Stocks Slightly Lower into Final Hour on Healthcare Reform Concerns, Profit-Taking, China Bubble Worries, More Shorting

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is lower, sector performance is mixed and volume is slightly above average. Investor anxiety is high. Today’s overall market action is slightly bearish. The VIX is rising .61% and is high at 24.82. The ISE Sentiment Index is below average at 127.0 and the total put/call is slightly below average at 77. Finally, the NYSE Arms has been running low most of the day, hitting .33 at its intraday trough, and is currently .53. The Euro Financial Sector Credit Default Swap Index is falling 4.11% today to 80.0 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 1.03% to 114.96 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 2.73% to 21 basis points. The TED spread is now down 445 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is unch. at 35.19 basis points. The Libor-OIS spread is falling another 3.19% to 17 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 2 basis points to 1.71%, which is down 95 basis points since July 7th. The 3-month T-Bill is yielding .13%, which is down 1 basis point today. Alt Energy, Financial, Technology, Steel, REIT and Road/Rail shares are substantially outperforming today, rising .75%+. Once again, the bears were unable to gain any real traction after a morning sell-off. Over the last week, the S&P 500 has been in a very tight, but volatile range, which is frustrating both the bulls and the bears. I tend to believe the next tradable move is higher, but the market’s mixed reaction to recent positive news events is a bit troublesome. As well, Chinese shares remain “heavy”. Chinese Iron Ore prices fell 10.71% this week, which is noteworthy. Nikkei futures indicate an +40 open in Japan and DAX futures indicate an +1 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, technical buying, less economic fear, diminishing financial sector pessimism and subdued long-term rates.

Today's Headlines

Bloomberg:

- Intel Corp.(INTC), the world’s biggest chipmaker, raised its sales forecast for this quarter, adding to evidence that personal-computer demand is recovering. Third-quarter sales will be at least $8.8 billion, Intel said in a statement today. That compares with at least $8.1 billion the company projected last month. The company also increased its gross-margin forecast for the period. “Consumers are driving the strength and the relative strength in PCs,” said Kreher, who recommends buying the shares and doesn’t own any. “We do have an expectation that 2010 will bring renewed demand from the corporate sector as well.”

- Copper rose to the highest price in almost 11 months on speculation that a revival of economic growth will spur demand for metal. Lead jumped to a one-year high. U.S. consumer spending rose in July, the third straight monthly gain, the Commerce Department said today. European confidence in the economic outlook increased this month to the highest since October, the European Commission said. Copper prices are headed for a seventh straight week of gains, the longest such rally since April 2007. Copper futures for December delivery rose 10.2 cents, or 3.6 percent, to $2.974 a pound at 11:07 a.m. on the New York Mercantile Exchange’s Comex division.

- The U.K. Financial Services Authority was dragged into a second political controversy in as many weeks after its chairman championed a global tax on financial transactions based on a 40-year-old theory. FSA Chairman Adair Turner proposed a “Tobin Tax” on banking deals in a Prospect magazine interview. This would redistribute bank profits to the poor and to “public goods” like fighting climate change. The remarks grabbed the attention of lawmakers and bankers who say the regulator might have a short political future. “It will now be a race as to who will sack him first,” said Simon Gleeson, a regulatory lawyer at London-based Clifford Chance LLP. “To be brutally honest, if he expected to continue in his position next year, he would not be saying this at all. He must have known this would annoy his political masters.”

- Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007. Credit Suisse Group AG and Scotia Capital, a unit of Canada’s third-largest bank, said they’re offering credit to investors who want to purchase loans. SunTrust Banks Inc., which left the business last year, is “reaching out to clients” to provide financing, said Michael McCoy, a spokesman for the Atlanta-based bank. JPMorgan Chase & Co. and Citigroup Inc. are doing the same for loans and mortgage-backed securities, said people familiar with the situation.

- U.S. Securities and Exchange Commission Chairman Mary Schapiro said it’s “critical” for regulators to gain more access to information on derivative transactions in order to police market abuses. Regulators need “information that allows us to construct an audit trail, so that we can find insider trading, manipulation and other concerns that can reverberate through the entire marketplace,” Schapiro said in an interview for Bloomberg Television’s “Conversations with Judy Woodruff” airing tonight. That ability “is really going to be critical.”

- The Federal Reserve will reduce the size of two auctions of cash to banks to $75 billion each in September from $100 billion this month in a sign of waning demand for the emergency loan program.

- US stocks are behaving like Japanese equities in the 1990s, meaning they S&P 500 may return 40% in the next year, according to Bank of America Corp. A “melt-up” rally in the US may be triggered by central bankers keeping interest rates near record lows, an economic recovery and an undervalued dollar, Bank of America strategists wrote. “Even in economies overcoming credit booms, rallies can be powerful and last much longer than you think,” Bank of America’s Sadiq Currimbhoy, Arik Reiss and Jacky Tang wrote.

- China’s stocks fell, with the Shanghai Composite Index completing a fourth weekly decline, on concern government measures to curb lending and production in industries including steel and cement will slow economic growth.

- An Obama administration plan to cut Medicare payments to heart and cancer doctors by $1.4 billion next year is generating a backlash that’s undermining the president’s health-care overhaul. While President Barack Obama and members of Congress have spent August debating health insurance and medical costs at public forums, specialists are waging what one advocate calls a “tooth and nail” fight against a separate initiative to boost the pay of family doctors, and cut fees for cardiologists and oncologists. The specialists, in newspaper columns and meetings with lawmakers, say patients will lose access to life-saving care, from pacemakers to chemotherapy.

- Steelmakers are resuming production at mills from China to Russia and the U.S. as the industry pulls out of its worst slump since World War II.

- Aeropostale Inc.(ARO), the U.S. teen retailer with more than 900 stores, said a strategy of planning discounts ahead of time has helped it outperform competitors in the recession.

- Hewlett-Packard(HPQ), Apple Inc.(AAPL), Dell Inc.(DELL) and other computer makers reduced their stockpiles of products to record low levels in the second quarter, setting the stage for Intel Corp.(INTC) to boost its sales forecast today. Days of inventory for companies in the PC industry fell to 13.4 in the second quarter, down from 17.3 at the end of last year, according to Crag Berger, an analyst at Friedman Billings Ramsey in NY. “Robust emerging market unit demand and all-time low PC supply chain inventories are combining to drive meaningful near-term strength for chip firms, and PC-chip firms in particular,” Berger wrote.

- Apple Inc.’s(AAPL) iPhone will go on sale in China in the fourth quarter, entering a market that has more wireless subscribers than the combined populations of the U.S. and the 16 nations that use the euro. China Unicom (Hong Kong) Ltd., the country’s second-biggest provider of mobile-phone service, will sell the iPhone 3G and the 3GS models, Chairman Chang Xiaobing told reporters in Hong Kong today. The deal isn’t exclusive, Apple said. That means other carriers will be able to offer the iPhone in China.

Wall Street Journal:

- A politically charged case involving Chinese tire imports will soon force the hand of an Obama administration that has yet to articulate a clear trade policy to anxious global trading partners. President Barack Obama has until Sept. 17 to rule on a U.S. International Trade Commission recommendation that the White House put a 55% tariff on low-grade car tires imported from China. The ITC's finding followed a complaint by the United Steelworkers that a flood of cheap Chinese tires in recent years had cost more than 5,000 union jobs.

MarketWatch:
- Stupid Investment of the Week. Ultra-short bond funds are long on failure.

Washington Post:

- When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. Today, the biggest of those banks are even bigger. The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit. J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show. A year after the near-collapse of the financial system last September, the federal response has redefined how Americans get mortgages, student loans and other kinds of credit and has made a national spectacle of executive pay. But no consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected.

- CIA Director Leon Panetta decided Thursday that the agency will ensure legal representation for case officers who become caught up in investigations of alleged interrogation abuses of detainees at overseas locations, a senior intelligence official said. Panetta's decision follows Attorney General Eric H. Holder Jr.'s appointment of a special prosecutor earlier this week to conduct a preliminary review of whether federal laws were violated during the interrogations. When working on controversial assignments, many CIA officers take out personal liability insurance, which sometimes reimburses legal fees if they face lawsuits or criminal charges, but others do not. "Panetta will do everything he can to ensure that anyone who needs legal representation has it, whether they have liability insurance or not," said the senior intelligence official, who spoke on the condition of anonymity because he was not authorized to speak before the decision is publicly announced. "It's a question of fairness. People who did tough jobs for the country won't be left by the side of the road."

hedgeweek:

- The Lyxor Global Hedge Fund index, an investable index based on Lyxor's hedge fund platform, has risen 3.24 per cent since the beginning of 2009.

Chicago Daily Herald:

- Motorola Inc.(MOT), whose phone business has lost more than $4 billion since 2007, is devoting most of its investment in smart-phone software to Google Inc.'s Android, aiming for a larger share of the market for Web-surfing devices. 'We're doing an entire business based around this platform," Christy Wyatt, Motorola's vice president in charge of software platforms, said in an interview yesterday. 'If you talk about the mid- to high-tier portfolio, the only platform-level investment we're making at this point is in Android." The company, which hasn't released a bestseller since its Razr handset five years ago, said it will unveil the Android devices on Sept. 10 and expects to have two phones ready for the holiday season. Its Android line may account for half of handset revenue next year, predicts Matt Thornton, an analyst at Avian Securities LLC in Boston.

Politico:

- The California insurer Anthem Blue Cross -- a subsidiary of the insurance giant WellPoint -- today blasted out an email to its customers, attacking the Democrats' health reform plans and asking customers to help fight them. The email says legislation "does not meet our definition of responsible and sustainable reform and "would likely have a significant negative impact on our partners and customers." The email warns the plan could wind up:

Techcrunch:

- A group of well known venture capital and large private equity firms are pooling resources to make a bid to acquire eBay-owned Skype, according to a source close to the deal.

Newsweek:

- It’s Good to Be a Pig by Barton Biggs. This market rally still has time to run. Suddenly the conventional wisdom is that the powerful rally in stock markets around the world is unjustified and has gone too far, too fast. Stocks are no longer cheap, the bears say, and the global financial system remains on its sickbed. Most economists and investors believe that while the world economy may rebound in the next few months, it's a bounce engineered by stimulus programs like Cash for Clunkers, and, as the steroids wear off, there will be another dip in 2010. I think the bears are wrong on both counts.

Reuters:
- China’s banking regulator ordered some lenders not to ramp up loans at the end of August.

- The "pay czar" tasked by the U.S. government with ruling on the eye-popping compensation of some of Wall Street's top earners is far from a stranger to big paychecks and the trappings of wealth. Kenneth Feinberg made $5.76 million last year as a partner in his Washington law firm, Feinberg Rozen LLP, according to a government ethics filing obtained by Reuters. And his assets, which include a stake in his law firm, two homes and dozens of investments, are worth anywhere from $11 million to $37 million, according to the filing, which places assets in broad value categories. His homes are a $1.66 million house in Bethesda, Maryland, near Washington, and a $1.96 million vacation home in West Tisbury, Massachusetts, on Martha's Vineyard.

- Tiffany & Co (TIF) posted higher-than-expected quarterly earnings on cost cuts and slightly recovering demand for jewelry, and raised its full-year outlook, sending its shares up 8.7 percent.

- A weekly measure of future U.S. economic growth slipped in the latest week, though its yearly growth rate surged to a 38-year high that suggests chances of a double-dip recession are slim. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index for the week to August 21 fell to 124.4 from a downwardly revised 124.9 the prior week, which was originally reported at 125.0. But the index's annualized growth rate soared to a 38-year high of 19.6 percent from a downwardly revised 17.4 percent the prior week, a number which was originally 17.5 percent. It was the WLI's highest yearly growth rate reading since the week to May 28, 1971, when it stood at 20.5 percent. "With WLI growth continuing to surge through late summer, a double dip back into recession in the fourth quarter is simply out of the question," said ECRI Managing Director Lakshman Achuthan, reinstating the group's recent warning to ignore negative analyst projections. Achuthan has recently projected that the recovery is moving at a stronger pace than any the United States has seen since the early 1980s.

Financial Times:
- The United Arab Emirates has seized a ship secretly carrying embargoed North Korean arms to Iran, say diplomats. The interception comes at a sensitive time. North Korea has invited the US for bilateral talks on nuclear issues and the UN Security Council’s western members are pressing for greater Iranian co-operation over its nuclear program.

cnmn.com.cn:

- China’s nonferrous metals output should rebound in the last five months of this year as producers return to profitability, according to an industry forecast. Output of all the metals may reach the same level as last year with the possible exception of aluminum, according to the Nonferrous Metal Industry Association.

Bear Radar

Style Underperformer:
Large-Cap Value (-.34%)

Sector Underperformers:
HMOs (-2.17%), Restaurants (-1.48%) and Oil Tankers (-1.40%)

Stocks Falling on Unusual Volume:
SNP, BLX, BNS, BMY, SNN and SNA

Stocks With Unusual Put Option Activity:
1) ALTH 2) DNDN 3) IMMU 4) ODP 5) GG

Bull Radar

Style Outperformer:
Mid-Cap Value (+.32%)

Sector Outperformers:
Semis (+2.01%), Computer Hardware (+1.47%) and I-Banks (+.87%)

Stocks Rising on Unusual Volume:
ELON, AIG, OVTI, QLGC, NVTL, NOK, VRSN, FCX, ZION, CHU, IRE, CHA, DELL, SLAB, DLLR, MRVL, ISIL, INTC, NVDA, RYAAY, ANDE, STEC, VLTR, AAPL, SIVB, JCG, TIF, WHI and CHU

Stocks With Unusual Call Option Activity:
1) TWM 2) JCG 3) TIF 4) AMD 5) QLGC

Trading Links

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

Markit CDS Market Summary

Commodity Futures

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

Friday Watch

Late-Night Headlines
Bloomberg:

- Dell Inc.(DELL), the second-largest maker of personal computers, reported sales and profit that beat estimates after cutting manufacturing costs and attracting buyers with low-priced notebooks. The shares rose 6.7 percent. Excluding some costs, second-quarter profit was 28 cents a share in the second quarter. Analysts had predicted 22 cents on average, according to a Bloomberg survey. Dell, based in Round Rock, Texas, rose as much as 60 cents to $16.25 in extended trading after climbing 98 cents to $15.65 on the Nasdaq Stock Market. Dell accidentally posted the earnings report on its Web site early, causing the shares to climb before the market closed. Dell said it’s seeing “seasonal demand improvements” this quarter in its consumer and federal-government businesses, though it expects slower orders from business customers in the U.S. and Europe. Business spending likely won’t pick up until 2010, with information-technology buyers in the U.S. showing the first signs of recovery, the company said. Demand for Microsoft Corp.’s new Windows operating system, due Oct. 22, may help drive new PC purchases, especially among customers who skipped Vista, Dell said. PCs account for more than half of Dell’s sales. Faster new processors from Intel Corp. -- used in PCs and servers -- may also spur corporate spending next year, he said. “The size of the installed base of old hardware has never been greater,” Michael Dell said. “I’m here to tell you there’s going to be a refresh cycle next year. It’s not all going to come in the first month or the second month, but over the course of the year.” “Corporations cannot defer IT spending forever,” said Dinesh Moorjani, an analyst with Broadpoint AmTech in San Francisco. He recommends buying the shares and this week boosted his estimates for Dell’s fiscal year revenue, betting that PC orders will rebound.

- J.Crew Group Inc.(JCG), the U.S. clothing retailer, reported second-quarter profit that exceeded analysts’ estimates after the company added stores and controlled costs. J.Crew added $1.49, or 4.5 percent, to $34.25 in extended trading.

- New regulation of the derivatives market that regulators failed to rein in nine years ago has wide political support thanks to the financial crisis, Commodity Futures Trading Commission Chairman Gary Gensler said. Gensler said in an interview today he is encouraged the financial industry recognizes “that there’s a consensus in Washington, both in the administration and on Capitol Hill that we have to bring the full over-the-counter derivatives marketplace under regulation.” That market has swelled to $592 trillion from $95 trillion in 2000, according to industry data. Gensler, 51, said there was little support in Congress to enact regulatory changes in 2000, when he was working at the Treasury Department during the Clinton administration. The political climate then led to a law exempting most derivatives from regulation. Gensler, who spent 18 years working at Goldman Sachs Group Inc. before joining the Treasury in 1997, became CFTC chairman in May after being nominated by President Barack Obama. Gensler said the CFTC isn’t going to need to revoke any more “no-action” letters that the agency’s staff had granted index investors from limitations on holdings in agriculture markets. On Aug. 19, the agency said it was revoking exemptions for two Deutsche Bank AG PowerShares commodity index funds and Gresham Investment Management LLC. “Those are the only two so-to-speak no-action letters that I’m aware of,” Gensler said. He rejected the idea that by limiting index fund holdings he might prevent smaller investors from participating in commodity markets. The commission is also considering whether to impose new federal limits on holdings in energy markets. The agency is preparing “shortly” to expand its reporting of large trader holdings, breaking out what hedge funds and swap dealers hold, he said. The agency will also release updated data showing the holdings of index investors.

- Wholesale electricity in the U.S. Northeast dropped to the lowest level in almost six years as the cost of natural gas fell and the recession cut demand. At the PJM Interconnection, a benchmark for the mid- Atlantic region, power fell $3.68, or 10 percent, to $32.31 a megawatt-hour on the Atlanta-based Intercontinental Exchange. That’s the lowest for the region, which stretches from Washington to Chicago, since Dec. 31, 2003. Mild summer weather and a weak economy have reduced industrial and residential demand for electricity as offices and factories shut and consumers cut back spending. Natural gas, a power plant and heating fuel that supplies about a fifth of U.S. electricity, dropped to the lowest price in more than seven years on Columbia’s TCO pipeline that delivers supplies to the mid-Atlantic region. In cash market trading today, the price fell 6.4 cents, or 2.2 percent, to $2.81 per million British thermal units. Cooling demand in the Northeast tomorrow will drop to 48 percent below normal for late August, said forecaster Weather Derivatives of Belton, Missouri. “Air conditioning usage will fall out of bed across the greater share of the U.S. population over the next few days,” said David Salmon of Weather Derivatives. Demand has declined so much in the Midwest that the grid operator there forecast a supply surplus unless generators cut back.

- Senator Charles Grassley of Iowa, one of three Senate Republicans negotiating on health care, said the soaring federal budget deficit “puts a stake in the heart” of $1 trillion measures being debated in Congress. Grassley, the top Republican on the finance committee, said a bipartisan plan being discussed by panel members will have to be scaled back to have any chance of passing in the wake of new deficit projections released this week. He also said he may not agree to a compromise on health care unless he’s sure his state’s hospitals won’t be harmed. “It’s going to have a big impact on whether I’ll even support something,” he said at a town-hall meeting yesterday in Le Mars, Iowa. He voiced concern that rural hospitals will be hurt by a pledge last month by hospital trade groups to produce $155 billion in cost savings over 10 years as part of an Obama administration drive to curb health-care expenditures. Grassley’s opinion matters because his talks with two other Republicans and three Democrats on the finance panel offer the last chance for a bipartisan accord to remake the $2.5 trillion medical-care system. Democrats are threatening a party-line vote if they can’t agree, a move that Republicans warn will undercut public support for any plan. His comments came during a month-long recess dominated by town-hall meetings across the U.S. that have highlighted the unease among many voters that a revamp of the health-care system may jeopardize their current coverage. Grassley said in an interview that he remains committed to negotiations with Finance panel chairman Max Baucus and the other four lawmakers -- Democrats Kent Conrad of North Dakota and Jeff Bingaman of New Mexico, and Republicans Mike Enzi of Wyoming and Olympia Snowe of Maine. Still, he said, a forecast by the Congressional Budget Office that deficits between 2010 and 2019 will total $7.1 trillion calls for a more-limited measure than the $900 billion bill the bipartisan group was discussing last month. “We’re going to be looking at smaller numbers,” he said. The deficit projection also dooms $1 trillion measures already moving through the House and approved by the Senate health committee, Grassley said.

- The Federal Reserve’s balance sheet expanded for a third straight week, the longest streak since April, as the central bank’s holdings of Treasuries and mortgage-related securities increased. The Fed’s assets rose $14.4 billion, or 0.7 percent, to $2.08 trillion in the week ended yesterday, the central bank said today in Washington. Its portfolio of Treasury securities rose $8.8 billion to $744.9 billion, mortgage-backed securities gained $13.3 billion to $622.9 billion and federal agency debt advanced $5.6 billion to $117.4 billion.

- The Commodity Futures Trading Commission will move ahead with regulation of the Chicago Climate Exchange Inc.’s voluntary carbon credit trading program for farms, factories and power plants, the regulatory body’s chairman, Gary Gensler, said today in an interview. The CFTC will use the same “significant price discovery” authority it invoked July 27 to impose position limits and reporting requirements on the IntercontinentalExchange Inc. Henry Hub natural gas swap, Gensler said in an interview today. “These markets and the carbon markets in the future will benefit by having a market regulator overseeing it to protect the market from manipulation and fraud,” Gensler said. CFTC’s move to regulate the trading of carbon financial instruments on the Chicago Climate Exchange comes as Congress debates a “cap-and-trade” program in which the federal government would create pollution credits that could be bought and sold. How to regulate the trading and picking an agency to enforce the rules are in dispute.

- Toyota Motor Corp. said it will shut a California auto-assembly plant that operated as a joint venture with General Motors Corp. for 25 years, the first time Japan’s largest carmaker has closed a factory at home or abroad. New United Motor Manufacturing Inc. in Fremont, California, will end production of Corolla cars and Tacoma pickups in March 2010, Toyota said in a statement. GM in June said it would end assembly of Pontiac Vibes at the plant, known as Nummi, and quit the venture as part of its bankruptcy reorganization.

- Japan’s consumer prices fell at a record pace in July, adding to signs that deflation will hamper a rebound from the nation’s worst postwar recession. Consumer prices excluding fresh food declined 2.2 percent from a year earlier after dropping 1.7 percent in the previous month, the statistics bureau said today in Tokyo. It was the sharpest decrease since the survey began in 1971. Japan is once again facing deflation, a sustained bout of falling prices that plagued the economy for a decade until 2005.

Wall Street Journal:

- A resurgence of terrorist violence across Southeast Asia has exposed links between various Islamist terror organizations that have proved resilient despite a yearslong U.S.-funded crackdown by authorities in the region. The rise of terrorism has come into focus in the wake of a series of attacks in the Philippines, southern Thailand and, most recently, the suicide bombing here July 17 on the JW Marriott and Ritz-Carlton hotels that killed nine people including the two bombers. The terror resurgence comes after years when authorities appeared to be gaining the upper hand. As the terror groups expand their activities, investigators are uncovering connections that show how the main organizations across Southeast Asia, many of them inspired by al Qaeda, are providing militants, training and shelter to each other. That has increased their effectiveness and made them especially difficult for authorities to crack.

- The campaign for mayor of this city, which has long promoted its racial tolerance, veered into controversy Thursday with the release of a memo urging black voters to unite around an African-American candidate and block the election of a white mayor. A local group known as the Black Leadership Forum called for African-Americans to consolidate their support around Lisa Borders, president of the Atlanta City Council and one of several African-American candidates, according to a memo circulated on the Web and to local media. The group said Ms. Borders had the best chance of winning support from white business leaders and defeating Mary Norwood, a white city councilwoman and a leading candidate for the Nov. 3 election, according to polls. "For the last 25 years Atlanta has represented the breakthrough for black political empowerment in the South," read the memo. "In order to defeat a Norwood (white) mayoral candidacy we have to get out now and work in a manner to defeat her without a runoff, and the key is a significant Black turnout." The memo was the sharpest signal yet of overt racial politics creeping into the competition to replace Shirley Franklin, elected as the city's first female mayor in 2001.

- In the game of political football that is today national security, spare a thought for CIA Director Leon Panetta. Quarterbacking is hard enough without getting sacked by your own team. President Barack Obama fought hard for the former California congressman during his uncertain February confirmation fight. That's about the last thing the president has done for his spy chief. Quite the opposite: If the latest flap over CIA interrogations shows anything, it's that Mr. Panetta has officially become the president's designated fall guy. The title has been months in the making. Mr. Obama is contending with an angry left that's riled by his decisions to retain some Bush-era counterterrorism policies. He's facing Congressional liberals still baying for Bush blood. He's hired Attorney General Eric Holder, who is giving the term "ideological purity" new meaning. Mr. Obama's way to appease these bodies? Hang the CIA and Mr. Panetta out to dry.

- As shares of American International Group Inc. continued to ascend Thursday, newly minted Chief Executive Robert Benmosche said he is taking a far more patient approach than his predecessor toward selling assets to repay the government. He is willing to wait as long as three years, he said, to offer stakes in two multibillion-dollar foreign units that the insurer had been racing to spin off. The comments underscore Mr. Benmosche's departure from the intentions of AIG before his arrival at the company in early August. AIG had previously hoped to spin off the businesses through initial public offerings starting next year to help pay back the government, which has committed as much as $173 billion in aid to the company. After analyzing all of AIG's businesses, Mr. Benmosche said, he determined the company wouldn't be able to repay the government even if it sold everything. But he suggested that if he can bolster the businesses before selling off units, the situation might improve. "The sum of the parts are a little below the whole. The whole has to be big enough to pay back the government, and with a little hard work there will be something left called AIG," he said. His remarks Thursday were among a number he has made to the media during his stay here; the comments, which have helped drive big stock moves, largely suggest he is focused on building value in the company rather than quickly breaking it apart. Since July 9, AIG shares are up more than 400%. AIG's share price rose 27% on Thursday, to $47.84 in 4 p.m. composite trading on the New York Stock Exchange.

- The U.S. Commodities Futures Trading Commission, or CFTC, Thursday authorized trading of derivatives in Brazil's benchmark Ibovespa stock index by U.S. residents, a BM&FBovespa exchange official said. The much-anticipated approval allows U.S. residents to trade the Ibovespa futures and options contracts via the CME Group's Globex trading system. "We anticipate that this approval will lead to a substantial increase in trading volumes of Ibovespa derivatives," said Edemir Pinto, the chief executive of the BM&FBovespa exchange. The derivatives will be available for trading immediately, Pinto added.

CNBC.com:
- Health Care Reform: How Democrats May Push Passage.

NY Times:

- A year after its war with Georgia, Russia is engaging in an increasingly hostile standoff with another pro-Western neighbor, Ukraine.Relations between the two countries are more troubled than at any time since the Soviet collapse, as both sides engage in provocations and recriminations. And it is here on the Crimean peninsula, home to a Russian naval base, where the tensions are most likely to burst into an open conflict.

CNNMoney.com:

- A $9 trillion federal deficit over 10 years may be too hard to comprehend. But this part is easy: Such unwieldy amounts of debt could have an impact on Americans' bottom line one way or the other -- if not tomorrow, then the day after. The U.S. government has been spending a great deal more than it has been taking in, and it is on track to do so well beyond the next 10 years. It has been borrowing money to make all that spending possible and it has to pay the money back with interest. How, you ask? By borrowing more. The solution is straightforward if unpleasant: Shy of finding a fairy willing to leave trillions under Uncle Sam's pillow, lawmakers will have to raise taxes and cut spending.

Forbes:

- Interactive Map: Most Expensive Zip Codes.

- Apple’s(AAPL) China Move. China Unicom to discuss Apple relationship in upcoming earnings call.

LA Times:

- President Obama, who won the White House with an electoral college landslide and enjoyed soaring public approval for the job he was doing in the weeks following his inauguration, has fallen to a 50% job approval rating in the newest daily tracking of the Gallup Poll released just now. The new low for Obama in the Gallup Poll, which measured the president's public job approval at a peak of 69% after his inauguration in January, tracks other national polls, which recently have gauged his approval ratings at 51%. It also coincides with apparent growing public concern about a protracted debate over healthcare in Washington, Gallup and other pollsters have found. Should the slide continue, Obama will by no means be the first president to slide below 50% in the Gallup Poll, which has been tracking public approval of presidents since Harry S. Truman. But Obama has reached his new low more quickly than most of his predecessors did, according to Gallup. Slipping below 50% before November of the first year in office would represent "the third-fastest drop" since World War II, Gallup reports. Republican Gerald Ford slipped below 50% in his third month as president, Democrat Bill Clinton during his fourth month. It took Republican President Eisenhower five years to fall below 50% in the public's eye, Gallup notes. It took both Republican George Bushes about three years. It took Democrat Lyndon Johnson and Republican Richard Nixon more than two years.

USA Today.com:

- Cash for clunkers ended this week — for cars. But old energy-hogging refrigerators and freezers qualify for recycling and cash from more than 60 utilities across the nation. And the federal government is making money available to states so consumers could get rebates of $50 to $200 for new, more energy-efficient appliances later this year in a so-called "cash for appliances" program. Combined, the appliance initiatives have a goal similar to the cash-for-clunker program for autos: They get less-efficient appliances off the nation's energy grid in favor of newer efficient ones. The government's rebate program, in which the Department of Energy is providing states with $300 million approved earlier this year as part of President Obama's $787 billion stimulus plan, serves another goal similar to the cash-for-clunker program: It's designed to boost the economy.

Reuters:

- The U.S. Federal Reserve should be careful not to over-stimulate the economy and stay focused on an exit from its aggressive monetary expansion as growth resumes, two senior Fed officials said on Thursday. St. Louis Federal Reserve Bank President James Bullard said the central bank would need to think about scaling back its economic support in the months ahead, while Richmond Fed chief Jeffrey Lacker said it should weigh whether to carry through with all of its current stimulus plans. "As we head to 2010, the Fed will shift its focus to implementing an exit strategy in order to avoid any potential inflation threats to the economy," Bullard said in prepared remarks. "Monetary policy is still very accommodative and the (Fed) intends to keep the fed funds target near zero for an extended period," he said, according to a summary of his presentation on the economic outlook at the College of Business at the University of Arkansas-Little Rock. Bullard emphasized that the exit ought to mean allowing the Fed balance sheet to shrink, perhaps by selling assets that it purchased this year to counter the worst recession since the Great Depression, rather than speedy rate hikes. Lacker, speaking earlier at an event in Danville, Virginia, suggested the Fed should consider now whether its planned purchases of mortgage securities might give the economy more of a boost than it needs. "Recent data suggest the economy is stabilizing, and there should be positive economic growth in the second half of 2009," said Bullard. Their comments were somewhat at odds with remarks on Wednesday by Atlanta Federal Reserve President Dennis Lockhart, who said there should be no hasty move toward raising rates and who urged policy-makers to show patience before withdrawing monetary policy stimulus, to ensure the recovery take holds.

- OmniVision Technologies Inc (OVTI), which makes semiconductor image sensor devices, reported a narrower-than-expected quarterly loss, helped by lower expenses, and forecast second-quarter results above Wall Street expectations. The company forecast second-quarter earnings, excluding items, of 10 cents to 20 cents, a share, on revenue of $155 million to $170 million. Analysts were looking for a loss of 8 cents a share, excluding items, on revenue of $108.3 million. "We are also encouraged that our flagship OmniBSI(TM) and CameraCube(TM) products are both gaining momentum with multiple Tier-1 customers globally," Chief Executive Shaw Hong said in a statement. Shares of Santa Clara, California-based OmniVision were at $15.35 in after-market trade. They closed at $13.30 Thursday on Nasdaq.

- Microchip designer Marvell Technology Group Ltd (MRVL) posted stronger-than- expected quarterly profits due to tighter cost controls and forecast earnings ahead of expectations, pushing its shares up 9 percent after hours.

- Micros Systems Inc (MCRS), which provides information systems to the hospitality industry, posted a better-than-expected quarterly profit, helped in part by lower expenses. Shares of Columbia, Maryland-based Micros were up 3 percent in trading after the bell.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (JCG) to Buy, target $40.

Piper Jaffray:

- Rated (BDX) Overweight, target $82.

Night Trading
Asian Indices are -.25% to +1.0% on average.

Asia Ex-Japan Inv Grade CDS Index 135.0 + 2 basis points.
S&P 500 futures unch.
NASDAQ 100 futures +.08%.

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

U.S. Equity Preview

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
- (FRO)/.00

- (TIF)/.33

Economic Releases

8:30 am EST

- Personal Income for July is estimated to rise .1% versus a 1.3% decline in June.

- Personal Spending for July is estimated to rise .2% versus a .4% gain in June.

- The PCE Core for July is estimated to rise .1% versus a .2% gain in June.

10:00 am EST

- Final Univ. of Mich. Consumer Confidence for August is estimated to rise to 64.0 versus a prior estimate of 63.2.

Upcoming Splits
- None of note

Other Potential Market Movers
- None of Note.

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