Wednesday Watch

Evening Headlines

Bloomberg:

• Fed Policy of Holding Rates Near Zero Subsidizes Large Banks, Hoenig Says. The U.S. central bank’s policy of holding interest rates near zero is a subsidy for large banks and redistributes wealth from savers to debtors, said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City. Banks can borrow at 0.25 percent and buy Treasury bonds that yield 3 percent, keeping the difference. “It provides them a means to generate earnings and restore capital, but it also reflects a subsidy to their operations,” he said to the House Subcommittee on Domestic Monetary Policy and Technology today in Washington. “It is not the Federal Reserve’s job to pave the yield curve with guaranteed returns for any sector of the economy, and we should not be guaranteeing a return for Wall Street or any special interest group,” he said. The central bank’s policy of holding rates near zero also “redistributes wealth in this country from the saver to debtor by pushing interest rates on deposits and other types of assets below what they would otherwise be,” he said. The effect “requires savers and those on fixed incomes to subsidize borrowers.”
• Palestinians Say Time Is Right for Statehood. Palestinians have made a “final decision” to pursue the first formal step toward recognition of statehood and United Nations membership in September, the Palestinian Authority’s envoy to the world body said today. Ambassador Riyad Mansour announced a “march to legislation” at the UN, saying his government “can’t wait any longer for the government of Israel to negotiate with us in good faith.” The initial move will come at the opening of the UN General Assembly in New York in late September, he said. The Palestinian decision defies pressure from the Obama administration, which has said the move will undercut efforts to restart direct Israeli-Palestinian talks, and jeopardizes U.S. aid to the Palestinian Authority. The Senate on June 28 passed by unanimous consent a resolution with 89 co-sponsors that calls for President Barack Obama to consider “restrictions on aid” if the Palestinians proceed at the UN.
• Oil Company Subpoenas Said to Be Readied by FTC in Gasoline Price Probe. The U.S. Federal Trade Commission is preparing to issue subpoenas to oil companies and refiners as it probes rising gasoline prices, a person familiar with the matter said.
• Female U.S. Senators Call on Saudi Arabia to Let Women Drive. Fourteen female U.S. senators called on Saudi Arabia today to end its ban on women driving cars, adding new public support to a once-quiet campaign to change Saudi policy. In a letter to King Abdullah, the senators called on the kingdom to honor its commitments to the United Nations Human Rights Council and the Arab Charter on Human Rights by giving women the right to drive. “The prohibition on women driving motor vehicles, even in cases of emergency, makes it impossible for citizens to exercise a basic human right,” wrote Senator Barbara Boxer of California, the second-ranked Democrat on the Senate Foreign Relations Committee, along with 13 colleagues from both political parties.
• India Signals Tougher Inflation Resolve to Avert 'Hard Landing' of Economy. The Reserve Bank of India signaled it’s prepared to accept a slower expansion to pull down an inflation rate that risks causing a crash in the pace of growth in Asia’s third-largest economy if left unchecked. Governor Duvvuri Subbarao was forced to escalate what was already the steepest increase in borrowing costs among major Asian economies, after household expectations for inflation exceeded 12 percent, above the 9.44 percent current pace. The bank will add another half point to the benchmark rate by the end of 2011, the median of 11 estimates in a Bloomberg survey yesterday showed. “Policy makers now have accepted that demand is the underlying driver of inflation and needs to be brought down to cool inflation and avoid a hard landing,” said Jahangir Aziz, an economist at JPMorgan Chase & Co., who previously worked at India’s finance ministry and the International Monetary Fund. “Capacity constraints are much tighter and demand pressures much higher than they had thought.”
• Steelmaker Yields Rise as Record Redemptions Near: China Credit. Steel companies in the world's biggest producer of the metal face a record amount of debt redemptions as an oversupply of the commodity in Asia threatens to slash prices and trim profits. "China continues to see surplus capacity in the market and the larger companies are suffering from cash constraints due to lower profitability," said Helen Wang, a Hong Kong-based basic-materials analyst at MF Global Holdings Ltd, in a phone interview. "Steel companies could face the possibility of higher costs to refinance their debt, especially in a tighter monetary cycle."
• Oil Falls in New York After Industry Report Shows U.S. Stockpile Increase. Oil fell in New York as investors bet that rising U.S. crude stockpiles indicated fuel demand may falter in the world’s biggest consumer of the commodity. Futures slipped as much as 0.5 percent today after the industry-funded American Petroleum Institute said inventories climbed 3.96 million barrels to 358.2 million last week. Crude for September delivery slid as much as 54 cents to $99.05 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.16 at 10:58 a.m. Sydney time. The contract yesterday climbed 39 cents, or 0.4 percent, to $99.59. Prices are 28 percent higher the past year.
• SEC Will Track Biggest Traders' Activity. The U.S. Securities and Exchange Commission will impose a system to monitor the behavior of high- frequency trading firms and hedge funds under new reporting standards for the most active market participants. SEC commissioners voted 5-0 today to adopt a tracking system for firms that buy and sell at least 2 million shares a day or meet other volume standards. The system, initially proposed three weeks before the May 2010 crash that temporarily erased $862 billion in U.S. share value, aims to help guard against market abuse and manipulation. “The collection of this information is particularly important given the increasingly prominent role played by very active market participants including high-frequency traders,” SEC Chairman Mary Schapiro said before the vote.
• Sovereign Ratings Should Be Free of Politics, S&P's Sharma Says. Credit-rating firms, which have weighed in on the debate over the U.S. debt ceiling, should be free from political pressure when they assess sovereign debt, Deven Sharma, the president of Standard & Poor’s, will tell lawmakers and regulators at a congressional hearing. “In a global economy where we rate more than 120 sovereign governments, it is particularly important that rating methodologies not become subject to influence by one or more countries seeking to benefit its own rating, which would undermine the independence, comparability and value of ratings to all,” Sharma said in testimony prepared for a House Financial Services subcommittee hearing tomorrow.
• Shanghai to Step Up Probes of Home Prices. Shanghai's government will step up inspections on the pricing of new homes to ensure that they aren't set at "unreasonably" high prices, as part of a nationwide effort to curb excessive gains.
• Juniper's(JNPR) Second-Quarter Sales, Profit Fall Short of Analysts' Estimates. Juniper Networks Inc. (JNPR), the second- largest maker of Internet networking equipment, reported quarterly sales and profit that fell short of analysts’ estimates after some customers postponed buying gear. Second-quarter profit excluding certain costs was 31 cents a share, the Sunnyvale, California-based company said today in a statement. Revenue rose 15 percent to $1.12 billion from $978.3 million a year earlier. Analysts on average projected profit of 33 cents a share and sales of $1.15 billion, according to a data compiled by Bloomberg. The shares fell as much as 17 percent.

Wall Street Journal:

• What's Wrong With America's Job Engine? Wary Companies Rely on Temps, Part-Timers, Hire Overseas. What's wrong with the American job engine? As United Technologies Corp. Chief Financial Officer Greg Hayes put it recently: "Sales have come back, but people have not.'' That's largely because the economy is growing much too slowly to absorb the available work force, and industries that usually hire early in a recovery—construction and small businesses—were crippled by the credit bust. Then there's the confidence factor. If employers were sure they could sell more, they would hire more. If they were less uncertain about everything from the durability of the recovery to the details of regulation, they would be more inclined to step up their hiring.
• Soros Investment Chief's Departure Comes Amid Poor Performance. George Soros’s move to return money to outside investors, and his top investment pro’s abrupt departure from Mr. Soros’s firm, come amid disappointing performance. His firm, Soros Fund Management LLC, has lost about 6% so far this year through the second quarter, according to a person familiar with the matter. That compares with a gain of 7.5% for the Standard & Poor’s 500, and a loss of 2.3% for the average ‘macro’ hedge-fund manager through the first half of the year, according to Hedge Fund Research. Last year, the firm gained 2.5%, below the nearly 13% price gain for the S&P 500.
• Valeant(VRX) Makes Approach For Meda. Valeant Pharmaceuticals International Inc. has made a takeover approach for Swedish specialty drug maker Meda AB, people familiar with the matter said, a deal that if consummated could be worth over $4 billion and mark the latest sign that a global wave of healthcare consolidation is underway.
• Illumina(ILMN) 3Q Net Up 2.8%, Shares Fall On Modest Boost To Outlook. Illumina Inc.'s (ILMN) third-quarter earnings rose 2.8% as revenue growth outstripped its higher costs, and the maker of biotechnology instruments raised its projections for this year. But shares were down 8.3% at $63.87 after hours as the boosted outlook was still short of analysts' expectations.
• The GOP's Reality Test. The Speaker has made mistakes in his debt negotiations, not least in trusting that Mr. Obama wants serious fiscal reforms. But thanks to the President's overreaching on taxes, Mr. Boehner now has the GOP positioned in sight of a political and policy victory. If his plan or something close to it becomes law, Democrats will have conceded more spending cuts than they thought possible, and without getting the GOP to raise taxes and without being able to blame Republicans for a debt-limit crackup or economic damage. If conservatives defeat the Boehner plan, they'll not only undermine their House majority. They'll go far to re-electing Mr. Obama and making the entitlement state that much harder to reform.

MarketWatch:

• NASDAQ Short Interest Down 1.1%. Short interest in Nasdaq-listed stocks dropped 1.1% in the first half of July from the prior two-week period, according to the exchange's semimonthly statistic.

Business Insider:

• The Government Just Admitted For The First Time It Is Using Cell Phone Data To Track Your Location. A group of Senators questioned the general attorney for the National Security Agency Tuesday about whether U.S. intelligence agencies are using cell phone geo location data to track U.S. citizens without their knowledge. According to The Wall Street Journal, the leader of the National Counterterrorism Center Matthew Olson told the Senate Select Committee on Intelligence that: "There are certain circumstances where that authority may exist."
• Chinese Luxury Price Inflation Is Even Crazier Than Overall Price Inflation. HuRun, which calculates an alternative luxury index for a basket of 61 high-end goods and services (38 of which are imported), said the prices of luxury goods in China were up 7.73% this year, compared with a 6.4% inflation rate for consumer goods overall. Notably, yachts and jets have seen the largest price surges, rising 22.1% over last year's prices. The cost of cosmetics and accessories have risen 16.6%, while luxury property prices have jumped 14.4%, HuRun said.

Zero Hedge:

• Watch Kansas Fed's Hoenig Explain Why He Is Not A Fan Of QE3 And Why He Believe Buying Government Debt Is Dangerous.

NY Times:

• U.S. May Have Way to Cover Bills After Deadline. Thanks to an inflow of tax payments and maneuvering by the Treasury Department, the government can probably continue to pay all of its bills for several days after Aug. 2, providing potentially critical breathing room for Congress to raise the debt ceiling, according to estimates by several Wall Street banks and a Washington research organization. The consensus is that the government will not run short of money until Aug. 10.

Forbes:

• Humphrey-Hawkins Meets the IMF. Noting that joblessness and bleak career prospects for the young are a factor in not only unrest-gripped emerging nations but most developed countries as well, Lagarde told the Council on Foreign Relations that this issue is part of a “social instability” challenge to be met at the Fund. (It was one of three “challenges,” she said, the other two being sovereign debt and economic growth. Growth and social instability meet at the workplace. )
• This U.N. Program Should Have Taxpayers Seeing REDD. While the Obama administration’s push to regulate domestic greenhouse gas emissions has mostly stalled, the worldwide fight for carbon suppression continues. Consider an ambitious United Nations effort that, while not widely known in the U.S., has implications for developing world economic growth and for American taxpayers.

Washington Post:

• Hero to Liberals, Soros Ends Hedge Fund Career to Escape Regulations. George Soros, the liberal left’s most prominent billionaire donor and activist, is winding down his career as a hedge fund manager, marking a major milestone in a financial and philanthropic career that spanned four decades. Citing new rules that would have required it to submit to more federal oversight, Soros’ management firm said Tuesday that it plans to close its $25.5 billion funds to outside investors and become a family-only enterprise. The move raised eyebrows in financial circles because Soros was an outspoken advocate for reforming Wall Street in the wake of the financial crisis. The change also enables Soros, who turns 81 next month, to become further involved in various philanthropic and political causes to which he has already devoted more than $7 billion, according to a person familiar with the company, who spoke on the condition of anonymity to discuss the firm’s transition. To liberals, Soros has towered as a prominent source of financial support. “He helped to build some of the progressive infrastructure that has, I think, made a significant difference in the debate,” said Robert Borsage, co-director of the Campaign for America’s Future, one of the liberal groups funded by the Democracy Alliance. “But perhaps his most important philanthropy in this area has yet to come.” Borsage points to Soros’s recent backing of the Institute for New Economic Thinking, a group devoted to promoting liberal economic policies, as a next step in countering the spread of conservative thought in academia. “George is distinctive in his philanthropy for his understanding of the importance of ideas,” Borsage added. Ironically, Soros’s backing for the sweeping financial reforms — which was embodied in landmark legislation enacted by Congress last year — helped put an end to his time in the hedge fund business. The act requires hedge funds, which manage pools of money on behalf of investors, to register with the Securities and Exchange Commission by early next year. “An unfortunate consequence of these new circumstances is that we will no longer be able to manage assets for anyone other than a family client as defined under the regulations,” the firm’s deputy chairmen, Jonathan Soros and Robert Soros, wrote in a letter to investors Tuesday.

Gateway Pundit:

• Long-Term Federal Budget Surplus/Deficit Graph.

The Blaze:

• Ohio Fall Ballot Cleared: Voters To Decide If State Opts Out Of Obamacare.

Politico:

• White House Press Secretary Jay Carney Mocks Press.
• Debt Ceiling Scenario Mulled by Congress.
  

Rasmussen Reports:

• Generic Republican Candidate 48%, Obama 42%.

Reuters:

• Las Vegas Sands(LVS) Q2 Swings to Profit, Shares Up. Las Vegas Sands Corp , the casino operator run by billionaire Sheldon Adelson, swung to a net profit in the second quarter, bolstered by improved business in the world's two most lucrative gambling markets, Macau and Singapore.
• S&P Sees 2nd Greek Debt Haircut, New Downgrade - CNBC. A new and bigger restructuring of Greek debt is likely within the next two years, an official from credit ratings agency Standard & Poor's said on Tuesday, adding a further downgrade of Greece's sovereign debt rating was "pretty certain." "The rating has a negative outlook, so we're pretty certain it's going to go lower because, of course, an actual debt restructuring is now on the table," David Beers, S&P's global head of sovereign ratings, told CNBC television.
  
• Panera(PNRA) Sales Miss Forecast, Shares Fall. Panera Bread Co (PNRA.O) reported softer-than-expected second-quarter sales at established restaurants, and its shares fell 4 percent after hours on Tuesday.
• Amazon(AMZN) Revenue, Spending Surges. Amazon.com Inc will use its surging revenue to boost growth and drive expansion into areas such as Web content and cloud computing rather than boost its margins. The largest Internet retailer reported a jump in quarterly revenue on sales of its Kindle electronic reader and other electronics and forecast better-than-expected revenue for the current quarter, sending its shares up more than 6 percent late on Tuesday.

Financial Times:

• Foreign Investment in Brazil Market Dives 70%.

BBC:

• Lockerbie Bomber Seen On TV Rally. The man convicted of blowing up a plane over the Scottish town of Lockerbie in 1988 has appeared at a rally broadcast by Libyan state television. Abdelbaset al-Megrahi was released from prison in Scotland almost two years ago on health grounds. Introducing him at a televised rally of members of Megrahi's tribe, the presenter said his conviction was the result of a conspiracy. He said his release had been a victory against oppression. The 1988 bombing of the US airliner, flying from London to New York, killed 270 people.

Shanghai Securities News:

• China may publish a new list of cities that will be required to limit home purchases by families in two months. The eastern Chinese cities of Kunshan, Jiaxing, Changshu and Yangzhou and the southern Chinese city of Zhuhai are likely to be on the list. The State Council this month said second and third-tier cities that have seen excessive price gains should restrict the number of homes each family is allowed to buy.

Financial News:

• China may raise interest rates at least once by the end of the year, citing experts.

Evening Recommendations
Citigroup:

• Reiterated Buy on (HSY), target $65.
• Reiterated Buy on (ILMN), target $90.

Piper Jaffary:

• Upgraded (TSCO) to Overweight, raised target to $80.
  
• Upgraded (PETM) to Overweight, raised target to $53.
• Upgraded (DLTR) to Overweight, raised target to $87.
  

Night Trading

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 115.50 -1.5 basis points.
  
• Asia Pacific Sovereign CDS Index 117.0 -1.25 basis points.
  
• S&P 500 futures +.15%.
  
• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DPS)/.76
• (GLW)/.47
• (PX)/1.37
• (ENR)/1.25
• (IACI)/.38
• (DBD)/.31
• (AET)/1.08
• (WLP)/1.80
• (DOW)/.79
• (ZMH)/1.19
• (BA)/.97
• (R)/.77
• (COP)/2.21
• (DAL)/.44
• (OII)/.48
• (TER)/.41
• (V)/1.23
• (AFL)/1.54
• (GMCR)/.36
• (CLF)/3.72
• (WFM)/.48
• (OI)/.61
• (CCI)/.10
• (CTXS)/.55
• (EQR)/.60
• (FLS)/1.80
• (AVB)/1.12
• (GMR)/-.26
• (CBG)/.24
• (WYN)/.56
• (SEE)/.38
• (NOC)/1.67
• (GD)/1.72
• (AKAM)/.37
• (LRCX)/1.09
• (SYMC)/.37
• (MUR)/1.65
• (JNY)/.25
• (AN)/.45
• (BMC)/.68
• (ATI)/.73
• (EXC)/.95
• (PFCB)/.55
• (HES)/1.97

Economic Releases
8:30 am EST

• Durable Goods Orders for June are estimated to rise +.3% versus a +1.9% gain in May.
• Durables Ex Transports for June are estimated to rise +.5% versus a +.6% gain in May.
• Cap Goods Orders for Non-Defense Ex Air for June are estimated to rise +1.0% versus a +1.6% gain in May.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,000,000 barrels versus a -3,727,000 barrel decline the prior week. Distillate supplies are estimated to rise by +1,625,000 barrels versus a +3,432,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +400,000 barrels versus a +757,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.3% versus a +2.3% gain the prior week.

2:00 pm EST

• Fed's Beige Book

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The 5-Year T-Note Auction, weekly MBA mortgage applications report and the (PII) Analyst/Investor Meeting could also impact trading today.
  

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

Stocks Falling into Final Hour on US Debt Ceiling Concerns, Emerging Market Inflation Fears, Rising Food/Energy Prices, Global Growth Worries

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Light
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 19.79 +2.27%
  
• ISE Sentiment Index 123.0 +13.89%
  
• Total Put/Call .75 -19.35%
  
• NYSE Arms .75 -12.14%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.02 -.32%
  
• European Financial Sector CDS Index 153.45 +6.75%
  
• Western Europe Sovereign Debt CDS Index 285.50 +.82%
  
• Emerging Market CDS Index 213.47 -1.08%
  
• 2-Year Swap Spread 23.0 +1 bp
  
• TED Spread 20.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .05% +2 bps
  
• Yield Curve 256.0 -3 bps
  
• China Import Iron Ore Spot $175.30/Metric Tonne +.11%
  
• Citi US Economic Surprise Index -83.80 +5.2 points
  
• 10-Year TIPS Spread 2.40% -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +8 open in Japan
• DAX Futures: Indicating +10 open in Germany

Portfolio:

• Slightly Higher: On gains in my Technology and Retail sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades modestly lower despite recent stock gains, eurozone debt angst, some earnings disappointments, US debt ceiling concerns, rising food/energy prices, emerging markets inflation fears and global growth worries. On the positive side, Education, Wireless, Networking, Computer and Internet shares are especially strong, rising more than +.75%. The MS Tech Index is substantially outperforming. Copper is rising +1.67%. Weekly retail sales rose +4.2% this week versus a +4.6% gain the prior week. The Spain sovereign cds is falling -9.94% to 302.90 bps and the Italy sovereign cds is falling -3.35% to 271.13 bps. On the negative side, Coal, Steel, Disk Drive, Biotech, Construction, Homebuilding and Road & Rail shares are under pressure, falling more than -.75%. Cyclicals and small-caps are relatively weak. Oil is rising +.34%, gold is gaining +.15%, the UBS-Bloomberg Ag Spot Index is rising +1.24% and lumber is falling -.43%. Rice is rising +.32%, hitting a new multi-year high, and has soared about +31.0% in less than 3 weeks. The US price for a gallon of gas is unch. today at $3.69/gallon. It is up .55/gallon in less than 5 months. The France sovereign cds is gaining +1.27% to 115.33 bps and the Greece sovereign cds is gaining +1.45% to 1,658.81 bps. The France sovereign cds is now only 9 bps away from its record high hit 5 days ago. Chinese equities were only able to bounce +.5% last night after recent sharp losses. India's Sensex fell another -1.9% and is now down -9.7% ytd. As well, Brazil's Bovespa continues to be one of the world's worst performers, falling another -1.0% today, and is down -14.33% ytd. Notwithstanding some politicians ongoing attempts to spook the equity and bond markets, stocks remain quite resilient in the face of still substantial headwinds. The 10-year yield is falling -5 bps to session lows at 2.95%. I continue to believe US debt ceiling political posturing will likely continue through at least week's end. Growth stock leaders continue to trade much better than the broad market, a trend that should continue over the longer-term. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt angst, global growth worries, US debt ceiling concerns, profit-taking, rising food/energy prices and emerging markets inflation fears.

Today's Headlines

Bloomberg:

• U.S. May Have Enough Cash to Delay Aug. 2 Deadline for Default. The U.S. Treasury Department may have enough cash to pay the government’s bills for days or even weeks if Congress fails to raise the debt limit before an Aug. 2 deadline, say analysts at UBS AG (UBSN) and Barclays Capital. The date set by the Treasury is a projection for when the U.S. exhausts its authority to borrow, not when it runs out of money. Chris Ahrens at UBS and Ajay Rajadhyaksha at Barclays say the debt limit may not have to be raised next week, in part because tax revenue is coming in higher than forecast. “Having borrowing authority is like having a credit card,” Rajadhyaksha said in an e-mail yesterday. While the Treasury “will no longer be able to use its credit card” after Aug. 2, “it should still be able to pay its bills on Aug. 3, which is ultimately what matters most.”
  
• Troop Pullouts Become Easy Savings in Debt-Reduction 'Smoke'. More than a third of Senate Majority Leader Harry Reid's new $2.7 trillion debt reduction plan comes from $1 trillion in "savings" that are happening anyway -- the reduction of U.S. forces in Iraq and Afghanistan. The Congressional Budget Office is required to assume that war spending will stay at current levels of $159 billion a year, plus inflation, for the next 10 years, at a cost of $1.8 trillion, even as President Barack Obama has announced a troop drawdown. Based on that official "baseline" projection, Reid, a Nevada Democrat, may count the already-begun reduction of U.S. forces as a cut. "It's just one more thing that makes you cynical about what's going on in Washington," said Rudolph Penner, a former CBO director who is now a fellow at the Urban Institute. Analysts such as Todd Harrison of the Center for Strategic and Budgetary Assessments in Washington agreed. "Let's not fool ourselves into thinking these are real savings," said Harrison. "This is money we were never going to spend anyway."
• Sovereign, Corporate Credit-Default Swap Indexes Fall in Europe. The cost of insuring against default on European sovereign and corporate debt fell, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments dropped 4.5 basis points to 261.5 at 12 p.m. in London. A decline signals improvement in perceptions of credit quality. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 5 basis points to 425, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.5 basis points to 113.75 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined 3 basis points to 169 and the subordinated index dropped 6 to 297.5.
  
• Italian, Spanish Yield Spreads to Bunds Widen After European Debt Auctions. Italian and Spanish 10-year bonds fell and benchmark German bunds advanced, widening the difference in yield between the securities, after debt sales by the Mediterranean nations. The Spanish 10-year bond yield increased four basis points to 6.07 percent as of 10:32 a.m. in London, widening the spread to bunds by six basis points to 333 basis points. The Italian 10-year bond yield climbed six basis points to 5.72 percent. The Italian-German spread rose to 298 basis points. Italy auctioned six month bills at the highest yield in almost three years, while Spain sold 2.89 billion euros ($4.2 billion)of three-month bills and six-month bills compared with a maximum target of 3 billion euros.
• New Home Sales Unexpectedly Fell for 2nd Month. Sales of new U.S. homes unexpectedly fell for a second month and a gauge of property values also dropped, showing the industry that sparked the recession is stagnating. Purchases dropped 1 percent in June to a 312,000 annual pace, a three-month low, figures from the Commerce Department showed today in Washington. Prices in 20 cities dropped 4.5 percent in the year ended May, the most since November 2009, according to a report from S&P/Case-Shiller.
• U.S. Consumer Confidence Unexpectedly Rises. Confidence among U.S. consumers unexpectedly rose in July from an eight-month low, led by a rebound in the outlook for jobs over the next six months. The Conference Board’s index climbed to 59.5 from a revised 57.6 reading in June that was lower than previously estimated, figures from the New York-based private research group showed today.
• George Soros to End Hedge Fund Career, Return Money on Increased Regulation. George Soros, the billionaire best known for breaking the Bank of England, is returning money to outside investors in his $25.5 billion firm, ending a career as hedge-fund manager that spanned more than four decades. Soros, who turns 81 next month, will hand back the money, less than $1 billion, by the end of the year, according to two people briefed on the matter. His firm will focus on managing assets solely for Soros and his family, according to a letter to investors. Keith Anderson, 51, chief investment officer since February 2008, is leaving, said the letter, signed by Soros’s sons Jonathan and Robert, who are co-deputy chairmen. “We wish to express our gratitude to those who chose to invest their capital with Soros Fund Management LLC over the last nearly 40 years,” they said in the letter. “We trust that you have felt well rewarded for your decision over time.” Soros’s sons said they took the decision because new financial regulations would have made it necessary for the firm to register with the Securities and Exchange Commission by March 2012 if it continued to manage money for outsiders.
• N.Y. Crude Oil Climbs to 6-Week High on U.S. Confidence Gain, Dollar Drop. Crude oil for September delivery rose $1.11, or 1.1 percent, to $100.31 a barrel at 12:17 p.m. on the New York Mercantile Exchange. The contract climbed to $100.62, the highest intraday price since June 10. Futures have increased 27 percent in the past year.
• Copper Gains as Strike Enters Fifth Day at Escondida, World's Biggest Mine. Copper rose to a one-week high in New York on speculation that a strike at the world’s biggest mine may worsen a global supply shortage. A strike at BHP Billiton Ltd.’s Escondida mine entered a fifth day as Chilean labor authorities prepared to mediate talks between union and company officials. The stoppage has cost about 12,000 metric tons in lost output, said Roberto Arriagada, a union director.
• Greece to Host Talks This Week on Private-Sector Role in Rescue. Athens will host a working meeting this week on implementing private-sector involvement in Greece’s second rescue package, a Greek Finance Ministry official said. The July 28 meeting, announced after talks in Washington yesterday between Greek Finance Minister Evangelos Venizelos and Institute of International Finance Managing Director Charles Dallara, will be the first such gathering and include foreign participants, said the official, who declined to be named in line with policy.
• Receive China 10-Year Swap as Growth Slows, Credit Agricole Says. Investors should receive China's interest-rate swaps because the world's second-largest economy will slow in the second half, Credit Agricole CIB said.
• Beef Tainted by Radiation to Be Recalled in Japan as Contamination Widens. Japan will help meat producer groups remove beef tainted with cesium from the market and has directed them to seek compensation from Tokyo Electric Power Co. as radioactive contamination spreads in the country’s food supply. The government will financially support the purchase, storage and incineration of meat from cattle fed with contaminated hay, which may cost as much as 2 billion yen ($25 million), said Hideo Harada, director for livestock policy planning at the Ministry of Agriculture, Forestry and Fisheries. The ministry said today that 2,906 cattle ate tainted feed before shipment. Fallout from Tepco’s crippled Fukushima nuclear plant poses a growing threat to Japan’s food supply as unsafe levels of cesium found in beef on supermarket shelves were also detected in vegetables and the ocean.
• SAP(SAP) to Reach Top End of Profits, Shares Surge. SAP AG, the world’s largest maker of business-management software, said it will meet the top end of its range of profit forecasts after second-quarter license sales beat estimates, sending the stock 5 percent higher in the final minutes of trading in Frankfurt.
• 3M Slumps as Profit Forecast Trails Estimates on Drop in LCD Screen Demand. 3M Co. tumbled the most in nine months after reporting lower-than-expected profit margins and sales because of lower demand for products used in LCD televisions. 3M fell $4.47, or 4.5 percent, to $90.60 at 12:36 p.m. in New York Stock Exchange composite trading.
• UPS Falls Most in a Year on 'Slow' Forecast. United Parcel Service Inc., the world’s largest package-delivery company, fell the most in 14 months after saying the third quarter will be “fairly slow” before demand picks up in the last three months of 2011. Atlanta-based UPS dropped $3.39, or 4.6 percent, to $70.66 at 11:56 a.m. in New York Stock Exchange composite trading, after slumping 6 percent, the biggest intraday decline since May 6, 2010.
• CFA Pass Rate Declines for First, Second Levels of Three-Part Examination. A lower percentage of hopefuls for the Chartered Financial Analyst designation passed the first and second level of their three-part exam in June compared with a year earlier, as a record number of people tried to get an edge in Wall Street hiring. Forty-two percent of applicants passed the exam’s first test, CFA Institute spokeswoman Kathy King said today, down from 46 percent on the June 2009 exam. Thirty-nine percent of applicants passed the second, compared with 41 percent a year earlier.

Wall Street Journal:

• Live Blog: The U.S. Debt Battle.
  
• Greece Expects Bond Swap in August. Greece expects to implement a deal with private creditors to swap their holdings of Greek bonds with longer-dated securities next month, the country's deputy finance minister said in a television interview Tuesday. Speaking on the privately owned Mega television channel, Deputy Finance Minister Philippos Sachinidis said bond holders would be offered four choices for trading in their existing Greek government bonds for 30-year debt.
• India Markets Drop After RBI Interest Rate Move. Indian stocks tanked on Tuesday morning, following a higher-than-expected increase in interest rates by the central bank. The Reserve Bank of India raised the benchmark interest rate by 0.50%, twice the hike that most analysts had expected. Within minutes of the announcement, Bombay Stock Exchange’s Sensex started falling and was down nearly 290 points or 1.55% to 18,578.61 by 1 p.m. “We are extremely disappointed,” said Gaurav Dua, head of research at Mumbai securities firm Sharekhan Ltd. “This could lead to a much higher than expected slowdown in the economy.”
• Chinese Outrage Grows Over Train Crash. A torrent of online outrage Tuesday over a deadly high-speed train accident reflected the mounting challenge China's leaders face in managing opinion of their governance among an increasingly wired and demanding public. Anger and skepticism that emerged quickly after Saturday's collision of two bullet trains in eastern China—which killed at least 39 people and injured more than 192—has intensified as the government has drawn fire for not being forthcoming enough with information on the disaster. Much of the criticism played out on Sina Weibo, China's most active Twitter-like microblogging site.

MarketWatch:

• Cummins(CMI) Up Nearly 5% After Profits Double.

Business Insider:

• China Hands Out Life Sentences for Selling Chemically-Enhanced Pork.
• The 20 Hot Silicon Valley Startups You Need to Watch.
• China Successfully Tests a Submersible That Will Give It Access to 99.8% of the Ocean Floor.
  

Zero Hedge:

• SAC Up 9.2% YTD, Paulson Heart Boehner, And Other Hedge Fund Observations.
• ISDA, Which Refuses to Declare Greece in Default, Has Given the US a 3 Day Grace Period Before a CDS Trigger. ISDA is rapidly deteriorating to rating agency status when it comes to credibility. After it made it all too clear in the past few weeks that no matter what happens it would never "determine" Greece (or any other European insolvent country) to have breached a CDS trigger (as that would apparently destroy the world), the same trade association (logically enough comprised of the same firms that make up the heart of the status quo) has joined the rating agencies, and as of last night the CME, in making it all too clear that a debt ceiling plan (preferably Reid's because it achieves absolutely nothing) has to pass, or else, after it earlier announced that the US has precisely 3 days to cure any missed debt payment before US CDS are triggered. Obviously this can not be allowed to happen, so expect this latest development to be used by the president in his nighlty scaremongering session.

New York Times:

• Congress to Consider Law Banning Jobless Discrimination.
• SEC Removes Credit Ratings From Regulations. Credit ratings are sprinkled throughout hundreds of pages of financial statutes and guidelines. But ever since Standard & Poor’s, Moody’s and other credit rating agencies belatedly sounded the alarms about the subprime mortgage mess, securities regulators have aimed to curb their influence over the financial industry. On Tuesday, the Securities and Exchange Commission unanimously approved a plan to erase references to credit ratings from certain rulebooks. The agency also adopted a substitute to the ratings, the first of several such changes the commission must enact in the coming months.
• Euro Zone Rescue Effect Appears to Peter Out. The wave of relief in European markets that accompanied a new rescue plan for embattled euro zone governments appears to have mostly run its course, suggesting that investors are becoming more skeptical about the plan’s prospects for success.

LA Times:

• McDonald's(MCD) to Make Happy Meals More Healthful. The fast food chain plans to add a serving of fruit or vegetable to all of the Happy Meals, which are aimed at children, and shrink the portion of French fries.

Gallup:

• Obama's Weekly Job Approval Ties Term Low of 43%.

Politico:

• Democrat David Wu Resigns. Democratic Rep. David Wu (Ore.) resigned from the House on Tuesday, just days after news broke that Wu had been accused of having an “unwanted sexual encounter” with a teenage girl. The Taiwanese-bornWu, 56, said he was stepping down to protect his family while he responds to “these very serious allegations.”
• Senate GOP, Dems, Write Obama on UN Gun Push. Thirteen Democratic senators have signed a letter opposing possible elements of the U.N. Arms Trade Treaty, which President Obama and Secretary of State Hillary Clinton back. The letter on the ATT is the latest mark of Congressional Democrats' unwillingness to engage on the stalled issue of gun control, and of gun owners' groups' -- led by the NRA -- deep inroads into the Democratic caucus in both houses.

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-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).

Reuters:

• Wall St. Hammers U.S. Steelmakers on Weak Outlooks. Shares of U.S. steelmakers fell sharply on Tuesday after the companies warned of lower third-quarter profits due to slow economic recovery, a drop in steel prices due to over-capacity, and higher raw material costs.

El Mundo:

• Spanish regional governments may say they won't be able to meet deficit targets again this year, citing the transcript of the last meeting that members of regional governments held in April. Regional politicians in charge of taxes, who are due tomorrow to meet Spain's Finance Minister Elena Salgado and Manuel Chaves, a deputy prime minister in charge of relations with the regions, may say they see the deficit targets as impossible to achieve.

Bear Radar

Style Underperformer:

• Small-Cap Growth (-.29%)

Sector Underperformers:

• 1) Steel -1.97% 2) Coal -1.19% 3) Road & Rail -1.19%

Stocks Falling on Unusual Volume:

• LII, ITW, NUVA, OMI, PVTB, MMM, ABFS, PNR, UPS, VDSI, ADVS, STEC, CLF, CLMT, TU, SONO, RCII, AEIS, PCAR, ADVS, USTR, CRDN, SCOR, STEC, CPSI, NFLX, PVTB, TNRX, CSTR, BRKR, FMER, ROSE, ATHN, WAT, AKS, UIS, CSL, RBC, WSO and FGP
  

Stocks With Unusual Put Option Activity:

• 1) YNDX 2) AKS 3) XME 4) SVU 5) IOC
  

Stocks With Most Negative News Mentions:

• 1) SIX 2) CPSI 3) GES 4) SPWRA 5) ESI
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value (+.31%)

Sector Outperformers:

• 1) Computer Hardware +2.71% 2) Networking +1.10% 3) Semis +.91%

Stocks Rising on Unusual Volume:

• LXK, VLTR, GEOY, BRCM, VOD, AAPL, CMI, AIXG, SI, SANM, ININ, HSII, CEVA, CYOU, RSTI, RDWR, BIDU, LGND, NTES, DWSN, ACIW, HMIN, AIXG, ACGL, CTRP, IDCC, RSH, GRA, GPI, BXS, HLX, DPZ, CNC, WU, CIT, DGI, AMG, MCP, WRB and FNF
  

Stocks With Unusual Call Option Activity:

• 1) KRE 2) RSH 3) TIN 4) STEC 5) ITW
  

Stocks With Most Positive News Mentions:

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

Charts:

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

Tuesday Watch

Evening Headlines

Bloomberg:

• Default by U.S. Can Be Avoided Until September, Silvia Says. The U.S. government can avoid a default for at least a month after the Aug. 2 deadline to lift the debt ceiling set by the Treasury Department, said John Silvia, chief economist at Wells Fargo Securities LLC. “The Federal Reserve and the Treasury can work together to generate enough cash probably for the next two or three months to avoid any kind of automatic default on the Treasury debt,” Silvia, who is based in Charlotte, North Carolina, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “There’s a way of getting around this issue for at least another month or two.”
• Greece Says It's Working With IMF, Hasn't Requested for More Financial Aid. Greek Finance Minister Evangelos Venizelos said his country is working with the International Monetary Fund on “procedural issues” regarding financing, while a debt official said the nation hasn’t made an additional loan request to the international lender. “Our goal is to return to positive growth and create primary surpluses by 2012,” Venizelos said during a speech in Washington yesterday. “Together we will succeed in rebuilding our country, restoring its fiscal independence and achieving the competitive position Greece deserves in the international market.” Greece’s credit rating was cut three steps by Moody’s Investors Service, which said the European Union’s rescue for the debt-laden nation will cause substantial losses for investors and amount to a default.
• FHA May Be Next in Line for Bailout: Delisle and Papagianis. The nationwide decline in house prices has created a vacuum in the U.S. mortgage market. Private financing for home loans has all but dried up and the U.S. government is now guaranteeing almost every new mortgage. Fannie Mae and Freddie Mac have received most of the media’s attention, but policy makers need to focus on the third leg of the housing- support stool: the Federal Housing Administration. The FHA has some major accounting problems. Left unaddressed, they could spook the markets, lead the FHA to seek a federal cash infusion and further enrage taxpayers. These outcomes can be avoided -- but only if policy makers are more transparent about the risks involved in guaranteeing mortgages. As private-financing options have disappeared, the role of the FHA has grown. Its market share has increased to about 30 percent today from 3-4 percent in 2007. That’s because the agency is now practically the only game in town, accepting borrowers with down payments of as low as 3.5 percent. As the last few years have made clear, sizable down payments -- or “skin in the game” -- are the key to avoiding defaults in the near term and to achieving a stable housing market in the long term.
• China's high-speed train crash three days ago may become a "turning point" for the nation's growth model, as it spurs a slowdown in infrastructure spending, Citigroup Inc. said. "Authorities may choose intentionally to slow GDP growth gradually but firmly to 7-8% in following years and spend more time to fix the problems created by artificial fast growth," Minggao Shen, an analyst at Citigroup, wrote. The accident will slow the pace of investment "at least in the near term" in subways, bridges and roads as well as in high-speed rail, which would affect demand for commodities, according to the note.
• Radiation Driving Japan Corn Cargo to Quarter-Century Low: Freight Markets. Japan, the world’s biggest corn importer, may buy the fewest cargoes in a quarter century as concern about radiation-tainted meat curbs livestock production.
• Crash Seen Giving 'Zero' Chance to China Train Exports. Chinese rail suppliers, who helped build the world’s largest bullet-train network in less than a decade, may struggle to sell equipment overseas after two locomotives collided, killing at least 39 people. Trainmakers CSR Corp. and China CNR Corp., builders including China Railway Construction Corp. and parts makers such as Zhuzhou CSR Times Electric Co., have targeted markets including the U.S. and Europe, touting experience gained from construction of the nation’s domestic network. The fatal crash, near Wenzhou on July 23, may undermine their sales pitches. “Their chances of selling high-speed trains are zero,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion in assets. “I don’t think they can ever get confidence back.”
• China's Stocks May Extend Worst Drop in 6 Months, UBS Says. China’s benchmark stock index may extend the biggest drop in six months and sink below this year’s low as slowing economic growth spurs analysts to reduce their earnings estimates by as much as 46 percent, according to UBS AG. A high-speed train crash may hurt profit growth for the nation’s two biggest trainmakers, said Chen Li, Shanghai-based head of China equity strategy at UBS. Analysts may cut their 2011 earnings growth forecasts for non-financial companies to as low as 15 percent from the current 28 percent, he said. The Chinese central bank is unlikely to ease its tighter monetary policies and may keep on raising interest rates to tame inflation that reached a three-year high last month, Chen said. “Investors’ expectations that tightening policies will be relaxed have been completely dashed after the government reiterated that current policies will remain in place,” Chen said in a telephone interview yesterday. The direction of economic controls shouldn’t change in the second half and will focus on curbing rapid price gains, China Central Television reported July 22, citing Premier Wen Jiabao.

Wall Street Journal:

• Obama Warns of Default Risk. With Congress deadlocked a week before the government runs out of cash to pay its bills, President Barack Obama warned Monday in his starkest terms yet that the U.S. is on the brink of a default that could trigger an economic upheaval.
  
• Live Blog: The U.S. Debt Battle.
  
• Crunch Time at Thomson Reuters. The family that controls Thomson Reuters Corp. has grown impatient with the company's performance and pressed for a recent shake-up, putting pressure on Chief Executive Tom Glocer to pull off a turnaround, according to people familiar with the matter.
• Big Fine in Metals Case. The former head trader at a hedge-fund giant settled regulatory allegations that he systematically attempted to manipulate prices of platinum and palladium, a sign that commodities regulators are intensifying efforts to crack down on manipulation in the futures markets. Christopher Pia—former head trader at hedge fund Moore Capital and a major player at the fund for 18 years—agreed to pay $1 million to settle civil allegations by the Commodity Futures Trading Commission, the regulator said in a release Monday.
• NFL and Players Agree on New Deal.
• The Latest Job Killer From the EPA. The agency's ozone rule will be the most expensive in history—and isn't required by law.
• A Leadership Default. The Obama Presidency has been unprecedented in many ways, and last night we saw another startling illustration: A President using a national TV address from the White House to call out his political opposition as unreasonable and radical and blame them as the sole reason for the "stalemate" over spending and the national debt. We've watched dozens of these speeches over the years, and this was more like a DNC fund-raiser than an Oval Office address. Though President Obama referred to the need to compromise, his idea of compromise was to call on the public to overwhelm Republicans with demands to raise taxes. He demeaned the GOP for protecting, in his poll-tested language, "millionaires and billionaires," for favoring "corporate jet owners and oil companies" over seniors on Medicare, and "hedge fund managers" over "their secretaries." While he invoked Ronald Reagan, the Gipper would never have used such rhetoric about his opposition on an issue of national moment.

CNBC:

• Greece Still Faces High Debt to GDP Ratio: IIF"s Dallara. Even after billions in debt forgiveness and a massive second bailout, Greece still faces a debt to GDP ratio of at least 100 percent, Charles Dallara, managing director of the Institute for International Finance, told CNBC in an exclusive interview Monday.
• Netflix(NFLX) Bracing for Slowdown in Subscriber Growth; Shares Skid. Netflix is bracing for a slowdown in its subscriber growth amid changes in the online video subscription service that will raise rates by as much as 60 percent for many customers.

Business Insider:

• Jefferson County Could Decide Thursday Whether To File For Largest-Ever Muni Bankruptcy. Officials in Jefferson County, Alabama could decide as soon as Thursday whether they will file for the largest municipal bankruptcy in U.S. history.
• GE(GE) Moves Healthcare Division's X-Ray Unit Headquarters To China. President Obama and Jeffrey Immelt are likely to face flak, since Obama appointed Immelt the top outside economic adviser and charged him with running a jobs-focused panel to help bring the U.S. economy back on track. GE came under scrutiny earlier this year after The New York Times reported the company did not pay any taxes in 2010. It has since been reported that GE had not finished its tax filing, and that the company expected to pay taxes. Immelt has also been criticized for employing 36,000 more people abroad, than in the U.S. and cutting 34,000 American jobs after becoming CEO, according to The Huffington Post.
  

Forbes:

• Government Induced Gloom.

WeeklyStandard:

• Is Obamacare the Source of Obama's Approval Woes? As of today, President Obama’s approval rating is only 42 percent in Gallup, while Rasmussen’s Presidential Approval Index shows that only 23 percent of likely voters “strongly approve” of Obama’s performance as president, compared to 44 percent who “strongly disapprove” — matching the highest “strongly disapprove” tally in Rasmussen’s index since November.

Politico:

• Harry Reid's Debt Ceiling Plan Faces Tough Odds. Senate Majority Leader Harry Reid’s new budget proposal to raise the national debt ceiling faces tough odds in his chamber, even with a White House endorsement. The Nevada Democrat’s proposal includes each party’s sacred cow: no revenue increases for Republicans, and no cuts to Social Security, Medicare or Medicaid for Democrats. But the bill calls for $1 trillion in savings from winding down the wars in Iraq and Afghanistan — a provision that Republicans, and even a Democratic caucus member, dismissed as a budgetary gimmick since the Pentagon already had planned to cut military spending through the troop drawdown. “I don’t think it’s a real cut,” Sen. Joe Lieberman (I-Conn.) told POLITICO, though he didn’t rule out supporting the plan. “It’s like a bookkeeping cut. It goes to an artificially high [Congressional Budget Office] number to just what we assume will be a reduction in overseas contingencies fund because we’re drawing our troops out of Iraq and Afghanistan.” Sen. Marco Rubio (R-Fla.) called it a “terrible plan” that “does not solve our problem.” And Sen. John Cornyn (R-Texas) pointed to the $1 trillion in savings from Iraq and Afghanistan and said, “I don’t know how you call that a savings.”

Rasmussen Reports:

• Generic Congressional Ballot: Republicans 44%, Democrats 38%.

USA Today:

• Texas Bucks National Unemployment Trend. Move to Texas. Finding work may not be quite that simple, but it sure seems that way. While the nation's job growth has limped along since the economic recovery began two years ago, the Lone Star State is enlarging payrolls in Texas-size fashion. From June 2009 to June 2011 the state added 262,000 jobs, or half the USA's 524,000 payroll gains, according to the Federal Reserve Bank of Dallas and the Bureau of Labor Statistics.

Reuters:

• Broadcom(BRCM) Results Beat Street Stock Leaps. Wireless chipmaker Broadcom (BRCM.O) gave a rosier-than-expected outlook for its revenues, dispelling worries about a tepid economy and high inventories and giving a hefty boost to its shares.
• Fed Should Raise Rates From Near Zero - Hoenig.
  

Passauer Neue Presse:

• European authorities may promote solar power in Greece as part of the country's aid package, quoting Guenther Oettinger, European Commissioner for energy, as saying in an interview.

Apple Daily:

• Asustek Computer Inc. expects third-quarter revenue to increase 30% from a year earlier, citing Kevin Lin, general sales manager of the company.

Financial News:

• China's high-speed train crash may lead to a rating downgrade for railway ministry bonds, citing a market participant. Liabilities for the Ministry of Railway may increase further as its spends tens of billion yuan each year on train and equipment purchases, the central bank-run paper reported, citing Zhao Jian, a professor at Beijing Jiaotong University.

Oriental Morning Post:

• Shanghai has tightened rules for home purchases by non-residents.

Evening Recommendations
Citigroup:

• Reiterated Buy on (ETN), boosted estimates, raised target to $67.
• Reiterated Buy on (NFLX), lowered estimates, target $300.

Piper Jaffary:

• Upgraded (VCLK) to Overweight from Underweight, target $23.
  

Night Trading

• Asian equity indices are -.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 117.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 118.25 +1.75 basis points.
  
• S&P 500 futures +.17%.
  
• NASDAQ 100 futures +.18%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LMT)/1.94
• (WDR)/.57
• (WPI)/1.00
• (NOV)/1.00
• (RSH)/.37
• (CPLA)/.90
• (SPG)/1.58
• (BIIB)/1.37
• (AMLN)/-.21
• (JBLU)/.09
• (CEVA)/.17
• (TROW)/.77
• (CSL)/.91
• (GRA)/.89
• (F)/.61
• (EK)/-.67
• (UA)/.08
• (RF)/.00
• (HSY)/.55
• (WAT)/1.14
• (CMI)/2.01
• (MMM)/1.59
• (UPS)/1.04
• (PCAR)/.69
• (ITW)/1.02
• (AVY)/.77
• (AKS)/.50
• (GILD)/.99
• (CHRW)/.69
• (SLG)/1.03
• (JNPR)/.33
• (ERTS)/-.40
• (LZ)/3.05
• (DWA)/.41
• (AMZN)/.34
• (LVS)/.44
• (PNRA)/1.17
• (IGT)/.22
• (JLL)/1.12
• (ILMN)/.37
• (LLTC)/.55
• (NSC)/1.29
• (BWLD)/.60
• (VLO)/1.45
• (OXY)/2.17
• (DPZ)/.36
• (AMG)/1.65
• (LXK)/1.03
  

Economic Releases
9:00 am EST

• The S&P/CS 20 City MoM% SA for for May is estimated unch. versus a -.09% decline in April.

10:00 am EST

• Consumer Confidence for July is estimated to fall to 56.0 versus a reading of 58.5 in June.
• Richmond Fed Manufacturing for July is estimated to rise to 5.0 versus 3.0 in June.
• New Home Sales for June is estimated to rise to 320K versus 319K in May.

Upcoming Splits

• (CLH) 2-for-1
  

Other Potential Market Movers

• The 2-Year Treasury Note Auction, 1-Year T-Bill Auction and the weekly retail sales reports could also impact trading today.
  

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