Tuesday Watch

Late-Night Headlines
Bloomberg:

- UBS AG’s(UBS) U.S. brokerage business stopped selling exchange-traded funds that use leverage because the products don’t conform to its emphasis on long-term investing. UBS Wealth Management Americas suspended sales of inverse and leveraged ETFs immediately, citing the “short-term nature of these securities,” the New York-based brokerage said in a statement today. Edward Jones, a St. Louis-based brokerage, and Minneapolis-based Ameriprise Financial Inc. have also halted leveraged-ETF sales. The Financial Industry Regulatory Authority and Massachusetts Secretary of the Commonwealth William Galvin said in the past two months that leveraged and inverse ETFs might not be appropriate for individual investors. The funds’ assets have increased 51 percent to $32.8 billion this year, according to data from State Street Corp., a Boston-based company that sells ETFs and tracks the industry. Finra told brokers in June that leveraged ETFs might be unsuitable for individual investors who hold them for more than one day. The Investment Company Institute, a Washington-based trade group for mutual funds, asked Finra to clarify its initial statement, urging it to provide guidance “rather than defining such securities as per se unsuitable for certain classes of investors.”

- The rising number of derivatives bets on a drop in the US dollar may indicate that the greenback is poised to strengthen. The net number of contracts hedge funds and other large speculators hold betting on a decline versus a rise in the value of the dollar against currencies traded at the Chicago Mercantile Exchange is at the highest level since July 28^th, 2008. Futures positions, when they reach an extreme, are many times viewed as a contrarian indicator because traders often rush to reduce positions when momentum in a currency shifts.

- The Obama administration’s economic leaders assured Chinese counterparts they will rein in a record budget deficit as China underscored its concern about preserving the value of its holdings of Treasuries. “China has a huge amount of investment in the U.S.” and “we are concerned about the security of our financial assets,” Assistant Finance Minister Zhu Guangyao said in a press briefing at the end of the first of two days of talks in Washington. Treasury Secretary Timothy Geithner said in opening remarks that the U.S. will ensure a “sustainable” deficit by 2013. In a shift from Bush administration meetings, officials indicated little sign of tension over the value of China’s yuan, which U.S. lawmakers have labeled as artificially cheap and an aid to Chinese exports.

- The wave of “option” adjustable- rate mortgages recasting to higher payments, projected by some economists to represent a looming source of foreclosures that will hurt housing markets over the next few years, will be smaller than “feared” because many borrowers will default before their bills change, Barclays Capital analysts said.

- Hedge funds and other companies using credit-default swaps would have to disclose to regulators any short positions related to those contracts, according to a legislative proposal from US Representatives Barney Frank. The bill, which may change, includes most of what the Obama administration has been pitching to curb the $592 trillion over-the-counter derivatives market, including clearinghouses and margin requirements, according to a two-page summary. Frank would also ban most “naked” credit-default swaps and require enhanced disclosures, the summary shows. Some lawmakers are regulators have said they are looking more closely into whether credit-default swaps were manipulated by short sellers to spread false rumors about financial companies such as bankrupt securities firm Lehman Brothers Holdings Inc. last year to drive down stock prices. In addition to rules on short positions, Frank’s legislation would move the most active derivatives to a regulated exchange and send them through a clearinghouse. Customized contracts, illiquid markets and smaller companies that aren’t “major market” players would be exempt, the summary shows.

- AOL, the Internet unit being spun off from Time Warner Inc.(TWX), may be worth less than $5.66 billion, based on the price Google Inc.(GOOG) received for its 5 percent stake in the company. Time Warner, based in New York, said in a regulatory filing today it repurchased the stake on July 8 for $283 million, a price that includes cash distributions owed to Google.

- Mitsubishi Heavy Industries Ltd., Japan’s biggest heavy-equipment maker, plans a wind-power generator assembly plant in the U.S. or Canada early next year to benefit from President Barack Obama’s push for cleaner energy. The proposed plant may cost as much as 10 billion yen ($105 million) and annually produce equipment capable of generating 600 megawatts of electricity, Yoshiaki Tsukuda, a director overseeing Mitsubishi’s engine and turbine business, said in an interview in Yokohama yesterday. Mitsubishi is competing with General Electric Co.(GE) to supply wind turbines and generators as the Obama administration embarks on legislation that will require utilities to get as much as 15 percent of their power from renewable sources.

Wall Street Journal:

- Google Inc.(GOOG) is teaming up with Visible World Inc., a well-known New York technology company that uses software to create multiple versions of a given ad, in its push to offer TV advertisers more targeting options. Google will combine the technology with its Google TV Ads, an automated auction-based system for buying TV ads by choosing which shows best fit the advertised product or service. The idea of such "addressable advertising" is to send a TV ad promoting a sale on minivans to a household with children, for example, and the same basic ad with a promo for a sports sedan to a childless household. "Audiences are more and more fragmented," said Mike Steib, director of Google TV Ads. "One ad with one message for one audience is not the right thing for everyone."

- Nvidia(NVDA), AMD(AMD) Push GPU Technology as Filmmakers Seek More Sophisticated Techniques; Intel(INTC) Tries Different Approach.

- An Obama administration effort to reduce home foreclosures by lowering the mortgage payments of struggling borrowers before they fall behind is failing to help as many people as expected. Among the problems: Some homeowners are being told they must be behind on their payments to receive help, which runs counter to the aim of the program. In other cases, delays are so long that borrowers who are current on their payments when they ask for a loan modification are delinquent by the time they receive one. There is also confusion about who qualifies.

- German luxury auto makers including BMW AG and Daimler AG's Mercedes-Benz are close to benefiting from a U.S. concession that will allow them and a few other foreign makers to keep selling cars that emit more greenhouse gases than those made by mass-market rivals such as General Motors Co. and Toyota Motor Corp. Under a provision of a plan to curb greenhouse gas emissions, the Obama administration has proposed to set less stringent standards for car makers that sell fewer than 400,000 vehicles a year in the U.S. That target defines the major German brands as well as a few smaller Asian manufacturers such as Suzuki Motor Corp. and Mitsubishi Motors Corp. "The German provision" -- as it is known to industry lobbyists -- resembles a California law that effectively exempts some foreign car makers from having to meet the same emissions standards as their U.S. rivals. BMW and Daimler declined to say whether they lobbied for the provision.

- A simmering dispute between the U.S. and Israel over Iran's nuclear program burst into the open on Monday, as U.S. Defense Secretary Robert Gates, on a visit to Israel, called for continued diplomatic engagement with Tehran, while Israeli officials repeatedly warned of a possible military strike against Iran's nuclear facilities. Iran's apparent pursuit of a nuclear weapon is emerging as a major source of tension between the U.S. and Israel, which are already feuding over President Barack Obama's call for a complete freeze on Israeli settlements in East Jerusalem and the West Bank.

- The Securities and Exchange Commission issued new rules to govern short-selling, promising investors new information about the volume and velocity of negative bets placed against companies, But it dropped a requirement that hedge funds disclose details of short positions to regulators. The SEC's move, which doesn't impose strong new curbs on short-selling beyond those imposed last fall, comes amid political pressure to reduce abusive use of short-selling. The SEC said self-regulatory organizations, such as the Financial Industry Regulatory Authority, or Finra, will begin posting on their Web sites "in the next few weeks" more information about short sales, including something akin to a tape that will show, on a one-month delay, the time at which a trader places a short-sale and the size of the position. Such data would enable investors and others to determine if traders are piling on a company. The self-regulatory organizations, such as Finra, will also publish daily aggregate volume information of short-selling in each exchange-traded stock. The SEC also would speed up disclosure of failed short trades across all companies from once a quarter to twice a month. Failed trades are an indication, but not evidence, that a stock has been manipulated. The SEC, however, is backing away from its earlier move to require hedge funds and other money managers to disclose their short positions to regulators on a weekly basis. Sen. Ted Kaufman (D., Del.), who has prodded the SEC to take additional steps, said in a statement that he was disappointed they didn't go further to restrict naked short-selling. "Instead of proposing action today to deal with the problem, the SEC apparently is content to let potential solutions sit on the shelf for another two months," he said.

- Cutting Repeat Hospital Trips – Simple Idea, Hard to Pull Off.

- Energy Secretary Steven Chu wants to kill research and development on cars that run on hydrogen fuel cells, but a spending bill approved by the House this month and another scheduled for a Senate vote this week would restore funding for the program.

- Ever notice that those who endorse high taxes and those who actually pay them aren’t the same people? Consider the curious case of Ways and Means Chairman Charlie Rangel, who is leading the charge for a new 5.4-percentage point income tax surcharge and recently called it “the moral thing to do.” About his own tax liability he seems less, well, fervent. Exhibit A concerns a rental property Mr. Rangel purchased in 1987 at the Punta Cana Yacht Club in the Dominican Republic.

MarketWatch.com:
- When Microsoft Corp. launches Windows 7 later this year, the new operating system is likely to stoke wide-ranging technology sales as big corporate customers act to uncork their pent-up demand, analysts say. In a new report, analysts at Deutsche Bank predicted that the release of Windows 7 on Oct. 22 "could trigger significant new investment across the technology value chain." That investment could outpace the same uptick in demand seen after previous operating-system launches, including the popular Windows XP as well as Windows Vista, which has been widely seen as a disappointment.

CNBC.com:
- The Obama administration's move to tame the volatile commodity and energy markets gets under way with hearings this week that promise to expose a wide fissure of disagreement over how it should be done. The Commodity Futures Trading Commission will hold the first of three hearings on Tuesday to consider whether to limit holdings of energy and agricultural contracts and whether some traders should be allowed to exceed so-called position limits. The agency, which will also hold meetings on Wednesday and on Aug 5., will investigate whether players with deep pockets distort the market's traditional role of price-setting when they amass huge market positions. To protect against market manipulation, the CFTC sets limits on the amount of contracts each investor can hold in some agricultural commodities. But for energy products, such as oil, the limits are set by the futures exchanges. "My firm belief is that we must aggressively use all existing authorities to ensure market integrity and efficiency," CFTC Chairman Gary Gensler said on July 7 in announcing the review of position limits. While some in industry balk at reforms, the CFTC has found broad support in Congress and among farm groups and companies who complain their traditional hedging practices were upset by big players tossing so much money into futures. The legislation would ban "naked" credit default swaps, require over-the-counter derivatives to go through central clearinghouses and direct the CFTC to set position limits on energy traders across all markets. Trading firms, fearful of losing revenue to CFTC's proposals, are expected to tell the agency that any changes could only make the market less efficient.

- Japan's Toyota Motor plans to launch a hybrid compact for around 1.5 million yen ($15,760) in Japan in late 2011, broadening its hybrid car line-up, the Asahi newspaper reported on Tuesday.

Forbes:

- If we agree on a few basic things that we all want, breaking up Goldman Sachs(GS) and most of the other big Wall Street banks makes a lot of sense. Let's start with the wants: The taxpayer should never again be asked to save the banks from the costs of their own investment decisions; American consumers and businesses should have access to financial products, credit and financing; bank shareholders deserve a chance to make some money. This is by no means a sure thing, but it seems as if a bunch of baby Goldmans are more likely to give us all of those outcomes than the big Goldman we've got.

Politico:

- Bipartisan negotiations on the Senate Finance Committee are moving closer to eliminating two health care provisions favored by many Democrats – a mandate on employers to provide insurance or pay a penalty, and a government insurance option, a senator and health care insiders said Monday. That could bring even greater pressure on Finance Chairman Max Baucus (D-Mont.), who has been challenged by more liberal senators who say he is sacrificing key Democratic priorities on health care reform to win the votes of a few Republicans. Sen. Olympia Snowe (R-Maine) confirmed that the three Republicans and three Democrats negotiating the Senate Finance bill are moving away from a broad-based mandate that would force employers to offer insurance. The senators instead are leaning toward a “free rider” provision that requires employers to pay for employees who receive coverage through Medicaid or who receive new government subsidies to purchase insurance through an exchange. Snowe stressed the committee hasn’t reached a final agreement on any of the key provisions but said, “There is not a broad-based employer mandate. … There are approximately 170 million Americans that receive coverage through employers. That is a significant percentage of the population. We don’t want to undermine that or create a perverse incentive where employers drop the coverage because their employees could potentially get subsidies through the exchange.” On the nonprofit insurance cooperative, Snowe also said no final decisions have been reached, but “it is safe to say it is probably one that will remain in the final document.”

- Sens. Kent Conrad (D-N.D.) and Chris Dodd (D-Conn.) are fiercely denying a report that they knew they were getting sweetheart mortgage deals — accusing a Countrywide Financial loan officer of distorting their relationships with the former mortgage giant. “There is nothing new here,” Conrad spokesman Christopher Gaddie told POLITICO Monday night. “These questions have been asked and answered by the senator already, and the facts remain the same: Sen. Conrad never asked for, expected or was aware of loans on any preferential terms.” According to an Associated Press report late Monday, Robert Feinberg, who worked in the Countrywide’s “VIP” section, informed congressional investigators last month that both senators were told “who you know is basically how you’re coming in here.”

Boston Globe:

- Food scientists are hoping for big things from small particles. Disease, obesity are latest targets of nanotechnology.

USA Today.com:

- Visa (V), the world's largest credit card network, announced a management reorganization Monday that includes the departure of its president, even as it said performance is meeting or exceeds its forecast.

AP:

- Four major cities — New York, Seattle, Houston, and Pittsburgh — will get no money from a $1 billion economic stimulus program to help cities avoid laying off police officers, officials told The Associated Press on Monday. Rep. Peter King of New York, the senior Republican on the Homeland Security Committee, criticized the decision. "It is disgraceful for New York City to be shut out just because the NYPD is doing such a great job under trying circumstances and Mayor (Mike) Bloomberg is doing such a wonderful job of managing the city's finances," said King, adding that the city "is the No. 1 terrorist target and should not be penalized for its success." Bloomberg, in a statement, called the decision "disappointing, to put it mildly. To punish our police department because they have driven down crime with fewer resources shows the backwards incentive system that is sometimes at work in Washington." He said the 9/11 attacks "were attacks on the nation and we should be receiving strong federal support for the NYPD to fight terrorism in the nation's largest city."

Reuters:

- Senior U.S. housing officials and leading mortgage companies on Tuesday will make a fresh commitment to help troubled borrowers keep their homes and will promise to expand foreclosure-prevention aid, sources familiar with the plans said. Executives from 25 mortgage service companies will spend much of the day in working meetings to trouble-shoot the foreclosure crisis and brainstorm with officials from Treasury and the Department of Housing and Urban Development.

- The growing debate over "flash" orders, amplified late last week when a prominent U.S. senator weighed in, could spell trouble for Direct Edge, the fast-growing stock trading venue that has the most to lose if they are banned. Rival exchanges, some of whom also offer flashes, have been coy on whether they support the service and may quietly hope they are eliminated for good. Direct Edge was the first to start "flashing" customer orders -- for fractions of a second -- to certain market members before routing them elsewhere to all participants. The practice gives banks, hedge funds, and some dark pools, where orders are matched anonymously, an advanced look at order flow.

- Shares of companies that make vaccines and drugs for flu rose on Monday after the World Health Organization said more than 20 countries and overseas territories confirmed their first cases of the H1N1 swine flu virus. Analysts believe the headlines have spurred investors to turn their attention to a basket of drugmakers developing novel therapeutics to combat a potential flu pandemic, as these companies stand a chance of benefiting from government funding or stock-piling grants.

Financial Times:

- A cautionary tale from China.

- Germany is pursuing a "dangerous" strategy in assuming a pick-up in world growth will restore the health of its export-driven economy, a top adviser to the Berlin government has warned. Peter Bofinger, an economics professor at Würzburg university in southern Germany, compared Berlin's response to the global crisis to "waiting for Godot".

Nikkei English News:

- Sumitomo Corp. has acquired a 42.5% interest in a Texas wind farm. Sumitomo purchased the stake from an investment arm of American International Group Inc. for an estimated $52.5 million to $105 million. General Electric(GE) holds another 42.5%, with the remainder owned by Invenergy LLC.

Shanghai Securities News:

- China Unicom has pledged to sell at least $732 million of Apple Inc.’s(AAPL) iPhone handset in China annually, citing people familiar with the situation. The Chinese carrier has promised Apple it will sell 1 million to 2 million iPhone handsets a year. China Unicom will buy the handsets from Apple for 3,000 yuan each, the report said. China Unicom will have exclusive rights to the iPhone in China for three years.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (VECO) to Buy, target $24.

- Reiterated Buy on (GLW), raised target to $21.

- Reiterated Buy on (AMGN), boosted target to $71.

Morgan Stanley:

- Upgraded (SOHU) to Overweight, target $82.70.

Night Trading
Asian Indices are unch. to +1.0% on average.

Asia Ex-Japan Inv Grade CDS Index +5.2%.
S&P 500 futures -.22%.
NASDAQ 100 futures -.22%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (PCAR)/.04

- (SII)/.21

- (VIA/B)/.48

- (COH)/.43

- (WAT)/.79

- (MHP)/.56

- (ODP)/-.11

- (FPL)/.97

- (ENR)/1.02

- (JEC)/.76

- (ROK)/1.9

- (CVH)/.41

- (CPO)/.30

- (X)/-3.44

- (UIS)/.00

- (BEAV)/.34

- (VLO)/-.51

- (UA)/-.02

- (WCG)/.37

- (MEE)/.19

- (WDC)/.27

- (NSC)/.63

- (PNRA)/.64

- (THQI)/-.09

- (MCK)/.86

- (HTZ)/.11

- (ADVS)/.11

- (PSYS)/.56

- (AGCO)/.53

Economic Releases

10:00 am EST

- Consumer Confidence for July is estimated to fall to 49.0 versus 49.3 in June.

Upcoming Splits
- None of note

Other Potential Market Movers
- Geithner/Clinton meeting with Chinese officials, the Fed’s Yellen speaking, weekly retail sales reports, S&P/CaseShiller Home Price Index, Richmond Fed Manufacturing Index, ABC Consumer Confidence, Keefe Bruyette Woods Community Bank Conference, (GE) Investor Webcast and the (RRI) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by financial and mining shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish at Session Highs, Boosted by Homebuilding, Financial, REIT, Construction, Oil Tanker, Disk Drive and Insurance Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Futures
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Slightly Lower into Final Hour on Profit-Taking

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Biotech longs and Financial 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, sector performance is mixed and volume is about average. Investor anxiety is very high. Today’s overall market action is mildly bullish. The VIX is rising 6.37% and is high at 24.47. The ISE Sentiment Index is about average at 152.0 and the total put/call is slightly below average at .77. Finally, the NYSE Arms has been running above average most of the day, hitting 1.44 at its intraday peak, and is currently 1.03. The Euro Financial Sector Credit Default Swap Index is dropping another 2.75% today to 77.66 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 falling 4.57% to 115.80 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 2.67% 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 down 5.03 at 41.31 basis points. The Libor-OIS spread is rising .46% to 30 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 1.89%, which is down 75 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is unch. today. Homebuilding, Financial, Insurance, Construction, Disk Drive and Oil Tanker shares are all posting meaningful gains today. The MS Cyclical Index is rising another 1.3%. The Euro Financial Sector Credit Default Swap Index is continuing its recent plunge, falling to the lowest level since August 13^th, 2008, which remains a large positive. Moreover, the North Amer. Investment Grade CDS Index is falling today to the lowest level since June 18^th, 2008. While it is a slight negative that the market didn’t respond more positively to the new home sales report, the major averages are short-term technically extended. As well, the bears have been unable to gain any downside traction despite relative weakness in some Nasdaq leaders. Subdued US stock sentiment, the recent surge in Nasdaq short interest, plunging credit market angst, improving economic data, high levels of investor performance anxiety, elevated levels of sideline cash, diminishing odds for draconian healthcare reform/cap-and-trade measures and range-bound energy prices/long-term rates should help US stocks to consolidate recent gains in a healthy fashion, setting the stage for another surge higher. Nikkei futures indicate an +57 open in Japan and DAX futures indicate an +11 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, investment manager performance anxiety, diminishing government healthcare reform worries, less economic fear and earnings optimism.

Today's Headlines

Bloomberg:

- Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilize. Sales increased to a 384,000 annual pace, higher than every forecast in a Bloomberg News survey and the most since November, figures from the Commerce Department showed today in Washington. The number of houses on the market dropped to the lowest level in more than a decade. Deutsche Bank Securities Inc. and Goldman Sachs Group Inc. economists said today’s figures signal an end to the slide in home construction and sales. While that means the drag on economic growth will turn to a stimulus in the second half of the year, property values are likely to continue falling and rising unemployment will temper the recovery, analysts said. The median price of a new home decreased 12 percent to $206,200 from $234,300 in June 2008. Builders had 281,000 houses on the market last month, down 4.1 percent from May and the fewest since February 1998. The number of unsold properties fell a record 36 percent from June 2008. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007.

- Surging Profit Estimates Signal 26% Rally for S&P 500.

- The cost to protect against defaults on U.S. corporate bonds using a benchmark credit-default swaps index dropped to the lowest in more than a year. Credit swaps on the Markit CDX North America Investment- Grade Index Series 12, which is used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, fell 4.5 basis points to a mid-price of 114.5 basis points as of 7:51 a.m. in New York, according to Barclays Capital. A decrease in the index typically signals improvement in investor confidence. The index is at the lowest since June 18, 2008, when a previous series was trading at about 113 basis points, according to CMA DataVision.

- Lumber rose the maximum permitted by the Chicago Mercantile Exchange for the second time in three sessions. Lumber futures for September delivery rose the CME’s daily limit of $10, or 5.3%, to $198 per 1,000 board feet at 9:47 am in Chicago.

- The Commodity Futures Trading Commission today imposed new limits on natural gas swaps on the IntercontinentalExchange Inc.(ICE), tightening the so-called “Enron loophole” that exempted the contract from regulation. “To protect the American public, it is essential that we bring transparency and accountability to the marketplace,” Commission Chairman Gary Gensler said in a statement. “Bringing this natural gas contract under the CFTC’s regulatory authority is a critical step toward ensuring a fair and orderly marketplace.” The loophole allowed traders to sidestep Nymex limits on natural gas positions which are designed to keep one investor from gaining too much control of the market. Nymex limits natural gas traders to 12,000 net futures and 1,000 in the last three trading days before the contract expires. ICE expects to impose similar limits on its swaps, said Kelly Loeffler, an ICE spokeswoman.

- Treasuries fell, pushing the yield on the 10-year note to the highest in over a month, as the U.S. completed the first of this week’s four auctions for a record $115 billion and new homes sales rose the most in eight years.

- Wells Fargo & Co.(WFC), the bank that boosted its U.S. property-related holdings by acquiring rival Wachovia Corp., is adding to those investments with purchases of mortgage-backed bonds, even as Federal Reserve Chairman Ben S. Bernanke warns of another wave of defaults.

- High-speed trading in the U.S. stock market may face its biggest threat after Senator Charles Schumer proposed prohibiting so-called flash orders. Schumer, the third-ranking Senate Democrat, urged the Securities and Exchange Commission to ban the practice in which some equity exchanges hold orders to buy and sell shares for a split second before publishing them on competing platforms. Schumer’s July 24 letter raises the stakes in a debate over whether computer-driven trading by hedge funds and Wall Street firms gives them an unfair advantage over other investors.

- The cost of three-month loans in dollars fell to below 0.50 percent for the first time, according to the British Bankers’ Association.

- Agilent Technologies Inc.(A), the world’s biggest maker of scientific-testing equipment, agreed to buy Varian Inc. for $1.5 billion in cash to add instruments used in the study of atoms and molecules. Varian shareholders will receive $52 a share, about 35 percent more than the closing price on July 24, Agilent said. Both companies’ boards have approved the transaction, Agilent said in a statement today.

- The S&P 500 has broken into new territory and may rally about 9% this year from current levels, according to technical analysts at Bank of America. The S&P 500 has closed above its January 2009 high near 944 and has also stayed above the May 2008 downtrend line of 900, both key signals that the index has potential to reach 1,055 to 1,065 this year, Bank of America’s Mary Ann Bartels and Stephen Suttmeier wrote today.

- Jeremy Grantham, chief investment strategist of Grantham Mayo Van Otterloo & Co., said shares in big U.S. companies are the best values and China’s economy could “come unhinged,” hurting emerging-markets stocks. “The easy winner of the cheapest equity subcategory contest is still high-quality U.S. blue chips,” Grantham, who oversees about $78 billion, wrote in a quarterly letter posted today on the Boston-based firm’s Web site. Edward Chancellor, a member of GMO’s asset-allocation team, “strongly suspects that the Chinese economy is dangerously unbalanced and very likely to come unhinged in the next few quarters, surprising the pants off investors,” Grantham wrote.

Wall Street Journal:

- U.S. President Barack Obama called Monday for deeper U.S. engagement with China, saying both countries can benefit by coordinating their responses to the economic crisis and working together to address climate change.

- Organic farmers and grocery retailers are embracing the idea of lower-cost, private-label products to retain newly budget-conscious consumers. Supervalu Inc., the fourth-largest U.S. food retailer by sales, expanded its Wild Harvest organic brand to 312 items, from 150 last spring. Safeway Inc., the third-largest U.S. food retailer , last fall began selling its organic food brands to other retailers. Private-label organics have "broken some price barriers for shoppers, and everyone is price sensitive these days," said Mike Gilliland, chief executive of Newflower Market Inc., a natural-grocery chain based in Boulder, Colo., with 25 stores.

- EBay Inc.(EBAY) on Monday announced a series of changes to its core marketplaces business that are designed to help large vendors sell new goods in greater volumes. The e-commerce company will tweak its search algorithm to favor new products, allow sellers to include more and bigger photos in their listings for free, and do away with features that sellers have used to dress up their listings, said two people familiar with eBay's plans.

- General Motors Co. Treasurer Walter Borst said Monday the auto maker expects billions in additional Energy Department funding now that the auto maker is "viable." GM has applied for more than $10 billion in Department of Energy funds, according to a spokesman for the company. The spokesman said GM expects to receive most, but not all of that funding if the DOE approves GM's loan request. Such loans would further extend the taxpayer commitment to GM's reorganization. The Treasury Department has already committed at least $50 billion in direct bailout funds to GM, and billions more to its affiliates, such as supplier Delphi Corp. and lender GMAC LLC.

CNBC:

- Corning stock(GLW) softened in early morning trading despite reporting better-than-expected second-quarter earnings on Monday. “It’s too early to declare that the recession is over, but I think clearly we think we’ve hit bottom and hopefully some bright signs in some of our businesses,” said Jim Flaws, chief financial officer at Corning.

New York Post:

- Sun Capital Partners, which just a couple of years ago was among the hottest private-equity groups in the country, has fallen upon hard times of late -- a victim of the recession, bad management decisions and -- according to critics -- outright greed.

NY Times:

- The global technology industry may have passed a turning point, showing a marked recovery in recent weeks after an extraordinarily deep downturn, according to the Organization for Economic Cooperation and Development. Production of semiconductors, computers, mobile phones and other electronic equipment is still considerably below pre-crisis levels but has rebounded strongly from the end of 2008 and early 2009, the organization says in a report set for publication this week. “Even a few weeks ago, we didn’t see the bounce-back in the data,” said Sacha Wunsch-Vincent, an O.E.C.D. economist. “We were still grappling with the size of the downturn. Now, this could be the turning point.”

Lloyd’s List:

- The nominal value of freight-derivatives trading may decline as much as 81% this year, citing estimates from Chris Reilly, chairman of the Forward Freight Agreement Brokers Association, and data from the Baltic Exchange. The freight-derivatives market may be worth between $30 billion and $40 billion in 2009. In 2008, the equivalent of 2.1 billion metric tons of freight was traded. The contracts were worth $155 billion.

- MORE than two-thirds of 150 large Chinese shipping companies intend to freeze or cut salaries this year in an effort to tackle the tough business environment. A joint survey conducted by Shanghai Shipping Exchange and CIC HR Management Consulting showed 55% of respondents said they would freeze wages this year.

Forbes:

- Absent a parallel stringent global regulatory framework, an E.U. decision to adopt stringent restrictions will stimulate migration of the alternative investment fund management sector to Switzerland, where Geneva and Lausanne have the existing legal and professional infrastructure to support such a shift. Furthermore, restrictions on funds operating outside the E.U. could foster tensions with the United States.

Rassmussen:

- Public opposition to the auto bailouts may translating into consumer buying decisions, with 46% of Americans now saying they are more likely to buy a car from Ford(F) because it did not take government money to stay in business. A new Rasmussen Reports national telephone survey finds that 13% say they are less likely to buy a Ford because the company didn’t receive a bailout, and 37% say it has no impact on their car buying. At the same time, nearly one-out-of-five Americans (19%) say someone in their family or a friend has chosen not to buy a car from GM or Chrysler because they took bailout money. Fifty-six percent (56%) say family or friends have not steered clear of GM or Chrysler for this reason, but 26% are not sure.

Politico:

- Americans need meaningful reforms that make health care more affordable and more accessible — particularly for those who currently do not have health insurance. However, President Barack Obama and Democratic leaders in Congress have held fast to a strategy that exploits this general desire and the current economic crisis in order to force a false choice upon the American people: the idea that if a government health care plan fails, then health care reform is dead. This is simply not the case.

- House Speaker Nancy Pelosi is one of the most despised political figures in the country. And, frankly, she doesn’t give a damn. “No, I don’t care,” Pelosi told POLITICO last Thursday, laughing heartily as she walked beneath the Capitol dome and plunged into a crowd of tourists.

New York Magazine:

- Tenacious G. Inside Goldman Sachs(GS), America’s most successful, cynical, envied, despised, and (in its view, anyway) misunderstood engine of capitalism.

PRNewswire:

- SEC, CFTC Asked to Investigate Goldman Sachs’(GS) Special Privileges Ahead of Cap-and-Trade. Today Steve Milloy, publisher of JunkScience.com, released a letter to SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler asking for an investigation into loopholes in the law which enable Goldman Sachs an unfair securities market advantage and a unique ability to manipulate commodities markets. It is Milloy’s concern that Goldman may similarly exploit any future carbon market created by the cap and trade legislation moving through Congress. The letter may be read here:

Reuters:
- Congress will consider steps to curb speculation in the credit default swaps market and could ban naked swaps, according to a U.S. House of Representatives Committee document obtained by Reuters. The bill would give regulators authority to set position limits on credit default swaps (CDS) dealers. It would also shift oversight of ICE Trust Clearinghouse from the Federal Reserve to the Securities and Exchange Commission, the document said.

Financial Times:
- Chinese regulators on Monday ordered banks to ensure unprecedented volumes of new loans are channeled into the real economy and not diverted into equity or real estate markets where officials say fresh asset bubbles are forming. The new policy requires banks to monitor how their loans are spent and comes amid warnings that banks ignored basic lending standards in the first half of this year as they rushed to extend Rmb7,370bn in new loans, more than twice the amount lent in the same period a year earlier. Beijing’s concerns are echoed in other countries across the region, most notably South Korea, where the government says it is taking steps to cool a real estate bubble, and Vietnam, where the government has ordered state banks to cap new lending to head off inflation. The flood of new lending also has implications for the quality of bank loans and the country’s overall growth. “China's economic recovery is being constructed on the back of a savaged banking system,” said Derek Scissors, a research fellow at the Heritage Foundation in Washington. “Tens of billions – and perhaps hundreds of billions – of dollars of loans will not be repaid.” He points out that in recent years total loan growth of around 15 per cent has supported gross domestic product growth of higher than 10 per cent but in the first half of this year total loan growth of around 33 per cent supported GDP expansion of only 7 per cent.“China's economic policies have shifted from being unsustainable over the very long term to being unsustainable for any more than one year,” Mr Scissors said.

Reforma:

- Mexico’s slumping auto production may shave 1.6 percentage points off the economy this year. Mexico may build 60% fewer vehicles this year than in 2008, citing a study by BBVA Bancomer SA, the country’s largest lender. The bank originally expected auto production to fall by no more than 40% in 2009.

DigiTimes:

- Toshiba is expected to ramp up its NAND flash production to over 90% of its capacity in August, according to sources at memory card makers. Despite the increases in output, the chipmaker has told downstream players that its supply to the spot market will be limited, prompting speculation that the Japan supplier is seeing strong demand from Apple, the sources indicated.

TheNational:

- Hotels continued to feel the pressures of the economic downturn last month, according to new data. Weaker demand coupled with more hotel rooms becoming available in Dubai had forced hotels to cut rates heavily to try to attract guests, hitting the emirate particularly hard, analysts said. “Because of the drop in occupancy there has been a bit of a panic on board and there have been massive rate cuts and promotions going on and packages,” said Jalil Mekouar, the executive vice president for MENA at Jones Lang LaSalle Hotels. In Dubai, occupancy levels fell from 75.8 per cent in June last year to 64.6 per cent last month, a 14.8 per cent fall, while average room rates dropped 22.4 per cent from Dh786.85 (US$214.18) to Dh610.44, according to data from STR Global. As a result, revenue per available room (RevPAR), the key industry indicator, was down by more than a third in Dubai, from Dh596.18 to Dh394.05.

Bear Radar

Style Underperformer:
Large-cap Growth (-.89%)

Sector Underperformers:
Education (-2.11%), Software (-1.87%) and Airlines (-1.52%)

Stocks Falling on Unusual Volume:
BCS, SNDA, SOHU, CTV, MYL, CALM, RYAAY, POOL, SPWRA, TBH, AET, RSH and NC

Stocks With Unusual Put Option Activity:
1) MYL 2) ATVI 3) CYOU 4) S 5) TROW

Bull Radar

Style Outperformer:
Small-Cap Value (+.34%)

Sector Outperformers:
Homebuilders (+1.92%), Banks (+1.58%) and I-Banks (+1.31%)

Stocks Rising on Unusual Volume:
PVTB, ONB, SLF, MFC, HIG, LGCY, CLMT, WFC, PLT, CHL, ADVS, PTNR, BBBB, VARI, CISG, BCRX, HITK, CRAI, CFSG, SIVB, SYNA, EBIX, UFPI, FUQI, CSKI, IBKC, FSLR, WPPGY, JJSF, WTFC, TRGT, NTY, EPE, KNM, KNX, TFX, HEP and VCP

Stocks With Unusual Call Option Activity:
1) NWL 2) ZMH 3) CEPH 4) RF 5) RHT