Wednesday Watch

Late-Night Headlines
Bloomberg:

- Iran has banned dozens of the country’s celebrities from state-run television and radio over their support for opponents of President Mahmoud Ahmadinejad, the opposition Web site Mowj said yesterday. Iran’s broadcaster has compiled a list of 100 well-known Iranians, including top filmmakers and actresses, who are forbidden from the state’s airwaves, Mowj said. They are banned from “having their picture shown” or “being active in programs related to the state broadcaster until further notice,” Mowj said.

- The head of the beleaguered devices unit at the U.S. Food and Drug Administration resigned after five years, calling it “in the best interest” of the agency.

- Applied Materials Inc.(AMAT), the largest maker of semiconductor-production machinery, predicted fourth- quarter sales and profit that topped analysts’ estimates, signaling that the chip market may have bottomed out. Profit will be as much as 4 cents a share in the period, which ends in October, the company said today on a conference call. Analysts had projected a loss of 5 cents, according to a Bloomberg survey. “There are more indications that demand is growing,” Chief Executive Officer Mike Splinter said on the call. “It’s too soon to conclude that a broad-based recovery is at hand.” New orders rose to $1.07 billion, up 65 percent from the second quarter. That compares with a prediction of a 40 percent gain by Patrick Ho, an analyst at Stifel Nicolaus & Co. in Dallas. Applied Materials, based in Santa Clara, California, rose 41 cents, or 3.1 percent, to $13.63 in extended trading.

- The other day I received an e-mail from David Axelrod, President Barack Obama’s senior adviser. OK, so millions of other people got the same e-mail, which begins “Dear Friend” and ends “Thank you, David.” Not all of them chose to respond. Axelrod was trying to dispel rumors circulating about “health insurance reform,” to borrow the administration’s new lingo for downplaying the scary stuff -- rationing care, government bureaucrats making decisions that were once the province of doctor and patient -- and aligning itself with a public that ranks insurance companies somewhere between lawyers and lobbyists. Adopting Axelrod’s tactics, I decided to share my response with millions of others (a few thousand, if I’m lucky). So here goes:

- Lead inventories in China, the world’s biggest producer, may be double the size of stockpiles held at warehouses of the London Metal Exchange, according to Xinling Refining Co. As much as 200,000 metric tons to 300,000 tons of the metal could be stored by smelters and traders, He Yonggang, a Shanghai-based sales manager at the Chinese lead refiner, said citing traders. LME inventories were 114,175 tons on Aug. 11. The inventory levels suggest battery makers’ demand for lead in the world’s largest consumer of the metal is lagging behind the 23 times jump in imports this year. Product sales to electric-bicycle makers, the major consumer of lead in China, have dropped “significantly,” He said. “Most traders and smelters are concerned about the declining lead products sales,” He said in an interview. “A majority of lead-acid battery is used in electric bikes, and since the financial crisis, the e-bike industry has been in poor condition.”

Wall Street Journal:

- The Obama administration is reviewing a congressional request to allow consumers to use "cash for clunkers" vouchers toward future vehicle purchases as a way to cope with dwindling supplies of many popular, fuel-efficient clunker replacements.

- Probably no issue, except for healthcare, is creating more polarization in the court of public opinion than Wall Street bonuses. On one side of the debate are those who say the rewards aren’t deserved, on the other are those receiving the rewards. A report issued late Tuesday by Johnson Associates Inc. is certain to add more fuel to the debate. The recruiting firm estimates bonuses will rise as much as 50% this year for some investment bankers, but it also offers some caution for those on Wall Street who might be expecting a big check. Though fixed-income and equities professionals dealing in plain-vanilla securities and derivatives can expect a bump of 50% or more from last year’s bonus check, other Wall Street types, including professionals in private equity, hedge fund, high net worth, asset management and prime brokerage businesses can expect a decline in bonus payments of between 20% and 35%.
- The Obama administration on Tuesday detailed a sweeping plan to more closely oversee the giant market for derivatives by forcing many of the products to trade on regulated exchanges or electronic platforms. The proposal, which was sent to legislators on Capitol Hill for consideration, seeks to prevent a repeat of problems last year when the growing use of derivatives by many financial firms went unchecked. The proposal would essentially make it easier to see prices and make markets more transparent.

- “I believe that by the end of my first term in office that we will have a universal health-care system instituted in this country. That is a commitment that I’ve made, and it is a commitment I want to be held accountable for.” The words belong to Barack Obama, and he spoke them in April 2007—the last time he visited Portsmouth, N.H., for a town-hall meeting on health care. The Associated Press reported the crowd that day “was almost single-mindedly focused on a single-payer system.” Candidate Obama asked if they would agree to much higher taxes for such a system. And he emphasized that he would remain open to changes even after he released his plan. Today, a very different Mr. Obama returns to Portsmouth for another town hall on health care. Gone is the demand that supporters acknowledge the implications of their plans (e.g., higher taxes). Gone too is the openness to good ideas from others. In their place is a my-way-or-the-highway president who impugns the character and motives of dissenters.

- Economists are nearly unanimous that Ben Bernanke should be reappointed to another term as Federal Reserve chairman, and they said there is a 71% chance that President Barack Obama will ask him to stay on, according to a survey. Meanwhile, the majority of the economists The Wall Street Journal surveyed during the past few days said the recession that began in December 2007 is now over. Battling the downturn defined most of Mr. Bernanke's term, which began in early 2006 and expires in January, and economists say his handling of the crisis has earned him four more years as Fed chief.

- The U.S. government is investigating whether several U.S. companies took part in a cross-border scheme to siphon oil products from Mexico's state oil company and smuggle them across the border. The probe is part of a broader two-year joint U.S.-Mexican investigation into a network of Mexican oil smugglers supported by the Gulf drug cartel, one of Mexico's most powerful and brutal criminal organizations. Oil theft has been common on both sides of the border for decades. But the breadth of the smuggling operation, extending from Petroleos Mexicanos, Mexico's state oil company, to U.S. companies, is a troubling sign of the growing reach of cross-border organized crime, as well as the efforts by Mexican drug cartels to diversify their business.

- Slack demand for electricity across the U.S. is leading to some of the sharpest reductions in power prices in recent years, offering a break for consumers and businesses who just a year ago were getting crunched by massive electricity bills. On Friday, the nation's largest wholesale power market serving parts of 13 states east of the Rockies is expected to report that electricity demand fell 4.4% in the first half of the year. That helped to push down spot, or daily market prices, by 40% during the first half of this year.

MarketWatch.com:
- With U.S. interest-rate hikes over the next year an increasing possibility, the U.S. dollar is expected to reverse to more normal behavior for a currency, such as rising on positive economic news that might eventually lift rates and the dollar's yield compared to other currencies. That pattern hasn't described the dollar's behavior for most of this year. "Over the past many months, traders could be excused if they have come to believe it's carved in stone that good news is dollar negative [...] and bad news is dollar positive," said Brian Dolan, chief currency strategist, at Forex.com.

NY Times:

- China formally arrested four employees of the British-Australian mining giant Rio Tinto, including an Australian citizen, late Tuesday, and charged them with commercial bribery and trade secrets infringement in a case that has rocked the global steel industry.

- After surpassing the United States as the world’s largest producer of household garbage, China has embarked on a vast program to build incinerators as landfills run out of space. But these incinerators have become a growing source of toxic emissions, from dioxin to mercury, that can damage the body’s nervous system. And these pollutants, particularly long-lasting substances like dioxin and mercury, are dangerous not only in China, a growing body of atmospheric research based on satellite observations suggests. They float on air currents across the Pacific to American shores.

- The Kuwaiti authorities said Tuesday that they had arrested six jihadists who were planning to attack the main United States military base in the country and other sites. The six men, all Kuwaitis, gave “full confessions” about their plans to attack Camp Arifjan, a sprawling American logistics and supply base in the desert south of Kuwait City, along with Kuwaiti security agencies and other targets, according to a statement released by Kuwait’s Interior Ministry. The men were a “terrorist network” under the influence of Al Qaeda, the statement said.

IBD:

- That's the formula that has helped Buffalo Wild Wings (BWLD) cruise through the consumer-led recession, which sunk many tonier restaurants.

Business Week:
- From the start, few believed Bernard Madoff's claim that he acted alone in creating and managing his $65 billion Ponzi scheme. On Aug. 11, in a Manhattan courtroom, that claim was revealed to be just another of Madoff's lies. Madoff's former chief financial officer, Frank DiPascali, pleaded guilty to 10 criminal charges relating to his involvement in the scam and agreed to cooperate with prosecutors. "I was loyal to him. I ended up being loyal to a terrible, terrible fault," he said in U.S. District Court. DiPascali's guilty plea is a big victory for prosecutors. As CFO, DiPascali was the face of Madoff's asset management business. When investors had questions, they spoke with DiPascali and it was he who usually explained Madoff's investment strategies to investors. In court, DiPascali said he helped Madoff prepare false documents for investors, accountants, and regulators, shifted money between accounts in New York and London, and otherwise helped make a fictitious business look real. "This guy knows where the bodies are buried," says Robert Lamb, a professor at New York University's Stern School of Business.

Rasmussen:

- The findings in the latest edition of the Generic Congressional Ballot remain fairly steady, as Republican candidates continue to hold a modest lead over Democrats for the seventh straight week. The latest Rasmussen Reports national telephone survey shows that 42% would vote for their district’s Republican congressional candidate while 38% would opt for his or her Democratic opponent.

- Republican candidate Robert F. McDonnell has opened a nine-point lead over Democrat R. Creigh Deeds in the race for governor in Virginia. The latest Rasmussen Reports telephone survey of Virginia voters finds McDonnell leading Deeds 47% to 38%. Three percent (3%) prefer some other candidate, and 12% are undecided. These figures reflect an improvement for McDonnell. A month ago, the GOP hopeful led by just three percentage points.

The Washington Post:

- A group usually seen as one of Barack Obama's allies in the health care debate - AARP - says the president went too far Tuesday when he said the seniors lobby had endorsed the legislation pending in Congress. AARP is sensitive to the issue because polls show that Medicare beneficiaries are worried their health care program will be cut to subsidize coverage for the uninsured. At the town hall in Portsmouth, N.H., Obama said, "We have the AARP onboard because they know this is a good deal for our seniors." He added, "AARP would not be endorsing a bill if it was undermining Medicare." But Tom Nelson, AARP's chief operating officer, said, "Indications that we have endorsed any of the major health care reform bills currently under consideration in Congress are inaccurate."

Reuters:

- ABC News reported on Tuesday that its U.S. consumer confidence index rose in the latest week, as many Americans became less worried about their personal finances. The Consumer Comfort Index rose to -47 in the week to Aug. 9 from -49 the prior week, although the index remains in deeply negative territory.

- Bearish bets in U.S. stocks dropped sharply at the end of July for the first time since mid-May, the exchanges said on Tuesday, suggesting short investors have been forced to abandon their bets in the wake of the recent hefty rally.

Financial Times:

- The International Swaps and Derivatives Association on Tuesday unveiled a new website designed to provide key information about the credit derivatives market for investors and dealers.

Late Buy/Sell Recommendations

- None of Note

Night Trading
Asian Indices are -2.0% to unch. on average.

Asia Ex-Japan Inv Grade CDS Index unch.
S&P 500 futures unch..
NASDAQ 100 futures +.08%.

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Economic Releases

8:30 am EST

- The Trade Deficit for June is estimated to widen to -$28.7B versus -$26.0B in May.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000,000 barrels versus a +1,670,000 barrel gain the prior week. Gasoline supplies are expected to fall by -1,200,000 barrels versus a -218,000 barrel decline the prior week. Distillate inventories are estimated to rise by +200,000 barrels versus a -1,136,000 barrel decline the prior week. Finally, Refinery Utilization is expected to fall by -.10% versus a -.03% decline the prior week.

2:00 pm EST

- The Monthly Budget Deficit for July is estimated to widen to -$180.0B versus -$102.8B in June.

2:15 pm EST

- The FOMC is expected to leave the benchmark fed funds rate unchanged at .25%.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Bloomberg Global Confidence Index, weekly MBA Mortgage Applications report, CanaccordAdams Growth Conference, Oppenheimer Communications/Tech/Internet Conference and the Jeffries Industrial Summit could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and commodity shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Finish Lower, Weighed Down by Bank, Alt Energy, REIT, Insurance and Gaming Shares

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In Play

Stocks Lower into Final Hour on Profit-Taking, Rising Financial Sector Pessimism, More Shorting, China Bubble Fears

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Steel longs and Financial longs. I took profits in a financial long and added to another medical long today, thus leaving the Portfolio 100% net long. The tone of the market is very negative as the advance/decline line is substantially lower, sector performance is mostly negative and volume is below average. Investor anxiety is high. Today’s overall market action is bearish. The VIX is rising 4.32% and is very high at 26.07. The ISE Sentiment Index is below average at 115.0 and the total put/call is slightly below average at .76. Finally, the NYSE Arms has been running high most of the day, hitting 1.50 at its intraday peak, and is currently 1.49. The Euro Financial Sector Credit Default Swap Index is rising 4.45% today to 82.0 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 4.95% to 110.38 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 8.18% to 28 basis points. The TED spread is now down 438 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 6.74% to 41.50 basis points. The Libor-OIS spread is rising .05% to 26 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 4 basis points to 1.91%, which is down 75 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is up 3 basis points today. Today’s headline losses aren’t too bad so far. There are an unusual number of stocks I monitor rising today given broad market losses. As well, Road & Rail shares are jumping 1.35%. Retail, HMO, Computer, Medical, Biotech, Drug and Homebuilding shares are substantially outperforming today. The 10-year yield is down 21 basis points since yesterday morning’s high, which is a large positive given this week’s bond supply. I am somewhat surprised at the market’s resilience today given bank stock losses and several negative headlines. A high NYSE Arms and below average volume indicate the bears lack conviction. The bond market’s reaction to tomorrow’s FOMC announcement will be key. Nikkei futures indicate a -65 open in Japan and DAX futures indicate an +32 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as profit-taking, more shorting, rising financial sector pessimism and China bubble worries offset lower long-term rates, less economic fear and diminishing healthcare reform concerns.

Today's Headlines

Bloomberg:

- Investors should sell China’s local- currency stocks as the market is in “bubble territory” and share prices already reflect expectations for a rebound in the economy and earnings, Shenyin & Wanguo Securities Co. said. China’s Shanghai Composite Index has jumped 79 percent this year, the world’s best performing major market, as new loans tripled to a record and the government implemented a stimulus package to revive economic growth. The measure trades at 35.4 times reported earnings, almost triple last year’s low in November and twice what investors pay for stocks on the MSCI Emerging Markets Index. “It’s difficult to find a catalyst that will further lift economic prospects,” said Yuan Yi, Shanghai-based analyst at Shenyin Wanguo, in a report today. “China’s stock market is in bubble territory, which means it’s being held up mainly by excess liquidity and not profit expectations.” Shenyin was voted No. 1 in strategy last year by Capital Week magazine. Yuan advised investors to reduce their equity holdings by selling into market rebounds and favoring retailers, food and beverage producers and drugmakers as these companies have more stable earnings. China Galaxy Securities Co., the nation’s largest brokerage, warned May 5 the local-currency stock market is a bubble which may burst as investor confidence in the nation’s economic recovery weakens and bank lending slows. The index may fall to 2,928 if it breaches the so-called support level of 3,138, according to DMG & Partners Securities Pte., citing analysis of chart patterns. The formation of a “double top,” made up of two consecutive peaks that are approximately equal with a moderate trough in between, is a signal for further losses, DMG analyst James Lim said in a report today.

- Timothy Barakett, founder of Atticus Capital LP, is closing his $3.5 billion Atticus Global Fund to spend more time with his family and concentrate on philanthropic interests, according to a letter sent to investors today. Barakett, 44, is also closing a $600 million fund he manages. Atticus expects to return 95 percent of investors’ money by the beginning of October, the letter said. “My decision is solely a personal one,” Barakett wrote. “After 15 years of being singularly focused on building and managing Atticus, I believe it is time to reassess my future.” The global fund has lost 6 percent this year, after losing 27 percent last year, only its second down year.

- China’s exports and new loans tumbled in July and industrial output rose less than estimates, underscoring government concern that the world’s third-biggest economy is yet to establish a solid recovery. Exports fell 23 percent from a year earlier, the customs bureau said. “The fixed-asset investment number is worrying because government-sponsored investment is a pillar of the recovery,” said Tao Dong, chief Asia-Pacific economist at Credit Suisse AG in Hong Kong. “This set of data should postpone any thought of more aggressive tightening; the economy is slowing down a little bit.” The export decline matched economists’ estimates and was the third biggest since China’s shipments began to shrink in November last year. Imports fell 14.9 percent, leaving a trade surplus of $10.63 billion. The industrial production figure suggested the economy “started the third quarter on a slightly softer tone,” Ben Simpfendorfer, a Hong Kong-based economist for Royal Bank of Scotland Plc, said in a Bloomberg Television interview. “It’s a modest disappointment.” July’s new loans were the least since the government dropped quotas limiting lending in November last year and pressed banks to support a 4 trillion yuan stimulus package. None of 11 economists surveyed forecast such a low number. China Construction Bank Corp., the nation’s second-largest bank, will cut new lending by about 70 percent in the second half to avert a surge in bad debt, President Zhang Jianguo said last week. “We noticed that some loans didn’t go into the real economy,” Zhang, 54, said in an Aug. 6 interview at the bank’s headquarters in Beijing. “I feel that some industries are expanding too rapidly. For example, housing prices are rising too fast, and housing sales are growing too fast.” UBS AG said in a July 31 note that the scale of China’s new lending in the first half was “neither sustainable nor necessary.” Consumer prices fell 1.8 percent last month from a year earlier, the biggest decline since 1999, the statistics bureau said today. They were unchanged from the previous month. Producer prices dropped a record 8.2 percent.

- China’s imports of copper and the metal’s products in July dropped for the first time in six months, declining from a record, after stockpiles increased in the world’s largest consumer. Imports slumped to 406,612 metric tons in July, the Beijing-based customs office said today. That’s 15 percent down from a record 477,217 tons in June, according to data on the Bloomberg. The country may have stockpiled as much as 400,000 tons of copper in the first half because of sizeable imports and a seasonal slowdown in demand, Macquarie Group Ltd. said July 6. Reported inventory by the Shanghai Futures Exchange has jumped fourfold this year to 63,434 tons from the end of 2008. Caijing magazine reported in June that China has bought 235,000 tons of copper for strategic reserves this year, citing Yu Dongming, a Chinese government official. The country has also bought aluminum, zinc and some rare metals for reserves. China may not continue purchases of industrial metals for strategic reserves after prices rebounded, the magazine cited Yu as saying.

- India’s weakest monsoon rains in five years may lower imports of fertilizer, a minister said, pressuring prices as China, the world’s biggest potash market, negotiates contracts for soil nutrients. Purchases of potash, used to grow rice, soybeans and sugar cane, in the six months ending Sept. 30 may be less than 2.16 million tons, Srikant Jena, minister of state for chemicals and fertilizers, said in an interview in New Delhi yesterday.

- Crude oil fell below $70 a barrel in New York U.S. equities dropped and the dollar strengthened for a sixth day. The Organization of Petroleum Exporting Countries raised its 2010 forecast for supply from outside the group to 51.17 million barrels a day as tax incentives slow the output decline in Russia, OPEC’s biggest rival, the organization said in its monthly report today.

- Russia’s economy contracted the most on record last quarter as rising unemployment sapped consumer demand, bank lending stalled and the government failed to approve a stimulus package until just two months ago. Gross domestic product contracted an annual 10.9 percent in the second quarter, the Federal Statistics Service said today, citing preliminary data. The median estimate in a Bloomberg survey of seven economists was for output to shrink 10.2 percent. Russia’s economic decline is worsening after output contracted 9.8 percent in the first quarter, ending 10 years of expansion that averaged close to 7 percent. The worst global financial crisis since the Great Depression undermined demand for Russia’s oil, natural gas and metals. Industrial production plunged as companies depleted stocks and struggled to raise funds during the credit crunch. “We can’t develop like this any longer,” President Dmitry Medvedev said yesterday during a meeting with political party leaders in the Black Sea resort of Sochi. “It’s a dead end. And the crisis has placed us in a situation where we will have to make decisions on changing the structure of the economy.”

- Amgen Inc.’s(AMGN) osteoporosis drug denosumab prevented fractures and strengthened bones in men taking hormone therapy for prostate cancer, according to a study released as U.S. advisers consider whether to recommend the treatment’s approval for sale. Denosumab reduced spinal fractures in prostate cancer patients by 62 percent compared with a placebo, and increased spinal bone mineral density, a predictor of fracture risk, according to research in the New England Journal of Medicine. “These are medical practice-changing results,” said Matthew Smith, the lead author. “It addresses an important unmet medical need for fracture prevention in men with prostate cancer.”

- Treasuries rose after the sale of a record $37 billion of three-year notes attracted the most demand ever from a group of investors that includes central banks, easing concern foreign buyers will shy away from U.S. auctions as the economy shows signs of recovering from recession.

CNBC:

- Elizabeth Warren, chairwoman of the US congressional oversight panel for the Troubled Asset Relief Program, said there’s no good estimate of how much toxic debt is left on the books of small and large financial institutions. Small banks in particular need more capital, Warren, a law professor at Harvard University, said.

- The Federal Reserve most likely won't be delivering any rate hikes at its meeting this week, but it can deliver something many investors are looking for: hope.

- Veteran banking analyst Richard Bove recommended taking short-term profits in US banking stocks as he expects a pullback in share prices, and said fundamentals for the sector had not yet improved.

- Google(GOOG) has lifted the lid on a new version of its search engine, allowing users to look at the results it will generate.

- Rival oil supplies and the sluggish pace of recovery in world consumption will shrink demand for OPEC's crude oil next year, the producer group said on Tuesday.

MarketWatch:
- U.S. companies slashed their workers' hours in the second quarter, boosting the productivity of the workplace to an annualized rate of 6.4%, the Labor Department reported Tuesday. It was the fastest increase in productivity in the nonfarm business sector in nearly six years. Economists surveyed by MarketWatch had been looking for a gain of 5.4%. Unit labor costs -- a key indicator of inflationary pressures -- plunged at a 5.8% rate, the largest decline in nine years and slightly wider than the 5.3% decline expected by economists. Hourly compensation rose just 0.2% in the second quarter. After inflation, real hourly compensation sank 1.1%.

Washington Post:

- If you're looking for green shoots, stop by the Whole Foods(WFMI) in Paramus, N.J. Wander in past the multihued display of locally grown flowers into the oasis of produce for which the upscale grocer is known: twenty-some types of leafy greens and pristine arrangements of flawless fruit, from rolling mounds of kiwis to deep bins of shiny crimson cherries.

NJ.com:

- Fighting to erase a double-digit deficit against Republican Chris Christie, Gov. Jon Corzine has brought two high-powered political strategists into his campaign and is overhauling his message to voters as he enters the final 90 days of an already heated race.Trailing by as much as 14 points in some polls, the governor has hired Democratic strategist Bill Maer, who has served as a senior political advisor to several major Democrats, and has asked Jamie Fox, a veteran Democratic operative, to take a more active role.

Rassmussen:

- Public support for the health care reform plan proposed by President Obama and congressional Democrats has fallen to a new low as just 42% of U.S. voters now favor the plan. That’s down five points from two weeks ago and down eight points from six weeks ago. A new Rasmussen Reports national telephone survey shows that opposition to the plan has increased to 53%, up nine points since late June. More significantly, 44% of voters strongly oppose the health care reform effort versus 26% who strongly favor it. Intensity has been stronger among opponents of the plan since the debate began. Sixty-seven percent (67%) of those under 30 favor the plan while 56% of those over 65 are opposed. Among senior citizens, 46% are strongly opposed. Sixty-two percent (62%) of unaffiliated voters oppose the health care plan, and 51% are strongly opposed. This marks an uptick in strong opposition among both Republicans and unaffiliateds, while the number of strongly supportive Democrats is unchanged.

Politico:

- Sen. Arlen Specter (D-Pa.) fired back Tuesday at a raucous town hall audience that booed and jeered him for more than an hour. Specter immediately tried to temper the rough crowd, which started booing him before the question-and-answer session even began, with the blunt warning: “If you want to stay in here, we’re not going to tolerate any demonstrations or booing. So, it’s up to you." But minutes later during the senator’s response to a question on whether Americans would be able to maintain their private insurance under the Democratic health care proposal, a protester who was not selected to speak stood up, walked into the aisle and began shouting at him. (video)

The Washington Times:

- The U.S. Commission on Civil Rights says some little-noticed provisions in the House health care bill are racially discriminatory, and it intends to ask President Obama and Congress to rewrite sections that factor in race when awarding billions in contracts, scholarships and grants. The commission also fears the programs, which are designed to improve health care in underserved areas, will not be effective. In a draft of a letter the commission approved Friday, the group raises constitutional questions about giving preferential treatment to minority students for scholarships, and about favoring medical schools and organizations that have a record of sending graduates to areas with inadequate health care services. "These programs are unlikely to reduce health care disparities among racial and ethic groups," according to the draft letter obtained by The Washington Times. "A growing body of evidence indicates that increasing access to high-quality physicians - whatever their racial or ethnic ancestry - is the best way to mitigate such disparities." The draft letter also cites testimony from Dr. Amitabh Chandra of Harvard University who said the idea that expanding the number of minority physicians and providing "cultural competence training" will bridge the health status gap is "grounded in hope more than science," according to the draft language.

USA Today:

- It will cost nearly $8 billion over the next decade to pay for the expanded federal bureaucracy needed to combat global warming under a bill passed by the House of Representatives, a report by the non-partisan Congressional Budget Office says. Critics of the House bill that passed in June, such as Republican Sen. James Inhofe of Oklahoma, have seized on the increased size of government to try to stir opposition in the Senate, which is scheduled to consider its climate-change bill in the fall. The bill "is full of regulations, mandates, bureaucracy and big government programs," Inhofe, the top Republican on the Senate Environment Committee, said in a speech on the Senate floor in July. The complex bill, which runs more than 1,400 pages, assigns new tasks to at least 21 federal agencies, from the Energy Department to the Commodity Futures Trading Commission. It also creates new government programs, such as an effort to limit deforestation in developing nations. The overall price tag: $8 billion from 2010 to 2019, according to the non-partisan Congressional Budget Office. Government agencies would charge fees in some cases, reducing the net cost to taxpayers to $7.8 billion over the 10-year period, the CBO says. The House bill would "significantly expand agencies' workloads" by having them "undertake a variety of rulemakings, conduct studies and assessments, prepare reports, and carry out other activities," the budget office said in a June report.

Reuters:
- Shares of CIT Group Inc(CIT) sank 20 percent on Tuesday after the troubled lender delayed filing its second-quarter report with regulators and again warned it may have to file for bankruptcy.

- Poor consumer demand amid economic turmoil and choppy credit markets will continue to pressure U.S. companies in consumer-dependent sectors for the remainder of this year, Standard & Poor's said in report on Tuesday. Companies in consumer products, media and entertainment and retail and restaurant sectors continue to feel the worst effects of the economic downturn and will likely see the most defaults through the remainder of 2009.

- Bernard Madoff's longtime deputy, Frank DiPascali, was charged with 10 crimes and is expected to plead guilty later on Tuesday for his role in Wall Street's biggest investment fraud.

- The chief executive of Swiss drugmaker Novartis AG on Tuesday said animal rights activists engaged in "terrorism" and attempted to block medical progress by burning down his holiday home and desecrating the graves of his relatives. "When you try to terrorize people and you burn their houses, when you desecrate graves and when you make death threats, to me that is way beyond activism and I would call this clearly terrorism," Daniel Vasella said in an interview on CNBC television. "These people tried to hinder medical progress and stand in front of new medicines for patients," Vasella said.

Financial Times:
- A runaway deficit may soon test Obama’s luck. Voters have good reason to disapprove. The deficit this year is likely to be $1,800bn (€1,270bn, £1,090bn). The gross federal debt is just about to bust the $12,100bn limit set by Congress. According to the Congressional Budget Office’s alternative fiscal scenario, public debt could rise from 44 per cent of GDP last year to 87 per cent by 2020. Spending on healthcare alone could rise from 16 to 22 per cent of GDP. The gap between spending and revenue in the latest House healthcare bill would be $65bn in just over a decade. The administration itself has no plan to balance the budget. Its own budget forecasts a trillion-dollar deficit as far ahead as 2019. Mega-deficits as far as the eye can see are bad politics. They could be even worse economics. The nightmare scenario is that mounting fears over US creditworthiness push up long-term interest rates, thereby choking off the nascent recovery.

Bear Radar

Style Underperformer:
Small-Cap Value (-2.36%)

Sector Underperformers:
Banks (-4.17%), Alt Energy (-4.01%) and REITs (-3.10%)

Stocks Falling on Unusual Volume:
ZION, BAC, AGNC, HRBN, PETD, PANL, FOSL, PRXL, PETM, KIRK, FUQI, CATY, ASIA, SGEN, AKAM, SPH, SKT, TKF, ETP, HPT, EMF, ETE and SWM

Stocks With Unusual Put Option Activity:
1) FRE 2) MTW 3) OSK 4) BRCM 5) MDR

Bull Radar

Style Outperformer:
Large-Cap Growth (-.91%)

Sector Outperformers:
HMOs (+.38%), Retail (-.44%) and Road & Rail (-.44%)

Stocks Rising on Unusual Volume:
GEOY, DLLR, AIXG, SATS, QGEN, ELON, QSFT, MYRG, BAGL, CHDX, JST, HGSI, PCLN, PWRD, JRJC, LINC, CFSG, CWCO, SUPX, FTEK, FUQI, GENZ, AGM, YPF, MR, SF and VCO

Stocks With Unusual Call Option Activity:
1) FNM 2) FRE 3) MFE 4) WMB 5) NUAN