Monday Watch

Weekend Headlines
Bloomberg:
- Shares of Williams-Sonoma(WSM) surged the most in almost three years today on speculation the biggest gourmet-cookware retailer in the US may be a takeover target, according to an analyst at Thomas Weisel Partners.
- China’s government shut down three companies whose tainted products were used in medicine and pet food, amid efforts to address concerns about the Asian nation’s food safety.
- HIV drugs will be given to people who don’t have the virus by US scientists to determine whether the medicines can protect those at greatest risk of catching the AIDS-causing disease.
- Germany will not be blackmailed into pulling its military forces out of Afghanistan, Chancellor Angela Merkel said, dismissing demand by Taliban insurgents who are reported to have taken German citizens hostage.
- Borders Group(BGP) sold 1.2 million copies of “Harry Potter and the Deathly Hallows” yesterday, giving the 1,200-store chain the highest single-day sales of any title in its history.
- Ev3 Inc.(EVVV), a maker of catheter-based devices to treat vascular diseases, agreed to buy FoxHollow Technologies(FOXH), the maker of a device to treat arterial blockage, for $780 million in cash and stock.
- Crude oil is falling a second day in NY on signs fuel stockpiles will increase as refiners increase output.
- Treasuries Attract Pension Funds Overflowing With Stock Gains.
- Bear Stearns(BSC) Shares Show Cayne’s Dummy ‘Body Blow’ Won’t Hurt.
- China’s copper imports, the largest in the world, fell 6.8% in June from May as rising prices reduced the profitability of shipments.

Wall Street Journal:
- Trying to cash in on investors’ fascination with alternative investments, Wall Street is pitching a complex new product that aims to mimic hedge-fund performance while avoiding the gigantic fees that real ones charge.
- Barclays Plc is trying to recover $400 million it invested in a Bear Stearns(BSC) fund, a conflict that could lead to arbitration or litigation.
- Technology demand is showing an unexpected surge, driven by rapidly falling prices for components such as computer chips and disk drives, business spending and a rush by people around the world to get on the Internet.
- Numbers Game: Why ‘Guidance’ May Not Matter.
- States Aim to Stem Tide of Home Foreclosures with Funds for Refinancing.

NY Times:
- A record number of fires, power failures, leaks, spills and breakdowns at US oil refineries this year has caused disruptions that have pushed up wholesale gasoline prices 35%.
- General Electric CEO Immelt faces pressure from stockholders to boost the company’s shares.
- Podcasters Unite to Figure Out a Role for Ads.

Business Week:
- The Best Product Design of 2007.
- The Dow's sprint isn't over. One big reason: Of the index's 30 components, at least nine are trading way below their fair market, or intrinsic, value, according to some valuation studies.

AP:
- Iranian and US officials will meet July 24 to discuss the security situation in Iraq, citing Hoshyar Zebari, Iraq’s foreign minister.

Reuters:
- OPEC concerned oil price may hurt global economy. Tight supplies of refined products in the US, investment fund buying of oil futures and international political tension have pushed the price higher, said OPEC President Mohammed al-Hamli.

Washington Post:
- Presidential candidates, including Democratic Senator Hillary Rodham Clinton and Republican Senator John McCain, have made stops at Google’s(GOOG) headquarters in an effort to show they are in touch with the company that has come to represent innovation in Silicon Valley.

Crain’s Chicago Business:
- The Chicago Board Options Exchange has barred about 600 members of the Chicago Board of Trade who haven’t exercised their CBOE trading rights from the exchange.

EE Times:
- Apple flash memory demand triggers shortage fears.

Star-Ledger of Newark:
- New Jersey Democratic Governor Jon Corzine urged United Parcel Service to obey state law and give benefits to partners in same-sex relationships.

CNNMoney.com:
- A fair price for both oil producers and consumers for a barrel of oil would be around $60 to $65 a barrel, a Kuwaiti state oil newsletter quoted the head of OPEC's research division as saying.

Financial Times:
- Merrill Lynch(MER), Lehman Brothers(LEH), Morgan Stanley(MS) and Citigroup(C) are among a group of investment banks developing an electronic trading platform for unregistered securities to compete with existing systems such as the one created by Goldman Sachs(GS).

Daily Telegraph:
- Facebook Inc., a social-networking Web site, is getting 150,000 new members a day.

South China Morning Post:
- China has indefinitely postponed the release of a so-called “Green GDP” because of bureaucratic infighting and local authorities’ opposition, citing Wang Jinnan, who devised the plan.

Hong Kong Commercial Broadcasting:
- China’s government will further tighten monetary policy after increasing lending and deposit rates last week, Hong Kong Monetary Authority Chief Executive Joseph Yam said.

Weekend Recommendations
Barron's:
- Made positive comments on (BBBY), (M), (KSS), (VIA), (KDN), (BBY) and (LVS).

Night Trading
Asian indices are -.75% to unch. on average.
S&P 500 futures -.01%.
NASDAQ 100 futures -.07%.

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
- (ALTR)/.21
- (AXP)/.86
- (ACI)/.27
- (ATHR)/.22
- (AV)/.15
- (CGNX)/.11
- (GNTX)/.21
- (HAL)/.56
- (HAS)/.18
- (LNCR)/.62
- (MRK)/.72
- (NFLX)/.24
- (SGP)/.35
- (STN)/.55
- (TASR)/.04
- (TXN)/.42
- (WFT)/.70

Upcoming Splits
- None of note

Economic Releases
- None of note

Today’s Other Potential Market Movers
- None of note

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and utility 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.

Weekly Outlook

Click here for The Week Ahead by Reuters.

Click here for Stocks in Focus for Monday by MarketWatch.com.

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

Economic reports for the week include:

Mon. – None of note

Tues. – Richmond Fed Index, weekly retail sales

Wed. – Weekly EIA energy inventory data, weekly MBA Mortgage Applications report, Existing Home Sales, Fed’s Beige Book

Thur. – Durable Goods Orders, Initial Jobless Claims, New Home Sales

Fri. – Advance 2Q GDP, Advance 2Q Personal Consumption, Advance 2Q GDP Price Index, Advance 2Q Core PCE, Univ. of Mich. Consumer Confidence

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

Mon. – Altera Corp.(ALTR), American Express(AXP), Atheros Communications(ATHR), Avaya Inc.(AV), Halliburton(HAL), Hasbro(HAS), Lincare(LNCR), Merck(MRK), Schering-Plough(SGP), Station Casinos(STN), Taser Intl.(TASR), Texas Instruments(TXN)

Tues. – Aflac(AFL), Amazon.com(AMZN), AT&T(T), Biogen Idec(BIIB), BJ Services(BJS), Bowater(BOW), Burlington Northern(BNI), CDW Corp.(CDWC), Centex Corp.(CTX), Cerner Corp.(CERN), Cheesecake Factory(CAKE), Chubb Corp.(CB), Countrywide Financial(CFC), Domino’s Pizza(DPZ), Eli Lilly(LLY), EMC Corp.(EMC), Energizer Holdings(ENR), Illumina Inc.(ILMN), Kimberly-Cark(KMB), Lam Research(LRCX), Legg Mason(LM), Lexmark Intl.(LXK), Linear Tech(LLTC), Lockheed Martin(LMT), McDonald’s(MCD), Nabors Industries(NBR), Northrop Grumman(NOC), Panera Bread(PNRA), PepsiCo(PEP), Raymond James(RJF), Stanley Works(SWK), United Parcel Service(UPS)

Wed. – Akamai Technologies(AKAM), Alcon(ACL), Allegheny Technologies(ATI), Anheuser-Busch(BUD), Apple Inc.(AAPL), Baidu.com(BIDU), Boeing Co.(BA), Colgate-Palmolive(CL), ConocoPhillips(COP), Corning Inc.(GLW), E*Trade(ETFC), F5 Networks(FFIV), Freeport-McMoRan(FCX), General Dynamics(GD), Genzyme Corp.(GENZ), LSI Coprp.(LSI), Norfolk Southern(NSC), PF Chang’s(PFCB), Pulte Homes(PHM), Qualcomm Inc.(QCOM), Ryland Group(RYL), Sealed Air(SEE), Symantec(SYMC), Terex Corp.(TEX), Timberland(TBL), Tractor Supply(TSCO), Tribune(TRB), Zimmer Holdings(ZMH)

Thur. – 3M Co.(MMM), Aetna(AET), AmerisourceBergen(ABC), Amgen(AMGN), Apache Corp.(APA), Beazer Homes(BZH), Becton Dickinson(BDX), Black & Decker(BDX), Bristol-Myers(BMY), CB Richard Ellis(CBG), Celgene(CELG), Cummins(CMI), Deckers(DECK), Dow Chemical(DOW), DR Horton(DHI), Exxon Mobil(XOM), Flextronics(FLEX), Ford(F), Ingram Micro(IM), Intercontinental Exchange(ICE), Kellogg(K), KLA-Tencor(KLAC), L-3(LLL), Level 3(LVLT), MBIA(MBI), McAfee(MFE), McKesson(MCK), Office Depot(ODP), QLogic(QLGC), Raytheon(RTN), Riverbed(RVBD), Royal Caribbean(RCL), Tidewater(TDW), VeriSign(VRSN), Wendy’s(WEN), Western Digital(WDC), XM Satellite(XMSR)

Fri. – Baker Hughes(BHI), Chevron Corp.(CVX), Clear Channel(CCU), Fortune Brands(FO), ITT Corp.(ITT), Medco Health(MHS)

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

Mon. – None of note

Tue. – The Fed’s Mishkin speaking, Fed’s Poole speaking

Wed. – The Fed’s Poole speaking, Fed’s Geithner speaking

Thur. – (MSFT) Analyst Meeting

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week mixed as better-than-expected earnings reports, more economic optimism and short-covering offsets profit-taking and lingering sub-prime concerns. My trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,552.50 -1.18%*

Click here for What a Week by TheStreet.com.

Weekly Scoreboard*

Indices
S&P 500 1,534.10 -1.18%
DJIA 13,851.08 -.40%
NASDAQ 2,687.60 -.72%
Russell 2000 836.44 -2.26%
Wilshire 5000 15,459.50 -1.24%
Russell 1000 Growth 614.51 -.60%
Russell 1000 Value 867.45 -1.76%
Morgan Stanley Consumer 730.74 -1.87%
Morgan Stanley Cyclical 1,109.91 -1.34%
Morgan Stanley Technology 653.23 +.58%
Transports 5,359.82 -.18%
Utilities 511.85 -.71%
MSCI Emerging Markets 141.34 -.63%

Sentiment/Internals
NYSE Cumulative A/D Line 76,081 -2.1%
Bloomberg New Highs-Lows Index +440 -37.0%
Bloomberg Crude Oil % Bulls 36.0 -19.0%
CFTC Oil Large Speculative Longs 246,844 -.88%
Total Put/Call 1.23 +32.26%
NYSE Arms 2.14 +201.41%
Volatility(VIX) 16.95 +11.88%
ISE Sentiment 132.0 -27.1%
AAII % Bulls 41.77 -4.3%
AAII % Bears 36.71 +22.4%

Futures Spot Prices
Crude Oil 75.82 +2.36%
Reformulated Gasoline 216.58 -2.67%
Natural Gas 6.39 -4.11%
Heating Oil 209.22 -.73%
Gold 683.50 +2.59%
Base Metals 267.19 +4.1%
Copper 369.50 +2.86%

Economy
10-year US Treasury Yield 4.95% -15 basis points
4-Wk MA of Jobless Claims 312,000 -2.0%
Average 30-year Mortgage Rate 6.73% unch.
Weekly Mortgage Applications 631.60 +.86%
Weekly Retail Sales +2.70%
Nationwide Gas $3.00/gallon -.05/gallon
US Cooling Demand Next 7 Days 6.0% below normal
ECRI Weekly Leading Economic Index 143.90 unch.
US Dollar Index 80.28 -.36%
CRB Index 324.44 -.20%

Best Performing Style
Large-Cap Growth -.59%

Worst Performing Style
Small-Cap Value -2.71%

Leading Sectors
Disk Drives +4.05%
Computer Services +3.6%
Computer Hardware +2.76%
Oil Service +2.39%
Semis +2.22%

Lagging Sectors
Banks -3.11%
Oil Tankers -3.44%
Homebuilders -4.86%
I-Banks -4.99%
Coal -7.67%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Profit-taking, Earnings Jitters, Lingering Subprime Concerns

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Computer longs, Medical longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative today as the advance/decline line is substantially lower, most sectors are declining and volume is heavy. My intraday gauge of investor angst is elevated, which is a positive. Cyclicals and small-caps are especially weak today. However, several sectors are hanging tough, including computer hardware, disk drives, oil service, defense and medical stocks. As well, an unusual number of stocks on my monitor pages are higher given headline losses. The 10-year yield is plunging another 6 basis points to, 4.95%. As I said when the 10-year yield was soaring in June, I still think the yield will fall to at least 4.75% later this quarter as inflation expectations diminish further. This will eventually be perceived as a large positive, especially for growth stocks. Google (GOOG) reported a slight disappointment after the close yesterday. I still think that the company is doing all the right things to become a monopoly in its fast-growing market and laying the groundwork to dominate many other Internet markets. I added a bit to my long yesterday in after-hours at around $511 and still expect it to easily surpass $600 before year-end. Intuitive Surgical (ISRG), on the other hand, is soaring 32% on a stellar report. I also think this is another example of a short squeeze. Short interest in the shares and the put/call open interest ratio are near records. As I said when ISRG was correcting last year down around $90, I still think the company has the potential to be one of the best growth stocks over the next decade. I remain long the shares. The NYSE reported yesterday after the close that short interest on the exchange surged another 3.9%, building on its recent parabolic rise and making another record high. I continue to believe this is unsustainable, and I will post more details on it next week. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower long-term rates, falling energy prices and bargain-hunting.

Today's Headlines

Bloomberg:
- The Fed’s Poole said that the sub-prime mortgage problem should remain isolated and that inflation expectations seem well contained.
- Corn futures in Chicago headed for the biggest weekly drop in 10 years and soybeans fell on speculation rains and cooler weather will promote development of the two biggest US crops.
- Sugar is falling in NY on speculation that India, the second-largest producer, may offer to sell unrefined supplies of the sweetener, adding to a global surplus.
- Natural gas futures in NY fell again, dropping 4%, on signs that US supplies are poised to break record levels this year.

Wall Street Journal:
- T.Boone Pickens, chairman of Dallas-based BP Capital LLC, wants to set up retail natural-gas transportation fueling stations in China to help cut pollution.
- Google Inc.(GOOG) started offering Internet tools, including free online advertisements, to politicians as a way to help them get elected.
- John Edwards, the third-ranking Democratic candidate for president, continues to hold sway over much of the party’s debate on Iraq, health care and other issues.
- The SEC may amend the rule which allows fund companies to charge marketing fees, known as 12b-1 fees, citing SEC Chairman Christopher Cox.

NY Times:
- US congressional Democrats are delaying an overhaul of the country’s voting system after receiving pressure from state and local officials and advocates for the disabled.

USA Today:
- US cities need to spend $1.6 trillion during the next five years to replace or rebuild aging roads, water systems, dams and airport runways, citing an engineering trade group.

AP:
- A plan to commemorate the sixth anniversary of the World Trade Center attacks in a small park is opposed by victims’ families. In a letter this week, family groups called the Trade Center “sacred ground” and questioned whether the crowds of mourners would be accommodated at Zuccotti Park, southeast of the site and about three-quarters of an acre in size.
- A military device found on a NJ women’s lawn today was inoperable and didn’t pose a hazard, citing police.
- Major General Richard Lynch, commander of US forces south of Baghdad, said it will take until late this year to defeat militants and until next summer to secure gains made by US soldiers. Reversing the US troop buildup in Iraq would risk giving up the progress American soldiers have made, he said. Yesterday, Lieutenant General Ray Odierno, the day-to-day commander of US forces in Iraq, said that al-Qaeda been placed on the defensive by a monthlong US offensive.