Today's Headlines

Bloomberg:
- The sea off Greenland’s eastern coast may have as much as 110 billion barrels of oil, with further reserves to the west of the island, citing the US Geological Survey and Greenland’s Directorate of Commodities.
- Mumbai, India’s commercial hub, was rocked by seven explosions on trains and in commuter stations, killing as many as 142 people and injuring 450 in the nation’s worst terrorist attack in 13 years.
- China’s government said it’s “very concerned” about North Korea’s missile tests and has conveyed its concerns to the Pyongyang-based leadership, according to a Chinese foreign ministry spokeswoman.
- A bill to prohibit online gambling in the US and prevent financial transactions with offshore online gambling sites is scheduled for a July 12 vote in the US House of Representatives.
- A glut of ships that carry liquefied petroleum gas, used by most Asian households for cooking, may leave some vessels standing idle, said Simon Hill, managing director of Petredec Services.
- US 10-year Treasury notes rose, pushing yields to the lowest in three weeks, on signs economic growth is slowing in response to 17 interest-rate increases by the Fed.
- The Bush administration cut its estimate of this year’s budget deficit by 30% to $296 billion amid a surge in tax collections from corporations and wealthy individuals.
- Blackstone Group raised $15.6 billion for buyouts, topping rivals such as Kohlberg Kravis Roberts and Texas Pacific Group as manager of the world’s largest takeover fund.
- National City(NCC) agreed to buy Harbor Florida Bancshares for about $1.1 billion in its first acquisition of bank braches in Florida.

Wall Street Journal:
- Companies in the UK and US are becoming less inclined to outsource information technology services, citing a survey by DiamondCluster Intl., a management consulting firm.
- Time Warner(TWX) expects plans by its AOL unit to offer Internet services for free to some customers to cost almost $1 billion in operating profit through 2009.
- Sequoia Capital, a venture capital firm known for providing startup money for Google(GOOG) and Yahoo!(YHOO), will shift its focus in China to semiconductor firms from Internet-related companies.

NY Post:
- Former Time Warner(TWX) executive Steve Case plans to set up an internet site starting October to help people manage healthcare needs such as transferring medical records, finding a doctor and scheduling an appointment.

NY Times:
- Google(GOOG) is planning to build an office and research center in Michigan that will employ as many as 1,000 workers.
- Hewlett-Packard(HPQ), which secured a $3 billion contract from Procter & Gamble(PG) in 2003 to manage its information technology, is slowing the growth pace in its consulting unit.
- US law-enforcement officials say that some users of methamphetamine are turning to identity theft to finance their illicit drug habit.

USA Today:
- Southwest Air(LUV) passengers flying from San Diego to Phoenix didn’t like getting assigned seats on the first of more than 200 flights the carrier will use to determine whether it should drop its open-seating policy.

AP:
- NYC will place hundreds of extra police officers in the subways during rush hour and increase random bag searches there in response to today’s train bombings in Mumbai.

Economic Releases

- None of note

Links of Interest

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- President Bush today approved an additional $80 million over the next two years to foster democracy in Cuba.
- China asked member governments of the UN Security Council to adopt a non-binding statement critical of North Korea’s ballistic missile program, a proposal the US and Japan rejected as too weak.
- Posco, the world’s fourth-largest steelmaker, may say profit declined for a third straight quarter as competition from China forced the company to lower prices and raw material costs rose.

Wall Street Journal:
- SEC Chairman Christopher Cox said Russia’s economic success depends on whether the government allows for the free flow of information. Russia’s restrictions on the media “deeply concern” capital markets, Cox wrote.

Financial Times:
- The European Commission will raise the ceiling for potential future fines on Microsoft(MSFT) to $3.8 million a day.

Age:
- US farmers are seeking hundreds of millions of dollars in compensation from AWB Ltd. as part of a class action filed in Washington against the Australian wheat exporter.

Chosun Ilbo:
- South Korea likely dropped its request to include goods made in the North Korean industrial park of Gaeseong from free-trade talks with the US.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated unch.

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Earnings of Note
Company/EPS Estimate
- (AMB)/.44
- (FLS)/.22
- (DNA)/.47
- (RI)/.51

Upcoming Splits
- None of note

Economic Releases
- None of note

BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity stocks in the region. I expect US equities to open modestly lower and to trim losses into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish Mixed on Weakness in Tech Shares

Indices
S&P 500 1,267.34 +.15%
DJIA 11,103.55 +.12%
NASDAQ 2,116.93 -.62%
Russell 2000 709.08 -.03%
Wilshire 5000 12,739.66 +.08%
S&P Barra Growth 584.58 +.12%
S&P Barra Value 681.28 +.18%
Morgan Stanley Consumer 614.39 +.72%
Morgan Stanley Cyclical 816.27 +.43%
Morgan Stanley Technology 475.65 -1.31%
Transports 4,861.30 +.37%
Utilities 418.86 +.53%
Put/Call .93 +4.49%
NYSE Arms 1.27 -16.35%
Volatility(VIX) 14.02 +.36%
ISE Sentiment 159.00 +28.23%
US Dollar 85.48 +.55%
CRB 346.67 -.40%

Futures Spot Prices
Crude Oil 73.44 -.23%
Unleaded Gasoline 217.05 -.19%
Natural Gas 5.61 +.04%
Heating Oil 196.15 -.15%
Gold 625.50 -.10%
Base Metals 228.81 +.61%
Copper 355.75 -.70%
10-year US Treasury Yield 5.12% unch.

Leading Sectors
Airlines +1.69%
HMOs +1.11%
REITs +1.09%

Lagging Sectors
Semis -2.20%
Networking -2.41%
Disk Drives -2.60%

Evening Review
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In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- The US, Japan and other backers of a UN resolution aimed at cracking down on North Korea’s ballistic missile program delayed a vote on the draft measure to give China a chance to reach a diplomatic solution.
- Alcoa Inc.(AA) said second-quarter profit surged 62% to a record $744 million on higher prices and increased demand from makers of aircraft, building materials and drink cans.

AP:
- One billion people could die from tobacco use by the end of the century, 10 times the mortality rate of the last century, citing public health officials.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Semi longs, Networking longs and Medical longs. I covered some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was below average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was mildly bearish. Meaningful losses were mainly confined to the tech sector. On the positive side, volume was below average, oil fell slightly, bears were unable to gain significant traction and bonds maintained recent gains. I am looking for more choppiness in the near term for the major averages.

Stocks Mixed into Final Hour on Weakness in Tech Shares

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Semi longs, Networking longs and Medical longs. I added to my (EEM), (IWM) and (QQQQ) shorts and exited a Semi long today, thus leaving the Portfolio 25% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is below average. It appears worries over economic growth are increasing. I continue to believe U.S. growth is just slowing and worst case fears of an imminent recession are way overdone. At current stock market valuations, in my opinion, consumer spending would have to plunge for the bears to be proven correct. I find this prospect highly unlikely. I expect US stocks to trade mixed into the close from current levels as lower energy prices and stable long-term rates offset worries over slowing economic growth.