Personal Incomes Rising, Spending Strong, Inflation Contained, Factories Heating Back Up

- Personal Income for June rose .5% versus estimates of a .4% increase and a .2% gain in May.
- Personal Spending for June rose .8% versus estimates of a .8% increase and an unchanged reading in May.
- PCE Core(MOM) for June was unchanged versus estimates of a .1% increase and a .2% gain in May.
- Factory Orders for June rose 1.0% versus estimates of a 1.0% increase and an upwardly revised 3.6% increase in May.

BOTTOM LINE: Incomes are now up 6.6% over the last year, significantly higher than the rate of consumer inflation which is currently around the long-term average of 3.0%. This is one of the most underappreciated aspects of the current economic environment.

The .8% gain in Personal Spending was the largest rise since July 2004. Spending on long-lasting items such as autos and furniture rose 3.3%, the most since May 2004. This is a big positive considering record energy prices.

The fact that the PCE Core, the Fed’s favorite inflation gauge, was unchanged in June is also a big positive. I continue to believe the Fed is raising rates to have ammunition for a future emergency and quell worries over housing froth, not because they are overly worried about inflation.

The increase in factory orders is further evidence of an improving manufacturing sector. The current streak of factory gains is the longest since the November 1998 to February 1999 period. Orders for non-defense capital goods excluding aircraft, a measure of future corporate investment, rose 3.9% in June which was the largest gain since January.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Tuesday Watch

Late-Night Headlines
Bloomberg:
- A New York state assemblyman said he will introduce a bill that would permit New York police to use racial profiling when deciding who to stop for anti-terrorism searches in the largest US transit system.
- Londoners are contending with the tightest security ever as measures implemented since last month’s bombings surpass those that followed the IRA attacks on the city in the 1970s and 1980s.
- Chevron’s $17.3 billion bid for Unocal is likely to win approval from a majority of shareholders next week amid doubt that a higher, all-cash offer from China’s Cnooc can overcome opposition by US lawmakers.
- Federal Reserve Chairman Greenspan’s policy of signaling his intentions for interest rates has helped drive down volatility in the bond market to a seven-year low, hurting earnings for trading firms.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on EBAY, UTX and EMC.
- Reiterated Underperform on PFG and AEP.

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.09%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
BMC/.13
CEPH/.59
COH/.24
CMCSA/.15
EMR/.95
IACI/.25
MBI/1.39
RDC/.31
SIRI/-.15
RIG/.33
TYC/.49

Upcoming Splits
None of note

Economic Releases
8:30 am EST
- Personal Income for June is estimated to rise .4% versus a .2% gain in May.
- Personal Spending for June is estimated to rise .8% versus a 0.0% change in May.
- PCE Deflator for June is estimated to rise 2.0% versus a 2.2% gain in May.

10:00 am EST
- Factory Orders for June are estimated to rise 1.0% versus a 2.9% increase in May.

Afternoon
- Total Vehicle Sales for July are estimated to rise to 18.3M versus 17.5M in June.
- Domestic Vehicle Sales for July are estimated to rise to 14.5M versus 14.1M in June.

BOTTOM LINE: Asian indices are mostly higher on gains in energy-related shares in the region. I expect US equities to open modestly higher on positive economic reports and stabilizing rates/oil. The Portfolio is 100% net long heading into the day.

Stocks Finish Mostly Higher as Earnings Optimism Remains High

I am unable to post this evening due to a scheduling conflict. I will post the Tuesday watch at its regular time tonight.

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

Stocks Higher Mid-day, Shrugging Off Rising Energy Prices and Interest Rates

Indices
S&P 500 1,238.47 +.35%
DJIA 10,647.20 +.06%
NASDAQ 2,199.73 +.67%
Russell 2000 684.72 +.73%
DJ Wilshire 5000 12,379.65 +.38%
S&P Barra Growth 594.22 +.39%
S&P Barra Value 639.83 +.31%
Morgan Stanley Consumer 590.10 -.01%
Morgan Stanley Cyclical 762.82 +.19%
Morgan Stanley Technology 502.80 +.45%
Transports 3,814.12 +.40%
Utilities 393.72 -.90%
Put/Call 1.0 +13.64%
NYSE Arms .81 -42.51%
Volatility(VIX) 12.02 +3.89%
ISE Sentiment 207.00 +24.70%
US Dollar 88.77 -.66%
CRB 314.96 +.94%

Futures Spot Prices
Crude Oil 61.90 +2.20%
Unleaded Gasoline 176.80 +2.43%
Natural Gas 8.15 +3.49%
Heating Oil 172.00 +2.49%
Gold 437.70 -.02%
Base Metals 127.16 +.59%
Copper 166.10 unch.
10-year US Treasury Yield 4.32% +.93%

Leading Sectors
HMOs +1.86%
Oil Service +1.80%
Biotech +1.49%

Lagging Sectors
Tobacco -.42%
Oil Tankers -.89%
Utilities -.91%

BOTTOM LINE: The Portfolio is higher mid-day on gains in my Medical Information Systems, Medical and Biotechnology longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, most sectors are higher and volume is below average. Measures of investor anxiety are mixed. Today’s overall market action is positive considering the rise in energy prices and interest rates. With 55% of the S&P 500 reporting, profits are rising 14% vs. estimates of a 6.6% increase just three weeks ago. I believe better-than-expected earnings and a P/E multiple expansion will continue to boost stocks through year-end. I expect stocks to rise modestly from current levels into the close on short-covering and stabilizing interest rates.

Today's Headlines

Bloomberg:
- GM will cut prices on 30 of its 2006 models to attract new customers as the company stop giving employee discounts to all buyers.
- US corporations posted better-than-expected profit growth of 14% in the second quarter.
- Atkins Nutritionals filed for bankruptcy protection in NY as consumer interest in low-carb weight-loss programs faded.
- Crude oil is rising within 25 cents of an all-time high after the death of Saudi Arabia’s King Fahd heightened concern about the stability of the world’s largest oil exporter.
- US Treasuries are falling, pushing 10-year yields to the highest since mid-April, as a manufacturing index for July rose more than forecast.
- The US dollar is dropping the most in almost three weeks against the euro on speculation the US currency’s 11% rally this year reflects higher interest rates and faster growth in the US than in Europe.

Wall Street Journal:
- Joe Eberhardt, a German marketing expert, is one candidate to succeed Eckhard Cordes as head of DaimlerChrysler’s Mercedes-Benz division.
- Guidant may say today that it’s returning to the market’s fastest-growing segment, that of treating patients with congestive heart failure.
- Cisco Systems, Internet Security Systems and US cybersecurity officials have been working over the weekend to avert possible attacks on Internet routers, after a public presentation on how system weaknesses could be exploited.
- Summit Partners, a private equity fund, will buy a one-third stake in hedge fund Coast Asset Management for $127 million.
- More investors in 401(k) US retirement plans will face charges for moving investments between mutual funds.
- The Central American Free Trade Agreement is likely to help the economy in Florida, where international trade provides 13% of the economy, citing local officials.
- Reality TV producer Mark Burnett appears to have made a serious mistake with his new reality series “Rock Star: INXS” on Viacom’s CBS.

NY Times:
- Television networks are offering more Internet programming for US viewers as demand for online advertising increases.

Washington Post:
- The number of mosques in the suburbs of Washington, DC is growing as the Muslim community in the region almost doubled during the 1990s.

Austin American-Statesman:
- Texas’s House of Representatives approved selling $41.1 million of bonds to finance a stem-cell research facility in Houston that may help the state compete in studies of the technology to treat diseases.