Stocks Reversing Higher into Final Hour on Less Economic Fear, Short-Covering, Bargain-Hunting

Portfolio:

• Higher: On gains in my Retail and Technology long positions
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and covered some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

Today's Headlines

Bloomberg:

• Housing Starts in U.S. Decrease More Than Forecast. Housing starts fell in June to the lowest level since October as a slump in sales following the expiration of a government tax incentive caused U.S. builders to cut back. Work began on 549,000 houses at an annual rate last month, fewer than the median estimate of economists surveyed by Bloomberg News and down 5 percent from May, Commerce Department figures showed today in Washington. Building permits, a gauge of future construction, rose 2.1 percent last month to a 586,000 pace, propelled by a 20 percent jump in multifamily applications that are often volatile. Permits for single-family housing, the biggest part of the market, dropped 3.4 percent to a 421,000 pace, the lowest since April 2009.
  
• Warren May Lack Votes for Consumer Agency, Dodd Says. Elizabeth Warren, the Harvard University professor touted to head a new consumer protection bureau, may not have sufficient support to win confirmation to the post, Senator Christopher Dodd said in a radio interview. Warren, chairman of a panel overseeing the Troubled Asset Relief Program, is credited with conceiving the agency included in the financial-regulation bill awaiting President Barack Obama’s signature. Warren, 61, has clashed with financial-industry executives and Obama administration officials including Treasury Secretary Timothy F. Geithner in her role leading the TARP Congressional Oversight Panel. Her criticism of the Treasury Department’s handling of the $700 billion bank bailout program has led to speculation -- dismissed by Treasury officials -- that Geithner is working to oppose Warren’s appointment to the consumer post. Warren has been lauded by consumer advocates and labor leaders including AFL-CIO President Richard Trumka, who endorsed her today.
• California Residents Protest City Manager's $800,000 Salary. Hundreds of residents of one of the poorest municipalities in Los Angeles County shouted in protest last night as tensions rose over a report that the city’s manager earns an annual salary of almost $800,000. An overflow crowd packed a City Council meeting in Bell, a mostly Hispanic city of 38,000 about 10 miles (16 kilometers) southeast of Los Angeles, to call for the resignation of Mayor Oscar Hernandez and other city officials. Residents left standing outside the chamber banged on the doors and shouted “fuera,” or “get out” in Spanish. It was the first council meeting since the Los Angeles Times reported July 15 that Chief Administrative Officer Robert Rizzo earns $787,637 -- with annual 12 percent raises -- and that Bell pays its police chief $457,000, more than Los Angeles Police Chief Charlie Beck makes in a city of 3.8 million people. Bell council members earn almost $100,000 for part-time work. City Attorney Edward Lee said the council members couldn’t discuss salaries in public without advance notice.
• Payrolls Fall in 27 U.S. States, Led by California. Payrolls decreased in 27 U.S. states in June, led by California and New York, signaling the slowdown in hiring is broad-based. Employers in California cut staff by 27,600 workers last month and those in New York reduced employment by 22,500, the Labor Department said today in Washington. Tennessee, Arizona and New Mexico rounded out the five states with the biggest job losses. For the second month, Nevada had the highest jobless rate in the country, rising to a record 14.2 percent from 14 percent in May. Data collection began in 1976. Unemployment in Michigan, the second-highest, dropped to 13.2 percent from 13.6 percent. Texas, with a gain of 14,000, and Kentucky, with a 6,200 increase, paced states showing an improvement in employment. Today’s report showed 16 states had unemployment of 10 percent or higher, the same as in May.
• Ortel Sees 'Considerable Downside' for Goldman's(GS) Stock: Video. Charles Ortel, managing director at Newport Value Partners, and Thomas Brown, chief executive officer of Second Curve Capital LLC, discuss Goldman Sachs Group Inc.'s second-quarter profit reported today. Goldman said profit dropped 82 percent, missing analysts' estimates on a slide in trading revenue five days after settling U.S. regulators' fraud allegations.
• Copper Jumps as Building Permit Gain Revives Demand Outlook. Copper prices jumped the most in three weeks after a gain in U.S. building permits boosted demand prospects for the metal used in electrical wiring and plumbing. Permits, a gauge of future construction, rose 2.1 percent last month to a 586,000 annual pace, the government said today. The gain was the first since March and was more than economists expected. Copper futures for September delivery rose 6.3 cents, or 2.11 percent, to $3.001 a pound at 12:01 p.m. on the Comex in New York.
• China Sees Export Threat From Brazil, India Monetary Tightening. Monetary tightening in India and Brazil may add to Europe’s sovereign-debt crisis in curbing demand for China’s exports, a Chinese official said. The outlook for trade is “complicated and difficult,” Yao Jian, a spokesman for the Ministry of Commerce, said at a press briefing in Beijing today. A government research body forecasts second-half export gains will slow to less than half the pace of the first six months. Demand may be restrained by Europe’s woes, the gradual end of post-crisis restocking by businesses, and tightening in emerging economies such as India and Brazil, Yao said. In Brazil, the central bank has lifted the benchmark lending rate, known as Selic, to 10.25 percent from a record low of 8.75 percent in April. Traders are betting on another half percentage point increase this week. India’s next monetary policy decision is on July 27.
• Hoyer Says House Will Debate China Currency Manipulation Bill. The U.S. House will debate legislation to authorize trade sanctions against China for currency manipulation as part of a package of measures to promote U.S. manufacturing, House Majority Leader Steny Hoyer said. The measure, sponsored by Representative Tim Ryan, an Ohio Democrat, would authorize imposition of countervailing duties on China’s exports to the U.S. if authorities determined that the renminbi is undervalued by at least 5 percent on average for 18 months. The measure, which would amend the 1930 Tariff Act that forbids subsidies of products imported into the U.S., would apply to all other foreign currencies.

Wall Street Journal:

• A Staunch and Self-Confident Ally by David Cameron. We have a clear common agenda: succeeding in Afghanistan, securing economic growth and fighting protectionism. No other international alliance seems to come under the intense scrutiny reserved for the one between Britain and the United States. There is a seemingly endless British preoccupation with the health of the special relationship. Its temperature is continually taken to see if it's in good shape, its pulse checked to see if it will survive. I have never understood this anxiety.

CNBC:

• More Than 40% Leave Obama Mortgage-Aid Program in June. The number of borrowers dropping out of a government program to help struggling homeowners rework their mortgage grew in June at almost twice the pace of those getting a permanent modification, the Treasury Department said on Tuesday.

Fox News:

• Pay Czar to Banks: Take Back 2008 Bonuses. Pay czar Ken Feinberg is getting ready to stick it to Wall Street again, preparing to demand, or “claw back”, bonus money that some banks paid out during the bailout year of 2008, FOX Business Network has learned. Whether the banks will do so is another story. If approved by the Treasury Department, Feinberg's decision could be announced as early as Friday, people close to the situation tell FOX Business. In an interview, Feinberg refused to say how much money he’s going to ask for or which banks will be targeted. “I’m aiming for Friday to make an announcement,” he said in an interview. “The banks will be notified shortly.”

FINalternatives:

• Hedge Fund Inflows Going To Largest Managers. Hedge funds saw net inflows of $9.5 billion in the second quarter, with the lion's share of that new money—$8.8 billion of it—going to firms with more than $5 billion in assets under management, according to data provider Hedge Fund Research. Those large firms now manage approximately 60% of total industry capital. But while the money poured in from investors, hedge funds themselves—hit with volatile markets—had a rough ride. The HFRI Fund Weighted Composite Index posted a decline of 2.5%, offsetting first quarter gains. Total hedge fund industry capital ended the most recent quarter at $1.65 trillion, down from $1.67 trillion the prior quarter.

Investment News:

• SEC Expected to Cap 12(b)-1s. Agency would limit fees to 0.25%; anything above would be treated as a sales charge. The SEC is planning to propose a new framework that would cap at 0.25% of assets the amount that funds can charge on a continuing basis to cover marketing and administration costs, according to sources who asked not to be identified. Any fees above the 0.25% limit would be treated as a load that is paid over time. It's unclear what the conversion period would be.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).

Politico:

• 4 House Dems Revolt. Four junior House Democrats frustrated with leadership’s approach to deficit spending are going rogue. Reps. Gary Peters, John Adler (D-N.J.), Jim Himes (D-Conn.) and Peter Welch (D-Vt.) are getting more vocal on their concerns about government spending. They’re forming a working group to propose major cuts to spending in areas like defense, energy, housing and agriculture that they say would save about $70 billion over ten years. “We have been growing increasingly frustrated with the lack of action and talking about specifics and putting those on the table,” Peters said in an interview with POLITICO.

El Pais:

• Spanish Finance Minister Elena Salgado said all the Spanish banks that underwent European Union stress tests passed.

Borsen:

Danish public sector growth must freeze for three years and then the prerequisite for it to start growing again should be growth in the private sector, Danish Foreign Minister Lene Espersen said in an interview. "We need to bring the public sector down to what we can afford, which is 26.5% of GDP," Espersen said.

Bear Radar

Style Underperformer:

• Small-Cap Growth (+.38%)

Sector Underperformers:

• 1) Computer Service (-2.33%) 2) Banks (-1.11%) 3) Computer Hardware (-.97%)

Stocks Falling on Unusual Volume:

• NETL, IBM, NUVA, MANT, ZION, ATHR, LNCR, AMTD, TUP and WHR
  

Stocks With Unusual Put Option Activity:

• 1) LYV 2) ATHR 3) WFT 4) WHR 5) HOG
  

Stocks With Most Negative News Mentions:

• 1) GS 2) JNJ 3) MI 4) TASR 5) XOM
  

Bull Radar

Style Outperformer:

• Small-Cap Value (-.10%)

Sector Outperformers:

• 1) Coal (+3.46%) 2) Steel (+3.03%) 3) Oil Service (+2.43%)

Stocks Rising on Unusual Volume:

• WFT, CLF, SSRI, HAL, CDE, EBS, ABAX, ICUI, CPKI, SBAC, ASTE, SCHN, HURN, CISG, UAUA, KNSY, PII, TKS, HOG, PKG, TXI and EXP
  

Stocks With Unusual Call Option Activity:

• 1) LM 2) WHR 3) ITW 4) CMCSK 5) ATHR
  

Stocks With Most Positive News Mentions:

• 1) BA 2) UNH 3) PEP 4) WHR 5) AAPL

Tuesday Watch

Evening Headlines
Bloomberg:

• Longer-Dated Bond Sales Soar Amid Best Returns: Credit Markets. Investors are buying longer-maturity corporate bonds at the fastest pace in more than three months, speculating that declining inflation expectations will keep the Federal Reserve from raising interest rates.
  
• Australia to Gauge European Bank Stress Tests, Inflation. Australian policy makers will use the results of this month’s European bank stress tests and local inflation figures due next week to decide whether to resume the Group of 20’s most aggressive round of interest-rate increases. “The important question for the board at its next meeting would be whether the new information materially changed the medium-term outlook for inflation,” Reserve Bank of Australia officials said in minutes of their July 6 meeting released in Sydney today.
• Amazon.com(AMZN) E-Book Sales Exceed Hardcovers for First Time. Amazon.com Inc., the largest Internet retailer, said growth in sales of its Kindle digital reader accelerated every month in the second quarter and that it’s selling more electronic books than hardcover editions. The pace of Kindle sales also has tripled since the company cut the price to $189 from $259, Amazon.com Chief Executive Officer Jeff Bezos said in a statement.
• Swine Flu Fizzles Out; WHO May Declare End to Pandemic Alert.
  

Wall Street Journal:

• China Is Coming Under Fire. A series of comments by some of the world's top executives questioning China's treatment of international companies reflects an anxiety that is altering the relationship between foreign business and Beijing. For years companies that do business in China largely avoided public criticism of Beijing's policies, fearing this could jeopardize their standing in the world's fastest-growing major market. But recent months have seen executives from some of the biggest companies in Europe and the U.S. speak out—a testament to mounting concern that China's economy is moving in a direction less friendly to foreign companies that have staked much of their future on it. The latest example came when two of Germany's leading industrialists—Jürgen Hambrecht, chairman of chemical giant BASF SE and Peter Löscher, chief executive of conglomerate Siemens AG—raised complaints about a range of Chinese policies toward foreign business during a public meeting with Chinese Premier Wen Jiabao and visiting German Chancellor Angela Merkel. That followed complaints in recent months from other top executives of General Electric Co., Microsoft Corp. and Google Inc. Foreign businesses are increasingly emboldened, executives and analysts say, by a sense that the Chinese market has become too important to stay silent over policies they feel jeopardize their future. The concerns center on policies that foreign executives feel put them at a disadvantage against increasingly potent Chinese competitors, or compel them to transfer valuable technology to China, or otherwise limit their access to what is now the world's biggest market for everything from trains to cars to cellphones. At Saturday's meeting between German and Chinese executives and officials, Mr. Hambrecht complained about companies facing the "forced disclosure of know-how" in order to do business in China. "That does not exactly correspond to our views of a partnership," he said, according to a report by Germany's Deutsche Presse-Agentur, whose reporter was at the meeting.
• BP(BP) Weighs New Way to Kill Gulf Well. Oil giant BP PLC was Monday considering yet another method to kill its ruptured Gulf of Mexico oil well amid concerns that the cap it installed last week could be allowing oil and gas to seep out the sides.
• ShoreBank's Ill-Fated Crosstown Expansion. Many of the nation's ailing small banks got into trouble when they expanded into unfamiliar regions across the country. ShoreBank Corp. ran into trouble across town. The Chicago bank, which provides financial services in distressed parts of the city, is reeling, in part, because it made loans to borrowers in low-income neighborhoods away from its historical focus on Chicago's South Side, according to a person familiar with the bank's strategy. ShoreBank's fate is hanging in the balance as it waits to hear if the government will provide a $75 million infusion that could help keep it in business.
• IRS Erred in High-Stakes Tax Case. The Internal Revenue Service said it made a more than $325 million error in a high-stakes tax battle with Vi, an operator of upscale retirement communities.
• Megabanks Pressure Smaller Players. At the end of May, Florida Business Bank shut down the loan office it opened here just a year ago. It wasn't doomed by the economy. It was surrounded by giant banks that keep getting bigger and bigger. Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co., which hold about $3.50 of every $10 in local deposits, are "squeezing" and "hoarding" customers "any way they can," says Jeff Wagner, chief financial officer at Florida Business Bank.
• Blagojevich Gambles in Taking the Stand. From almost the day he was arrested 19 months ago and charged with running the state government like a criminal enterprise, former Illinois Gov. Rod Blagojevich has said he couldn't wait for his day in court to tell his side of his story. Tuesday he is expected to get his chance.
• Why Hasn't Israel Bombed Iran (Yet)? The military risks are large; the political risks could be even bigger.

Bloomberg Businessweek:

• Einhorn Buys Apple(AAPL), Saying Its Growth Prospects Are Undervalued. David Einhorn, the hedge-fund manager known for shorting Lehman Brothers Holdings Inc. before it collapsed, said he bought shares of Apple Inc. in the second quarter because the iPhone maker’s growth is undervalued. Einhorn’s firm, Greenlight Capital Inc., purchased the stock at an average price of $248.09 each, or 15 times the money manager’s estimate for 2010 earnings, according to a letter sent to fund shareholders on July 16. “While growth over the next few years will certainly be slower than it has been over the last few years, AAPL does not appear to have fully penetrated its market opportunities,” wrote Einhorn, referring to Apple by its stock symbol. “Accordingly, the opportunity to invest in this leading company (with a better financial profile than market participants seem to acknowledge) appears iTtractive.”
• Tourre Says He Relied on Goldman Sachs(GS), Denies Fraud. Fabrice Tourre, the Goldman Sachs Group Inc. executive director sued by the Securities and Exchange Commission for fraud, disputed the claims and said he relied on his firm’s legal and compliance department. Tourre, in a filing yesterday in federal court in Manhattan, denied making any materially misleading statements or omissions related to the 2007 sale of the Abacus 2007-AC1 collateralized debt obligation linked to subprime mortgages.

CNBC:

• TI(TXN) Posts Results in Line With Views, but Shares Tumble. Texas Instruments on Monday posted a quarterly profit that matched what analysts expected, but posted revenue slightly below analyst expectations due to a shortfall from one key mobile phone customer. However, shares of the chipmaker fell more than 6 percent in extended trading.
• IBM(IBM) Earnings Rise, Beat Forecasts, but Sales Disappoint. IBM reported a higher profit that exceeded what Wall Street was expecting, but the company's shares lost ground in extended trading as its revenue was lighter than forecast and a decline in services contract signings damaged investors' confidence.

IBD:

• Insurers Set Up for Next 'Affordable' Crisis. Subprime Scandal: When Democrats described FinReg as the most sweeping overhaul of Wall Street since the Depression, they didn't say it would also affect your local insurance agent. But it does. Check out Title V of their 2,300-page regulatory fatwah. It sets up a powerful new race-monitoring bureaucracy within the Treasury Department called the Office of National Insurance — the first office in the federal government focused on insurance. According to the final draft of the bill, which President Obama will sign this week to much partisan fanfare, the office "shall have the authority to monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance."

NY Times:

• Need a Mortgage? Don't Get Pregnant. Expectant parents shopping for a home are not the only ones concerned about the date of the baby’s arrival. Mortgage lenders are taking a harder look at prospective borrowers whose income has temporarily fallen while they are on leave, including new parents at home taking care of a baby. Even if a parent plans on returning to work within weeks, some lenders are balking at approving the loans. “If you are not back at work, it’s a huge problem,” said Rick Cason, owner of Integrity Mortgage, a mortgage firm in Orlando, Fla. “Banks only deal in guaranteed income these days. It makes sense, but the guidelines are sometimes actually harsher than they need to be.”

Zero Hedge:

• 37 Year Old Greek Investigative Journalist And Blogger Murdered. The Guardian reports that the prominent Greek reporter and blogger Socratis Giolas was allegedly murdered by the Sect of Revolutionaries terror group, after being shot 16 times in front of his pregnant wife. "The 37-year-old radio chief is the first journalist to be killed in the country since newspaper publisher Nikos Monferatos was gunned down by the infamous 17 November terror group in 1985. Giolas, who was also a frequent blogger, posting reports on popular online newsblog Troktiko, sought to illuminate Greece's seamier underside. The shooting came days before he was due to release an investigative series on corruption, colleagues said."

The Detroit News:

• Chevy Volt Doesn't Get Leno Charged Up. It's 'a people mover, not a people impresser,' comedian says. Late-night comic and "Tonight Show" host Jay Leno, who has been courted by General Motors Co. to help build buzz for the Chevrolet Volt, zinged the automaker with a backhanded compliment to the highly anticipated electric car. GM executives gave Leno a Volt late last year to test drive, but the noted gearhead -- who says he is excited about the Volt launch later this year and hasn't ruled out buying one -- likened the extended-range electric car to an underwhelming compact model being phased out by GM's Chevrolet brand. "If you didn't know, you might think it's a Cobalt or a Camry," Leno said in an interview with The Detroit News to promote a Saturday charity performance at the Chrysler Museum in Auburn Hills.
• Ford(F): New Explorer Ups Fuel Efficiency by 30%. Ford Motor Co. today confirmed the all-new 2011 Ford Explorer will be 30 percent more fuel-efficient than the outgoing model. Ford has been building up the crossover's debut with Facebook teaser pictures of parts of the vehicle and a steady diet of snippets about features and attributes. The new Explorer goes on sale later this year, but the production model has not been shown on the auto circuit.

Rasmussen Reports:

• California Voters Divided Over Stimulus Plan. Voters in California are divided over whether the $787 billion economic stimulus plan enacted by President Obama and Congress last year has been good or bad for the economy. A new Rasmussen Reports telephone survey of Likely Voters in the state finds that 36% of voters think the stimulus plan helped the economy, while 35% say it hurt the economy. Another 24% feel the stimulus plan had no impact on the economy. Nationally, voters are much less divided on the issue: 29% say the stimulus plan helped the economy and 43% say it hurt the economy. Half (49%) of voters in California feel the U.S. economy is getting worse. Twenty-seven percent (27%) think it is getting better, and another 20% think the economy is about the same.
• Generic Congressional Ballot: Republicans 45%, Democrats 36%. Republican candidates now hold a nine-point lead over Democrats on the Generic Congressional Ballot for the week ending Sunday, July 18, the widest gap between the two parties in several weeks. A new Rasmussen Reports national telephone survey finds that 45% of Likely Voters would vote for their district's Republican congressional candidate, while 36% would opt for his or her Democratic opponent. Support for Republicans inched up a point from last week, while support for the Democrat fell two points. While solid majorities of Democrats and Republicans support the candidates of their respective party, voters not affiliated with either party prefer the Republican candidate by a 47% to 21% margin.

Politico:

• Reality Gap: U.S. Struggles, D.C. Booms. America is struggling with a sputtering economy and high unemployment — but times are booming for Washington’s governing class. The massive expansion of government under President Barack Obama has basically guaranteed a robust job market for policy professionals, regulators and contractors for years to come. The housing market, boosted by the large number of high-income earners in the area, many working in politics and government, is easily outpacing the markets in most of the country. And there are few signs of economic distress in hotels, restaurants or stores in the D.C. metro area. As a result, there is a yawning gap between the American people and D.C.’s powerful when it comes to their economic reality — and their economic perceptions. A new POLITICO poll, conducted by market research and consulting firm Penn Schoen Berland, underscores the big divide: Roughly 45 percent of “Washington elites” said the country and the economy are headed in the right direction, while roughly 25 percent of the general population said they felt that way.
  

Reuters:

• Credit Managers' Sentiment Turns Negative - Report. International credit portfolio managers' sentiment turned negative in the second quarter amid worries economic growth will suffer as governments cut spending, according to a survey released on Monday. The survey by the International Association of Credit Portfolio Managers contrasts with strongly positive sentiment found in the previous survey, conducted at the end of March, according to IACPM.
• Atheros(ATHR) Q2 Beats Street; PC Revenue Falls Sequentially. Wireless networking chipmaker Atheros Communications Inc (ATHR) posted better-than-expected quarterly results, but revenue from the PC segment fell 10 percent sequentially due to uncertainty in European markets. The company remains cautious on near-term demand in the PC market, Chief Executive Craig Barratt said on a conference call. Shares of the company were down 8 percent at $28.05 in trading after the bell.

Telegraph:

• Cameron Can Teach Obama a Thing or Two on Deficit Reduction. If there is a double dip, there is plainly going to have to be a rethink, but actually President Obama’s anti-business rhetoric and increasingly impotent populism threaten to do far more damage to the recovery than measured deficit reduction. Indeed, America’s failure to take the deficit seriously is a large part of the problem. You are never going to see a strong, investment led recovery in the US while there is so much uncertainty on economic policy. US business leaders have meanwhile rarely felt so unloved, vilified and demoralised. That’s hardly a conducive backdrop to investment. Obama needs urgently to show some leadership and switch his approach. Perhaps Cameron can persuade him, but I’m not holding my breath. I’ve reflected in a more considered fashion on all this in a longer piece for tomorrow’s print edition of The Daily Telegraph.
• Hungary's IMF Revolt Augurs Ill for Greece. The collapse of Hungary's talks with the International Monetary Fund and the EU is a chilly reminder that sovereign debt crises do not end with a rescue package and a click of the fingers. As austerity drags on for year after year, democracies react. "We told the IMF/EU that further austerity was out of the question," said Hungary's economic minister Gyorgy Matolcsy, offering no hint that the Fidesz government is willing to back down despite yesterday's surge in Hungarian default costs by 51 basis points. The Fidesz movement – an amalgam of libertarians and nationalists with a Left-populist tilt – won a crushing victory in April on a campaign of defiance against both Brussels and the IMF. It has been spoiling for a fight ever since.

CTV.ca:

• Toronto's Year-Over-Year Home Sales Down. While Toronto's real estate sales volume is significantly down over the same period in 2009, housing prices continue to rise, says the Toronto Real Estate Board. In figures released Monday, the board said there were 2,790 sales through the Multiple Listing Service for the first two weeks of July. That is a 37 per cent decrease from the 4,437 sales made in the first two weeks of July 2009.The average price recorded for the first two weeks of this month was $427,931. That figure is eight per cent higher than the average of $394,750 recorded for the same period of July 2009.

Dong-a Ilbo:

• North Korea executed a former Cabinet official who had been responsible for negotiations with South Korea, citing an official in Beijing. Kwon Ho Ung, North Korea's chief delegate to ministerial-level talks between the two sides from 2004 to 2007 was killed by firing squad, the paper said. The Ministry of People's Security and the Ministry of Sate Security, the North's two main security arms, are rounding up "impure elements" to show their loyalty to Kim Jong Un, the heir apparent to North Korean leader Kim Jong Il, the newspaper said in an editorial July 17.
  

Securities Times:

• The monetary supply normalization is key to the objective of China's current macroeconomic control, citing Ba Shusong, a researcher at the State Council's Development and Research Center.

China Daily:

• China should give the nation's central bank greater independence in drafting monetary policy as part of the government's bid to achieve economic stability, Ma Jun, Deutsche Bank AG's chief Greater China economist, wrote in a commentary today. The nation should also modify its system for appraising the performance of local government officials, as the current system encourages the pursuit of growth and excessive investment, Ma wrote. China should also increase its use of "economic leverage" including interest rates and exchange rates to guide the economy and reduce the use of administrative decrees, Ma said. The government should also strengthen China's social security system to minimize the effects of economic policy adjustments, Ma wrote.

Shanghai Securities News:

• China's banking regulator has called on local authorities to step up inspections of property loans, citing an official with the China Banking Regulatory Commission. The regulator also called for prevention of "excessive" lending for land purchases. The regulator has also ordered that bank loans account for at most 50% of financing for property developments, according to the report. The banking regulator also called for China's national policies should be followed strictly.

China Business News:

• Home prices in the Chinese cities of Beijing, Shanghai, Tianjin, Guangzhou and Shenzhen may decline 20% from current levels in the second half, citing real estate broker Centaline Property Agency Ltd. Prices may fall in the second half as a result of an increased supply of new homes on the market, the report said.

perthnow:

• Falling Chinese Demand to Hit Ore Price. A SLOWING Chinese economy has led Credit Suisse to slash iron ore price forecasts for next year by 20 per cent. This also prompted it to cut the rating on BHP Billiton(BHP) to neutral and slash the big miner's profit forecast by $US4 billion ($4.6bn). In its most recent quarterly commodities review, Credit Suisse chopped its 2010 iron ore price forecast by $US23 a tonne to $US106 and for 2011 from $US132 to $US104. Analysts at the bank said Chinese Government cooling measures had cut steel production dependent on iron ore imports by about 4 million tonnes a month. Concerns about Europe have led to steel demand being reduced there by up to 2 million tonnes a month across the continent. In the past three months, iron ore spot prices at Chinese ports slipped 35 per cent.

Evening Recommendations
BMO Capital:

• Rated (PNC) Outperform, target $73.

Night Trading

• Asian equity indices are -.25% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 132.0 -5.0 basis points.
• Asia Pacific Sovereign CDS Index 126.75 -4.75 basis points.
  
• S&P 500 futures +.25%.
  
• NASDAQ 100 futures +.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AMTD)/.28
• (OMC)/.77
• (HOG)/.44
• (STT)/.87
• (BIIB)/1.12
• (JNJ)/1.21
• (UAUA)/1.75
• (BTU)/.63
• (FRX)/.86
• (UNH)/.74
• (WHR)/2.19
• (BK)/.55
• (PEP)/1.08
• (CRUS)/.25
• (ITW)/.83
• (GS)/1.99
• (SYK)/.80
• (GILD)/.87
• (ALTR)/.53
• (MDRX)/.17
• (JNPR)/.29
• (VMW)/.32
• (LLTC)/.50
• (AAPL)/3.09
• (YHOO)/.17
• (CTAS)/.33
• (BSX)/.03

Economic Releases
8:30 am EST

• Housing Starts for June are estimated to fall to 577K versus 593K in May.
• Building Permits for June are estimated to rise to 575K versus 574K in May.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Tarullo testifying before Senate on FinReg, weekly retail sales reports and the ABC consumer confidence reading could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Reversing Higher into Final Hour on Tech Sector Optimism, Short-Covering, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 25.31 -3.54%
  
• ISE Sentiment Index 94.0 +42.42%
  
• Total Put/Call .69 -37.27%
  
• NYSE Arms .80 -85.95%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 113.45 bps +2.57%
  
• European Financial Sector CDS Index 129.40 bps +2.77%
  
• Western Europe Sovereign Debt CDS Index 136.0 bps +1.84%
  
• Emerging Market CDS Index 244.74 bps -.40%
  
• 2-Year Swap Spread 23.0 -2 bps
  
• TED Spread 37.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 237.0 +2 bps
  
• China Import Iron Ore Spot $118.10/Metric Tonne +.17%
  
• Citi US Economic Surprise Index -34.10 -.6 point
  
• 10-Year TIPS Spread 1.70% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -118 open in Japan
• DAX Futures: Indicating +48 open in Germany

Portfolio:

• Higher: On gains in my Biotech and Technology long positions
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 reverses to session highs on light volume despite some negative eurozone sovereign debt news and another poor US housing reading. On the positive side, Education, REIT, Wireless, Computer Service, Disk Drive, Semi, Software, Oil Service and Utility stocks are especially strong, rising 1.0%+. The MS Tech Index is jumping +1.2%. The 2-year swap spread is falling to the lowest level since early May. Gold is falling to the lowest level since mid-May, which is also a positive. The 10-year yield is also rebounding +4 bps today. On the negative side, Airline, Road&Rail, Gold, Ag and Oil Tanker shares are under pressure, falling more than -1.0%. Small-caps are underperforming. (XLF) has been unable rebound despite recent losses and today's broad market reversal. The European Investment Grade CDS Index is rising +3.5% to 116.5 bps today. Moreover, the Hungary sovereign cds is soaring +16.08% to 371.05 bps and the Russia sovereign cds is rising +4.6% to 180.25 bps. So far, the euro is ignoring this development. I would like to see better breadth and volume materialize before becoming more aggressive on the long side. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, rising economic fear, increasing financial sector pessimism, tax hike worries and regulatory concerns.