Thursday Watch

Late-Night Headlines
Bloomberg:

- Best Buy Co.(BBY), the world’s largest electronics retailer, is using its “Geek Squad” computer- repair workers to remotely fix technical problems in a test that started about six months ago. About two dozen employees work at home rather than providing services in stores or driving to customers’ houses, said Derek Krueger, manager of operations for the new remote- support unit. Krueger said he plans to add about 18 more in the next month and may expand the range of services to TV and home- theater support.

- India’s government proposed reducing corporate tax rates to a record low while broadening the tax base to fund an expanding budget deficit in the biggest change to tax laws in almost five decades. Finance Minister Pranab Mukherjee proposes to lower tax rates for companies including Reliance Industries Ltd., the nation’s biggest by market value, to 25 percent from about 30 percent, according to a statement in New Delhi. Taxes on equities trading in Asia’s second-biggest emerging market may be abolished.

- Princeton University Economist and New York Times columnist Paul Krugman bought an apartment on Manhattan’s Upper West Side for $1.7 million. It was on the market for more than a year. “It’s quite possible, though not certain, that retrospectively, we’ll say that the recession ended in July or August, maybe September,” Krugman said in an interview from Kuala Lumpur. “My guess is that we’ve bottomed out now, that August was probably the trough month.” Krugman said he thinks Manhattan prices will continue to decline. “Yes, I do expect New York prices might fall some more, but we need a place. And I came into some money,” he said.

- Australia’s Senate rejected the government’s climate-change legislation, forcing Prime Minister Kevin Rudd to amend the bill or call an early election. Senators voted 42 to 30 against the law, which included plans for a carbon trading system similar to one used in Europe. Australia, the world’s biggest coal exporter, was proposing to reduce greenhouse gases by between 5 percent and 15 percent of 2000 levels in the next decade.

- China, the world’s largest market for cellular phones, may have as many as 240 million users of the so-called third generation mobile devices, said the minister of industry and information technology Li Yizhong. “The next three years will be the golden age of China’s 3G industry,” Li said today. “Based on our calculations, an initial 45 billion yuan of investments may lead to 1 trillion yuan in aggregate investments by the industry and its suppliers.”

Wall Street Journal:

- The Securities and Exchange Commission's scrutiny of so-called flash orders is extending to options exchanges, where some say the practice is more common than on stock exchanges. Flash orders give traders on some exchanges a sneak peek at market activity, a practice that critics say leads to lower transparency and gives certain traders an advantage over others.

- The House of Representatives is likely to propose a temporary, one-year measure to prevent repeal of the estate tax, as time is running short for a bipartisan group of senators to agree on a permanent rate by the end of this year. Democrats are determined not to see the estate tax repealed, which according to tax cuts passed under President George W. Bush will happen on Jan. 1, if Congress doesn't act by the end of the year. The House will likely propose to scrap the one-year repeal and instead extend 2009 estate-tax rates for another year, according to congressional aides. At current levels, the first $3.5 million of estate wealth is exempt from the tax. Above that amount, wealth is taxed at a 45% rate.

- Some of the nation's biggest food and agriculture companies are planning to release a flurry of studies in coming weeks that scrutinize the potential impact of climate-change legislation, warning that it could lead to higher food prices. A group of agriculture giants including Cargill Inc., along with meat company Tyson Foods Inc. and food maker General Mills Inc., is concerned the companies might bear a disproportionate share of the costs of such legislation, according to a memo reviewed by The Wall Street Journal. Other members of the food coalition include the Grocery Manufacturers Association, the National Turkey Federation, the American Meat Institute and the American Frozen Food Institute. The coalition, which formed informally about two months ago, is becoming more active after concluding that member companies didn't win enough concessions in the House climate legislation, industry lobbyists said. The Senate is expected to take up its own climate bill when senators return from recess next month. The letter said Congress "must take extreme care to avoid adverse impacts on food security, prices, safety, and accessibility to necessary consumer products." The letter also criticized the House bill for failing to provide transitional assistance to "low-income households struggling with rising food prices."

- Cap-and-Trade’s Unlikely Critics: Its Creators. Economists Behind Original Concept Question the System's Large-Scale Usefulness, and Recommend Emissions Taxes Instead.

- Washington topped off the tank of "cash for clunkers" money just in time before it ran dry last week. But would-be car buyers could have to pay up to get some of the most popular vehicles eligible for the program unless car makers order up more production.

MarketWatch.com:
- Toyota Motor Corp. (TM) will launch a hybrid car that is cheaper and more fuel-efficient than its Prius model as early as 2011, the Yomiuri Shimbun reported Thursday.

- The tablet PC could be Apple’s next big thing. Industry analysts who follow Apple say it's all but certain a tablet version of the Mac will be on the market by early 2010, if not sooner. The potential benefit to Apple could end up being billions of dollars of new sales. Piper Jaffray analyst Gene Munster said recently that he had discussions with an Asian component supplier which said it had received orders for a touch screen device that needed to be filled by the end of the year. Munster believes that's evidence Apple will launch a new tablet PC in early 2010. "We expect the tablet hardware to be similar to an iPod touch, but larger and we expect the key differentiator of the device to be its software," Munster said, adding that the software could resemble a version of the Mac operating system used in the iPhone, and also provide access to the iPhone's popular App Store. Munster estimates that an Apple tablet device will probably cost around $600, placing it between the highest-end iPod touch at $399 and the MacBook, which starts at $999. At $600, Munster calculates that sales of 2 million Mac tablets could add $1.2 billion to Apple's sales next year. Shaw Wu, of Kaufman Bros., said Apple may have seen the need to get into the netbook, or tablet market, before it's too late. Wu said sources with Asian computer manufacturers said Apple has been buying up touch screens in various sizes ranging from 4 inches to 10- and 12-inch models to determine what form factor would work best in a Mac tablet.

CNBC.com:
- Yesterday the financials were dragging the market down, and today the sector was one of the most lucrative movers. Names like JPMorgan(JPM), Citigroup(C) and Goldman Sachs(GS) experiencing multiple percentage point upswings and ended the day with the positive news that Hedge Fund titan John Paulson bought up 168 million Bank of America(BAC) shares. "This is a huge turnaround story," says Karen Finerman, "Everything went wrong here... and then everything started to turn. The potential profitability here is enormous. I like Bank of America, I think we're early in the turnaround story." Finerman herself is long both BAC common shares and preferred shares, and notes that Paulson's move gives a large vote of confidence. "The financial sector will still have the steep yield curve working in their favor," says Joe Terranova, "the capital markets are clearly improving right now... I think everything lines up well in the financial sector for a potential return to normalized earnings. Now that Bank of America is back on the rise, keep in mind that mutual funds are under-invested in this name." After the Bank of America news, what other names are likely to rise? Karen Finerman suggests Wells Fargo(WFC), noting that it is also a big bank and has acted very similar to BAC throughout the crisis. Guy Adami sees the best plays being the downstream plays like Piper Jaffray(PJC), Raymond James(RJF) and Jefferies(JEF) are the names he likes. Pete Najarian suggests keeping an eye on regional banks if the commercial industry begins on the mend.

- The market for luxury homes isn’t as bad as it appears, Robert Toll, CEO of Toll Brothers(TOL) told CNBC. “I guess the luxury end isn’t dead as it’s been observed to be," Toll said in a taped interview. "The information from today is more indicative than anecdotal...It could be that this market follows the fortunes of the general public that’s invested—the stock market is going up.” “We’re almost back to a normal cancellation rate and the reason is, you’re seeing a different kind of buyer,” he said. “The cancellations come out of people who were speculators in the market…that’s been supplanted pretty strongly by buyers who were for real.” In terms of the economic situation, Toll said the economy bottomed 2 to 3 months ago, indicating that the homebuilders market is going to be better both in short and long-term.

Business Week:
- In these brutal economic times, one huge hit has been kiosk retailer Redbox, which offers $1-per-day DVD rentals. That's great news for consumers and even better news for Coinstar (CSTR), which last year bought control of the rapidly expanding Redbox. Until lately, Coinstar was better known for coin-counting machines that swap change for redeemable vouchers. Viewed as a recession play by investors, Coinstar's stock is up more than 80% this year.

Lloyd’s List:

- FREIGHT rates are finally heading in an upwards direction on the world’s two biggest trade routes as container lines keep capacity under tight control. Spot rates for cargo moving eastbound across the Pacific have risen sharply over the past week, while recent modest gains in the Asia-Europe trades are holding.

Forbes:

- History is littered with examples of major economic and financial crises in countries that have engaged in profligate public spending. These sad experiences should be raising red flags in the U.S. Public finances suggest that the country could very well be on the path to either a destructive burst of inflation or an outright government debt default.

Gartner:

- Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 per cent decrease from the second quarter of 2008, according to Gartner, Inc. Smartphone sales surpassed 40 million units, a 27 per cent increase from the same period last year, representing the fastest-growing segment of the mobile-devices market. Apple's expansion into a larger number of countries in the past year has produced a clear effect on sales volumes, as have the recent price adjustments on the 8GB 3G iPhone. Sales of 5.4 million units in the second quarter of 2009 indicated a 509 per cent growth in shipments and helped Apple maintain the No. 3 position in the smartphone market, where it has stayed since the third quarter of 2008. Apple brought its much-anticipated new device — the iPhone 3G S — to market at the end of the second quarter of 2009, but its full potential will only start to show in the sales figures in the second half of 2009.

Politico:

- Out on the health care firing line, senators and members of Congress continued to get battered by constituents angry over President Barack Obama’s reform plan Wednesday — with voters raising questions about everything from assisted suicide to coverage for illegal immigrants.

Rasmussen:

- Forty-two percent (42%) of Pennsylvania voters favor the health care reform plan proposed by President Obama and congressional Democrats. The latest Rasmussen Reports survey of voters in the state finds that 53% are opposed. But the intensity is clearly with those who are opposed to the plan. Just 21% of Keystone State voters Strongly Favor the plan while 41% are Strongly Opposed.

AMM.com:

- Nucor Corp.(NUE), citing a combination of strengthening demand and the need to recoup rising input costs, is attempting to increase transaction prices on carbon steel plate products by $40 per ton. And buyer sources see no reason the increase won't stick.

StreetInsider.com:

- John Paulson's Paulson & Co. Inc. hedge fund released its 13F for the quarter ended June 30, 2009. Paulson's new 168M share stake in BofA (NYSE: BAC) is sure to make waves. In addition Paulson's fund bought a number of other bank stocks during the quarter. Highlights:

Sky News:

- Lockerbie bomber Abdelbaset Ali Mohmed al Megrahi is set to be released on compassionate grounds due to his terminal cancer. Megrahi was sentenced to life in prison for blowing up a Pan Am airliner over the Scottish town of Lockerbie as it flew from London to New York on December 18, 1988. All 259 people on board were killed, as well as 11 people on the ground. Libya has repeatedly called for Megrahi's release - most recently at a meeting between Gordon Brown and Libyan leader Muammar Gaddafi last month.

Reuters:

- JetBlue Airways(JBLU) is offering a $599 one-month pass for unlimited travel on Wednesday in a bid to get more passengers airborne and jump-start a sluggish summer for the airline industry. The pass, valid until August 21, allows holders to visit any of the airline's 56 destinations. The pass is valid between September 8 and October 8 this year with no blackout dates and with every available seat up for grabs. People can book flights up to three days before they want to travel. If they cancel or change their reservations less than three days before the flight, they are subject to a $100 fee. To buy the pass, customers must enroll in JetBlue's loyalty program, TrueBlue.

- The Federal Reserve said on Wednesday the U.S. economy was showing signs of leveling out two years after the onset of the deepest financial crisis in decades and it moved to phase out one emergency measure. The U.S. central bank also kept its benchmark short-term interest rate steady near zero and said it would likely stay there for an extended period to guide the way to recovery. The Fed made its clearest statement to date that it sees the recession nearing an end and that shattered financial markets are healing.

- Copper prices added to robust closing levels in Wednesday's after-hours trade as an encouraging U.S. Federal Reserve statement prompted buyers to take prices back near session highs. U.S. copper futures for delivery in September HGU9 surpassed closing levels at $2.8235 a lb on the New York Mercantile Exchange's

COMEX division, advancing 9.10 cents, or 3.33 percent, to $2.8275 a lb in late dealings.

Financial Times:

- Chinese companies account for more than half of the world’s initial public offerings this year as a recovery in share prices helped boost momentum in Hong Kong from March and Beijing lifted a ban on new listings on the mainland in June. There have been 30 new listings by Chinese companies in mainland China and in Hong Kong in 2009 to date, raising a total $13.7bn, or 51 per cent of global IPO volume, Dealogic estimates.

Alibaba.com:

- As the exclusive distributor of iPhones, China Unicom has 5 million units ready for the first batch to go on sale in September, a source said Tuesday. A well-informed source said China Unicom paid Apple(AAPL) 10 billion yuan for 5 million WCDMA standard iPhones with unit price of 2,000 yuan. According to Toni Sacconaghi, an analyst from Sanford C Bernstein, in the original profit model, Apple would share 20 percent to 30 percent of the profit dividends with its distributors, so Apple's profit share amounts to 32 percent, while its sales share only account for 8 percent. Apple made compromises in the China market because of its great demand and intense competition, but Apple can still make profits from each unit from 1,000 yuan and 1,100 yuan. Yu added that every employee at China Unicom is excited about the potential profits the iPhone may bring since 5 million iPhones means 5 million new customers for China Unicom, leading to profits from cell phone fees three to four times higher.

Late Buy/Sell Recommendations
Citigroup:

- Downgraded (DHI) to Sell, target $10.

- Reiterated Buy on (GOOG), target $580. We continue to view the (GOOG) risk-reward as highly favorable. Our checks with almost all of the leading Search Engine Marketing firms suggest that QTD Spend, Volume & CPC trends are at least in-line with Q2 trends and in select cases improving. In particular, Search’s biggest vertical (Retail) is showing lift. The biggest takeaway from our participation in this week’s Search Engine Strategy conference is San Jose, CA, is the snowballing momentum for Mobile Search. Advertisers are seeing 10x increase in click-thrus via Mobile devices. Mobile Search activity is ramping fast this Smartphone Summer, and ad dollars are following. With all major eCommerce companies having now reported Q2 results, we believe their collective outlook for H2 marketing spending is Clearly Positive for ‘Net Advertising, both Search & Display. Vs. 3% Y/Y marketing spend growth in H1, H2 could see 20% growth. Google just released a Web Developer Preview of its next-gen Search Engine, codenamed Caffeine. Our initial tests indicate a select, but material increases in Index Size and Speed over Google’s current Search results. What One Wedding Video Says About YouTube’s Potential – 19MM views later, the user-generated “JK Wedding” video is still showing strong viral growth & likely generating revenue And profits for Google, given related Advertising and Music Purchases links and our analysis of YT’s infrastructure costs. Seems like GOOG’s biggest loss-leader is turning profitable. GOOG Long Thesis – 1) The worst of macro & fx headwinds are now behind GOOG. 2) CPCs – GOOG’s most important cyclical driver – have turned. 3) Paid click growth is stable. 4) Slowing Capex/Personnel costs & discretionary discipline practically guarantee margin expansion. 5) EPS quality has improved. 6) Mobile momentum building & 7) YouTube growing profitably! All means GOOG’s Y/Y op inc growth will accelerate from H1’s 18%.

- Reiterated Buy on (TYC), boosted target to $37.

Thomas Weisel:

- Rated (POT) Overweight, target $110.

- Rated (MOS) Overweight, target $58.

- Rated (AGU) Underweight, target $46

Night Trading
Asian Indices are +.50% to +1.75% on average.

Asia Ex-Japan Inv Grade CDS Index -2.1%.
S&P 500 futures +.26%.
NASDAQ 100 futures +.15%.

Morning Preview

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Earnings of Note
Company/EPS Estimate
- (URBN)/.26

- (RGLD)/.14

- (WW)/.70

- (DPS)/.50

- (WMT)/.845

- (KSS)/.74

- (RRGB)/.37

- (JWN)/.48

- (AAP)/.02

- (DV)/.50

- (EL)/.20

- (ADSK)/.18

- (BGG)/-.03

Economic Releases

8:30 am EST

- Advance Retail Sales for July are estimated to rise .8% versus a .6% gain in June.

- Retail Sales Less Autos for July are estimated to rise .1% versus a .3% gain in June.

- The Import Price Index for July is estimated to fall .5% versus a 3.2% gain in June.

- Initial Jobless Claims for last week are estimated to fall to 545K versus 550K the prior week.

- Continuing Claims are estimated to fall to 6300K versus 6310K prior.

10:00 am EST

- Business Inventories for June are estimated to fall .9% versus a 1.0% decline in May.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly EIA natural gas inventory report, (ERIC) investor relations forum, (ATV) general meeting, CanaccordAdams Growth Conference, UBS Engineering & Construction Conference, (MF) shareholders meeting, (MDCI) shareholders meeting, (RHT) shareholders meeting and the (QSII) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial 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 Sharply Higher, Boosted by Homebuilding, Networking, Steel, I-Banking, Insurance and Airline Shares

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Stocks Soaring into Final Hour on Less Economic Fear, Diminishing Financial Sector Pessimism, Subdued Long-Term Rates

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Steel longs, Technology longs, Biotech long, Medical longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Investor anxiety is very high. Today’s overall market action is very bullish. The VIX is falling 3.16% and is very high at 25.18. The ISE Sentiment Index is low at 108.0 and the total put/call is above average at .92. Finally, the NYSE Arms has been running low most of the day, hitting .31 at its intraday trough, and is currently .49. The Euro Financial Sector Credit Default Swap Index is rising 3.32% today to 84.0 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 4.18% to 114.99 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 1.23% 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 8.5% to 38.94 basis points. The Libor-OIS spread is rising 1.29% to 26 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 1 basis point to 1.90%, which is down 76 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is down 1 basis point today. The broad market’s reaction to today’s news is very impressive. All industries are participating, with many market leading stocks up significantly. Small-caps are especially strong. The bond market is holding onto gains achieved over the last two days despite supply fears, equity gains and dovish FOMC comments, which is a large positive. The Citi US economic surprise index is now up to +57.10 versus a reading of +41.50 in Europe. US scrap steel prices are up another 3% this week, which is an economic positive. On the negative side, credit default swap indices are higher again today, despite equity market gains. As well, the Shanghai Composite is now down 10.3% in 8 days and is testing its 50-day moving average for the first time since March. Further weakness in China would be a concern for US investors. Nikkei futures indicate an +200 open in Japan and DAX futures indicate an +33 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, diminishing financial sector pessimism, investment manager performance anxiety, subdued long-term rates and declining healthcare reform concerns.

Today's Headlines

Bloomberg:

- The Federal Reserve said it will slow the pace of its $300 billion program to buy U.S. Treasuries and anticipates that the full amount will be purchased by the end of October. “To promote a smooth transition in markets as these purchases of Treasury securities are completed, the committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October,” the Federal Open Market Committee said in a statement after a two-day meeting in Washington. The buying was previously scheduled to end in September. Officials left the benchmark interest rate between zero and 0.25 percent, and said economic conditions mean the rate will stay “exceptionally low” for an “extended period.” The decision was unanimous.

- The U.S. budget deficit topped $1 trillion for the first nine months of the fiscal year and broke a monthly record for June as the recession subtracted from revenue and the government spent to rejuvenate the economy. The shortfall for the fiscal year that began Oct. 1 totaled $1.1 trillion, the first time that the gap for the period surpassed $1 trillion, Treasury figures showed today in Washington. The excess of spending over revenue for June was $94.3 billion, the first deficit for that month since 1991, according to data compiled by Bloomberg.

- President Barack Obama sent Congress his plan to rein in the $592 trillion over-the-counter derivatives industry, a measure that would cut into a profitable market for banks led by Goldman Sachs Group Inc.(GS) and JPMorgan Chase & Co(JPM). The proposal issued yesterday would pressure derivatives users such as banks and hedge funds to move away from opaque customized contracts by imposing higher capital and margin requirements on the instruments. Standardized derivatives would be moved to regulated exchanges or trading platforms and sent through official clearinghouses, according to the draft measure. “The big broker dealers make a lot of money trading these customized derivatives,” said Paul Miller, a banking analyst for FBR Capital Markets in Arlington, Virginia. Custom derivatives are more profitable than contracts traded over an exchange, so the dealers will work to get the legislation “watered down,” Miller said.

- China’s stocks tumbled, with the Shanghai Composite Index entering a so-called correction, on concern a slump in exports and new loans will undermine the country’s economic recovery. The benchmark index fell 4.7 percent to a four-week low as the commerce ministry said China’s $4 trillion yuan ($585 billion) stimulus package can’t completely offset falling export demand. The gauge has lost 10 percent since reaching a 15-month high on Aug. 4 as banks reined in lending to avert asset bubbles. “Investors have realized the recovery of the economy isn’t as solid as they had expected,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “Inflows into equities will slow down for the rest of the year as new lending growth eases.”

- United States Natural Gas Fund(UNG), the world’s largest exchange-traded fund in the fuel, will suspend offering new shares on concern that federal regulators will keep it from investing in natural gas. The Commodity Futures Trading Commission heard testimony in July and August that commodity funds may be distorting energy prices. CFTC Chairman Gary Gensler has said he believes that speculation contributed to a surge in crude oil to a record $147.27 a barrel. The fund invests in futures and swaps to track the price natural gas. UNG said in a filing today that it won Securities and Exchange Commission approval to sell up to 1 billion new units, which would give the fund room to almost triple in size. The new units won’t be offered until the fund is certain it can meet its investment objectives or knows what regulatory limits it may face for energy product holdings, according to the filing.

- Chinese limits on the sale of books, films and music from the U.S. violate global commerce rules, the World Trade Organization ruled, handing President Barack Obama’s administration its first trade victory against China. WTO judges largely sided with a U.S. complaint that accused China of making U.S. companies sell copyright-protected products such as magazines, CDs and video games through state-approved or state-run businesses. The ruling, handed down in June and only made public today, also went against Chinese curbs on foreign producers of audiovisual goods that exempt domestic rivals.

- Macy’s Inc.(M), the second-biggest U.S. department-store chain, increased its full-year profit forecast and posted earnings that beat analysts’ estimates after it cut expenses and inventories.

- Treasuries fell as a record $23 billion auction of 10-year notes drew less-than-forecast demand with investors reluctant to buy securities before the conclusion of today’s Federal Reserve policy meeting.

- Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values. The median price of an existing single-family home dropped to $174,100, the most in records dating to 1979, the National Association of Realtors said today. Total sales rose 3.8 percent to a seasonally adjusted annual rate of 4.76 million from the first quarter and fell 2.9 percent from 2008’s second quarter.

- A 37% drop in the Baltic Dry Index, a barometer of commodity prices, from this year’s high may foreshadow losses in the dollars of Canada, Australia and New Zealand, countries that rely on raw-material exports. “Commodity currencies and the Baltic Dry Index tend to move somewhat in synch,” said Camilla Sutton, director of currency at Scotia Capital Inc. in Toronto. “We’ve seen the index drop dramatically. It’s a cautionary sign.” The fall in the Baltic Dry Index may reflect a deceleration in the stockpiling of commodities in China, Sutton said. If that’s the case, “commodity currencies including the Canadian dollar could move dramatically lower,” she said.

- European industrial production unexpectedly declined in June, suggesting the region’s economy may struggle to emerge from the recession. Output in the 16-nation euro area dropped 0.6 percent from May, led by a 4.2 percent decline in production of durable consumer goods, the European Union’s statistics office in Luxembourg said today. Economists had predicted a gain of 0.3 percent, according to the median of 30 forecasts in a Bloomberg News survey. From a year earlier, June output fell 17 percent.

- Confidence in the world economy surged to a 22-month high in August on signs the worst global recession since World War II is approaching an end, a Bloomberg survey of users on six continents showed. The Bloomberg Professional Global Confidence Index jumped to 58.12 this month from 39.13 in July. It is the first time the reading exceeded 50, which means optimists outnumber pessimists. A measure of U.S. participants’ confidence in the world’s largest economy rose to 47.3 from 29.5, the survey showed. “It’s clear the recession is over and some kind of recovery is underway,” said Nick Kounis, chief European economist at Fortis Bank Nederland Holding NV in Amsterdam, and a regular survey participant. “We have the biggest monetary and fiscal stimulus policy in history, globally, and we’re starting to see it work. Probably the next debate will be about how strong and sustainable the recovery is.”

- Toll Brothers Inc.(TOLL), the largest U.S. luxury homebuilder, rose the most since November after third- quarter revenue that exceeded analysts’ estimates. “It does feel as if the fence-sitters are looking for reasons to jump in on the side of buying,” Chief Executive Officer Robert Toll said in the statement. “Those taking this step today have more confidence than one year ago.” Toll said customers signed 837 net contracts, 3 percent more than the third quarter of 2008. The builder cut the incentives to buyers and the company’s cancellation rate was 8.5 percent, the lowest since the second quarter of fiscal 2006. Toll rose $2.45, or 12 percent, to $11.96 at 10:59 a.m. in New York Stock Exchange composite trading.

Wall Street Journal:

- Insiders at the biggest U.S. banks have had a poor record in picking the bottom for their companies' stocks, but at Citigroup, where insiders bought shares as they bottomed in March, bank officials are buying again. Chairman Richard Parsons, new Citibank head Eugene McQuade and Manuel Medina-Mora, the chief executive of Citigroup's Latin America and Mexico business, combined to buy $6.68 million in stock at an average per-share price of $3.31, according to regulatory filings.

- The SEC has sent Wells Notices to Pequot Capital Management and founder Art Samberg relating to their trading in Microsoft securities. As this Wall Street Journal article Tuesday reported, the agency received at least 45 tips related to the hedge fund, which closed in May under the weight of investigations into possible insider trading. Here is the letter Pequot sent to explain the Wells Notice to investors:

- Accounting rulemakers may expand the use of mark-to-market accounting, a move which could affect some banks' earnings by including changes in the value of their assets to a greater degree. But the banking industry, which already loathes mark-to-market accounting -- pegging an asset's value to the ups and downs of the market -- is likely to oppose such a change strongly. Many financial assets already must be marked to market, but others aren't - notably loans, which make up a huge chunk of banks' balance sheets.

- A controversial House proposal to double a Pentagon request to buy executive jets for use by government officials died in chorus of opposition that started with the press, spread to the public and ultimately included President Barack Obama. The episode, as reported in The Wall Street Journal, offers some insight into the way members of Congress use the budget process to get things they want -- usually in the absence of public uproar.

- The White House is priming the defibrillator paddles to revive ObamaCare, and its new strategy is to talk about "health-insurance reform," rather than "health-care reform." The point is to make its proposals seem less radical than they are, while portraying private insurers as villains for supposedly denying coverage to the sick. Sounds like a good time to explain a few facts about the modern insurance market. Start with the reality that nine out of 10 people under 65 are covered by their employers, most of which cover all employees and charge everyone the same rate. President Obama's horror stories are about the individual insurance market, where some 15 million people buy coverage outside of the workplace.

New York Post:

- Taking aim at its rivals, Google(GOOG) revealed it's working on a new version of its popular search engine that strives to deliver faster and more comprehensive results. Google invited Web developers to check out the project, code-named "caffeine," at an alternate site and provide feedback.

MarketWatch:
- Byron Wien is leaving Pequot Capital in the wake of an investigation that's forcing the hedge fund firm to shut down. Wien, who was chief investment strategist at Pequot, will join private-equity giant Blackstone Group L.P. (BX) as vice chairman of Blackstone Advisory Services, the firm said.

- The market for credit default-swaps, whose record spikes last year became an emblem of panic cascading across financial markets, faces a future that's calmer but still reflects far more credit risk than in years past. An index that tracks the cost of buying credit protection against defaults by some of North America's biggest, investment-grade companies, has fallen to about 113 basis points, off 60% on Tuesday from its November peak. Last week it reached its lowest level since May 2008. The drop indicates banks that sell the protection feel less worried about the ability of corporations to make debt payments and they're willing to sell credit protection more cheaply.

TechCrunch:

- LinkedIn tonight celebrated their 45 millionth user sign up, according to LinkedIn’s Marketing Project Manager Florina Xhabija’s Twitter message. According to comScore, LinkedIn had 16 million worldwide monthly unique visitors and 331 million page views in June 2009, up from 7.7 million and 114 million a year ago, respectively.

Politico:

- Democrats have a senior citizen problem. Frustrated older Americans are packing the town halls on health care. They are incredibly passionate about their Medicare benefits. Polls show senior citizens largely disapprove of health care reform ideas so far. And of course, they vote — in larger numbers than any other demographic. But so far, Democrats have focused much of their health care sales pitch on middle-class Americans and the uninsured — a slight that has been noticed by senior citizens, who hold great influence with members of Congress. A July 31 Gallup Poll found that just 20 percent of Americans aged 65 and older believe health care reform would improve their own situation, noticeably lower than the 27 percent of 18- to 49-year olds and 26 percent of 50-to-64-year-olds who say the same. The senior citizen problem could pose a serious problem for the 2010 election cycle.

The Washington Times:

- Four years after Hurricane Katrina exposed major deficiencies in the capacity of governments to evacuate and care for the disabled during a natural disaster, America's most vulnerable citizens are barely considered in most emergency plans, according to a report being issued Wednesday by the National Council on Disability. The report says huge gaps exist in those emergency plans despite an executive order issued by President Bush in 2004 urging federal and local governments, as well as private organizations, to consider the unique needs of the disabled when planning rescues and preparing to provide emergency shelter.

USA Today:

- Federal authorities have launched an effort to detect lone attackers who may be contemplating politically charged assaults similar to the recent murders of a Kansas abortion doctor and a Holocaust museum security guard. The effort, known as the "Lone Wolf Initiative," was started shortly after President Obama's inauguration, in part because of a rising level of hate speech and surging gun sales. "Finding those who might plan and act alone, the so-called lone offenders ... will only be prevented by good intelligence, the seamless exchange of information among law enforcement at every level, and vigilant citizens reporting suspicious activity," said Michael Heimbach, the FBI's assistant director for counterterrorism.

Reuters:
- Citigroup Inc's(C) contract with energy trader Andrew Hall, which reportedly could pay him up to $100 million this year, will not be subject to rulings by the Obama administration's pay czar, a source close to the bank said on Wednesday.

Financial Times:
- The US summer driving season “seems to have fizzled out before getting started” the International Energy Agency said on Wednesday, striking a cautious tone on prospects for a recovery in global energy demand next year. Warning that evidence of a bottoming out of the global recession was “patchy”, the energy watchdog of the developed world said next year’s expected recovery in global oil demand growth would be subdued at just 1.6 per cent, or 1.3m barrels a day, in 2010.

Bear Radar

Style Underperformer:
Large-cap Growth (+1.28%)

Sector Underperformers:
Education (-.49%), Coal (+.31%) and Drugs (+.52%)

Stocks Falling on Unusual Volume:
HURN, BOBE, GRMN and SYX

Stocks With Unusual Put Option Activity:
1) ADSK 2) LINTA 3) GNW 4) A 5) MBI

Bull Radar

Style Outperformer:
Small-Cap Value (+1.77%)

Sector Outperformers:
Insurance (+3.74%), Homebuilders (+3.60%) and Networking (+3.22%)

Stocks Rising on Unusual Volume:
CREE, ADSK, ERTS, STO, HRBN, AAON, BAGL, CLNE, LINTA, AIXG, ALOG, AMAT, FTEK, STEC, ROCK, BUCY, PRXL, PANL, VRSN, ZUMZ, IDCC, SAM, TRW, TOL, ITB, MFB and ETH

Stocks With Unusual Call Option Activity:
1) ESI 2) QLGC 3) CREE 4) TOL 5) FITB