Today's Headlines

Bloomberg:
- FedEx CEO Smith told CNBC that record-high crude oil prices will slow the “economy down to some degree.”
- AMD, the second-largest maker of chips for personal computers, said it sued larger competitor Intel, claiming it forced away dozens of potential clients.
- Citigroup hired more than 30 people including former Enron executive Vincent Kaminski at its Houston energy-trading unit to rebuild a business once offered for sale.
- PetroChina became Asia’s largest company by market value, overtaking Toyota Motor, as the Chinese oil producers’ shares rose 3.5% to a record on higher oil prices.
- Chinese automaker Chery Automobile may join Asian and European companies with US plants to compete with GM and Ford on their home turf, an entrepreneur planning to bring Chery cars to the US said.
- The Chicago Board of Trade, the second-biggest US futures market, has received “expressions of interest” in a business combination from one or more companies, as it prepares an IPO.
- US Treasury notes fell the most in more than two weeks after the Conference Board’s measure of June consumer confidence rose more than forecast.
- The US dollar is rallying against the euro as reports showed US consumer confidence at a three-year high while optimism dwindles in Germany and Italy.
- The US Senate approved legislation to revamp the nation’s energy policy by fostering more efficient use of energy and the development of renewable fuels such as ethanol.
- Crude oil is falling more than $1/bbl. on the Senate’s approval and speculation US refiners lifted output of transportation fuels, easing concern that supplies could be strained during the summer travel season.

Wall Street Journal:
- Japan’s new assertiveness has intensified the Asian nation’s rivalry with China as a younger generation of politicians calls for a stronger response to China’s nationalistic initiatives.
- US federal prosecutors have obtained the cooperation of a former stockbroker in their investigation of the way law firm Milberg Weiss Bershad & Schulman allegedly recruited plaintiffs for class-action law suits.
- China has banned distribution of the Far Eastern Economic Review’s June issue because of an essay about a historical account of the brutality of Chinese communist leader Mao Zedong.
- The US underestimates the state of its economy because of a lack of understanding about its strengths and weaknesses, David Malpass, chief economist at Bear Stearns wrote.

Washington Post:
- President Bush’s administration has taken the side of public schools in a dispute over special-education student rights and school funding priorities that the US Supreme Court will review in its next term.

Maariv:
- Direct foreign investment in Israel will probably more than triple this year to $6 billion.

Handelsblatt:
- Ninety-seven percent of German executives expect Chancellor Gerhard Schroeder to lose a planned early election this year, citing a poll by Psephos GmbH.

Les Echos:
- Goldman Sachs’ co-head of European investment banking, Yoel Zaoui, forecast that 2005 may be the best year for mergers and acquisitions in Europe since 2000.

Xinhua News Agency:
- China has more than 100 million Internet users, second only to the US.

Consumer Confidence at 3-Year High

- Consumer Confidence for June rose to 105.8 versus estimates of 104.0 and an upwardly revised reading of 103.1 in May.

BOTTOM LINE: US consumer confidence rose to a three-year high in June, spurred by an improving labor market and rising incomes. The percentage of consumers expecting their incomes to rise was the highest this year even as gas prices rose. Incomes rose 7% last month from a year earlier, more than twice the rate of inflation. The present situations component of the index increased to 120.7, the highest since September 2001. The expectations component of the index rose to 95.8 from 93.4. The percentage of consumers who expected their incomes to increase in the next six months increased to 19.4%, the highest this year. The percentage of consumers who saw jobs as “hard to get” fell to 22.6% from 24.1%. Overall, a very positive report considering energy prices are near record highs.

Links of Interest

Market Snapshot
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IBD New America
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Real-time Intraday Chart/Quote

Tuesday Watch

Late-Night Headlines
Bloomberg:
- John Walton, son of Wal-Mart Stores founder Sam Walton, died in a plane crash near Jackson Hole Airport in Wyoming today.
- CNOOC Ltd., China's third-biggest oil company, will borrow $7 billion from its state-owned parents at below-market interest rates to help finance an $18.5 billion bid for Unocal Corp.

Xinhua News:
- Flooding in southern China caused by heavy rainfall has killed 607 people and caused $3.3 billion in damage this year. Some 164 people remain missing.

Beijing Times:
- Citigroup inc. scrapped talks with China Construction Bank to take a strategic stake in the Chinese lender.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on BAC and ENH.
- Reiterated Underperform on HBAN, FHN and NFS.
- Downgraded STX to Underperform.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.10%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
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CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
APOL/.74
BE/.00
DRL/.40
EMMS/.15

Upcoming Splits
None of note

Economic Releases
10:00 am:
- Consumer Confidence for June is estimated to rise to 104.0 versus 102.2 in May.

BOTTOM LINE: Asian indices are mostly higher as oil prices pulled back from early session highs. Consumer Confidence will likely come in modestly below expectations. I expect US equities to open mixed and move modestly higher in the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Modestly Lower as Oil Closes Above $60

Indices
S&P 500 1,190.69 -.07%
DJIA 10,290.78 -.07%
NASDAQ 2,045.20 -.39%
Russell 2000 628.31 -.33%
DJ Wilshire 5000 11,822.97 -.06%
S&P Barra Growth 568.12 +.03%
S&P Barra Value 618.48 -.18%
Morgan Stanley Consumer 569.58 -.16%
Morgan Stanley Cyclical 708.53 -.53%
Morgan Stanley Technology 473.50 -.61%
Transports 3,395.84 -.45%
Utilities 382.19 +.40%
Put/Call .95 +6.74%
NYSE Arms 1.27 -8.70%
Volatility(VIX) 12.52 +2.79%
ISE Sentiment 128.00 -48.18%
US Dollar 88.45 -.37%
CRB 311.37 -.28%

Futures Spot Prices
Crude Oil 60.29 -.41%
Unleaded Gasoline 167.30 -.12%
Natural Gas 7.12 -.18%
Heating Oil 167.50 -.07%
Gold 441.20 -.11%
Base Metals 123.51 -.64%
Copper 156.20 -.06%
10-year US Treasury Yield 3.90% -.39%

Leading Sectors
Energy +1.51%
Homebuilders +1.50%
Oil Service +1.32%

Lagging Sectors
Semis -1.32%
Networking –1.51%
Airlines -3.20%

Evening Review
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Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- None of note

Banc of America:
- Upgraded RYL to Buy.

Afternoon/Evening Headlines
Bloomberg:
- Women who become sterilized form cancer treatments may still be able to get pregnant if their ovary tissues are frozen before high-dose chemotherapy, a new study suggests.
- Carlyle Group, a US-based private investor with $30 billion under management, plans to raise $1 billion in the next few months for a new Asia investment fund, said Rajeev Gupta, who will head the group’s India unit.
- Wyeth raised its estimate for 2005 earnings to $2.80 to $2.90 a share, citing revenue growth, slower-than-expected cost increases and favorable tax developments.
- Milberg Weiss Bershad & Schulman LLP, a law firm that specializes in shareholder fraud lawsuits, said it never made illegal payments to a client, a retired California lawyer, who was charged by a grand jury last week.
- IBM said the SEC started an informal probe of its disclosure about first-quarter earnings and stock-option expenses.
- Google’s shares rose above $300 after less than a year as a public company, cementing the most-used Internet search engine’s status as the world’s largest media company by market value.
- Crude oil closed above $60 a barrel for the first time on concern that Iran’s new president may limit foreign investment in the nation’s oil industry.

BOTTOM LINE: The Portfolio finished modestly higher on gains in my Homebuilding longs and Steel shorts. I did not trade in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market was modestly negative today as the advance/decline finished lower, most sectors fell and volume was light. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was mildly negative. I expect Consumer Confidence to come in slightly below estimates tomorrow. Google hit another all-time high today and remains my largest long position.