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Tuesday Watch

Late-Night Headlines
Bloomberg:
- Shares of Cedar Fair LP(FUN) rose the most in 20 months after a report said the third-largest US theme-park operator hired Bear Stearns(BSC) to seek a buyer that will agree to keep the management team.
- Ford Motor(F) said it will team up with Southern California Edison to help develop rechargeable batteries for future plug-in vehicles.
- There is no evidence Turkey has massed troops on its border with Iraq, a Pentagon spokesman said.

NY Times:
- One of the suspects in the failed terror attempt in Glasgow, Scotland, worked as an aeronautical engineer for an Indian company that designs parts for Boeing Co.(BA) and Airbus SAS.

Financial Times:
- Chuck Prince, CEO of Citigroup(C), said turmoil in the US subprime-mortgage market is not so big a risk that it would slow down the company’s lending.

Commercial Times:
- Lee Chang Yung Chemical Industry Corp. plans to spend $1.6 billion over the next three years on alternative energy projects such as the production of methanol, ethanol and polysilicon.

Korea Economic Daily:
- SK Telecom Co. plans to acquire Sprint Nextel Corp.(S), the third-largest US mobile phone services business.

Bisnis Indonesia:
- At least 49 companies have received approval from Indonesia’s Investment Coordinating Board for plants that make biofuels.

Xinhua News Agency:
- The membership of China’s ruling Communist Party rose last year by 2.64 million to 72.39 million people.

Late Buy/Sell Recommendations
Citigroup:
- Financial players have now firmly moved ahead of refining as the main near-term driver of oil prices accounting for over $10 of the move higher since the start of the year versus over $7 for refining. Open interest increased 4% last week to a record 1.5 mm, while net speculators also reached an all-time high. We remain of the view that ex transitory factors, the upcoming shift to winter gasoline and restart of several major refineries are events that need to pass before adopting a more bullish stance on oil.
- Reiterated Buy on (GGC), target $23.
- Upgraded (DTV) to Buy, raised target to $30.

Citigroup:
- Rated (URBN) Underweight, target $18.
- Rated (ANF) Underweight, target $62.

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated unch.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (AYI)/.88
- (CHTT)/.77
- (ETP)/.69
- (ETE)/.34
- (GBX)/.45
- (HELE)/.30
- (PBG)/.63

Upcoming Splits
- (FTK) 2-for-1
- (TPL) 5-for-1

Economic Releases
10:00 am EST
- Wholesale Inventories for May are estimated to rise .4% versus a .3% gain in April.

Other Potential Market Movers
- The Fed’s Bernanke speaking, weekly retail sales reports, E3, CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference, Roth Capital Semi Conference and Kaufman Brothers Defense Tech Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Mildly Higher on Decline in Long-term Rates and Fall in Oil

Indices
S&P 500 1,531.85 +.09%
DJIA 13,649.97 +.28%
NASDAQ 2,670.02 +.13%
Russell 2000 853.24 +.11%
Wilshire 5000 15,471.17 +.10%
Russell 1000 Growth 609.55 +.06%
Russell 1000 Value 872.69 +.13%
Morgan Stanley Consumer 734.60 -.15%
Morgan Stanley Cyclical 1,104.40 +.35%
Morgan Stanley Technology 638.97 +.27%
Transports 5,279.32 +.92%
Utilities 506.46 +.26%
MSCI Emerging Markets 139.20 +1.16%

Sentiment/Internals
Total Put/Call .81 -5.81%
NYSE Arms 1.13 +82.11%
Volatility(VIX) 15.16 +2.99%
ISE Sentiment 171.0 +25.0%

Futures Spot Prices
Crude Oil 72.05 -1.04%
Reformulated Gasoline 234.50 +1.53%
Natural Gas 6.41 -.56%
Heating Oil 209.10 -.20%
Gold 662.30 +1.15%
Base Metals 260.37 +1.01%
Copper 362.40 +.82%

Economy
10-year US Treasury Yield 5.14% -4 basis points
US Dollar 81.45 -.01%
CRB Index 321.23 +.12%

Leading Sectors
Alternative Energy +3.86%
Engineering&Construction +1.47%
Biotech +.70%

Lagging Sectors
Restaurants -.72%
Computer Hardware -.81%
Homebuilders -1.23%

Evening Review
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In Play

Afternoon Recommendations
Bank of America:
- Rated (CVA) Buy, target $30.

Oppenheimer:
- Rated (SQNM) Buy, target $8.

BMO Capital:
- Rated (QLGC) Outperform, target $21.

Afternoon/Evening Headlines
Bloomberg:
- Alcoa Inc.(AA), bidding to require rival Alcan(AL) in a hostile takeover, said second-quarter profit fell 3.9% as costs for shutdowns at two US smelters eroded the benefit of rising prices. The shares fell .56 in after-hours trading to $41.79.
- Shares of Akamai Technologies(AKAM) will replace Biomet(BMET) in the S&P 500. The stock rose 4.6% in after-hours trading.
- The Cheesecake Factory(CAKE) reported total revenues increase approximately 15.7% in the second quarter. The stock rose 4.5% in after-hours trading.
- WD-40 Company(WDFC) reported net sales for the third quarter increased 6.2% over the third quarter of last year. The stock fell 10.3% in after-hours trading.

AP:
- The head of the US National Hurricane Center was reassigned after more than 20 of the center’s employees called for his ouster.

Reuters:
- Hedge fund Moore Capital Management LLC has taken a 5.08% stake in US home builder Beazer Home USA(BZH), according to a regulatory filing on Monday.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Biotech longs, Medical longs and Semi longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was mixed today as the advance/decline line finished about even, sector performance was mixed and volume was about average. Measures of investor anxiety were about average into the close. Today's overall market action was mildly bullish. Over the weekend, Barron's had a positive mention on one of my longs, Gilead Sciences (GILD). I think that the recent pullback is over and the stock can be purchased around current levels. It remains my favorite biotech long. I went to the Apple (AAPL) store again over the weekend. It was even more crowded this time. About the same number of people were around the iPhone stand, however, more were looking at the computers. I suspect the "halo effect" is intensifying more than most analysts had expected. Just like last year before oil plunged $28 per barrel in six months, numerous investment managers have come on CNBC of late saying oil service is their favorite sector and has the largest weighting in their portfolios. I still believe this will be one of the worst performing sectors during the second half of the year as oil begins another substantial decline later this quarter. Semis have traded especially well of late. One of my longs, Broadcom (BRCM), has pulled back and in my opinion is providing investors an excellent entry point in the shares for strong outperformance through year-end. As has been the case often of late, many stocks substantially outperformed the major averages today. The 10-year yield finished near session lows, falling 4 basis points ahead of Bernanke's speech on inflation. I suspect the yield will fall further before week's end. One of the interesting things about the current rally is the lack of insider selling. Insider selling remained very muted again last week even as stocks approached highs. This is a big positive.

Today's Headlines

Bloomberg:
- Iranian drivers won’t have the right to buy gasoline at a higher price if they want to consume more than their monthly allowance, President Mahmoud Ahmadinejad said.
- Jerry Speyer, president and CEO of Tishman Speyer Properties LP, the owner of NY’s Rockefeller Center and Frankfurt’s Messeturm, see an “uptick” in new home purchases in the US.
- Google(GOOG) agreed to buy closely held Postini Inc. for $625 million, adding e-mail security services to its programs for small businesses.
- Carl Icahn raised his bid for Lear Corp.(LEA) by 3.5% to $2.9 billion after opposition from stockholders and investor advisory firms.
- Johnson & Johnson(JNJ) will begin a $10 billion share repurchase program, its largest ever.
- Michael Berger, a former US hedge fund manager who fled NY in 2002 after his conviction in a $400 million securities fraud, was captured by Austrian federal police.
- Just when a majority of analysts say Bristol-Myers Squibb(BMY) has done about all it can for shareholders, new medicines for diabetes and cancer, together with takeover speculation, may keep the stock rising.
- Sony Corp.(SNE) cut the price of the PlayStation 3 in the US by $100, or 17%, after sales trailed Nintendo’s Wii and Microsoft’s(MSFT) Xbox 360.
- Shares of First Solar(FSLR) soared as much as 19% after the maker of solar power modules announced five contracts that may be worth $1.28 billion.
- Global fuel markets may see slower gains in prices by next year, as refinery capacity, energy efficiency and use of biofuels grows, increasing the supply of fuel, the IEA said.
- Corn is falling another 2.1% on speculation that cool, wet weather will bolster the US crop.
- Crude oil is falling .52/bbl. as some analysts and traders speculated recent gains were unjustified as inventories of the fuel in the US are near decade highs.

Wall Street Journal:
- Apollo Management LP, a US buyout firm, increased its offer for Utah-based chemical maker Huntsman Corp.(HUN) by 75 cents a share to $28.
- Hundreds of US hedge-fund advisers have ended their registrations with the SEC a year after a US appeals court invalidated a registration requirement.
- US educators say the restraint and seclusion of students with behavioral problems has come under scrutiny as schools are pressured to include such students in normal classes. An administrative-law judge ruled in March that a local school district violated federal law by educating an autistic student prone to aggressive behavior in excessively restrictive settings.
- Maintaining the detention facility at Guantanamo Bay, Cuba, is justifiable and necessary, and there are no feasible alternatives, David Rivkin and Lee Casey wrote. Closing the center also would allow al-Qaeda to further its cause by taking advantage of Western sensibilities, public opinion and legal rules, the two former Justice Dept. officials said.

NY Times:
- NY will have more than 100 cameras monitoring cars in Lower Manhattan by the end of the year as part of an anti-terrorism surveillance program modeled on one in London.
- US voters believe the presidential campaign has ramped up too quickly, as candidates vie for their attention and money, citing dozens of interviews.
- The Wall Street Journal may reduce news staff within a few months if Rupert Murdoch’s $5 billion bid to buy Dow Jones(DJ) fails, citing senior editors and a member of management.

NY Post:
- Streets throughout NY will soon be paved using recycled materials as part of environmental plans announced by the city’s transportation commissioner.

Chronicle of Higher Education:
- The US may face a shortage of 24,000 doctors and almost a million nurses by 2020, as medical schools aren’t turning out enough graduates to balance expected retirements, citing a report by PricewaterhouseCoopers’ Health Research Institute.

Independent:
- Virgin Atlantic Airways will buy eight more Boeing(BA) 787 Dreamliner jets, bringing the total to 23.

Securities Times:
- China should let the yuan trade in a more unpredictable and volatile fashion to fight speculators’ bets that the currency will keep rising, citing a report by government economists.

Xinhua News:
- China’s Internet users may increase spending 32% in 2007 to $48 billion, citing a report by the China Internet Network Information Center.

Economic Releases

- None of note

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes