Weekly Scoreboard*

Indices

• S&P 500 1,101.60 -.09%
  
• DJIA 10,465.94 +.40%
  
• NASDAQ 2,254.70 -.65%
  
• Russell 2000 650.89 +.04%
  
• Wilshire 5000 11,372.08 -.13%
  
• Russell 1000 Growth 490.63 -.59%
  
• Russell 1000 Value 566.35 +.28%
  
• Morgan Stanley Consumer 676.04 -.35%
  
• Morgan Stanley Cyclical 858.29 -.83%
• Morgan Stanley Technology 555.55 -1.40%
  
• Transports 4,422.94 +1.22%
  
• Utilities 385.53 -.32%
  
• MSCI Emerging Markets 41.22 +.85%
  
• Lyxor L/S Equity Long Bias Index 959.70 +1.07%
  
• Lyxor L/S Equity Variable Bias Index 848.79 +.54%
  
• Lyxor L/S Equity Short Bias Index 861.65 -2.16%
  

Sentiment/Internals

• NYSE Cumulative A/D Line +92,376 +2.69%
  
• Bloomberg New Highs-Lows Index +34 +45
  
• Bloomberg Crude Oil % Bulls 33.0 +13.79%
  
• CFTC Oil Net Speculative Position +44,313 +22.60%
  
• CFTC Oil Total Open Interest 1,240,029 +2.13%
  
• Total Put/Call .80 -3.61%
  
• OEX Put/Call 1.37 -52.26%
  
• ISE Sentiment 102.0 -10.53%
  
• NYSE Arms 1.21 +18.63%
  
• Volatility(VIX) 23.50 +.13%
  
• G7 Currency Volatility (VXY) 11.24 -8.69%
  
• Smart Money Flow Index 8,810.75 +1.09%
  
• Money Mkt Mutual Fund Assets $2.801 Trillion +.10%
  
• AAII % Bulls 40.0 +24.38%
  
• AAII % Bears 33.33 -25.98%
  

Futures Spot Prices

• CRB Index 274.35 +2.90%
  
• Crude Oil 78.95 +.07%
  
• Reformulated Gasoline 212.24 +.35%
  
• Natural Gas 4.92 +8.38%
  
• Heating Oil 208.81 +.49%
  
• Gold 1,183.90 -.79%
  
• Bloomberg Base Metals 204.72 +3.84%
  
• Copper 331.15 +3.57%
  
• US No. 1 Heavy Melt Scrap Steel 322.96 USD/Ton -.11%
  
• China Hot Rolled Domestic Steel Sheet 4,217 Yuan/Ton +1.91%
• S&P GSCI Agriculture 354.14 +6.78%
  

Economy

• ECRI Weekly Leading Economic Index 121.10 +.41%
  
• Citi US Economic Surprise Index -37.4 -.4 point
  
• Fed Fund Futures imply 66.20% chance of no change, 33.80% chance of 25 basis point cut on 8/10
• US Dollar Index 81.54 -1.12%
  
• Yield Curve 236.0 -4 basis points
  
• 10-Year US Treasury Yield 2.91% -8 basis points
  
• Federal Reserve's Balance Sheet $2.308 Trillion -.31%
  
• U.S. Sovereign Debt Credit Default Swap 36.84 +1.45%
• U.S. Municipal CDS Index 207.88 -4.87%
  
• Western Europe Sovereign Debt Credit Default Swap Index 114.92 -10.05%
  
• 10-Year TIPS Spread 1.77% unch.
  
• TED Spread 31.0 -4 basis points
  
• N. America Investment Grade Credit Default Swap Index 104.88 -2.36%
  
• Euro Financial Sector Credit Default Swap Index 99.62 -17.86%
  
• Emerging Markets Credit Default Swap Index 213.55 -7.63%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 253.0 -14 basis points
  
• M1 Money Supply $1.706 Trillion +.06%
• Business Loans 591.20 -.72%
  
• 4-Week Moving Average of Jobless Claims 452,500 -1.0%
  
• Continuing Claims Unemployment Rate 3.6% +10 basis points
  
• Average 30-Year Mortgage Rate 4.54% -2 basis points
  
• Weekly Mortgage Applications 720.60 -4.37%
  
• ABC Consumer Confidence -48 -3 points
  
• Weekly Retail Sales +2.80% -10 basis points
  
• Nationwide Gas $2.74/gallon +.02
  
• U.S. Cooling Demand Next 7 Days 17.0% above normal
• Baltic Dry Index 1,942 +7.83%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 -5.88%
  
• Rail Freight Carloads 230,443 +1.22%
  
• Iraqi 2028 Government Bonds 84.06 +.44%
  

Best Performing Style

• Small-Cap Value +.43%

Worst Performing Style

• Mid-Cap Growth -.77%

Leading Sectors

• Hospitals +2.77%
• HMOs +2.77%
• Airlines +2.32%
• REITs +1.98%
• I-Banks +1.88%

Lagging Sectors

• Steel -2.39%
• Networking -3.07%
• Disk Drives -3.07%
  
• Oil Tankers -4.49%
• Education -4.80%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Reversing Higher into Final Hour on Heatlhcare Stock Strength, Short-Covering, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Around Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 24.35 +.91%
  
• ISE Sentiment Index 103.0 -.96%
  
• Total Put/Call .78 -21.21%
  
• NYSE Arms 1.22 -9.16%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.88 bps +1.18%
  
• European Financial Sector CDS Index 99.0 bps +.05%
  
• Western Europe Sovereign Debt CDS Index 115.0 bps +2.56%
  
• Emerging Market CDS Index 209.85 bps -2.12%
  
• 2-Year Swap Spread 17.0 unch.
  
• TED Spread 31.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .14% -1 bp
  
• Yield Curve 235.0 -5 bps
  
• China Import Iron Ore Spot $136.30/Metric Tonne +.15%
  
• Citi US Economic Surprise Index -37.40 +3.4 points
  
• 10-Year TIPS Spread 1.77% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -7 open in Japan
• DAX Futures: Indicating +12 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Medical, Technology and Retail long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 reverses higher from morning losses again despite a mildly disappointing GDP report and a weaker euro. On the positive side, Homebuilding, HMO, Hospital, Biotech, Medial and Gold stocks are especially strong, rising 1.5%+. The S&P GSCI Ag Spot Index is rising another +3.07% today and is now up +25.5% from its June 7th low. Copper also continues to trade well, rising another +.78%. Lumber is jumping +3.7% today. The Baltic Dry Index has gained another +6.35% this week. The Spain sovereign cds is falling -1.33% today to 176.17 bps, despite negative comments from Moody's. The Libor-OIS spread is falling to the lowest level since May 20th. On the negative side, Oil Tanker, Alt Energy, Steel and Software shares are under mild pressure, falling more than -.5%. The 10-year yield continues to fall too much, dropping another -8 bps to 2.89%. I suspect stocks will build on today's reversal early next week. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, technical buying, healthcare stock strength and bargain-hunting.

Today's Headlines

Bloomberg:

• U.S. Economy: Growth Slows as Consumer Spending Decelerates. The U.S. economy slowed in the second quarter as a scarcity of jobs eroded consumer spending, leaving the rebound dependent on a surge in business investment. Gross domestic product grew at a 2.4 percent annual pace, less than forecast, after a 3.7 percent first-quarter gain that was larger than previously estimated, according to Commerce Department data issued today in Washington. Other reports showed business activity unexpectedly accelerated in July and consumer sentiment fell less than projected. “The economy is muddling through,” Ethan Harris, head of North America economics at Bank of America-Merrill Lynch Global Research in New York, said in an interview. “We’re probably not going to see a really strong number for a while. We need to see some pickup in job growth.”
  
• Business Activity in U.S. Expanded Faster in July. Business activity in the U.S. expanded in July at a faster pace than projected, signaling manufacturing is driving growth in the world’s largest economy. The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 62.3 this month, exceeding the median forecast of economists surveyed by Bloomberg News, after 59.1 in June. The employment measure rose to 56.6 from 54.2 in June, and the production gauge increased to 65 from 64.2. The gauge of new orders climbed to 64.6 from 59.1. The index of backlogs rose to 57.6 from 50.7. The gauge of inventories increased to 50.8 from 46.5.
• Bank Debt Swaps Headed for Biggest Monthly Drop Since April 08'. An index of credit-default swaps insuring against losses on European bank bonds is heading for the biggest monthly drop since April 2008. The Markit iTraxx Financial Index linked to 25 banks and insurers has fallen 43.5 basis points this month and is near the lowest level since April 23. The gauge pared the decline today, rising 3.5 basis points to 118.5, according to JPMorgan Chase & Co. prices at 1:30 p.m. in London. “We believe the best course of action for investors is to go with the flow,” said Aziz Sunderji, a London-based strategist at Barclays Capital. “We would advise investors to spend the remainder of the summer adding risk.”
• Acquisition Spree May Point to Second-Half Pickup in Dealmaking. A spate of mergers and acquisitions during the past two weeks may signal the start of a comeback for global dealmaking in the second half of 2010. There have been 787 announced deals since July 19 with a total disclosed value of $86.4 billion, according to data compiled by Bloomberg. The surge pushed global deal volume past the $1 trillion mark for the year, more than a 10 percent increase over the first seven months of 2009. Companies are now getting more confident as they increasingly hoard cash and borrowing costs fall, according to some dealmakers. “While boards have been reluctant to pull the trigger, they’re getting more comfortable with the economic environment and so there may be a pickup,” said Wilhelm Schulz, head of European M&A at Citigroup Inc.
• Soybeans, Corn Gain as Small World Crops May Aid U.S. Exports. Soybeans jumped to a 12-week high and corn rose for a third day as hot, dry weather damaged crops from Russia to Germany, boosting demand for supplies from the U.S., the world’s largest grower and exporter. Russia, the seventh-largest feed-grain exporter and oilseed processor, declared emergencies in 27 crop-producing regions, four more than a week ago, as drought harmed crops across at least 10.3 million hectares (25.5 million acres). German grain production will fall as much as 11 percent to 44 million metric tons from last year, Alfred C. Toepfer International GmbH said. “People have underestimated the damage and the crops are still shrinking,” said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis. “There is a tightening global supply, and that means more U.S. exports.” Soybean futures for November delivery climbed 9.25 cents, or 0.9 percent, to $9.9725 a bushel at 11:03 a.m. on the Chicago Board of Trade, after rising to $10.0175, the highest price since May 3. The most-active contract was up 10 percent in July, heading for the biggest monthly gain since May 2009. Corn futures for December delivery rose 7.25 cents, or 1.8 percent, to $4.01 a bushel on the CBOT, after touching $4.025, the highest level since July 19. Corn has advanced 7.4 percent this month, which would be biggest monthly increase since April.
• Congress to Vote on Lifting Obama Ban on Deep-Water Drilling. Lawmakers will vote today on a proposal to overturn President Barack Obama’s suspension of deep-water drilling as the House debates legislation toughening rules for companies producing oil and natural gas offshore. An amendment that would end the Obama administration’s moratorium on exploration is among nine scheduled for debate before the House votes on an overhaul of drilling rules in the aftermath of BP Plc’s Gulf of Mexico oil spill.
• 'Meaningful Correction' Looms for China Housing, Economists Say. China’s housing prices, which have tripled in major cities in the past 10 years, face a “meaningful correction” in the next year or two, according to a paper from the U.S. National Bureau of Economic Research. Prices of like-for-like-quality land at auction in Beijing climbed almost 800 percent between 2003 and this year, economists Jing Wu, Joseph Gyourko and Yongheng Deng wrote in the working paper published by the Cambridge, Massachusetts- based arbiter of U.S. business cycles. Their calculations showed Beijing prices could fall as much as 40 percent if investors lost confidence in the market.
• McAfee Advances the Most in 17 Months on Third-Quarter Forecast. McAfee Inc., the second-largest maker of security software, rose the most in 17 months in New York trading after the company’s forecast allayed investors’ concerns about slowing growth. McAfee jumped $2.65, or 8.8 percent, to $32.90 at 1:53 p.m. in New York Stock Exchange composite trading. Earlier, it climbed 10 percent to $33.30 in the biggest gain since February 2009.

Wall Street Journal:

• BP(BP) Well-Plugging Effort Hits Snag. The government's point man for the Gulf oil spill said Friday there has been a delay in a procedure that will help stop the gusher for good.

CNBC:

• Letting Bush Tax Cuts Die 'Not a Good Plan': Fed's Bullard.

NY Times:

• Moody's Says Spain's Credit Rating Likely to Slip. Moody’s said on Friday that Spain’s sovereign debt, whose triple-A rating was put on review late last month, would likely be downgraded at the end of a three-month study, given the country’s growth prospects and the challenges it may face in implementing fiscal austerity. The cost of credit default swaps on Spanish sovereign debt widened to 185 basis points, 7 more than the previous day. By comparison, the cost of protecting Greek sovereign debt swung out by 15 basis points to 739, while the C.D.S. on Portuguese sovereign debt moved 3 basis points to 221. The Spanish national statistics agency said Friday that unemployment had edged higher for a second quarter, hitting 20.09 percent, up 0.04 percent since the last measure was announced in March. Despite the ratings review, Moody’s said “the credit fundamentals of Spain continue to be very strong.”

Lloyd's List:

• US Shippers Wary as Box Shortages Continue. SOME of the largest shippers in the US are continuing to suffer from container shortages as the back-to-school and pre-Christmas peak shipping season gets underway on the transpacific trade. During what is a traditional financial results season for US-listed corporations, executives leading firms shipping toys, clothing and household goods reported facing problems with both capacity on vessels and a shortage of boxes.

Market Folly:

• Hedge Fund Viking Global Likes American Tower(AMT), Invesco(IVZ): Q2 Letter.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -16 (see trends).

Politico:

• Budget-Cutting Democrats Are Undercut. A Democratic spending fight broke out behind closed doors Thursday, as party leaders successfully pressured four junior lawmakers not to offer an amendment slashing housing and transportation programs by $1.02 billion. House Appropriations Committee Chairman David R. Obey argued passionately against the amendment and its authors — though not by name — in a speech to the Democratic Caucus in the morning, according to Democratic insiders.
• Democrats Race Republican Party to Health 'Repeal'. For the first time, House Democrats are proposing repealing a piece of the health care overhaul, one that small businesses have been warning is going to be overly burdensome. The move comes just four months after the Democrats' health plan passed in March. The provision would have required businesses to file 1099 tax forms for all transactions with vendors that total over $600. Due for implementation in 2012, it would have raised $19 billion over 10 years to pay for the health care overhaul. Rep. Scott Murphy (D-NY) offered the bill on Friday morning. Ways and Means Chairman Sander Levin (D-Mich.), spoke in favor of the bill on the House floor Friday. The move comes after Republicans threatened to attach a similar amendment to a vote on the Democrats? jobs legislation late Thursday.

Real Clear Politics:

• Dems' Health Care Plans Mean Lower Quality, Long Waits. Senate Majority Leader Harry Reid, D-Nev., told a group of liberal activists meeting in Las Vegas they shouldn't worry about not getting the single-payer provision in the new health care law. "We're going to have a public option," Reid said. "It's just a question of when." Remember the objections conservatives and many Republicans raised during the debate about government-run health care and the danger of eliminating private health insurance, despite its many flaws? Recall that Britain's National Health Service was frequently cited as an example of where the U.S. health system might be headed: coverage for all, but with lower quality, long waits for major surgery and denial of care when the government decides the procedure is not "cost effective."Anyone who believes a U.S. health care system based on the NHS model can somehow fare better than Britain's had better consider this recent headline and story from London's Sunday Telegraph: "Axe Falls on NHS Services; Hip operations, cataract surgery and IVF rationed; Cancer care, maternity, pediatric services at risk."

MailOnline:

• America's Deadliest Month Yet: As 3 More U.S. Soldiers Are Killed in Afghanistan the Death Toll for July Stands at 63.

CESR:

• Report on Trends, Risks and Vulnerabilities in Financial Markets.

Vedomosti:

• Russia will boost defense spending 60% by 2013 to 2.03 trillion rubles to upgrade its arms, fleet and air forces, citing a three-year budget approved by the government yesterday.

Valor Economico:

• Brazil's economy will continue to have a "weak" expansion in the third quarter, after growth decelerated in the second quarter as a result of the withdrawal of fiscal and monetary stimulus, citing Economic Policy Secretary Nelson Barbosa. Growth is Latin America's biggest economy will be closer to .5% than to 1% in the second quarter over the first three months of the year, Barbosa said. Barbosa forecast the economy contracted .1% in July.

Bear Radar

Style Underperformer:

• Mid-Cap Value (-.30%)

Sector Underperformers:

• 1) Oil Tankers -1.70% 2) Oil Service -.86% 3) Alt Energy -.74%

Stocks Falling on Unusual Volume:

• THOR, CVD, COHR, FSLR, CTV, VLCM, APKT, NTRI, CSTR, CAVM, CTCT, PLCE, ARBA, FNSR, OCLR, ANW and GNW
  

Stocks With Unusual Put Option Activity:

• 1) JDSU 2) WFR 3) CSTR 4) K 5) UPL
  

Stocks With Most Negative News Mentions:

• 1) AEP 2) ATI 3) X 4) MNI 5) KRNY
  

Bull Radar

Style Outperformer:

• Small-Cap Value (+.20%)

Sector Outperformers:

• 1) HMOs +2.13% 2) Hospitals +1.52% 3) Biotech +1.47%

Stocks Rising on Unusual Volume:

• ABAX, CQB, VOLC, BG, QDEL, MNTA, TWC, CHA, TLK, CVC, MFE, QSFT, VECO, CPL, COP, PWER, PRAA, WCRX, MXWL, SHOO, ACOM, VPRT, GPRO, HMSY, ABAX, EXPE, CHDX, ASIA, IDSA, ROVI, VOLC, LIFE, MNTA, NFLX, ITRI, BPO and AGP
  

Stocks With Unusual Call Option Activity:

• 1) LPX 2) APKT 3) PWER 4) VPRT 5) CSTR
  

Stocks With Most Positive News Mentions:

• 1) CVX 2) ACI 3) GOOG 4) MSFT 5) AAPL
  

Friday Watch

Evening Headlines
Bloomberg:

• Yields Dropping to '04 Levels Spark Busiest July for Sales: Credit Markets. U.S. corporate bond sales soared 31 percent this month, the busiest July on record, as yields fell to the lowest in more than six years on growing investor confidence in the economic recovery. Issuance of $85.7 billion exceeded the previous high for the month of $71.1 billion set last year, according to data compiled by Bloomberg. The cost of borrowing fell to 5.04 percent, the lowest since April 2004, and down from the 2010 high of 5.75 percent on Jan. 4, according to Bank of America Merrill Lynch’s U.S. Corporate & High Yield index. That decline would save issuers about $7.1 million of interest per $1 billion of bonds.
  
• Health Law Needs Repeal: Douglas Holtz-Eakin and Michael Ramlet. The new health-care law is a threat to the health of small businesses. Its heavy dosage of mandates and penalties will be a financial burden, and the law is riddled with hidden barriers to stronger job growth. The small business implications of the legislation are important because data from the ADP National Employment Report shows that since January 2001 companies with one to 49 employees were responsible for 36 percent of job growth, while those with 50 to 499 workers accounted for 44 percent of new jobs. Small business vitality is crucial to the economic fortunes of U.S. workers, and substantial new costs that curtail their hiring should be of concern to companies, workers and policymakers alike. Sadly, the new health-care law is an assault on small business, beginning with the 3.8 percent Medicare tax on net investment income -- a direct tax on many business owners. Of even greater concern is the law’s most celebrated feature -- the mandate to cover full-time employees with health insurance. For businesses with more than 50 workers, this means paying a penalty if any full-time workers receive subsidized coverage. For larger companies already providing insurance, the law codifies the status quo. For every other company, the mandate will compete for scarce capital that might be used for hiring and expansion. It is even worse for firms with 50 employees or fewer, as the mandate presents a tremendous growth hurdle. For a business not offering insurance, hiring the 51st worker will trigger a penalty of $42,000. How many firms will choose not to expand?
• Citigroup(C) Said to Pay $75 Million to Settle SEC Subprime Case. Citigroup Inc. will pay $75 million to settle U.S. regulatory claims that it misled investors by understating holdings linked to subprime mortgages by billions of dollars as the housing crisis unfolded in 2007.
• Iceland's Credit Outlook Cut to Negative at Moody's on Foreign Loan Ruling. Iceland’s rating outlook was cut to negative at Moody’s Investors Service after a court ruling on foreign currency loans threatened to trigger bank losses that may require a government cash injection to offset. Iceland’s Baa3 sovereign rating, the lowest investment grade, may be lowered to junk if the bank ruling hurts the island’s economic recovery and forces the government to raise its debt levels by bailing out the banks, Moody’s said in a statement. “The magnitude of the banking system losses that will result from the recent court ruling is not known at this time but it is clear that Iceland still faces significant risks to its economic and financial recovery,” said Kathrin Muehlbronner, a Moody’s vice president and lead analyst for Iceland, in the statement.
• Orexigen's(OREX) Two-Drug Obesity Pill Cuts Hunger, Cravings, Weight in Study. Obese patients who took Orexigen Therapeutics Inc.’s experimental pill combining an anti- addiction drug and an antidepressant lost more weight than those who took a placebo, a company-sponsored study found. Patients who took the Orexigen pill, Contrave, and were given diet and exercise suggestions shed 5 percent to 6 percent of their body weight compared with an average weight loss of 1.3 percent among those taking placebos. La Jolla, California-based Orexigen is racing with Vivus Inc. and Arena Pharmaceuticals Inc. to bring weight-loss drugs to market. Applications from all three are pending before the U.S. Food and Drug Administration.
• Samsung Electronics Profit Jumps 83% to Record on Recovery in Memory Chips. Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, said second-quarter profit jumped 83 percent to a record, fueled by a recovery in demand for computer-memory chips. Net income climbed to 4.28 trillion won ($3.6 billion) in the three months ended June 30, from 2.33 trillion won a year earlier, the Suwon, South Korea-based company said in a statement today. Revenue increased 17 percent to 37.9 trillion won, Samsung said. Samsung joined technology companies including Intel Corp., Apple Inc. and Hynix Semiconductor Inc. in posting higher earnings for the latest quarter after prices increased on demand.
• Mexican Authorities Find 15 Bodies Near Monterrey; Drug Cartels Suspected. Mexican authorities discovered at least 15 bodies in a garbage ditch outside of the city of Monterrey, said David Perales, spokesman for the Nuevo Leon state investigation agency. The agency suspects the dead were killed by drug cartels, Perales said, speaking in a telephone interview from Monterrey, which is 280 miles south of San Antonio, Texas. Officials are investigating whether there were more victims, he said. Separately, investigators in the southern town of Taxco uncovered at least 77 bodies in an abandoned mine last month.

Wall Street Journal:

• Republicans Press FDA Head on Chinese Heparin. Two Texas Republicans want FDA Commissioner Peggy Hamburg to press Beijing on what Chinese health authorities did to track the contaminated heparin linked 81 deaths in the U.S. in 2008. Hamburg is visiting China next month, and Reps. Joe Barton and Mike Burgess see an opportunity to figure out how the how the contamination occurred and what is being done now to ensure supplies are pure. “The case of the tainted blood thinner remains unsolved,” the two said in a letter to Hamburg. “You are going to the source country of that crime,” and added: “Your trip represents the best hope of a breakthrough in solving this case.”
• From Tiananmen Square to Possible Buffett Successor. Twenty-one years ago, Li Lu was a student leader of the Tiananmen Square protests. Now a hedge-fund manager, he is in line to become a successor to Warren Buffett at Berkshire Hathaway Inc. Mr. Li, 44 years old, has emerged as a leading candidate to run a chunk of Berkshire's $100 billion portfolio, stemming from a close friendship with Charlie Munger, Berkshire's 86-year-old vice chairman. In an interview, Mr. Munger revealed that Mr. Li was likely to become one of the top Berkshire investment officials. "In my mind, it's a foregone conclusion," Mr. Munger said.
• Computer Evidence Ties Leaks to Soldier. Investigators have found concrete evidence on computers used by Pfc. Bradley Manning that link him with the leak of classified Afghanistan war reports, a U.S. defense official said. The disclosure came as Defense Secretary Robert Gates pledged Thursday to "aggressively investigate the leak" and find ways to prevent further breaches, and told reporters that he had invited the Federal Bureau of Investigation to assist the probe. Defense officials said the FBI was investigating whether civilians aided Pfc. Manning in providing the information to WikiLeaks, a Web-based group that this week released 76,000 secret reports from Afghanistan.
• Democrats Under Fire Over Health-Law Reporting Mandate. Congressional Democrats may water down or repeal new tax-reporting rules that are supposed to raise $16 billion for health-care legislation, facing a chorus of criticism about the rules. House Democrats were forced to postpone a vote late Thursday on a GOP motion calling for repeal of the reporting requirement. That, in turn, delayed action on an $11 billion bill that expands federally-subsidized bonds for infrastructure projects. House lawmakers may add language to the infrastructure bill to weaken or repeal the IRS reporting regime, Democratic aides said. "This is an issue we want to address and now we have an opportunity to do so," said Kristie Greco, a spokeswoman for House Majority Whip James Clyburn (D., S.C.).

Bloomberg Businessweek:

• U.S. Nuclear Projects Tied Up Awaiting Federal Loan Guarantees. The so-called nuclear renaissance that was supposed to boost U.S. capacity to generate emissions- free power may stall as developers await decisions from the Obama administration on federal aid.
• The New Abnormal. Americans are broke and depressed—and also swilling $3 lattes and waiting in line for iPhones. Welcome to the schizophrenic economy.

CNBC:

• Chinese Economy Strong? Depends Who You Ask.

Business Insider:

• With Case Against The Wyly Brothers, The SEC Goes To War Against Offshore Finance. We're still reading and digesting the details of the just-announced insider trading charges against Texas investors The Wyly brothers, but one thing is already clear: this is a major shot across the bow aimed at offshore tax.

Star-Telegram:

• Obama to Raise Money in Dallas. President Barack Obama is expected to be in Dallas in early August as part of a two-city Texas trip to raise money for Democratic candidates, Democratic sources said Wednesday. The Dallas fundraiser, at a private residence, has apparently replaced plans for a presidential visit to either Houston or San Antonio. Obama is also scheduled to be in Austin on Aug. 9 for a fundraiser sponsored by the Democratic National Committee. Republican Gov. Rick Perry has asked for a meeting with him after he arrives in Texas to discuss concerns over border security and the administration's planned deployment of 250 National Guard troops to the border, far fewer than the 1,000 Perry requested. Obama's campaign travels this week called for fund-raisers in Washington, D.C., and New York City as well as the taping of an interview with ABC's "The View." His schedule next month, according to press reports, includes Democratic events in Atlanta and Chicago, as well as the Texas stops.
  

Boston Globe:

• Patrick Yields Ground on Casino Bill, Says One Slot Parlor OK. In a significant shift in his public position, Massachusetts Governor Deval Patrick said this afternoon that he would sign a casino gambling bill with one slot parlor and three full-scale casinos if legislators agreed to break a "logjam" on other unrelated measures.

PIMCO:

• Stress Test Smokescreen Can't Hid Europe's Hard Future by Andrew Balls, Head of European Portfolio Management.

AppleInsider:

• Apple(AAPL) Job Listing Hints at 'Revolutionary' New Mac OS X 10.7 Feature. A new corporate job listing from Apple boasts of a "revolutionary" new feature for the foundations of Mac OS X that will "truly amaze everyone." The new job listing posted this week and discovered by AppleInsider makes numerous references to a specific, singular feature said to be a part of the Mac OS X operating system. Of course, it declines to reveal what that feature could be, but the ad does use the word "revolutionary" on three separate occasions.

Politico:

• EPA Rejects Challenge to Climate Rules. The Environmental Protection Agency Thursday rejected an effort to keep it from regulating greenhouse gas emissions, saying that e-mails released in last fall’s “Climategate” scandal gave it no reason to reconsider the science of global warming. In a sternly written opinion, EPA Administrator Lisa Jackson said she didn’t agree with requests from the GOP attorneys general from Texas and Virginia, the U.S. Chamber of Commerce and other conservative groups that questioned the underlying science linking humans to global warming and also warned of the potential economic burdens from new climate rules. EPA last December concluded that greenhouse gases are a threat to public health and welfare, a decision clearing the way this spring for climate-based regulations for new cars and trucks. Next year, the agency is expected to write standards for power plants and other major industrial sources of heat-trapping gases. In their petitions, EPA’s opponents had highlighted stolen e-mails from prominent climate scientists that they allege showed collusion to hide contrary information debunking global warming. Texas Attorney General Greg Abbott had also warned that the EPA rules would lead to “unprecedented bureaucratic licensing and regulatory burdens on farmers, ranchers, small businesses, hospitals and even schools.” But Jackson said the groups’ arguments lack merit.
• Ethics Unveils 13 Rangel Charges. A scathing House ethics report charges that Rep. Charles Rangel, an iconic New York powerbroker, violated 13 ethics and federal regulations covering public officials, including pressuring lobbyists and corporations to cough up millions for a New York college building bearing Rangel’s name. In releasing a "Statement of Alleged Violation" of against Rangel, investigators drew a portrait of a veteran lawmaker who used his office and staffers for his own personal benefit and aggrandizement, repeatedly running afoul of House financial disclosure rules. He now faces an ethics “trial” unless he’s able to cut a deal with the ethics committee.

Reuters:

• Republican Concerns Could Stall START Treaty. Senate Republicans voiced objections on Thursday to the new START nuclear arms treaty with Russia. At a Senate Armed Services Committee hearing, Republicans said the accord could impede U.S. plans for an anti-missile defense system and pressed the Obama administration to release the full treaty negotiating record to answer their questions. "We originally were told that there would be no references to missile defense in the treaty and no linkage drawn between offensive and defensive weapons," Senator John McCain said, adding that one section included a "clear, legally binding limitation on our missile defense options." "Why did the administration agree to this language after saying they would do no such thing?" he asked. "We're insisting on an opportunity to review the negotiating record for ourselves, specifically those parts dealing with the ambiguous references to missile defense."
• Wynn(WYNN) Q2 Profit Doubles, Shares Decline. Casino operator Wynn Resorts Ltd's (WYNN) quarterly profit more than doubled as revenue in Macau rose 74 percent, but much of the beat came from a spike in casino winnings, and shares fell more than 3 percent.
• First Solar(FSLR) Profit Tops Street, Trims Sales View. First Solar (FSLR) reported better-than-expected quarterly profits on Thursday, but trimmed its 2010 sales forecast because of weaker prices. Its shares fell 4 percent in after hours trading.

Financial Times:

• US Banks in Rush for Cheap Finance. US banks are taking advantage of improving earnings and growing investor demand to raise billions of dollars in debt at historically low interest rates, a move that could boost the sector’s profits in coming years. The burst of fundraising in the US is in stark contrast to Europe where banks have struggled to issue debt as the eurozone crisis and worries about the financial industry have undermined market confidence. The cheap finance locked in by big institutions such as JPMorgan Chase, US Bancorp, Goldman Sachs and Morgan Stanley in recent days marks a remarkable comeback for a sector that was shunned by investors during the financial crisis. Less than two years after the government was forced to intervene to ease a dramatic credit crunch, US banks sold more than $7bn in debt last week – the largest weekly total since September 2009, says Dealogic. US Bancorp, a Minneapolis-based lender, raised $1bn in five-year bonds at an interest rate of 2.45 per cent – one of the lowest ever paid by a bank. Lower funding costs boost profits because they increase the margins earned by banks on their loans to consumers, companies and investors.

China Securities Journal:

• Chinese central bank adviser Zhou Qiren said the nation can consider a small yuan depreciation to help stabilize export growth.

Oriental Morning Post:

• Shanghai will announce tightening measures for the real estate market in the second half of the year, citing Zhou Bo, head of Shanghai's National Development and Reform Commission.

Evening Recommendations
Citigroup:

• Reiterated Buy on (IRM), raised target to $32.
• Reiterated Buy on (NIHD), target $50.
• Reiterated Buy on (JNPR), target $36.
  

Morgan Stanley:

• Reiterated Overweight on (POT), raised estimates, target $135.

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 118.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 113.0 -.5 basis point.
  
• S&P 500 futures -.50%.
  
• NASDAQ 100 futures -.47%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NWL)/.44
• (FSS)/.07
• (SPG)/1.34
• (MCK)/1.07
• (ACI)/.25
• (WY)/.13
• (ITT)/1.07
• (CVX)/2.46
• (AEP)/.69
• (FO)/.75
• (BWA)/.67
• (MSTR)/.86
• (MRK)/.82

Economic Releases
8:30 am EST

• 2Q Advance GDP is estimated to rise+2.6% versus a +2.7% gain in 1Q.
• 2Q Advance Personal Consumption is estimated to rise +2.4% versus a +3.0% gain in 1Q.
• 2Q Advance GDP Price Index is estimated to rise +1.1% versus a +1.1% gain in 1Q.
• 2Q Advance Core PCE is estimated to rise +1.0% versus a +.7% gain in 1Q.
• The 2Q Employment Cost Index is estimated to rise +.5% versus a +.6% gain in 1Q.

9:45 am EST

• Chicago Purchasing Manager for July is estimated to fall to 56.0 versus a reading of 59.1 in June.

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for July is estimated to rise to 67.0 versus a prior estimate of 66.5.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking on CNBC, Bloomberg FCI for July and the NAPM-Milwaukee for July could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day