Stocks Slightly Lower into Final Hour on Eurozone/US Debt Uncertainty, Profit-Taking, More Shorting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 18.97 -1.25%
  
• ISE Sentiment Index 190.0 +59.66%
  
• Total Put/Call .84 +25.37%
  
• NYSE Arms .87 +38.20%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.54 -3.03%
  
• European Financial Sector CDS Index 163.66 -2.21%
  
• Western Europe Sovereign Debt CDS Index 296.50 -1.55%
  
• Emerging Market CDS Index 220.11 -.60%
  
• 2-Year Swap Spread 27.0 -2 bps
  
• TED Spread 24.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.
  
• Yield Curve 256.0 +5 bps
  
• China Import Iron Ore Spot $174.40/Metric Tonne +.11%
  
• Citi US Economic Surprise Index -94.40 +.3 point
  
• 10-Year TIPS Spread 2.31% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +45 open in Japan
• DAX Futures: Indicating +17 open in Germany

Portfolio:

• Higher: On gains in my Tech and Medical sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 hugs the flatline despite another decline in eurozone debt angst, more US debt ceiling optimism, financial sector strength, buyout speculation and earnings optimism. On the positive side, REIT, Bank, I-Banking, Ag and Utility shares are especially strong, rising more than +.75%. (XLF) has substantially outperformed throughout the day. The France sovereign cds is dropping -10.52% to 102.43 bps, the Spain sovereign cds is down -3.93% to 341.82 bps, the Italy sovereign cds is down -5.03% to 287.22 bps, the Belgium sovereign cds is falling -6.1% to 190.05 bps, the Ireland sovereign cds is falling -8.46% to 1,063.90 bps, the Greece sovereign cds is falling -3.82% to 2,382.90 bps and the UK sovereign cds is declining -6.1% to 68.81 bps. Moreover, the Eurozone Investment Grade CDS Index is dropping -5.5% to 99.13 bps. The US sovereign cds is falling -3.87% to 52.48 bps. Spanish and Italian equities surged +3.0% today, finishing at session highs. On the negative side, Airline, Software, Oil Tanker, Internet, Semi, Computer Service, Networking and Biotech shares are under pressure, falling more than -.75%. Oil is rising +.42%, lumber is falling -2.15% and copper is falling -.72%. Rice is rising +1.33%, 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 unch. today at $3.68/gallon. It is up .54/gallon in less than 5 months. The Western Europe Sovereign CDS Index is still near its record high. Chinese and Indian equities were unable to rally with the rest of the world overnight. As well, Brazil's Bovespa still trades very poorly. While today's action is a bit disappointing for the bulls, with so much uncertainty regarding the Eurozone/US debt situations and recent stock gains, today's performance isn't too bad. Furthermore, the large decline in many key eurozone sovereign cds is a large positive. If this continues through tomorrow I would expect to see another push higher in stocks. One of my longs, (ISRG), is breaking to a record high today on volume after delivering a stellar earnings report. The stock is extended short-term, but I still see significant upside to the shares from current levels over the longer-term. 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:

• Papandreou Sees Make-or-Break Time in Debt Crisis on Eve of Europe Summit. Greek Prime Minister George Papandreou says Europe’s leaders need to show tomorrow that they can resolve the European Union debt crisis to avoid a contagion enveloping Italy and Spain. “It could be a make-or-break moment for where Europe is going,” Papandreou said during an interview in his Athens office at Parliament yesterday. “Markets are saying pretty much what I’m saying too: that Greece is doing what it can, but that Greece is not going to be able to carry the weight of all of Europe and the other problems that Europe has.”
• Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show. The cost of insuring against default on sovereign and corporate bonds fell for a second day on optimism agreements will be reached to resolve debt crises in the U.S. and Greece. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 17 basis points to 278 at 11:30 a.m. in London. Swaps on U.S. Treasuries fell 3 basis points to 51, down from a 2 1/2-year high of 56 on July 18, according to CMA. Swaps on Greece dropped 58 basis points to 2,442, according to CMA. Ireland tumbled 72 to 1,084, Portugal decreased 83 to 1,099 and Spain fell 23.5 to 334.5, while Italy declined 19 to 286. France fell 11 to 104 and Belgium was 15 lower at 189. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 19 basis points to 442, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 4.5 basis points to 119.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 13 basis points to 175 and the subordinated index dropped 24.5 to 305.
  
• Existing-Home Sales in U.S. Fell .8% in June. Sales of previously owned U.S. homes unexpectedly declined in June to a seven-month low as the industry struggled to overcome rising unemployment and foreclosures.
• BofA(BAC) Jumps as Analysts Dismiss Capital Hike. Bank of America Corp. (BAC) gained the most in four months of New York trading as analysts from Wells Fargo & Co., Citigroup Inc. (C) and Nomura Holdings Inc. wrote that the biggest U.S. lender probably won’t need to raise capital. The bank rose 40 cents, or 4.1 percent, to $9.97 at 11:13 a.m. in New York Stock Exchange composite trading.
• Amazon(AMZN) Boosts Netflix(NFLX), Hulu Rivalry With CBS Deal. Amazon.com Inc. (AMZN), escalating its competition with Netflix Inc. (NFLX) and Hulu LLC, reached an agreement allowing customers to watch thousands of the CBS television shows online. The non-exclusive agreement with CBS Corp. (CBS) adds 2,000 episodes of shows, including full seasons of “Numb3rs” and “Medium” at no additional cost to subscribers of the Amazon Prime service, the world’s largest online retailer said today in a statement.
• Zillow(Z) Triples to $60 in Stock Market Debut. Zillow Inc., an online real estate information service, more than doubled in its trading debut after selling shares above an increased price range. The shares, trading on the Nasdaq Stock Market under the symbol Z, climbed to $43.21 at 11:26 a.m. New York time, after earlier surging to $60. Zillow had raised the price range on the IPO to $16 to $18 a share earlier this month, after initially proposing to sell at $12 to $14. Citigroup Inc. (C) was the lead underwriter for the offering.
• AllianceBernstein(AB) Stops Bets Against Dollar, Starts Shorting Euro, Pound. AllianceBernstein LP, a New York- based fund manager with $460 billion in assets, said it ended its bets against the dollar as the debt crisis in the euro region deteriorates. The U.S. unit of French insurer Axa SA (CS) has moved to a so- called neutral position on the dollar, according to Anthony Chung, its London-based director of research and currency strategies. That means its holdings match the weight suggested by indexes used to benchmark performance. AllianceBernstein is also betting on a weaker euro and British pound, as well as strength for Scandinavian currencies and the Swiss franc. “The dollar is cheap at the current level, as a lot of bad news has been discounted,” Chung said in an interview. “We are slightly more positive on the dollar now. We were a bit short three months ago. Another reason is that the debt problem in Europe is getting worse.”
• Gundlach's Hedge Fund Said to Rise 28% on Mortgage-Backed Bond Investments. Jeffrey Gundlach’s hedge fund has gained 28 percent since its Sept. 1 start, driven by bets on mortgage-backed securities, according to an investor briefed on the returns. The DoubleLine Opportunistic Income Fund, which invests in fixed-income securities, is up 16 percent through the first half of the year, net of fees, said the investor, who asked not to identified because the information is private.
• Japan Can't Rule Out Possible Export of Contaminated Beef. Japan's government said it can't rule out the possibility beef contaminated with radioactive material has been exported, as consumers and lawmakers accused authorities of negligence on food safety. "We cannot completely rule out the possibility" contaminated beef was beef was also sold abroad, Yuichi Imasaki, the deputy director of the farm ministry's meat and egg division said by phone.
• Massachusetts Suing RBC Capital, Agent Over 'Dishonest' Leveraged ETF Sale. Massachusetts’ top securities regulator is suing RBC Capital Markets LLC and one of its former registered representatives over the sale of leveraged exchange- traded funds, saying they sold them to clients who didn’t understand how the investments worked.
• SEC Weighs Approving System to Monitor Biggest Traders' Activity. The U.S. Securities and Exchange Commission said it will decide July 26 whether to establish a system to watch the trading behavior of big market participants including high-frequency trading firms and hedge funds. The system, proposed three weeks before the May 6 crash that temporarily erased $862 billion in market value of U.S. shares, would apply to firms that buy and sell at least 2 million shares a day. Traders that execute $20 million of equities a day or $200 million in a month also would qualify.

Wall Street Journal:

• Obama Open to Short-Term Debt Deal. President Barack Obama is open to a short-term deal to raise the debt ceiling if the White House and congressional leaders need just a bit more time to finalize a large deal to slash the country's deficit, White House press secretary Jay Carney said Wednesday. Mr. Obama remains opposed to a short-term stand-alone deal to raise the country's debt ceiling. "We believe a short-term extension absent an agreement to a larger deal is unacceptable," Mr. Carney said at the White House.
• China Gives Details of Bloody Ethnic Clash. China offered new details of a bloody battle in its restive Xinjiang region this week, with state media saying police shot dead 14 rioters in the clash and a local government website publishing the first photographs of the incident. Local officials have described the violence Monday in the remote city of Hotan as a terrorist attack by separatists from the mostly Muslim ethnic Uighur minority. The government hadn't previously said how many assailants died in the incident, saying only that two security personnel and two civilian hostages had been killed.
• BofA(BAC) Merrill Lynch Rolls Out High-Frequency Powered Trading Platform. Bank of America Merrill Lynch (BAC) has launched a high-speed system for electronic stock trading, built for the bank by a high-frequency trading firm. The platform, called BofAML Express, aims to provide rapid connections to U.S. securities exchanges alongside new risk control measures now required by the Securities and Exchange Commission.
• Meet Google's(GOOG) Latest Takeover Target: InterDigital(IDCC).
• BigBand(BBND) Sees AT&T as Significant Customer in 2nd Half.
  

MarketWatch:

• Apple(AAPL) Shares Still a Bargain, Street Says. Analysts pump up estimates, targets following blow-out results.

CNBC.com:

• Banks Say Euro Zone Levy for Greece Wrong Option: Sources. Banks may launch lawsuits if a euro zone bank levy is imposed on the industry to help fund a rescue of Greece as it would unfairly punish banks not exposed to the country, two bank industry sources said on Wednesday. A tax on euro zone banks to raise 10 billion euros a year for three years has been proposed, but that would send a completely wrong signal by punishing banks regardless of their holdings, the sources said.
• US Bancorp(USB) Earnings Rise as Loan Losses Ease. Shares of US Bancorp last rose about 4 percent.

Business Insider:

• Dreamworks CEO: It's Unbelievable How Bad Movies Are Right Now.
• Mind-Melting Facts About Apple's(AAPL) June Quarter.
• Here's Everything You Need to Know About Tomorrow's Huge EU Meeting.
• NYU Professor Catches 20% of His Students Cheating, And He's The One Who Pays For It.
• The Case For A Hard Landing in China.
  

Atlantic Wire:

• Welcome to China's Fake Apple(AAPL) Store. (pics)

Philly.com:

• Penn State Report Even More Bullish on Marcellus Shale. An updated Pennsylvania State University economic study of the Marcellus Shale gas boom is even more bullish than past reports, projecting that Pennsylvania could supply a quarter of the nation's natural gas by 2020.

Gallup:

• Obama Job Approval: 48% Disapprove, 42% Approve. (graph)

Politico:

• Ethics Panel Outsources Waters Case. Stung by allegations of misconduct within the panel, the House Ethics Committee has hired an outside counsel to take over the case against Rep. Maxine Waters.

The Economic Times:

• Real Estate Sale Registrations in Mumbai Hit 24-Month Low. Mumbai, the largest residential market in the country, has hit a new 24-month low as far as sale registrations are concerned. For the month of June, the city clocked a 27% dip in sales registrations, which is close to the levels that were last seen during June 2009. A monthly report on Mumbai real-estate, published by Prabhudas Lilladher, paints a grim picture of the city's realty space. "With no visible signs of a meaningful correction in prices, affordability continues to remain a major cause of concern..." the report states. "The current sales environment is likely to be much worse than what is reflected in the already low June sale registration figures, as the June numbers will reflect sales that have happened in March and April," it added. A couple of days ago, global property consultants, Knight Frank came out with a similar report that talked a crisis brewing in Mumbai's realty space.

Xinhua:

• Beijing's commercial housing sales dropped 20% to 3.89 million square meters in the first half from a year earlier, citing the city statistics bureau.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-.59%)

Sector Underperformers:

• 1) Software -1.17% 2) Networking -.93% 3) Airlines -.59%

Stocks Falling on Unusual Volume:

• RVBD, YHOO, OPNT, INFA, CEO, FCFS, MO, FTNT, LUFK, CTRN, AMAG, ICLR, WBMD, AIXG, ALTR, FFIV, YHOO, ARUN, APKT, VECO, ECL, SYK and HBI
  

Stocks With Unusual Put Option Activity:

• 1) STJ 2) YNDX 3) FRO 4) MUR 5) DO
  

Stocks With Most Negative News Mentions:

• 1) NOG 2) CSIQ 3) EE 4) ABFS 5) F
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value (+.33%)

Sector Outperformers:

• 1) I-Banking +3.39% 2) Banks +1.71% 3) Agriculture +.80%

Stocks Rising on Unusual Volume:

• STD, USB, FULT, AAPL, CHL, BP, LNG, MUR, VMW, BIDU, GIB, ETFC, IDCC, ISRG, CTAS, MANH, RYAAY, CRUS, AMTD, ARMH, NTRS, RDEN, QCOM, ZAGG, EQIX, OVTI, VRUS, NLC, PJC, CLX, URI, BA, KCG, SPR, TAOM and BBG
  

Stocks With Unusual Call Option Activity:

• 1) SLM 2) ILMN 3) STJ 4) LTD 5) XL
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) CMG 3) GOOG 4) ISRG 5) WMT
  

Charts:

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

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.