Monday Watch

Weekend Headlines
Bloomberg:
- Intel Corp.(INTC), Cisco Systems(CSCO) and Johnson & Johnson, perennial favorites of money managers seeking US stocks with the fastest profit growth, are becoming staple for so-called value investors. Shares of growth companies in the S&P 500 trade at an average 16.3 times estimated earnings, while value stocks, those priced at a discount to the market or their historical average, trade at 14 times profits. The gap between them, now 2.3 points, has narrowed from 25.5 at the beginning of the decade, data compiled by Bloomberg show.
- Bear Stearns Cos.(BSC) Co-President Warren Spector resigned after credit market losses and eroding investor confidence increased pressure for management changes at the second-largest underwriter of securities tied to the slumping US housing market.
- The US House completed congressional passage of anti-terrorist legislation that gives President Bush more power to conduct electronic surveillance for the next six months.
- Federal Reserve Chairman Ben Bernanke may respond to the latest squall in financial markets the same way he did when turbulence hit four months ago: with a change in words rather than policy.
- Jones Apparel Group(JNY) said it plans to accept an increased $950 million offer from Fast Retailing Co. of Japan for its Barneys New York stores chain, turning down a bid from Dubai’s Istithmar PJSC.
- Democratic US House Speaker Nancy Pelosi Risks Losing Support by Continuing to Fund Pet Projects.
- Lead, the best-performing commodity in 2007, has peaked and may plummet for the rest of the year.
- Yields on 10-year notes fell below where they started in January after climbing to a five-year high in June. Government securities are on track to return 5.3% this year, the best performance since gaining 12% in 2002, Merrill Lynch index data show.
- The US House for the first time approved a requirement that investor-owned utilities produce electricity from renewable energy sources.
- US officials are coordinating with the Iraqi government to arrange a security meeting with IranBaghdad, a State Dept. spokeswoman said. in
- The US House approved a $16 billion tax plan and a renewable electricity mandate in broad energy legislation that shifts the government’s focus to wind, solar and biomass production at the expense of traditional energy sources.
- Reliance Industries Ltd., India’s largest company by market value, will invest as much as $14 billion over the next three years in oil exploration and production as the government offers new rigs to drill each year.
- The NY Times will shrink the width of its newspaper by 1 ½ inches tomorrow to cut newsprint expenses, almost eight months ahead of schedule, according to a note to its readers.
- Chrysler LLC's new owner, Cerberus Capital Management LP, picked former Home Depot(HD) CEO Robert Nardelli as CEO, succeeding Tom LaSorda.

Wall Street Journal:
- News Corp.(NWS/A) Chairman Murdoch, who agreed to buy Dow Jones(DJ) last week, said the Wall Street Journal “needs a little more urgency” on its front page.
- Imperial Chemical Industries Plc reached a tentative agreement to be taken over by Akzo Nobel NV and a German partner for about $16.3 billion.

NY Times:
- The US government will begin enforcing rules for new highway bridges in October intended to ensure they are safe and their foundations can withstand river currents.
- Many dogs wear collars with ID tags. Now some collars also have Global Positioning System units, motion sensors or other additions to help owners keep track of their pets the high-tech way.

Barron’s:
- EchoStar Communications(DISH) and GMAC LLC are among companies whose high-yield bonds are attractive after a recent decline in the fixed-income market.

MarketWatch.com:
- Newly minted ETF targets companies that cater to the rich.
- Health-care fund manager Rob Junkin is Stockpicker of the Quarter.

AP:
- US Senator Hillary Rodham Clinton drew boos and hisses in Chicago today when she defended representatives of special interests who contribute to campaigns. “A lot of those lobbyists, whether you like it or not, represent real Americans,” the NY Democrat and potential presidential candidate, said at the Yearly Kos convention of 1,500 “bloggers.”

IBD:
- Credit Woes Grow As Fear Over Fears Worsen Problems.

Reuters:
- Markets give short-sellers long-awaited gains.

EE Times:
- The production outage at certain Samsung Electronics fabs could cause the current shortage of NAND flash parts to linger through the first half of August – potentially boosting prices, according to iSuppli Corp.

CBS News.com:
- Republican John McCain said Saturday that Congress could share in the blame for the Minnesota bridge collapse because lawmakers diverted billions of dollars in transportation money from road work to pet projects.

DigiTimes:
- Acer Inc.’s notebook computer shipments will surpass 1.5 million units this month, up from an average 1 million a month in the second quarter.

Washington Post:
- Hedge Funds to the Rescue. A decade ago, financial globalization seemed terrifying. Crises swept from East Asia to Russia and Brazil; the implosion of a globe-spanning hedge fund, Long-Term Capital Management, forced the Fed to orchestrate a bailout. But this decade may be remembered for the opposite lesson.

Financial Times:
- On Wall Street: Hedge fund storm is no reason to panic.

London-based Times:
- Jacques Nasser, former chief executive officer of Ford Motor(F), may visit the Land Rover and Jaguar factories in the UK, as part of an attempt to buy the brands.

Observer:
- British troops serving in Afghanistan may remain in the country for more than 30 years, a UK army chief said.

AFP:
- The Al-Qaeda terror network has warned that US diplomatic missions are legitimate targets and the group would attack them, citing a video posted on a terror-monitoring Web site.

Finanz & Wirtschaft:
- Credit Suisse Group reduced its investments in the US subprime lending market “early” and is now “comfortable” with its position, CEO Brady Dougan said.

China Times:
- Taiwan plans to build wave-energy plants powered by a current flowing past its east coast to help cut fuel imports and carbon dioxide emissions, citing Energy Bureau Director-General Yeh Huey-ching.

Kyodo News:
- Japan’s government plans to ease restrictions on US beef imports after meetings between the two countries ended in Tokyo yesterday with “no serious problems,” citing Japanese officials.

Xinhua:
- Brazil and Mexico will sign accords to promote ethanol production and biofuel technology exchange, Brazil’s Agricultural Minister Reinhold Stephanes said.
- China still faces serious challenges in ensuring the safety of medicines, meat and other products even after recent improvements, citing Hui Lusheng, assistant director of the State Food and Drug Administration.

Weekend Recommendations
Barron's:
- Made positive comments on (CLX), (LBTYA) and (BR).
- Made negative comments on (ACA).

Citigroup:
- Inventories at semiconductor manufacturers declined 3.5% in 2Q07, well below normal seasonal builds of 7.1%. While the inventory correction has been underway since September, the possibility of tightness in a strong end-market environment creates potential for strong sector fundamentals in 2H07.

Night Trading
Asian indices are -1.75% to -1.0% on average.
S&P 500 futures -.26%.
NASDAQ 100 futures -.21%.

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
- (NILE)/.24
- (BMC)/.34
- (CNO)/.19
- (CXW)/.26
- (CTRP)/.15
- (DNB)/.97
- (JCOM)/.35
- (MNT)/.34
- (QSII)/.33
- (ZQK)/.02
- (ROG)/.18
- (SINA)/.24
- (ELOS)/.36
- (TRID)/.25
- (WYNN)/.53

Upcoming Splits
- (HCSG) 3-for-2

Economic Releases
- None of note

Other Potential Market Movers
- The CIBC Enterprise Software Conference and the Pacific Crest Tech Forum could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% 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 several economic reports of note and some significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:
Mon. – None of note

Tues. – Non-farm Productivity, Unit Labor Costs, FOMC Rate Decision, Consumer Credit, weekly retail sales

Wed. – Weekly MBA Mortgage Applications, Wholesale Inventories

Thur. – Initial Jobless Claims, ICSC Chain Store Sales

Fri. – Import Price Index, Monthly Budget Statement

Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. – Blue Nile(NILE), BMC Software(BMC), Conseco(CNO), Dun & Bradstreet(DNB), Quiksilver(ZQK), Sina Corp.(SINA), Trident Microsystems(TRID), Wynn Resorts(WYNN)

Tues. – Cisco Systems(CSCO), Dean Foods(DF), Duke Energy(DUK), El Paso(EP), Emerson Electric(EMR), Flour Corp.(FLR), Frontier Oil(FTO), Harrah’s Entertainment(HET), Marsh & McLennan(MMC), Marvel Entertainment(MVL), McDermott Intl.(MDR), Onyx Pharmaceuticals(ONXX), Papa John’s(PZZA), Priceline.com(PCLN), Titanium Metals(TIE), Tyco Intl.(TYC)

Wed. – Advance Auto Parts(AAP), American International Group(AIG), Barr Pharma(BRL), Brightpoint(CELL), Cablevision Systems(CVC), Flowserve(FLS), Georgia Gulf(GGC), Hansen Natural(HANS), Jack in the Box(JBX), News Corp.(NWS/A), Nuance Communications(NUAN), Polo Ralph Lauren(RL), Sprint Nextel(S), Station Casinos(STN)

Thur. – Brinker Intl.(EAT), California Pizza Kitchen(CPKI), Cardinal Health(CAH), Diebold(DBD), Dillard’s(DDS), Dynegy(DYN), Emulex(ELX), Limelight(LLNW), Nvidia Corp.(NVDA), Urban Outfitters(URBN)

Fri. – Bausch & Lomb(BOL), EchoStar Communications(DISH), International Rectifier(IRF), Kohl’s(KSS), Pacific Sunwear(PSUN), Triarc(TRY)

Other events that have market-moving potential this week include:
Mon. – CIBC Enterprise Software Conference, Pacific Crest Tech Forum

Tue. – RBC Tech Conference, CIBC Enterprise Software Conference, Canaccord Adams Global Growth Conference, Pacific Crest Tech Forum

Wed. – CSFB Electrical Equip. & Multi-Industry Conference, Canaccord Adams Global Growth Conference, Pacific Crest Tech Forum

Thur. – CSFB Electrical Equip. & Multi-Industry Conference, RBC Tech Conference, Canaccord Adams Global Growth Conference, (BBY) Investor and Analyst Day

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on constructive Fed comments, better-than-expected earnings reports, mostly positive economic data, bargain-hunting, lower energy prices and short-covering. My trading indicators are giving bearish signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,433.06 -1.78%*

Click here for The Weekly Wrap by Briefing.com.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,433.06 -1.78%
DJIA 13,181.91 -.63%
NASDAQ 2,511.25 -1.99%
Russell 2000 755.42 -2.88%
Wilshire 5000 14,389.19 -1.87%
Russell 1000 Growth 579.44 -1.25%
Russell 1000 Value 800.71 -2.27%
Morgan Stanley Consumer 700.95 -.21%
Morgan Stanley Cyclical 1,016.40 -.92%
Morgan Stanley Technology 617.81 -2.49%
Transports 4,873.81 -3.28%
Utilities 476.75 +.41%
MSCI Emerging Markets 130.82 -1.65%

Sentiment/Internals
NYSE Cumulative A/D Line 65,800 -2.09%
Bloomberg New Highs-Lows Index -735 -11.03%
Bloomberg Crude Oil % Bulls 16.0 -65.1%
CFTC Oil Large Speculative Longs 264,395 +4.53%
Total Put/Call 1.43 +10.0%
NYSE Arms 3.52 +156.93%
Volatility(VIX) 25.16 +4.1%
ISE Sentiment 103.0 -21.97%
AAII % Bulls 45.88 +3.78%
AAII % Bears 40.0 +8.58%

Futures Spot Prices
Crude Oil 75.48 -2.04%
Reformulated Gasoline 202.90 -2.65%
Natural Gas 6.09 -2.09%
Heating Oil 203.40 -2.87%
Gold 684.40 +1.86%
Base Metals 255.51 +.73%
Copper 347.90 -1.90%

Economy
10-year US Treasury Yield 4.69% -7 basis points
4-Wk MA of Jobless Claims 305,500 -1.1%
Average 30-year Mortgage Rate 6.68% - 1 basis points
Weekly Mortgage Applications 607.10 -.31%
Weekly Retail Sales +2.8%
Nationwide Gas $3.86/gallon -.06/gallon
US Cooling Demand Next 7 Days 27.0% above normal
ECRI Weekly Leading Economic Index 142.50 -.77%
US Dollar Index 80.18 -.95%
CRB Index 318.17 -.45%

Best Performing Style
Large-Cap Growth -1.25%

Worst Performing Style
Small-Cap Value -3.66%

Leading Sectors
Defense +2.16%
Engineering & Construction +1.81%
Gaming +1.29%
Medical Equipment +1.19%
HMOs +.77%

Lagging Sectors
Insurance -4.28%
Coal -5.41%
Biotech -5.42%
Oil Service -6.4%
I-Banks -7.6%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Falling into Final Hour on Bear Stearns Comments

BOTTOM LINE: The Portfolio is lower into the final hour as losses in my Computer longs and Biotech longs are more than offsetting gains in my commodity shorts and emerging market shorts. I added to my (EEM) short and to my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 50% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, every sector is lower and volume is above average. My intraday gauge of investor angst is at a very elevated level. The major averages and breadth are pushing lower on comments from Bear Stearns (BSC) on a conference call. I didn't think they said anything we didn't already know, but the market's reaction to them was severe. Bank of America is defending BSC, saying its valuation is at a 12-year low and that the decline in the shares is overdone. Trading in the broad market has a sloppy, panicky feel to it again. The CBOE total put/call ratio soared to a very elevated 1.76. It has been higher only nine other times in the last decade. The last time it was this high was March 15, a day after the market had already bottomed. Moreover, the 10-day moving average of the CBOE total put/call is a very elevated 1.25. It has only exceeded this level once in history, which was during the March decline. Only time will tell, but I sense that the market has once again priced in the worst-case scenario rather than the most realistic one with regards to the U.S. economy and stocks. I expect US stocks to trade mixed-to-lower into the close from current levels on credit fears and worries regarding overseas shares Sunday night/Monday morning.

Today's Headlines

Bloomberg:
- Crude oil is falling another $.70/bbl. after OPEC said it pumped the most oil in July since September 2004, excluding Angola’s entry in January.
- Colorado State University forecasters trimmed the number of major hurricanes they expect to form in the Atlantic Ocean this year to four from five forecast in May.
- Bear Stearns(BSC), the manager of two hedge funds that collapsed last month, had its credit-rating outlook cut to negative by S&P on concern declining prices for mortgage-backed securities will reduce earnings.
- President Bush signed legislation today that stiffens requirements for screening air and sea cargo and increases anti-terrorism grants to high-risk states and cities.

Wall Street Journal:
- US recalls of toys contaminated by lead paint may point to a Chinese health problem, because lead is still a typical addition to paint in the country.
- Hayman Capital Partners LP and Balestra Capital Partners are among US hedge funds that profited in July by betting on problems in the subprime mortgage market.
- Cardiologists at the Minneapolis Heart Institute have started airlifting heart-attack patients from as far as 210 miles away to provide them with faster treatment than they would get otherwise.
- Bulgari Spa, Cartier, LVMH Moet Hennessy Louis Vuitton SA and other European jewelry and luxury goods companies are boosting sales of diamond engagement rings as demand for them increases in Europe and China.

NY Times:
- Young working women in major US cities are earning more than their male counterpart, citing an analysis of census data.

Dow Jones:
- Kohlberg Kravis Roberts is looking to buy Beyonics Technology’s hard-disk drive business.