Stocks Mixed into Final Hour as Short-Covering, Less Economic Fear, Diminishing Healthcare Reform Worries Offset Profit-Taking, Earnings Shortfalls

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Biotech longs and Technology longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is about even, most sectors are rising and volume is above average. Investor anxiety is very high. Today’s overall market action is mildly bullish. The VIX is falling .68% and is high at 23.27. The ISE Sentiment Index is below average at 116.0 and the total put/call is slightly above average at .93. Finally, the NYSE Arms has been running around average most of the day, hitting 1.43 at its intraday peak, and is currently .88. The Euro Financial Sector Credit Default Swap Index is dropping another 5.44% today to 79.99 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 1.86% to 121.35 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling .58% to 32 basis points. The TED spread is now down 434 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is unch. at 43.50 basis points. The Libor-OIS spread is rising .04% to 31 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 4 basis points to 1.88%, which is down 76 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is unch. today. The Euro Financial Sector Credit Default Swap Index is continuing its recent plunge, falling to the lowest level since August 19^th, 2008, which remains a large positive. The market’s resilience today (especially the Naz) is very impressive given the disappointments from (MSFT), (AMZN) and (BRCM). Many sectors are higher, with healthcare-related, airline, insurance and alternative energy shares especially strong. As well, the MS Cyclical Index is rising another 1.1%. Many heavily-shorted stocks have experienced stunning advances over the last couple of weeks, which has likely left many shorts trigger-happy. I expect further healthy consolidating broad market action next week before another push higher commences. Nikkei futures indicate an +150 open in Japan and DAX futures indicate an +25 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, investment manager performance anxiety, technical buying, diminishing government healthcare reform worries and less economic fear.

Today's Headlines

Bloomberg:

- U.S. House Democratic leaders, faced with a rebellion by some party members over health-care legislation, threatened to bypass a deadlocked committee to bring the bill to a vote next week. The chairman of the Energy and Commerce Committee said he would agree to a vote by the full House without prior action by his panel if House leaders are unable to negotiate a compromise with the dissenters. Chairman Henry Waxman doesn’t have the votes to pass legislation in his committee without the support of seven self described fiscally conservative Democrats, known as Blue Dogs. “I won’t allow them to turn over the control of the committee to the Republicans, which is what they’ve threatened to do,” Waxman said. “We’ve got to get moving on this legislation. I hope we don’t come to that conclusion.” Representative Mike Ross of Arkansas, a leader of the Blue Dogs, said it would be a mistake for Speaker Nancy Pelosi to bring the measure to the floor before the recess. Democratic leaders in both chambers are struggling to get momentum behind the bill. Senate Majority Leader Harry Reid said yesterday a Senate vote will be postponed until September. Rangel said to help build support for the House measure, leaders will include in it language calling for two studies by a new federal commission of issues that have divided Democrats. The first would examine geographic disparities in Medicare rates; the second would examine how Medicare reimbursement would work under a newly established government-run insurance program, which would provide coverage to a portion of the nation’s 46 million uninsured.

- Leveraged-loan prices rose this week to the highest in 2009 amid signs of improving credit quality and better-than-expected earnings from U.S. companies including Ford Motor Co. The S&P/LSTA U.S. Leveraged Loan 100 Index, which tracks the most actively traded high-yield, high-risk loans, climbed to 80.50 cents on the dollar yesterday. It was 61.97 cents on the dollar Dec. 31 and ended last week at 79.71.

- Microsoft Corp.(MSFT), the world’s largest software maker, offered to include rival Web browsers on the Windows operating system to settle a European Union antitrust case, the EU said.
- Fannie Mae and Freddie Mac grew to the point where they posed “enormous risk” to the financial system, an error that will shape how policy makers restructure the companies, Treasury Secretary Timothy Geithner said. “It would have been good had we figured out a way to avoid that out earlier,” Geithner told the House Financial Services Committee today. “That mistake should underpin much of what we do in thinking about how to create a more stable system.” The Obama administration has yet to figure out what to do with Fannie Mae and Freddie Mac, which regulators seized in September as the mortgage-finance companies’ losses threatened to further disrupt the housing market.

- United States Natural Gas Fund, the world’s largest fund in the commodity, has changed its investment strategy, buying a $250 million bilateral swap that isn’t subject to regulatory position limits. It’s the first time the fund has used an off-market trade to mimic price changes in the fuel. The shift comes as regulators debate new limits on how many futures and swaps that such funds can hold. The fund grew 11- fold since the start of the year to 347.4 million shares before it ran out of new shares on July 7. It is awaiting permission from the Securities and Exchange Commission to sell 1 billion more.

- President Barack Obama’s national security adviser said today enough progress has been achieved on the security front in Iraq to enable American businesses to invest there. “Now is the time for the private sector to do what it does best,” retired General James Jones told the U.S. Chamber of Commerce in Washington. It must build businesses, create jobs and “create opportunities,” he said. “We need to develop private-sector interactions,” Jones added. The Chamber will sponsor an investment conference in Washington Oct. 20-21 for American business executives to explore investment opportunities in Iraq.

- Iraq’s oil potential is larger than earlier understood, President Barack Obama’s national security adviser said today. “They have discovered more reserves and it looks like the aggregate possibilities are even bigger than we previously thought,” James Jones said in a brief interview after a speech at the U.S. Chamber of Commerce in Washington. Jones, who formerly headed the Chamber’s Institute for Energy, said exploration is “yielding more reserves” as it becomes easier to move around Iraq.

Wall Street Journal:

- U.S. health officials said H1N1 virus could strike up to 40% of Americans over the next two years and as many as several hundred thousand could die if a vaccine campaign and other measures aren't successful. Those estimates from the Centers for Disease Control and Prevention mean about twice the number of people who usually get sick in a normal flu season would be struck by swine flu. Officials said those projections would drop if a new vaccine is ready and widely available, as U.S. officials expect.

- The party of the left owns the White House, a filibuster-proof Senate, and a 70-seat House majority. As one House Republican aide quipped: “We could have every GOP congressman and their parents vote against a Democratic bill, and still not stop it.” All Democrats have to do is agree on something.

CNBC:

- A federal minimum wage increase that takes effect Friday could prolong the recession, some economists say, by forcing small businesses to lay off the same workers that the pay hike passed in better times was meant to help.

- Through the noise a peak in jobless claims is apparent—a classic sign of a recession’s end.

New York Post:

- A multiracial group of police officers stood with the white officer who arrested a black Harvard scholar and asked President Barack Obama and Gov. Deval Patrick apologize for comments union leaders called insulting. Officers said they "deeply resent" any implication that race played a role in Sgt. James Crowley's arrest of Henry Louis Gates Jr. at his home near Harvard University last week. At a news conference Friday, union leaders said Crowley "acted appropriately" when he arrested the scholar for disorderly conduct. Police say Gates flew into a race when officers responding to a report of a burglary asked Gates to show identification.

MarketWatch:
- The world's top two memory-chip makers -- South Korea's Samsung Electronics Co. and Hynix Semiconductor Inc. -- posted sharply improved second-quarter results Friday, hinting at a recovery in the global chip market.

- All too often in investing, running with the herd will get you trampled. But if you are an investor in money-market funds, heading for the exits with the masses is probably a smart idea right now, because investing in money funds is the Stupid Investment of the Week. Some $15 billion moved out of money funds during the week ended July 21, according to iMoneyNet, a Westborough, Mass. research firm. That brought the out-the-door total to $248 billion since Jan.13, when assets reached an all-time peak. Still, there's $3.6 trillion in money-market mutual funds, with just under $950 billion of that belonging to retail investors. And yet, the Crane 100 Money Fund Index, which tracks the yields on the top money funds, currently stands at 0.17%.

Detroit Free Press:

- Detroit is in danger of running out of cash if the city doesn’t take steps to eliminate a $20-million to $25-million budget shortfall before Oct. 1, Mayor Dave Bing told the Free Press on Thursday. After spending most of his first two months in office poring over Detroit’s financial books and organizational structure, Bing said the city is so deeply in the red that the following measures must be taken to avoid bankruptcy:

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 30% of the nation's voters now Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-eight percent (38%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -8 (see trends). Overall, 49% of voters say they at least somewhat approve of the President's performance. Today marks the first time his overall approval rating has ever fallen below 50% among Likely Voters nationwide. Fifty-one percent (51%) disapprove.

Politico:

- The negotiations between House Energy and Commerce Chairman Henry Waxman (D-Calif.) and seven conservative Democrats on his panel fell apart Friday afternoon after the chairman told reporters he could move the bill to the floor without a committee vote. Arkansas Rep. Mike Ross, the top negotiator for conservative Democrats in the Blue Dog Coalition, told reporters Friday that the negotiations "pretty much fell apart this afternoon." In a meeting with Blue Dogs Friday, Waxman rescinded two previous concessions to help cut health care costs over time and ensure the government-sponsored health care won't impede on the private market. Asked how this leaves the negotiations, Ross said it "leaves the chairman with not enough votes to get it out of committee."

USA Today:

- Lobbyists and businesses that employ them donated $5.8 million last year to foundations affiliated with congressional groups, a USA TODAY analysis of federal lobbying data shows. Nearly all of it — $5.7 million — went to non-profit groups connected to the Congressional Black Caucus and the Congressional Hispanic Caucus Institute, according to the analysis. Under congressional rules, the caucuses face limits on how much public money they can use to support their activities. They also are barred from using private funds to operate. However, nothing stops lobbyists from writing big checks to the non-profits connected to caucuses. Giving to a caucus-related group is a way to earn favor with a large number of lawmakers, said Sheila Krumholz, of the non-partisan Center for Responsive Politics. Lobbyists "get to rub shoulders with lawmakers and their families in a relaxed comfortable atmosphere," she added. "It's all conducive to building cordial relationships that you can later cash in on."

Reuters:
- A gauge of future U.S. economic growth edged higher in the latest week, while its

measure of annual growth continued to stride at five-year highs, feeding hopes that a smooth recovery is due this year, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 118.4 in the week to July 17 from 118.1 the previous

week. The index's annualized growth rate jumped to a fresh five-year high of 7.7 percent from 7.0 percent one week ago. It was the index's highest yearly growth rate reading since the week ended May 7, 2004, when it stood at 7.8 percent. "With WLI growth climbing to a new five-year high, it is reaffirming that the end of recession is at hand and that the U.S. economy is poised for recovery in short order," said

Lakshman Achuthan, managing director at ECRI.

- China National Petroleum Corp(CNPC) is to take the majority stake from BP (BP) in a project to develop the Rumaila oilfield in Iraq, industry sources said on Friday. The sources said BP will remain part the project, which was awarded to develop the 17-billion-barrel southern Rumaila field in a bidding round at the end of June, but not with the majority stake under its initial bid made in partnership with CNPC.

- U.S. gasoline prices have probably peaked for 2009 and could face increasing downward pressure as seasonally higher summer driving demand fades into the rear-view mirror. Motor fuel inventories have climbed for six straight weeks, gaining even around the Fourth of July holiday, traditionally the peak of demand in the United States. "This year is unusual because inventories are high and gasoline demand is very poor. So far we haven't seen much of a driving season," said Antoine Halff, vice president of research at Newedge Group, who expects prices to fall. Meanwhile, inventories of distillate fuels, which include diesel and heating oil, have swelled to the highest level in nearly 25 years.

- Warren Buffett said he has no plans to soon exercise Berkshire Hathaway Inc's warrants to buy $5 billion of Goldman Sachs Group Inc stock, although he could make a big profit by doing so. Berkshire got the warrants in September when it also bought $5 billion of Goldman preferred shares, which throw off a $500 million annual dividend. The warrants let Omaha, Nebraska-based Berkshire buy Goldman common shares at $115 each at any time until October 1, 2013. With Goldman's stock having closed at $165.45 on Thursday, those warrants are worth well over $2 billion.

- The percentage of empty privately-owned U.S. homes fell in the second quarter to levels last seen in mid-2006, a government report on Friday showed. The vacancy rate fell to 2.5 percent from 2.7 percent in the first quarter of 2009, the Commerce Department reported.

Bear Radar

Style Underperformer:
Large-cap Growth (-.71%)

Sector Underperformers:
Software (-3.89%), Education (-1.34%) and Road & Rail (-.95%)

Stocks Falling on Unusual Volume:
RVBD, RIGL, IRBT, WFR, MSFT, AMZN, BRCM, INFA, NOC, NUVA, DECK, HITT, NFLX, STAR, CAKE, BUCY, ACO and WAB

Stocks With Unusual Put Option Activity:
1) CTX 2) RSH 3) USU 4) UAUA 5) ETFC

Bull Radar

Style Outperformer:
Large-cap Value (-.40%)

Sector Outperformers:
Alt Energy (+.87%), Hospitals (+.80%) and Airlines (+.67%)

Stocks Rising on Unusual Volume:
UTL, STP, ABT, BMY, CVS, CA, FSLR, CSIQ, SPWRA, SEPR, HWAY, ALGN, CYBS, AVCT, BIDU, CISG, AMSG, ENER, SIVB, SGEN, OXPS, IBKR, CPSI, OMCL, ITRI, HSII, CNW, BDK, GPN, EMN, EVY, COF and CB

Stocks With Unusual Call Option Activity:
1) RIGL 2) SPWRA 3) IR 4) RSH 5) TOL

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Friday Watch

Late-Night Headlines
Bloomberg:

- “Naked” credit-default swaps may be banned under provisions in the main U.S. House legislation overhauling oversight of the $592 trillion derivatives industry, House Financial Services Committee Chairman Barney Frank said. “The question of banning naked credit-default swaps is on the table,” Frank, a Massachusetts Democrat, said during an interview on Bloomberg Television today. The legislative proposal will be released next week, Frank said. House Agriculture Committee Chairman Collin Peterson, a Minnesota Democrat, said he is helping draft the legislation, which could ban credit-default swaps where the investor doesn’t own the debt on which the contracts are based. “Frank has indicated to me he wants a total ban on naked credit default swaps,” Peterson said in a statement through a spokesman today. Under Frank’s current proposal, market makers would be excluded from the ban on naked credit-default swaps, according to Representative Melissa Bean of Illinois, a Democrat and co- sponsor of a competing bill giving the U.S. Treasury authority over derivatives. As much as 80 percent of the $26.4 trillion credit-default swap market is traded by investors who don’t own the underlying debt, according to Eric Dinallo, who stepped down this month as superintendent of the New York State Insurance Department. The New Democrat Coalition’s legislation yesterday would still give the SEC and CFTC authority to propose rules for margin and collateral requirements and determine which contracts must be backed by a clearinghouse or traded on an exchange. The Treasury would have “disapproval power” over any regulations, and could censure or suspend traders or revoke registrations, according to the bill.

- The Securities and Exchange Commission should develop a central database of stock loan information to curb abusive short sales, six U.S. senators urged in a letter to the agency’s chairman. The SEC should “urgently consider” a proposal that would stiffen rules requiring brokerages to locate a willing lender of a stock before completing a short sale, according to the letter whose backers include Republican Orrin Hatch and Democrat Robert Menendez, both members of the Senate Finance Committee. Under the proposal, investors would have to identify the actual shares they intend to borrow in a central database operated by Depositary Trust & Clearing Corp. “One share owned would be one share located -- and ultimately one share delivered on time,” the senators said in the letter. “This proposal potentially represents a great stride forward and a substantial improvement on current short sale market practices.” The SEC, led by Chairman Mary Schapiro, is weighing multiple rules to dictate when traders can bet shares will fall, after lawmakers and business groups said short-sellers fed last year’s plunge in financial shares and the collapse of Lehman Brothers Holdings Inc. The SEC last year enacted rules that have almost eliminated naked short selling, so called because a trader has shorted a stock without obtaining a loan. The proposed DTCC database would prohibit multiple investors from executing short sales relying on a single indication of an available loan. It would make them match their short sales with a specific set of shares available to borrow. “This centralized ‘hard locate’ system seems to offer a viable way to eliminate ‘over selling’ of stock inventories, in that there would no longer be multiple locates on the same shares of a security,” the senators said in the letter.

- President Barack Obama’s concession that his effort to revamp U.S. health care will miss a deadline led analysts to recommend buying shares in the industry. Obama, who once set an Aug. 7 deadline to pass health- overhaul bills in both houses of Congress, said at a White House press conference last night that he “will get it done this year.” Senate Democratic leader Harry Reid said today his chamber won’t vote on an overhaul bill until September. Every day Obama’s historic effort to curb health spending and extend coverage to an estimated 46 million uninsured Americans is delayed, “health stocks will gradually rise,” Les Funtleyder, an analyst with Miller and Tabak & Co., said today in an interview. Investors in insurance and pharmaceutical shares have “overestimated” how much Obama’s overhaul might depress earnings, Funtleyder said. “The worst of the worst for these sectors, like drug price controls or a government-run health plan, seems to have moved off the table and investors are still assuming the worst,” Funtleyder said. “That makes now a very good time to invest in the sector.”

- Issuance of collateralized mortgage obligations repackaging standard agency home-loan securities has soared to a pace typical before the “liquidity crises” of recent years, reflecting demand from banks and money managers, according to Amherst Securities Group analysts. Issuance rose to $64.8 billion last quarter, from $23.4 billion in the first quarter and $6.8 billion in the fourth quarter, the analysts led by Laurie Goodman wrote in a report yesterday. Banks, flush with deposits and lending less, are seeking to take advantage of a “quite steep” difference between short- term funding costs and higher investment yields amid a declining supply of “competing” assets such as new adjustable-rate mortgages and related bonds, the analysts wrote. “Total return” managers also have liked the debt, they said. “Hence the rejuvenation of the CMO market,” the New York- based analysts wrote.

- Microsoft Corp.(MSFT) fell as much as 8.8 percent in late trading after reporting a 29 percent profit drop and sales that missed analysts’ estimates, a sign that demand for Windows and Office software is still declining.

- JPMorgan Chase & Co.(JPM), the second- largest U.S. bank by assets, will increase salaries for investment bankers who earn half or more of their total compensation in year-end bonuses, a person familiar with the firm said. The plan, unveiled today at a meeting with investment bank co-heads Steven Black and William Winters, will be implemented in 2010 and details will be announced closer to the end of this year, the person said, declining to be identified because pay matters are confidential. The salary increase doesn’t change total pay.

- Samsung Electronics Co., Asia’s biggest maker of chips, flat-screens and mobile phones, reported an unexpected increase in profit, helped by a recovery in demand for liquid-crystal-display televisions and handsets. Higher prices of memory chips and LCDs, coupled with increasing demand for flat-panel TVs and mobile phones, may help Samsung’s profit climb to a five-year high this quarter, according to analysts’ projections.

- Amazon.com Inc.(AMZN) reported a 10 percent decline in second-quarter profit and lower revenue than analysts anticipated after the online retailer lowered prices. The stock dropped 8.6 percent in late trading.

Wall Street Journal:

- The Associated Press, taking a hard line against Web sites that run stories without permission, said it is creating a way to track and control the distribution of its articles online.

- President Barack Obama's health-care plan is in jeopardy because of serious concerns that costs will spin out of control. As much as anyone, it's White House budget director Peter Orszag's job to save it. Mr. Orszag is the administration's point man for controlling health-care spending. So when the director of the Congressional Budget Office, which Mr. Orszag used to run, testified eight days ago that none of the health plans pending on Capitol Hill would control long-term spending, Mr. Orszag knew that meant trouble.

- Just a few months ago, conglomerates Berkshire Hathaway Inc. and Leucadia National Corp. made a bid to buy parts of CIT Group Inc. CIT rebuffed the offer, according to people familiar with the matter, because the price was too low. Now CIT and its advisers are evaluating a similar break-up, this time with the threat of bankruptcy bearing down, and its shares worth less than a dollar each. CIT's aviation-finance and rail-finance operations are the units most likely to be sold, said these people, who cautioned the analysis is still in early stages.

- Federal criminal authorities are investigating whether Corey Ribotsky, a Long Island, N.Y., hedge-fund manager who has said he has $770 million under management, lied to investors about their returns and the holdings of his various funds, according to people familiar with the matter. Prosecutors from the U.S. attorney's office in Brooklyn and investigators from the Federal Bureau of Investigation and the Securities and Exchange Commission are looking at whether the 38-year-old Mr. Ribotsky and his firm defrauded investors as the stock market fell amid the credit crisis, these people said.

- How’s the economy, you ask? I have the proverbial good news and bad news, but in this case, they’re exactly the same: The U.S. economy appears to be hitting bottom. First, the good news. Right now, it looks like second-quarter GDP growth will come in only slightly negative, and third-quarter growth will finally turn positive.

CNBC.com:
- America’s Top States For Business ’09. Overall Rankings:

NY Times:

- It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets. Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense. These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk. Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs(GS) are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer. And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage. Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy. High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there. Although precise figures are elusive, stock exchanges say that a handful of high-frequency traders now account for a more than half of all trades. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee. High-frequency traders generated about $21 billion in profits last year, the Tabb Group, a research firm, estimates. “You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient,” said Andrew M. Brooks, head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. “But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”

- Big as California’s budget woes are today, so are the problems lurking in its biggest pension fund. The fund, known as Calpers, lost nearly $60 billion in the financial markets last year. Though it has more than enough money to make its payments to retirees for many years, it has a serious long-term shortfall. Meanwhile, local governments in the state are pleading poverty and saying they cannot make the contributions that would be needed to shore it up. Those problems now rest largely on the slim shoulders of Joseph A. Dear, the fund’s new head of investments. He is not an investment seer by training, but he thinks he has the cure for what ails Calpers, or the California Public Employees’ Retirement System, the largest in the nation with $180 billion in assets. Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure. That’s right, he wants to load up on many of the very assets that have been responsible for the fund’s recent plunge.

CNNMoney.com:

- A government watchdog raised questions about the Obama administration's estimate that up to four million people could be helped by the president's mortgage modification program. Also, the Government Accountability Office said Thursday the Treasury Department must develop better procedures to ensure loan servicers are equipped to participate in the $75 billion program and adhere to its rules. The report comes as the pressure mounts on the administration to address growing complaints about the program, including that some servicers are violating the rules.

Politico:

- The Congressional Black Caucus is blasting away at Blue Dog Democrats and other fiscal conservatives in their own party for making "spurious" claims about the high cost of the House health reform plan, POLITICO has learned. The issue isn't about race, aides tell me. It's about the CBC, which represents some of the most progressive members in the House, wanting to have a say in final negotiations -- and to prevent party conservatives from dominating. The 42-member caucus, whose support is crucial for the passage of any plan, is worried that intense talks going on between the Dogs, White House Chief of Staff Rahm Emanuel and House leaders will undermine efforts to provide quality coverage to the poor and working class.

Reuters:

- Investors bid up shares of Regeneron Pharmaceuticals Inc (REGN) and Seattle Genetics Inc (SGEN) on Thursday after Medarex Inc (MEDX) agreed to be acquired by Bristol-Myers Squibb Co (BMY) at a 90 percent premium. Analysts speculated that those two companies, which have similar specialties to Medarex, could be the next to be acquired. The $2.4 billion deal for antibody technology specialist Medarex, announced late on Wednesday, marked the latest in a string of windfalls for biotech investors this year.

- ICE Clear Europe and Eurex Clearing AG have been given permission to clear credit default swaps, a type of derivative that exacerbated the global financial crisis, the Securities and Exchange Commission said on Thursday. The SEC approved conditional exemptions that will allow ICE Clear, owned by IntercontinentalExchange Inc (ICE) , and Eurex, a derivatives exchange owned by Deutsche Boerse, to operate as central counterparties.

Financial Times:

- Daniel Mudd, appointed this week chief executive of Fortress Investment Group, plans to spearhead an acquisition strategy that could see the hedge fund buy other financial companies including banks, insurers, traditional money management groups and other hedge funds. Mr Mudd, former chief executive of Fannie Mae, joins Fortress as the hedge fund industry looks for signs that outflows, or investor withdrawals, are beginning to slow. Wes Edens, Fortress founder, told staff this week that the group could pounce on smaller rivals by buying other hedge funds and the assets of funds that are being wound down. “Did you make last year’s losses back? If you are still down by the end of the year, it is all over for you,” Mr Edens said of those hedge funds. Fortress is expected to join the group of investors extending $3bn in rescue funding to beleaguered CIT, according to people familiar with the matter.

- Moves by governments and regulators to shore up banking systems and financial markets risked a push towards financial protectionism, leading bankers warned on Thursday. The bankers, who included senior officials at Deutsche Bank, JPMorgan, Spain’s BBVA and Sweden’s SEB, said they supported “far-reaching” regulatory reforms including changes to pay practices across banks and tougher capital requirements. However, in a report on the future of financial regulation, they voiced concern about swift moves to change rules in the UK and the US that would include curbs on risky compensation practices. The report came just days after Christine Lagarde, France’s finance minister, attacked banks for a return to paying guaranteed bonuses and called on the Group of 20 nations to stop “procrastinating” and curb practices deemed to encourage excessive risk-taking. The Institute of International Finance report said: “There is a danger of a loss of global integration and co-operation, as happened between 1914 and 1945.

Shanghai Securities News:

- China’s new loans this month may decline from June as some banks slowed or suspended lending.

South China Morning Post:

- Chinese colleges fake jobs for graduates. Teachers sign up students to fictional companies to boost records.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded .

- Reiterated Buy on (CELG), boosted target to $63.

- Reiterated Buy on (MSFT), target $28.

- Reiterated Buy on (AMZN), target $100.

- Reiterated Buy on (XRX), target $10.

RBC:

- Rated (PSYS) Outperform, target $30.

Night Trading
Asian Indices are +.25% to +1.50% on average.

Asia Ex-Japan Inv Grade CDS Index -1.05%.
S&P 500 futures -.49%.
NASDAQ 100 futures -.65%.

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Earnings of Note
Company/EPS Estimate
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Economic Releases

10:00 am EST

- Final Univ. of Mich. Consumer Confidence for July is estimated to rise to 65.0 versus a prior estimate of 64.6.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed's Bernanke, Treasury's Geithner; FDIC's Blair Testifying on Regulatory Reform could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by commodity and technology shares in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.