Stocks Rising into Final Hour on Less Eurozone Debt Angst, US Debt Ceiling Optimism, Tech Sector Strength, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 19.19 -8.4%
  
• ISE Sentiment Index 117.0 +8.33%
  
• Total Put/Call .71 -25.26%
  
• NYSE Arms .69 -63.28%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 97.49 -1.77%
  
• European Financial Sector CDS Index 167.63 -3.14%
  
• Western Europe Sovereign Debt CDS Index 301.17 -.33%
  
• Emerging Market CDS Index 221.53 -1.81%
  
• 2-Year Swap Spread 29.0 unch.
  
• TED Spread 23.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .02% +2 bps
  
• Yield Curve 251.0 -4 bps
  
• China Import Iron Ore Spot $174.40/Metric Tonne unch.
  
• Citi US Economic Surprise Index -94.70 +3.3 points
  
• 10-Year TIPS Spread 2.32% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +131 open in Japan
• DAX Futures: Indicating +50 open in Germany

Portfolio:

• Higher: On gains in my Tech, Biotech, Medical and Retail sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 breaks back above its 50-day moving average to session highs despite eurozone debt angst, US debt ceiling concerns, emerging markets inflation fears, global growth worries, rising energy prices and a lagging financial sector. On the positive side, Education, Homebuilding, Networking, Disk Drive, Computer, Software, Oil Service, Alt Energy, Internet, Semi and Gaming shares are especially strong, rising more than +2.25%. "Growth" stocks are outperforming "value" again. Small-caps are also relatively strong. Copper is rising +1.45%, lumber is rising +1.9% and gold is falling -1.42%. Weekly retail sales rose +4.6% this week versus a +5.4% gain the prior week. The France sovereign cds is dropping -7.3% to 114.29 bps, the Spain sovereign cds is down -7.26% to 353.90 bps, the Italy sovereign cds is down -6.25% to 301.86 bps, the Belgium sovereign cds is falling -6.62% to 201.74 bps and the UK sovereign cds is declining -6.3% to 73.11 bps. On the negative side, Oil Tanker and Airline shares are down to slightly higher on the day. (XLF) has underperformed throughout the day. The Transports are underperforming again. Oil is rising +1.86%. Rice is hovering near a multi-year high and has soared almost +29.0% in about 2 weeks. The US price for a gallon of gas is unch. today at $3.68/gallon. It is up .54/gallon in less than 5 months. The Hungary sovereign cds is rising +4.79% to 303.43 bps. The Western Europe Sovereign CDS Index is hovering near its record high. Many true "growth" stocks continue to massively outperform the broad market. I continue to believe the European debt debt situation must calm significantly for US stocks to gain meaningful upside traction from current levels. One of my longs, (AAPL) reports after the close. I will view any initial kneejerk "sell the news" reaction on conservative guidance as another buying opportunity. I still see substantial upside to the shares from current levels longer-term on p/e multiple expansion, enterprise market penetration and new products. I expect US stocks to trade mixed-to-higher into the close from current levels on less eurozone debt angst, US debt ceiling optimism, tech sector strength, short-covering, bargain-hunting and technical buying.

Today's Headlines

Bloomberg:

• Investors Leery Europe Can Fix Greek Crisis: IMF. Greece’s sovereign-debt crisis risks infecting the rest of the euro region even if officials avert a default, threatening the global economic recovery, the International Monetary Fund said. Both the European Commission and the European Central Bank “considered that a sovereign default or a credit event would likely trigger contagion to the core euro-area economies with severe economic consequences,” according to an IMF staff report on the region’s economy. “Staff however also saw serious risks of contagion, even under a strategy which tries to avoid default or credit events.” German Chancellor Angela Merkel said today that the crisis can’t be resolved in “one spectacular step” at this week’s European leaders’ summit on July 21. Government chiefs are meeting for the second time in a month, aiming to break a deadlock over a new Greek rescue that has spooked investors. Spanish and Italian bond yields surged yesterday, piling pressure on officials to end the turmoil. “Despite adjustment efforts and support from euro-area member states and the ECB, market participants remain unconvinced that a sustainable solution is at hand,” the Washington-based fund said. An intensification of the debt crisis, “especially if stress were to spread to the core euro area, could have major global consequences,” the IMF said in a separate report. “This is supported by financial market signals” and “thus, decisive further policy actions to contain the crisis are critical not only for the euro area itself, but also from a global perspective.” European leaders are at odds with one another and with the ECB over demands by Germany and Finland that private investors bear some of the burden of a new Greek bailout. The IMF said leaders need to “scale up the capacity” of the region’s rescue fund and make it more flexible. “We would really advocate the crisis management facilities to allow interventions in secondary markets, provide guarantees, backstops for other fiscal agents and for banks if necessary,” Luc Everaert, division chief for euro area policies in the IMF’s European Department, said on a conference call with reporters. Everaert also said European Union authorities must clarify their approach on private sector involvement and need stronger economic governance. “We need fiscal disciple and it will be unavoidable to subordinate some fiscal sovereignty for the common good,” Everaert said.
• Sovereign Credit-Default Swaps Index Falls From Record in Europe. The cost of insuring against default on European government debt fell from a record as investors pared bets that a sovereign default is imminent. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell 14 basis points to 292 at 11 a.m. in London. Swaps on all of Europe’s peripheral governments and France dropped from all-time highs, signaling improvement in perceptions of credit quality. Markets rebounded from a selloff triggered by concern a disorderly Greek default would infect Europe’s governments and banks. Greek Finance Minister Evangelos Venizelos said an agreement is “attainable” at a European summit in two days and European Central Bank Governing Council member Ewald Nowotny said the ECB may accept Greek bonds as collateral. “It looks like correctional tightening, but I’d refuse to dip my toe in the market until Thursday, and only if we see some clarity emerge,” said Harpreet Parhar, a strategist at Credit Agricole SA in London. “Even if we see something positive on Greece on Thursday, which I think is unlikely, I’m still not convinced it will be enough to drag Italy and Spain back across the firewall.” Swaps on Italy dropped 18 basis points to 303 and Spain declined 25 to 360, according to CMA. Contracts on Ireland fell 16 basis points to 1,180, Portugal declined 22 basis points to 1,192 and France was 8 lower at 116. Swaps on Greece fell 33 to 2,535 basis points, signaling an 88 percent probability of default within five years. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 14 basis points to 457, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell from the highest level in more than a year, dropping 3.5 basis points to 123.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 9.5 basis points to 185.5 and the subordinated index dropped 14.5 to 326.5.
• European Stress Tests May Spark Need to Raise Additional Capital, S&P Says. European banks may seek to raise additional capital after last week’s stress tests revealed their riskiest investments and showed a need to curb their dependence on governments, ratings company Standard & Poor’s said. “The stress test process is likely to add further impetus to banks’ capital raising efforts in the lead-up to the implementation of Basel III,” Richard Barnes, a London-based credit analyst said in a report today. “Sovereign support remains an important rating factor for many European banks.”
• Soros's Quantum Holding 75% Cash Leads Hedge Funds Baffled by Instability. Keith Anderson, who runs the $25.5 billion Quantum Endowment Fund for Soros Fund Management LLC, has seen enough of choppy global markets. In mid-June, Anderson told his portfolio managers to pull back on trades as the hedge fund’s losses hit 6 percent for the year, according to two people familiar with the New York-based firm. As a result, the fund is about 75 percent in cash as it waits for better opportunities, said the people, who asked not to be identified because the firm is private.
• Oil Gains in NY as U.S. Supplies, China Demand Counter Europe Debt. Oil climbed in London for the first time in four days on speculation that European lawmakers may reach an agreement to resolve the region’s debt crisis, and on signs of shrinking crude stockpiles in the U.S. Crude for August delivery on the New York Mercantile Exchange rose as much as $1.31, or 1.4 percent, to $97.24 a barrel after a government report showed that housing starts in the U.S. rose more than forecast in June to the fastest pace in five months.
• Japan Should Have Nuclear Weapons: Ishihara. Tokyo Governor Shintaro Ishihara criticized Prime Minister Naoto Kan’s vow to reduce dependency on atomic energy after the Fukushima disaster, saying instead the country should deepen its nuclear embrace to include weapons. “Japan should absolutely possess nuclear weapons,” Ishihara said in a July 15 interview at his office in Tokyo, citing China and North Korea as potential threats. “I don’t think we can easily do away with atomic power. Nuclear energy is inexpensive if managed well,” he also said.
• Chinese Police Shoot Rioters in Xinjiang as Xi Warns Tibetan Separatists. China’s Vice President Xi Jinping warned Tibetans against separatist activities after forces fired on rioters in the northwestern region of Xinjiang, underscoring the struggle to manage ethnic tensions. China will fight against separatist activities by the “Dalai group,” the official Xinhua News Agency cited Xi as saying in a speech in Lhasa today, a reference to supporters of the Dalai Lama, Tibet’s exiled spiritual leader. The government will “completely destroy” any attempt to undermine stability in Tibet and unity in China, Xi said. His remarks followed yesterday’s assault on a police station in the ethnic Uighur-dominated city of Hotan that killed two hostages, two policemen and a security guard, the People’s Daily said. Authorities today executed a former vice mayor of the eastern city of Hangzhou and an ex-vice mayor of Suzhou city, who were convicted of bribery, Xinhua said, citing the Supreme People’s Court. Xinjiang, where the central government in Beijing faces sporadic challenges to its power, was the scene of clashes two years ago involving Uighurs that left almost 200 people dead. The Munich-based World Uyghur Congress, citing unidentified people in Xinjiang, said police fired on about 100 Uighurs protesters in the city’s main bazaar, according to a statement from the affiliated Washington-based Uyghur American Association. The demonstration was against land seizures and disappearances after the riots two years ago, the group said. The Xinjiang riots also come as protests increase across China as income gaps widen. So-called mass incidents -- riots, strikes and protests -- doubled in five years to 180,000 in 2010, Sun Liping, a professor at Beijing’s Tsinghua University, said in a Feb. 25 article in the Economic Observer.

Wall Street Journal:

• Obama Backs New Senate Debt Plan. President Barack Obama on Tuesday backed a $3.7 trillion deficit-reduction plan after it gained fresh momentum from a bipartisan group in the Senate.
• Global Hedge-Fund Assets Rise. Global hedge-fund assets rose to a record $2.04 trillion by the end of the second quarter, as investors continued to allocate new capital to hedge funds despite volatile markets, Hedge Fund Research said Tuesday.
• German Auditors: German Banks, Insurers To Write-Down Greek Bonds In 2Q. German banks and insurers might have to write off 30%-50% of their exposure to Greek sovereign bonds in second quarter earnings reports, the head of the German auditors association IDW, Klaus-Peter Naumann, told Dow Jones Newswires Tuesday.
• Goldman(GS) Profit Misses Estimates; 1,000 Jobs to Be Cut. Goldman Sachs Group Inc. reported a second-quarter profit of $1.05 billion, significantly lower than expectations, as difficult markets led the Wall Street bank to reduce risk taking to the lowest levels in five years. The per-share earnings of $1.85 were 42 cents below the consensus expectations of analysts, only the fifth profit miss in its 12 years as a publicly traded company. "Certain of our businesses had disappointing results as we reduced our market risk in response to attempting to manage fluctuations in prices and market liquidity," said Chief Executive Lloyd Blankfein in a statement.
• Live Blog: Murdochs, Brooks Face UK Panel on Phone Hacking.
• Currency 'Fear' Gauges Show Anxiety as Europe Crisis Worsens. The currency market's fear gauges are flashing red as investors dump wagers that the euro will rise ahead of Thursday's European summit aimed at tackling Greece's financial crisis. A gauge of expected volatility in the euro/dollar exchange rate, based on options prices, has risen to about 13.6 from 13.2 on Friday--near its highest level of the year. A similar measure for the euro/Swiss franc rate hit 14.8, the highest level in two years.
• PPP Survey Shows Bachmann Ahead. Tea-party favorite Rep. Michele Bachmann (R., Minn.) took first place – just barely — in Public Policy Polling’s new national survey of Republican primary voters, besting former Massachusetts Gov. Mitt Romney 21% to 20%.
  

Fox Business:

• Exclusive: FBI Raids Homes of Suspected 'Anonymous' Hackers. The FBI executed search warrants at the New York homes of three suspected members of notorious hacking group Anonymous early Tuesday morning, FoxNews.com has learned. More than 10 FBI agents arrived at the Baldwin, N.Y., home of Giordani Jordan at 6:00 a.m.EST with a search warrant for computers and computer-related accessories, removing at least one laptop from the premises.

MarketWatch:

• IBM(IBM), Chips Give Strong Lift to Tech Stocks. Big Blue’s shares jump 3% on results; semiconductors gain on bullish note.

CNBC.com:

• European Central Bank Governing Council member Ewald Nowotny said that the bank isn't "able or willing to deal with the problems of specific countries," according to an interview. "For the ECB there is the very clear priority to maintain price stability, that is our compass, our clear goal," he said. "So whatever we do has to be seen in this context."
• House to Vote on Tea Party-Backed Debt Plan.
  

Business Insider:

• June Housing Starts Smash Expectations, With Big 14.6% Jump.

Zero Hedge:

• Senators Warn China That Escalation in South China Sea Threatens US "National Interests", China Likely to Retaliate.
• Moody's Warns That Any Fluff Deficit Reduction Plan Will Likely Result In Downgrade.
  

IHS:

• DRAM Price Reductions Decelerate in 2012. Slower advancements in semiconductor manufacturing technology this year will cause a deceleration in price reductions for dynamic random access memory (DRAM), according to the IHS iSuppli Memory and Storage Service from information and analysis provider IHS (NYSE: IHS). Following a drop of 14.2 percent in the first quarter of 2011, the global average decline in pricing for DRAM slowed to 12 percent in the second quarter. The rate of decrease is expected to decline to 9 percent in the third quarter and then dwindle to just 4 percent in the fourth quarter. The rate of decrease will further slow to just 1 percent in the first quarter of 2012, and then remain in the 3 to 4 percent range during the rest of 2012.

The Daily Beast:

• Piers Morgan's Murdoch Apologia. The CNN host and former News of the World editor says on his show that ex-boss Rupert Murdoch is victim of a witch hunt.
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 24% 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 -18 (see trends).

USA Today:

• Some Federal Workers More Likely to Die Than Lose Jobs. Federal employees' job security is so great that workers in many agencies are more likely to die of natural causes than get laid off or fired, a USA TODAY analysis finds. Death — rather than poor performance, misconduct or layoffs — is the primary threat to job security at the Environmental Protection Agency, the Small Business Administration, the Department of Housing and Urban Development, the Office of Management and Budget and a dozen other federal operations. The federal government fired 0.55% of its workers in the budget year that ended Sept. 30 — 11,668 employees in its 2.1 million workforce. Research shows that the private sector fires about 3% of workers annually for poor performance, says John Palguta, former research chief at the federal Merit Systems Protection Board, which handles federal firing disputes.

Telegraph:

• Only Germany Can Save EMU As Contagion Turns Systemic. Europe's leaders have finally run out of time. If they fail to agree on some form of debt pooling and shared fiscal destiny at Thursday's emergency summit, they risk a full-fledged run on South Europe's bond markets and a disorderly collapse of monetary union.

FAZ:

• Greece's creditors should agree to a reduction of the country's public debt by 50% to help it regain financial stability, Germany's five-strong council of economic advisers said in a joint article. That would cut debt to 106% of GDP from 160% of GDP, the council said. The debt reduction should be combined with an offer to investors to trade Greek bonds against European Financial Stability Facility bonds, the council said.

Chinamining.org:

• China Considers Expansion of Tax on Natural Resources. A plan regarding the expansion of the natural resources tax has been submitted to the State Council, China's cabinet for approval, as stated by an official from the State Administration of Taxation (SAT) on Saturday, according to the Shanghai Securities News Monday. Guo Xiaolin, deputy head of the general office at the SAT, made the statement at a press briefing Saturday. The scope for levying a natural resources tax will be expanded from including petroleum and natural gas to also including other resource products such as coal.
  

Bear Radar

Style Underperformer:

• Large-Cap Value (+.71%)

Sector Underperformers:

• 1) Gold & Silver -1.28% 2) Oil Tankers -.93% 3) HMOs -.26%

Stocks Falling on Unusual Volume:

• AVY, BRO, AEM, MMR, LNCR, GSVC, ZAGG and TAOM
  

Stocks With Unusual Put Option Activity:

• 1) LEAP 2) WHR 3) RTN 4) S 5) ECA
  

Stocks With Most Negative News Mentions:

• 1) USG 2) HK 3) AFAM 4) SMG 5) AN
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.92%)

Sector Outperformers:

• 1) Computer Services +3.48% 2) Networking +2.95% 3) Software +2.26%

Stocks Rising on Unusual Volume:

• SIMO, NETL, MSTR, IBM, TIBX, BT, IDCC, WBMD, NWSA, ASML, HANS, TZOO, JVA, CRZO, NUVA, ETFC, AOS, HOG, PII, NL, SKY, PDC, FXEN, LEN, MOS, MMI, MGM, TDC, HXL, IPG, CCE, WFC, STLD and ID
  

Stocks With Unusual Call Option Activity:

• 1) ALL 2) PCYC 3) TLT 4) BHI 5) IDCC
  

Stocks With Most Positive News Mentions:

• 1) BA 2) AAPL 3) GOOG 4) IBM 5) MSFT
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Tuesday Watch

Evening Headlines

Bloomberg:

• Euro Trades Near One-Week Low Before Debt Summit, Australian Dollar Gains. The euro was 0.7 percent from its lowest level in a week against the dollar on concern European leaders will be unable to agree on steps to contain the region’s debt crisis at a summit this week. The yen traded 0.9 percent from a one-week high versus the euro before Spain and Greece sell as much as 5.75 billion euros ($8.1 billion) of bills today amid concern surging bond yields threaten to boost financing costs. Australia’s dollar pared earlier gains after minutes of the July policy meeting showed the Reserve Bank has scope to extend an interest-rate pause partly because of risks posed by Europe’s debt crisis. “These sovereign issues continue to move from one stumbling block to the next,” said Richard Grace, chief currency strategist and head of international economics in Sydney at Commonwealth Bank of Australia. “The euro is probably going to head back down and test $1.40 again.” European Central Bank President Jean-Claude Trichet reiterated that the ECB rejects any solution to Greece’s debt crisis that involves default, selective default or a credit event in a joint interview with Estonian, Slovakian and Slovenian newspapers. Yields on Spanish and Greek bonds hit euro-era records yesterday. Spanish 10-year yields rose 25 basis points to 6.32 percent, taking the spread over German bunds to 367 basis points. Greek two-year yields surged 291 basis points to 36 percent. Italy’s 10-year yield increased 21 basis points to 5.97 percent. “Europe’s debt problem is getting very serious,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest listed bank. “We can’t really expect concrete measures to come out from the summit. That will likely continue weighing on the euro and accelerating flows into safe haven currencies.”
• Banks Face Tripling of Capital Levels as EU Moves on Basel III Regulations. Banks face demands from the European Union to more than triple the minimum levels of core capital they must hold to stave off insolvency under proposals that some lenders complain will hamper the region’s economic recovery. Michel Barnier, the EU’s financial-services chief, will propose tomorrow a law to implement global rules approved by the Basel Committee on Banking Supervision aimed at bolstering banks resilience to shocks. Lenders will need to raise about 423 billion euros ($595.5 billion) by 2019 to comply with the EU’s version of the Basel III rules, according to a draft of the EU proposals obtained by Bloomberg News. “A lot of existing capital will need to be replaced, it will not count any longer,” said Markus Heidinger, a partner dealing with financial regulation at law firm Wolf Theiss in Vienna. “At best, 10 percent of the work is done. It is just the beginning.”
• Accounting 'Red Flags' Drive Bond Spreads to Record Levels: China Credit. Borrowing costs have risen to record levels for Chinese companies marked with “red flags” by ratings firms for unclear financial reporting and high levels of private ownership. The extra yield investors demand to own the bonds of Nine Dragons Paper Holdings Ltd. (2689), LDK Solar Co. and Road King Infrastructure Ltd. (1098) instead of similar-maturity government debt widened to all-time highs after they were named by Fitch Ratings or Moody’s Investors Service for issues such as having changeable profit margins or long-serving independent directors. The bookkeeping of Chinese corporations has come under scrutiny after short sellers said companies from Longtop Financial Technologies Ltd. to Sino-Forest Corp. (TRE) were overstating profit margins or exaggerating asset holdings. Spreads on the nation’s company bonds widened 23 basis points this year to 146 basis points, compared with a one basis-point advance for company debt in the U.S., Bank of America Merrill Lynch indexes show. “No one knows everything about what’s really going on at some of these companies,” said Scott Bennett, Aberdeen Asset Management Asia Ltd.’s Singapore-based regional head of credit.
• BofA(BAC) Mortgage Settlements Magnify Capital Strain as $50 Billion Gap Looms. Bank of America Corp. (BAC) may have to build its capital cushion by $50 billion and renege again on Chief Executive Officer Brian T. Moynihan’s pledge to raise the firm’s dividend as mortgage losses drain funds. Expenses tied to soured home loans may total $20.4 billion in the second quarter, pulling the bank further from capital ratios demanded under new international standards, the Charlotte, North Carolina-based company said June 29. The gap may equal 2.75 percent of risk-weighted assets starting in 2013 -- at about $18 billion for each percentage point -- crimping Moynihan’s ability to raise dividends and repurchase shares. “They are likely to be in capital-building mode for longer than previously anticipated,” Jason Goldberg, a Barclays Capital analyst, said in an interview. For now, he said, “I’m hard-pressed to see meaningful capital redeployment.”
• Cisco(CSCO) Cuts 6,500 Workers, Record $1.3B in Costs. Cisco Systems Inc. (CSCO), the largest networking-equipment maker, plans to eliminate about 6,500 jobs, or 9 percent of its full-time workforce, to help trim $1 billion in annual costs and step up profit growth.
• Deutsche Bank(DB), SocGen, RBS(RBS) Face Pressure to Boost Funds After Stress Tests. Deutsche Bank AG (DBK), Royal Bank of Scotland Group Plc (RBS), Societe Generale SA and UniCredit SpA (UCG) may face pressure from investors to boost capital after scraping through Europe’s banking stress tests. Deutsche Bank, Germany’s largest bank, had a core Tier 1 capital ratio of 6.5 percent under the test’s adverse scenario. While that surpassed the 5 percent fail rate, it ranked eighth among the 12 German banks that participated and 57th overall among the 90 banks tested. Edinburgh-based RBS had a ratio of 6.3 percent, Societe Generale of Paris 6.6 percent and Milan- based UniCredit 6.7 percent.
• India Government Sees Growth Imperiled With Rising Greek-Like Tax Evasion. As Rama Murthy completes the sale of his three-bedroom apartment in the southern Indian city of Hyderabad, he accepts from the buyer a bag full of rupees -- a part of the purchase price the tax man will never see. “Almost 40 percent of the sale price I got in hard cash,” said Murthy, 39, who works at a software maker. “It’s illegal, but it’s rampant in India to avoid paying tax.”
• Apple(AAPL) Supplier Catcher Surges in Taipei as Citigroup(C) Raises Price Target. Catcher Technology Co., which makes metal casings for Apple Inc. computers, surged to the highest in four years in Taipei after Citigroup Inc. and Macquarie Group Ltd. both raised their share price estimate 22 percent. The stock jumped by the 6.9 percent daily limit to NT$224.50 as of 10:35 a.m. local time, the highest intraday price since July 13, 2007.

Wall Street Journal:

• Debt Worries Roil Markets. Worries about government debt rocked capital markets on both sides of the Atlantic Monday, as fears that the Greek crisis will spread combined with concerns at the standoff over the U.S. debt ceiling. The selloff started in Europe, hitting bonds and stocks in countries regarded as vulnerable to contagion from Greece, and spread to the U.S. where the Dow Jones Industrial Average ended at its lowest level since late June after a wild session.
• News of the World vs. WikiLeaks. Only one placed at risk 'the lives of countless innocent individuals.' How does this year's phone hacking scandal at the now-defunct British tabloid News of the World—owned, I hardly need add, by News Corp., the Journal's parent company—compare with last year's contretemps over the release of classified information by Julian Assange's WikiLeaks and his partners at the New York Times, the Guardian and other newspapers? At bottom, they're largely the same story.

CNBC:

• Special Report: Banks Continue Robo-Signing.
• IBM(IBM) Beats, Raises Forecast, Sending Shares Higher. IBM beat earnings expectations and raised its full-year guidance, helped by strong sales of its computers and software. Its shares rebounded in after-hours trading. The tech company reported earnings excluding items rose to $3.09 from $2.61 a share in the year-earlier period. The company also said signings of new business at its services division surged more than expected during the second quarter, and raised its full-year guidance by 10 cents to $13.25 a share; analysts had expected $13.22 a share.

Business Insider:

• The Unraveling: Afghanistan On The Edge Of Chaos.

Zero Hedge:

• Steve Wynn on Brack Obama: "This Administration Is The Greatest Wet Blanket To Business And Job Creation In My Lifetime".

CNNMoney:

• Borders Liquidates: 10,700 Jobs Lost. Borders Group will liquidate its remaining assets after efforts to find a buyer fell through, the bookstore chain announced Monday. The nation's second largest book seller, which filed for bankruptcy protection earlier this year, currently operates 399 stores and employs approximately 10,700 workers.
• Why Are Market Bears So Sleepy? The level of short interest, or number of shares being held by investors who borrow stocks and quickly sell them with the hopes of buying them back later at a lower price, is surprisingly low. According to research from Brockhouse Cooper, a Montreal-based brokerage firm, short interest on the New York Stock Exchange is just 3.4% of overall shares. That's about where this level was in December 2007 before the Great Recession began. And it's off sharply from the peak of 4.9% during the height of the 2008-2009 bear market panic.

Rasmussen Reports:

• Generic Congressional Ballot: Republicans 44%, Democrats 38%.
• 54% Favor Repeal of Health Care Law, 52% Say Law Will Increase Deficit. The latest Rasmussen Reports national telephone survey of Likely Voters shows that 54% favor repeal of the health care law passed in March of last year, including 43% who Strongly Favor its repeal. Thirty-nine percent (39%) oppose repeal of the law, including 26% who are Strongly Opposed.

Reuters:

• Wynn(WYNN) Profit Tops Street as Vegas Recovers. Wynn Resorts Ltd posted second-quarter profit and revenue that handily topped Wall Street estimates as revenue at its Wynn Macau unit soared 36.7 percent and business in Las Vegas improved.
• High Fertilizer Prices Help Mosaic(MOS) Beat Street. Rising fertilizer prices and robust food demand helped Mosaic Co post a better-than-expected quarterly profit on Monday. Shares of Mosaic rose 1.6 percent to $67.50 in after-hours trading.
• Murdoch Has Board Backing. News Corp independent directors are fully behind Rupert Murdoch, a board member told Reuters on Monday, as his iron grip on his vast media empire came under question because of the hacking scandal that already has consumed his London newspaper company.

Asahi:

• Cattle shipped from Japan's Yamagata and Niigata prefectures, as well as from Fukushima, may be contaminated with radioactive cesium, citing reports from the local governments. Farmers in the three prefectures have shipped a total of 648 cows fed with straw that contained high levels of cesium, the report said.

Xinhua:

• China's central government called for a crackdown on the "infiltration and sabotage" activities of separatist forces in Tibet. China needs to firmly safeguard national unification and stability in Tibet, citing a message by the Chinese central government.
• Chinese Vice President Xi Jinping vowed to fight against separatist activities by the "Dalai group," and "completely destroy" any attempt to undermine stability in Tibet and unity in China, citing Xi who made the comments during a speech in Lhasa.
  

South China Morning Post:

• Investors Steering Clear of Property. Confidence among investors in Hong Kong housing drops 58pc, more than any other asset class, as soaring values price people out of the market.

21st Century Business Herald:

• The southern Chinese city of Shenzhen will from Aug. 1 not allow home prices to rise on a month-to-month basis. Authorities from the districts of Baoan and Longgang are notifying property companies that home-price targets for the second half of this year will limit month-on-month price increases to zero. The previous target had capped home-price gains to below the economic growth rate, according to the report.

People's Daily:

• Chinese central bank adviser Zhou Qiren suggested contracting money supply and increasing the supply of goods to manage inflation. It is hard to expect good results if authorities only curb inflation by cracking down on high prices, Zhou said, according to the report.
• The Chinese Academy of Social Sciences called on the city of Beijing to use strict measures to rein in population growth in the nation's capital.
  

Evening Recommendations
Citigroup:

• Reiterated Buy on (HAL), raised estimates, boosted target to $70.
  

CSFB:

• Reiterated Outperform on (MOS), target $85.
  

RBC Capital:

• Rated (F) Outperform, target $19.
  

Night Trading

• Asian equity indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 127.0 +4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 128.75 +3.25 basis points.
  
• S&P 500 futures +.26%.
  
• NASDAQ 100 futures +.26%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CMA)/.54
• (HOG)/.72
• (KEY)/.20
• (KO)/1.16
• (BTU)/1.06
• (MMR)/-.14
• (STT)/.97
• (UNH)/.89
• (BK)/.56
• (BAC)/.29
• (OMC)/.92
• (AMTD)/.29
• (JNJ)/1.24
• (GWW)/2.11
• (WFC)/.69
• (FRX)/.96
• (GS)/2.30
• (SYK)/.90
• (CMG)/1.67
• (ALTR)/.64
• (ISRG)/2.71
• (RVBD)/.21
• (YHOO)/.18
• (CTAS)/.43
• (VMW)/.47
• (CSX)/.44
• (AAPL)/5.87
• (FTNT)/.08

Economic Releases
8:30 am EST

• Housing Starts for June are estimated to rise to 575K versus 560K in May.
• Building Permits for June are estimated to fall to 595K versus 612K in May.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Hoenig speaking and the weekly retail sales reports could also impact trading today.
  

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

Stocks Falling into Final Hour on Soaring Eurozone Debt Angst, US Debt Ceiling Concerns, Financial Sector Pessimism, Global Growth Worries

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 21.46 +9.88%
  
• ISE Sentiment Index 102.0 +67.21%
  
• Total Put/Call .93 -13.89%
  
• NYSE Arms 1.78 +44.78%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 99.25 +2.24%
  
• European Financial Sector CDS Index 174.05 +10.31%
  
• Western Europe Sovereign Debt CDS Index 302.17 +3.78%
  
• Emerging Market CDS Index 226.07 +2.29%
  
• 2-Year Swap Spread 29.0 +1 bp
  
• TED Spread 21.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 255.0 unch.
  
• China Import Iron Ore Spot $174.40/Metric Tonne -.11%
  
• Citi US Economic Surprise Index -98.0 +1.9 points
  
• 10-Year TIPS Spread 2.33% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -105 open in Japan
• DAX Futures: Indicating +40 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech, Biotech and Retail sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered them
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 breaks convincingly below its 50-day moving average on soaring eurozone debt angst, US debt ceiling concerns, emerging markets inflation fears, global growth worries and financial sector pessimism. On the positive side, Coal, Restaurant, Education and Computer Service shares are holding up well. "Growth" stocks are outperforming "value" again. Oil is falling -1.5% and the UBS-Bloomberg Ag Spot Index is down -.5%. On the negative side, Airline, Gaming, Homebuilding, Insurance, Bank, Networking, Paper, Steel, Oil Tanker and Alt Energy shares are especially weak today, falling more than -2.0%. Small-cap and cyclicals are underperforming. (XLF) has traded poorly again throughout the day. The Transports, which had been leading the market, are heavy again today. Gold is up +.75%. Rice is hovering near a multi-year high and has soared almost +30.0% in about 2 weeks. The US price for a gallon of gas is +.01/gallon today to $3.68/gallon. It is up .54/gallon in less than 5 months. The Spain sovereign cds is up +9.86% to 380.11 bps, the Italy sovereign cds is jumping +6.32% to 321.11 bps, the France sovereign cds is surging +9.77% to 123.32 bps, the Germany sovereign cds is jumping +8.9% to 63.77 bps, the Greece sovereign cds is rising +1.9% to 2,475.0 bps, the Belgium sovereign cds is gaining +7.4% to 216.31 bps, the Portugal sovereign cds is up +5.3% to 1,204.60 bps and the Ireland sovereign cds is up +5.4% to 1,190.15 bps. The Germany sovereign cds is breaking out technically and is at the highest level since March 2009. The Western Europe Sovereign CDS Index is making another record high and the European Financial Sector CDS Index is near its recent high. The Ireland, France, Greece and Portugal sovereign cds are making a new record highs today, as well. The China Development Bank(which lends heavily to local governments) cds is rising +4.0 bps to 177.0 today, which is the highest since May 2009. Shanghai copper inventories have risen +45.0% in 5 days. Brazil's Bovespa fell another -1.03% today to the lowest since May 2010 and is down -15.1% ytd. Italian equities fell another -3.1%, finishing at session lows, and are down -11.3% ytd. As well Spanish shares fell another -1.44% and French shares fell another -2.04%, both finishing near session lows. I continue to believe US debt ceiling concerns are masking underlying euro currency weakness. Many true "growth" stocks continue to massively outperform the broad market. If the eurozone debt situation continues to spin out of control through week's end, another imminent test of the S&P 500's 200-day moving average is likely. I expect US stocks to trade mixed-to-high into the close from current levels on a bounce off the lows in the euro, bargain-hunting, short-covering and growth stock strength.