Bull Radar

Style Outperformer:
Mid-cap Value (+2.90%)

Sector Outperformers:
Biotech (+4.38%), Gaming (+4.16%) and Telecom (+3.66%)

Stocks Rising on Unusual Volume:
NIHD, LNC, ABB, LFC, SNP, MMM, ACL, CLMT, CASY, CAKE, ESL, AIR, MEDX, POOL, ISRG, NVEC, HITK, CELG, CHDX, COHU, HUBG, TESO, CCMP, EBAY, SCHL, CYOU, FFIV, ONXX, GENZ, CHIC, CYMI, KYO, JAH, TUP, LTM, CSL, TMO and FIC

Stocks With Unusual Call Option Activity:
1) SPF 2) CELG 3) JEF 4) FITB 5) MCO

Links of Interest

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Thursday Watch

Late-Night Headlines
Bloomberg:

- Occidental Petroleum Corp.(OXY), the biggest oil producer in Texas, said its discovery of a natural- gas and oil field in California holding the equivalent of as much as 250 million barrels of crude may be the state’s biggest in 35 years. The field in Kern County is 80 percent-owned by Occidental, the Los Angeles-based company said today in a statement. The find has the potential to boost Occidental’s California reserves by 28 percent. Chevron Corp., the second-biggest U.S. oil company, owns the rest, Kurt Glaubitz, a spokesman for the San Ramon, California-based said in an e-mailed statement.

- VMware Inc.(VMW), the biggest maker of programs that let computers run multiple operating systems, posted second-quarter profit that beat analysts’ estimates on services and maintenance sales. The shares rose in late trading. VMware, majority-owned by EMC Corp., rose as much as $3.53, or 11 percent, to $34.78 in late trading after closing at $31.25 on the New York Stock Exchange.

- Intercontinental Exchange Inc.(ICE), the firm that started clearing credit-default swaps trades between banks in March, plans to extend the service to the dealers’ clients in October amid regulator demands to curb market risks.

- For all the talk this year about the Chinese refusing to buy U.S. bonds, the real story is about the People’s Republic of China’s failure to find buyers for the equivalent of $1.7 billion of its debt because too many investors showed no interest at auctions that would be considered disastrous if their outcomes were repeated on Wall Street. Other Asian countries are having similar problems.

- Legg Mason Inc.’s(LM) Bill Miller said “the worst has passed” for the U.S stock market and that financial and technology companies will probably lead gains. “Bargains abound in the U.S. stock market,” Miller, 59, wrote in a letter to investors in his Legg Mason Value Trust fund. “Bull markets typically begin when the following four conditions are present: the economy is bottoming, profits are bottoming, the Fed is stimulating and valuations are low. That’s where we are now.”

- EBay Inc.(EBAY), owner of the most visited U.S. e-commerce Web site, reported profit and sales that beat analysts’ estimates, a sign that Chief Executive Officer John Donahoe’s turnaround effort is gaining traction.

- The Russian central bank should cut its benchmark rates by as much as 5 percentage points to spur lending to floundering industries, banking executives said.

- Treasuries rose, rebounding from yesterday’s decline, before the Federal Reserve buys bonds today as part of its plan to cap consumer borrowing costs. The central bank is scheduled to purchase Treasuries maturing from August 2026 to May 2039, according to its Web site, under a program to scoop up $300 billion of government securities over six months. The government is scheduled to announce today how much it will raise in four auctions next week

- The U.S. Senate called on President Barack Obama to consider returning North Korea to the State Department’s list of state sponsors of terrorism and imposing additional sanctions on the country. The chamber voted 66-31 today to approve a nonbinding resolution urging the administration to produce a report within 30 days examining whether North Korea is supporting terrorism, abetting the spread of weapons of mass destruction, and whether adding the country to the terrorism list would advance U.S. foreign policy goals. .

Wall Street Journal:

- Worldwide demand for phones using third-generation, or 3G, technology remains robust despite a broader decline in the handset market, according to Qualcomm Inc. (QCOM) Chairman and Chief Executive Paul Jacobs. The San Diego company is benefiting from increasing interest in more advanced phones and a continued willingness to upgrade devices despite a downturn in spending. Handset sales are expected to ramp up in the second half of the calendar year, according to Chief Financial Officer Bill Keitel. Jacobs noted that the transition to digital TV has freed up airwaves Qualcomm previously purchased, and has allowed the company to expand the reach of its Flo mobile TV service into new markets, and augment service in existing cities. The company said it expects operating expenses to grow at a slower rate than its revenue. On the emerging markets, Jacobs said the company is seeing strong demand out of China, which recently moved into 3G.

- Obama Needs a Move to the Middle.

- Four more former Merrill Lynch managing directors have joined the exodus at Bank of America, taking another team of bankers with them. James Boylan, a managing director in Merrill’s health-care investment-banking unit, recently left the firm and will become head of investment banking at Leerink Swann, a boutique investment bank in Boston that specializes in middle-market health-care deals. Joining Boylan are former Merrill managing directors Bryan Giraudo, Tony Gibney and Mark Page, each of whom had been with Merrill for several years working on pharmaceutical, biotechnology and medical-device deals.

- Polls are turning against President Barack Obama’s health-care plan. The political calendar is, too. On Monday, the Washington Post/ABC poll reported that 49% of Americans approve of his handling of health care while 44% disapprove. What many people missed is that those who strongly disapprove of the president’s approach on health care now outnumber those who strongly approve by 33% to 25%. That presages further decline. Already, 49% of independents disapprove of the president’s approach, up from 30% in April, a staggering shift in 11 weeks.

- You’d think the owners of Zappos.com would want to take the cash and run. But that wasn’t entirely the case, according to a person familiar with the deal who spoke to Deal Journal. In fact, Zappos’ management insisted on receiving only Amazon stock to pay for their business, which has grown into the largest online shoe retailer. The management viewed Amazon’s(AMZN) shares as undervalued. So, apparently did Amazon, which initially insisted on paying only cash for the transaction. But Zappos won out, and it secured an all-stock transaction.

- Sellers of marijuana as a medicine here don't fret about raids any more. They've stopped stressing over where to hide their stash or how to move it unseen. Now their concerns involve the state Board of Equalization, which collects sales tax and requires a retailer ID number. Or city planning offices, which insist that staircases comply with the Americans With Disabilities Act. Then there is marketing strategy, which can mean paying to be a "featured dispensary" on a Web site for pot smokers. After years in the shadows, medical marijuana in California is aspiring to crack the commercial mainstream.

- It’s shaping up to be a grim year for the Spokane Public School district in Washington state. Like so many others, it is making deep cuts in everything from teaching staff to school supplies this coming school year. But there’s one bright spot for the district: The amount of federal dollars to incorporate technology in the classroom—and to train teachers to use it—is expected to double to about $160,000 from the previous year. At the same time school districts around the nation are bracing for a round of severe belt-tightening as a result of strained state and local budgets, they’re also getting a significant bump in federal funding to make their classrooms more tech-savvy, which they hope will help improve student performance.

MarketWatch.com:
- Bristol-Myers Squibb Co.(BMY) has signed a deal to buy biopharmaceutical firm Medarex Inc.(MEDX) for $16 a share in cash, resulting in an aggregate purchase price of about $2.4 billion, the two companies said in a statement late Wednesday. The price is almost double Medarex's Wednesday close.

- Sharp Corp. plans to launch its first mobile phone designed for advanced 3G wireless technology in China next month, with other models to follow there by the end of the current fiscal year, according to a report Thursday.

CNBC.com:
- Wells Fargo(WFC) stock took a hit Wednesday, as a surge in bad loans overshadowed record profit, sending its shares down 5.3 percent. But some of that pressure may be profit-taking by investors who were expecting a robust profit for the quarter, and going forward the bank's profitability remains “very strong,” Howard Atkins, the company’s chief financial officer told CNBC on Wednesday.

Business Week:
- Demand looks to be recovering for Cisco Systems Inc., the world's largest provider of computer-networking equipment, according to two analysts.

Politico:

- President Barack Obama used a prime-time news conference Wednesday to urge Americans to get behind his flagging health care reform efforts in Congress, seeking to reassure an increasingly jittery public that the government can overhaul the system without jeopardizing the care most citizens currently receive. Obama endorsed a House committee's plan to fund part of the new program by imposing a surtax on families making over $1 million a year - but insisted he would not support any bill that helped fund the $1 trillion plan with a tax on middle-class families.

Rasmussen:

- Just 31% of likely voters now believe the United States is heading in the right direction, according to the latest Rasmussen Reports national telephone survey. Down one point over the past week, it’s the lowest level found on the question since mid-February. Sixty-three percent (63%) of voters say the country is moving down the wrong track, up a point from last week and the highest finding since the second week in February.

The Washington Post:

- Wall Street's biggest banks are setting aside billions of dollars more to pay their executives and other employees just months after these firms were rescued with a taxpayer bailout, renewing questions about compensation practices in the aftermath of the financial crisis. The recent outcry over bonuses at bailed-out firms prompted public alarm and promises of reform from financial leaders, who acknowledged that pay and bonuses should not reward risky short-term business decisions -- such as those that contributed to the meltdown -- but instead longer-term financial performance. But Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

Reuters:

- Intuitive Surgical Inc (ISRG) reported second-quarter earnings on Wednesday that blew past Wall Street expectations, as instrument and accessories revenue jumped, sending its shares up more than 14 percent. The maker of the da Vinci robotic surgical system posted a net profit of $62.4 million, or $1.62 per share, compared with a profit of $51.2 million, or $1.28 per share, a year ago. That topped analysts' average expectations by a whopping 35 cents, according to Reuters Estimates, and pushed shares to $199.37 in extended trading from their Nasdaq close at $169.79. "The numbers look outstanding. The company performed dramatically better than expected in both revenues and earnings per share," said Leerink Swann analyst Rick Wise. "It clearly suggests that, despite extraordinary challenges, where hospital capital expenditures is under pressure, Intuitive Surgical continues to do amazingly," said Wise, who added the 76 da Vinci systems sold in the quarter topped his estimate of 68 and the previous quarter's 66. "The results far exceed Street expectation," said Canaccord Adams analyst Jason Mills, who had been looking for 57 da Vinci systems sold in the quarter. "They are bucking the trend here, so it's quite amazing," he added. Total revenue rose nearly 19 percent from a year ago to $260.6 million and was up 38 percent from the first quarter. Wall Street was estimating revenue of $230 million. Instrument and accessories revenue rose to $95.8 million from $73.6 million, driven by 52 percent growth in da Vinci surgical procedures. The company raised its 2009 procedure growth estimate to 45 percent from its previous forecast of 40 percent growth. It still sees 35 percent growth in service revenue for the year. "I consider our ability to continue positive growth during the worst worldwide recession in recent memory to be a significant accomplishment," Chief Executive Lonnie Smith told analysts and investors on a conference call.

- Network-equipment maker F5 Networks Inc (FFIV) posted a quarterly profit that beat market estimates, partly helped by lower expenses and improved margins, and forecast better-than-expected fourth-quarter results. Shares of the Seattle-based company, which have risen 69 percent in last six months, were trading up 3 percent at $37.00 in trading after the bell.

- Semiconductor equipment maker Cymer Inc (CYMI) posted a surprise quarterly profit, helped by a 36 percent fall in operating expenses, and forecast third-quarter revenue above Street expectations, sending its shares up 7 percent.

- Nigeria has proposed that its 2010 budget be based on an oil price of $50 per barrel and oil output of 4 million barrels per day, the oil minister said on Wednesday.

- Leading U.S. business groups warned Congress Wednesday it could start a "green trade war" by passing a climate change bill that threatens other countries with tariffs on energy-intensive goods. "We urge the Senate to refrain from including provisions that could negatively impact U.S. relations with key trading partners and disrupt the global trading systems," the U.S. Chamber of Commerce, the National Foreign Trade Council and two other groups said in a letter to Senate leaders.

Financial Times:

- An advocacy group on Wednesday launched a campaign to derail the nomination of a Goldman Sachs(GS) executive to a high position in the US state department because of his past role in raising public funds for a Chinese company linked to Sudan. Public Accountability Initiative, a not-for-profit organisation, said Robert Hormats, whom Barack Obama nominated this week as undersecretary of state for economic affairs, had made misleading comments about the 2000 listing for PetroChina, the Chinese energy group whose parent, CNPC, has been present in Sudan since 1996. “Hormats’s role in the PetroChina deal raises serious questions about his fitness to serve in a post that will give him substantial influence over international economic policy and US-China relations,” it added. The PetroChina IPO came before the killings in Darfur reached the scale that led the Bush administration to label them as genocide, but Sudan was already on the US terrorist list. Since PetroChina’s public offering, several high profile investors have sold stakes in response to public pressure. Issues surrounding Mr Hormats’ role in the PetroChina offering also come at a time of growing suspicion about Goldman Sachs’ influence of in Washington.

South China Morning Post:

- China's industrial production is recovering, the Ministry of Industry and Information Technology said yesterday, but the sector is plagued by "illegal construction", blind expansion and rising losses, especially in the iron, cement and shipbuilding industries.

- Shanghai, normally the mainland's economic locomotive, posted its slowest growth for the first half of a year since 1992 as it bore the brunt of the global recession and languished behind the national recovery.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (QCOM), target $58.

- Reiterated Buy on (STI), target $22..

Night Trading
Asian Indices are +.25% to +1.50% on average.

Asia Ex-Japan Inv Grade CDS Index +.98%.
S&P 500 futures +.43%.
NASDAQ 100 futures +.32%.

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Conference Calendar

Who’s Speaking?
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Earnings of Note
Company/EPS Estimate
- (OMC)/.74

- (MCD)/.97

- (MAN)/.10

- (HOT)/.17

- (LLL)/1.78

- (ESI)/1.72

- (ALXN)/.16

- (ESV)/1.46

- (TIN)/.11

- (CME)/3.23

- (NCR)/.07

- (NEM).47

- (RTN)/1.13

- (WYE)/.85

- (F)/-.49

- (PM)/.77

- ZMH)/.96

- (UPS)/.48

- (R)/.38

- (T)/.51

- (EMC)/.16

- (UNP)/.75

- (BNI)/.99

- (COF)/-.65

- (NFLX)/.50

- (CAKE)/.25

- (KLAC)/-.14

- (MSFT)/.36

- (BRCM)/.14

- CB)/1.29

- (AXP)/.20

- (JNPR)/.18

- (MMM)/.94

- (TRA)/.99

- (NOC)/1.29

- (AMZN)/.33

- (HSY)/.35

- (NUE)/-.59

- (CELG)/.45

- (CA)/.38

- (WFR)/.00

- (DO)/2.64

- (KMB)/1.02

- (OXY)/.78

- (DECK)/.09

Economic Releases

8:30 am EST

- Initial Jobless Claims for last week are estimated to rise to 557K versus 522K the prior week.

- Continuing Claims are estimated to rise to 6390K versus 6273K prior.

10:00 am EST

- Existing Home Sales for June are estimated to rise to 4.84M versus 4.77M prior.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Tarullo testifying on systemic risk before the Senate, Fed board meeting on home loan rules and the EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by automaker 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.

Stocks Finish Slightly Higher, Boosted by Homebuilding, Education, Gaming, Restaurant, Financial and Semi Shares

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In Play

Stocks Slightly Higher into Final Hour on Less Economic Fear, Diminishing Homebuilder Pessimism, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Technology longs, Financial longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is falling 1.80% and is high at 23.44. The ISE Sentiment Index is below average at 114.0 and the total put/call is above average at 1.0. Finally, the NYSE Arms has been running around average most of the day, hitting 1.78 at its intraday peak, and is currently .90. The Euro Financial Sector Credit Default Swap Index is dropping another 4.4% today to 87.33 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 1.53% to 123.94 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling .07% to 32 basis points. The TED spread is now down 434 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling .15% to 42.94 basis points. The Libor-OIS spread is rising .24% to 31 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis points to 1.81%, which is down 83 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is unch. today. Today appears to be another healthy consolidation day after recent outsized market gains. The Euro Financial Sector Credit Default Swap Index is continuing its recent plunge, which remains a big positive. As well, the US sovereign debt credit default swap index is dropping another 5.6% to the lowest level since early May. Despite negative news from (WFC), (BK) and (MS), (XLF) is holding up very well, which bodes well for further gains. Small-cap and cyclical shares are outperforming again today with the transportation stocks rising another .9%. Moreover, Semi, Education, Gaming, Restaurant, Homebuilding and Disk Drive stocks are all posting meaningful gains. Finally, investor angst has been relatively high all day with the total put/call opening at a very high 1.32 this morning, which is a big positive and bodes well for further near-term gains. Nikkei futures indicate an +83 open in Japan and DAX futures indicate a -12 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, investment manager performance anxiety, less economic fear and earnings optimism.