Wednesday Watch

Late-Night Headlines
Bloomberg:
- Intl. Business Machines(IBM) said second-quarter profit rose 11% after the company reduced expenses by cutting jobs in Europe and shifting work to India.
- Charles Schwab(SCHW) said second-quarter profit rose 35% after price cuts lured new clients. TD Ameritrade’s(AMTD) third-quarter net income increased 67%.
- Yahoo!(YHOO) said second-quarter profit fell after a year-earlier gain. Sales rose 26% as the company’s Web pages drew more users and advertisers.
- Toyota Motor(TM), the largest seller of hybrid autos, may produce gasoline-electric models that can be recharged at any outlet to reduce the use of gasoline.
- The Senate approved 63-37 legislation to overturn a ban on federal funding for research on new embryonic stem cells.
- Crude oil traded below $74/bbl. in NY after falling to a one-week low yesterday on speculation Middle East oil supplies won’t be disrupted by the military conflict in Lebanon.
- Asian stocks trading in the US posted their worst losing streak in two months.
- Copper prices fell in Shanghai, London, and NY amid concern that consumption in China may drop as the country adopts more measures to slow economic growth.

Financial Times:
- Wal-Mart Stores(WMT) is developing a new generation of hybrid truck engines and other fuel saving technology to improve the efficiency of its truck feet.
- General Motors(GM) will ensure every car and light truck it produces meets or beats the best fuel economy of its rivals, and is willing to sacrifice performance and cost, citing an interview with Vice-Chairman Bob Lutz.

London-based Times:
- Google(GOOG) will introduce click-to-play video ads in the UK, allowing users to select which ad messages they wish to view.

Commerical Times:
- Asustek Computer this month started shipping Playstation 3 units it manufactured to Sony Corp.(SNE) for the rollout of the game console in November.

AP:
- State-licensed casinos in Louisiana won a best-ever $2.38 billion from gamblers in the year ended June 30 even after the devastation from hurricanes Katrina and Rita.
- Israel sent a unit of soldiers into Southern Lebanon to search for weapons and tunnels used by Hezbollah.

JoongAng Ilbo:
- North Korean leader Kim Jong Il ordered the country’s soldiers and civilians to go on a state of military alert, citing an unidentified South Korean government official.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated -.39%.

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Earnings of Note
Company/EPS Estimate
- (ABT)/.57
- (ALL)/1.61
- (DOX)/.46
- (ASD)/.93
- (AMR)/1.14
- (AAPL)/.44
- (BK)/.56
- (BAC)/1.10
- (CDWC)/.79
- (CAKE)/.28
- (CIT)/1.16
- (ET)/.35
- (EBAY)/.24
- (GD)/1.00
- (GPC)/.69
- (INTC)/.13
- (JPM)/.87
- (JNPR)/.19
- (KMI)/1.02
- (LRCX)/.83
- (MEL)/.52
- (MOT)/.31
- (NVLS)/.38
- (QCOM)/.41
- (RMBS)/.07
- (RYL)/1.93
- (STX)/.41
- (LUV)/.26
- (STJ)/.38
- (STI)/1.48
- (UNH)/.68
- (WM)/.93

Upcoming Splits
- (RS) 2-for-1

Economic Releases
8:30 am EST
- The Consumer Price Index for June is estimated to rise .2% versus a .4% gain in May.
- The CPI Ex Food & Energy for June is estimated to rise .2% versus a .3% gain in May.
- Housing Starts for June are estimated to fall to 1900K versus 1957K in May.
- Building Permits for June are estimated to fall to 1920K versus 1946K in May.

10:00 am EST
- Bernanke Report on Economy & Fed Policy

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 650,000 barrels. Gasoline supplies are expected to fall 875,000 barrels, while distillate inventories are estimated to rise 1,750,000 barrels. Finally, Refinery Utilization is expected to rise 1.0%.

BOTTOM LINE: Asian indices are higher, boosted by technology and automaker stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing higher. The Portfolio is 100% net long heading into the day.

***Alert***

I am unable to post the Tuesday Close due to a scheduling conflict. I will post the Wednesday Watch Later this evening.

Stocks Mostly Lower into Final Hour as Commodities Weaken Further and Long Rates Rise

BOTTOM LINE: The Portfolio is slightly lower into the final hour as gains in my Commodity shorts are mostly offsetting losses in my Retail and Internet longs. I added to my (EEM), (IWM) and (QQQQ) shorts this morning and then took profits, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is about average. Gold is breaking back below its 50-day moving average today, falling another $21.90. It has declined almost $50 in less than two days. This action is very bearish for the metal considering the Middle East situation and today's PPI. I continue to believe Gold, copper and oil are all in the process of forming major tops. Oil will likely continue to trade at very inflated levels into hurricane season, at which time I suspect it will finally begin falling substantially. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and lower energy prices ahead of Bernanke’s speech tomorrow.

Today's Headlines

Bloomberg:
- Shares of PartyGaming Plc, the world’s largest Internet poker company, dropped after Betonsports Plc and its CEO were indicted by a US grand jury.
- Gold declined in NY and London on speculation that conflict is easing in the Middle East.
- Natural gas fell for a second day in NY as forecasters predicted hot weather across the country would ease later this week, reducing consumption of the power-plant fuel.
- US 10-year Treasuries fell for the first day in almost two weeks after a report showed producer prices increased in June by more than economists forecast.

Wall Street Journal:
- US tea sales reached $6.2 billion last year, having quadrupled since the early 1990s, and there are 2,000 tea houses across the country, compared with 200 a decade ago.
- General Motors(GM) top North American sales and marketing executive says eliminating discounts in favor of permanent low prices has helped the automaker stabilize its market share.
- UnitedHealth Group(UNH) remains a high-quality company whose stock investors remain keen to snap up.
- Some US venture capitalists no longer bet on start-up companies with bright ideas but on businesses that are to be had cheaply after going through hard times.

NY Times:
- A Chicago alderman wants the city to be the first to outlaw restaurants’ use of cooking oils that contain so-called trans fats in order to improve the city’s health.
- US researchers say they are making rapid strides in the field of artificial intelligence as they try to simulate the human brain 50 years after the term was coined.
- Pfizer’s(PFE) research chief says the company and other drugmakers are on the verge of a new age of discovery that will make debilitating illnesses such as cancer and diabetes more manageable.
- General Dynamics(GD) will offer new cockpit systems in its Gulfstream business jets that give pilots computer-generated views of terrain regardless of weather.
- The US Justice Department’s attorney for the Eastern District of NY is looking at possible overcharging in the stock-lending business, along with use of so-called finders’ fees, as part of an inquiry into short-selling practices.

AP:
- The NAACP is calling on black consumers to stop shopping at Target(TGT) until the company answers the civil rights group’s survey questions.

Daily Telegraph:
- UK home prices are likely to rise almost 50% between now and 2011, meaning the average home would cost almost $546,000 in five years’ time, according to Oxford Economic Forecasting, a research group.

Yediot Aharonot:
- Four out of five Israelis support fighting Hezbollah until it withdraws from the Lebanese border and 58% say the terrorist organization must be destroyed.

Sky News:
- The Israeli assault on Lebanon will end within a few weeks, an Israeli army official said.

PPI Rises, Foreign Demand for US Assets Strong

- The Producer Price Index for June rose .5% versus estimates of a .3% increase and a .2% rise in May.
- The PPI Ex Food & Energy rose .2% versus estimates of a .2% increase and a .3% gain in May.
- Net Foreign Security Purchases for May rose to $69.6B versus estimates of $58.4B and $51.1B in April.

BOTTOM LINE: Prices paid to US producers rose at a faster rate in June on higher costs for food, energy and autos, Bloomberg reported. Prices of raw materials fell 1.7% and prices for computers declined 3.2% last month. So far this year, wholesale prices are rising at an annual rate of 2.1% versus a 3.6% gain in the first part of lat year. I expect producer prices to continue to decelerate over the intermediate-term.

International investors increased purchases of US financial assets in May as holding in the world’s largest economy offered security from sagging emerging markets, Bloomberg said. Purchases of Treasury securities rose a net $13.2 billion versus $3.4 billion in April. Foreign purchases of US equities rose $2.7 billion, while corporate bond purchases increased to $36.5 billion. I expect foreign demand to remain strong and increase over the intermediate-term.

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