Today's Headlines

Bloomberg:
- US stocks are rising, sending the DJIA past 14,000 for the first time, after wholesale inflation unexpectedly declined and Goldman Sachs(GS) recommended American Express(AXP) shares.
- Syria rejected President Bush’s proposal for an international conference on the Israeli-Palestinian conflict.
- Goldman Sachs(GS) plans to build the first new office tower on the Jersey City, New Jersey, waterfront since the Sept. 11 terrorist attacks, a $560 million building to rise 500 feet alongside its existing office.
- Corn is dropping for a second session in Chicago as rains in the Midwest were expected to improve prospects for crops. Corn has plunged 26% from late-February euphoric highs.

Wall Street Journal:
- Apollo Management LP, a leveraged-buyout firm started by Leon Black, is planning to list shares on a new Goldman Sachs Group Inc. exchange, which will allow it to raise funds and keep the advantages of staying private.
- Coca-Cola(KO) pushed Sony Corp.(SNE) out of the top position for the first time in seven years in the Harris interactive annual poll of “best brands.”
- Bain Capital LLC is raising $15 billion for its leveraged-buyout fund, yet keeping a third of it aside to alleviate the pressure such big funds feel to invest the money as quickly as possible.
- PNC Financial Services Group(PNC) is among US banks boosting wages, benefits and training to attract better qualified tellers capable of handling more complex tasks.
- China doesn’t plan to disclose estimates of the economic cost of pollution after studies on the subject proved to be sensitive and were suspended, citing officials.
- US cable tv providers are using digital-video recording technology to lure viewers away from satellite TV, citing a report by the Carmel Group.

NY Times:
- Nintendo’s Wii is attracting video game developers and publishers because it is cheaper and easier to build for than its rivals.

AP:
- Wells Fargo(WFC) today will start a new international money transfer service to Mexico, India, Vietnam and other countries.

Daily Telegraph:
- England’s wealth divide between rich and poor is at its widest in more than 40 years, citing a study by the Joseph Rowntree Foundation charity.

Reuters:
- Merrill Lynch’s(MER) CFO on Tuesday said the company has limited risk from two Bear Stearns(BSC) hedge funds that recently collapsed.

Xinhua News Agency:
- China’s gold production rose 15.3% in the first half to 122.2 metric tons because higher prices prompted miners to increase output, citing the National Development and Reform Commission.

Producer Prices Decelerate as Fuel and Food Costs Decline, International Demand for US Assets Hits New Record, Industrial Production Accelerates

- The Producer Price Index for June fell -.2% versus estimates of a .2% gain and a .9% increase in May.

- The PPI Ex Food & Energy for June rose .3% versus estimates of a .2% gain and a .2% increase in May.

- Net Long-term TIC Flows for May rose to $126.1B versus estimates of $73.0B and $80.3B in April.

- Industrial Production for June rose .5% versus estimates of a .5% gain and a -.1% decline in May.

- Capacity Utilization for June rose to 81.7% versus estimates of 81.6% and 81.4% in May.

BOTTOM LINE: Prices Paid to US producers unexpectedly dropped for the first time in five months, restrained by declines in fuel and food costs, Bloomberg reported. Excluding passenger cars, core prices only rose .1%. Fuel prices fell 1.1% led by a 23.9% decline in gas costs. Food prices fell .8% as the cost of eggs, fresh fruit and meats all declined. The price of intermediate goods rose .5% versus a 1.1% increase the prior month. Computer prices fell 3.4% versus a 2% decline the prior month. The core PPI rose 1.8% year-over-year, right at the 20-year average. I continue to believe most measures of inflation have already peaked for this cycle and will continue to show deceleration through year-end.

Foreign buying of US financial assets unexpectedly soared to a new record in May as international investors snapped up American stocks and corporate bonds, Bloomberg said. International demand for U.S. stocks jumped a net $41.9 billion vs. $27.4 billion in April. As well, international demand for U.S. Treasuries jumped by $21.6 billion vs. $376 million in April. It is also interesting to note that Caribbean banking centers, which analysts link to hedge funds, sold a net $28.5 billion of U.S. Treasuries. Despite overall record purchases of US Treasuries, China reduced its holdings by $6.6 billion, which is a positive, in my opinion. Predictions of the demise of international demand for U.S. assets continue to seem way off-base. I continue to believe foreign demand for US assets will remain strong over the intermediate-term.

Industrial Production in the US rose last month by the most since February as factories turned out more automobiles, computers and electronics, Bloomberg reported. Capacity Utilization is still right near the 20-year average. Production of consumer durable goods, including autos, furniture and electronics, rose 1.6% versus a .3% decline the prior month. Motor vehicle production surged 2.5% versus a .5% decline the prior month. Manufacturing of home electronics rose 2.6% in June. I continue to believe inventory rebuilding will help boost US economic growth back to around average rates through year-end.

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

Tuesday Watch

Late-Night Headlines
Bloomberg:
- President Bush said Palestinians have arrived at a “moment of choice” between accepting the violent path Hamas has charted against Israel or a more peaceful route to a Palestinian state.
- Demand for services in Japan unexpectedly fell in May, suggesting waning consumer spending is slowing growth in the world’s second-largest economy.

Wall Street Journal:
- Google Inc.(GOOG) is working on a new service to let mobile-phone users find and buy items such as ringtones. Under the new system, users will get a list of companies that provide the content they’re seeking and links to allow them to purchase the material.
- News Corp(NWS/A) reached a tentative agreement for the purchase of Dow Jones & Co.(DJ) at its original $5 billion offer price. The deal will be put to the full Dow Jones board tomorrow evening for its approval, said people familiar with the situation.
- The leading Republican presidential candidates have received more campaign donations from private-equity firms than Democrats, a shift from past fund-raising patterns as Democrats view the industry as a source of new taxes.

Crain’s Chicago Business:
- The Chicago Tribune will begin selling ads on its front page and the first page of two other sections.

Daily Telegraph:
- Democratic Representative Keith Ellison, the first Muslim congressman in the US, compared President Bush to Adolf Hitler. The Democratic congressman, who addressed a gathering of atheists in his hometown of Minnesota, also suggested Bush may have been responsible for the Sept. 11 attacks.

21^st Century Business Herald:
- China’s state investment company that is being set up to manage the nation’s foreign-exchange reserves, will book profits in US dollars, citing a financial researcher.

Late Buy/Sell Recommendations
Keybanc:
- Rated (PWR), (EME) and (JEC) Buy.

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 futures unch.
NASDAQ 100 futures -.02%.

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/EPS Estimate
- (ADTN)/.29
- (CHB)/.08
- (SCHW)/.23
- (KO)/.82
- (CCK)/.45
- (CSX)/.64
- (FRX)/.77
- (INTC)/.19
- (JEF)/.39
- (JNJ)/1.00
- (KEY)/.70
- (MER)/2.02
- (PPDI)/.36
- (RF)/.69
- (SLM)/.73
- (STT)/1.01
- (USB)/.67
- (WFC)/.67
- (YHOO)/.11

Upcoming Splits
- (IOSP) 2-for-1

Economic Releases
8:30 am EST
- The Producer Price Index for June is estimated to rise .2% versus a .9% gain in May.
- The PPI Ex Food & Energy for June is estimated to rise .2% versus a .2% gain in May.

9:00 am EST
- Net Long-term TIC Flows for May are estimated to fall to $70.0B versus $84.1B in April.

9:15 am EST
- Industrial Production for June is estimated to rise by .5% versus unch. in May.
- Capacity Utilization for June is estimated to rise to 81.6% versus 81.3% in May.

1:00 pm EST
- The NAHB Housing Market Index for July is estimated to rise to 27 versus a reading of 26 in June.

Other Potential Market Movers
- The Fed’s Hoenig speaking, weekly retail sales reports, (AMAT) Analyst Meeting, AG Edwards E&P Conference and SEMICON West could also impact trading today.

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

Stocks Finish Mostly Lower on Lingering Sub-prime Concerns and Profit-taking

Indices
S&P 500 1,549.52 -.19%
DJIA 13,950.98 +.31%
NASDAQ 2,697.33 -.36%
Russell 2000 848.47 -.85%
Wilshire 5000 15,609.34 -.28%
Russell 1000 Growth 617.24 -.16%
Russell 1000 Value 880.35 -.30%
Morgan Stanley Consumer 742.34 -.32%
Morgan Stanley Cyclical 1,125.11 +.01%
Morgan Stanley Technology 649.21 -.04%
Transports 5,378.68 +.17%
Utilities 507.43 -1.57%
MSCI Emerging Markets 141.46 -.54%

Sentiment/Internals
Total Put/Call .83 -10.75%
NYSE Arms .90 +26.82%
Volatility(VIX) 15.59 +2.90%
ISE Sentiment 169.0 -6.63%

Futures Spot Prices
Crude Oil 74.20 +.37%
Reformulated Gasoline 214.32 -3.67%
Natural Gas 6.40 -4.01%
Heating Oil 206.05 -2.37%
Gold 665.90 -.21%
Base Metals 258.84 257.26 +.20%
Copper 356.0 -.92%

Economy
10-year US Treasury Yield 5.04% -5 basis points
US Dollar 80.56 -.01%
CRB Index 320.64 -1.37%

Leading Sectors
Telecom +.54%
Wireless +.43%
Semis +.34%

Lagging Sectors
Utilities -1.57%
Oil Tankers -2.71%
Coal -3.25%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Deutsche Bank:
- Rated (WNR) Sell, target $48.

Afternoon/Evening Headlines
Bloomberg:
- US Energy Secretary Samuel Bodman sees alternative fuel “breakthroughs” in the next few years.
- Gasoline futures fell 4.4%, the biggest drop in more than eight months, on forecasts a government report this week will show a rise in US inventories with oil inventories near decade highs.
- IBM(IBM) shares reached a five-year high after the company announced a $1.4 billion contract to manage information technology for AstraZeneca Plc, the UK’s second-biggest drugmaker.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Semi longs and (TLT) long. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was below average. Measures of investor anxiety were about average into the close. Today's overall market action was mildly bearish. Despite weakness in the major averages, many market-leading growth stocks traded very well again today. The 10-year yield finished at session lows, which is a positive. Commodity prices fell today, with natural gas(-3.6%), gasoline (-4.0%) and corn (-5.6%) especially weak. As well, the Shanghai composite came under renewed pressure overnight, falling 2.4% on talk from government officials that inflation in the country is accelerating. Some well known bears today were pointing to the CNBC Trillion Dollar Survey and suggesting it is evidence of investor complacency. However, that survey says 80% think the DJIA will close "around 14,000 or higher" at year-end. We are already "around 14,000," so theoretically, 100% of the respondents could believe that stocks will trade "around 14,000 or lower" by year-end. I would hardly call this one survey evidence of investor complacency. I continue to believe the herd has never been more bearish in US history given the recent run we have had and records in the major averages.

Stocks Mixed into Final Hour as Lower Rates, Buyout Activity, Positive Economic Data Offset by Subprime Concerns, Profit-taking

BOTTOM LINE: The Portfolio is higher into the final hour on gains in Retail longs, Internet longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative today as the advance/decline line is lower, most sectors are declining and volume is below average. It is interesting to note the recent uptick in “bull-mocking” by the “permabears.” I would expect to see this near a major market bottom, not anywhere near a top. This is just further evidence of the “U.S. negativity bubble”, in my opinion. It appears the bears' strategy is to take investors' focus off of their own numerous failed calls as the major averages surge once again to records. By chastising the bulls, however, the "fearleaders" are just drawing more attention to their own analysis. Investors would be well-served to perform historical searches on the bears' dire commentary to remind themselves of what they have been told since the major bear market lows of October 2002. The bears' scary predictions during periods of high market stress have been especially telling. The S&P 500 is up 111.5% since the 2002 low, averaging a 17% return on an annualized basis. It is also notable, considering the view by most that oil can only go higher, that the gasoline crack spread has collapsed 40% in five days and is down 17% just today. Moreover, the spread has plunged 57% from the highs seen in mid-May, around when gasoline futures peaked for the year. As well, gasoline futures are dropping another 3.5% today and convincingly breaking down through the uptrend that has been in place since December of last year. The contango in the oil futures market, which encouraged hoarding, is also beginning to reverse meaningfully for the first time in years. This is also occurring when crude oil large speculative traders have never been more net long oil futures and commercial hedgers, historically the “smart money,” have never been more net short oil. I suspect we are within six weeks of another major tradable top in oil, similar to the one seen last year before the commodity plunged $28 per barrel in less than six months. Like last year, this decline should provide another huge upside catalyst for the broad market. I plan to meaningfully increase my energy-related short exposure again over the next six weeks. I expect US stocks to trade mixed-to-higher into the close from current levels on lower long-term rates, buyout speculation and lower commodity prices.