Stocks Surging into Final Hour on Less Economic Fear, Stability in Asia

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Financial longs and Biotech longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short 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 gaining and volume is below average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is falling 5.7% and is very high at 26.19. The ISE Sentiment Index is low at 85.0 and the total put/call is above average at .94. Finally, the NYSE Arms has been running low most of the day, hitting .49 at its intraday trough, and is currently .68. The Euro Financial Sector Credit Default Swap Index is falling 1.24% today to 90.0 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 .85% to 123.90 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 5.83% to 25 basis points. The TED spread is now down 441 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 4.73% to 42.94 basis points. The Libor-OIS spread is falling 3.10% to 23 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 6 basis points to 1.76%, which is down 90 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is up 1 basis point today. The broad market continues to display resilience in the face of potential negative catalysts. Cyclicals are outperforming today, but aren’t recouping yesterday’s losses. Gaming, homebuilding and networking shares are especially strong. Weekly retail sales fell -4.4% this week versus a -4.2% decline the prior week. While there has been a slight improvement recently, a meaningful pick-up in consumer spending has yet to materialize. Healthcare stocks are weaker today on continuing uncertainty over the “public option” of the healthcare reform plan. Asia’s performance tonight will like dictate tomorrow’s open here as worries over China’s bubble still persist. Given that the major averages are technically extended, but so many investors expect a correction, it is very possible that equities just chop around over the near-term, frustrating both bulls and bears. Nikkei futures indicate an +55 open in Japan and DAX futures indicate an +9 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as more shorting, healthcare reform worries, higher energy prices and profit taking offset less economic fear and stability in Asian equities.

Today's Headlines

Bloomberg:

- Home Depot Inc.(HD), the largest home- improvement retailer, reported second-quarter profit that fell less than analysts estimated and increased its full-year earnings forecast after reducing operating expenses. Home Depot rose 83 cents, or 3.2 percent, to $26.94 at 10:40 a.m. in New York Stock Exchange composite trading.

- The Baltic Dry Index, a measure of shipping costs for commodities, fell for the first time in four session as rates for the larger coal and iron-ore transporters had the steepest drop in almost two weeks. The index tracking transport costs on international trade routes slid 70 points, or 2.5%, to 2,704 points.

- Cap-and-trade legislation to limit U.S. carbon dioxide emissions has “gotten out of control” and needs to be scaled back in Congress, said former Democratic Senator Timothy Wirth. “The Republicans are right -- it’s a cap-and-tax bill,” Wirth, a climate-change negotiator during President Bill Clinton’s administration, said in an Aug. 14 interview. “That’s what it is because they are raising revenue to do all sorts of things, especially to take care of the coal industry, and it makes no sense.” “I’m not critical of cap-and-trade,” said Wirth, head of the UN Foundation, a philanthropy established in 1998 with $1 billion from Ted Turner, founder of the CNN cable network. “But it has to be used in a targeted and disciplined way, and what has happened is it’s gotten out of control.” Wirth, who represented Colorado in the Senate, says the House-passed plan is “too broad across the economy.” Critics such as billionaire investor Warren Buffett say cap-and-trade would amount to a regressive tax and burden businesses and consumers. Four Democratic lawmakers have said the Senate should scrap attempts to pass the cap-and-trade provisions of the legislation this year, and focus instead on a narrower bill requiring the use of renewable energy. Senate Majority Leader Harry Reid, a Nevada Democrat, said he is confident an energy bill will be passed this year including climate provisions. The Senate remains under pressure to pass a cap-and-trade bill because failure to act would leave regulation of carbon emissions in the hands of the Environmental Protection Agency, which has asserted its right to do so, according to Nikki Roy, who monitors Congress for the Pew Center on Global Climate Change in Arlington, Virginia. EPA regulations would trigger a raft of lawsuits, “delay regulatory certainty” for businesses and postpone the unleashing of low-emissions energy technology needed for a new, carbon-constrained world, he said.

- Wholesale prices in the U.S. fell more than forecast in July as energy costs receded, capping the biggest 12-month drop on record and showing inflation will not be an immediate concern for Federal Reserve policy makers. The 0.9 percent decrease in prices paid to factories, farmers and other producers followed a 1.8 percent gain in June, the Labor Department said today in Washington. Excluding food and fuel, so-called core prices unexpectedly fell 0.1 percent. A record amount of excess capacity will prevent production bottlenecks from developing, indicating wholesale prices will be slow to recover even as the economy improves. A lack of inflation was one reason Fed policy makers last week reiterated a pledge to keep the benchmark interest low for an “extended period.” “If you have an environment where excess stock remains large and inflation continues to be slow, the Fed will want to keep monetary policy easing,” Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report. “The fact you have so much slack in the economy puts downward pressure on prices.”

- Target Corp.(TGT), the second-largest U.S. discount retailer, reported second-quarter profit that fell less than analysts estimated. The shares rose as much as 8.2 percent in New York trading.

- A lower percentage of Wall Street job applicants passed the third and final test to become Chartered Financial Analysts, a designation that offers an edge during Wall Street’s worst shakeout in at least three decades. Forty-nine percent of candidates passed the third stage of the test, down from 53 percent last year, the Charlottesville, Virginia-based CFA Institute said in an e-mailed statement today. Forty-one percent of the people who took the Level 2 test passed, down from 46 percent a year ago.

CNBC:

- Federal securities officials warned investors for the first time Tuesday that leveraged exchange-traded funds could lead to big losses. The warning by the U.S. Securities and Exchange Commission on leveraged ETFs follows similar statements from the financial industry and the secretary of state in Massachusetts, who is known as outspoken on securities issues. The funds have drawn scrutiny because they can yield big losses for investors over time in choppy markets. In an alert to investors issued Tuesday the SEC urged investors to carefully consider the details of these funds. "It is possible you could suffer significant losses even if the long-term performance of the index showed a gain," the SEC said.

MarketWatch:
- The global recession is now over and a recovery has begun, Olivier Blanchard, the top economist for the International Monetary Fund, said Tuesday. The global recession has not been typical, and the recovery won't be either, he said. "One should not expect very high growth rates in the recovery."

CNNMoney:

- The iPhone, which has had a tough time competing in the Japanese market, finally broke through in July with the launch of the iPhone 3GS. According to a report in Electronista, market data from Gfk Japan shows the 32 GB iPhone in the No. 1 spot for July, ahead of Japanese-made phones from Sharp, Panasonic (PC), NEC, Casio and Sony Ericsson (a Japanese/Swedish joint venture).

Washington Post:

- President Obama made clear Monday that he favors the repeal of the Defense of Marriage Act, and intends to ask Congress to repeal the 13-year-old law that denies benefits to domestic partners of federal employees and allows states to reject same-sex marriages performed in other states.

- The country's growing unemployment is overtaking subprime mortgages as the main driver of foreclosures, according to bankers and economists, threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind.

Miami Herald:

- An unclassified U.S. intelligence report says Venezuelan President Hugo Chávez is ``moving forcefully'' to stifle media criticism by closing scores of radio stations, tightening controls on one TV station and maneuvering to seize control of another.

LA Times:

- The busiest U.S. seaport complex won't fully recover from the economic downturn until 2013, a report says. Imports at both facilities fell in July from a year earlier.

Rassmussen:

- Republican candidates have now matched their biggest lead over Democrats of the past several years on the Generic Congressional Ballot. The latest Rasmussen Reports national telephone survey shows that 43% would vote for their district’s Republican congressional candidate while 38% would opt for his or her Democratic opponent. The level of support for Democratic candidates is unchanged this week, but backing for GOP candidates rose one point from a week ago. This is now the eighth straight week Republicans have led on the Generic Ballot.

Politico:

- The House Republican Conference digs in today to a fact reported recently by Bloomberg's Tim Burger: That the pharmaceutical lobby, PhRMA, has hired David Axelrod's AKPD Media — a fact that raises eyebrows because Axelrod sold the firm under an agreement that left it owing him $2 million, a lot of money for a political media company. It's hard to imagine a situation in which, say, Karl Rove was still getting checks from a firm that was, in turn, employed by the drug lobby not drawing fire from the left, and Axelrod's arrangement is, a bit belatedly, getting that attention.

- When you’re Barack Obama and you’ve lost Jon Stewart, you’ve got a problem.

“Mr. President,” the “Daily Show” host said Monday night, “I can’t tell if you’re a Jedi — 10 steps ahead of everything — or if this whole health-care thing is kickin’ your [rear.]” White House officials, by acknowledging that a public option (or government plan) is not essential to achieving health care reform, may have improved their chances of ultimately getting a bill. In the meantime, though, they have touched off the most ferocious backlash among liberal talking heads since President Obama took office.

Portfolio.com:

- Hewlett-Packard Co(HPQ) is considering selling or shutting parts of its outsourcing business to focus on the higher-margin areas of its technology services offering, people familiar with the matter said. A year after buying Electronic Data Systems for $13 billion, HP executives are discussing the possibility of divesting parts of the outsourcing operations, especially in its business process outsourcing (BPO) arm, sources told Reuters.

Reuters:
- The chief regulator of U.S. commodities markets, Gary Gensler, is serious about limiting speculation in energy futures trading and will move to provide details about managed funds' contract positions in an attempt to make markets more transparent. "I think, as chairman, we have to seriously consider" position limits, he said. "Position limits help protect the markets from highly concentrated positions that can be distorting in difficult periods," he said. Gensler, the former Goldman Sachs executive charged with overhauling the volatile commodity trading world, held up agriculture regulation as a model for energy trading where prices have whipsawed over the past several months. To protect against market manipulation, the CFTC sets limits on the contracts each investor can hold in some agricultural commodities. But for energy products, such as oil, the limits are set by the futures exchanges. The accountability limits set by futures exchanges, however, are not "stop" or "yield" signs that prevent market players from taking highly concentrated positions that can distort market dynamics, Gensler said. "They're sort of honk-as-you-go-by signs," he said, noting that in the last 12 months, accountability levels in four major energy products were exceeded by about 70 parties. Gensler said the agency would also subject a number of exempt contracts to oversight. "This is not a small number." We're going to have a series of these that we're going to try to put out in the next couple of months." Starting this month, the CFTC will issue expanded weekly trader reports including four categories: producers and merchants, swap dealers, hedge funds, and other participants.

- August retail sales in the United States could prove stronger after a poor reading in July that was "misleading", hedge fund manager Barton Biggs told Reuters Television on Tuesday. Biggs, whose New York-based Traxis Partners manages close to $1 billion, said in an interview that July retail sales were skewed because a number of states moved their sales tax holidays for back-to-school sales to August, from July last year. "That caused people to delay (purchases) and pushed sales into August," Biggs said. The unexpected drop in July sales, after a rise in June, dented optimism after numerous previous data points had suggested the U.S. economy was on the road to recovery.

Financial Times:
- The Obama administration was on Tuesday scrambling to contain a growing backlash from liberal Democrats that could prove fatal to his hopes of pushing through healthcare reform. In a letter to Kathleen Sibelius, the secretary for health and human services, 60 Democratic lawmakers in the House of Representatives warned that they would vote against healthcare reform if it excluded a public insurance option that would provide a state-run alternative to private insurance plans for low-income people. That would leave Mr Obama needing 22 Republican votes in the lower chamber – a very tall order. “Americans deserve reform that is real – not smoke and mirrors,” said the letter. “To take the public option off the table would be a grave error; passage in the House of Representatives depends upon inclusion of it.” The letter, which crystallizes what appears to be an unbridgeable divide between conservative “blue dog” and “progressive” Democrats, follows a series of recent White House hints that it would be prepared to junk the public option in order to get an overall bill passed. “If the president can’t overcome this divide then this could kill his chances of enacting healthcare reform,” said David Gergen, a leading political analyst. “The White House needs to radically rethink how it is managing this debate.” Tuesday’s letter also reinforced the increasingly wide gulf between the House and the Senate. Centrist Democratic senators, including Max Baucus, chairman of the influential finance committee, and Kent Conrad, chairman of the budget committee, have made it clear that a bill that included a public option would not pass in the Senate.

- Election officials in Afghanistan braced themselves on Tuesday for one of the world’s most challenging polls as Taliban insurgents escalated their offensive on Kabul, the capital, ahead of Thursday’s vote. A wave of attacks struck Kabul, killing 13 people, among them Nato troops and United Nations staff, and injuring more than 50. Taliban militants have vowed to disrupt the presidential and provincial elections. The attacks come in defiance of efforts by the government to buy a temporary peace with Taliban commanders and declarations of a cessation of hostilities by Nato and Afghan forces on polling day.

Globe and Mail:

- It's been in the spotlight more than almost any other product of the information age, but the iPhone is becoming hard to find in Canada. Apple Inc.(AAPL) is shipping limited supplies of its smart phone to Rogers Communications Inc., the only Canadian wireless operator able to carry the device, as the California company scrambles to try to meet global demand that appears to have exceeded its own forecasts. Rogers is advising shoppers that it is out of stock of Apple's latest device, the iPhone 3GS, which was launched in June, as well as earlier models introduced last summer.

Kyodo News:

- Global LCD TV shipments are estimated to increase 10-15% to 155 million units in 2010 amid a gradually recovering global economy, according to market sources. The sources indicated that vendors are optimistic about the 2010 market and have started talking with LCD panel makers about panel supply for 2010. The sources noted that better-than-expected LCD TV sales in the North America market helped boost global LCD TV shipments in the first half of 2009 to 56 million units, and if MoniTV sales were included, the first-half shipments reached 64 million units. With the second half of the year being the peak season for LCD TV sales, global LCD TV shipments for the entire 2009 may exceed 130 million units, the sources said. Panel supply remains tight due to glass substrate shortages, and current inventories for notebook and monitor panels are below two weeks, while monitor and notebook inventory levels in the end market are about 3-4 weeks, the sources added.

Bear Radar

Style Underperformer:
Large-cap Growth (+.85%)

Sector Underperformers:
HMOs (-.80%), Medical Equipment (-.33%) and Education (-.13%)

Stocks Falling on Unusual Volume:
DFG, ALGN, EXBD and TJX

Stocks With Unusual Put Option Activity:
1) HURN 2) AXL 3) JAVA 4) CRM 5) TSL

Bull Radar

Style Outperformer:
Small-Cap Value (+.89%)

Sector Outperformers:
Banks (+1.97%), Steel (+1.94%) and Networking (+1.75%)

Stocks Rising on Unusual Volume:
BBT, HURN, PRGO, CAVM, CTRP, A, CAH, TGT, GB, IX and HD

Stocks With Unusual Call Option Activity:
1) HURN 2) AXL 3) TGT 4) BBBY 5) BIIB

Links of Interest

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Briefing.com In Play

SeekingAlpha Market Currents

WSJ Today’s Markets

Briefing.com Stock Market Update

Stocks On The Move
Upgrades/Downgrades

WSJ Data Center

StockCharts Market Performance Summary

Morningstar Style Performance
Sector Performance
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
Chart Toppers
CNBC Real-Time Intraday Quote/Chart
HFR Global Hedge Fund Indices

Tuesday Watch

Late-Night Headlines
Bloomberg:

- Corporate credit slumped on concern a five-month credit market rally is “unsustainable” as Japan’s economy grew less than economists estimated and U.S. consumer confidence fell. Yields relative to benchmark rates on U.S. corporate bonds jumped the most since March, while credit-default swaps tied to investment-grade debt rose to an almost-four-week peak. Contracts on JPMorgan Chase & Co. and Goldman Sachs Group Inc. debt climbed to the highest levels in a month, according to CMA DataVision. Investors are concerned the recovery in Japan’s economy, which emerged from its deepest postwar recession in the second quarter, will falter once governments worldwide complete $2 trillion in stimulus spending. Speculation the U.S. consumer will help revive global growth was dented last week when a confidence index fell to the lowest since March. “While there is a rebound in economic activity, consumption is still impacted,” Philip Gisdakis, a Munich-based strategist at UniCredit SpA, wrote in a note to investors today. “This problem will not disappear in the short term and indicates that the current recovery might not be sustainable.” The extra interest investors demand to own U.S. corporate bonds rather than Treasuries jumped 7 basis points, the most since March 30, to 387 basis points, according to Merrill Lynch & Co. index data. Spreads on Merrill Lynch’s broadest index of investment-grade and high-yield debt have widened for the five past trading days, snapping a 20-day narrowing streak. Credit-default swaps on the Markit CDX North America Investment-Grade Index, linked to 125 companies in the U.S. and Canada, jumped 6.2 basis points to a mid-price of 123 basis points as of 4:30 p.m. in New York, the highest since July 22, according to CMA. The CDX index has climbed about 18 basis points since Aug. 7, when it reached a 14-month low amid economic reports signaling the recession may be ending. Contracts on JPMorgan, the biggest U.S. credit-card lender, rose about 5 basis points to 81.6 basis points, the highest level since July 16, according to CMA. Credit derivatives tied to debt of Goldman Sachs gained 10 basis points to 150 basis points, the highest since July 13, CMA prices show. Credit swaps on Citigroup Inc. jumped 21 basis points to 298 basis points, the highest since July 29, according to CMA. All three banks are based in New York. The cost of protecting bank bonds from default also rose, with the Markit iTraxx Financial Index of 25 European banks and insurers up 4.5 basis points to 97.5 basis points and the subordinated index 9 basis points higher at 184 basis points. The extra yield investors demand to own junk-rated debt rather than Treasuries jumped 23 basis points, the most in two months, to a two-week high of 917 basis points today, after climbing 37 basis points last week, its first weekly increase since the period ended July 10, according to Merrill Lynch index data.

- House Speaker Nancy Pelosi said a health-care overhaul should include a government-run insurance program, reiterating her backing for the plan after an administration official suggested the president may back down. “There is strong support in the House for a public option,” Pelosi, of California, said in a statement. “A public option is the best option to lower costs, improve the quality of health care, ensure choice and expand coverage.” Other Democrats called on President Barack Obama to stand by his commitment to create the new government plan to compete with private companies, saying they wouldn’t be able to support any health-reform measure that lacked a public option. Representative Maxine Waters of California said she was “very troubled to hear that after months of negotiations, supposedly moving toward meaningful health-care reform, the public option may in fact be off the table.” Republicans and some Democrats oppose the creation of a federal health-care plan, saying it would undercut private insurers and expand the government’s role too much. Senator Jay Rockefeller, a West Virginia Democrat and member of the finance committee, which is taking the lead in the Senate on the legislation, called the inclusion of a new public health plan “a must.” The public option “is the only proven way to guarantee that all consumers have affordable, meaningful, and accountable options,” he said in a statement. Omitting the government plan “is a deal-breaker for many Democrats,” said Stuart Rothenberg, editor of the nonpartisan Rothenberg Political Report in Washington. Polls show Americans increasingly disapprove of the legislation. While shedding the public option may allay some of those concerns, it risks generating opposition from the 83-member Congressional Progressive Caucus. The group’s co-chairman, Representative Raul Grijalva, an Arizona Democrat, said today he won’t support a measure that doesn’t have a government plan. Health-care reform can’t happen “without a robust public option,” he said in a statement.

- “UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.” -- Barack Obama, Aug. 11, 2009 No institution has been the butt of more government- inefficiency jokes than the U.S. Postal Service. Maybe the Department of Motor Vehicles. The only way the post office can stay in business is its government subsidy. The USPS lost $2.4 billion in the quarter ended in June and projects a net loss of $7 billion in fiscal 2009, outstanding debt of more than $10 billion and a cash shortfall of $1 billion. It was moved to intensive care -- the Government Accountability Office’s list of “high risk” cases - - last month and told to shape up. (It must be the only entity that hasn’t cashed in on TARP!) That didn’t stop President Barack Obama from holding up the post office as an example at a town hall meeting in Portsmouth, New Hampshire, last week. When Obama compared the post office to UPS and FedEx, he was clearly hoping to assuage voter concerns about a public health-care option undercutting and eliminating private insurance. What he did instead was conjure up visions of long lines and interminable waits. Why do we need or want a health-care system that works like the post office? What’s more, if the USPS is struggling to compete with private companies, as Obama implied, why introduce a government health-care option that would operate at the same disadvantage?

- Adults older than 40 with severe sleep apnea, a condition that blocks their breathing and causes them to gasp, were almost 50 percent more likely to die than those who sleep normally, according to a large, government- funded study.

- Asian currencies may weaken as this month’s 16% drop in China’s benchmark stock index fuels concern a recovery in the world’s third-largest economy is losing steam, according to Royal Bank of Scotland Group Plc. New lending in July fell to about a quarter of June’s level as the central bank limited credit used to buy stocks and property. “People are concerned that once they take the froth away there’s not much left in Chinese growth,” said Chia Woon Khien, a currency and rates strategist at RBS in Singapore. “If the stock market comes down, a lot of the high-yielding, risk-friendly currencies, like the Korean won, Indonesian rupiah and Indian rupee, will weaken.” The correlation between China stocks and Asian currencies “has become tighter” as regional economies become more dependent on Chinese demand for their exports, said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong.

- China, planning to bankroll a $6 billion iron ore expansion of Fortescue Metals Group Ltd. in Australia, is poised to make further investments to help break the “stranglehold” of the world’s three-largest exporters. “The Chinese steel mills are trying to dilute the concentration of iron ore supply,” said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. “They will be looking for more deals like this.”

- Japan’s 3.7 percent economic expansion last quarter ended the country’s worst postwar recession. The bounce may be as good as it gets. Growth will slow to an annual 2.9 percent pace in the three months ending Sept. 30, according to the median forecast of 10 economists surveyed after yesterday’s gross domestic product report. Falling business investment and rising unemployment may hamper a recovery that has been fueled by $2.2 trillion in emergency spending by governments worldwide.

- U.S. airlines will carry 16 million passengers during an eight-day Labor Day holiday period, a 3.5 percent decline from a year earlier, as the global recession trims demand, the Air Transport Association said. About 1 million fewer passengers will fly than a year earlier as domestic and international travel fall, the group said in a statement today. Holiday travel spans Sept. 2 through Sept. 9, according to the ATA, the lobbying group for major U.S. carriers.

Wall Street Journal:

- A senior U.S. immigration official said Monday that his agency will intensify a crackdown on employers of workers in the country illegally as part of the Obama administration's new immigration strategy. John Morton, the new chief of U.S. Immigration & Customs Enforcement, a unit of the Department of Homeland Security, said that the agency is set to increase the number of companies it will audit and systematically impose fines on violators. Violations could also lead to criminal charges, he said. On July 1, Homeland Security Secretary Janet Napolitano announced an audit of employers to verify whether their employees were eligible to work. Mr. Morton said that 654 companies are currently being audited and that many more employers will be notified soon that they also will be under scrutiny by the government.

- Obama Underwrites Offshore Drilling. You read that headline correctly. Unfortunately, the Obama Administration is financing oil exploration off Brazil. The U.S. is going to lend billions of dollars to Brazil's state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil's Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil's planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan. The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-Im Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas. But look on the bright side. If President Obama has embraced offshore drilling in Brazil, why not in the old U.S.A.? The land of the sorta free and the home of the heavily indebted has enormous offshore oil deposits, and last year ahead of the November elections, with gasoline at $4 a gallon, Congress let a ban on offshore drilling expire.

- Earlier this year, Federal Deposit Insurance Corp. Chairman Sheila C. Bair had a discreet visit from a Spanish banker. Francisco González, chairman and chief executive of Banco Bilbao Vizcaya Argentaria SA, the second-largest bank in Spain by stock-market value after Banco Santander SA, wanted to make sure the FDIC kept him in mind when selling assets the agency is getting from failed U.S. banks, according to people familiar with the meeting. BBVA's 64-year-old boss dropped by the Treasury Department and Federal Reserve with a similar message, these people said. In a recent interview, Mr. González wouldn't comment on the meetings, but he said BBVA is interested in making "tactical" acquisitions in the southern half of the U.S. that would build on the foothold the bank has established during the past several years, including the $9.6 billion purchase of Compass Bancshares Inc., of Birmingham, Ala., in 2007. "It would be logical that at the right moment the bank should grow tactically in the U.S., for it to make an acquisition," Mr. González said. "A player like us should be at the table" when the FDIC is hunting for prospective buyers of bank assets.

- As central bankers keep pumping huge sums into the global financial system, they are also pumping up one of the riskier investment strategies in the currency market. Known as the "carry trade," the strategy involves borrowing money in countries such as Japan where interest rates are low, then investing it where rates are higher and pocketing the difference.

- While other recession-wracked restaurant chains offer meals for as little as $5, Panera Bread Co.(PNRA) has this deal on its menu: a lobster sandwich for $16.99. Panera has been bucking conventional industry wisdom during the downturn by eschewing discounts and instead targeting customers who can still afford to shell out an average of about $8.50 for lunch. The St. Louis-based chain of 1,400 cafes says it has been able to persuade customers to pay premiums because it has been improving the quality of its food.

MarketWatch.com:
- With delinquency rates rising to a record high, banks were still clamping down on lending to businesses and consumers over the past three months, and they said they planned to keep their credit standards tight for at least a year, the Federal Reserve reported Monday. In its quarterly survey of banks' senior loan officers, the Fed said lending standards got even tighter for almost every type of loan, from prime residential mortgages to commercial and industrial loans. The survey covered May, June and July. "The degree of caution exhibited in the survey of senior loan officers over coming quarters will act as a drag on the coming recovery," wrote Richard Moody, chief economist for Forward Capital.

- And at least according to one top-performing newsletter, there's been too much of a good thing in the stock market since this rally began last March. The newsletter is the Value Line Investment Survey, which is in a tie for first place for risk-adjusted performance over the three decades the Hulbert Financial Digest has been monitoring the investment newsletter industry. In its Aug. 21 issue, which was emailed to subscribers early Monday, Value Line reduced its recommended equity allocation to the range of 60% to 70%. This reflects a cautious to outright bearish posture on Value Line's part, since the firm has never lowered its recommended allocation to below 50%. The last time it was lower than it is now was October 2000.

CNBC.com:
- American International Group(AIG), the insurer that received billions of dollars in a U.S. bailout, said on Monday that it will pay newly-appointed Chief Executive Robert Benmosche an annual salary of $7 million. In a filing with the U.S. Securities and Exchange Commission, AIG said the salary would consist of $3 million in cash and $4 million in fully-vested common stock. He will also be eligible for a performance bonus of up to $3.5 million. The pay has been approved in principle by Washington's new pay czar Kenneth Feinberg, said AIG. Once the world's largest insurer, AIG was saved last September by a taxpayer bailout that has grown to as much as $180 billion. The company had teetered on the brink of collapse from losses on credit default swaps, a type of derivative that sank in value as the credit crisis grew worse.

NY Times:

- Central Asia Sounds Alarm Over Islamic Radicalism.

- The White House has apparently shut down the e-mail address it was using to track what it called “fishy” information about its efforts to overhaul the health care system.

Emails sent to flag@whitehouse.gov now bounce back, with the reply reading, “The email address you just sent a message to is no longer in service. We are now accepting your feedback about health insurance reform via: http://www.whitehouse.gov/realitycheck.”Macon Phillips, director of new media at the White House, had rolled out the e-mail address in an Aug. 4 blog post, writing, “There is a lot of disinformation about health insurance reform out there, spanning from control of personal finances to end of life care. These rumors often travel just below the surface via chain emails or through casual conversation. Since we can’t keep track of all of them here at the White House, we’re asking for your help. If you get an email or see something on the web about health insurance reform that seems fishy, send it to flag@whitehouse.gov.” The White House maintained that it was not collecting the names of those criticizing its reform push. But the effort got almost immediate pushback from Republican and conservative critics, many of them citing privacy concerns. Senator John Cornyn, a Texas Republican, charged that the administration was creating an enemies list, writing in a letter to President Obama, “I am not aware of any precedent for a president asking American citizens to report their fellow citizens to the White House for pure political speech that is deemed ‘fishy’ or otherwise inimical to the White House’s political interests.”

- The Securities and Exchange Commission, after months of considering what to do about short-selling, came up with a new idea on Monday that could make it virtually impossible to place an order to sell stock short and be sure it would be executed quickly.

IBD:

- By the end of the month, says Andy Fisher, senior vice president for investor relations, United Therapeutics (UTHR) will be selling Tyvaso, an inhaled drug also for PAH.

Forbes:

- By embracing ObamaCare, the American Medical Association could set off a civil war among members.

Washington Post:

- As prospects fade for a public, or government-run, option as part of health-care reform, key senators are considering another model to create competition for private insurers: member-owned, nonprofit health cooperatives. Sen. Kent Conrad (D-N.D.), the chief advocate for including cooperatives in reform legislation, has cited examples as disparate as the Land O'Lakes dairy concern, rural electricity cooperatives and Ace Hardware. But so far, cooperatives have been defined in the health-care debate primarily in terms of what they are not: They would not be run by the government. That may make the cooperatives more politically palatable to conservatives, as well as to some Democrats such as Conrad, who fear that the public option may be a bridge too far. But it also presents new challenges: Cooperatives would face potentially greater difficulty getting off the ground and obtaining discounted rates from doctors and hospitals, observers say.

Politico:

- House Democratic officials say a public option will remain in their version of a health reform bill, even now that the White House has acknowledged it may be dropped later. “This is just for the Senate,” a House leadership official said about the administration’s concession on a public option. “There is no way it passes the House the first time around without a public option. “The liberals (around 100-plus) won’t allow it. It if comes back from conference committee without public option and there is the right pitch that it is this or nothing, then it may pass the House.” Leaders now say the House will put off a vote on health reform until the end of September — to provide a cooling-off period from the raucous town meetings and to give strategists a better sense of where the Senate is headed.

Reuters:

- From Africa to Europe, the Middle East and the United States, China's drive to project its economic might abroad can sometimes breed fear and resentment.The risks are likely to grow as Beijing channels more of its foreign exchange reserves, which stood at $2.13 trillion at the end of June, into foreign investments.

- The U.S. economy is probably due for two strong quarters of economic growth to close out 2009, but the recovery may falter next year, former Federal Reserve Chairman Alan Greenspan said on Monday. "I think we're OK for the next six months," Greenspan told Reuters in an interview. "We are getting a recovery in (housing) starts and motor vehicles, but the process doesn't have legs to it." Auto sales and housing, normally the driving forces behind economic recovery, got a boost from government efforts such as the $3 billion "cash-for-clunkers" trade-in program, which encouraged consumers to buy new cars, but it may not be sustainable.

Late Buy/Sell Recommendations

RBC Capital:

- Rated (KEX) Outperform, target $44.

- Rated (JBHT) Outperform, target $37.

- Rated (UTIW) Underperform, target $13.

- Rated (YRCW) Underperform.

Keybanc:

- Rated (CTV) Buy, target $32.

Night Trading
Asian Indices are -2.0% to -.50% on average.

Asia Ex-Japan Inv Grade CDS Index 148.0 unch.
S&P 500 futures +.11%.
NASDAQ 100 futures +.21%.

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
- (TGT)/.66

- (HD)/.59

- (CAH)/.86

- (SKS)/-.52

- (TJX)/.59

- (ADI)/.19

- (HPQ)/.89

- (JKHY)/.30

Economic Releases

8:30 am EST

- The Producer Price Index for July is estimated to fall .3% versus a 1.8% rise in June.

- The PPI Ex Food & Energy for July is estimated to rise .1% versus a .5% gain in June.

- Housing Starts for July are estimated to rise to 598K versus 582K in June.

- Building Permits for July are estimated to rise to 576K versus 570K in June.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly retail sales reports, ABC Consumer Confidence index, (PBR) analyst meeting and the (PHM) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity shares in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.