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Monday Watch

Weekend Headlines
Bloomberg:
- Refinery executives are buying more of their own stock than at any time since 2000, prompting investors to bet that a retreat in oil will boost profits and reverse the biggest share decline in a decade. Executives at 10 refining companies snapped up $2 million of their shares last month, twice what they sold., which helped raise the average level of purchases to the highest in eight years. Caxton Associates, Citadel Investment Group and Renaissance Technologies, which oversee $64 billion in hedge-fund assets, also boosted bets that the shares will rebound. “Anyone right now buying the refiners would have to be banking on a pullback in oil prices,” said Jack Ablin, who oversees $65 billion as chief investment officer at Harris Private Bank in Chicago.
- Saudi Arabia is ready to keep on increasing crude output after July if the market needs it, Saudi Oil Minister Ali al-Naimi said.
- Crude oil fell in NY after Saudi Arabia pledged to increase production next month and militants in Nigeria called a cease-fire in their attacks on oil pipelines and vessels.
- Walt Disney’s(DIS) ESPN, the most-watched sports channel is in partnership talks with the NFL to carry more games.
- McCain, Helped by Republican Party, Has More Money Than Obama.
- India’s central bank, which has raised interest rates to a six-year high and reduced cash in the banking system, will take further measures to curb the fastest inflation in 13 years, the government said.
- President Bush said lifting the ban on US offshore oil and gas drilling might eventually help reduce gasoline prices, and Congress should be held accountable if it doesn’t take action.
- Sales of sport-utility vehicles in China may slow after the government raised gasoline prices, Fitch Ratings Ltd. said.
- Japanese manufacturers said they are pessimistic about the outlook for the country’s export-led expansion because of surging energy and commodity costs and the risk of a US recession.

Wall Street Journal:
- As 2008 approaches its midpoint, two of the world’s worst-performing stock markets were not long ago investors’ biggest darlings – China and India.
- Fed, SEC Near Accord To Redraw Wall Street Regulation.

MarketWatch.com:
- Retail investors: Beware Hong Kong shenanigans. Changes in listing rules raise questions.

CNBC.com:
- Are Small-Cap Stocks Signaling a Recovery? In times of economic uncertainty, investors don’t usually flock to volatile assets like small-company stocks. Despite all the bad news surrounding record-high oil prices, mounting job losses, and continuing troubles in housing, the Russell 2000 index of small stocks has soared 12.7 percent since mid-March. By comparison, the Standard & Poor’s 500 index of large stocks is up by a more modest 3.5 percent.

NY Times:
- Demand for certifications of homes as environmentally friendly is growing, reflecting the popularity of “green” living.
- The New Fight for Financial News. Thomson Reuters is going hard after Bloomberg LP, which has long been the marquee name on Wall Street for financial information.
- Papers Facing Worst Year for Ad Revenue. The flow of advertising dollars to Web sites from print has picked up speed.
- Obama’s Campaign Closely Linked With Ethanol.

IBD:
- Diabetes Care Drives Novo’s(NVO) Profit Growth.

TheStreet.com:
- Corning(GLW) said Friday that it continues to see strength in US liquid crystal television display sales in the first five months of 2008.

alternativeassetadviser:
- The MSCI Hedge Invest Strategy Indices subdivide the composite MSCI Hedge Invest Index, enabling a more granular investment exposure to the following distinct hedge fund strategies: Systematic Trading, Discretionary Trading, Event-Driven and Merger Arbitrage, Long Bias, Variable Bias, Equity Non-Directional, Convertible and Equity Arbitrage, and Fixed Income.

LA Times:
- Researchers have uncovered a new clue to the cause of Alzheimer’s disease.

Washington Post:
- European government officials are concerned that Barack Obama’s plan to talk with Iran about its nuclear program without demanding an end to uranium enrichment first will undermine diplomatic efforts. The European officials, speaking anonymously, said requiring the Iranians to the stop enrichment is at the core of UN resolutions designed to curb the nuclear program. Discarding that precondition might fray relations between Europeans and the US, the Europeans said.

Business Week:
- Marcial: Strong Signals for Qualcomm(QCOM). The rally in the stock looks to continue with the rollout of new devices that use the company’s wireless communications technology.

Portfolio.com:
- Countrywide’s(CFC) VIP Club. Senators Dodd and Conrad are among the government officials who scored VIP loans from CEO Angelo Mozilo. An exclusive Portfolio investigation.

Boston Herald.com:
- Look what your petrodollars helped finance: “The cause of the discord: The Jews conspired against Islam.” “In these verses is a call for jihad, which is the pinnacle of Islam.” God “prohibits killing the soul . . . unless for just cause . . . unbelief after belief, adultery and killing an inviolable believer intentionally.” These quotes are from Arabic language, secondary-school textbooks at northern Virginia’s Islamic Saudi Academy. The academy is operated by the Saudi Arabia Embassy and sponsored by the Saudi government. The Saudi state, in turn, is being funded quite lavishly by average American motorists who buy $4.08 gasoline, partially refined from Saudi crude oil. U.S. airlines, shippers, factories and other petroleum buyers inadvertently underwrite such Saudi-inspired hate.

USA Today:
- Google’s(GOOG) Cutts: Good directions drive traffic to your website.

CNNMoney.com:
- Stocks we love: 5 big earners.
- Selling big business on the iPhone.
- Gold: Don’t count on $1,000.

Reuters:
- US corn futures fell 2% in early Asian trading on Monday as improving weather conditions in the Midwest, which struggled with its worst flooding in 15 years, pulled thee grain from record highs last week.

Financial Times:
- Australia overtook the US as the most obese nation in the world, with more than a quarter of the population diagnosed with the condition, citing a study published yesterday. Four million Australians, or 26%, are obese, compared with 25% in the US, according to a study by The Baker Heart Institute in Melbourne.
- Royal Dutch Shell Plc, Europe’s biggest oil producer, delayed drilling in the waters off Alaska for a year because of a court case brought by environmentalists, citing a company manager. The delay will extend and aggravate the energy supply crisis in the US, according to Pete Slaiby, Shell’s general manager for Alaska.
- Bond insurers such as Ambac(ABK), MBIA(MBI) and FGIC are talking to banks about wiping out $125 billion of insurance on risky debt securities in what could be the only way to limit the financial damage surrounding the bond insurers. If agreements are struck about the value of these CDS contacts - and the discussions could take months - it could be significant for the entire financial system, which is clogged up by the uncertainty around the value of derivatives and complex bonds linked to mortgage-backed securities.
- Out of India. Market sell signals seldom come much clearer than this. Two of India’s top industrialists are poised to trade in controlling stakes in their businesses.

TimesOnline:
- Citigroup(C) and Goldman Sachs(GS) cut more staff as effect of credit crunch lingers.

Telegraph:
- Gordon Brown warns OPEC that Britain will cut demand. Britain is ready to spend up to £100 billion weaning households off the expensive energy imports that threaten family finances, Gordon Brown has warned oil-exporting countries. Describing the recent surge in oil prices as the third and worst oil shock to hit the world economy in three decades, Mr Brown promised to deliver British consumers "security of supply that's based on lowering our dependency on imported oil." At the OPEC meeting, he proposed a "new deal" between oil producers and consumers, pledging more transparency in energy markets to help oil states plan new investment in their production capacity. In exchange, the Prime Minister promised to urge Western governments to open their economies to investment from Gulf states enriched by a doubling in oil prices over the last year. Brown also served notice on the oil producers that Britain and other Western economies will dramatically increase efforts to reduce their demand for OPEC's oil. In a new renewable energy strategy to be published on Thursday, the Government will set out plans to reduce Britain's oil consumption by nearly 10 per cent in little more than a decade. The cut will be achieved by a major expansion in renewable power sources like wind, wave and solar generation, and a new drive to increase household energy efficiency.

Wirtschaftswoche:
- German export business confidence declined to the lowest since the end of 2001 in May as the global economy is slowing, citing figures from the Ifo research institute. Orders from abroad dropped 3.8% in April from March.

Le Temps:
- Hedge funds control as much as 30% of the world’s commodity trades, citing Syngenta AG CEO Michael T. Mack. That’s “sufficient to potentially disturb” normal price-fixing mechanisms, he said. Mack also reiterated Syngenta plans to introduce a corn seed with an enzyme that can boost the efficiency of ethanol factories next year.

South China Morning Post:
- China’s banking regulator warned of risky investment products being sold by the nation’s banks that are destabilizing the stock market, citing Li Fuan, head of the regulator’s innovation department. The “blind competition” among Chinese banks to introduce new products has increased risk and caused “chaos” in the market, Li said.

China Daily:
- China’s Guangdong province plans to boost its minimum wages to attract workers to the southern Pearl River Delta region and plug a labor shortage, citing a government official. Shenzhen has adopted a new minimum wage, effective on 1 July, with downtown workers getting at least a 17.6% raise from the prior year. Suburban workers’ minimum wage was boosted 20%, the report said.

Nikkei English News:
- OPEC plans to spend $220 billion by 2012 to increase oil production. $160 billion will be spent on drilling and other related operations to boost output by 5 million barrels a day. The remaining $60 billion will be spent to increase refining capacity by 3 million barrels a day. It is the largest five-year investment by the 13-nation oil producing cartel.

21^st Century Business Herald:
- China needs to keep tightening monetary policies at its current stage, citing an official of the People’s Bank o f China. The central bank fins the required reserve ratio a more effective tool than the interest rate, it said, citing the official.

Kuwait Times:
- Saudi Arabia May Convince OPEC Colleagues to Raise Output Too.

Haaretz.com:
- Israel is a long way from attacking Iran.

Weekend Recommendations
Barron's:
- Made positive comments on (MRO), (XOM), (NFX), (KFT), (RCN), (ONXX) and (SHOR).

Citigroup:
- Reiterated Buy on (OI), target $70.

Night Trading
Asian indices are -1.25% to -.50% on avg.
S&P 500 futures +.30%.
NASDAQ 100 futures +.19%.

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Earnings of Note
Company/Estimate
- (WAG)/.59

Upcoming Splits
- None of note

Economic Releases
- None of note

Other Potential Market Movers
- The (ECA) analyst meeting, (FEIC) investor meeting and Wachovia Nantucket Equity Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and automaker shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for stocks in focus for Monday by MarketWatch.

There are several 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. – S&P/CaseShiller Home Price Index, Consumer Confidence, Richmond Fed Manufacturing Index, House Price Index, weekly retail sales

Wed. – Durable Goods Orders, New Home Sales, FOMC rate decision, weekly MBA Mortgage Applications report, weekly EIA energy inventory data report

Thur. – Final 1Q GDP, Final 1Q, Personal Consumption, Final 1Q GDP Price Index, Final 1Q Core PCE, Initial Jobless Claims, Existing Home Sales, weekly EIA natural gas inventory report

Fri. – Personal Income, Personal Spending, PCE Core, Univ. of Mich. Consumer Confidence

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

Mon. – Walgreen Co.(WAG)

Tues. – Jabil Circuit(JBL), Darden Restaurant(DRI), Sonic Corp.(SONC), Kroger Co.(KR)

Wed. – Monsanto(MON), General Mills(GIS), Nike Inc.(NKE), Oracle Corp.(ORCL), CKE Restaurants(CKE), Herman Miller(MLHR), Red Hat Inc.(RHT), Bed Bath & Beyond(BBBY), American Greeting(AM)

Thur. – Discover Financial(DFS), Lennar Corp.(LEN), ConAgra Foods(CAG), Palm Inc.(PALM), Christopher & Banks(CBK), Paychex(PAYX), Accenture(ACN), Rite Aid(RAD), McCormick & Co.(MKC), Micron Tech(MU)

Fri. – KB Home(KBH), Steelcase Inc.(SCS), Finish Line(FINL)

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

Mon. – (ECA) analyst meeting, (FEIC) investor meeting, Wachovia Nantucket Equity Conference

Tue. – (ALD) investor day, (POR) analyst day, (RDC) conference call, Wachovia Nantucket Equity Conference, Jeffries Healthcare Conference, Bank of America Utilities Conference, Deutsche Bank Alternative Energy Conference, UBS Global Financial Markets & Technology Conference

Wed. – (PRXL) investor meeting, (WMB) analyst day, (MORN) investment conference, Jeffries Healthcare Conference, Wachovia Nantucket Conference, UBS Global Financial Markets & Technology Conference

Thur. – (MORN) investment conference, (GT) investor meeting, (XLNX) analyst meeting, (AUXL) conference call, (BRCD) technology day, Wachovia Nantucket Conference, Jeffries Healthcare Conference, UBS Insurance Conference

Fri. – (MORN) investment conference, JPMorgan Tobacco Conference, UBS Insurance Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, lower energy prices, less economic pessimism, a bounce in emerging market shares, a bounce in financial stocks, bargain-hunting and short-covering. My trading indicators are giving mostly bearish signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,317.93 -3.10%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,317.93 -3.10%
DJIA 11,842.69 -3.77%
NASDAQ 2,406.09 -1.97%
Russell 2000 725.73 -1.07%
Wilshire 5000 13,440.00 -2.70%
Russell 1000 Growth 571.14 -2.37%
Russell 1000 Value 698.67 -3.53%
Morgan Stanley Consumer 668.21 -3.32%
Morgan Stanley Cyclical 909.27 -3.72%
Morgan Stanley Technology 582.78 -2.23%
Transports 5,194.02 +.88%
Utilities 518.85 -.99%
MSCI Emerging Markets 138.91 -1.33%

Sentiment/Internals
NYSE Cumulative A/D Line 53,362 +.10%
Bloomberg New Highs-Lows Index -423
Bloomberg Crude Oil % Bulls 29.0 +38.1%
CFTC Oil Large Speculative Longs 203,806 -6.72%
Total Put/Call 1.29 +41.8%
OEX Put/Call 1.43 +22.2%
ISE Sentiment 76.0 -40.3%
NYSE Arms 1.36 +98.53%
Volatility(VIX) 22.87 +7.78%
G7 Currency Volatility (VXY) 9.91 -7.04%
Smart Money Flow Index 8,378.52 -.18%
AAII % Bulls 32.98 +5.54%
AAII % Bears 45.74 -14.62%

Futures Spot Prices
Crude Oil 134.95 +.02%
Reformulated Gasoline 343.0 -.93%
Natural Gas 13.03 +3.11%
Heating Oil 376.07 -1.90%
Gold 904.0 +3.58%
Base Metals 247.87 +4.93%
Copper 382.0 +6.74%
Agriculture 469.38 -.19%

Economy
10-year US Treasury Yield 4.17% -9 basis points
10-year TIPS Spread 2.50% -2 basis points
TED Spread .95 +10 basis points
N. Amer. Investment Grade Credit Default Swap Index 116.20 +4.19%
Emerging Markets Credit Default Swap Index 239.06 +3.77%
Citi US Economic Surprise Index +12.30 +83.6%
Fed Fund Futures 10.0% chance of 25 hike, 90.0% chance of no move on 6/25
Iraqi 2028 Govt Bonds 73.0 -1.93%
4-Wk MA of Jobless Claims 375,300 +.9%
Average 30-year Mortgage Rate 6.42% +10 basis points
Weekly Mortgage Applications 507,900 -8.83%
Weekly Retail Sales +2.2%
Nationwide Gas $4.08/gallon +.01/gallon.
US Cooling Demand Next 7 Days 2.0% above normal
ECRI Weekly Leading Economic Index 132.60 -.23%
US Dollar Index 73.03 -1.50%
Baltic Dry Index 9,474 -6.59%
CRB Index 455.38 +2.13%

Best Performing Style
Small-cap Growth -.57%

Worst Performing Style
Large-cap Value -3.53%

Leading Sectors
Airlines +2.21%
Steel +2.07%
Oil Service +1.64%
Alternative Energy +1.59%
Biotech +.35%

Lagging Sectors
Insurance -4.33%
Telecom -5.14%
Gaming -5.31%
Banks -5.86%
HMOs -11.24%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Sharply Lower, Weighed Down by Airline, Gaming, Technology, Steel, Financial Shares

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