Today's Headlines

Bloomberg:
- Crude oil fell more than $3 a barrel as the U.S. dollar strengthened and BP Plc restored shipments on a Caspian Sea pipeline through Turkey. Energy futures fell as the rising dollar eased demand for commodities as an inflation hedge. The Organization of Petroleum Exporting Countries will probably increase oil supply in August by 400,000 barrels a day, or 1.2 percent, as Iran releases crude oil held in storage, according to preliminary estimates from PetroLogistics Ltd. OPEC will next meet to review production targets on Sept. 9 in Vienna.
- Lehman Brothers Holdings Inc.,(LEH) the fourth-largest U.S. securities firm, climbed as much as 16 percent in New York trading after Korea Development Bank said it's ``considering'' an investment in the company.
- The US dollar rose against the euro and the yen as a South Korean bank said it's ``considering'' an investment in Lehman Brothers Holdings Inc., indicating U.S. financial firms may weather credit market turmoil. The U.S. currency also rose versus the euro on speculation yesterday's biggest drop since June was overdone and as a decline in European industrial orders added to evidence of a deepening economic slowdown. Dollar stability and price declines in oil and other commodities are ``encouraging,'' Bernanke said in a speech at the Kansas City Fed's two-day conference on financial stability in Jackson, Hole, Wyoming. He added that the inflation outlook remains ``highly uncertain'' and the Fed ``is committed to achieving medium-term price stability and will act as necessary to obtain that objective.''
- European industrial orders fell the most in more than six years in June, led by a drop in transport equipment such as planes and rail cars. Industrial orders in the 15-nation euro area declined 7.4 percent from a year earlier, the most since December 2001, the European Union statistics office in Luxembourg said today.
- The cost of protecting corporate bonds from default in Europe may fall almost 25 percent in a U.S. government rescue of mortgage lenders Fannie Mae(FNM) and Freddie Mac(FRE), according to BNP Paribas SA analysts. Credit-default swaps on the Markit iTraxx Europe index of 125 companies with investment-grade ratings may drop to 75 basis points from about 98 today, according to Vivek Tawadey, head of credit strategy at BNP Paribas in London. The index, which declines as perceptions of credit quality improve, last dropped as low as 75 on May 21.
- The cost of protecting Lehman Brothers Holdings Inc.(LEH) from default dropped the most in five months after Korea Development Bank said it's ``considering'' an investment in the company. Credit-default swaps on New York-based Lehman fell 67 basis points to 322 basis points, the biggest one-day drop since March 18, according to CMA Datavision prices as of 10:42 a.m. in New York.
- Larry Grace, an analyst at Kim Eng Securities Ltd., says crude oil may fall below $110. (video)
- Copper dropped the most in more than a week as rising stockpiles signaled demand may be waning for the metal used in pipes and wires. Inventories monitored by the London Metal Exchange jumped 4.6 percent to 163,800 metric tons, the biggest one-day gain since May 9 and the highest total since Feb. 11.
- Goldman Sachs(GS) and Merrill Lynch(MER) have missed out on the rally in bank and brokerage stocks since July 15, the day Second Curve Capital LLC’s Thomas Brown says financial stocks “made their bottom.” Brown, who as a Donaldson, Lufkin & Jenrette bank analyst topped Institutional Investor's analyst ranking eight times in the 1980s and '90s, believes financial-stock ``valuations are compelling,'' according to his blog, bankstocks.com.
- China Squelches Speech the Simple, Ancient Way.
- China's yuan completed the biggest weekly gain in three months on speculation officials will seek a stronger currency to curb the trade surplus and deter the U.S. from imposing penalties.
- The U.K. economy stagnated unexpectedly in the second quarter, ending the nation's longest stretch of economic growth in more than a century. Gross domestic product was unchanged from the previous quarter, the Office for National Statistics said, compared with a previous estimate for growth of 0.2 percent.
- OAO Gazprom, the world's biggest natural-gas producer, fell in Moscow trading after analysts said they were ``shocked'' by the company's plans to raise its investment budget to more than $40 billion this year.

Wall Street Journal:
- Europe’s Hangover. The US may be better than Europe at rebounding from economic shocks because its policy makers react quickly to avert recession, while European officials focus on controlling inflation, said Thomas Mayer, the co-head of global economics at Deutsche Bank AG. The European Central Bank in tightening monetary policies, may have underestimated the severity of the world economic slowdown, the economist said. A European recession, while it may not be deep, could be lengthy and recovery slow, Mayer wrote, adding that inflation probably won’t be a big concern.

NY Times:
- Kleiner Perkins Caufield & Byers’ $100 million fund to invest in developers of applications for Apple Inc.’s(AAPL) iPhone signals a shift in mobile phone technology to software makers from wireless carriers.

CNBC.com:
- Warren Buffett tells our Becky Quick that he has been adding recently to one of the two stakes Berkshire Hathaway already has in a pair of financial stocks: American Express(AXP) and Wells Fargo(WFC).
- A slide in oil prices as demand weakens will continue, prompting many analysts to lower their price forecasts, a Reuters poll found on Friday. The August poll of more than 30 analysts shows a fall in the consensus forecasts for U.S. crude for a current year for the first time since early 2007, after a sharp rise in oil prices in the first seven months of this year had forced most analysts to raise their forecasts several times. "U.S. demand is responding even stronger and quicker to high prices than what we believed two months ago," said Torbjorn Kjus of DnB NOR Markets from Norway, Europe's largest oil producer.

BusinessWeek.com:
- Apple’s(AAPL) Ambitious iPhone 3G Plans. It intends to make at least 40 million iPhones in the next year. This would be 50% above current estimates.

Seeking Alpha:
- Rumors of a Deutsche Bank bid for Charles Schwab appear to be fueling speculative options activity in the brokerage this morning as shares read 2.5% higher at $23.59.

The Washington Post:
- Mobile service provider Verizon Communications Inc.(VZ) is nearing an agreement with Google Inc.(GOOG) on a wide-ranging partnership, the Wall Street Journal said, citing people familiar with the situation. The deal under discussion would make Google the default search provider on Verizon devices and give it a share of ad revenue, the paper said.
- Obama Camp Has Many Ties to Wife’s Employer.

The Beaufort Gazette:
- This is huge: A new speech-to-text technology from Google(GOOG) in which you type in a word or a phrase and it searches through YouTube videos to find all the instances where someone said it. Right now, it's being used on YouTube's You Choose video page (youtube.com/youchoose) and applied to all of John McCain and Barack Obama's YouTube videos, both those produced by their campaigns and by everyday folk.

AP:
- There are signs of a promised Russian pullback from positions deep in Georgia. No Russian forces could be seen Friday afternoon in and around Igoeti, which had been their closest position to Georgia's capital. A Russian armored column also was seen moving away from a base in western Georgia and a Georgian official said that forces were leaving the key central city of Gori. Russian President Dmitry Medvedev and other officials have said Russian forces would pull back to separatist regions and surrounding security zones by day's end Friday.

US News:
- Best Colleges 2009.

Reuters:
- U.S. stock index futures jumped on Friday after investor Warren Buffett said he has no bets against the dollar and stocks are more attractive now than a year ago.

TimesOnline:
- A long-awaited bid for TNT, the Dutch delivery group, from UPS(UPS), the American parcels giant, could be made as soon as this weekend if speculation in the Square Mile is anything to go by.

Le Parisien:
- More than half of French people want the country to withdraw troops from Afghanistan after 10 soldiers were killed there this week, according to an opinion poll published in Le Parisien today.

ARD television:
- Most Germans reject an extension of the North Atlantic Treaty Organization to include Georgia, a poll shows.

AFP:
- Nigerian Stock Exchange Chief Executive Officer Ndi Okereke-Onyiuke is being investigated after holding a fund-raising event linked to US presidential candidate Barack Obama. US electoral laws forbid donations from foreigners to electoral campaigns. Officers from Nigeria’s Economic Financial Crimes Commission interviewed Okereke-Onyiuke on Aug. 20 and Aug. 21 about a dinner she hosted last week where $80,000 was raised. Okereke-Onyiuke said the dinner, dubbed ‘Africans for Obama 2008,’ wasn’t linked to the Obama Campaign group in the US.

Bear Radar

Style Underperformer:

Mid-cap Growth +.18%

Sector Underperformers:

Coal irlind (-2.01%), Gold (-1.76%) and Construction (-1.32%)

Stocks Falling on Unusual Volume:

APWR, VLCM, CYBX, PERY, NDSN, VRGY

Stocks With Unusual Put Option Activity:

1) BCSI 2) KO 3) AES 4) GGB 5) GRA

Economic Releases

- None of note

Bull Radar

Style Outperformer:

Small-cap Value (+1.61%)

Sector Outperformers:

Airlines (+5.11%), I-Banks (+2.29%) and Telecom (+1.87%)

Stocks Rising on Unusual Volume:

TLK, INTU, PZE, NGLS, CSUN, BCSI, SKIL, BMRN, AKAM, PLCE, ZUMZ, NCIT, GXDX, HEES, CNQR, ALO, PTE, XSD, OKS, TUC, MR, KG, LEH, DKS, HLF and TTC

Stocks With Unusual Call Option Activity:

1) SCHW 2) APWR 3) AKAM 4) CREE 5) LEH

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Friday Watch

Late-Night Headlines
Bloomberg:
- General Motors Corp.(GM) will spend more than $500 million to build a new small car in Ohio, part of a campaign to replace slow-selling trucks with more fuel-efficient models just as oil prices begin to retreat from record highs. Chief Executive Officer Rick Wagoner announced the investment today in Lordstown, where GM will assemble the Chevrolet Cruze in 2010. Ford Motor Co., Toyota Motor Corp. and Nissan Motor Co. plan similar moves. The race to supplant trucks with cars echoes the push in the 1990s to add sport-utility vehicle factories as gasoline below $1.25 a gallon made those trucks cheap to drive. The automakers are now planning to shut or reconfigure their truck plants as $4- a-gallon fuel scares buyers away.
- Global cotton consumption will drop in the next year, rather than increase as expected a month ago, because of a decline in China, the world’s biggest user, UK-based research firm Cotlook Ltd. said. The consumption estimate includes a decline of 300,000 tons in China because of rising production costs, a shortage of electricity and an “unfavorable” economic climate, Cotlook said. World production will reach 24.05 million tons, 78,000 tons more than expected last month, as rains improved crop prospects in India, the largest grower after China.
- Dell Inc.(DELL), the third-biggest server maker, posted the biggest gains in the market for computers used to run corporate networks and Web sites last quarter, according to research firm Gartner Inc. Dell's server sales rose 15 percent, compared with an 11.5 percent gain at top-ranked International Business Machines Corp.(IBM) and a 2.9 percent increase at second-place Hewlett-Packard Co.(HPQ), Stamford, Connecticut-based Gartner said today in a statement.
- Gap Inc.(GPS), the largest U.S. clothing retailer, said second-quarter profit rose 51 percent after it discounted fewer jeans and T-shirts. The shares rose 3.6% in after-hours trading.
- Foot Locker(FL) rose 8.3% in extended trading. The owner of more than 3,750 shoe stores said annual profit may profit may be as high as 85 cents a share excluding some charges. Analysts polled by Bloomberg estimated 71 cents on average.

Wall Street Journal:
- Time Warner Inc.’s(TWX) Warner Bros. Pictures plans to make fewer films and spend more money on them following the success of “The Dark Knight,” citing President Jeff Robinov. Robinov wants to release as many as eight movies a year by 2011, many of them centered on characters from the studio’s DC Comics unit.
- Freddie Mac executives are sounding out private-equity firms and other investors about the possibility of buying new common or preferred shares in the mortgage company.

IBD:
- Network General Acquisition Gives NetScout(NTCT) A Good Hand To Play.

CNNMoney.com:
- Job boom could be coming soon. Economists at the Univ. of Michigan predict that 3.5 million jobs will be created in the next two years.

NY Post:
- Barack Obama's long-lost half-brother has surfaced in Kenya - living like a recluse on less than $1 a month and hiding his family ties.

USA Today.com:
- Airline profitability shows progress as fuel costs ease.

Financial Times:
- Investors pulled their money out of Russia in the wake of the Georgia conflict at the fastest rate since the 1998 rouble crisis, new figures showed on Thursday. Russian debt and equity markets have also suffered sharp falls since the conflict began on August 8, with yields on domestic rouble bonds increasing by up to 150 basis points in the last month. The moves come as President Dmitry Medvedev faces pressure from business leaders concerned that the impact of the global credit crisis is starting to be felt in Russia.
- Economic growth has shown scant sign of returning to the eurozone in August with private sector output contracting for the third consecutive month, an influential survey revealed on Thursday. Purchasing managers' indices suggested the 15-country zone remained on the brink of recession, with the performances of Germany and France deteriorating noticeably in August.

TimesOnline:
- The International Olympic Committee has ordered an investigation into mounting allegations that Chinese authorities covered up the true age of their gold-medal winning gymnastics star because she was too young to compete. An IOC official told The Times that because of "discrepancies" that have come to light about the age of He Kexin, the host nation’s darling who won gold in both team and individual events, an official inquiry has been launched that could result in the gymnast being stripped of her medals.
- Russia fighting machine is showing its age, say military analysts.

Livemint.com:
- Apple’s(AAPL) iPhone 3G set to create waves in India. Few diminutive devices have so besotted the world’s imagination in recent times as Apple Inc.’s iPhone. The second edition of the mobile phone officially launches in India on Thursday midnight.

Thanh Nien:
- Many companies listed on Vietnam’s stock exchanges plan to cut their earnings estimates this year because of a slowing economy.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (PLCE), target $44.
- Maintain Buy on (HNZ), target $59.
- Reiterated Buy on (TECD), target $45.
- Reiterated Buy on (FE), target $82.

Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 futures -.17%.
NASDAQ 100 futures -.20%.

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Earnings of Note
Company/EPS Estimate
- (ANN)/.48
- (PERY)/-.02
- (SKIL)/.07

Upcoming Splits
- (SYNA) 3-for-2

Economic Releases
- None of note

Other Potential Market Movers
- None of note

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 rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.