Economic Releases

None of note

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Friday Watch

Late-Night Headlines
Bloomberg:
- Australia has increased its troop commitment to Afghanistan ahead of elections in September, Defense Minister Robert Hill said.
- The US dollar is poised for its biggest weekly advance against the euro in more than two months on speculation international investors are increasing purchases of US debt to boost returns.
- Economic growth among members of the Association of Southeast Asian Nations may slow by as much as 1.5 percentage points this year if the price of oil remains above $60/bbl., said Secretary-General Ong Keng Yong.
- Crude oil may fall for a second week as record gas prices deter consumers, reducing demand, and global production increases, a Bloomberg survey showed.

Financial Times:
- China has set up an armed and helicopter-equipped police force in major cities to fight terrorism and an increasing number of riots.

Commercial Times:
- AU Optronics cut its target for 2005 shipments of small-and medium-sized flat-panel displays by 20% to 55 million units because mobile-phone makers postponed orders.

Japan Metal Daily:
- Chinese export-coke prices fell below $200 a ton for the first time in two years on a free-on-broad basis because of oversupply and as steelmakers cut production.

China Business News:
- A Home Depot unit, which focuses on wholesale and retail of home-improvement products, won approval to set up a store in Shanghai.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on MRVL.
- Reiterated Underperform on HC and BKS.

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.09%.

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Earnings of Note
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ANN/.17

Upcoming Splits
CRR 3-for-2
STGS 3-for-2

Economic Releases
None of note

BOTTOM LINE: Asian indices are mostly lower, led down by exporting shares in the region. I expect US equities to open modestly lower and to move higher later in the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Modestly Lower on Light Volume

Indices
S&P 500 1,219.02 -.10%
DJIA 10,554.93 +.04%
NASDAQ 2,136.08 -.42%
Russell 2000 651.19 -.55%
DJ Wilshire 5000 12,137.81 -.14%
S&P Barra Growth 584.09 -.01%
S&P Barra Value 630.61 -.19%
Morgan Stanley Consumer 587.42 +.28%
Morgan Stanley Cyclical 738.16 -.59%
Morgan Stanley Technology 496.57 -.81%
Transports 3,711.07 -.38%
Utilities 391.45 +.22%
Put/Call 1.0 -5.66%
NYSE Arms 1.14 +15.22%
Volatility(VIX) 13.42 +.90%
ISE Sentiment 158.00 +.64%
US Dollar 88.57 +.65%
CRB 311.75 -.62%

Futures Spot Prices
Crude Oil 63.55 +.44%
Unleaded Gasoline 187.10 +.43%
Natural Gas 9.00 +.81%
Heating Oil 179.60 +.31%
Gold 444.60 -.02%
Base Metals 128.74 +.45%
Copper 160.25 unch.
10-year US Treasury Yield 4.20% -1.50%

Leading Sectors
Tobacco +1.34%
Broadcasting +.52%
Biotech +.32%

Lagging Sectors
Disk Drives -.83%
Airlines -.97%
Steel -2.50%

Evening Review
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Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on GOOG.

Afternoon/Evening Headlines
Bloomberg:
- The US dollar rose for a fifth straight day against the euro, the longest streak in two months, and advanced versus the yen as a report showed the biggest gain in Philadelphia-area manufacturing since April.
- Retailers Gap and Limited Brands reduced their annual profit forecasts after the wrong fashion calls produced sluggish second-quarter sales.
- The US government brokered the release of 404 Moroccan prisoners held by Western Sahara’s Polisario Front rebels for up to two decades, in a step that may help end a dispute over the dessert territory and improve ties between Algeria and Morocco.
- US Treasuries surged on optimism foreign demand may be rising after a Japanese government report showed the country’s investors doubled their purchases of overseas bonds.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Medical and Internet longs. I added back my IWM and QQQQ shorts in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was light. Measures of investor anxiety remained mixed into the close. Overall, today’s market action was negative considering more positive economic data and the fall in long-term rates. Investors seem somewhat spooked by the recent decline in copper and oil. As well, the 10-year T-note yield continues to drop and is now at 4.2%, which is leading some to point to an imminent economic slowdown. These developments will be viewed positively a few weeks from now as GDP growth remains strong and inflation measures decelerate further.

Stocks Mixed Mid-day Even as Oil and Rates Fall

Indices
S&P 500 1,219.15 -.11%
DJIA 10,557.26 +.07%
NASDAQ 2,138.94 -.29%
Russell 2000 652.90 -.29%
DJ Wilshire 5000 12,138.65 -.14%
S&P Barra Growth 584.43 +.05%
S&P Barra Value 630.28 -.24%
Morgan Stanley Consumer 588.01 +.39%
Morgan Stanley Cyclical 738.68 -.52%
Morgan Stanley Technology 497.10 -.71%
Transports 3,713.11 -.33%
Utilities 391.55 +.24%
Put/Call 1.03 -2.83%
NYSE Arms 1.17 +16.96%
Volatility(VIX) 13.39 +.68%
ISE Sentiment 156.00 -.64%
US Dollar 88.59 +.67%
CRB 310.51 -1.01%

Futures Spot Prices
Crude Oil 62.50 -1.19%
Unleaded Gasoline 182.50 -3.49%
Natural Gas 8.88 -5.39%
Heating Oil 176.10 -1.28%
Gold 444.70 -.11%
Base Metals 128.74 +.45%
Copper 165.90 +.12%
10-year US Treasury Yield 4.22% -1.09%

Leading Sectors
Tobacco +1.57%
Broadcasting +.91%
Biotech +.80%

Lagging Sectors
Energy -.87%
Disk Drives -1.22%
Steel -2.29%

BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my Internet, Medical and Retail longs. I added to my existing longs, including GOOG/BRCM/BBY/ISRG/AAPL, this morning, thus leaving the Portfolio 100% net long. The tone of the market is modestly negative as the advance/decline line is lower, most sectors are declining and volume is light. Measures of investor anxiety are mixed. Today’s overall market action is negative, considering the decline in energy prices, above-expectations Philly Fed report and decline in long-term rates. The AAII % Bulls fell to 29.29% this week from 39.74% the prior week; this reading is now at depressed levels. Likewise, the % Bears rose to 40.40% from 28.85% the prior week; this is an above-average level. This is a very positive development given the market's recent performance and makes me more confident that another substantial rally will begin over the next 6 weeks. I expect US stocks to trade modestly higher from current levels into the close on short covering.

Today's Headlines

Bloomberg:
- Nintendo will start selling its smallest player next month as Sony prepares for European sales of its PlayStation Portable after releases in Japan and the US.
- Iran received a military delegation from China, paving the way for cooperation in the defense field, Iran’s Mehr News agency reported, citing Brigadier General Nasser Mohammadi Far.
- Google plans to sell as many as 14.8 million shares in a secondary offering.
- Manufacturing growth in the Philadelphia area accelerated this month as companies rebuilt inventories and stepped up production to meet demand.
- The US dollar is rising for a fifth straight day against the euro, the longest streak in two months, and advanced versus the yen as a report showed the biggest gain in Philadelphia-area manufacturing since April.
- The yield on the 10-year T-note is falling after a Japanese government report showed that the country’s investors doubled their purchases of overseas bonds.
- Crude oil is falling again on signs that higher prices are finally cutting consumption.

NY Times:
- New York City and its suburbs have one of the highest death rates from heart disease, which is usually more common among poor people.

Wall Street Journal:
- India’s national oil companies will team up with Chinese counterparts to bid jointly for foreign energy assets, to cut the cost of fuelling their economies.
- Tommy Hilfiger is planning to put itself up for auction.
- Many Chinese are turning to the growing number of drugstores instead of state hospitals for medication, fueling a new market for over-the-counter treatments from multinational pharmaceutical companies.
- China’s health-care system is experiencing an increase in private programs for people who don’t want the lines and low-quality of care at government-run hospitals.
- Citadel Investment Group LLC, a Chicago hedge fund, played a leading role in a shortage of 10-year US T-notes recently.
- Morgan Stanley will probably raise $2 billion from the sale of its aircraft-leasing business.
- Generic drugs are boosting profit for companies such as Carmark and Express Scripts.
- Barclays Global Investors has be come the first asset manager to start an ETF tracking micro-cap US companies.
- More new US stocks have come to the market in the first two weeks of August than in any full month so far this year.

LA Times:
- Re/Max International plans to compete with Realtor.com in displaying all US residential property listings on its Web site.

Taloussanomat:
- Nokia Oyj plans to install Apple Computer’s iTunes software on its new music phone.