Tuesday Watch

Late-Night Headlines
Bloomberg:

- Chinese stocks may fall by as much as 18 within the next three months as the benchmark Shanghai Composite Index’s plunge on July 29 is a “warning” to investors of steeper declines, said Carter Worth, chief market technician at Oppenheimer & Co. The Shanghai index is rising at an “unjustifiably steep angle” and recent declines in the benchmark, including the 5% drop last week, are occurring in unusually heavy volume, he said today from New York. Worth is recommending clients reduce their holdings in Chinese stocks by as much as half. “The market does not go higher from here,” Worth said. “There has been virtually no pullbacks and it needs to pull back to be healthy.” Worth said the odds of China stocks falling or “trading sideways” in the next 10 to 154 weeks are 90%.

- A third of Russia’s 42,000 clothing retailers will close by the end of this year after the economic crisis hurt local spending, according to the head of the European Fashion and Textile Export Council. The likely retail failures and order cutbacks in Russia mean companies in fashion-exporting nations such as Germany will deliver less apparel for the winter season, said Reinhard Doepfer, who leads the Brussels- and Stuttgart-based industry group. He said the Council surveyed German clothing makers and found an average of 35 percent of their deliveries to Russia would be unsold this summer.

- Macau casino billionaire Stanley Ho underwent brain surgery after suffering a head injury in a fall and is in intensive care in a Hong Kong hospital, Apple Daily reported today, citing people it didn’t identify.

Wall Street Journal:

- Stocks powered their way to two new milestones Monday amid a growing belief that the recession is over and better days lie ahead. Eleven days after the Dow Jones Industrial Average surpassed 9000, Standard & Poor's 500-stock index broke through 1000, and the Nasdaq Composite Index passed 2000.

- Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration's faltering plan to overhaul U.S. financial regulation, according to people familiar with the meeting. The proposed regulatory revamp is one of President Barack Obama's top domestic priorities. But since it was unveiled in June, the plan has been criticized by the financial-services industry, as well as by financial regulators wary of encroachment on their turf. Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp. Chairman Sheila Bair. Friday's roughly hourlong meeting was described as unusual, not only because of Mr. Geithner's repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies. Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system. Ms. Schapiro and Ms. Bair, among others, have argued that more authority should be shared among a council of regulators. "You are talking about tremendous regulatory power being invested in whatever this entity is going to be," Ms. Bair told the Senate Banking Committee last month. "And I think, in terms of checks and balances, it's also helpful to have multiple views being expressed and coming to a consensus." Officials from the Federal Reserve and the Office of the Comptroller of the Currency, meanwhile, have questioned the creation of a new federal agency to oversee consumer regulations, a move that would take away powers from both institutions. In addition to Mr. Bernanke, Ms. Bair and Ms. Schapiro, other attendees at Friday's meeting were: Fed Governor Daniel Tarullo, Comptroller of the Currency John Dugan, Commodity Futures Trading Commission Chairman Gary Gensler and Office of Thrift Supervision Acting Director John Bowman. The top Republicans on these committees, Sen. Richard Shelby (R., Ala.) and Rep. Spencer Bachus (R., Ala.), have also expressed skepticism over ceding too much power to the Fed."A rush to judgment where they basically throw these things together without any consensus is going to be a disaster," Rep. Bachus said.

- Robert Mueller deals in chemicals for a living -- things that can unstick glue, thin paint, make plastic -- but he'd never seen an order like the one he got for sodium silicate. The compound is typically used to repel bugs or seal concrete, but this buyer's online order form betrayed a whole different intent: "To Kill Car Engines." "That worried me a little, so I picked up the phone and called the gentleman," recalls Mr. Mueller, an owner of chemical-firm CQ Concepts Inc. in suburban Chicago. What Mr. Mueller discovered is that sodium silicate is the designated agent of death for cars surrendered under the federal cash-for-clunkers program. To receive government reimbursement, auto dealers who offer rebates on new cars in exchange for so-called clunkers must agree to "kill" the old models, using a method the government outlines in great detail in its 136-page manual for dealers: Drain the engine of oil and replace it with two quarts of a sodium-silicate solution. At dealerships across America, mechanics accustomed to fixing engines are battling for the chance to ruin them. "Everybody wants to go first, so I'm probably going to have to make them draw straws," says Jim Burton of Randy Curnow Buick Pontiac GMC in Kansas City, Kan. As service manager, however, he might reserve that thrill for himself. "I can't wait," he says.

- Hospitals are costly places. Andrew Thompson hopes his company can help keep people out of them. His Silicon Valley start-up, Proteus Biomedical Inc., is testing a miniature digestible chip that can be attached to conventional medication, sending a signal that confirms whether patients are taking their prescribed pills. A sensing device worn on the skin uses wireless technology to relay that information to doctors, along with readings about patients' vital signs.

- With plenty of videogames available for downloading, gamers no longer have to leave their bedrooms. But investors should beware pulling the plug on GameStop(GME).

- Placement agents’ worst nightmares have come true, as the Securities and Exchange Commission Monday released the full, 114-page documentation supporting proposals on ending pay-to-play problems at public pension funds that it made last month. The documentation affirms what many placement agents had feared after reading the short initial proposal from the SEC, which was somewhat vague: under the new rules, private equity firms would be banned from using placement agents to solicit business from government pension fund clients.

- China's banking regulator may limit a popular capital-boosting technique in a way that could put a crimp on loan growth, a person familiar with the situation said Monday. The China Banking Regulatory Commission may deem subordinated bonds issued by a bank ineligible as capital if those bonds are held by another bank, the person said. The banking regulator estimates about half the subordinated bonds in circulation are held by other banks. Already this year, Chinese banks have issued 210.9 billion yuan ($30.87 billion) of subordinated bonds, nearly triple the 72.4 billion yuan issued in all of 2008. Analysts said any curb on how subordinated debt can be used would likely slow lending, because it would limit the appetite of the market's biggest investors, which are banks. She Minhua, an analyst at Haitong Securities, said, "Changing the rules would effectively cause a further decline in banks' capital adequacy ratios, so the fastest way for them to maintain a healthy ratio would be to cut loans." Analysts say Chinese authorities have grown concerned that high levels of lending this year will result in an increase in bad debt. Chinese banks extended 7.4 trillion yuan in new loans during the first half of this year, equivalent to half of the country's gross domestic product for the period.

- Lilly Ventures, the venture capital arm of Eli Lilly & Co., has spun out from its parent in an effort to compensate its members more like a traditional venture firm.

Barron’s:

- ONLINE-FINANCIAL-SERVICES COMPANY E*Trade Financial (ticker: ETFC) has seen egregious losses during the recession, as the stock has fallen from the high $20s in 2006 to below a dollar this year on its subprime exposure. But one hedge fund seems to see glimmers of hope for the overlooked technology aspects of the businesses and is now a 5% owner. On July 29, Coatue Management disclosed that it owns 56,057,572 shares, or a 5.03% stake in E*Trade.

CNBC.com:
- Frustrated with the pace of bipartisan talks, Democratic leaders on Monday promised to push a sweeping health care bill through the Senate whether they get Republican support or not. Sen. Chuck Schumer, D-N.Y., the third-ranking Senate Democrat, raised the prospect of the leadership crafting a bill to Democratic specifications and using a rare legislative procedure to expedite legislation fulfilling President Barack Obama's top domestic priority. Schumer said Democratic leaders continue to look at invoking a procedural maneuver that would allow them to pass the health bill with 51 instead of 60 votes. A spokesman for Senate Minority Leader Mitch McConnell, R-Ky., scoffed at Schumer's complaints. He noted that Schumer himself hasn't committed to supporting whatever the Finance negotiators produce and that other Democrats have also criticized the plan that's taking shape.

NY Times:

- A small placenta can endanger a fetus by limiting the delivery of food and oxygen. Now researchers at Yale have developed an easy method of measuring the volume of the placenta during pregnancy.

- An extremist Shiite group that has boasted of killing five American soldiers and of kidnapping five British contractors has agreed to renounce violence against fellow Iraqis, after meeting with Iraq’s prime minister. The prime minister, Nuri Kamal al-Maliki, met with members of the group, Asa’ib al-Haq, or the League of the Righteous, over the weekend, said Ali al-Dabbagh, a spokesman for the prime minister, confirming reports. “They decided they are no longer using violence, and we welcome them,” he said in a telephone interview.

CNNMoney.com:

- Does General Electric(GE) need to put aside more cash to handle bad loans at its finance arm? GE says it doesn't -- it even insists it has higher loan loss reserves than the biggest US banks. But investors aren't fully convinced. And a look at just one small slice of GE Capital's $650 billion of assets suggests why they are right to be skeptical.

Forbes:

- Analysts don't anticipate that The IntercontinentalExchange(ICE) will be hurt by possible upcoming regulatory changes. Meanwhile, ICE continues to try to build a transparent market place for derivative securities and credit default swaps.

Rasmussen:

- A new Rasmussen Reports national telephone survey finds that only 22% expect the situation there to get better, down seven points from a month ago. The plurality (41%) says things will get worse in the coming months, an increase of two points since the beginning of July.

USA Today.com:

- The stock market may be roaring, but mutual fund investors are snoring. The Dow Jones industrial average has soared 9.9% since June 30, and gains like that usually attract big inflows to stock funds. Not this time. In fact, fund investors are far more interested in bonds than stocks. Investors bought a net $2.3 billion of stock funds the week ended July 22, according to the Investment Company Institute, the funds' trade group. Net purchases for July 1 through July 22, the latest figures available: $4.1 billion. But investors remain far more interested in bonds, which have fared far better than stocks the past decade. Total purchases for bond funds from July 1 through July 22: $28.8 billion. TrimTabs.com, which tracks fund flows, estimates that another $5.2 billion has flowed into stock funds the past five days — more than in the previous four weeks combined. But even that figure is dwarfed by TrimTabs.com's estimate of $12.3 billion that sloshed into bond funds the past five days.

Reuters:

- A U.S. bank regulator is expected to move quickly in finalizing guidelines on private equity investments in failed banks, possibly easing one of its most controversial proposals, sources said on Monday. The rules could be finalized as soon as this month and could see a key measure that is being proposed for banks to be bought by private equity, the Tier 1 leverage ratio, reduced from a proposed 15 percent to around 10 percent, industry sources said. Uncertainty over the Federal Deposit Insurance Corp's rules has stalled plans by investors to buy banks, and slowed some deals already in the works, sources previously told Reuters.

Financial Times:

- Market traders and investors will get a chance to express their views on proposed new short-selling rules in Europe next month, when the Paris-based Committee of European Securities Regulators holds a public hearing on its planned two-tier disclosure system. Under the CESR proposals, outlined in July, hedge funds and other short sellers could be obliged to reveal short positions of as little as 0.1 per cent of a company’s outstanding equity to the regulator of the most liquid market for the stock. These disclosures would remain private – between the investor and the regulator – but a short position which reached 0.5 per cent of more of the outstanding stock would have to be publicly disclosed. Market participants would also need to take account of any position that amounted to an “economic exposure” to a particular share – so that exchange-traded and over-the-counter derivatives would also be covered by the proposed rules. US regulators have also said they are watching international developments closely and would consider amending their plans if an international consensus begins to develop.

- The prices of the most traded risky European and US loans have reached their highest levels for more than a year, in a further sign of improving conditions in credit markets. Over the past week, European leveraged loan prices reached 89.11 per cent of face value, a high not seen since July 10, 2008, according to Standard & Poor’s LCD and Markit. The same is true for riskier US loans, for which the average price bid rose above 90 per cent of face value for the first time since June 24, 2008. Growing confidence in an economic recovery was further highlighted by a fall in a key barometer of financial stress, the spread between three-month dollar Libor – the rate banks charge each other to borrow – and three-month US Treasury bills. This so-called TED spread fell to its lowest level for two years on Monday – 29.3 basis points – having reached a high of 464bp last October. The rally in loan prices above a key threshold of 80-85 per cent of face value will also reduce pressure on collateralised loan obligations, complex funds that pool loans, which at the height of the credit boom accounted for 60 per cent of the demand for leveraged loans. As the price of their assets fall below 85 per cent, or more commonly 80 per cent, of face value, CLO managers have to mark-to-market those loans, which can lead to them breaching collateral tests and cutting off management fees. Rating agencies have warned about the potential systemic risk posed by CLOs because many of them were exposed to the same borrowers. Moreover, the rising loan prices should reduce the risk of a growing number of zombie CLOs – funds where managers have reduced management operations owing to the lack of fees, which threatened to make restructuring corporate debt difficult. The recovery in prices has led to an “outstanding” year for loan funds, according to one loan investor. Returns to European loan funds were up 22 per cent, and up 32 per cent for US loan funds during the first half of 2009, according to Standard & Poor’s. Loan funds in the US and Europe were down by about 30 per cent in 2008.

Shanghai Securities News:

- Property transactions in the Chinese cities of Beijing, Shanghai, Guangzhou and Shenzhen fell last month from June because of high prices, citing analysts.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (DOW), target $27.

William Blair:

- Rated (MYGN) Outperform.

Night Trading
Asian Indices are +.50% to +1.50% on average.

Asia Ex-Japan Inv Grade CDS Index unch.
S&P 500 futures -.15%.
NASDAQ 100 futures -.15%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (THC)/-.03

- (SPG)/1.37

- (HSIC)/.76

- (MLM)/.77

- (UPL)/.46

- (HEW)/.60

- (IT)/.17

- (MVL)/.32

- (JOE)/-.20

- (PPL)/.39

- (DBD)/.33

- DHI)/-.21

- (DUK)/.25

- (DISCA)/.32

- (EMR)/.57

- (ADM)/.44

- (CAM)/.47

- (CVS)/.64

- (KFT)/.54

- (CEPH)/1.31

- (ERTS)/-.14

- (WFMI)/.20

- (BMC)/.49

- (JACK)/.57

- (ED)/.50

- (PZZA)/.34

- (ICE)/1.13

- (CNO)/.22

- (ONXX)/.20

- (RDC)/.74

- (OPEN)/.04

- (DNR)/.17

Economic Releases

8:30 am EST

- Personal Income for June is estimated to fall 1.0% versus a 1.4% gain in May.

- Personal Spending for June is estimated to rise .3% versus a .3% increase in May.

- The PCE Core for June is estimated to rise .2% versus a .1% gain in May.

10:00 am EST

- Pending Home Sales for June are estimated to rise .7% versus a .1% gain in May.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Tarullo speaking, weekly retail sales reports, ABC Consumer Confidence reading and the (CAT) analyst event could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by commodity 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 100% net long heading into the day.

Stocks Finish Sharply Higher, Boosted by Commodity, Road & Rail, Gaming, Insurance and Hospital Shares

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In Play

Stocks Surging into Final Hour on Less Economic Fear, Short-Covering, Technical Buying, Earnings Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Technology longs, Steel longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, every sector is rising and volume is above average. Investor anxiety is very high. Today’s overall market action is very bullish. The VIX is rising .62% and is very high at 26.08. The ISE Sentiment Index is low at 109.0 and the total put/call is slightly below average at .75. Finally, the NYSE Arms has been running above average most of the day, hitting 1.20 at its intraday peak, and is currently 1.15. The Euro Financial Sector Credit Default Swap Index is falling 1.14% today to 74.0 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 .88% to 111.46 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 1.47% to 30 basis points. The TED spread is now down 436 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 13.1% to 39.90 basis points. The Libor-OIS spread is falling 3.41% to 27 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 6 basis points to 1.87%, which is down 77 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is down 1 basis point today. The MS Cyclical Index is soaring another 3.2% today. Road & Rail, Gaming, Hospital, Steel and Oil Service stocks are all surging 3.75%+ today. The NYSE Arms is high again today, given the gains in the major averages, which is a positive for the third day in a row. The US sovereign debt credit default swap is plunging another 13.3% today to 26.0 basis points, which is a new low and a large positive. While US stocks remain technically extended short-term, I continue to believe pullbacks will be relatively mild and short-lived in nature. Nikkei futures indicate an +165 open in Japan and DAX futures indicate an +11 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, technical buying and more earnings optimism.

Today's Headlines

Bloomberg:

- Linde AG, the world’s second-biggest maker of industrial gases, said business will improve in the second half as the global economy shows signs of recovery.

- Markit Group Ltd., the data provider majority-owned by Wall Street’s largest banks, is under Justice Department scrutiny for potential anticompetitive practices ranging from requiring customers to buy bundled services to restricting which trades can be cleared in the $26 trillion credit-default swap market.

- Copper in London, Shanghai and New York jumped to the highest in 10 months, leading an advance in industrial metals, as the U.S. economy shrank less than expected and a Chinese manufacturing index climbed to a one-year high. Copper for three-month delivery surged as much as 4 percent, bringing the gain this year to more than 90 percent.

- Crude oil traded above $71 a barrel for the first time in a month on signs that industrial activity is picking up and may trigger a recovery in fuel demand.

- Ford Motor Co.(F) said July U.S. sales rose 2.3 percent, its first monthly gain since 2007, as the government’s so-called cash-for-clunkers incentive may have helped the auto industry to the strongest pace this year.

- A gauge of financial-market stress dropped to the lowest level in more than two years amid evidence that financial institutions are emerging from the worst of the global credit seizure. The TED spread, the difference between what banks and the Treasury pay to borrow for three months, narrowed to 29.6 basis points today, the first time it slid below 30 basis points since March 26, 2007, when it was at 29.2 basis points. The measure has declined 434 basis points since peaking in October last year after the September collapse of Lehman Brothers Holdings Inc.

- Manufacturing shrank less than forecast, and construction spending unexpectedly rose, as overseas demand and the Obama administration’s stimulus help resuscitate U.S. factories from their worst slump in 28 years. The Institute for Supply Management’s factory gauge rose to an 11-month high of 48.9 in July, according to the Tempe, Arizona-based group. Readings below 50 signal contraction; the gauge has risen every month since hitting a low of 32.9 in December. The Commerce Department reported that construction gained 0.3 percent in June, helped by government spending. The factory slump is abating as leaner inventories, smaller cutbacks in business investment and an end to the slump in homebuilding indicate the worst recession since the Great Depression is ending. The federal “cash-for-clunkers” program also is boosting demand for cars, analysts said. The ISM’s production index rose to 57.9, the highest level since June 2007, from 52.5. A gauge of export orders increased to 50.5, indicating the first expansion since September, from 49.5 in June. The reading for new orders rose to 55.3, the highest since July 2007, from 49.2 a month earlier. The inventory index rose to 33.5 from 30.8, which was the lowest level since 1982. A figure below 50 means manufacturers are reducing stockpiles. The employment index rose to 45.6 from 40.7. The index of prices paid increased to 55 from the breakeven point of 50 in June. The supplier delivery gauge, a measure of the time it takes to receive goods, rose to 52 from 50.6. The measure of orders waiting to be filled rose to 50 from 47.5.

- Some of the largest U.S. electricity companies, including Duke Energy Corp.(DUK) and American Electric Power Co.(AEP), are fighting what may be a $100 billion battle with smaller cooperatives, community providers and state regulators over the right to pollute. As the Senate writes a bill to control greenhouse gases, the groups are swarming over a pot of free permits that cap carbon emissions and create a trading system of pollution rights.

- Panasonic Corp., the world’s largest maker of plasma televisions, raised its earnings forecast for the fiscal first half, citing a stabilizing global economy, increased savings and a more favorable currency exchange rate.

- Deflation is helping U.S. companies get back on their feet, convincing some investors that stocks are poised to rise. Wholesale costs declined by 4.6 percent last quarter, outpacing the drop in consumer prices by the most in seven years, according to data compiled by Bloomberg. The gap, a gauge of company pricing power, is more than double the six-decade average and the widest since September 2002, a month before stocks rebounded from a 2 1/2-year bear market and began a rally that doubled the value of U.S. equities. “Input costs have come down dramatically and it’s going to be one of the real engines that fuels this recovery,” said Burt White, Boston-based chief investment officer at LPL, which oversees $234 billion. “You could easily see an explosion in earnings that surprises and drives this market much, much higher.” White says the S&P 500 could “easily” reach 1,200 by year-end as raw materials fall and the economy recovers. The projection implies a 22 percent advance from last week’s close of 987.48.

Wall Street Journal:

- Did Pulte Homes(PHM) call the bottom of the housing market? It would certainly seem that way.

- Afghan insurgents killed nine foreign soldiers -- six of them Americans -- on Saturday and Sunday, in one of the deadliest weekends in Afghanistan for the U.S. and its allies since the fall of the Taliban in 2001. The bloody opening to August came after the most lethal month for the coalition in the nearly eight-year Afghanistan campaign. In July, 75 foreign troops were killed, more than 40 of them Americans.

CNBC:

- Bank of America(BAC) has agreed to pay $33 million to settle charges that it made false and misleading statements to investors about bonuses at Merrill Lynch, the U.S. Securities and Exchange Commission said on Monday. In a lawsuit in Manhattan federal court, the SEC said Bank of America claimed that Merrill had agreed not to pay year-end performance bonuses or other incentive compensation to Merrill executives before the Jan. 1, 2009, without Bank of America's permission.

- You can learn a lot about the retail sector by looking Stores Media’s “Hot 100 Retailers” list. Stores Media is the publishing and communications of the industry trade group the National Retail Federation and the list ranks all public companies with more than $300 million in retail sales, and it provides a good snapshot of who's growing and why.

New York Post:

- Forget the Securities and Exchange Commission -- large investors are starting to turn to private eyes to make sure the professionals investing their cash are on the up and up. In the wake of the massive and long-running frauds run by money managers Bernie Madoff and allegedly R. Allen Stanford -- and the failure of the SEC to catch either person -- large investors are starting to buy "Madoff insurance," independent research provided by savvy gumshoes. "One fund of funds is asking us to look into the social aspects of one of their money managers, issues like drug use and divorce," said David Matesanz, of Veracity Worldwide, a market intelligence firm.

Rassmussen:

- Just 16% of U.S. voters believe that tax increases help the economy. A new Rasmussen Reports national telephone survey finds most voters (54%) say tax increases hurt the economy, a number that has been fairly consistent for more than a decade. The survey was taken late last week, prior to Sunday TV appearances by top White House officials who, for the first time, refused to rule out middle class tax increases as a way to pay for the health care reform plan now working its way through Congress.

- Forty-eight percent (48%) of U.S. voters now rate the U.S. health care system as good or excellent. The latest Rasmussen Reports national telephone survey shows that just 19% rate it as poor. These figures reflect a significant increase in support for the health care system over the past few months.

Politico:

- House Minority Leader John Boehner has predicted a “very, very hot summer.” House Speaker Nancy Pelosi is bracing for what she calls “the fight of our lives.” If ever there was a time for a curtain raiser on an intermission, this is it. So here are five things to watch over the most consequential August recess in recent history:

- Before rank-and-file House Democrats bolted for summer break last week, Speaker Nancy Pelosi gave them each a three-by-eight-inch pocket card and told them never to leave home without it. For Pelosi and her top aides, the two-sided, blue-and-maroon glossy — a personalized cheat sheet to help Democratic members tell their constituents what they’ll gain from health care reform — is the key to winning the critical month of August. Republicans have their own summer strategy: With Americans growing wary of plans for health care reform, GOP leaders are telling their members to take the fight straight to the Democrats. “You have to capitalize on the anxiety in the voter base,” a House GOP leadership aide said. “How are [Democrats] going to defend a health care bill that the American people hate? You just ram it down their throats and knock their teeth in.”

Reuters:
- China's big four state banks extended about 165 billion yuan ($24 billion) in new loans in July, marking a sharp fall from previous months, banking sources told Reuters. Industrial and Commercial Bank of China, the largest bank, made just 30 billion yuan in new loans last month, while Agricultural Bank of China reported a net drop, according to a banker who declined to be named. The four banks accounted for about 45 percent of total loans in the first half of the year. Local media reported earlier that total new loans in July fell to about 500 billion yuan last month, a steep drop from the monthly average of 1.23 trillion yuan in the first six months of 2009. Banks issued 7.37 trillion yuan in new loans in the first six months, equivalent to about 25 percent of the country's GDP. The central bank is due to publish July's lending figures next week.

- Member nations approved the first budget rise above inflation for the U.N. atomic watchdog in six years on Monday after heavy U.S. lobbying for more resources to shore up the fight against stealthy nuclear proliferation. Analysts say the non-proliferation regime is at risk from Iran's uranium enrichment drive and stonewalling of an agency probe into Western suspicions Tehran is seeking nuclear weapons, not energy; follow-on demand for nuclear power elsewhere in the volatile Middle East; and North Korea's nuclear bomb tests. Diplomats said France, Germany and Canada were among major donors who held out for zero real growth, but finally bowed to U.S. arguments that a bigger infusion was urgent to help the IAEA upgrade sagging infrastructure. The United States, the IAEA's biggest financier, broke ranks with zero growth advocates after President Barack Obama took office, boosting its own contribution by 20 percent and calling for IAEA funding to be doubled over the next four years.

- Energy major BP(BP) plans to invest $2 billion over the next 5 years in the oil and gas contracts it operates in Algeria, the head of the company's Algerian unit said in an interview. The investments will include drilling three new exploration wells at a promising gas field, maintaining production at two large gas fields that BP operates jointly, and operating the world's first industrial-scale project to capture and store the carbon dioxide released from a gas field.

- Troubled insurer American International Group Inc has chosen former MetLife chief Robert Benmosche as its new CEO, The Wall Street Journal reported, citing people familiar with the matter. In total, AIG has been given a taxpayer lifeline of up to $180 billion over the course of three successive bailouts. The company is expected to report second-quarter results this week. It has reported billions of dollars in losses in each of the previous five quarters.

- Google Inc (GOOG) Chief Executive Eric Schmidt is resigning from Apple Inc's (AAPL) board of directors, the companies said, citing increased competition between the two leading technology companies.

Financial Times:
- Wages in Japan have suffered their sharpest drop since tracking began almost two decades ago, fuelling concerns that the economy will remain under pressure from depressed consumer spending. Labour Ministry figures showed monthly wages, including overtime pay and bonuses, slid 7.1 per cent from a year earlier in June to Y430,620, the 13th consecutive decline but the biggest since the data series started in 1990. The steep June decline stemmed in large part from deep cuts to bonuses as manufacturers in particular continued to suffer from weak demand.

TimesOnline:

- Iran has perfected the technology to create and detonate a nuclear warhead and is merely awaiting the word from its Supreme Leader, Ayatollah Ali Khamenei, to produce its first bomb, Western intelligence sources have told The Times. The sources said that Iran completed a research program to create weaponised uranium in the summer of 2003 and that it could feasibly make a bomb within a year of an order from its Supreme Leader.

Telegraph:

- Apple’s(AAPL) tablet computer will be ‘home media center and games console’. An analyst who claims to have seen Apple's rumored touch-screen tablet computer says it will fulfill a variety of multimedia functions. The unnamed analyst told Barron's that he had seen a prototype of the device, and believes it will be available in November following an official September launch. The source said that the wider computer industry had slowed production on their own touch-screen tablet devices to see what kind of gadget Apple produced.

Lusa:

- Macau’s casino revenue rose 3.1% in July from a year earlier, citing data from the casino operators. For the first seven months of this year, revenue declined 10% from the year-earlier period.

Bear Radar

Style Underperformer:
Small-Cap Growth (+.80%)

Sector Underperformers:
Telecom (-.21%), Biotech (+.13%) and HMOs (+.35%)

Stocks Falling on Unusual Volume:
NTT, RSG, CLX, HURN, SVNT, GENZ, GMCR, DCO, VVC and HAE

Stocks With Unusual Put Option Activity:
1) SVNT 2) ASML 3) XL 4) BX 5) BEN