Stocks Higher into Final Hour on Lower Long-Term Rates, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Financial longs, Technology longs, Biotech longs and Medical longs. I covered all my (IWM)/(QQQQ) hedges and my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is above average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 4.08% and is high at 27.30. The ISE Sentiment Index is slightly below average at 128.0 and the total put/call is slightly below average at .78. Finally, the NYSE Arms has been running about average most of the day, hitting .90 at its intraday peak, and is currently .83. The Euro Financial Sector Credit Default Swap Index is rising 2.29% today to 103.17 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising .77% to 124.94 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 1.57% to 46 basis points. The TED spread is now down 417 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is declining 2.25% to 46.06 basis points. The Libor-OIS spread is rising .03% to 42 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 9 basis points to 2.0%, which is down 64 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is unch. today. It is a large positive to see the 10-year yield reverse 15 basis points lower from its session high. The (XLF) is pushing up through its 200-day moving average for the first time in about 2 years, which is a major broad market positive. The AAII % Bulls fell to 39.25% this week, while the % Bears rose to 39.25%, which is also a positive considering recent gains. One of my longs, (ISRG) is breaking convincingly higher through its 200-day moving average on above average volume after (CHDX) made positive comments regarding sales of the da Vinci surgical system in China. I still see substantial upside to the shares from current levels. Nikkei futures indicate an +100 open in Japan and DAX futures indicate an +7 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, technical buying, lower long-term rates, less economic fear and investment manager performance anxiety.

Today's Headlines

Bloomberg:

- Treasuries gained as the highest yield on a 30-year U.S. bond auction in almost two years attracted investors concerned that record government spending and debt sales will lead to inflation. “At 4.7 percent, 30-year Treasuries are compelling,” said Nils Overdahl, a bond-fund manager at New Century in Bethesda, Maryland, which oversees $500 million. “You are really picking up a lot.” The bonds drew a yield of 4.72 percent at the auction, the highest since August 2007. Benchmark 10-year note yields reached 4 percent earlier for the first time since October on concern the budget deficit and a falling dollar will prompt investors to reduce holdings of U.S. debt. The yield on the 10-year note fell 11 basis points, or 0.11 percentage point, to 3.84 percent, after climbing as high as 4.0038 percent, at 1:19 p.m. in New York, according to BGCantor Market Data.

- Former Federal Reserve Chairman Paul Volcker said the global economic slump is easing “most clearly” in the U.S. and the U.K.

- The cost of protecting corporate bonds in the U.S. from default fell after jobless claims slowed and retail sales climbed for the first time in three months. Credit-default swaps on Gap Inc., the largest U.S. clothing retailer, fell to the lowest since November 2004, according to CMA DataVision. Contracts on Bentonville, Arkansas-based Wal- Mart Stores Inc. declined to the lowest in eight months.

- North Korea demanded South Korean companies quadruple wages at their jointly operated manufacturing plants as the United Nations prepares to curb financial flows to the communist nation. Kim Jong Il’s regime asked South Korea to pay $300 a month for each of 38,000 North Korean workers at the South-funded Gaeseong Industrial Complex, according to a Unification Ministry official who briefed reporters in Seoul. North Korea also demanded $500 million in rent for use of the facility on its territory starting next year, the official said, without specifying if the amount was an annual figure.

- Michael Hasenstab is betting on Iraqi and Malaysian debt to boost returns for his top-ranked Templeton Global Bond Fund, while shunning U.S. Treasuries, U.K. gilts and Japanese bonds.

- Crude oil climbed above $72 a barrel and gasoline jumped to an eight-month high after the International Energy Agency raised its global demand forecast.

- Russia’s economy contracted the most in 15 years in the first quarter after industrial production plunged and the government’s 3 trillion rubles ($97 billion) in stimulus spending failed to boost companies and banks. Gross domestic product tumbled an annual 9.8 percent, compared with growth of 1.2 percent in the previous quarter, the Moscow-based Federal Statistics Service said in a statement on its Web site today. The preliminary estimate on May 15 was a 9.5 percent contraction.

- The vacancy rate in Dubai’s residential property market could double to about a third by the end of 2010 as the population declines and new buildings add to a glut of homes, UBS AG said. The amount of empty houses and apartments may increase from as much as 15 percent at the moment, Saud Masud, a Dubai-based analyst at UBS, said in an interview today. About 30,000 homes will be competed by 2011, Masud estimates.

Wall Street Journal:

- U.S. authorities have resettled four Chinese Uighurs to Bermuda from the prison at Guantanamo Bay, Cuba, the Justice Department said Thursday. The detainees had been in the prison for years despite being cleared for release by U.S. national security officials and the courts. President Barack Obama has ordered the prison closed and government officials are trying to determine what to do with the more than 230 detainees who remain at Guantanamo.

- Some things in politics you can't make up, such as President Obama's re-re-endorsement Tuesday of "pay-as-you-go" budgeting. Coming after $787 billion in nonstimulating stimulus, a $410 billion omnibus to wrap up fiscal 2009, a $3.5 trillion 2010 budget proposal, sundry bailouts and a 13-figure health-care spending expansion still to come, this latest vow of fiscal chastity is like Donald Trump denouncing self-promotion. Check that. Even The Donald would find this one too much to sell. But Mr. Obama must think the press and public are dumb enough to buy it, because there he was Tuesday re-selling the same "paygo" promises that Democrats roll out every election.

CNBC:

- Inflation? Fugheddaboudit. With signs the recession is almost over and no end in sight to the government’s borrowing binge, inflation hawks are circling the market. Well, they better keep looking, say skeptics of the inflation spike scenario. "I think it’s blown entirely out of proportion," says economist David Jones of DMJ Advisors. "Inflation is going to stay lower than expected for awhile," adds Ram Bhagavatula, managing director at the hedge fund, Combinatorics Capital. Unlike in past recovery periods, inflation is unlikely to rear its ugly head anytime soon; in fact, it may be years before it becomes a legitimate threat to the economy.

MarketWatch:
- Forget green shoots. We've seen a veritable hothouse of economic, market and political vegetation sprouting in the past several days that clearly shows the worst of the financial crisis is over.

IBD:

- Cisco Systems' (CSCO) entry into the server market is creating surprisingly sudden headaches for the network gear maker as longtime server partners — now rivals — steer sales to Brocade Communications Systems. According to market tracker Dell'Oro Group, Brocade (BRCD) gained a sizable 14 points of market share from Cisco between January and March in high-end storage area network switches, which connect data storage systems.

Philly.com:

- Overlooked signs the US housing market is turning. In the Sacramento Delta suburbs east of San Francisco - where home prices soared and fell as viciously as anywhere in the country - a housing market rebound is feverishly under way.

Washington Post:

- The Obama administration will announce plans today to tighten scrutiny of mountaintop coal mining, in an effort to reduce environmental damage from operations that shear off peaks and fill Appalachian valleys, federal officials said.

Economist:

- Caught Short. Returns have improved but hedge funds still face a lot of problems.

TheDeal.com:

- In what should not surprise longtime readers of The Deal, J.P.Morgan Chase & Co. (NYSE:JPM) agreed to acquire the rest of hedge fund manager Highbridge Capital Management LLC as of July 1.

NorthJersey.com:

- While national foreclosure filings are on the rise, New Jersey filings dropped 41 percent in May from a year ago, RealtyTrac said Wednesday.

Politico:

- President Barack Obama Thursday made his strongest pitch yet for sweeping health-care reform by year’s end, drawing on campaign-style tactics and rhetoric and taking sharp aim at critics of his proposed “public option” plan. In remarks prepared for a town meeting here at Southwest High School, the president said he believes “strongly” that health care reform should include “a public insurance option.” “If the private insurance companies have to compete with a public option, it will keep them honest and help keep prices down,” Obama said.

RTTNews:

- Thursday, Chindex International Inc. (CHDX), a U.S.-based healthcare company with main operations in China, reported a profit in its fourth quarter, compared to prior year's loss, boosted by strong revenues mainly from Medical Products division. Revenue for the fourth quarter increased 72% to $59.66 million from $34.62 million last year. Quarterly revenue from the Medical Products division surged 130% year-over-year to $39.5 million, and revenue from the Healthcare Services division increased 16% to $20.2 million. According to the company, the revenue growth reflected the recognition of revenue for certain government-backed loan programs, as well as higher medical products sales such as daVinci units, and growth in inpatient and outpatient revenues in the hospital division.

Reuters:
- Iraq’s South Oil Co. is seeking to boost crude output by as much as 500,000 barrels a day by 2012, citing the company’s new head Fayad al-Nema. South Oil, which exports about 1.5 million barrels of oil a day through the southern port of Basra, is in talks with companies such as Halliburton Co., Schlumberger Ltd., Baker Hughes Inc. and Weatherford International Ltd. to boost production.

- Qualcomm Inc (QCOM) raised its current-quarter profit and revenue targets on stronger sales of mobile phone chips, but its warning that shipments would fall next quarter dampened investor enthusiasm.

- Ford Motor Co (F) Chief Executive Alan Mulally said on Thursday that the U.S. economy is on the right track to begin improving in the second half of the year."We think we are right on track to start this recovery in the second half," Mulally told reporters on the sidelines of an an event promoting the Taurus sedan.

- The two primary U.S. financial market regulators are drafting legislation to implement the Obama administration's proposed crackdown on over-the-counter derivatives, said sources familiar with discussions at the agencies late on Wednesday. In another sign that a merger is unlikely between the Securities and Exchange Commission and the Commodity Futures Trading Commission, the sources said the agencies could split oversight of OTC derivatives under the legal language they are working on for eventual submission to Congress. The SEC, the larger and older of the two agencies, may take charge of regulating credit default swaps, a type of OTC derivative, for publicly traded companies, one source said.

- The International Monetary Fund has raised its global growth estimates for 2010 to 2.4 percent from 1.9 percent in April because of stimulus measures taken in recent months, a G8 source who has seen the latest figures said. The recovery will be gradual, however, and the risks to the outlook are on the downside, the source told Reuters on Thursday, speaking on condition of anonymity.

FinanzNachrichten.de:

- BHP Billiton(BHP) and Japanese steelmakers including Nippon Steel Corp and JFE Holdings Inc have agreed to about a 33 percent cut in the 2009 iron ore price, a source familiar with the matter said on Thursday.

Bear Radar

Style Underperformer:
Small-cap Value (+1.19%)

Sector Underperformers:
Homebuilders (-1.08%), REITs (-.99%) and Restaurants (-.65%)

Stocks Falling on Unusual Volume:
CBEY, EVEP, UNH, LULU, FUQI, TNDM, CNQR, VPRT and OXPS

Stocks With Unusual Put Option Activity:
1) XLU 2) UNH 3) SWN 4) WYE 5) VRSN

Bull Radar

Style Outperformer:
Large-cap Value (+1.20%)

Sector Outperformers:
Banks (+2.28%), Computer Hardware (+2.12%) and Drugs (+2.03%)

Stocks Rising on Unusual Volume:
BAC, BCS, SNP, GSK, PFE, CHDX, SCHS, ZEUS, CFSG, BCSI, CTRN, PALM, PLXS, WATG, PICO, PSYS, ASCMA, CDZI, WSBC, DNBK, FFIV, ISRG, MPWR, DRIV, BBOX, PVD, IXP, TOD, EMG, WWW, MTX, IGN, CXG and AA

Stocks With Unusual Call Option Activity:
1) VMC 2) CTV 3) CA 4) CSC 5) LULU

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Thursday Watch

Late-Night Headlines
Bloomberg:

- The financial crisis is over and credit markets have healed, said Royal Bank of Canada President and Chief Executive Officer Gordon Nixon. “The financial crisis I think is over, if you define it as a crisis,” Nixon, 52, told reporters today at the International Economic Forum of the Americas/Conference of Montreal. “We are now returning to a much more normal environment.”

- China’s exports fell by a record as the global recession cut demand for goods produced by the world’s third-largest economy. Overseas sales dropped 26.4 percent in May from a year earlier, the customs bureau said in a statement on its Web site today. That compares with the median estimate for a decline of 23 percent in a Bloomberg News survey of 15 economists, and a 22.6 percent contraction in April.

- Comcast Corp.(CMCSA), the largest U.S. cable operator, will offer some television shows over the Internet to a test group of subscribers in the coming weeks, Chief Operating Officer Stephen Burke said. Comcast is teaming up with Time Warner Inc. on the feature, called OnDemand Online, Burke said in an interview. The cable operator plans to offer it to more customers by the end of the year, he said.

- The U.S. Treasury Department is considering issuing rules this summer to allow lenders to modify commercial real estate loans without triggering tax penalties on investors as the industry braces for an increase in defaults, a person familiar with the matter said. The Real Estate Roundtable, a Washington trade group, began in December to urge Treasury and the Internal Revenue Service to waive tax penalties that would otherwise be assessed on investor pools known as Real Estate Mortgage Investment Conduits and Real Estate Investment Trusts.

- House Republican staffers said Federal Reserve and Treasury officials overstepped their authority and pressured Bank of America Corp. to complete its Merrill Lynch & Co. purchase, in a memo obtained by Bloomberg. The memo prepared by the staffers for Republican lawmakers at a House Oversight Committee hearing tomorrow cites what it identifies as excerpts from internal Fed e-mails to support their stance. The committee issued a subpoena to the Fed yesterday for documents related to the transaction.

- BP Plc Chief Executive Officer Tony Hayward said demand for oil coming from the U.S. gasoline market “has probably peaked” as ethanol blending gains ground and Congress works on enforcing fuel efficiency. The U.S. has the potential to offset future higher energy demand with efficiency measures over the next 10 years, Hayward said at a presentation of BP’s Statistical Review of World Energy yesterday in London. At the same time, investment in more biofuel production and the possible end of ethanol import restrictions may lead to replacing petroleum in transport fuels. “We probably sold as much gasoline into the U.S. as we’ll ever sell” in the first half of last year, Hayward said. The U.S. “is not a growth market. Gasoline demand in the U.S. fell last year for the first time since 1991, according to the Energy Department in Washington. Motorists burned 8.964 million barrels of the fuel daily in 2008, 3.5 percent less than a year earlier, amid recession-driven job losses and wage cuts. The slump continued into 2009. World oil production may peak at some stage, driven by limited demand from consumers, Hayward said. Rising oil prices may encourage wider use of alternative sources of energy and biofuels production expansion to substitute crude. “The world has ample proven reserves” to “meet the world’s needs for decades to come,” Hayward said. “It will be a demand- side phenomenon, not a supply-side phenomenon,” which will limit global crude oil production. “Demand for fuel for transport in the U.S. has probably peaked” relating to hydrocarbons, he said. BP is targeting the U.S. ethanol market as it plans to invest between $5 billion and $6 billion to expand production of the biofuel in Brazil. In May, it has appealed to Californian regulators to set the first U.S. example by suspending state import tariffs on Brazilian ethanol. “We believe fundamentally in free and open energy markets and a tariff on imported ethanol is the tariff on the free energy markets,” Hayward said. “It would be a good thing” to cancel the Brazilian import restrictions, he said.

- Japan’s economy shrank less than the government initially estimated as business investment and inventories fell at a slower pace. Gross domestic product shrank at a record 14.2 percent annual pace in the three months ended March 31, less than the 15.2 percent reported last month, the Cabinet Office said today in Tokyo.

- Petroleo Brasileiro SA(PBR) had its debt rating cut to the lowest investment grade level by Standard & Poor’s, which said Brazil’s state-controlled oil company may need partners to help finance its investment plan.

Wall Street Journal:

- Dell Inc.(DELL) is cranking up its mergers and acquisitions engine, just as competition for technology deals begins heating up again. While Dell officials have publicly said they want to do more deals, they have given few specifics. But Chief Executive Michael Dell expects his company to acquire a "significant-sized company" in coming months, according to a person who has spoken with the CEO. The computer maker wants to expand its data-storage and tech-services businesses, according to people who have recently spoken with its chief financial officer, Brian Gladden.

- A canny trade by a small brokerage firm in two markets at the heart of the financial crisis has left some of the biggest players on Wall Street crying foul. The trade, by Amherst Holdings of Austin, Texas, was particularly galling to the big banks because it turned what they believed was a sure-fire profit into a loss. The burned banks include J.P. Morgan Chase & Co., Royal Bank of Scotland Group PLC and Bank of America Corp. Some banks have reached out to two industry trade groups about Amherst's actions, and the groups are reviewing the transaction, according to people familiar with their thinking. "It's all-out warfare" between the banks and Amherst, said a senior banker at one firm that lost money. At issue is a move by Amherst to boost the price of bonds to avoid paying out on credit-default swaps it had sold. Banks are questioning whether Amherst set them up by selling credit-default swaps and then rendering them worthless.

- Rising interest rates threaten to dim prospects for a housing recovery and choke off a refinance wave that was a major plank of the Obama administration's economic-stimulus efforts. On Wednesday, rates on 30-year fixed-rate mortgages climbed to 5.79%, up from 5% two weeks ago, according to HSH Associates. That jump will cut roughly in half the number of borrowers with an incentive to refinance, according to FTN Financial.

- Long-term mutual funds saw overall buying, or inflows, for the 12th straight week, as inflows into both stock and bond funds picked up from the previous two weeks, according to figures released from the Investment Company Institute. Total estimated inflows were $13.6 billion in the week ended June 3. Stock funds had estimated inflows of $4.63 billion, up from $1.59 billion the previous week.

- One at a time the government's top critics seemed to go to jail, or simply disappear. Syrgak Abdyldayev, a local journalist, began to investigate whether the attacks had anything to do with a team of Russian-speaking specialists who arrived last year to advise the Kyrgyz government. He published several scathing articles accusing the government of shunting aside its opponents and turning to Moscow for financial support, including one in February that likened Russian aid to "oxygen for a sinking submarine." Then Mr. Abdyldayev became a victim. Three men attacked him with metal pipes as he left his newspaper one evening in March, broke both his arms, his ribs and a leg, and stabbed him 26 times in the buttocks.

- The World Health Organization will hold an emergency meeting on Thursday as the H1N1 swine flu virus continues to spread around the globe, increasing the likelihood a pandemic will be declared.

MarketWatch.com:
- "If gasoline prices stay elevated, it will dramatically dilute the tax-cut portion of the Obama stimulus plan," said Boockvar, who calculates that for every $1 move in the price of gasoline, "it's an extra $140 billion more in consumer spending at the pump."

CNBC.com:
- The Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group, according to a report issued Wednesday.

NY Times:

- Tough words from Washington arrived by phone on Tuesday at Citigroup headquarters in New York. On the line was Sheila C. Bair, the head of the Federal Deposit Insurance Corporation — and a powerful behind-the-scenes player at the giant bank. She was calling to press directors once again to put Citigroup’s troubled house in order. Ms. Bair urged the board to take swift action to purge Citigroup’s troubled assets, sell money-losing businesses and assess senior management.

- Strong buying by China has helped lift commodity prices around the world this spring, but growing evidence suggests that a sizable portion of this buying has been to build stockpiles in China, and may not be sustainable. At least 90 large freighters full of iron ore are idling off Chinese ports, where they face waits of up to two weeks to unload because port storage operations are overflowing, chief executives of shipping companies said in interviews this week. Yet actual steel production from that iron ore is recovering much more slowly in China, and Chinese steel exports remain weak. Commodities and shipping executives describe Chinese stockpiling in recent months of a range of other commodities as well, including aluminum, copper, nickel, tin, zinc, canola and soybeans. Starting in April, China began stockpiling significant quantities of crude oil. “There has been enormous stockpiling of all commodities” by China, and this cannot continue indefinitely, said Tim Huxley, the chief executive of Wah Kwong Maritime Transport Holdings, a big shipping line based here. Moody’s Investors Service announced on Wednesday that it was putting a negative outlook on the base metals, mining and steel industries in Asia and the Pacific, having previously done so for these sectors elsewhere. One of the best leading indicators of international trade in commodities is the Baltic Exchange Dry Index, which measures the daily cost of chartering a large freighter. While the Standard & Poor’s GSCI has continued to rise in the last week, the freight index has fallen by a fifth in that period. Richard S. Elman, the chief executive of the Noble Group, Asia’s largest diversified commodities trading company, bounced up from the conference table in his office here when asked about freight rates during an interview on Tuesday morning. He walked over to his desk, dominated by three computer screens that partly obscure a perfect view of Hong Kong’s harbor, and quickly punched up on one screen a list of daily charter rates for large bulk carrier freighters. The list showed ship owners charging $58,000 a day now but just $24,000 a day for charters next year or in 2011 — an indication that there will be more ships than cargoes in the years ahead, particularly with shipyards still finishing vessels ordered during the recent boom. Pointing to the rates for the next two years, Mr. Elman said, “That’s the real market” for ships.

IBD:

- But many off-price chains and niche retailers have thus far held up well. Among them stands Citi Trends (CTRN), a Savannah-based discount chain that caters to urban shoppers in Atlanta, Charlotte and other cities in the southeastern U.S.

NY Post:

- Less than a month after being told by Donald Trump that she can keep her Miss California crown, Carrie Prejean is being fired, Foxnews.com has learned exclusively. K2 Productions, the independent producers of the Miss California USA pageant, under license from Miss Universe, cites continued breach of contract issues as the reason for Prejean's firing. The decision is revealed in documents obtained by FOXNews.com.

Politico:

- Alaska Gov. Sarah Palin took a second swipe at David Letterman on Wednesday, calling the CBS “Late Show” host’s jokes about one of her daughters “disgusting” and “sexually perverted.” In an e-mailed statement, the Republican governor said: “Laughter incited by sexually perverted comments made by a 62-year-old male celebrity aimed at a 14-year-old girl is not only disgusting, but it reminds us some Hollywood/N.Y. entertainers have a long way to go in understanding what the rest of America understands — that acceptance of inappropriate sexual comments about an underage girl, who could be anyone's daughter, contributes to the atrociously high rate of sexual exploitation of minors by older men who use and abuse others.”

- The White House has refused a request from Sen. Chuck Grassley for all the exemptions it’s granted to President Barack Obama’s ethics policy. And that’s got the Iowa Republican on a mission to make public every ethics waiver and recusal issued to administration officials. “The American people deserve a full accounting of all waivers ... to better understand who is running the government and whether the administration is adhering to its promise to be open, transparent and accountable,” Grassley wrote in a letter Wednesday to the director of the U.S. Office of Government Ethics.

Reuters:

- Wall Street may be losing its luster for new U.S. college graduates who are increasingly looking to the government for jobs that enrich their social conscience, if not their wallet.

- Goldman Sachs Group Inc (GS) is taking much more trading risk than rival Morgan Stanley (MS), and some analysts wonder if the largest investment bank could be making itself vulnerable to another downturn. Goldman's supporters say the bank is keeping to a strategy that served it well during the financial meltdown: fund itself in bond markets and trade actively, both for clients and its own account. But Goldman is also forgoing many of the safety measures that competitors like Morgan Stanley have embraced, such as building businesses less dependent on trading activity and finding reliable sources of cheap deposit funding. If the economy deteriorates and bond markets seize up again, the bank could find itself posting big losses.

Financial Times:

- General Electric(GE), the US industrial group, will announce a $500m deal on Thursday to supply new gas and steam turbines to the Kingdom of Bahrain as the company continues to push for a greater presence in the Middle East to counteract troubles in its domestic market. Through the deal GE will supply advanced power equipment and services to Al Dur, Bahrain’s largest power plant, which will generate 30 per cent of the country’s electricity when completed. The move is GE’s latest effort to embrace faster-growing emerging markets while it struggles domestically and works to shrink its finance arm, GE Capital. GE has signed more than $6bn worth of contracts in the Middle East during the last year, which the New York-based company notes is supporting domestic manufacturing jobs and boosting its wind business which is lacking a strong market in the US. In 2008 GE signed a $3bn contract with Iraq for 56 turbines for a project that was to double the country’s capacity to generate electricity. The company has more than 1,000 of its turbines operating throughout the Middle East.

- Deloitte is suffering from the slowdown in China, which is forcing the accountancy firm to impose unpaid leave on staff, its global head said on Wednesday. James Quigley, global chief executive of Deloitte, said that while the Chinese market for accountancy firms had been buoyant during the boom in initial public offerings and mergers and acquisitions, the firm had more recently been affected by a slowdown in activity.

- Iran’s presidential election campaign moved towards a gripping climax last night, ahead of a poll that has turned into a referendum on Mahmoud Ahmadi-Nejad’s performance. Thousands of demonstrators camped around the state broadcaster to protest against a final television address allocated to the controversial incumbent, while hundreds of thousands joined carnival-like parades through the country. The most hotly contested election in Iran’s post-revolutionary history could have a significant impact on the evolution of domestic and foreign policy. Mir-Hossein Moussavi, a reformist who poses a serious challenge to the fundamentalist president, has pledged to loosen social restrictions and to pursue detente with the west, while Mr Ahmadi-Nejad has vowed to continue his controversial economic and nuclear policies.

TimesOnline:

- Three British companies have been shortlisted to bid for contracts to work on Iraq's oil and gas fields, pitting themselves against 32 other non-Iraqi companies in a televised, two-day bidding procedure revealed at Baghdad's Oil Ministry.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (JCP), target $43.

Night Trading
Asian Indices are -.25% to +1.25% on average.

Asia Ex-Japan Inv Grd CDS Index +1.61%
S&P 500 futures +.46%.
NASDAQ 100 futures +.40%.

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Economic Releases

8:30 am EST

- Advance Retail Sales for May are estimated to rise .5% versus a -.4% decline in April.

- Retail Sales Less Autos for May are estimated to rise .2% versus a -.5% decline in April.

- Initial Jobless Claims for last week are estimated to fall to 615K versus 621K the prior week.

- Continuing Claims are estimated to rise to 6780K versus 6735K prior.

10:00 am EST

- Business Inventories for April are estimated to fall -1.0% versus a -1.0% loss in March.

Upcoming Splits
- None of note

Other Potential Market Movers
- The US Selling $11B 30-Year Bonds, Fed’s Lockhart speaking, weekly EIA natural gas inventory report, UBS Electronic Payments Summit, BofA/Merrill Transportation Conference, William Blair Growth Stock Conference, Needham Biotech & Medtech Conference, Goldman Sachs Healthcare Conference, UBS Basic Materials Conference, (SYMC) Analyst Meeting and the CSFB Convergence Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.