Inc.(AMGN), the world's largest biotechnology company, beat analysts' estimates after sales of its top-selling anemia drugs declined less than expected. The company also raised its full-year earnings forecast. Amgen shares rose as much as 3.3 percent to $62.50 in extended trading.
- Merrill Lynch & Co.(MER) took steps to shore up its endangered credit rating by selling $8.5 billion of stock and liquidating $30.6 billion of money-losing assets at a fifth of their original value. Temasek Holdings, the Singaporean government investment fund that bought shares in Merrill last December to become the firm's biggest investor, will buy $3.4 billion of stock in the new offering, New York-based Merrill said today in a statement. Merrill will book a $2.5 billion expense related to the transaction as well as $5.7 billion of additional writedowns on collateralized debt obligations and associated hedges.
- The mixing of street drugs and alcohol with prescription medications has contributed to a fivefold increase in the number of deaths ascribed to medication errors since the 1980s, according to a study. The combination of a person taking medications at home with alcohol or street drugs, or with both, accounted for 17 percent of the fatal errors in 2004, up from 2.3 percent in 1983, according to a University of California, San Diego study that examined U.S. death certificates. The study was published today in the Archives of Internal Medicine.
- The Australian dollar fell to near its lowest in more than two weeks and the New Zealand dollar traded close to a six-month low on concern global credit-market losses will hinder growth in the South Pacific economies.

MarketWatch.com:
- Phooey to the faint-hearted. Martin Pring lists four key reasons to be optimistic today:

CNBC.com:
- The number of hedge funds registered in the Cayman Islands exceeded 10,000 in June for the first time, another indication that the hedge fund industry continues to grow despite market turmoil, Cayman authorities said Monday. At the end of June, there were 10,037 hedge funds and fund-of-hedge-funds registered in the offshore tax haven, up from 9,413 at the end of 2007, according to the Cayman Islands Monetary Authority (CIMA).
- The recent decline in oil prices is expected to continue amid fresh signs that the rapid run-up in crude prices is curbing demand, particularly in the US, analysts say.

NY Times:
- Clinton Doesn’t Seem to Be High on Obama’s List. When Senator Hillary Rodham Clinton abandoned her bid for the presidency and endorsed Senator Barack Obama in June, she made clear that she was interested in becoming his running mate, and Mr. Obama and his associates signaled respectfully that she would get full consideration. But there is mounting evidence that Mr. Obama’s interest in Mrs. Clinton for the post has faded considerably, if, in fact, she ever really was a strong contender to be on the ticket with him.
- China Taking Larger Role in World Trade Negotiations.
- For the first time, Comedy Central’s “Daily Show” with Jon Stewart and “The Colbert Report” will be broadcasting a political advertisement, one promoting Senator Barack Obama. MoveOn will spend $150,000 to run it for one week on Comedy Central and MTV, which had not accepted political advertising for more than a decade but reversed that policy a month ago. Both MTV and Comedy Central are owned by Viacom Networks(VIA/B).

MIT Tech Review:
- Boosting Cellulosic Biofuels. The Department of Energy's National Renewable Energy Laboratories(NREL) is to begin work testing a catalyst developed by Dow Chemical(DOW), the industrial giant based in Midland, MI, to see if it can be used to massively boost the production of ethanol made from biomass. The partnership will attempt ways to make ethanol biofuel from cellulosic biomass, such as waste from corn or wood, using thermochemical processes. If successful, a catalytic process could theoretically achieve production rates of 130 gallons of alcohol per ton of biomass, a significant improvement on the 60-to-80-gallon yields produced by existing biochemical fermentation plants, says Mark Jones, a technology strategy development scientist with Dow.

USA Today.com:
- Republican presidential candidate John McCain moved from being behind by 6 points among "likely" voters a month ago to a 4-point lead over Democrat Barack Obama among that group in the latest USA TODAY/Gallup Poll. The Friday-Sunday poll, mostly conducted as Obama was returning from his much-publicized overseas trip and released just this hour, shows McCain now ahead 49%-45% among voters that Gallup believes are most likely to go to the polls in November.

Lloyd’s List:
- Prospects of a fullscale container shipping slump worsened today as new figures showed that cargo volumes from Asia to northern Europe actually contracted in June as several major economies headed towards recession. Last month’s decline was the first recorded since 2001 when the industry hit rockbottom, with both freight and charter rates collapsing. Container lines have been reporting spot ocean rates of around $650 a teu, less than half the prices prevailing a year earlier when this trade corridor was booming. The problems piling up are being compounded by the huge schedule of newbuilding deliveries, with all the very largest ships on order earmarked for the Asia-Europe trades.

Portland Business Journal:
- The Oregon Energy Facility Siting Council gave its approval of the site of a wind farm billed to be the largest in the world. The Shepherd's Flat Wind Farm, which would span Gilliam and Morrow counties in north-central Oregon, is proposed to have 303 wind turbines with a peak capacity of 909 megawatts -- instantly doubling the state's current wind-generated capacity of 889 megawatts, making it one of the largest wind farms in the country.

AP:
- An al-Qaeda commander who escaped from a US prison urged Muslims in a video posted on the Internet to kill the king of Saudi Arabia for leading an interfaith conference this month. Abu Yahia al-Libi, who escaped from Afghanistan’s Bagram prison in 2005, said in the video that bringing religions together equated to renouncing Islam. “Equating Islam with other religions is a betrayal of Islam,” al-Libi said. He called for “the speedy killing of this tyrant.”

Reuters:
- About 13 percent of banks placed on a regulatory watch list historically have failed, the head of the U.S. Federal Deposit Insurance Corp said on Monday. Bair said she would be surprised if she saw another bank failure like IndyMac, or larger.
- The Financial Accounting Standards Board, under pressure from lawmakers, will reconsider its timeline for a controversial rule change that may force banks to bring trillions of dollars in off-balance sheet assets onto their books at its Wednesday meeting. FASB, which sets U.S. accounting rules, will reconsider the rule's effective date and transition provisions, according to a schedule posted on its website.

Financial Times:
- The New York Stock Exchange is responding to the sharp rise in algorithmic trading by introducing technology designed to give NYSE floor brokers the ability to trade algorithmically and more easily locate large sources of liquidity.
- Two prominent international campaign groups on Monday accused Beijing of failing to meet promises it made on human rights and the environment when it won the bidding to host the 2008 Olympic Games.
- Oil innovation after years of caution. Using Bright Water could raise the amount of oil that can be recovered from a field by up to 35 per cent.

CBC:
- Canada's housing market slumped considerably in the first six months of 2008, said the Canadian Real Estate Association on Monday. The number of residential homes sold across the country sagged by 13 per cent for the January to June period, according to figures released by the organization.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (VECO), target $22.
- Reiterated Buy on (AXL), target $11.
- Reiterated Buy on (VZ), target $42.

Night Trading
Asian Indices are -2.75% to -.50% on average.
S&P 500 futures -.04%.
NASDAQ 100 futures -.21%.

Morning Preview
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Commodity Movers
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Today in IBD
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Earnings of Note
Company/EPS Estimate
- (CL)/.94
- (ETR)/1.50
- (MAS)/.19
- (MHP)/.67
- (NOC)/1.40
- (NOV)/1.13
- (X)/3.82
- (ANR)/.53
- (AG)/.97
- (MSO)/.03
- (BEAV)/.57
- (COH)/.50
- (LEA)/.70
- (NCR)/.35
- (JAH)/.64
- (UA)/.00
- (CEPH)/1.08
- (VIA/B)/.58
- (CBG)/.41
- (ADVS)/1.0
- (LRCX)/.39
- (OMX)/.17
- (CTX)/-1.35
- (OSG)/2.76
- (ERTS)/-.33
- (MET)/1.51
- (GNW)/.56
- (BWLD)/.27

Upcoming Splits
- (ARTW) 2-for-1

Economic Releases
10:00 am EST
- Consumer Confidence for July is estimated to fall to 50.1 versus a reading of 50.4 in June.

Other Potential Market Movers
- The S&P/CaseShiller Home Price Index, weekly retail sales reports, Keefe Bruyette & Woods Community Bank Investor Conference, (BEC) investor meeting, (GCO) analyst event and (IRIS) financial analyst reception could also impact trading today.

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