Stocks Surging into Final Hour on Less Economic Fear, Diminishing Sovereign Debt Angst, Short-Covering, Technical Buying

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 23.90 -8.43%
  
• ISE Sentiment Index 106.0 +20.45%
  
• Total Put/Call 1.02 +10.87%
  
• NYSE Arms .50 -68.58%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 106.75 bps -2.72%
  
• European Financial Sector CDS Index 112.37 bps -4.21%
  
• Western Europe Sovereign Debt CDS Index 134.33 bps -3.98%
  
• Emerging Market CDS Index 224.12 bps -3.87%
  
• 2-Year Swap Spread 19.0 -1 bp
  
• TED Spread 20.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 213.0 +5 bps
  
• China Import Iron Ore Spot $148.40/Metric Tonne +.07%
  
• Citi US Economic Surprise Index -53.20 +4.1 points
  
• 10-Year TIPS Spread 1.62% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +95 open in Japan
• DAX Futures: Indicating -4 open in Germany

Portfolio:

• Higher: On gains in my Tech, Ag, Retail, Medical and Biotech long positions
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, covered some of my (EEM) short, added to my (DISCA) long
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 is trading near session highs and is moving back above its 50-day moving average. On the positive side, Gaming, Ag, Oil Tanker, Coal, Defense, Road & Rail, Restaurant and REIT stocks are especially strong, rising 2.75%+. Small-Cap and cyclical shares are outperforming. The Libor-OIS and TED spreads continue to trend lower. The 10-year yield is climbing +7 bps to session highs at 2.64%. Copper is +1.8% higher on the day, while lumber is jumping ++3.57%. The European Investment Grade CDS Index is falling -3.33% to 103.91 bps, the Spain sovereign cds is falling -3.99% and the Ireland sovereign cds is declining -5.52% to 278.64 bps. On the negative side, Education, HMO, Bank and Disk Drive shares are underperforming. (XLF) has also underperformed throughout the day. Market volume remains anemic, which is also a negative. I suspect stocks will build further on today's rally before week's end. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, declining sovereign debt angst, short-covering, bargain-hunting and technical buying.

Today's Headlines

Bloomberg:

• U.S. Industrial Production Rises More Than Forecast. Production jumped twice as much as forecast in July, signaling manufacturing is shouldering a U.S. economic recovery that is showing signs of moderating in the second half of the year. Output climbed 1 percent as factories churned out more computers, appliances, automobiles and industrial machinery, the Federal Reserve said today in Washington. Another report showed work began last month on fewer houses than forecast. This year, GM kept most of its U.S. plants open during the traditional shutdowns, a move that economists said propelled auto output last month. Production jumped twice as much as forecast in July, signaling manufacturing is shouldering a U.S. economic recovery that is showing signs of moderating in the second half of the year. “This is encouraging,” said Lou Crandall, chief economist at Jersey City, New Jersey-based Wrightson ICAP LLC, who correctly forecast the jump in output. “This is a welcome interruption in the softening trend of economic data. Factory output is still growing solidly.” Output of motor vehicles and parts surged 9.9 percent in July after falling 2.5 percent a month earlier. Excluding autos and parts, manufacturing still increased 0.6 percent after declining 0.3 percent.
• A benchmark gauge of corporate credit risk in the U.S. fell the most in more than two weeks, as companies reported profits that topped estimates and wholesale costs increased last month. The Markit CDX North America Investment Grade Index dropped 3.5 basis points to a mid-price of 107.1 basis points as of 12:02 pm in New York, according to Markit Group. Swaps on Ford Motor Credit fell 27 basis points to a mid-price of 360 basis points, according to CMA. Contracts on Bank of America(BAC) fell 6.5 basis points to 148, CMA prices show.
• Potash(POT) Rejects $39 Billion Bid From BHP Billiton(BHP). Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, rejected an unsolicited $39 billion takeover proposal from BHP Billiton Ltd. as too low, prompting speculation of a higher bid. Potash Corp. turned down the $130-a-share offer, saying it was “grossly inadequate,” and adopted a so-called shareholder rights plan as a defense. Potash Corp. jumped as high as C$151.08 ($146.18) in Toronto trading and competitors rallied on expectation the industry will consolidate. The shares of competitors Intrepid Potash Inc.(IPI) and Mosaic Co.(MOS) also advanced today, gaining 6.4 percent and 8.4 percent respectively. Yara International ASA, the largest publicly traded nitrogen-fertilizer maker, jumped 5.9 percent to 254.2 kroner in Oslo, the highest closing price since March.
• Hefty Bag Maker Pactiv(PTV) to Be Bought by Rank. Pactiv Corp., the maker of Hefty trash bags, agreed to be bought by Rank Group Ltd. in a transaction valued at about $6 billion, helping the New Zealand packaging company expand in takeout-food containers and cutlery. The per-share price is $33.25, 39 percent more than the $23.97 close on May 14, before talks were disclosed. The financing includes equity from Rank Group and unit Reynolds Group Holdings Ltd., as well as debt financing from Credit Suisse, HSBC and Australia New Zealand Bank. The acquisition is the biggest deal for Rank Group’s owner and New Zealand’s richest man, Graeme Hart, a former tow-truck driver who amassed a fortune investing in businesses from lumber to dairy and built a global packaging empire through takeovers. His holdings include the world’s second-biggest drink-carton company and the maker of Reynolds Wrap foil.
• Soros Boosts Stake in Massey Energy(MEE), Adds 1.7 Million Shares of Coal Miner. Billionaire George Soros’s hedge fund boosted its stake in Massey Energy Co., owner of the West Virginia mine where 29 people died in April, to 2.2 million shares during the second-quarter. Soros Fund Management LLC, which oversees $25 billion, purchased 1.7 million shares of Massey during the quarter, according to a filing with the U.S. Securities and Exchange Commission yesterday. The New York-based fund’s position was valued at $59.4 million at the end of June.
• PMI Group(PMI) Leads Mortgage-Insurer Rally on John Paulson's 'Pure Play' Bet. PMI Group Inc., the insurer that posted 12 straight quarterly losses, rose the most in three months, leading mortgage guarantors higher after billionaire John Paulson’s hedge fund disclosed it bought 5 million shares. Paulson’s stake in the Walnut Creek, California-based company makes his hedge fund the ninth largest holder of PMI, according to data compiled by Bloomberg. “The mortgage insurers are the most pure play” to bet on stabilization and recovery of the housing market, said Matthew Howlett, a New York-based analyst at Macquarie Group Ltd. in an interview today. “He views PMI as surviving, and it’s got the largest discount to others in the group.” The insurer climbed 15 percent, or 38 cents, to $2.98 at 11:38 a.m. in New York Stock Exchange composite trading, making it the biggest gainer in the Russell 2000 Index. MGIC Investment Corp., the largest U.S. mortgage guarantor, rose 6 percent to $7.82 and No. 2 Radian Group Inc. gained 8.9 percent to $7.22.
• Copper Prices Climb to One-Week High. Copper climbed to the highest price in a week after a drop in the dollar boosted demand from buyers seeking alternative assets. Copper prices also gained today as inventories monitored by the London Metal Exchange sank to the lowest level since Nov. 13. Copper futures for December delivery added 5.5 cents, or 1.7 percent, to $3.3555 a pound at 9:16 a.m. on the Comex in New York. “Copper is a bellwether, and the fact that it is holding up is a good sign” for the economy, McGhee said. “It is acting as a leader rather than a follower.”
• U.S. Household Debt Shrank 1.5% in the Second Quarter. U.S. household debt fell 1.5 percent in the second quarter as consumers, facing an unemployment rate near a 26-year high, reduced mortgages and credit-card accounts, according to the Federal Reserve Bank of New York. Respondents to a quarterly survey of consumers conducted by the New York Fed for the first time showed total consumer indebtedness was $11.7 trillion at the end of June, down 6.5 percent from its peak in the third quarter of 2008. Household delinquency rates declined in the second quarter for the first time since early 2006, falling to 11.4 percent of outstanding debt from 11.9 percent on March 31, the New York Fed said.
• Home Depot(HD) Profit Tops Analysts' Estimates as Sales Increase. Home Depot Inc., the largest U.S. home-improvement retailer, reported second-quarter profit that exceeded analysts’ estimates as U.S. sales rose 1 percent amid high unemployment. Net income increased 6.8 percent to $1.19 billion, or 72 cents a share, in the quarter ended Aug. 1, from $1.12 billion, or 66 cents, a year earlier, Atlanta-based Home Depot said today in a statement. Analysts projected 71 cents, the average of 23 estimates in a Bloomberg survey. Home Depot advanced 4.93% to $28.71 at 2:12 p.m. in composite trading on the New York Stock Exchange.
• Pimco's Gross Urges 'Full Nationalization' of Housing Finance. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. should consider “full nationalization” of the mortgage- finance system as the Obama administration plots the revival of a market that was at the center of the 2008 credit crisis. “To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,” Gross said today at a U.S. Treasury Department conference in Washington. “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.”
• Fed Buys $2.551 Billion Treasuries in Resumption of Purchases. The Federal Reserve bought $2.551 billion of Treasuries in the first outright purchase of U.S. government debt since October to prevent money from being drained from the financial system. The Fed bought 14 of the 25 securities listed for possible purchase. The notes mature from August 2014 to February 2016, the Federal Reserve Bank of New York said in a statement today on its website. The New York Fed conducts open-market operations to implement the policies of the Federal Reserve System.

Wall Street Journal:

• Freddie Mac Ramps Up Pressure On Banks Over Defective Loans. Mortgage finance giant Freddie Mac is getting more aggressive toward banks that it says sold it crummy mortgages. Already, Freddie Mac (FMCC), and its sibling Fannie Mae (FNMA), have recovered billions from the banks as they seek to hold them accountable for improperly underwritten mortgages sold to them in the past. Now, in a regulatory filing, Freddie Mac has said that if banks didn't buy back defectively underwritten mortgages "on a more timely basis," it would saddle slow-poke banks "with financial consequences or with stated remedies for non-compliance, as part of the annual renewals of our contracts with them." In other words: If a bank won't buy back defective mortgages at a reasonable clip, it may face penalties imposed by Freddie Mac.
• Were Ireland Fears Overdone? Here’s a read on the good reaction Ireland’s successful bond sale is getting in the market. In the fancy-schmantzy world of derivatives, the cost to insure against an Irish sovereign-debt default is falling. It now costs about $280,000 a year to insure $10 million of Irish government debt, compared with $286,000 before Tuesday’s €1.5 billion bond sale and as much as $305,000 yesterday, according to data provider Markit. Prices of so-called credit-default swaps tied to Spain and Portugal have also fallen, while credit-default swap indexes tied to European companies with less than stellar credit ratings have also improved.
• Geithner Sees U.S. Role in Mortgage Market. The U.S. government will likely continue to play a role in guaranteeing mortgages, but policy makers must figure out how to design a system that doesn't lead to a rerun of the collapse of mortgage-finance giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner told attendees at a housing summit convened on Tuesday.

Barron's:

• Research In Motion(RIMM): Torch Price Cut In Half After Weak Launch. The price of the Research In Motion (RIMM) BlackBerry Torch has been cut in half - to $99.99 - on Amazon.com (AMZN) and some other sites, less than a week after the new phone went on sale at $199.99. Early reports from the Street suggest sales of the new phone have been tepid at best.

CNBC:

• Economy Not as Bad as Investors Fear: Kocherlakota. The Federal Reserve's decision last week to buy more U.S. government debt should not be viewed as a sign the economic outlook is worse than investors thought, a top Federal Reserve official said on Tuesday.

Zero Hedge:

• Guest Post: The Purpose Behind Engineered Economic Collapse.

New York Times:

• China Tells Banks to Cut High-Risk, Hidden Loans.

GIZMODO:

• Apple(AAPL) Reportedly Testing Proximity-Aware iPhone Prototypes. Apple's recent hiring of Benjamin Vigier, an expert in near field communications, led many to wonder if the next iPhone could also be our next wallet. According to TechCrunch, Apple's already testing prototypes of just such a proximity-aware iPhone. According to TechCrunch's sources, Apple's testing contactless payment-capable iPhones equipped with hardware from NXP Semiconductor, suggesting that such functionality is definitely something they're working on for inclusion in the next iPhone.
• Apple(AAPL) Awarded Patents for iPhone's Slide to Unlock and Pop-Up Keyboard.
  

SiliconRepublic:

• Battle of the Tablets as Apple(AAPL) Readies 7-Inch iPad. According to Engadget Apple has been at work on a number of new formats, with rumours ranging from large to small versions of the ‘magical’ iPad.

Rasmussen Reports:

• Just 37% Say Their Congress Member Deserves Reelection. Incumbent members of Congress don’t exactly get a vote of confidence from their constituents in a new Rasmussen Reports national telephone survey. Just 27% of Likely U.S. Voters think their representative in Congress is the best possible person for the job, down six points from November of last year. Only 37% think their local congressional representative deserves reelection, compared to 42% who felt that way last fall.

Politico:

• Obama Hits New Polling Low. President Barack Obama's approval rating has dipped to a new low in the latest Gallup poll. Obama's 44 percent average approval in Gallup's daily tracking polls last week marks the weakest level of support he has registered since taking office. His weekly average had been holding steady at 45 percent approval in recent weeks. Additionally, the share of Americans who disapprove of the president's job performance reached 50 percent for the first time over the three-day stretch of Aug. 13-15. The drop can likely be attributed to the loss of independents. Obama's approval rating among independents now stands at 39 percent, down 4 points from June. Obama began his presidency with the support 74 percent of independents.
• MoveOn.org Calls for Boycott of Target(TGT). The liberal group MoveOn.org ramped up its campaign against Target Corp. Tuesday with a new TV ad urging shoppers to boycott the retail giant over its $150,000 donation to a Minnesota politician who opposes gay marriage – and its decision not to give a matching amount to pro-gay candidates for balance.

Financial Times:

• Agricultural Traders Positioned to Reap Gains. As US farmers reap the benefits from failing crops around the world, the traders that handle the country’s grain exports will cash in too. The windfall highlights the profitability of a multibillion sector led by Cargill, the world’s largest agricultural commodities trader, which rose to prominence during the 2007-2008 food crisis, when agricultural commodities prices hit all-time highs. “The US is the world’s island of wheat supply,” says Dan Basse, president of AgResource, a Chicago-based consultancy, who forecast that traders would ship overseas about 5bn bushels of corn, soyabeans and wheat on the year to June 2011, up more than 15 per cent from 4.3bn bushels in the 2009-2010 season. “The increase in exports bodes very well for US grain traders,” he says, echoing a view widely held in the industry.

AFP:

• Israel Has '8 Days' to Hit Iran Nuclear Site: Bolton. Israel has "eight days" to launch a military strike against Iran's Bushehr nuclear facility and stop Tehran from acquiring a functioning atomic plant, a former US envoy to the UN has said. Iran is to bring online its first nuclear power reactor, built with Russia's help, on August 21, when a shipment of nuclear fuel will be loaded into the plant's core. At that point, John Bolton warned Monday, it will be too late for Israel to launch a military strike against the facility because any attack would spread radiation and affect Iranian civilians. "Once that uranium, once those fuel rods are very close to the reactor, certainly once they're in the reactor, attacking it means a release of radiation, no question about it," Bolton told Fox Business Network. "So if Israel is going to do anything against Bushehr it has to move in the next eight days." Absent an Israeli strike, Bolton said, "Iran will achieve something that no other opponent of Israel, no other enemy of the United States in the Middle East really has and that is a functioning nuclear reactor." But when asked whether he expected Israel to actually launch strikes against Iran within the next eight days, Bolton was skeptical. "I don't think so, I'm afraid that they've lost this opportunity," he said.

Caijing:

• China will reduce its holdings of Treasuries because of potential risks from the U.S. government's medium-to-long-term debt level, citing Zhang Ming, a China Academy of Social Sciences researcher. China had a fundamental shift in its "risk appetite" for U.S. debt, it said, citing Zhang's research.
  

Bear Radar

Style Underperformer:

• Large-Cap Value (+1.48%)

Sector Underperformers:

• 1) Education -.35% 2) Foods +.85% 3) HMOs +.88%

Stocks Falling on Unusual Volume:

• STRA, BBL, BHP, LLY, MAIN, OVTI, PWRD, LOPE, SYUT, TOO and ANF
  

Stocks With Unusual Put Option Activity:

• 1) HBC 2) CHS 3) HOLX 4) IPI 5) MBI
  

Stocks With Most Negative News Mentions:

• 1) BA 2) TSN 3) C 4) EEP 5) SYPR
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+2.12%)

Sector Outperformers:

• 1) Agriculture +4.94% 2) Oil Tankers +3.42% 3) Coal +3.20%

Stocks Rising on Unusual Volume:

• IGTE, MTB, NIHD, PHG, OFG, STO, CLF, SWC, SGK, CECO, TITN, ASYS, NANO, CAGC, RINO, ANDE, CPLA, URBN, RNOW, MELI, IDSA, ABCO, CNQR, VECO, JBHT, CREE, GMCR, NFLX, PTV, ACC, POT, EMV, YZC, SQM and MOS
  

Stocks With Unusual Call Option Activity:

• 1) CHS 2) POT 3) IPI 4) A 5) ADP
  

Stocks With Most Positive News Mentions:

• 1) HD 2) WMT 3) AAPL 4) POT 5) HPQ
  

Tuesday Watch

Evening Headlines
Bloomberg:

• Mortgage Bonds Slumping Amid Concern of 'Mega-Refi' Wave: Credit Markets. Government-backed mortgage bonds are underperforming Treasuries by the most this year, after reaching record high prices, amid concern refinancing will accelerate. The inability of certain homeowners to qualify for new Fannie Mae and Freddie Mac loans is raising speculation that the U.S. will loosen rules, punishing even more bondholders. “Why are you going to believe the government is going to continue to pursue a policy that favors investors over homeowners?” said Doug Dachille, chief executive officer of New York-based First Principles Capital Management LLC. He said he supports allowing borrowers who haven’t missed payments on Fannie Mae and Freddie Mac loans to get lower-cost mortgages without consideration of their incomes or home values. Investors will be looking for signals on what the government may do when the Treasury Department and Department of Housing and Urban Development host a summit tomorrow in Washington on how to repair the mortgage-finance system, said Steve Kuhn, who helps oversee about $750 million of mortgage- bond investments for Pine River Capital Management LLC in Minnetonka, Minnesota.
  
• Paulson Hedge Fund Bought 1.1 Million Shares of Goldman Sachs(GS) Last Quarter. John Paulson, the hedge-fund manager who became a billionaire by betting against U.S. mortgage markets, bought 1.1 million shares of Goldman Sachs Group Inc. in the second quarter. Paulson’s stake in the New York-based bank, which settled a fraud lawsuit with U.S. regulators in July, was valued at $144.4 million at the end of the quarter, according to a filing today with the U.S. Securities and Exchange Commission. In April, regulators alleged Goldman Sachs failed to disclose the role his firm, Paulson & Co., played in designing and betting against a mortgage security sold to other investors. The SEC didn’t accuse Paulson or his firm of wrongdoing. Goldman Sachs agreed to pay $550 million to settle the case, conceding it made a “mistake,” without admitting misconduct.
• The cost of credit-default swaps insuring the government debt of Pakistan from default rose 129 basis points to 700 basis points as of 9:45 a.m. in Singapore, according to Royal Bank of Scotland Group Plc prices.
• Bill Gates's Charitable Foundation Buys 500,000 Shares of Goldman Sachs(GS). The Bill & Melinda Gates Foundation, established by the co-founder of Microsoft Corp., bought 500,000 shares of Goldman Sachs Group Inc. in the second quarter, according to a filing today with the U.S. Securities and Exchange Commission.
• Mexico Is Said to Plan Tariffs on U.S. goods in Border Trucking Dispute. Mexico will impose additional import tariffs on U.S. goods in retaliation for the U.S. government’s failure to restore a program allowing Mexican trucks to operate north of the border, according to an official at the Economy Ministry. Mexican Economy Minister Bruno Ferrari will announce a new list of U.S. products subject to tariffs today, said an official at the ministry who declined to be identified because he isn’t authorized to speak on the subject.
• Debt Virus Spreads After Make-Believe Recovery: Matthew Lynn. The euro area is growing again. The banking system has survived its stress tests. The Greeks have implemented their first austerity measures with some success. The fevered predictions of the early summer that the euro was doomed, and that Europe’s sovereign-debt crisis would rip through countries such as Spain and Portugal like a virus, have been forgotten. The crisis appears to be over. Don’t believe it. Under the surface, the cracks in the euro are getting worse. The imbalances in the euro area are growing all the time. The resistance to the bailout package will rise as the terms turn out to be immoral and absurd. And the big-deficit nations are locked in a downward economic spiral. The euro has bought itself some time, at a huge cost. And yet little has been done to fix the causes of the crisis.
• Yen Rises to 6-Week High Versus Euro on Global Slowdown Concern. The yen traded near a six-week high against the euro as concern the global economic recovery is losing momentum boosted demand for safer assets. Japan’s currency gained versus 12 of its 16 major counterparts before reports that economists said will show German investor confidence deteriorated, U.K. inflation slowed and Canadian factory sales declined. New Zealand’s dollar fell toward a five-week low versus the greenback on speculation the central bank will halt interest-rate increases. South Korea’s won gained the most in two weeks on speculation the authorities will allow it to rise to contain inflation. “There are growing signs that a slowdown is broadening to many countries,” said Soichiro Mori, chief strategist in Tokyo at FXOnline Japan Co., a margin-trading company.
• Buffett's Berkshire(BRK/A) Takes Stake in Fiserv(FISV), Adds to J&J(JNJ) Holding. Berkshire Hathaway Inc. increased its Johnson & Johnson stake, repurchasing shares that Chairman Warren Buffett sold in the financial crisis to fund investments in firms including Goldman Sachs Group Inc.

Wall Street Journal:

• Militants Overtake India as Top Threat, Says Pakistan's ISI. Pakistan's main spy agency says homegrown Islamist militants have overtaken the Indian army as the greatest threat to national security, a finding with potential ramifications for relations between the two rival South Asian nations and for the U.S.-led war in Afghanistan. A recent internal assessment of security by the Inter-Services Intelligence, Pakistan's powerful military spy agency, determined that for the first time in 63 years it expects a majority of threats to come from Islamist militants, according to a senior ISI officer. The assessment, a regular review of national security, allocates a two-thirds likelihood of a major threat to the state coming from militants rather than from India or elsewhere. It is the first time since the two countries gained independence from Britain in 1947 that India hasn't been viewed as the top threat.
• Rare Opportunity for China. China loves its rare earth. But its jealous guarding of these minerals could disrupt the market in ways that even Beijing won't appreciate.
• Voters Back Tough Steps to Reduce Budget Deficit. Frustrated voters, fixing on the $1.5 trillion federal deficit as a symbol of Washington's paralysis, appear increasingly willing to take drastic steps to address the red ink.
• U.S. Sounds Alarm at China's Military Buildup. The Pentagon voiced alarm over China's military buildup, saying it was expanding its advantage over Taiwan and investing heavily in ballistic and cruise missile capabilities that could one day pose a challenge to U.S. dominance in the western Pacific. In its annual report to Congress on Chinese military capabilities, the Pentagon also cited China's advances in electronic warfare. The U.S. government has been the target of cyber intrusions the report says appear to have originated in China and aimed to steal military secrets. "These intrusions focused on exfiltrating information, some of which could be of strategic or military utility," the report said.
• Uncle Sam, Venture Capitalist. Meet the battery company that Obama visited yesterday.

Bloomberg Businessweek:

• ConAgra Trade Group Is Fined by CFTC for Step to Get First $100 Oil Trade. ConAgra Trade Group Inc. was fined $12 million over a false trade in 2008 when one of the firm’s brokers wanted to be the first to buy $100 oil, according to the Commodity Futures Trading Commission. The incident that led to the charge of causing a non-bona fide price to be reported occurred on Jan. 2, 2008, as oil prices neared $100 a barrel on the New York Mercantile Exchange, the CFTC said today in an e-mailed statement. ConAgra and the regulator settled the charges without admitting or denying wrongdoing, the CFTC said. As prices neared the historic level, the ConAgra trader said he’s “just going to be a madman,” according to a transcript of the conversation in the CFTC order.
• Fed's Outright Treasury Debt Purchases May Top $300 Billion. The Federal Reserve will likely reemerge as the biggest buyer of Treasuries when it resumes purchasing U.S. government securities today to prevent money from draining out of the financial system. JPMorgan Chase & Co. strategists estimate the Fed will buy about $284 billion in Treasuries over the next year, or more than the combined purchases of Japan and China during the year ended May.
• Copper Consumption Growth in China to Slow, Antaike Predicts. Copper usage in China, the world’s largest consumer, may grow at a slower pace this year as real- estate curbs cut demand, according to a state-owned researcher.
• George Soros Sold JPMorgan(JPM), U.S. Bancorp(USB) in Second Quarter. Billionaire George Soros’s Soros Fund Management LLC sold shares of JPMorgan Chase & Co., PNC Financial Services Group Inc. and U.S. Bancorp in the second quarter as financial stocks dropped.

NY Times:

• In Bold Display, Taliban Orders Stoning Deaths. The Taliban on Sunday ordered their first public executions by stoning since their fall from power nine years ago, killing a young couple who had eloped, according to Afghan officials and a witness. The punishment was carried out by hundreds of the victims’ neighbors in a village in northern Kunduz Province, according to Nadir Khan, 40, a local farmer and Taliban sympathizer, who was interviewed by telephone. Even family members were involved, both in the stoning and in tricking the couple into returning after they had fled.

Business Insider:

• China's Economic Growth is Just a Sprint Toward Breakdown by Robert Reich.

Zero Hedge:

• Dissecting The Flashing Red Warning Light of Record Stock Correlations.

Forbes:

• Pennsylvania Official Wants to Ban Marcellus Drilling. A Pittsburgh city councilman says he wants to ban Marcellus Shale drilling in the city. Councilman Doug Shields said Monday that he will introduce legislation to ban such drilling in Pittsburgh. Shields said that Pittsburgh's Community Protection from Natural Gas Extraction Ordinance will be introduced Tuesday.
• U.S. Needs An Exit Plan For Fannie and Freddie. Former Fed Chairman Paul Volcker says that eventually Fannie and Freddie need to be wound down and replaced by new firms.

Rasmussen Reports:

• Generic Ballot: Republican 48%, Democrat 36%. Republican candidates have jumped out to a record-setting 12-point lead over Democrats on the Generic Congressional Ballot for the week ending Sunday, August 15, 2010. This is the biggest lead the GOP has held in over a decade of Rasmussen Reports surveying. Voters not affiliated with either party prefer the GOP candidate by a 52% to 21% margin.

Reuters:

• GM Mulls "Cornerstone" Sales in IPO - Sources. General Motors Co [GM.UL] is considering selling a chunk of the carmaker's stock to institutions who would commit to buy and hold major stakes as the company prepares for its initial public offering, people familiar with the discussions said on Monday. GM is mulling a plan under which sovereign wealth funds or pension funds would serve as "cornerstone investors," a technique often used for large initial public offerings to show that key investors are supporting the deal, four people said.
• Urban Outfitters(URBN) Q2 Tops on Fresh Styles, Few Discounts. Urban Outfitters Inc (URBN) posted a bigger-than-expected quarterly profit as its fresh styles remained a favorite with shoppers, boosting sales across its brands and sending its shares up 4 percent after the bell.
• Drug Hitmen Kidnap Mexican Mayor Near U.S. Border. Suspected drug hitmen have abducted the mayor of a tourist town near Mexico's northern city of Monterrey in the latest surge in drug violence threatening to undermine industry and scare off investors.

Financial Times:

• Resurgence of Controversial Hedge Fund Strategy. The hedge fund strategy pioneered – and made notorious – by Long Term Capital Management is returning to prominence amid one of its most successful years yet, aided in large part by the massive issuance of bonds by the UK government and other sovereigns. Fixed-income relative value trading – shunned by investors after the collapse of LTCM in 1998 – has been one of the industry’s few outperformers this year, thanks to massive pricing anomalies caused by fiscal stimulus packages and unconventional central bank monetary policies around the world. According to Hedge Fund Research, the average relative value fund has returned 5.33 per cent so far this year, compared with just 1.52 per cent from the average hedge fund.
• US Housing: Sunset Boulevard. With one child at home and another on the way, Elise and Morgan Richardson of Idaho Falls began looking last spring to buy a home. “You get married, you have kids and you buy a house,” says Mrs Richardson, 26. “That is just the order of things.” Buying a home has been a rite of passage for nearly two-thirds of the American population since the 1960s. But as the dream of ownership turned into a nightmare for borrowers who, thanks to easy credit during the recent boom, wound up in homes they could not afford when the market began to collapse four years ago, government officials are for the first time in decades seriously rethinking policies that promoted home ownership as a national birthright.

Telegraph:

• Barclays(BCS) Fined $300 Million by US for Breaking Sanctions Against Brutal Regimes. Barclays on Monday reached a $298m settlement with US prosecutors that allows the bank to close the lid on an investigation into its business dealings with individuals linked to Cuba, Iran, Libya, Myanmar and Sudan.

China Daily:

• The U.S.'s stance on territorial claims in the South Ci9na Sea region is "a provocation to China, aimed at sowing discontent between China and its Southeast Asian neighbors," Tao Wenzhao, a senior research fellow at Tsinghua Center for US-China Relations, wrote in an opinion piece in the China Daily.
• About 51% of Shanghai flats and 66% of Beijing flats are empty, citing an online investigation by volunteers conducted in 100 Chinese cities. The survey, based on counting the number of apartments observed to have no lights on at night, was conducted on more than 1,000 real-estate projects and was organized by Sina.com, according to the report. In Hainan, more than 70% of the rooms didn't have lights on, the paper said.
  

Financial News:

• China's banking regulator has ordered limits on lending to property developers with idle land, citing an official with the China Banking Regulatory Commission. The banking regulator has also reiterated the need to firmly implement China's other control measures for the nation's property market.

Caixin:

• China Unicom Ltd. will sell Apple's(AAPL) iPad in China, citing a China Unicom person.

Evening Recommendations
Citigroup:

• Reiterated Buy on (TROW), target $56.
• Reiterated Buy on (FL), target $19.
• Reiterated Buy on (ADI), target $36.
  

CSFB:

• Rated (CVH) Outperform, target $25.
• Rated (WLP) Outperform, target $68.
• Rated (UNH) Outperform, target $41.
• Rated (HUM) Outperform, target $60.
  

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 126.0 +3.5 basis points.
  
• Asia Pacific Sovereign CDS Index 120.0 -1.75 basis points.
  
• S&P 500 futures +.29%.
  
• NASDAQ 100 futures +.32%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (HD)/.70
• (SKS)/-.17
• (ANF)/.16
• (WMT)/.96
• (TJX)/.73
• (ADI)/.60
• (JKHY)/.35

Economic Releases
8:30 am EST

• The Producer Price Index for July is estimated to rise +.2% versus a -.5% decline in June.
• The PPI Ex Food & Energy for July is estimated to rise +.1% versus a +.1% gain in June.
• Housing Starts for July are estimated to rise to 560K versus 549K in June.
• Building Permits for July are estimated to fall to 580K versus 586K in June.
  

9:15 am EST

• Industrial Production for July is estimated to rise +.5% versus a .1% gain in June.
• Capacity Utilization for July is estimated to rise to 74.6% versus 74.1% in June.
  

Upcoming Splits

• (JOSB) 3-for-2
  

Other Potential Market Movers

• The Housing Finance Conference, weekly retail sales reports, ABC consumer confidence reading, Lazard Retail Conference, (CF) analyst day and the (MW) analyst day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.