Stocks Finish Modestly Lower on Light Volume Profit-taking

Indices
S&P 1,297.52 -.37%
DJIA 11,345.05 -.32%
NASDAQ 2,147.75 -.75%
Russell 2000 705.33 -.89%
Wilshire 5000 12,959.86 -.42%
S&P Barra Growth 600.64 -.39%
S&P Barra Value 695.09 -.34%
Morgan Stanley Consumer 631.26 -.12%
Morgan Stanley Cyclical 792.82 -1.04%
Morgan Stanley Technology 496.25 -1.28%
Transports 4,296.59 -2.05%
Utilities 438.72 +.13%
Put/Call 1.18 +29.67%
NYSE Arms 1.21 +43.37%
Volatility(VIX) 12.22 +4.98%
ISE Sentiment 80.00 +3.90%
US Dollar 84.67 -.49%
CRB 335.50 +.96%

Futures Spot Prices
Crude Oil 72.52 +1.94%
Unleaded Gasoline 194.50 -1.11%
Natural Gas 6.65 -1.08%
Heating Oil 203.25 +2.16%
Gold 638.20 +.47%
Base Metals 231.54 +1.90%
Copper 348.00 -.27%
10-year US Treasury Yield 4.81% -.58%

Leading Sectors
Gold & Silver +4.91%
Oil Service +.93%
HMOs +.57%

Lagging Sectors
Airlines -1.84%
Semis -2.05%
Homebuilders -2.13%

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Afternoon Recommendations
Piper Jaffray:
- Rated (RNVS), (PGNX) and (NUVO) Outperform.

Afternoon/Evening Headlines
Bloomberg:
- Treatments used to promote a younger appearance, including laser facial resurfacing, chemical peels, and topical creams, may reduce pre-cancerous lesions and lower the risk of skin cancer, a study found.
- American Airlines, United Airlines and Delta Air Lines, the three largest US carriers, rescinded a $10 increase on round-trip tickets because rivals didn’t match the higher prices.
- Treasuries rose, pushing yields on 10-year notes to their lowest since March, on signs that inflation and growth in the US economy are slowing.
- Italy will make a “significant” contribution to a UN peacekeeping force in southern Lebanon, Italian Prime Minister Romano Prodi told UN Secretary General Kofi Annan.

Panorama:
- Petroleos de Venezuela SA, South America’s largest oil company, expects production from its Tomoporo oil field in western Venezuela to rise 75% to 315,000 barrels per day over the next six years.

BOTTOM LINE: The Portfolio finished lower today on losses in my Retail longs, Semi longs and Commodity shorts. I added (IWM) and (QQQQ) hedges 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, most sectors fell and volume was very light. Measures of investor anxiety were higher into the close. Overall, today's market performance was slightly bearish. Unleaded gas futures have declined 18% in less than a month. The average 30-year mortgage rate has declined 28 basis points in a month, as well. The Mid-East cease fire and JonBenet case have resulted in war moving into the background on the news channels. Finally, the S&P 500 has surged 6.3% from June lows. These developments should spur a rebound in upcoming consumer sentiment gauges.

Stocks Lower into Final Hour on Low Volume Profit-taking

BOTTOM LINE: The Portfolio is lower into the final hour on looses in my Retail longs, Semi longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is very light. The Chicago Fed recently released its third-quarter edition of the bank's Economic Perspectives. In this edition, there is an interesting study entitled "The great turn-of-the-century housing boom" by Jonas D. M. Fisher and Saad Quayyum. They say the boom has to do with gains in Americans' wealth and the introduction of innovative mortgages. They say record-high home ownership rates will last due to an aging population. Finally, they say that due to the fact that home sales gains had sound underpinnings, the economy won't suffer as much pain from the current slowdown as it has in prior corrections. Overall, this report is arguing for a "soft-landing" in housing as home sales stabilize at relatively high levels by historic standards. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower long-term rates and bargain-hunting.

Today's Headlines

Bloomberg:
- Iran rejected the suspension of its uranium enrichment program, the min objective of a European Union-led offer of incentives to which the country is due to give a formal reply tomorrow.
- The dollar fell to an 11-week low against the euro as traders reduced expectations the Fed will increase its interest-rate target again this year.
- Morgan Stanley(MS) agreed to acquire Golenborough Realty Trust for about $840 million in cash, giving it office properties from Boston to California.
- Ford Motor(F), slashing production after battling a decade-long drop in US market share, is preparing to extend buyout offers to all its factory workers in North America.
- President Bush said the US plans to increase aid to Lebanon to more than $230 million and urged rapid deployment of a UN force to ensure stability and distribution of the help.
- Treasuries are rising again, pushing yields on 10-year notes to their lowest since March, on signs that inflation and growth are slowing.

Wall Street Journal:
- US companies are seeking private equity deals to remove themselves from the stock market, as Sarbanes-Oxley rules push up costs and curb innovation, Maurice “Hank” Greenberg wrote.
- EBay(EBAY) faces calls for a change in management from businesses selling goods on the site.
- Wal-Mart Stores’(WMT) critics were branded a “traveling circus” by Arkansas Governor Mike Huckabee after he was asked to back criticism.
- Friendster, the Internet-based social network competing with News Corp.’s(NWS) MySpace.com, will say today it got a $10 million investment from venture capitalists, as it tries to attract more users.
- Wal-Mart Stores(WMT) plans to reduce solid waste at its almost 4,000 US outlets by 25% in three years.
- Researchers have concluded that the human immune system one day might be restored to fight the AIDS virus or even cancer.
- A comedian and a so-called “mentalist” have set up a sleuth service to ferret out the growing number of imposters on MySpace.com.

NY Times:
- Pakistanis in the US say economic success and social integration reduce the chances that a member of their community would become an anti-American plotter.
- A digital security software application called Cleversafe offers a lower-cost way to secure documents as smaller fragments of data that can be reassembled only by the computers that originally created the files.

Washington Post:
- Iraq’s ambassador to the US, Samir Sumaida’ie, urged the US not to withdraw its troops from Iraq until the country is more stable.

Dawn:
- A 48-member delegation from the US visit Pakistan next month to explore investment opportunities in the energy sector.

Financial News:
- Silver Lake Partners, manager of the world’s biggest tech buyout fund, put Instinet Group up for sale after receiving an unsolicited bid for the business.

la Repubblica:
- Israeli Prime Minister Ehud Olmert said Italy should take over from France and lead the UN peacekeepers in southern Lebanon.

AFP:
- Former Iraqi dictator Saddam Hussein refused to enter a plea at the start of a trial for genocide during the 1988 Anfal campaign against the Kurds.

Economic Releases

- None of note

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Monday Watch

Weekend Headlines
Bloomberg:
- Israeli special forces raided Lebanon late yesterday to prevent arms from being smuggled to Hezbollah fighters from Iran and Syria, five days after a cease-fire came into effect.
- UN Secretary-General Kofi Annan is “deeply concerned” about Israel’s raid two days ago in eastern Lebanon that endangers the “fragile calm” in the region.
- US Treasuries posted the biggest weekly increase since May after slowing inflation and housing bolstered investor expectations that the Fed may be finished raising rates this year.
- BHP Billiton Plc(BHP) reopened the world’s biggest copper mine and resumed talks with striking workers in Chile.
- Democratic Senator Joe Lieberman, who will run as an independent in the November general election, told CBS’s “Face the Nation” that a proposal by Democratic nominee Ned Lamont to set a deadline for withdrawing US troops from Iraq would incite more sectarian violence and terrorism in the Middle East.
- China’s decision to raise benchmark interest rates and give lenders more discretion over mortgage costs ay curb soaring investment by developers while avoiding a slump in demand from home buyers.
- Thailand and its neighbors including Cambodia are favored by child predators and other sex tourists, attracted by their vulnerable populations, lax laws and reluctant enforcement, aid organizations say.
- Corn may decline and soybeans fall for a seventh straight week as rains and cooler weather in the US Midwest increase prospects for the autumn harvests.

NY Times:
- US District Judge Anna Diggs Taylor ignored statutory arguments when she ruled that the NSA’s terrorist surveillance program was unconstitutional, citing scholars.
- Papa John’s Intl.(PZZA) plans to open more than 800 restaurants outside the US during the next 10 years, focusing on the UK, Mexico, Russia, China, India and Korea.
- Russia’s richest investors are putting their money outside the country as they seek to protect their assets from the government and earn larger profits.

San Jose Mercury News:
- The city of San Jose leads the California Bay Area in the production of solar energy.

LA Times:
- Increased US border patrols, more barriers and high-tech monitoring along the Mexican border has made it more difficult for illegal immigrants to enter the US.

Reuters:
- Contrarian investors are betting that the beaten-up shares of online auction leader eBay(EBAY) have hit bottom.

Guardian:
- Iranian President Mahmoud Ahmadinewjad, who has called for the destruction of Israel, called for the British people to stop supporting Tony Blair, saying the UK prime minister’s foreign policies are harming the country’s reputation.

Yomiuri:
- The Japanese government seeks to exempt oil from economic sanctions that the UN would impose upon Iran if the country refuses to abandon its nuclear program.

Weekend Recommendations
Barron's:
- Had positive comments on (AMP), (AET) and (PG).
- Had negative comments on (NKE) and (HIG).

Night Trading
Asian indices are -.75% to unch. on average.
S&P 500 indicated -.19%
NASDAQ 100 indicated -.35%.

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Earnings of Note
Company/Estimate
- (BOBE)/.32
- (LOW)/.60
- (VRNT)/.29

Upcoming Splits
- None of note

Economic Releases
- None of note

BOTTOM LINE: Asian Indices are lower, weighed down by automaker and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the week.