Stocks Falling into Final Hour on Rising Economic Worries, Profit-Taking, More Shorting

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Steel longs, Biotech longs and Technology longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is below average. Investor anxiety is very high. Today’s overall market action is bearish. The VIX is rising 2.02% and is very high at 25.21. The ISE Sentiment Index is very high at 256.0 and the total put/call is above average at .97. Finally, the NYSE Arms has been running very high most of the day, hitting 2.44 at its intraday peak, and is currently .65. The Euro Financial Sector Credit Default Swap Index is rising 4.17% today to 87.26 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 3.31% to 117.21 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 3.15% to 26 basis points. The TED spread is now down 440 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 6.4% to 39.50 basis points. The Libor-OIS spread is falling 2.62% to 25 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling another 9 basis points to 1.73%, which is down 93 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is unch. today. Considering recent stock market gains, a better-than-expected July jobs report and an uptick in auto sales, today’s consumer confidence reading was even more disappointing. Healthcare reform fears are likely weighing heavily on the American psyche right now. As well, deflation concerns and the ongoing correction in Chinese equities are pressuring stocks today. Cyclical shares are especially weak, falling 3.23%. On the positive side, the NYSE Arms has been very high most of the day on below average volume. Bank stocks, led by (BAC), are hugging the flat line, which is a big positive. Rumors are circulating that Monday’s Master Trust data will show that credit card losses are improving more rapidly than analysts’ had estimated. As of now, there does not seem to be much bearish conviction behind today’s pullback. Nikkei futures indicate a -112 open in Japan and DAX futures indicate an +21 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on lower long-term rates, declining energy prices, diminishing financial sector pessimism and short-covering.

Today's Headlines

Bloomberg:

- Instead of a so-called New Normal of subdued growth, the U.S. may be heading for a robust recovery. The worst recession since the 1930s has created a reservoir of demand that will buoy the economy, say a growing number of economists led by James Glassman at JPMorgan Chase & Co., former Federal Reserve Governor Laurence Meyer and Stephen Stanley at RBS Securities Inc. “Whenever we have plunged off a cliff and fallen into a deep hole in the past, for a while the economy has a tendency to bounce back very quickly,” said Glassman, a senior economist at JPMorgan in New York. Glassman and his colleagues this month said forecasts of 3 percent to 4 percent growth in coming quarters may be too low given “pent-up” consumer demand.

- Leveraged Loans Extend Gains as Stocks Beat Credit, Repay Debt. “The rally in equities has made this type of financing available to issuers,” said Bradley Rogoff, a credit strategist at Barclays Capital in New York. Stock sales to repay bank lines will be “modest” and won’t match bonds issued to refinance debt, he said in an interview yesterday, adding that “it’s a bigger positive when it happens because you’re de-levering.”

- Jana Partners bought 3.6M Bank of America(BAC) shares during 2Q. Ken Heebner took new stakes in Ford(F), JCPenney(JCP) and Bank of America(BAC). Heebner’s top 3 holdings at June 30 were Ford(F), Goldman Sachs(GS) and Bank of America(BAC). Moore Capital took a 20.05M share stake in Bank of America(BAC) and a 16.8M share stake in CIT Group(CIT). Moore Capital is now the 5^th largest holder in CIT Group.

- Crude oil fell to a two week low after a report showed that confidence among U.S. consumers unexpectedly declined in August for a second consecutive month, bolstering skepticism that fuel demand will rebound this year. Oil tumbled as much as 4.6 percent after the Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 from 66 in July. Oil also declined as the dollar gained against the euro, reducing the appeal of commodities to investors looking for an inflation hedge. “Consumers are worried about the economy, and that’s raising concerns about demand,” said Phil Flynn, vice president of research at PFGBest, a Chicago-based brokerage. “Just a few days ago people were worried about inflation. That’s no longer the case.” U.S. crude-oil supplies increased by 2.52 million barrels to 352 million in the week ended Aug. 7, an Energy Department report on Aug. 12 showed. Stockpiles in Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is stored, rose 281,000 barrels to 33.6 million, the highest since March. “Brent is now trading at a substantial premium to WTI,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “This tells us that the U.S. market is grossly oversupplied.”

- BB&T Corp.(BBT), the North Carolina lender that bought back a $3.1 billion stake from the U.S. government, is taking over offices and deposits of Colonial BancGroup Inc.(CNB), according to a person familiar with the matter. Colonial, Alabama’s second-largest bank, is being closed by regulators today, the person said, becoming the largest U.S. bank failure of 2009 after an expansion into Florida saddled the lender with more than $1.7 billion in soured real-estate loans.

- Confidence among U.S. consumers unexpectedly fell in August for a second consecutive month as concern over jobs and wages grew. The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2, the lowest level since March, from 66 in July. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 62.1 from 63.2.

- The cost of living in the U.S. was unchanged in July, and dropped by the most since 1950 from a year ago, as the recession sapped companies’ pricing power. Today’s figures indicate no sign that the Federal Reserve’s record $1 trillion of injections into the banking system have passed through to faster inflation. Compared with a year earlier, consumer prices were down 2.1 percent, the biggest 12-month decrease since 1950.

- The U.S. Senate should abandon efforts to pass legislation curbing greenhouse-gas emissions this year and concentrate on a narrower bill to require use of renewable energy, four Democratic lawmakers say. “The problem of doing both of them together is that it becomes too big of a lift,” Senator Blanche Lincoln of Arkansas said in an interview last week. “I see the cap-and-trade being a real problem.” The resistance by Lincoln and her Senate colleagues undercuts President Barack Obama’s effort to win passage of legislation that would cap carbon dioxide emissions and establish a market for trading pollution allowances, said Peter Molinaro, the head of government affairs for Midland, Michigan- based Dow Chemical Co., which supports the measure. “Doing these energy provisions by themselves might make it more difficult to move the cap-and-trade legislation,” said Molinaro, who is based in Washington. “In this town if you split two measures, usually the second thing never gets done.”

- China stocks completed the worst weekly drop since February, sending the benchmark equity index to a six-week low, on concern this year’s rally has overvalued the prospects for earnings growth. “The market has formed the expectation that liquidity will become tight for the rest of the year as the government is set to fine-tune its monetary policy,” said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai. “A slower-than-expected economic recovery is also hurting investor confidence.” The Shanghai index entered a correction this week after its retreat from this year’s high on Aug. 4 surpassed 10 percent. The gauge, which ended the week 12 percent below the peak, trades at 33 times the reported profit of its companies, compared with a price-to-earnings ratio of 18 times for the MSCI Emerging Markets Index. Exports fell 23 percent from a year earlier, the government said on Aug. 11, while urban fixed-asset investment rose a less- than-estimated 32.9 percent in the first seven months from a year earlier. New loans plunged to 355.9 billion yuan in July, less than a quarter of advances in June, according to the central bank. “The economy is recovering, but at a very slow pace,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai. “Share price gains have far more than reflected that.”

- Schering-Plough Corp.(SGP), the drugmaker being acquired by Merck & Co. won U.S. approval for a new treatment for adults with schizophrenia or bipolar mania. The Food and Drug Administration cleared asenapine, a fast- acting tablet that dissolves under the tongue, Schering-Plough said today in a statement. The drug, to be sold under the brand name Saphris, will compete with Eli Lilly & Co.’s Zyprexa and AstraZeneca Plc’s Seroquel.

- Google Inc.(GOOG), seeking new ways to make money from Internet-search advertising, is dressing up its plain-text search ads with movie and TV previews. After starting to test videos in its ads last year, Google is considering adding product-demonstration clips to the experiment, said Nick Fox, a director of business product management working on the project. The advertisements look similar to traditional ads, except for a small box with a plus sign. With a click of a mouse, the box opens a video player. “It’s clear that this is something that users want,” Fox said this week in an interview. “It ties back to trying to understand what a user is doing on Google, what an advertiser is trying to sell -- and matching those up.”

Wall Street Journal:

- Remember when Wall Street was obsessed with Microsoft’s bulging bank account? Now it’s Apple that is awash in cash, the latest symbol of the company’s stunning ascendance over the past decade. As of June 27, Apple had a whopping $31.1 billion in cash and investments, up 27% from the year-earlier figure. The company’s cash position is the strongest among all technology companies, reckons Brian Marshall, an analyst at Broadpoint AmTech. (It’s not the largest, strictly speaking; Cisco Systems recently reported $35 billion in cash and Microsoft listed $31.4 billion, but both companies have debt that takes them below the net cash position of debt-free Apple, Marshall says).

- Tremont Group Holdings, which lost more than $3 billion in client assets through Madoff, has reached a deal to auction off much of its remaining hedge-fund assets. In coming weeks, hedge-fund holdings making up a large portion of several portfolios recently valued at around $400 million will go on the auction block in a process overseen by Duff & Phelps Corp., which won the bid to manage the process for Tremont, people familiar with the matter say. Holdings valued at some $180 million are expected to be sold by October, with additional assets already sold or awaiting sale, according to people familiar with the matter.

- Elderly Americans are turning out in droves to fight ObamaCare, and President Obama is arguing back that they have nothing to worry about. Allow us to referee. While claims about euthanasia and "death panels" are over the top, senior fears have exposed a fundamental truth about what Mr. Obama is proposing: Namely, once health care is nationalized, or mostly nationalized, rationing care is inevitable, and those who have lived the longest will find their care the most restricted.

CNBC:

- Mohamed El-Erian, co-chief investment officer of Pacific Investment Management Co., told CNBC the US government’s stimulus spending isn’t leading to a genuine consumer recovery. “We are yet to see a durable recovery,” El-Erian said.

SeekingAlpha:

- The man cited to be Ben Bernanke's replacement if and when the stock market (not the economy) takes a decided turn for the worse, Larry Summers, has been implicated in an act that may make his transitioning into his role of running monetary policy for the world's biggest economy slightly more complicated. A report that was issued several months ago by Asia Times' blog discloses that the man who has President Obama's attention on all matters financial was in fact selling the AAA-rated tranches of toxic CDOs held by his former employer, multi billion hedge fund D.E. Shaw after the collapse of the CDO-loaded Bear Stearns hedge fund.

NY Times:

- Big banks, facing government pressure to clean up their balance sheets, are beginning to quietly unload billions of dollars in toxic residential mortgages. A handful of distressed mortgage players including hedge funds and private equity firms have been eagerly bidding on the assets, which they believe will generate healthy profits over time once the mortgages are modified, according to sources briefed on the deals. In one of the biggest deals so far, Wells Fargo(WFC) recently sold a $600 million pool of mostly nonperforming mortgages to Arch Bay Capital, a specialty mortgage service company majority-owned by the hedge fund York Capital Management, according to people briefed on the deal. It’s unclear exactly how much Arch Bay paid for the mortgages, but other bidders who looked at the assets estimated the pool was sold for between 35 cents and 40 cents on the dollar. In addition to government pressure, the recent spate of positive earnings has given many banks confidence that they can absorb the write-downs associated with selling whole mortgage pools at a steep discount.

MarketWatch:
- Teen-clothing retailer Abercrombie & Fitch Co.(ANF) swung to a second-quarter loss, with sales hurt by its higher-priced assortment that alienated recession-minded shoppers. Still, investors cheered the stock after adjusted results topped Wall Street expectations.

- Commentary: Recent drop in short interest not necessarily a bad sign.

Dallas Morning News:

- Dallas-Fort Worth home foreclosures fell 17% in the first half of 2009.

Washington Post:

- The Obama administration made a national priority of spreading high-speed Internet access to every American home and offered stimulus money to help companies pay for it, but the biggest network operators are staying away from the program. As the Aug. 20 deadline nears to apply for $4.7 billion in broadband grants, AT&T, Verizon and Comcast are unlikely to go for the stimulus money, sources close to the companies said. Their reasons are varied. All three say they are flush with cash, enough to upgrade and expand their broadband networks on their own. Some say taking money could draw unwanted scrutiny of business practices and compensation, as seen with automakers and banks that have taken government bailouts. And privately, some companies are griping about conditions attached to the money, including a net-neutrality rule that they say would prevent them from managing traffic on their networks in the way they want. "We are concerned that some new mandates seem to go well beyond current laws and [Federal Communications Commission] rules, and may lead to the kind of continuing uncertainty and delay that is antithetical to the president's primary goals of economic stimulus and job creation," said Walter B. McCormick Jr., president of USTelecom, a trade group that represents telecoms including AT&T and Verizon.

LA Times:

- YouTube and Sony are crossing the streams. YouTube is now hosting a weeklong showing of Sony's comedy classic "Ghostbusters" in honor of the film's 25th anniversary. Oddly, when the film plays for seven days on the world's No. 1 online video site, it will be not be in a YouTube player. It will instead be piped in through Sony's Crackle player, which will be embedded on the site. That's a considerable departure* for YouTube, whose brand has for years been synonymous with its trademark square video player, with big buttons and a small screen. That YouTube is allowing a major Hollywood studio to plop down a foreign video player in the middle of its site is the latest sign that the platform has become more receptive to the entertainment industry's advances.

The Detroit News:

- Gov. Jennifer Granholm is proposing an entertainment tax, another 25-cent boost in the cigarette tax and a penny levy on bottled water to help erase next year's budget deficit. Sources closest to budget negotiations said Thursday the plan -- which would raise about $685 million a year -- also would slightly reduce the state's film tax credit and an income tax break for low-income families. The governor would phase out the widely unpopular 22 percent surcharge on the Michigan Business Tax over three years starting in 2011.

The Washington Times:

- Dr. Ezekiel J. Emanuel, the White House official targeted by Sarah Palin and other conservatives as an advocate for health care rationing and "death panels," said Thursday his "thinking has evolved" on the need to decide who gets treated and who does not. "When I began working in the health policy area about 20 years ago ... I thought we would definitely have to ration care, that there was a need to make a decision and deny people care," said Dr. Emanuel, a health care adviser to President Obama in the Office of Management and Budget, during a phone interview. "I think that over the last five to seven years ... I've come to the conclusion that in our system we are spending way more money than we need to, a lot of it on unnecessary care," he said. "If we got rid of that care we would have absolutely no reason to even consider rationing except in a few cases." Dr. Emanuel, the elder brother of White House Chief of Staff Rahm Emanuel, spoke with The Washington Times from Italy, where he is on vacation.

Rassmussen:

- The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 30% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-eight percent (38%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -8 (see trends).

Politico:

- Former President Bill Clinton told an audience of liberal online activists Thursday evening that the nation has “entered a new era of progressive politics” that could last for decades if Democrats can pass ambitious measures such as health care reform and climate change. In a nearly hour-long keynote address to the fourth annual Netroots Nation convention in Pittsburgh, a gathering of roughly 1,500 progressive bloggers and activists, Clinton said the nation—and public opinion—has dramatically changed in the 16 years since he took office. But he noted that President Barack Obama and the Democratic-controlled Congress needed the support of the online community to achieve their agenda. “We have entered a new era of progressive politics which, if we do it right, can last 30 or 40 years,” Clinton said. “America has rapidly moved to another place on a lot of these issues.” “The president needs your help,” he said, “and the cause needs your help.”

Reuters:
- A U.S. future economic growth gauge rose in the latest week, as its yearly growth rate surged to a 26-year high, suggesting that recovery will commence at the briskest pace in decades, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to a 47-week high of 123.9 in the week to Aug. 7 from a downwardly revised 121.7 the prior week, which was originally reported at 121.8.

Meanwhile, the index's annualized growth rate leapt to a 26-year high of 13.4 percent from last week's five-year high of 10.4 percent, which ECRI originally reported at 10.5 percent. It was the index's highest yearly growth rate reading since the week to Aug. 26, 1983, when it stood at 13.9 percent. "With WLI growth surging, the odds are rising that the early stage of this economic recovery will be stronger than any since the early 1980s," said Lakshman Achuthan, Managing Director at ECRI.

Financial Times:
- We all now know that the decision to leave the credit default swaps market largely unregulated didn’t really work out too well. The Commodity Futures Modernization Act of 2000 has even been criticized by those who helped create it. Lax regulation + excessive risk taking + generally poor risk management + complex instruments that few really understood = not a good idea. So why has there been so little debate over the Obama administration’s proposals, announced on Tuesday, to comprehensively regulate CDS along with the rest of the OTC world? Most of the proposed legislation is relatively uncontroversial. It provides for regulation and transparency for all OTC derivative transactions, dealers and other major participants. But the plan also calls for a big chunk of the regulatory work to be shared - between the SEC and the CFTC. Are regulators, anywhere in the world, good at sharing anything? Key details of the proposals include:

Bear Radar

Style Underperformer:
Small-Cap Value (-2.52%)

Sector Underperformers:
Disk Drives (-3.84%), Steel (-3.09%) and Coal (-3.05%)

Stocks Falling on Unusual Volume:
WGO, CSTR, GRMN, TNDM and BKS

Stocks With Unusual Put Option Activity:
1) IDCC 2) CSTR 3) PCAR 4) MHK 5) LEAP

Bull Radar

Style Outperformer:
Large-Cap Value (-1.34%)

Sector Outperformers:
Medical Equipment (-.31%), Software (-.51%) and Utilities (-.63%)

Stocks Rising on Unusual Volume:
BF/B, STZ, IX, COLM, ADSK, RMBS, FSYS, RIMM, NTES, ANF, AVY, NYM, FFH and GIL

Stocks With Unusual Call Option Activity:
1) KG 2) MHK 3) ANF 4) NUE 5) JWN

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Friday Watch

Late-Night Headlines
Bloomberg:

- India may trigger as much as 1.9 trillion rupees ($39 billion) in stock sales, equivalent to five years of equity offerings, with a proposal to limit stakes of controlling shareholders. Prime Minister Manmohan Singh’s government is considering a plan that would require at least 25 percent of a company’s stock to be traded. The rule would prompt equity sales in 560 of Mumbai’s 3,335 most-active stocks, such as NMDC Ltd. and Steel Authority of India Ltd., according to data compiled by Bloomberg.

- Delta Air Lines Inc.(DAL) and the Atlanta airport are nearing a lease agreement that would pave the way for an $800 million bond sale, the biggest such offering in the U.S. this year, people familiar with the talks said. The debt will pay for a new international terminal at the world’s busiest airport, which is in talks with Atlanta-based Delta and other airlines as their leases expire after 30 years. A lease accord may come this month, clearing a path for the bonds, said the people, who asked not to be identified because the discussions are private.

- The Obama administration is considering higher fees on larger financial firms to help cover the costs of new regulations on consumer financial products, an administration official said. The two-tiered fee structure would levy higher fees on firms with over $10 billion in assets, while fees for smaller institutions would not rise, the official said on the condition of anonymity because the proposals have not been announced. Fees also will be assessed on non-bank financial institutions, the official said.

- Japan’s demand for services rose unexpectedly in June as government stimulus measures spurred consumer spending, another sign that the economy is emerging from a recession. The tertiary index, which captures 63 percent of the economy, climbed 0.1 percent from May, when it slid a revised 0.3 percent, the Trade Ministry said today in Tokyo. The median estimate of surveyed was for a 0.3 percent drop.

Wall Street Journal:

- Intel Corp. (INTC), Dell Inc. (DELL), and Fujitsu Ltd. (FJTSY) are among the new partners with the nonprofit group Connected Nation to put computers and cheap Internet service into low-income homes, the parties announced Thursday.

- Bond guru Bill Gross , whose Pimco Total Return is the world's largest mutual fund, has bought a bayfront home in Newport Beach, Calif. through a trust for $23 million, according to three people close to the deal. Records show the home was bought by the Monte Carlo Trust, which names as trustee Jeff Stubban. Mr. Stubban couldn't be reached for comment. Three people familiar with the matter say Mr. Gross intends tear the home down and build a new one on the site. Mr. Gross's new property includes a 1979 Georgian home of 11,000 square feet with nine bedrooms and 12 baths. Set on a double lot, the home includes 112 feet of frontage on Newport Harbor.

- The possibility that Scotland could release the terminally ill Libyan agent convicted in the 1988 Lockerbie bombing was denounced by both victims' families and the U.S. government. The uproar stems from the fact that the convicted bomber, Abdel Baset Ali Mohmet al-Megrahi, has prostate cancer and is seeking to be released. Mr. al-Megrahi was sentenced in 2001 to a minimum of 27 years in prison for his involvement in blowing up a New York-bound Pan Am airliner as it flew over the Scottish town of Lockerbie, killing all 259 people on board and 11 people on the ground. Many on the December 1988 flight were American citizens traveling home for the holidays. The Scottish government said Thursday that its justice secretary, Kenny MacAskill, is considering two applications, either of which would result in Mr. al-Megrahi's release from prison. One is a request to release him from prison on so-called compassionate grounds because of his advanced cancer. The other, from the Libyan government, would allow him to serve out the remainder of his sentence in a Libyan jail.

MarketWatch.com:
- Financial-services shares built on the previous session's gains Thursday on news that renowned hedge-fund manager John Paulson's firm snapped up Bank of America Corp. and other bank stocks in the second quarter. Paulson buying bank stocks is "a noteworthy change from a recent and accurate financial bear," said Stifel Nicolaus & Co. analysts. "We believe it is likely that the companies in which he added to his original positions and the companies in which he took new positions will react positively to this filing as they may be getting a vote of confidence from someone who was right during the downfall," they added. In a separate report Thursday, insurer Liberty Mutual Group Inc. rebuilt positions in Bank of America(BAC) as well as Wells Fargo(WFC) in the second quarter, according to Bloomberg. Liberty Mutual sidestepped much of the carnage in financial stocks by selling the stocks last year, but the company made Bank of America its largest stock holding in the second quarter, according to the report.

CNNMoney.com:

- Just how much is a rainmaker at a bailed-out bank really worth? Or a senior executive at a recently bankrupt automaker for that matter? Such questions will soon be a subject of discussion at the White House as the biggest recipients of government aid begin submitting compensation plans for their top 100 employees to the Obama administration's recently appointed pay czar. Seven companies -- AIG (AIG), Chrysler, Citigroup (C), Chrysler Financial, Bank of America (BAC), General Motors and GMAC -- are due to submit proposed employment contracts for their 25 highest-paid employees Friday. Compensation proposals for the next 75 most compensated employees are due by Oct. 13. Kenneth Feinberg, the man charged with handling the task, is expected to rule on the first set of pay plans within the next 60 days. That information is due to be made public by Treasury sometime after, although any announcement may not include details of pay packages for individual employees.

Business Pundit:

- 12 Economic Bubbles That May Burst.

Politico:

- After an intimate White House lunch last week, Republican Sen. Chuck Grassley said he was confident President Barack Obama was working toward a truly bipartisan health care reform bill. "I'm not walking away from the table; I'm being pushed away from the table," Grassley said in Afton, Iowa, warning that Democrats might go it alone on health care. If the Democrats lose Grassley, the top Republican negotiator on the Senate Finance Committee, they very likely lose any hope of a bipartisan bill. Even worse, if Grassley bails, then conservative Democrats like Ben Nelson may follow. While Grassley has always criticized the process in the Senate, his fresh criticisms, before the home state crowd, are magnified as contentious town hall scenes are repeated across the country. And if the August unrest has spooked a safe, respected senior senator like Grassley, it can't be good sign for the dozens of much more vulnerable moderates from both parties, who worry that the wrong vote on health care could cost them the job next year.

- A new coalition on Thursday launched $12 million in television ads to support President Barack Obama’s health reform plan, in the opening wave of a planned tens of millions of dollars this fall. The new group, funded largely by the pharmaceutical industry, is called Americans for Stable Quality Care. It includes some odd bedfellows: the American Medical Association, FamiliesUSA, the Federation of American Hospitals, PhRMA and SEIU, the service employees’ union. The decision of labor and progressive groups to join with industry groups could draw new heat about the president's package from the left. The ads began airing at about 11 a.m. ET Thursday.

Time.com:

- Q&A: Why Barton Biggs, head of hedge fund Traxis Partners, is bullish.

Reuters:

- Nordstrom Inc (JWN) posted a steep decline in quarterly profit on Thursday that nevertheless met Wall Street's expectations, as the upscale department store chain controlled inventory and expenses to offset languishing sales. The company raised its profit forecast for the fiscal year based on what it called better-than-expected performance in its second quarter. The quarter included three major sales campaigns, making it Nordstrom's second-largest in terms of net sales.

- Ford Motor Co (F) said on Thursday it was increasing production after a surge in sales ignited by the U.S. "Cash for Clunkers" program. The No. 2 U.S. carmaker said it would build another 6,000 Focus sedans in the current quarter by adding overtime and a Saturday shift at an assembly plant in Wayne, Michigan. A second plant in Kansas City, Missouri, will increase output of the Escape, a small SUV, by another 3,500 vehicles, reversing plans to shut down for two days this month. The actions take Ford's third-quarter output in North America to 495,000 vehicles, up 18 percent over a year ago.

- Merrill Lynch, a unit of Bank of America Corp (BAC), is ramping up its recruitment programs for financial advisers with signing packages more generous than its 2006 and 2007 offerings, according to a story on the Financial Times website. Citing industry recruiters and unnamed people in the company, the story said Merrill Lynch Global Wealth Management is offering signing bonuses of 140 percent of the previous 12 months' "production" in an bid to attract top advisers. It also said the company is offering another 200 per cent over five years if advisers hit aggressive growth targets, according to the story.

Financial Times:

- Two freshly elected Democrats are wavering in their support of healthcare reform, as a rancorous summer series of “town hall” debates appears to be ­hardening opposition against the Obama administration. Frank Kratovil and Tom Perriello, who as freshmen congressmen would be expected to back the party leadership, both say proposals for expanding coverage to the uninsured are un­acceptable in their current form and should focus more on cost savings. Billed as a chance to sell healthcare reform to the American people in small meetings across the country, the town hall debates have seen protesters screaming at their elected representatives. In spite of hopes by proponents of reform that voters would be turned off by the sometimes ugly scenes, a poll yesterday from USA Today gave an indication that the debates were having the opposite effect. Some 34 per cent of respondents said the demonstrations had made them more sympathetic to the protesters, while 21 per cent said they were less sympathetic. In the all-important independents grouping, 35 per cent against 16 per cent said they were now more sympathetic to the protesters – a margin of more than two to one. The Obama administration was on Thursday attempting to regain the initiative with a self-described “chain” e-mail from the senior adviser David Axelrod, pointing to a series of “myths and facts” in the debate. But the “myths” identified by David Axelrod, one of Mr Obama’s chief advisers, themselves highlight how the healthcare dispute has spilt out of the White House’s control.

Financial Post:

- Little-known lithium has emerged as the hottest commodity of the moment as investors look for a way to cash in on the anticipated flood of electric cars into the marketplace.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (EL), boosted target to $41.

- Reiterated Buy on (URBN).

CSFB:

- Rated (RS) Overweight, target $44.

Night Trading
Asian Indices are -.50% to +.75% on average.

Asia Ex-Japan Inv Grade CDS Index unch.
S&P 500 futures -.18%.
NASDAQ 100 futures -.17%.

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Economic Releases

8:30 am EST

- The Consumer Price Index for July is estimated unch. versus a .7% gain in June.

- The CPI Ex Food & Energy for July is estimated to rise .1% versus a .2% increase in June.

9:15 am EST

- Industrial Production for July is estimated to rise .4% versus a -.4% decline in June.

- Capacity Utilization for July is estimated to rise to 68.3% versus a 68.0% gain in June.

10:00 am EST

- The Preliminary Univ. of Mich. Consumer Confidence reading for August is estimated to rise to 69.0 versus 66.0 in July.

Upcoming Splits
- None of note

Other Potential Market Movers
- The CSFB Aerospace & Defense Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology 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.