Today's Headlines

Bloomberg:

- U.S. home prices had the smallest annual drop in 10 months, signaling the free fall of property values is abating in the three-year housing slump at the center of a global recession. Prices declined 5.6 percent in May from a year earlier and rose 0.9 from April, the Federal Housing Finance Agency in Washington said today. Economists expected a 0.2 percent drop for the month, according to the median of 16 estimates in a Bloomberg survey. “We saw a rebound of home prices in some parts of the country in part because the share of distressed sales dipped,” said Thomas Lawler, a former Fannie Mae economist who’s an independent consultant in Leesburg, Virginia.

- The Treasury Department would get final authority over the $592 trillion over-the-counter derivatives market under legislation that a group of House Democrats plans to introduce. The Derivatives Trading Accountability and Disclosure Act would create an Office of Derivative Supervision within the U.S. Treasury, with the power to set rules for traders, according to a copy of the bill. The New Democrat Coalition, a group of 69 lawmakers that describes itself as moderate and pro-growth, is pushing the legislation.

- Farmers are right to be concerned that proposed legislation aimed at reversing climate change may raise their costs and make U.S. exports less competitive, Senate Agriculture Committee Chairman Tom Harkin said. “With good reason, we hear a lot of concern expressed about projected costs to consumers, farmers, ranchers and other businesses from proposed energy and global-warming legislation,” Harkin, an Iowa Democrat, said today at a hearing in Washington on the role of agriculture in climate legislation. The Farm Bureau’s president, Robert Stallman, called quick action on a bill the “height of folly” and said it will cut farm income by $5 billion a year.

- Corn fell to a seven-month low as cool, wet weather boosts yields in the U.S., the world’s biggest producer and exporter. Parts of the Midwest will get as much as 2.6 inches (6.6 centimeters) of rain in the next five days, ending two weeks of below-normal moisture, the National Weather Service said. Temperatures may average as much as 4 degrees Fahrenheit below normal through July 29, the service forecast. Crop conditions are the best in five years, the government said.

- Vietnam’s dong slumped to a record low on speculation some companies are holding onto the U.S. currency because of concern inflation will quicken. “It’s a very worrying situation when people are turning their back on the dong and trying to keep their money in other assets,” said Phan Thi Chinh, Hanoi-based deputy chief executive officer of Bank for Investment & Development of Vietnam, the second-biggest lender. “It will get worse unless the central bank takes some very strong measures.”

- Mortgage bonds guaranteed by US agency Ginnie Mae will probably swell to $1 trillion by the end of 2010 because borrowers with low down payments or credit scores can only qualify for government-insured loans, Bank of America Corp. analysts said. The Federal Housing Administration, which insures loans with down payments as low as 3.5% and has no credit-score requirements, is “the only source of funding for these leveraged borrowers,” Ankur Mehta and Ohmsatya Ravi, the NY-based analysts, wrote. Debt explicitly backed by the US through Ginnie Mae, formally known as the Government National Mortgage Association, climbed to $680 billion as of June 30 from $360 billion two years earlier.

- Crude oil fell for the first time in six days after a U.S. government report showed a smaller-than- forecast decline in inventories. Inventories along the Gulf Coast, home to the bulk of U.S. crude processors, rose 1.63 million barrels to 180.9 million, the first gain in seven weeks. Gasoline supplies climbed 813,000 barrels to 215.4 million last week, the sixth-straight gain, according to the report. Stockpiles of distillate fuel rose 1.22 million barrels to 160.5 million, the highest since January 1985.

- The S&P 500 may rally as much as 9% by August after the benchmark measure for US equities closed above 950 yesterday, according to technical analysts at UBS AG. “It’s just a matter of time before we see a new high,” Zurich-based Michael Riesner and Marc Muller wrote.

- The Federal Reserve is “embroiled” in politics and has “stretched beyond reason” its authority to make loans, said William Poole, who served as president of the St. Louis Fed from 1998 to 2008. “ I don’t think independent can mean the Fed can do whatever it wants under any circumstance,” Poole, a senior economic adviser to Palo Alto, California-based Merk Investments LLC, said in an interview today on Bloomberg Radio. “The Fed has chosen to make loans to certain firms and not others.”

- Federal Reserve Chairman Ben S. Bernanke deserves a second term because of his actions to stabilize the economy over the past year, said Democratic Senator Jack Reed, a Banking Committee member.

- Onyx Pharmaceuticals Inc.(ONXX) rose the most in more than two years after a study showed its only product Nexavar, a liver cancer drug developed by the company and Bayer AG, showed promise in fighting breast tumors. Onyx rose $7.02, or 24 percent, to $35.71 at 1:04 p.m. New York time in Nasdaq Stock Market composite trading.

- Goldman Sachs Group Inc.(GS) agreed to the U.S. Treasury’s request for $1.1 billion to redeem warrants the government received when it invested in the firm, which reported record second-quarter profit last week.

Wall Street Journal:

- House Speaker Nancy Pelosi said Wednesday that she expects the House will vote on health-care legislation next week, despite continued dissension among conservative Democrats on the measure.

- Bankrate Inc.(RATE) agreed to be taken private by private-equity firm Apax Partners for $571 million, while the company also projected second-quarter and 2009 results below analysts' expectations.

MarketWatch:
- Home-builder shares rallied early Wednesday after NVR Inc.(NVR) said its second-quarter profit fell from the year-ago period but handily topped Wall Street's consensus expectations. The iShares Dow Jones U.S. Home Construction Index Fund(ITB) , a sector exchange-traded fund, was up 3%.

- Key technical resistance levels seem to be falling one after the other, cementing investors' expectations that the market is in bullish mode, even as the summer doldrums keep enthusiasm for fresh buying on hold, analysts said. "We've already taken out some key resistance levels" that have paved the way for the S&P 500 to new highs for the year, said Peter Cardillo, market economist at Avalon Partners.

- Mortgage applications rose a seasonally adjusted 2.8% last week from the prior week, overcoming higher interest rates charged on fixed-rate home loans, according to the Mortgage Bankers Association's survey released Wednesday.

The Detroit News:

- The House overwhelmingly approved a $150 million program to research natural-gas powered vehicles. By a vote of 393-35, the House passed the bill that authorizes the Energy Department to conduct a five-year program of natural gas vehicle research, development and demonstration, authorizing $30 million annually starting in the 2010 budget year.

Detroit Free Press:

- Delphi Corp. could dump its pension for U.S. hourly workers on the federal government, the Troy-based supplier, saying it must shed its pension obligations to emerge from bankruptcy, said late Tuesday.

LA Times:

- Rental car companies, once reliable customers of the Big Three, are buying more imports than domestic models.

SeekingAlpha:

- Why Leveraged and Derivatives-Based ETFs Are Dangerous.

Forbes:

- Iraq's oil minister has met representatives of a British Petroleum-led consortium to discuss plans to develop a prized southern oil field. BP(BP) and Chinese consortium partner CNPC walked away from an international oil auction on June 30 with development rights for the 17.8 billion barrel Rumaila field. Their win came after they agreed to take less money for the oil then they had first asked for. According to the ministry, the field's development plan should be submitted in July and the final contract should be signed in August. Last month's auction was Iraq's first international oil licensing round in over three decades.

- The Michigan Democratic Party is considering asking voters to raise the state's minimum wage to $10 an hour. The minimum wage currently is $7.40 an hour.

Rassmussen:

- The health care reform legislation working its way through Congress has lost support over the past month. The latest Rasmussen Reports national telephone survey shows that 44% of U.S. voters are at least somewhat in favor of the reform effort while 53% are at least somewhat opposed. Today’s 44% level of support is down from 46% two weeks ago, and 50% in late June. Opposition has grown from 45% in late June to 49% two weeks ago and 53% today.

- The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 29% of the nation's voters now Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-five percent (35%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -6 (see trends).

Politico:

- A coalition of anti-abortion groups is set to open a new front against Democrats’ efforts to restructure American health care, claiming the plans open a back door to publicly financed abortions. The groups, which are launching a broad campaign on the issue this week, claim that existing health care proposals constitute a stealth “abortion mandate” that will spend taxpayer money on abortions and require insurance companies to cover abortions.

EETimes:

- Despite ongoing supply bottlenecks, vendors for large LCD panels still sell below manufacturers costs, reckons iSuppli. However, the market researcher expects an impressive recovery during the second half of the current year. The market for LCD panels with a diagonal dimension of 25cm and more has shrunk over nine consecutive months. In the second quarter, the trend reversed: Sales climbed 41.4 percent over the first quarter. Already during the first quarter, low inventories and significantly reduced production rates caused tight support.

SiliconValleyBusinessJournal:

- Reports on Tuesday indicated that Apple Inc.(AAPL) and Verizon Wireless(VZ) may team up on a non-cellphone device - perhaps the tablet that the computer company has been rumored to be developing. TheStreet.com reported that Verizon would subsidize the cost of Apple's version of the stripped-down computers that other companies have been offering for around $300. Meanwhile, UBS Securities analyst Maynard Um suggested in a note on Tuesday that Apple and Verizon could introduce a non-cellphone device this year.

Reuters:
- Federal Reserve Chairman Ben Bernanke on Wednesday fought hard to protect the independence of the U.S. central bank and keep responsibility for consumer protection on financial products in its hands. In a second day of testimony on the Fed's semiannual monetary policy report, Bernanke told the Senate Banking Committee that the U.S. central bank wants to shield monetary policy from political interference, but understands the need to be accountable to taxpayers.

- Three of the world's biggest drugmakers posted better-than-expected quarterly earnings on Wednesday and gave bullish forecasts for the rest of the year, demonstrating the industry's resilience in the weak economy.

- Fortress Investment Group (FIG), which on Sunday named Daniel Mudd as its new chief executive, will pay the former Fannie Mae chief a $1.9 million bonus for the final four-and-a-half months of this year. Mudd, pushed out when the U.S. government nationalized nearly all of Fannie Mae last year, was named CEO to allow Wesley Edens and other top officers to focus more on their hedge fund and private equity investments.

ChinaDaily:

- Controversial Internet filter Green Dam will be included with some PC packages sold in China, despite a decision to delay the software's launch. "The Green Dam porn filter will be included in all PCs participating in our August promotion, which targets students and their parents," said Wu Shaodong, an Acer sales representative in Beijing.

Bear Radar

Style Underperformer:
Large-cap Growth (-.07%)

Sector Underperformers:
Coal (-2.20%), Oil Service (-1.26%) and Hospitals (-1.09%)

Stocks Falling on Unusual Volume:
CFR, QLGC, POR, PVA, NBR, ICLR, PPDI, GENZ, FUQI, ALGT, STJ, TNB, NCI, ATI, YPF, CVD and CRL

Stocks With Unusual Put Option Activity:
1) GENZ 2) UPL 3) ATI 4) SBUX 5) NE

Bull Radar

Style Outperformer:
Small-cap Growth (+.69%)

Sector Outperformers:
Homebuilders (+3.63%), Restaurants (+2.59%) and Semis (+1.70%)

Stocks Rising on Unusual Volume:
ATHR, LLTC, SNP, PFE, TI, AAPL, AMX, WYE, USB, NXY, PAA, ONXX, SBUX, SPAR, GNTX, CHIC, SHPGY, WINN, ILMN, OSTK, LULU, LLTC, ADSK, CYOU, STX, MKSI, CHRW, AAPL, DMND, PWRD, CSL, OFG and PTV

Stocks With Unusual Call Option Activity:
1) JNPR 2) SBUX 3) GENZ 4) BBY 5) ATHR

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:

- Credit Suisse Group AG advised investors to trim their holdings in government bonds and buy equities, reversing a recommendation from June. Credit Suisse raised its estimate for the Standard & Poor’s 500 Index by 14 percent to 1,050 by the end of the year, citing improving economic indicators and earnings. Investors should increase holdings of global equities to “overweight” and reduce government bonds to “benchmark,” according to London-based global strategist Andrew Garthwaite. The VIX and investment-grade corporate bond spreads have returned to more “normal levels” and this will allow money market funds to buy into the stock market, Garthwaite told clients in a note today.

- Caterpillar Inc., Merck & Co. and DuPont Co. were among companies reporting earnings that beat analysts’ estimates by cutting jobs while projecting rising demand. The surprises may signal the recession is near its end. About 77 percent of the 94 Standard & Poor’s 500 companies reporting results beat earnings projections for the second quarter, pushing the index toward the highest proportion of positive surprises for any quarter in Bloomberg data stretching back to 1993.

- U.S. regulators say they may curb wheat-price speculation by ending exemptions on limits to holdings of futures contracts, after prices surged to a record last year. The Commodity Futures Trading Commission is “looking very closely” at phasing out waivers that allow index traders to exceed position limits, Chairman Gary Gensler told the Senate Subcommittee on Investigations today in a hearing in Washington. The CFTC wants to curb gaps between cash prices and futures that made it difficult for farmers to manage risk, he said. The CFTC, along with the Securities and Exchange Commission and the Federal Reserve, is also considering new regulations for the $592 trillion derivatives market. Gensler said position limits for commodities will make new rules more necessary so that traders won’t evade restrictions by migrating toward unregulated, over-the-counter transactions. The CFTC today scheduled hearings on July 28, July 29 and Aug. 5 to discuss energy position limits and exemptions. the sheer size of some funds makes their impact inevitable, said Steve Nicholson, a commodity procurement specialist for International Food Products Corp. in St. Louis. “The commodity markets were never built to take on the trading volume or money influx that the hedge and index funds have put into these markets,” he said at the hearing.

- Oil for September delivery in New York fell for the first time in six days after an industry report showed an increase in crude supplies in the U.S., the world’s largest energy user. Stockpiles rose 3.1 million barrels to 349.9 million last week, the first increase since April, the industry-funded American Petroleum Institute reported yesterday. “It is going to be difficult for oil to forge higher if we continue to get indications of weak fundamentals,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. If the API report is “any indication of how the DOE numbers are going to come in tonight, it’s a pretty bearish picture,” he said.

- Standard & Poor’s backtracked on ratings cuts issued last week and raised the ranking on commercial mortgage-backed debt from three bonds sold in 2007. The securities, restored to top-ranked status, had been downgraded as recently as last week, making them ineligible for the Federal Reserve’s Term Asset-Backed Securities Loan Facility to jumpstart lending.

- European Union Ambassador John Bruton said a provision in a U.S. climate-change bill that passed the House of Representatives last month would discriminate against foreign automakers, violating a pledge the Obama administration made at financial summits this year. The bill would provide financial assistance to develop and produce electric vehicles in the U.S., and the Senate should change that provision, Bruton said in a statement today. “Limiting financial assistance to American producers rather than allocating the resources to the best and most competitive manufacturers is both protectionist and wasteful,” Bruton said.

- Global investors give Federal Reserve Chairman Ben S. Bernanke top marks for combating the worst financial crisis since the Great Depression and overwhelmingly favor his reappointment amid optimism that the world economy is on the mend. Sixty-one percent of investors surveyed in the first Quarterly Bloomberg Global Poll say the world economy is stable or improving and almost 75 percent take a favorable view of the 55-year-old chairman. By almost a three-to-one margin, they say Bernanke has earned another four-year term when his current one expires in January.

- The U.K.’s house-price slump will persist until 2012 and hurt consumer spending, the National Institute of Economic and Social Research said. Home values will resume their decline because recent gains were driven by a lack of available homes and the number of mortgages remains 65 percent lower than before the financial crisis, the London-based institute said today. It also predicts gross domestic product will keep falling until the final quarter of this year.

- China’s investors opened the most accounts to trade stocks in 18 months, lured by the world’s second-best performing benchmark index and a rebound in the nation’s economic growth. Investors opened 484,799 new stock accounts last week, the most since the five days ended Jan. 25, 2008, data from the nation’s clearing house showed today. “The prospect of making quick bucks in the stock market is luring retail investors,” Liu Xiangning, a Shenzhen-based strategist at United Securities Co., said by telephone.

Wall Street Journal:

- Iraqi Prime Minister Nouri al-Maliki, reluctantly thrust three years ago into a job few expected him to hold onto, arrives in Washington this week as a transformed leader -- with widening popularity among Iraqis, grudging respect of some political foes and a more even footing with his U.S. hosts. The quiet former Arabic-literature scholar has demonstrated surprising resilience, establishing himself as Iraq's first national leader since Saddam Hussein. His three years of consistent leadership, a prospect that initially seemed remote, augurs more stability for Iraq as U.S. involvement diminishes.

- Democratic centrists said they won a tentative commitment from the White House to back a proposal to curb the growth of Medicare costs, as party leaders girded for a vote next week on health-care legislation. House Speaker Nancy Pelosi (D., Calif.) said her chamber remains on track to take up the legislation. She told rank-and-file Democrats at a midday meeting Tuesday that "this is the biggest thing we will do in our lives," according to people who took part. Ms. Pelosi is facing resistance from centrist lawmakers who say health-care legislation already passed by two House committees and under consideration by a third doesn't go far enough to contain costs.

- How to Make Health-Care Reform Bipartisan by Bobby Jindal.

- Shopping center giant Developers Diversified Realty Corp. is working on raising $600 million through two bond sales that promise to be a litmus test for one of the government's key economic rescue programs. Those deals are on track to be the first major offerings of commercial-mortgage-backed securities that will take advantage of the Term Asset-Backed Securities Loan Facility, or TALF, program.

- Procter & Gamble Co.(PG) is getting closer to a possible sale of its prescription-drug business, and several parties, including specialty drug maker Warner Chilcott Ltd., and private-equity firm Cerberus Capital Management LP, are engaged in later-stage discussions, according to people familiar with the matter. The unit could fetch about $3 billion, these people say.

- Authorities in Africa and Europe opened separate investigations into allegations of wrongdoing involving a company connected to Chinese President Hu Jintao's son, a potentially embarrassing development for the leadership in Beijing. Officials in Namibia are investigating corruption allegations in a deal involving state-owned Chinese company Nuctech Co. President Hu's son, Hu Haifeng, is a former president of Nuctech. He is now the Communist Party secretary of its parent company, Tsinghua Holdings Co., according to the parent company's Web site.

- Smart homes are an idea as old as the Jetsons. But some big companies are betting that the reality will soon catch up to the vision. Cisco Systems Inc., Comcast Corp., General Electric Co. and ADT Security Services are joining investors in a $23 million funding round for iControl Networks Inc., a start-up whose software allows customers to control a home's lights, thermostat and security system via the Web. Other start-ups are also vying to supply software to monitor and manage such technology, which could be a $5 billion a year market by 2011, according to research firm Parks Associates.

- The tally of credit derivatives worldwide rose to $26.6 trillion in the week ended July 17, up from $26.44 trillion a week earlier, according to data published Tuesday by the Depository Trust and Clearing Corp. When the DTCC began publishing its records at the end of October, the value of outstanding contracts was $33.56 trillion.

CNBC.com:
- Apple(AAPL) Conference Call Live Blog.

- Calpers, the largest U.S. pension fund, said on Tuesday it suffered a record 23.4 percent drop in the value of its assets in the last year.

- Starbucks(SBUX) posted quarterly earnings Tuesday that handily topped analysts' estimates as the world's biggest coffee chain began reaping rewards from slashing costs and closing stores, sending its shares higher in extended trading.

- As Congress spent much of the last three months looking at ways to tighten regulations on financial institutions, some of the biggest recipients of the government's $700 billion bailout increased their spending on influencing legislators. "While these companies continue to count their taxpayer cash, they're using their lobbying against critical financial reform," said Ed Mierzwinski, consumer program director at Public Interest Research Group. "Anywhere but Washington, you would think this was the Saturday morning cartoons."

NY Times:

- The leader of President Obama’s automotive task force warned members of Congress on Tuesday that reversing or stopping the closing of thousands of General Motors and Chrysler dealerships could threaten the automakers’ turnarounds and keep them from repaying billions in government loans. The official, Ron Bloom, also said the government no longer needed to guarantee the warranties on G.M. and Chrysler vehicles, now that the companies had emerged from bankruptcy protection.

Business Week:
- As tech titan IBM(IBM) raises its earnings expectations, analysts approve of its efforts to jettison lower-margin units in pursuit of more profitable software and services.

CNNMoney.com:

- Real estate appraisers are the latest villains in the continuing saga of the bursting of the real estate bubble. Industry groups including the National Association of Realtors and the National Association of Home Builders are howling that new appraisal guidelines that went into effect on May 1 are producing below-market appraisals that are killing sales and adding yet another tough hurdle to refinancing.

Rasmussen:

- Support for Republican congressional candidates has reached its highest level in over two years as the GOP lengthens its lead over Democrats in the latest edition of the Generic Ballot. A new Rasmussen Reports national telephone survey shows that 42% would vote for their district’s Republican congressional candidate while 38% would opt for the Democratic candidate.

LA Times:

- Ghostbusters, the game, has outpaced its blockbuster-movie-cum-game rivals. The title sold 440,000 copies in June, the month it released, according to a post in The Times' Company Town. Transformers: Revenge of the Fallen sold 296,000 copies, and THQ's Up, based on the Pixar Animation Studios film, sold 270,000.

The Washington Post:

- Immigration analysts urged Congress on Tuesday to carefully weigh a leading Democratic senator's plan to require all U.S. workers to verify their identity using fingerprints or digital photos, saying such an effort faces technological and political obstacles. The warnings came as Sen. Charles E. Schumer (D-N.Y.), chairman of the Senate Judiciary Committee's subcommittee on immigration, used a panel hearing to reveal new details of his proposal, which he said must be part of any broader immigration overhaul.

USA Today.com:

- The big squeeze on small-business financing continues, despite the overall loosening of U.S. Small Business Administration-backed loans in recent months, two new studies show. Nearly four in 10 small-business owners polled in the past few weeks said they are not able to get the financing they need to run their firms, according to a study Wednesday from the National Small Business Association. That's up from a third in December 2008.

Reuters:

- Apple Inc's(AAPL) quarterly profit blew past Wall Street forecasts thanks to strong sales of Macs and iPhones and higher-than-expected gross margins, boosting its shares 4 percent on Tuesday. The company continued to defy the global recession with a solid 13 percent jump in fiscal third-quarter net profit. It sold more than seven times as many iPhones -- 5.2 million units of its latest signature device -- as the year-ago period. "The numbers are great. Their gross profits continue to surprise people and there is a return to product momentum ... a return to growth in the Mac business," said Andy Hargreaves, an analyst at Pacific Crest Securities. "And then the iPhone is doing tremendously well and that is a potent combination." Sales of Macs and iPhones both beat analysts' expectations, helped by product refreshes and lower prices, while iPod shipments were toward the low end of forecasts. Apple said it sold 2.6 million Macs, up 4 percent from a year ago, and 5.2 million iPhones in the June quarter, during which the company launched its third-generation iPhone 3GS and cut the price on the second-generation model to $99. The iPhone is often thought of as more of a consumer device, but Apple said nearly 20 percent of Fortune 100 companies have bought at least 10,000 units and it is unable to make enough iPhone 3GSes to meet demand -- a shortfall the company said it is working to address. Although the smartphone segment continues to grow more crowded with competitors, Chief Operating Officer Tim Cook said on a conference call the company is "years ahead of other people" in its competitive position. Apple posted a gross margin of 36.3 percent, above the 34 percent some analysts predicted. That compared with 36.4 percent in the last quarter and 34.8 percent a year ago. The company saw margins at 34 percent in the September quarter. Cash and marketable securities totaled more than $31 billion, one of the biggest cash hoards in all of technology. The results demonstrated the consumer appeal of Apple's products despite a troubled economy that has dented sales at competitors selling less expensive products. Apple reported relative strength in consumer demand, and weakness in education, one of its key markets. Cook said the company hoped to have an iPhone in China within a year. Chief Executive Steve Jobs did not make an appearance on the company's conference call, despite rumors that he might.

- Gambling on volatile small-cap biotechnology companies can be gut wrenching even in the best of times, but wild stock jumps based on positive clinical data may tempt investors to give them a second look with the hope of catching that really big payoff. Human Genome Sciences Inc (HGSI) this week provided the latest golden carrot that investors may follow back into the sector. Positive data on its experimental lupus drug that caught Wall Street by surprise led its shares to nearly quadruple to $12.51 on Monday. The stock was up another 14 percent on Tuesday as others jumped on the bandwagon.

- Hard drive maker Seagate Technology (STX) raised its forecasts for margins and overall industry sales in the current quarter, citing a larger-than-expected increase in corporate demand for computers, and its shares rose 4 percent.

- Industry in Central and Eastern Europe has been hammered by a fall in orders because of the global economic downturn, reversing years of strong growth and causing big cuts in jobs. The following are examples of major layoffs in the region's countries, with developments in unemployment.

Financial Times:

- It may be the worst crisis in Petrobras’s(PBR) history, says the company’s president, and it comes as Brazil’s state-owned oil group is ratcheting up development of the country’s potentially vast deep-water oilfields. Last week, members were selected for a Brazilian parliamentary investigation committee (CPI) into allegations of fraud, corruption, over-invoicing and tax avoidance by the company. The inquiry, which begins hearings next month, risks complicating the Brazilian government’s efforts to set eagerly awaited new regulations to cover some of the world’s few big, unexploited oil reserves, which some analysts say place Brazil on the cusp of a new oil boom. The allegations against Petrobras and the ANP – the government regulatory body for petroleum and gas – include fraud in bidding to repair oil exploration rigs, serious contract irregularities in construction, over-invoicing in building the Abreu e Lima refinery in Pernambuco, diversion of royalties, a disputed tax bill of R$4.3bn ($2.3bn) and budget irregularities. “Petrobras is a political apparatus of President Lula,” says Álvaro Dias, the opposition senator who has brought the inquiry. “We want to investigate, reveal the facts, and punish those responsible.”

- Credit rating agencies would face a raft of new disclosure rules and restrictions but would not be forced to overhaul their business models under proposed US legislation sent to Congress on Tuesday. The plan by the US Treasury is aimed at reducing conflicts of interest at rating agencies, boosting the regulatory authority of the US Securities and Exchange Commission over the agencies and reducing the financial system’s reliance on credit ratings. But critics said the plan, an element of the Obama administration’s broader financial regulatory blueprint, fell far short of what was needed. The proponents of an overhaul of ratings agencies charge that they overlooked the risks of investing in complex, “structured” securities linked to risky mortgages, many of which carried triple A stamps of approval.

Commercial Times:

- Intel Corp.(INTC) will lower the prices of its processors by between 11% and 19 this week to increase its market share and boost shipments. Intel also hopes to stimulate demand for computers in the second half of the year with the price cut.

South China Morning Post:

- Shenzhen salaries have dropped for the first time in a decade as the global financial crisis and tougher labor laws hit earnings in one of the mainland's richest cities.

- Profits at the mainland's biggest state-owned enterprises slumped more than 26 per cent in the first half of the year.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (KFT) to Buy, target $32.

- Reiterated Buy on (VFC), target $73.

Night Trading
Asian Indices are +.25% to +1.0% on average.

Asia Ex-Japan Inv Grade CDS Index unch.
S&P 500 futures -.28%.
NASDAQ 100 futures +.11%.

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Earnings of Note
Company/EPS Estimate
- (STI)/-.63

- (APD)/.98

- (NTRS)/.79

- (USB)/.14

- (CSL)/.45

- (PJC)/.36

- (WHR)/.67

- (BK)/.52

- (PFCB)/.40

- (MO)/.47

- (PEP)/1.00

- (STJ)/.63

- (BA)/1.21

- (KEY)/-.40

- (WFC)/.34

- (ITW)/.35

- (QCOM)/.51

- (FFIV)/.37

- (CMG)/.89

- (STLD)-.11

- (VMW)/-.19

- (NE)/1.49

- (TEX)/-.27

- (SNDK)/-.17

- (MOS)/.07

- (EBAY)/.35

- (ISRG)/1.29

- (GENZ)/.85

- (LLY)/1.02

- (SWK)/.58

- (PCU)/.17

- (PFE)/.47

- (MS)/-.54

- (DAL)/-.29

- (DPZ)/.20

- (ADS)/1.00

Economic Releases

10:00 am EST

- The House Price Index for May is estimated to fall .2% versus a .1% decline in April.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -2,100,000 barrels versus a -2,813,000 barrel decline the prior week. Gasoline Supplies are expected to rise by +650,000 barrels versus a +1,438,000 barrel build the prior week. Distillate inventories are expected to rise by +1,500,000 barrels versus a +553,000 increase the prior week. Finally, Refinery Utilization is expected to fall by -.50% versus a +1.07% gain the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
- Fed Chairman Bernanke’s monetary policy testimony before the House, MBA mortgage applications report, (MCK) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by mining and technology shares 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.