Weekly Scoreboard*

Indices

• S&P 500 1,079.25 -3.78%
  
• DJIA 10,303.15 -3.29%
  
• NASDAQ 2,173.48 -5.02%
  
• Russell 2000 609.49 -6.33%
  
• Wilshire 5000 11,093.23 -4.06%
  
• Russell 1000 Growth 479.69 -4.14%
  
• Russell 1000 Value 554.90 -3.61%
  
• Morgan Stanley Consumer 669.89 -2.48%
  
• Morgan Stanley Cyclical 826.47 -5.55%
• Morgan Stanley Technology 529.64 -5.85%
  
• Transports 4,201.81 -5.73%
  
• Utilities 387.70 -1.53%
  
• MSCI Emerging Markets 40.69 -3.20%
  
• Lyxor L/S Equity Long Bias Index 971.02 +.08%
  
• Lyxor L/S Equity Variable Bias Index 851.27 -.18%
  
• Lyxor L/S Equity Short Bias Index 847.06 -.75%
  

Sentiment/Internals

• NYSE Cumulative A/D Line +92,422 -3.14%
  
• Bloomberg New Highs-Lows Index -281 -384
  
• Bloomberg Crude Oil % Bulls 17.0 -34.62%
  
• CFTC Oil Net Speculative Position +60,336 +8.37%
  
• CFTC Oil Total Open Interest 1,274,605 +3.24%
  
• Total Put/Call .98 +5.38%
  
• OEX Put/Call .79 -27.52%
  
• ISE Sentiment 68.0 -30.61%
  
• NYSE Arms 1.19 -26.54%
  
• Volatility(VIX) 26.24 +20.70%
  
• G7 Currency Volatility (VXY) 12.32 +4.38%
  
• Smart Money Flow Index 9,028.17 +.50%
  
• Money Mkt Mutual Fund Assets $2.822 Trillion +.1%
  
• AAII % Bulls 39.76 +30.83%
  
• AAII % Bears 30.12 -21.23%
  

Futures Spot Prices

• CRB Index 268.79 -2.15%
  
• Crude Oil 75.39 -6.52%
  
• Reformulated Gasoline 193.96 -7.92%
  
• Natural Gas 4.33 -3.46%
  
• Heating Oil 199.56 -6.92%
  
• Gold 1,216.60 +.79%
  
• Bloomberg Base Metals 207.21 -3.07%
  
• Copper 327.25 -3.21%
  
• US No. 1 Heavy Melt Scrap Steel 296.67 USD/Ton -11.13%
  
• China Hot Rolled Domestic Steel Sheet 4,252 Yuan/Ton +.28%
• S&P GSCI Agriculture 376.23 +3.13%
  

Economy

• ECRI Weekly Leading Economic Index 122.40 +.58%
  
• Citi US Economic Surprise Index -57.40 -24.5 points
  
• Fed Fund Futures imply 66.0% chance of no change, 34.0% chance of 25 basis point cut on 9/21
• US Dollar Index 82.92 +3.15%
  
• Yield Curve 214.0 -17 basis points
  
• 10-Year US Treasury Yield 2.67% -15 basis points
  
• Federal Reserve's Balance Sheet $2.310 Trillion +.05%
  
• U.S. Sovereign Debt Credit Default Swap 48.14 +23.97%
• U.S. Municipal CDS Index 222.93 +6.95%
  
• Western Europe Sovereign Debt Credit Default Swap Index 136.77 +13.86%
  
• 10-Year TIPS Spread 1.65% -13 basis points
  
• TED Spread 22.0 -5 basis points
  
• N. America Investment Grade Credit Default Swap Index 107.98 +3.97%
  
• Euro Financial Sector Credit Default Swap Index 114.73 +13.08%
  
• Emerging Markets Credit Default Swap Index 228.49 +8.16%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 275.0 +23 basis points
  
• M1 Money Supply $1.737 Trillion +.60%
• Business Loans 604.80 +1.66%
  
• 4-Week Moving Average of Jobless Claims 473,500 +3.1%
  
• Continuing Claims Unemployment Rate 3.5% -10 basis points
  
• Average 30-Year Mortgage Rate 4.44% -5 basis points
  
• Weekly Mortgage Applications 734.30 +.56%
  
• ABC Consumer Confidence -47 +3 points
  
• Weekly Retail Sales +3.0% +10 basis points
  
• Nationwide Gas $2.77/gallon -.01
  
• U.S. Cooling Demand Next 7 Days 25.0% above normal
• Baltic Dry Index 2,437 +23.20%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 -5.88%
  
• Rail Freight Carloads 231,208 -.72%
  
• Iraqi 2028 Government Bonds 85.65 +.86%
  

Best Performing Style

• Large-Cap Value -3.61%

Worst Performing Style

• Small-Cap Growth -6.35%

Leading Sectors

• Telecom +.44%
• Food -.70%
• Gold -.80%
• Drugs -1.17%
• Airlines -1.53%

Lagging Sectors

• Coal -7.08%
• Alternative Energy -7.66%
• Disk Drives -8.37%
  
• Semis -8.59%
• Education -9.61%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Eurozone Debt Worries, Rising Economic Fears, China Concerns, Technical Selling

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 25.86 +.51%
  
• ISE Sentiment Index 67.0 -44.63%
  
• Total Put/Call .97 -2.02%
  
• NYSE Arms 1.01 -17.09%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 107.98 bps -2.39%
  
• European Financial Sector CDS Index 115.66 bps -1.0%
  
• Western Europe Sovereign Debt CDS Index 136.0 bps -.72%
  
• Emerging Market CDS Index 225.81 bps -.29%
  
• 2-Year Swap Spread 20.0 +1 bp
  
• TED Spread 22.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 215.0 -4 bps
  
• China Import Iron Ore Spot $148.30/Metric Tonne unch.
  
• Citi US Economic Surprise Index -57.40 -1.3 points
  
• 10-Year TIPS Spread 1.65% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -28 open in Japan
• DAX Futures: Indicating +13 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech and Ag long positions
  
• Disclosed Trades: None
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 is trading lower, below its 50-day moving average, despite a bounce in Asian equities and positive economic data from Germany. On the positive side, Airline, Gaming, Computer and Paper stocks are especially strong, rising .75%+. The S&P GSCI Ag Spot Index is rising another +.5%. The Libor-OIS and TED spreads continue to trend lower. Tech shares are trading somewhat better today. On the negative side, Education, Alt Energy, Gold, Wireless and I-Banking shares are especially weak, falling .75%+. Small-caps have underperformed throughout the day. Some key stocks are trading poorly. The UK sovereign cds is up +8.6% today and has risen +22.8% over the last five days to 71.59 bps. Moreover, the Greece sovereign cds is rising +3.0% today to 841.80 bps. The 10-year yield is falling -7 bps, back near Wed.'s lows, to 2.68%. Copper is also falling -1.0% today and the euro continues to trade poorly despite its recent sell-off and Germany's positive economic data. With volume so light, it is hard to read too much into today's action, but the averages still feel a bit heavy and trading is very sloppy. I will wait to see the market's reaction to Monday's economic data before further shifting market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, rising economic fear, sovereign debt concerns, technical selling and China worries.

Today's Headlines

Bloomberg:

• Spanish Bonds Fall on Economy Concern; Bunds Yield Record Low. Spanish bonds fell and the extra yield investors demand for holding Greek debt instead of German bunds rose to the most since May on concern flagging growth in nations on Europe’s periphery will crimp the region’s recovery. The yield on the Spanish 10-year bond climbed six basis points to 4.27 percent as of 4:20 p.m. in London. The extra yield, or spread, investors demand to hold Greek 10-year securities instead of equivalent-maturity German debt, Europe’s benchmark, rose 13 basis points to 810 basis points. That’s the most since May 7, before the European Union announced a 750 billion-euro financial backstop for the region’s most indebted nations. The yield on the bund fell three basis points to 2.39 percent, after earlier sliding to 2.37 percent, the lowest since Bloomberg began compiling this data in 1989. “The divergence suggests this is a two-speed economy, and that raises questions about sustainability of German economic growth going forward,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. The drag from “austerity measures will kick in at some point. Rates in the core bond market should remain subdued.”
• Corn, Soybean Futures Rise as Heat May Cut Yields in U.S. Corn and soybeans rose on speculation that a heat wave in the U.S. will cut yields of crops projected to be the biggest ever. Corn futures for December delivery rose 6.75 cents, or 1.6 percent, to $4.285 a bushel at 10:32 a.m. on the Chicago Board of Trade, heading for a third straight weekly gain. Before today, the commodity advanced 23 percent since June 29, the day before the government said farmers planted less this year than they had planned. Soybean futures for November delivery climbed 12.75 cents, or 1.2 percent, to $10.4125 a bushel in Chicago. The most-active contract was up 0.8 percent for the week, after rising 5.2 percent the prior two weeks.
• Washington Post Shorts at 19-Year Highs as Bears Take on Buffett. Bets against shares of Washington Post Co. have increased to the highest level since at least 1991, as the federal government considers rules that could reduce revenue at its Kaplan education unit. Short interest in Post Co. rose to 386,917 shares as of July 30, up nearly three-fold this year, according to New York Stock Exchange data compiled by Bloomberg. It’s the highest level since September 1991, the earliest data in Bloomberg’s database.
• Blackstone(BX) to Buy Dynegy for More Than $540 Million. agreed to acquire Blackstone Group LPDynegy Inc., the Texas power producer that lost 94 percent of its market value in the past three years, for more than $540 million.
• Heebner Fund Exits Investment Banks, Mining Companies. Kenneth Heebner’s Capital Growth Management LP sold stakes in Goldman Sachs Group Inc. and Morgan Stanley and exited its biggest mining holdings during the second quarter, according to a regulatory filing. The firm, based in Boston, sold miners Freeport-McMoran Copper & Gold Inc., Teck Resources Ltd. and Cliff Natural Resources Inc. during the quarter, according to a document filed with the U.S. Securities and Exchange Commission today. The firm’s biggest new purchase was 5.2 million shares of SanDisk Corp., the largest maker of flash-memory cards for digital cameras and phone.
• Hoenig Says Fed Zero-Rate Policy Fans Recovery Doubts. The Federal Reserve’s commitment to keep its target interest rate near zero may backfire by fanning doubts the recovery can be sustained, Kansas City Fed President Thomas Hoenig said. “If in an attempt to add further fuel to the recovery, a zero interest rate is continued, it is as likely to be a negative as a positive in that it brings its own unintended consequences and uncertainty,” Hoenig said today in a speech in Lincoln, Nebraska. Keeping the rate after a year of expansion “gives legitimacy to questions about the sustainability of growth.”
• Iran's Bushehr Nuclear Plant to Start Up Aug. 21. Iran’s first nuclear power plant will start operating Aug. 21, with electricity generation to begin “several months later,” said Rosatom Corp., the Russian state nuclear holding company building the facility. “On the 21st, nuclear fuel will be delivered to the reactor storage facility and from that moment on the plant can be certified as a nuclear power installation,” Rosatom spokesman Sergei Novikov said by phone in Moscow.
• PayPal Said to Talk With Google(GOOG) About Handling Android Payments.
  

Wall Street Journal:

• Rosenberg: Odds of Double Dip Higher Than 50/50.
• Stabbing-Spree Suspect Agrees to Return to Michigan. The suspect in a three-state stabbing spree that left five people dead and 13 others wounded agreed Friday to return to Michigan to face charges in one of the attacks. Elias Abuelazam, 33, was arrested Wednesday night in Atlanta before a flight to Israel, his native country, and charged with attempted murder in a July 27 knife strike in Flint that put the victim in a hospital for a week.

CNBC:

• Would Cutting Corporate Taxes Jumpstart US Economy?
• Stolen Innocence: Theft of Children's Identity Rising.
  

NY Times:

• China to Build State-Run Search Engine. In an apparent bid to extend its control over the Internet and cash in on the rapid growth of mobile devices, China plans to create its own government-controlled search engine. The new venture would be fresh competition for Baidu.com(BIDU), a private company that runs China’s dominant search engine. Baidu has seen its market share grow since Google retreated from the mainland earlier this year.

Business Insider:

• 10 Monster Bubbles Currently in the Making.

Zero Hedge:

• One Possible Explanation for the Plunging Euro: Pension Accounting Change to Impact European Deficit Calculations.

LA Times:

• News Corp.(NWS) Plans National Newspaper for Tablet Computers and Cellphones. It's the latest bid by a major media company to build readership using new devices such as the iPad. The new publication would offer short, snappy stories and operate under the auspices of the New York Post.

Politico:

• Greene Indicted on Porn Charge. South Carolina Democratic Senate nominee Alvin Greene was indicted Friday on felony charges of showing pornography to a college student. Greene, an unemployed 32-year-old military veteran, had refused to discuss the charges, which surfaced after he was the surprise winner of the state’s June Democratic primary over better-known Charleston City Councilman Vic Rawl.

USA Today:

• More Receiving Top Secret Clearance From FBI For Terrorism Cases. More state and local law enforcement officers are getting top-secret clearances from the FBI to access sensitive federal information in terrorism cases than at anytime since the Sept. 11 attacks, a USA TODAY review of bureau records shows. Clearances granted to members of the FBI's network of regional terrorism task forces jumped to 878 in 2009, up from 125 in 2007, signaling intensified attention to domestic terror threats.

Reuters:

• Hedge Funds Short Banks After Stress Tests, Results. Hedge funds have started shorting bank stocks again on concerns last month's stress tests were too weak and failed to reveal underlying problems, although many are cautious of taking big bets in such choppy markets. A wave of what some commentators have seen as good news, including a bumper earnings season, an easing of capital reforms and relatively few failures of the high-profile stress tests, have lifted banks' shares, creating an opportunity for short-sellers betting prices will fall. "Some funds have started to put on shorts again after the strong rally," said Ken Kinsey-Quick, who runs funds of hedge funds at Thames River Capital. "(Managers believe that) until they (the banks) come clean they'll be hugely volatile and remain sick for years to come. They're still sitting with a lot of loans that are not performing." Hedge fund Noster Capital has begun shorting five European banks -- Barclays (BARC.L), UBS (UBSN.VX), Intesa SanPaolo (ISP.MI), UBI (UBI.MI) and BBVA (BBVA.MC). Manager Pedro de Noronha criticized the tests for ignoring sovereign debt that banks hold to maturity.
• US Economic Growth Gauge Rises to 9-Week High - ECRI.
  

Cinco Dias:

• Spain may implement additional austerity measures if it fails to meet its budget deficit targets, citing Deputy Finance Minister Jose Manuel Campa.

China National Radio:

• Chinese Vice Premier Li Keqiang said in Beijing today that measures to tackle property speculation will be kept in place. The supply of affordable housing should be sped up, he said.

Bear Radar

Style Underperformer:

• Large-Cap Growth (-.29%)

Sector Underperformers:

• 1) Education -4.75% 2) Gold -.92% 3) Wireless -.76%

Stocks Falling on Unusual Volume:

• EBS, DLB, CAGC, TSTC, RRGB, LINC, CRZO, DEG and DV
  

Stocks With Unusual Put Option Activity:

• 1) MTG 2) SHLD 3) APOL 4) CX 5) NLY
  

Stocks With Most Negative News Mentions:

• 1) JBLU 2) JCP 3) MF 4) LLY 5) DDS
  

Bull Radar

Style Outperformer:

• Mid-Cap Value (+.20%)

Sector Outperformers:

• 1) Gaming +1.34% 2) Homebuilders +1.11% 3) Computer Hardware +.72%

Stocks Rising on Unusual Volume:

• XEC, AEE, AES, EPAY, ADSK, VIP, UNCA, RMBS, VECO, CHBT, NTAP, TTEK, BYI, SUP and PTI
  

Stocks With Unusual Call Option Activity:

• 1) ADSK 2) VPRT 3) NTAP 4) JWN 5) ADTN
  

Stocks With Most Positive News Mentions:

• 1) BX 2) AAPL 3) IBM 4) BA 5) LMT
  

Friday Watch

Evening Headlines
Bloomberg:

• Goldman Sachs Sees 25% to 30% Chance of U.S. Falling Back Into Recession. Goldman Sachs(GS) said there is a 25 to 30% chance that the U.S. economy will fall back into recession, in a note e-mailed to clients. "As signs of slower U.S. growth have multiplied, market participants have become worried about the possibility of a double-dip recession," wrote analysts including Ed McKelvey, Goldman Sachs's senior U.S. economist. "We think the probability is unusually high - between 25% and 30% - but we do not see double dip as the base case."
• KKR, Bain Companies Repay Leveraged Loans as Economy Sours: Credit Markets. Speculative-grade companies are doubling the rate at which they’re repaying leveraged loans as they try to curb the likelihood of rising defaults amid signs the U.S. economy is slowing. Rite Aid Corp., the third-biggest pharmacy retailer, KKR & Co.’s First Data Corp. and Toys “R” Us Inc., part-owned by Bain Capital LLC, sold or marketed $27.9 billion of high-risk, high-yield bonds and loans in August, with 25 percent of proceeds slated to refinance bank debt, according to data compiled by Bloomberg and Standard & Poor’s Leveraged Commentary and Data. Borrowers with $482.7 billion in loans due in coming years are trying to extend debt maturities as the Federal Reserve forecasts the pace of economic recovery is likely to be “more modest in the near term” than anticipated. Bond sales surged to $20.9 billion in the first two weeks of August, exceeding the $16.7 billion for all of July, Bloomberg data show. “It’s the marginal issuer who has access in this type of environment who may not have had access under tougher market conditions that swings the needle,” said John Fenn, a credit market analyst at Citigroup Inc. in New York. “What we need is a steady run rate of $15 billion to $20 billion of bonds and loans every month until 2012 to make a considerable dent in the maturity wall.”
• China Bank Clampdown May Trigger 'Flood' of Bond Sales by Property Firms. China’s order for banks to transfer off-balance-sheet loans may lead to a “flood” of bond issuance from real-estate companies, CLSA Asia-Pacific Markets said. The China Banking Regulatory Commission said assets linked to wealth management products provided by trust companies must be shifted on to banks’ balance sheets by the end of 2011. The “important tightening measure” put a funding squeeze on local governments’ special-purpose vehicles and the property industry, CLSA strategist Christopher Wood said. “Property developers and local government-backed infrastructure projects were important beneficiaries of such funding,” Wood wrote in his Greed & Fear report yesterday. “These are precisely the areas the CBRC has been trying to curb lending to.” The slowdown in the Chinese economy reduces the possibility of further tightening measures while beneficiaries of the nation’s growth such as the “commodity complex” are vulnerable in coming months, CLSA’s Wood wrote.
• Two New Jersey Men Charged in $200 Million Fraud Targeting Orthodox Jews. Two New Jersey men were charged for their role in a $200 million Ponzi scheme that targeted Orthodox Jews, according to the Federal Bureau of Investigation and U.S. prosecutors. Eliyahu Weinstein, 35, was charged with orchestrating a real-estate investment fraud to dupe fellow Orthodox Jews in New Jersey, New York, Florida, California and abroad, U.S. Attorney Paul Fishman said today in a statement. Vladimir Siforov, 43, also was charged in the scheme. By using “lies, threats, deliberate misrepresentations and even counterfeit checks,” Weinstein and Siforov “exploited the close community ties of the Orthodox Jewish community for one goal: to steal money through an elaborate real estate and Ponzi scheme,” Michael B. Ward, special agent in charge of the FBI’s office in Newark, New Jersey, said in a statement.
• Nvidia(NVDA) Said to Be Planning Direct Challenge on Intel(INTC) in Tablet Processors. Nvidia Corp., the maker of chips for computer graphics cards, is working on a microprocessor for tablet devices that would directly compete with Intel Corp. products, two people familiar with the matter said.
• Oracle(ORCL) Says Google's(GOOG) Android Operating System Infringes Its Java Patents.
• U.S. Saudi Sale, With Helicopters, Said to Approach $60 Billion. A proposed U.S. weapons sale to Saudi Arabia of Boeing Co. F-15 fighter jets also includes as many as 132 Boeing Apache attack helicopters and United Technologies Corp. UH-60 Black Hawk helicopters that bring the total value of the package to around $60 billion, according to a government official familiar with the plan. “I think it would be the largest ever,” said William Hartung, director of the New York City-based New America Foundation’s Arms and Security Initiative. “Other deals that used to be considered large,” like the $9 billion sale of 72 F-15s to the Saudis in 1992-93 or the kingdom’s $9 billion acquisition of U.S. AWACS surveillance aircraft in 1981, “aren’t even in the ballpark, even allowing for inflation,” Hartung said. The package includes 84 F-15s at a cost of $30 billion and helicopter sales totaling about $30 billion that include spare parts, training simulators, long-term logistics support and some munitions. The Saudis would buy about 72 UH-60 Black Hawk helicopters and as many as 60 AH-64D Longbow Apaches, the official said. The Longbow is the U.S. Army’s premier anti-tank helicopter, capable of firing laser-guided or all-weather air-to-ground missiles.

Wall Street Journal:

• Cable Firms Eye Tablet Space. More TV shows and movies may be coming to tablet computers like Apple Inc.'s iPad—for those who pay to watch. At least seven of the ten largest subscription-TV providers in the U.S. are building new tablet-computer applications that offer select TV shows and movies to their existing subscribers, often for little or no additional fee.
• Pakistan Fight Stalls for U.S. The U.S. military has stopped lobbying Pakistan to help root out one of the biggest militant threats to coalition forces in Afghanistan, U.S. officials say, acknowledging that the failure to win better help from Islamabad threatens to damage a linchpin of their Afghan strategy. Until recently, the U.S. had been pressing Islamabad to launch major operations against the Haqqani network, a militant group connected to al Qaeda that controls a key border region where U.S. defense and intelligence officials believe Osama bin Laden has hidden.
• Treasury's New Idea for Laggard Banks: We'll Sit in at Your Meeting. The U.S. wants to send Treasury employees to observe board meetings at banks that have consistently missed dividend or interest payments related to the government's financial-sector bailout.
• Investigators Question Attendant's Tale. Investigators probing the circumstances surrounding a JetBlue flight attendant's outburst and exit from a plane at Kennedy Airport are beginning to question the narrative that he was provoked by an injury suffered during a confrontation with an unruly passenger, according to Port Authority officials with knowledge of the investigation.
• Pentagon Slams WikiLeaks' Plan to Post More War Logs. U.S. defense officials on Thursday responded angrily to WikiLeaks' plan to post additional Afghan war logs, with Defense Secretary Robert Gates suggesting that the move could further endanger the lives of Afghans who helped the U.S. war effort. WikiLeaks founder Julian Assange, speaking to a group in London by video link on Thursday, said his group had gone through 7,000 of the 15,000 documents the group has so far withheld from publishing.
• Lehman: Och-Ziff Helped Spread Rumors. One of the world's largest hedge funds participated in spreading false rumors that helped bring down Lehman Brothers Holdings Inc., according to allegations filed in court papers in a Manhattan bankruptcy court. Och-Ziff Capital Management LLC "likely disseminated and/or was the recipient" of an inaccurate rumor that Lehman had spun off debt to two Lehman-controlled hedge funds to reduce the investment bank's leverage, according to the filing. Investors were focused on Lehman's debt levels in the months before its failure. The rumor was one of many "lies" spread by unscrupulous market participants looking to profit from shorting the troubled investment bank's stock, alleged the filing, made on Wednesday by lawyers investigating Wall Street firms on behalf of Lehman's bankruptcy estate.

CNBC:

• Foreclosure Math: Shadow Inventory Adds Up.

Business Insider:

• Look How Much Federal Spending is Funneled Through The States. (graph)

The Daily Caller:

• Obama Approval Rating Falls into New Danger Zone, Weighed Down by Growing Economic Fears. President Obama’s approval rating has crossed into a new danger zone over the last month, as fresh concerns over the economy have pushed his positives and negatives into upside down territory, a development that will cause political winds to blow even harder against Democrats this fall. One month ago on July 12, Obama’s approval and disapproval both stood at 47 percent in the Real Clear Politics poll average. On Tuesday, the president’s approval had fallen to 44.4 percent. Disapproval had jumped to 50.4 percent. The graph illustrating the movement is stark. After muddling through the past year in parallel lines, the black line for approval has taken a nose dive and the red line for disapproval has shot up.

Politico:

• California Democrat Blasts HUD for Happy Talk. Rep. Dennis Cardoza doesn’t think that Housing and Urban Development Department Secretary Shaun Donovan has any right to tout the administration’s successes at preventing home foreclosures in California. The California Democrat has fired off a heated letter to President Barack Obama after reading an op-ed piece from Donovan in the Fresno Bee, highlighting the falling foreclosure rate in California’s Central Valley as evidence that HUD’s efforts to tackle the housing crisis are yielding results. “I’m incredibly disappointed in the lack of professionalism and lack of understanding shown by this agency. They don’t get it,” Cardoza told POLITICO. “For him to try to convince my folks, who are suffering on a daily basis, that he’s right because he’s read some statistics in Washington when he doesn’t get it, it’s really just absurd,” Cardoza continued.
• Judge OK's Same-Sex Marriages to Begin Next Week. A federal judge in California accelerated the battle over same-sex marriage Thursday by giving the green light for such marriages to begin in that state next week unless a higher court steps in. The new order from U.S. District Court Judge Vaughn Walker said such marriages may begin Aug. 18 under the landmark ruling he issued last week holding California’s voter-approved ban on same-sex marriages to be unconstitutional.
  

USA Today:

• Consumer Spending Was Tepid in July, MasterCard Says. Shoppers dug in their heels in July, bad news for the stalling economy and worse for struggling retailers. Excluding gasoline and autos, U.S. retail sales rose a meager 0.1% last month from June, according to figures released Thursday by MasterCard Advisors' SpendingPulse, which estimates spending in all forms including cash. Excluding autos, sales fell — 0.9%.

Reuters:

• India to Target Google(GOOG), Skype Messaging Next - FT. India may shut down Google (GOOG) and Skype Internet-based messaging services over security concerns, the Financial Times reported on Friday, as the government threatened a similar crackdown on BlackBerry services.
• Kohl's(KSS), Nordstrom(JWN) Cautious on 2010, Shares Fall. Department stores Kohl's Corp (KSS) and Nordstrom Inc (JWN) disappointed investors with conservative profit outlooks, while Kohl's said the cost to adapt to new consumer credit card laws would bite into profit. Kohl's, which caters to a cost-conscious customer, lowered its 2010 profit view, while Nordstrom stood by a previously-issued earnings forecast but did not raise it. The outlooks signaled both companies' uncertainty over consumer spending in the highly-competitive retail apparel market.
• July U.S. Video Game Sales Down 1% - NPD. Retail sales of video game software and equipment fell 1 percent in July, industry tracker NPD said on Thursday, as the sector showed some signs of improvement. Game software sales fell 8 percent to $403.3 million, while hardware sales rose 12 percent to $313.8 million. Sales of video game accessories, slipped 2 percent to $129.3 million.

Financial Times:

• US Probes Corruption in Big Pharma. The US Department of Justice is scrutinising payments by leading pharmaceuticals companies for hospitality, consultants, licensing agreements and charitable donations in markets around the world as part of a wide-ranging corruption probe. GlaxoSmithKline(GSK), Pfizer(PFE), Bristol-Myers Squibb(BMY) and Eli Lilly(LLY), among others, have disclosed being contacted by the DoJ and Securities and Exchange Commission in connection with the investigation. Merck(MRK), the US drugs group, announced last week that it had also been contacted and was co-operating with investigators. An industry attorney familiar with the probe said that the DoJ was looking at whether pharma companies had ignored a “systematic risk” inherent in the global drugs business and ignored obligations under local and US anti-bribery law. The highly regulated nature of the business, combined with the fact that healthcare officials in many non-US markets were government funded, made the industry a natural target for such a probe, the person added. The investigation is at a relatively early stage but is considered a priority for the DoJ.

Telegraph:

• The Stunning Decline of Barack Obama: 10 Key Reasons Why The Obama Presidency is in Meltdown.
• US Bank Bail-Out 'Helped Foreign Banks'. The US Treasury has been accused of mishandling taxpayers money after a Congressional panel found that the $700bn (£449bn) bail-out of the banking industry at the height of the financial crisis helped foreign banks far more than overseas bail-outs helped American banks.

Alibaba.com:

• China Should Raise Ceiling on Deposit Rates - Economist. China should target a rise in banks' deposit interest rate ceiling, rather than hiking the benchmark interest rates, to pull real deposit rates out of negative territory, a senior government economist said in remarks published on Friday. Since February, the country's consumer inflation has been higher than the official one-year deposit rate, now at 2.25 percent. Consumer inflation in July reached 3.3 percent. "We must give the market a signal that we are pulling it (the real deposit rate) to a positive level," Xia Bin, an adviser to the cabinet and the central bank, told the official People's Daily overseas edition. "But to avoid the unnecessary negative impact from a one-off interest rate rise amid the economic slowdown, we should rather push ahead with the market-oriented interest rate reform and allow the deposit rate to float appropriately," he added.

Shanghai Securities News:

• Former Chinese central bank adviser Fan Gang said the pace of growth for the nation's money supply is "overly high."

Evening Recommendations
Citigroup:

• Reiterated Buy on (KSS), target $68.

Needham:

• Rated (N) Buy, target $20.
• Rated (SFSF) Buy, target $25.
• Rated (TLEO) Buy, target $27.
• Rated (CTCT) Buy, target $30.
  

Night Trading

• Asian equity indices are +.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 122.0 -4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 121.75 +3.75 basis points.
  
• S&P 500 futures +.54%.
  
• NASDAQ 100 futures +.53%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JCP)/.05

Economic Releases
8:30 am EST

• The Consumer Price Index for July is estimated to rise +.2% versus a -.1% decline in June.
• The CPI Ex Food & Energy for July is estimated to rise +.1% versus a +.2% increase in June.
• Advance Retail Sales for July are estimated to rise +.5% versus a -.5% decline in June.
• Retail Sales Less Autos for July are estimated to rise +.3% versus a -.1% decline in June.
• Retail Sales Ex Autos & Gas for July are estimated to rise +.1% versus a +.1% gain in June.

9:55 am EST

• The Preliminary Univ. of Mich. Consumer Confidence reading for August is estimated to rise to 69.0 versus a reading of 67.8 in July.

10:00 am EST

• Business Inventories for June are estimated to rise +.2% versus a +.1% increase in May.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Hoenig speaking and the BofA Merrill Specialty Pharma Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.