Stocks Rising into Final Hour on Less Financial Sector Pessimism, Short-Covering, Lower Long-Term Rates, Falling Inflation Expectations

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Steel longs, Technology longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are rising and volume is about average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 1.26% and is very high at 25.13. The ISE Sentiment Index is low at 109.0 and the total put/call is slightly below average at .77. Finally, the NYSE Arms has been running low most of the day, hitting .35 at its intraday trough, and is currently .59. The Euro Financial Sector Credit Default Swap Index is falling 1.03% 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 falling 1.33% to 113.46 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 2.02% to 27 basis points. The TED spread is now down 439 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 4.59% to 37.69 basis points. The Libor-OIS spread is falling .65% to 26 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 8 basis points to 1.82%, which is down 84 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is unch. today. Given the declines in weekly retail sales reported during July, today’s negative monthly number shouldn’t have been a surprise. I suspect retail sales will show decent improvement this month. It is a large positive to see inflation expectations and long-term rates coming in today. Cyclicals have traded well throughout the session. Coal, Oil Service, Networking, Steel, Gaming, Bank and Semi shares are especially strong, rising 2%+. Preliminary August Consumer Confidence should meet or exceed estimates tomorrow. Nikkei futures indicate an +43 open in Japan and DAX futures indicate an +7 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on lower long-term rates, diminishing financial sector pessimism, falling inflation expectations, investment manager performance anxiety and declining healthcare reform concerns.

Today's Headlines

Bloomberg:

- Investment-grade bonds from large banks and financial institutions, utilities and some energy companies make “compelling” purchases, according to Pacific Investment Management Co. LLC. “Yield spreads for high-quality investment grade corporate bonds are still wide relative to historical levels, and we think attractive risk-adjusted value still exists in certain areas of this market,” he said. “There is a clear disconnect between financial markets and underlying fundamentals.”

- Ford Motor Co.(F), benefiting from the Obama administration’s “cash-for-clunkers” program, said it’s boosting factory output by 26 percent in the second half to meet the increased demand. Ford, the only major U.S. automaker to avoid bankruptcy, is raising North American production by 18 percent in the third quarter to 495,000 cars and trucks. Fourth-quarter output climbs 33 percent, the Dearborn, Michigan-based company said today. The Ford Focus small car and the Escape small sport-utility vehicle are among the top 10 sellers in the federal program that gives consumers as much as $4,500 to trade in an older car for a fuel-efficient auto. Other leading sellers, such as the Fusion sedan, helped Ford post its first monthly sales increase in July since 2007 as auto demand picks up across the industry. “The Ford Escape and Focus are flying off dealer lots and we’re doing all we can to ensure our dealers are well stocked,” Mark Fields, Ford’s president of the Americas, said in a statement. “We also are planning a significant increase in fourth-quarter production compared with last year, continuing to match production to the real demand.”

- Copper rose to the highest in more than 10 months in New York and London on speculation that demand is reviving after the Federal Reserve said the U.S. recession is easing and the two biggest euro-zone economies expanded. The U.S. economy is “leveling out,” the central bank said yesterday as it pledged to keep interest rates low for an “extended period.” Second-quarter gross domestic product rose a seasonally adjusted 0.3 percent from the first quarter in both Germany and France, the nations’ statistics offices said today. Economists surveyed by Bloomberg had predicted contractions. Copper for September delivery gained 7.85 cents, or 2.8 percent, to $2.902 a pound on the New York Mercantile Exchange’s Comex unit at 8:24 a.m. local time. The contract climbed as high as $2.93, the highest intraday price since Sept. 29.

- Monsanto Co.(MON), the world’s largest seed maker, plans to charge as much as 42 percent more for its new genetically modified seeds next year than older offerings because they increase farmers’ output. Roundup Ready 2 Yield soybeans will cost farmers an average of $74 an acre in 2010, and original Roundup Ready soybeans will cost $52 an acre, St. Louis-based Monsanto said today in presentations on its Web site. SmartStax corn seeds, developed with Dow Chemical Co.(DOW), will cost $130 an acre, 17 percent more than the YieldGard triple-stack seeds they will replace.

- Warren Buffett’s Berkshire Hathaway Inc.(BRK/A) provided more details on writedowns of equity securities after U.S. regulators asked the company in April “to clarify the facts and circumstances” involved in valuing stocks. Berkshire told the Securities and Exchange Commission that it wrote down stocks when “there was considerable uncertainty in the business prospects” of companies. Berkshire didn’t write down equities when “in management’s judgment the future earnings potential and underlying business economics of these companies were favorable,” according to a May 22 letter from Chief Financial Officer Marc Hamburg to the SEC. Berkshire has been under pressure from the SEC to improve disclosure as the recession weighed on results.

- Crude oil may plunge to less than $10 a barrel in the next decade after surging to a record $147 last year, said Robert Prechter, who achieved fame for cautioning on Oct. 5, 1987, that stocks would crash. “I expect crude oil prices to fall below $10 a barrel sometime over the next decade,” Prechter, founder of Elliott Wave International Inc., said in an e-mail yesterday. “It took many years for it to achieve $147.50, and it will take a long while for the full retreat to occur.” Oil should fall to between $4 and $10 a barrel based on a technical analysis called Elliott Wave principle, Prechter said in the Elliott Wave Theorist report last month.

- Iran recommended the International Atomic Energy Agency support a ban on military operations or threats of such action against nuclear facilities. Aliasghar Soltanieh, Iran’s ambassador to the United Nations agency, asked Secretary-General Mohamed ElBaradei to include the proposal on the agenda for the IAEA’s annual meeting next month, the state-run Fars news agency reported today.

- Crude oil prices, which have surged 60% this year, may not rise above $80 a barrel because spare production capacity among OPEC member has swollen. In March the 12-member group could have produced 6.84 million barrels a day above its actual production, if needed, the most since 2001, according to a monthly Bloomberg News survey of oil companies, producers and analysts. That margin was 6.11 million barrels last month. “The Saudis are happy with oil in the $70-to-$80 range,” Mueller said. “It’s low enough to stop development of some oil sands and alternative energy sources while not hurting the economy. If prices rose above $75 they would open the spigot.”

- Goldman Sachs Group Inc.(GS) and JPMorgan Chase & Co.(JPM) would be barred from a planned U.S. carbon- emissions market or face trading restrictions under proposals by Democratic senators crafting climate change legislation. At least nine members of the majority party say speculation by Wall Street banks may cause excessive price swings in the cap-and-trade system of pollution allowances at the center of President Barack Obama’s plan to curb global warming. The senators say they may limit participation to polluters needing permits, ban derivatives or impose stricter regulations than exist in today’s energy markets. “The volatility that has existed in the oil market is exactly what we don’t want to happen in carbon markets,” said Senator Maria Cantwell, a Democrat from Washington state who wants to exclude financial companies from the carbon market. “The banks contributed to that, and the banks continue to contribute to it.” Goldman Sachs spokesman Michael Duvally said the company had no comment. The bank “will continue to act as a market maker in emissions trading,” including carbon dioxide, according to an environmental policy paper it issued. Markets will have inadequate liquidity without bank participation, Bill Winters, co-chief executive officer of JPMorgan’s investment bank, said at a July 23 press conference in New York. Carbon markets “will die, and the temperature on the planet will go up by a couple of degrees, more than it would have otherwise, and we’ll be really sorry about it,” Winters said. Senator Byron Dorgan, a North Dakota Democrat, said he will oppose creating any carbon-trading market. “It won’t be very long before we have derivatives, we’ll have swaps, we’ll have synthetic swaps, you name it, we’ll have all of them and it’ll be a field day for speculation,” Dorgan said July 17 on the Senate floor. “There is a growing faction of senators demonizing the potential role Wall Street will have in pollution derivatives markets, and with good reason,” said Tyson Slocum, energy program director for Public Citizen, a Washington-based advocacy group. “The odds are that the Senate simply has too many hurdles to overcome to get this bill done this year.”

- The Libor-OIS spread narrowed to a level former Federal Reserve Chairman Alan Greenspan said he regarded as “normal,” adding to evidence the freeze in credit markets is thawing. The spread, which gauges the reluctance among banks to lend, fell 1 basis point to 25 basis points today, the least since Jan. 24, 2008. The spread soared to 364 basis points on Oct. 10 last year after Lehman Brothers Holdings Inc.’s collapse in September. Greenspan said in a June 2008 interview he wouldn’t consider credit markets back to “normal” until the spread was at 25 basis points. Financial markets “improved further in recent weeks,” the Fed said yesterday.

- Treasuries rose as a report showing retail sales unexpectedly fell in July suggested inflation remains restrained, helping to spur higher-than-forecast demand at a record $15 billion auction of 30-year bonds. Ten-year note yields touched their lowest levels in over a week as retail sales fell 0.1 percent in July, the first drop in three months.

Wall Street Journal:

- A credit crisis is brewing in "microfinance," the business of making the tiniest loans in the world. Microlending fights poverty by helping poor people finance small businesses -- snack stalls, fruit trees, milk-producing buffaloes -- in slums and other places where it's tough to get a normal loan. But what began as a social experiment to aid the world's poorest has also shown it can turn a profit. That has attracted private-equity funds and other foreign investors, who've poured billions of dollars over the past few years into microfinance world-wide. The result: Today in India, some poor neighborhoods are being "carpet-bombed" with loans, says Rajalaxmi Kamath, a researcher at the Indian Institute of Management Bangalore who studies the issue. In India, microloans outstanding grew 72% in the year ended March 31, 2008, totaling $1.24 billion, according to Sa-Dhan, an industry association in New Delhi. "We fear a bubble," says Jacques Grivel of the Luxembourg-based Finethic, a $100 million investment fund that focuses on Latin America, Eastern Europe and Asia, though it has no exposure to India. "Too much money is chasing too few good candidates."

- Team Obama is suffering from Extended Campaign Syndrome. In an election, campaign staffers are often just trying to survive until the next week or the next primary. They cut corners because they are fatigued or under pressure. They can be purposely combative and even portray critics as enemies. Carrying this mindset into the White House can get you into trouble, a lesson the Obama administration is now learning the hard way. For example, there's a video being circulated online of Barack Obama telling the Illinois AFL-CIO in 2003, "I happen to be a proponent of a single payer universal health-care program . . . we may not get there immediately" and then telling an SEIU Health Care Forum in 2007, "I don't think we're going to be able to eliminate employer coverage immediately. There's going to be some transition process. I can envision a decade out or 15 years out or 20 years out where we've got a much more portable system."

NY Times:

- Small-business owners hoping for some assistance of the sort given to the nation’s biggest banks applauded when the Small Business Administration unveiled a lending program in May. Washington officials and some lenders predicted that the program, providing emergency bridge loans as part of the economic stimulus package, would save jobs and provide a lifeline for vulnerable businesses. Many in the banking industry expected it to be fully subscribed in months. But the program is off to a slow start, and many banks, including some of the largest, appear reluctant to take part. With $255 million, the program is prepared to make about 10,000 loans of up to $35,000 each. As of Monday, the agency reported that only 1,127 loans, totaling $36.8 million, had been extended.

MarketWatch:
- U.S. retail sales unexpectedly fell 0.1% in July, as soft sales for most types of merchandise offset a boost from the government's cash-for-clunkers subsidy, the Commerce Department reported Thursday. It was the first decline for seasonally adjusted sales in three months. The report shows that consumer spending is still weak despite attempts by the government to stimulate demand. Sales at most kinds of stores declined in July.

The Detroit News:

- The Obama administration will not make public the detailed compensation plans for the highest employees at seven companies that have accepted bailout loans. General Motors Co., Chrysler Group LLC, GMAC Inc. and Chrysler Financial are among the seven in the process of submitting compensation plans for their top 25 executives by Friday, and will outline proposals for their top 100 execs in the coming months. The four auto sector companies have received more than $80 billion in taxpayer loans -- though Chrysler Financial has repaid its $1.5 billion loan. Last week, GM submitted several hundred pages outlining its pay practices, said spokesman Tom Wilkinson, but doesn't plan to make the list public.

AllThingsDigital:

- Time to get the rumor mill kicked into high gear: Multiple music industry sources say Apple executives have told them the company is planning one of its famed keynote events for the week of September 7th. But in true Apple fashion, the company has been non-committal about the exact date of the event, or what it will be showing off.

NY Post:

- First it was the banks and automakers that got a helping hand from Uncle Sam -- and soon some New York City apartment complexes could get one, too. A bill winding its way through Congress proposes to prop up deteriorating apartment complexes by injecting $2 billion from the Troubled Asset Relief Program into an effort to stabilize multifamily properties in default or foreclosure. The bill, which is called the TARP for Main Street Act and was sponsored by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Rep. Nydia Velazquez (D-Brooklyn and Manhattan), would use TARP funds that have been returned by banks and plow it into programs that, according to the bill, would create "sustainable financing" for the complexes as well as provide funding for property rehabilitation.The House is considering the measure, which focuses on apartment buildings with units that are either rent stabilized or receive government subsidies.

Rassmussen:

- For the first time in over two years of polling, voters trust Republicans slightly more than Democrats on the handling of the issue of health care. The latest Rasmussen Reports national telephone survey shows that voters favor the GOP on the issue 44% to 41%. Democrats held a four-point lead on the issue last month and a 10-point lead in June.

Politico:

- He may be presiding over two wars and facing a terror threat at home and abroad, but you'd hardly know it from listening to President Barack Obama speak. Obama has uttered more than a half-million words in public since taking office Jan. 20 — and a POLITICO analysis of nearly every word in this vast public record shows that domestic topics dominate, so much so that Obama sounds more like a peacetime president than a commander in chief with more than 100,000 troops in the field.

StreetInsider.com:

- Ken Griffin's Citadel hedge fund showed a 4.85%, or 7,067,768 share, stake in UAL Corporation (UAUA) in a 13G filing. The firm held 900,666 shares at the quarter ended 3/31/09. A 13G indicates a passive filing.

Reuters:
- Walmart Stores Inc(WMT) posted better-than-expected quarterly earnings on Thursday as a clampdown on inventory offset falling sales, and the company forecast a full-year profit that could beat Wall Street estimates, sending its shares up 1.7 percent.

- IBM(IBM) said on Thursday it expects revenue at its analytics business to grow by around 15 to 20 percent from next year on, as the fledgling unit wins more contracts. International Business Machines Corp (IBM) said the analytics business, which helps clients plot trends, predict risk and cut costs, is likely to account for more than $2 billion in revenue in 2010 -- a fraction of IBM's 2008 revenue of $103.6 billion. This year, revenue from analytics could grow by about 10 percent, it said.

- Venezuelan President Hugo Chavez is unleashing an avalanche of laws to regulate business and promote "Marxist trade," a new push to build a socialist economy in the shopping-mad, oil-exporting nation. Chavez, a close ally of Cuba who fully embraced socialism in 2007, has steadily increased the role of the state in the OPEC member's economy with a slew of nationalizations and tough controls on prices and foreign exchange. Following are some of the key laws currently being discussed in the national assembly:

Kyodo News:

- Japan's crude steel output in the current fiscal year is likely to fall to the lowest level in nearly 40 years due to weak demand amid the global economic slowdown, according to industry projections made available by Thursday.

Bear Radar

Style Underperformer:
Large-cap Value (+.10%)

Sector Underperformers:
Alt Energy (-1.17%), Medical Equipment (-1.03%) and Defense (-.90%)

Stocks Falling on Unusual Volume:
STP, AAP, CEG, UMPQ, ASBC, GSIC, MIDD, NTES, SNDA and URS

Stocks With Unusual Put Option Activity:
1) LDK 2) ACAD 3) EL 4) JAVA 5) ADSK

Bull Radar

Style Outperformer:
Large-Cap Growth (+.53%)

Sector Outperformers:
Networking (+3.12%), Oil Service (+2.70%) and Banks (+1.92%)

Stocks Rising on Unusual Volume:
ANW, PUK, ING, BAC, UBS, STI, CLF, AA, SGY, CHDX, CPTS, CISG, ICFI, DIOD, IPSU, URBN, HRBN, CLNE, CHKP, PALM, FORR, ITRI, PAAS, SXCI, VECO, POWI, CORE, FSLR, CENX, SHLD, STEC, SRX, TAL, HRS, GOL, KAI, AZ and WW

Stocks With Unusual Call Option Activity:
1) MHK 2) LOW 3) NTES 4) NVLS 5) KLAC

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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

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

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.