Today's Headlines

Bloomberg:
- The cost of protecting U.S. corporate bonds from default fell as crude oil prices dropped to a more than six-week low and Wachovia Corp. slashed its stock dividend and said it may sell assets to shore up capital. Credit-default swaps on the Markit CDX North America Investment Grade Index, a benchmark gauge of credit risk tied to the bonds of 125 companies in the U.S. and Canada, fell 3 basis points to 136.5 basis points as of 11:38 a.m. in New York, according to broker Phoenix Partners Group.
- Crude oil fell more than $4 a barrel, dropping to a six week low, on forecasts a tropical storm in the Gulf of Mexico will miss oil fields and refineries and a .68% surge in the US dollar.
- Corn fell below $6 a bushel for the first time in seven weeks on speculation falling energy costs will diminish the appeal of commodities as a hedge against inflation. ``Crude oil is driving speculators and investors to dump all commodity positions,'' said Chad Henderson, a market analyst for Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. ``Grains are following crude oil.''
- Wachovia Corp.(WB) Chief Executive Officer Robert Steel plans to cut $2 billion of expenses by the end of next year and sell parts of the fourth-biggest U.S. bank after posting a record quarterly loss, slashing the dividend 87 percent and eliminating 6,350 jobs.
- United Airlines parent UAL Corp(UAUA) rose the most since leaving bankruptcy two years ago after saying it will cut 7,000 jobs and free up cash under a new credit-card agreement with JPMorgan Chase & Co.(JPM).
- Bayerische Motoren Werke AG, the world's largest maker of luxury autos, plans to offer battery- powered Mini cars in the U.S. by mid-2009 to meet demand for fuel-efficient vehicles. ``There will be electric Minis driven by real customers a year from now,'' Jim McDowell, chief of the Mini brand in North America, said at an event today in Birmingham, Michigan.
- Caterpillar Inc.(CAT), the world's largest maker of earthmoving equipment, said second-quarter profit climbed 34 percent, exceeding analysts' estimates, on demand for backhoes and mining tools in China and the Middle East.
- General Electric Co.(GE), turning to sovereign wealth as it exits U.S. consumer financing, formed an $8 billion venture with Abu Dhabi's Mubadala Development Co. to profit from commercial investments in the Middle East and Africa. State-owned Mubadala also said it wants to become a top 10 holder in Fairfield, Connecticut-based GE, whose shares have lost about a quarter of their value since April 11.
- Quest Diagnostics(DGX) Inc., the largest U.S. provider of medical tests, rose the most in three months in New York trading after reporting second-quarter profit that beat analysts' estimates.
- United Parcel Service Inc.(UPS), the world's largest package-delivery company, said second-quarter profit fell 21 percent as fuel costs rose and the cooling economy damped domestic shipments. Revenue rose 6.7 percent to $13 billion, Atlanta-based UPS said today in a statement. ``Although things remain very uncertain, the sky is not falling,'' said Dan Ortwerth, an analyst at Edward Jones & Co. in St. Louis.
- The US dollar rose the most against the euro in more than two weeks as Treasury Secretary Henry Paulson voiced support for the currency and the Federal Reserve Bank of Philadelphia president said interest rates should be raised.
- Federal Reserve Bank of Philadelphia Charles Plosser said the central bank should raise interest rates ``sooner rather than later'' to lower inflation and prevent price expectations from getting out of control.

Wall Street Journal:
- GM(GM) Teams With Dozens Of Utilities on Plug-In Cars. Collaboration Seeks To Smooth the Path For Electric Vehicles.
- The Federal Energy Regulatory Commission is moving forward with an investigation in which it has accused fallen hedge fund Amaranth Advisors of manipulating the natural-gas markets, the agency said Thursday.

NY Times:
- Videoconferencing Gains Favor as Travel Costs Rise.
- Product Placement Finds a New Home on TV News Set.

USA Today:
- Iraqi insurgents have nearly ceased their once constant attacks on US convoys, allowing shipments for reconstruction projects to reach their highest levels since the start of the war.

MacDailyNews:
- RUMOR: Apple’s(AAPL) secret product is ‘MacBook touch’.

La Stampa:
- Europe’s economic recovery may take longer than the ECB forecasts and could come after the fourth quarter, citing an interview with board member Lorenzo Bini Smaghi.

Interfax:
- The pace of Russia’s economic growth could be slowed by high inflation, citing Finance Minister Alexei Kudrin. Producer-price growth accelerated to 28.1% in June, a 3 ½ year high, the statistics service said yesterday. The annual inflation rate stood at 15.1% in June, the most since December 2002.

Estado de Sao Paulo:
- Republican presidential nominee John McCain said closer ties between the US and Brazil would offset the influence of Venezuelan President Hugo Chavez. McCain said he would support Brazil’s entry into the Group of Eight and his proposed “League of Democracies.” He also vowed to cut subsidies to US sugar producers and lower tariffs on Brazilian ethanol if elected.

Arab Times:
- Kuwaiti lawmakers Mohammed al-Obaid urged the government to take serious measures to curb “alarming” price rises in food and other commodities.

Jordan Times:
- Jordan’s inflation rate for the year is unlikely to fall below 14%, citing a report by First Strategieh Consulting. Inflation will slow down the economy and negatively impact employment and standards of living, citing Tayseer Smadi, the report’s author. Jordanian inflation accelerated to an annual 16.6% in June as the prices of food, housing, clothing and services increased following the government’s lifting of fuel subsidies, according to the government’s Dept. of Statistics.

Bear Radar

Style Underperformer:

Mid-cap Growth -1.19%

Sector Underperformers:

Coal irlind (-7.59%), Semis (-4.50%) and Energy (-2.70%)

Stocks Falling on Unusual Volume:

MICC, TXN, VOD, HES, TIE, GMXR, GDP, CSIQ, ARTC, SNDK, SIMO, NPBC, ALV, TLP, AMX and BSX

Stocks With Unusual Put Option Activity:

1) SPF 2) LUV 3) NSM 4) ITMN 5) BTU

Home Prices Fall Less Than Expected

- The House Price Index for May fell .3% versus estimates of a .8% decline and a .8% decline in April.

BOTTOM LINE: US home prices fell a less-than-expected 4.8% in May from a year earlier, Bloomberg reported. The monthly house price index is down 4.9% from its peak in April 2007, the Office of Federal Housing Enterprise Oversight said. The West South Central region, which includes Oklahoma, Arkansas, Texas and Louisiana saw prices rise .5%. The US median existing home price is still 52.0% higher over the last 8 years. Home prices are likely already near their bottom, but will remain in a range over the intermediate-term.

Bull Radar

Style Outperformer:

Small-cap Growth (+.02%)

Sector Outperformers:

HMOs (+9.27%), Airlines (+9.04%) and I-Banks (+2.71%)

Stocks Rising on Unusual Volume:

PAS, CNC, UNH, ICLR, BIIB, KO, PCAR, HMC, TXT, TLK, QLGC, WNR, HOC, VLTR, FDRY, OMCL, WGOV, RBCAA, AMLN, FWRD, PMTI, CHTT, LNCR, ALXN, SWSI, GENZ, TTES, GILD, PICO, RYAAY, PCAR, BXG, RGA, DGX, PSD, AXE, CSL and PKG

Stocks With Unusual Call Option Activity:

1) TAP 2) BRCD 3) TXN 4) SPF 5) MPEL

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
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In Play
Exchange Volume vs. Average
NYSE Unusual Volume
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Chart Toppers
Real-Time Intraday Quote/Chart
Dow Jones Hedge Fund Indexes

Tuesday Watch

Late-Night Headlines
Bloomberg:
- Hedge Fund Groups Urge SEC to End Ban of ‘Naked’ Short Sales. Two hedge fund groups asked US regulators to refrain from expanding beyond next week an emergency rule to curb short sales in the shares of Fannie Mae, Freddie Mac and 17 investment banks. The SEC should avoid extending the rule past its expiration July 29 or including additional companies, the Managed Funds Assoc. and the Coalition of Private Investment Companies wrote to the SEC today. The Managed Funds Assoc. was founded in 1991 and represents hedge funds, which oversee about $2 trillion. Well know short-seller James Chanos is the chairman of the Coalition of Private Investment Companies, which represents more than 20 companies with $120 billion in assets.
- Bill Gross, who manages the world's biggest bond fund, said mortgage-backed bonds issued by government-sponsored enteprises Fannie Mae(FNM) and Freddie Mac(FRE) are ``an excellent buy.'' (video)
- Fritz Meyer, senior market strategist at Invesco Aim Advisors says the US housing market is near bottom. (video)
- Apple Inc.(AAPL) forecast profit that missed analysts' estimates, signaling that back-to-school orders and demand for the iPhone may not maintain the company's growth streak. The shares fell 11 percent in late trading.
- American Express Co.(AXP), the biggest U.S. credit-card company by purchases, withdrew its 2008 earnings forecast after second-quarter profit fell 37 percent on worse-than-expected consumer defaults. The shares slumped 11 percent in extended trading.
- Texas Instruments Inc.(TXN), the second largest U.S. semiconductor maker, reported earnings and gave a forecast that missed analysts' estimates amid slowing demand for its mobile-phone and analog chips. The stock fell 13 percent.
- UK Lawmakers See ‘Substantial Improvement’ in Iraqi Security.
- Brocade Communications Systems Inc.(BRCD), the world's largest maker of switches for data-storage networks, agreed to buy Foundry Networks Inc.(FDRY) for $3 billion, adding products used by telecommunications and cable service providers.
- Crude oil fell in New York as Tropical Storm Dolly is unlikely to affect oil and natural gas operations in the Gulf of Mexico while heading toward the coast of Texas. Dolly is predicted to come ashore on July 23 at the southern tip of Texas, where the border meets Mexico, and south of the main U.S. production areas, the National Hurricane Center said at 8 p.m. Miami time.
- Merck & Co.(MRK), the third-largest U.S. drugmaker, said net income increased 5 percent on greater use of its diabetes pill Januvia and added revenue outside the U.S. Merck fell $2.33, or 6.6 percent, to $33 at 5:35 p.m. in extended trading after falling 6.2 percent earlier on the New York Stock Exchange.
- India's rupee will fall 7 percent by year-end as overseas investors sell the nation's stocks and a decline in capital inflows widens the current-account deficit, according to Barclays Plc. The currency will weaken to a 20-month low by Dec. 31 as the broadest measure of trade will worsen in the fiscal year ending March 31 due to the decline in investment inflows, said Peter Redward, head of research for emerging Asia at Britain's third-largest bank.

NY Times:
- Has the Press Voted for Obama? Plenty of Republicans think the news media is in the tank for Barack Obama, but a Rasmussen Reports survey found that plenty of other Americans agree: “49% of voters believe most reporters will try to help the Democrat with their coverage, up from 44% a month ago. Just 14% believe most reporters will try to help McCain win, little changed from 13% a month ago. Just one voter in four (24%) believes that most reporters will try to offer unbiased coverage.”
- Ford to Make a Broader Bet on Small Cars. The company, which devoted itself for nearly 20 years to pickup trucks and sport-utility vehicles, is about to drastically alter its focus to building more small cars.

BusinessWeek.com:
- Rising property values lured many Spaniards into the real estate market but the bubble has burst and the crisis is quickly spreading through the country’s economy.

AppleInsider:
- During his quarterly financial results call, Apple's chief financial officer Peter Oppenheimer revealed that the company will make a key "product transition" that cuts back on its profit margins to help shut out rivals. The new, unnamed product will continue to have "technologies and features that others can't match," according to the CFO.

USA Today.com:
- "What are you doing?" That question is the rocket fuel for Twitter — a hot social-network service that lets you tell people what you are up to at any given moment of the day — via cellphone, instant messenger, or the Web. Never heard of it, you say?
- The Bush administration wants to set the stage before leaving office for developing oil shale, rocky deposits in the western U.S. that could eventually yield 800 billion barrels of oil, according to government estimates.

EMedia Wire:
- LocateStock.com, www.locatestock.com, announced today that responding to the growing need for short sale compliance tools, a group led by former Securities and Exchange Commission chairman Harvey Pitt is creating a new electronic surveillance system to help brokers and hedge funds comply with new short selling requirements. The company is RegSHO.com and the new technology-based compliance platform can be found at www.regsho.com. A partial list of the securities currently affected by an SEC emergency order on naked short selling as identified by the SEC is: Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), Bank of America (NYSE: BAC), Merrill Lynch (NYSE: MER), Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH).

Reuters:
- The emergency U.S. rules to clamp down on short selling has driven up the cost of borrowing financial stocks, short sellers said on Monday, prompting some bearish investors to look for alternative trading strategies. "Clearly borrowing the shares in Fannie and Freddie has gotten more difficult and dealers seem to be clearly hoarding borrowed shares," said Brad Golding, managing director at private money management firm Christofferson, Robb and Co in New York, who shorts financial stocks. The new rule has increased the cost of borrowing "considerably," said a second short seller, who spoke on condition of anonymity.

Financial Times:
- Fed seems focuses on inflation over growth.
- Paragon, the struggling buy-to-let mortgage lender, is in talks with Blackstone(BX) about a potential takeover, which shows the US private equity group may be ready to call the bottom of the credit crisis.

The Guardian:
- The world's first commercially available "smart" homes, which will be virtually self-sufficient in energy terms by using cutting-edge efficiency and microgeneration technologies, will be available by the end of 2009 for rent in Barcelona and Paris, developers told a conference in Spain yesterday.

Krungthep Turakij:
- Thai corporate closures more than tripled in June because of slowing economic growth, citing Phanit Lortragool, deputy director general of the Business Development Dept. The number of companies that halted operations last month surged 215% to 3,504. Most closures were in the construction and property industries. In the first half, the number of company closures doubled to 16,114.

National Defense:
- Hydrogen Fuel Cells to Power Homes, Vehicles in Japan.

South China Morning Post:
- Private housing transactions in Beijing dropped 41% in the first six months compared with a year earlier.

Viet Nam News:
- Vietnam’s government raised gasoline prices by 31% and kerosene prices by 44%, according to a joint-statement from the Ministry of Finance and Ministry of Industry and Trade.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (ALB), target $47.
- Reiterated Buy on (CE), target $55.

Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 futures -.92%.
NASDAQ 100 futures -1.67%.

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Earnings of Note
Company/EPS Estimate
- (BIIB)/.84
- (BHI)/1.24
- (BJS)/.40
- (CSL)/.80
- (UNH).64
- (CPO)/.83
- (FRX)/.80
- (FCX)/2.45
- (HAL)/.68
- (IEX)/.55
- (LMT)/1.88
- (JEC)/.82
- (XTO)/1.05
- (OMC)/.96
- (SWK)/1.04
- (STI)/.66
- (UAUA)/-2.05
- (PCP)/1.93
- (RF)/.43
- (WAT)/.71
- (CME)/3.85
- (PNR)/.66
- (LXK)/.78
- (DGX)/.77
- (DD)/1.07
- (WB)/-.69
- (CAT)/1.54
- (KEY)/-2.01
- (JEF)/-.13
- (AKS)/1.14
- (UPS)/.85
- (WM)/-1.02
- (BRCM)/.35
- (ISRG)/1.17
- (PNRA)/.49
- (YHOO)/.16
- (LLTC)/.45
- (CERN)/.50
- (CEC)/.30
- (BXP)/.59
- (VMW)/.23
- (ILMN)/.29
- (NSC)/1.05
- (DPZ)/.24
- (LCC)/-1.29

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- The House Price Index for May is estimated to fall .8% versus a .8% decline in April.

Other Potential Market Movers
- The Fed’s Plosser speaking, weekly retail sales reports and Richmond Fed Manufacturing Index could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial shares in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.