Monday Watch

Weekend Headlines
Bloomberg:
- Apple’s iPhone debuted to crowds in US cities from New York to San Francisco as shoppers snapped up the handset and praised its slim design.
- Apple’s US debut of the iPhone drew thousands of shoppers over the weekend, emptying most AT&T’s(T) inventory and causing network glitches as the flood of customers began activating the device.
- The Ontario Teachers’ Pension Plan, BCE Inc.’s biggest shareholder, agreed to buy the telephone service provider for $48.5 billion.
- Security at US airports was increased today, ahead of the July 4^th holiday, and the threat to commercial aviation remained high after terrorist incidents in the UK, White House spokesman Tony Snow said.
- A burning car crashed through the main glass doors of Glasgow airport’s passenger terminal at 3:15 pm local time, a police spokeswoman said. The incident occurred a day after police dismantled two car bombs in central London.
- Northern Iraq’s semi-autonomous government will offer 40 oil and gas blocks for exploration, part of plans to increase daily output to 1 million barrels in the next five years.
- President Bush said the US is seeing “hopeful signs” from its troop increase in Iraq, including a drop in sectarian murders and suicide attacks.
- Police arrested five people and searched houses after an attack on Glasgow Intl. Airport and two attempted London car bombings forced Prime Minister Gordon Brown’s new government to step up security in the UK.
- Hard-Landing Risk is Rising for China’s Economy.
- Macquarie Communications Infrastructure Group and partners agreed to buy a US wireless tower operator for $1.4 billion, adding American assets to a UK network bought in April. Macquarie Communications and Macquarie Infrastructure Partners will buy Boca Raton, Florida-based Global Tower Partners, which has 2,500 towers and 4,600 rooftop wireless communications points across the US and Puerto Rico.
- Investors and economists who’ve grown used to European Central Bank President Jean-Claude Trichet’s vow to be on constant lookout for signs of faster inflation are likely to find the term disappearing from his pronouncements.
- Confidence among Japan’s largest manufacturers held near a two-year high and companies said they’re increasing spending, supporting the central bank’s argument for a third interest-rate increase in seven-years.
- Manufacturing activity in China expanded at a slower pace in June, according to a survey of purchasing managers released today.

Wall Street Journal:
- The European Union is following the US’s lead in banning some seafood farmed in China, citing EU spokesman Philip Tod.
- AT&T(T) agreed to acquire Dobson Communications, a wireless carrier, in a deal worth $2.5 billion to $3 billion.

NY Times:
- Biotechnology and pharmaceutical companies are taking advantage of patent expirations to combine old drugs to replenish their pipelines faster and at lower costs.
- President Bush will seek help from Russian leader Vladimir Putin in putting economic pressure on Iran to get the nation to halt its nuclear program.
- General Mills(GIS), Kellogg(K) and Toys “R” Us have increased scrutiny of food ingredients and products they import from China or receive from suppliers.
- US Deal-Making topped $1 Trillion in First Half. Slowdown? What slowdown?

Forbes:
- The world’s richest individual’s halved their allocations to alternative investments in 2006, largely in favor of real estate and equity investments, but the appetite for hedge funds and private equity is poised to return, according to a report by Merrill Lynch and Capgemini.

ABC News:
- Democratic Senator Barack Obama raised more than $30 million for his US presidential campaign in the second quarter. Senator Hillary Clinton’s presidential campaign has said that they expect the NY Democrat to have brought in $27 million in the second quarter.

Barron’s:
- Investor’s Guide to the Presidential Candidates.
- Republican presidential candidate Mitt Romney strikes some voters as just too slick, and his adherence to Mormonism has hurt him in the polls. Democrat Bill Richardson, the garrulous governor of New Mexico, has bloviated himself from near the front of his party's field to the back. Yet Romney would be the best Republican candidate for stocks, bonds and the economy, and Richardson, hands down, would be the best Democrat.

ifixit:
- Technicians explain the iPhone’s construction and identify specific parts.

Crain’s Chicago Business:
- Microsoft Corp.(MSFT) Chairman Bill Gates and Manulife Financial’s John Hancock subsidiary are buying Illinois farmland to cash in on rising demand for corn to make ethanol.

SILICONVALLEY.COM:
- Months after release, demand for Nintendo’s Wii still far outpaces supply.

Economist:
- As the line blurs between hedge funds and banks, a bit of mystique goes missing.

Financial Times:
- McDonald’s Corp.(MCD) plans to convert cooking oil from its restaurants into biodiesel to run its 155 delivery trucks in the UK.

Observer:
- Two UAE-based funds plan to buy one or both of Ford’s(F) Jaguar and Land Rover units.

Times of London:
- Carlyle Group is among buyout firms who have made informal approaches for Virgin Media Inc.(VMED).

Sunday Times:
- GLG Partners LP, a London-based hedge fund manager, is dividing an 11% stake in the firm valued at $400 million among 16 of its best-performing traders.

Telegraph:
- China’s stock market boom is “too hot.”

South China Morning Post:
- Property prices in Beijing will probably fall after next year’s Olympic Games, citing a government-controlled research group. There is now a bubble forming in the city’s property market, quoting a report released by the Beijing Olympics Economic Research Institute. The institute estimates average annual demand of 20 million square-meters in new flats, a figure that is “way below the built up areas.”

Weekend Recommendations
Barron's:
- Made positive comments on (SSW), (SAH) and (UAG).
- Made negative comments on (DFS-W) and (AAPL).

Citigroup:
- Reiterated Buy (BWA), raised target to $99.

Night Trading
Asian indices are unch. to +.50% on average.
S&P 500 indicated +.20%.
NASDAQ 100 indicated +.18%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (NDN)/.01
- (UAPH)/1.35

Upcoming Splits
- (CXW) 2-for-1

Economic Releases
10:00 am EST
- ISM Manufacturing for June is estimated at 55.0 versus a reading of 55.0 in May.
- The ISM Prices Paid Index for June is estimated to fall to 68.5 from 71.0 in May.

Other Potential Market Movers
- The (SFC) shareholders meeting could also impact trading on Monday.

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

Weekly Outlook

Click here for The Week Ahead by Reuters

Click here for the Bloomberg US Equity Monday Preview

There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – ISM Manufacturing, ISM Prices Paid

Tues. – Pending Home Sales, Factory Orders, Total Vehicle Sales, weekly retail sales reports

Wed. – All US markets closed

Thur. – weekly MBA mortgage applications report, weekly EIA energy inventory report, Challenger Job Cuts, ADP Employment Change, Initial Jobless Claims, ISM Non-Manufacturing

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – 99 Cents Only Stores(NDN)

Tues. – None of note

Wed. – All US markets closed

Thur. – Healthways(HWAY), International Rectifier(IRF),

Fri. – Laidlaw Intl.(LI)

Other events that have market-moving potential this week include:

Mon. – None of note

Tue. – None of note

Wed. – All US markets closed, BOE Policy Meeting

Thur. – BOE Policy Meeting, ECB Policy Meeting

Fri. – The Fed’s Yellen speaking

BOTTOM LINE: I expect US stocks to finish the week modestly higher on declining long-term rates, subsiding terrorism fears, diminished sub-prime concerns, lower energy prices, bargain hunting, better-than-expected earnings reports and short-covering. My trading indicators are giving mixed signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,503.35 +.05%

Click here for The Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,503.35 +.05%
DJIA 13,408.62 +.36%
NASDAQ 2,603.23 +.55%
Russell 2000 833.70 -.13%
Wilshire 5000 15,163.08 +.03%
Russell 1000 Growth 595.22 -.03%
Russell 1000 Value 858.51 +.07%
Morgan Stanley Consumer 728.96 +.39%
Morgan Stanley Cyclical 1,076.43 -.59%
Morgan Stanley Technology 622.61 -.14%
Transports 5,098.88 -.18%
Utilities 498.17 +2.64%
MSCI Emerging Markets 131.11 -.45%

Sentiment/Internals
NYSE Cumulative A/D Line 74,318 -2.49%
Bloomberg New Highs-Lows Index +144 +136.1%
Bloomberg Crude Oil % Bulls 48.0 +28.0%
CFTC Oil Large Speculative Longs 197,493 -1.63%
Total Put/Call 1.01 -1.94%
NYSE Arms 1.41 +57.47%
Volatility(VIX) 16.23 +3.05%
ISE Sentiment 166.0 +30.71%
AAII % Bulls 39.02 -9.59%
AAII % Bears 35.77 +6.2%

Futures Spot Prices
Crude Oil 70.47 +2.22%
Reformulated Gasoline 223.75 -.16%
Natural Gas 6.78 -5.23%
Heating Oil 203.79 -.19%
Gold 651.50 -.91%
Base Metals 251.09 -.14%
Copper 343.0 +1.84%

Economy
10-year US Treasury Yield 5.03% -10 basis points
4-Wk MA of Jobless Claims 316,000 +.3%
Average 30-year Mortgage Rate 6.67% -2 basis points
Weekly Mortgage Applications 618.60 -3.90%
Weekly Retail Sales +1.70%
Nationwide Gas $2.97/gallon -.02/gallon
US Cooling Demand Next 7 Days 5.0% below normal
ECRI Weekly Leading Economic Index 142.80 unch.
US Dollar Index 81.93 -.50%
CRB Index 315.74 +.32%

Leading Sectors
Disk Drives +2.96%
Utilities +2.64%
Telecom +2.60%
Wireless +2.2%
Internet +2.2%

Lagging Sectors
I-Banks -1.55%
Gold -1.87%
Coal -1.97%
Homebuilders -2.94%
Oil Service -3.55%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks at Session Lows into Final Hour on Terrorism Fears, Subprime Worries and End-of-Quarter Profit-taking

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my I-Banking longs, Software longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is mildly lower, most sectors are lower and volume is about average. The PCE Core year over year rose 1.9% in May, the smallest increase since March 2004. This is also well below the 20-year average of 2.5% and within the Fed's comfort zone. The myth of problematic inflation lives on; however, if oil begins collapsing in the third quarter as it did last year, this argument will become extremely difficult to make. The fundamentals for oil are even worse this year, in my opinion. The 10-year yield is at session lows, falling 8 basis points. It has dropped 30 basis points in less than two weeks. The NYSE Arms is an above-average 1.23, the VIX is rising 8.2% and the CBOE total put/call is an above-average 1.0. Sloppy action over the last few days appears to me to be a function of buyers stepping away after a great quarter and aggressive funds selling/shorting winners. I expect large buyers to re-emerge next week. I also think better-than-expected earnings, a break below 5% in the 10-year yield, diminishing subprime fears and a large acquisition could provide upside catalysts for the broad market over the coming weeks. I expect US stocks to trade modestly higher into the close from current levels on lower long-term rates and subsiding end-of-quarter profit-taking.

Today's Headlines

Bloomberg:
- The DJIA is poised to post its best quarterly performance since the fourth quarter of 2003.
- UK police dismantled a car bomb found outside a nightclub packed with hundreds of people near London’s Piccadilly Circus, raising concern about terrorism.
- US treasuries are rising after a government report showed the Fed’s most closely watched measure of inflation slowed in May. The 10-year yield has plunged 27 basis points in less than 2 weeks.
- The Canadian dollar fell after the nation’s economy unexpectedly registered zero growth in April.
- Washington Mutual(WM), the biggest US savings and loan, will refinance up to $2 billion in subprime loans. The loans will be refinance or modified at discounted rates to help borrowers’ stabilize their finances and avoid foreclosure.
- BP Plc(BP), Europe’s second-largest oil company, and UK biofuels developer D1 Oils Plc said they plan to start a joint venture to plant jatropha for use as biodiesel.
- General Motors(GM) will invest $945 million over the next five years in Europe to introduce more fuel-efficient vehicles that cause less pollution.
- The price of US steel sheet fell for a third straight month in June because of reduced demand from manufacturers and a drawdown of inventories by distributors, Purchasing magazine said.
- Corn plunged to a 12-week low in Chicago after a government report said US farmers planted more acres than forecast in March.
- Crude oil rose to a 10-month high in NY on speculation by investment funds that low supplies of gas will continue to boost prices into the summer.
- Talbots Inc.(TLB) appointed apparel-industry veteran Trudy Sullivan as its new CEO in an effort to stem five years of declining profit at the women’s clothing retailer.
- Chicago Board of Trade’s(BOT) largest shareholder, Sydney-based hedge fund Caledonia Investments, has voted against the proposed sale to the Chicago Mercantile Exchange because the price is too low.
- Bear Stearns(BSC) hired Jeffrey Lane from Lehman Brothers Holdings(LEH) to run its asset-management division after the near-collapse of two hedge funds forced the firm to put up $1.6 billion for a bailout.

Wall Street Journal:
- Discover Financial Services, set to be spun off by Morgan Stanley(MS), is far smaller than rivals Visa USA Inc. and MasterCard Inc., yet its shares may be attractive because credit-card demand is growing.
- Delta Air Lines may be the leading contender to gain the first new non-stop flights between the US and China, to be awarded under agreements signed in May.
- Iowa Senator Charles Grassley, the top Republican on the Senate Finance Committee, may determine the outlook for legislative proposals to raise taxes on the hedge-fund and private-equity industries.
- Lawmakers moved to salvage parts of a grand compromise on immigration reform following the collapse of the broad package.

Boston Herald:
- Massachusetts is considering creating a loan pool backed by as much as $200 million in state bonds to enable homeowners to refinance unaffordable mortgages.

Washington Post:

- Russian authorities have shut down a US-funded non-profit training organization for journalists and filed criminal charges that critics say are politically motivated.

LA Times:
- Doug Frantz, managing editor of the LA Times, will become the Middle East bureau chief for the Wall Street Journal next month.

AP:
- The California State Assembly approved another 17,000 slot machines at casinos run by four Southern California tribes that will bring the state hundreds of millions of dollars in new revenue.

CNBC:
- The SEC is increasing its scrutiny of Bear Stearns’(BSC) hedge fund business.

Financial Times:
- Goldman Sachs Group(GS) was the top investment banking adviser in the world in the first half of 2007, citing Dealogic data.

China Knowledge:
- BP Plc(BP), Europe’s second-largest oil company, aims to double the import and sale of liquefied petroleum gas in China by 2010.