Today's Headlines

Bloomberg:
- A year after suicide bombers killed 52 people on three London Underground trains and a bus, police say they have intensified their terrorism investigations and the likelihood of another attack is high.
- A ban of gay marriage doesn’t violate the state constitution of New York, the state’s highest court ruled, leaving Massachusetts as the only US state allowing such unions.
- Philip Morris USA and other cigarette makers don’t have to pay $145 billion to Florida smokers, the state’s top court ruled, refusing to reinstate a punitive-damage award the companies said would bankrupt them.
- Mexico’s currency, stocks and bonds surged after Felipe Balderon, who pledges to maintain President Vicente Fox’s economic policies, led a near complete recount of the country’s closest-ever presidential election.
- US Treasuries rose after a private survey showed the pace of service industry expansion last month slowed more than economists forecast, damping expectations the Fed will lift interest rates next month.

Wall Street Journal:
- Microsoft(MSFT) plans to offer free software that will let Word, Excel and PowerPoint handle documents in a competing format promoted by Sun Microsystems(SUNW), IBM(IBM) and others.
- General Motors(GM) executives are putting together a case against a link-up with Nissan Motor and Renault SA and will present it at a GM board meeting tomorrow.
- Magazines, in a break from tradition, are using their front covers as advertising space for customers as competition for ad dollars intensifies.
- North Korea has sent missiles to Iran in an effort to strengthen ties with Tehran and build a combined front to resist US pressure.
- GE(GE) wants to win more credit-card customers and is expanding its range of offerings to include people who don’t normally qualify for cards.
- Walt Disney’s(DIS) ABC television has obtained about $2.3 billion in prime-time advertising commitments.
- Time Warner’s(TWX) AOL unit is considering offering its menu of services, including e-mail, free of charge to anyone with a high-speed Internet connection.
- Wal-Mart Stores(WMT) has developed a sizable business selling financial services to people on low incomes who may shop in its stores but don’t have accounts at traditional banks.
- Neiman Marcus Group(NMG/A) plans to open the first of four new smaller boutique stores this month that will target younger customers with contemporary apparel, shoes and accessories.

NY Times:
- The inability of New Jersey’s government to end a budget stalemate isn’t about tax issues, but more about a clash of two senior Democratic leaders and their struggle to control the party.
- Wireless networks will be installed at 18 locations in 10 of NYC’s parks by the end of August as the city expands free Internet access.

Financial Times:
- Investors have set aside $1.3 trillion for worldwide private-equity projects, which shows there’s no slowdown in buyout funding and acquisitions, citing a survey by Private Equity Intelligence.

Job Market Still Healthy, Service Sector Slows, Pending Home Sales Rise

- Initial Jobless Claims for last week fell to 313K versus estimates of 315K and 315K the prior week.
- Continuing Claims rose to 2455K versus estimates of 2408K and 2403K prior.
- ISM Non-Manufacturing for June fell to 57.0 versus estimates of 59.0 and a reading of 60.1 in May.
- Pending Home Sales for May rose 1.3% versus estimates of unch. and a 3.6% decline in April.

BOTTOM LINE: The number of US workers filing first-time applications for state jobless benefits fell last week, evidence of a healthy labor market, Bloomberg said. The four-week moving average of claims rose to 308,500 from 306,000 the prior week. The monthly payrolls report tomorrow is expected to show 170,000 new jobs in June, more than double the prior month. Moreover, Automatic Data Processing(ADP) is projecting a 368,000 increase in payrolls for June. The insured unemployment rate, which tracks the US unemployment rate, remained at 1.9%. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases. I expect tomorrow’s jobs report to modestly exceed estimates of 170,000.

Service industries in the US expanded at a slower pace last month as the housing market cooled, Bloomberg reported. The order backlogs component of the index rose to 55.5 versus 52 the prior month. The employment component of the index fell to 52 from 58 prior. The Prices Paid component fell to 73.9 versus 77.5 the prior month. I expect ISM Non-manufacturing to continue to decelerate as consumer spending slows to more average levels.

Contracts to buy previously owned homes in the US rose for the first time in four months in May, suggesting the slowdown in housing will be moderate, Bloomberg said. Pending resales rose 9.9% in the West and .6% in the Midwest. They fell 1.7% in the South and .6% in the Northeast. The national median existing-home price will probably rise 5.3% this year, according to the National Assoc. of Realtors said on June 6. This number provides more evidence that housing is only slowing to more healthy sustainable levels.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
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

Thursday Watch

Late-Night Headlines
Bloomberg:
- Peabody Energy Corp.(BTU) said it agreed to purchase Australia’s Excel Coal Ltd. for about $.134 billion in cash.
- Bisys Group(BSG) said personal details of 61,000 hedge fund investors were lost when an employee’s truck carrying the files was stolen.
- Andres Manuel Lopez Obrador led in a recount of Mexican election ballots that authorities say will determine the outcome of the nation’s closest ever presidential vote.
- Apple Computer(AAPL) and Creative Technology said in court papers they “remain open to the possibility” of ending their litigation battles over handheld music players.

Financial Times:
- Citigroup Inc.(C) saved over $500 million in 2005 by introducing a central computerized purchasing system and renegotiating contracts, citing an interview with Tim Tynan, head of the company’s business services unit.
- Republican Senators Bill Frist, John McCain and Democratic Senator Charles Schumer have written to President Bush saying that Russia should either let US hedge fund manager William Browder back into Russia or provide a credible explanation as to why it is denying entry to its largest foreign portfolio investor.

China Daily:
- China Petroleum & Chemical and Jiangsu Sanfangxiang Industry are among more than 100 Chinese polyester fiber makers facing dumping charges from the US.

Chosun Ilbo:
- North Korea may test-fire as many as four more short or medium-range missiles within the next five days.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.25% to unch. on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated -.10%.

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
- (AYI)/.57
- (DLP)/1.34
- (LI)/.51
- (HI)/.02
- (TIBX)/.06

Upcoming Splits
- (INTU) 2-for-1
- (WOS) 2-for-1
- (HANS) 4-for-1
- (HP) 2-for-1
- (UBS) 2-for-1

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 315K versus 313K the prior week.
- Continuing Claims are estimated to fall to 2408K versus 2409K prior.

10:00 am EST
- ISM Non-Manufacturing for June is estimated to fall to 59.0 versus a reading of 60.1 in May.
- Pending Home Sales for May are estimated to fall .2% versus a 3.7% decline in April.

10:30 am EST
- Bloomberg consensus estimates call for a 2,000,000 barrel crude oil drawdown. Gasoline supplies are expected to fall by 800,000 barrels. Distillate supplies are estimated to rise by 1,650,000 barrels. Finally, refinery utilization is expected to rise 0.30%.

BOTTOM LINE: Asian indices are mostly lower, weighed down by exporting stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Near Session Lows on Low Volume Pullback

Indices
S&P 500 1,270.91 -.72%
DJIA 11,151.82 -.68%
NASDAQ 2,153.54 -1.69%
Russell 2000 719.85 -1.50%
Wilshire 5000 12,799.00 -.83%
S&P Barra Growth 586.37 -.77%
S&P Barra Value 683.03 -.69%
Morgan Stanley Consumer 610.18 -.57%
Morgan Stanley Cyclical 824.76 -.85%
Morgan Stanley Technology 489.23 -1.85%
Transports 4,921.53 -1.07%
Utilities 415.69 -.66%
Put/Call 1.33 +49.44%
NYSE Arms 1.13 +16.44%
Volatility(VIX) 14.15 +8.43%
ISE Sentiment 166.00 +151.52%
US Dollar 85.61 +.54%
CRB 349.86 +.49%

Futures Spot Prices
Crude Oil 75.14 -.07%
Unleaded Gasoline 227.50 -.04%
Natural Gas 5.76 unch.
Heating Oil 206.26 +1.68%
Gold 630.70 +.16%
Base Metals 216.88 -1.45%
Copper 340.25 -.04%
10-year US Treasury Yield 5.22% +1.39%

Leading Sectors
Energy +.39%
REITs -.10%
Drugs -.43%

Lagging Sectors
Steel -2.07%
Gold & Silver -2.31%
Semis -3.16%

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

Afternoon Recommendations
Susquehanna:
- Rated (ENTG) Positive.

Afternoon/Evening Headlines
Bloomberg:
- US IPOs backed by venture capital firms raised $2 billion in the second quarter, almost quadruple the first quarter’s total.
- Microsoft(MSFT) is planning to have a portable music and video player out by Christmas in a challenge to Apple Computer’s(AAPL) iPod.
- US states are “dumbing down” their grade-school tests, where high failure rates could bring penalties under the federal “No Child Left Behind” law, Univ. of California researchers reported.
- US 10-year Treasuries fell the most in three weeks after a private report estimated US companies in June added the most jobs since at least 2001, fueling speculation the Fed will raise rates next month.
- Boeing(BA) may win a $7.3 billion order for military aircraft from Canada’s government because it may be the only supplier that can meet the country’s requirements.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Semi longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, almost every sector fell and volume was below average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bearish. Breadth improved from this morning, but was still solidly negative. A $1.26 per barrel rise in oil to record highs couldn't boost most energy-related equities. On the positive side, the 10-year yield finished at 5.21%, off session highs. My intraday measures of investor angst were elevated throughout the day, and volume was below average. Moreover, many market leading stocks finished only slightly lower and in some cases higher. The underlying tone of this market is much improved from recent weeks, even on pullbacks. While the Nasdaq Biotech Index (NBI) traded about 1% lower today, many leading stocks in the sector traded well and held recent gains. Genentech (DNA), Celgene (CELG), Gilead Sciences (GILD), Imclone Systems (IMCL), Amylin Pharmaceuticals (AMLN) and Cephalon (CEPH) all traded well. GILD remains my favorite at current levels and I remain long the stock.

Stocks Lower into Final Hour on North Korea Worries and Rising Long-term Rates

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs and Retail longs. I added (IWM) and (QQQQ) shorts on the open and also added to my (TLT) long and a few existing shorts, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is substantially lower, almost every sector is lower and volume is below average. The rise in the 10-year yield and North Korea's missile tests are pressuring stocks. The market's reaction appears overdone to me. North Korea's missile test was widely expected. ADP's(ADP) projection that 368,000 new jobs were created in June vs. estimates of 160,000 is suspect, in my opinion. I will be very surprised, based on my analysis, if the job market is that strong. I expect US stocks to trade modestly higher into the close from current levels on short-covering, stabilizing long-term rates and bargain hunting.