Today's Headlines

Bloomberg:
- The US government is intensifying its scrutiny of hedge funds as lawmakers weigh stricter oversight of the industry with $1.2 trillion in assets under management.
- Sharp Corp., the world’s largest maker of liquid-crystal display televisions, said profit rose 23% in its first quarter, buoyed by soccer’s World Cup.
- Crude oil is falling $1.30/bbl. on speculation that the conflict between Israel and Lebanon won’t spread in the Middle East.

Wall Street Journal:
- Genentech Inc.(DNA) agreed to pay Inotek Pharmaceuticals as much as $625 million for the right to produce a new kind of drug for treating cancer and heart ailments.
- Dow Chemical(DOW) will seek to become more environmentally friendly by 2015, putting more effort into water treatment, car-emissions cleanup and other systems.

USA Today:
- More than half of Americans say they blame Hezbollah “a great deal” for the Middle East fighting, compared with 15% that blame Israel, according to a poll of 1,005 adults taken July 21-23.
- The pace of rebuilding in Mississippi is increasing.

NY Times:
- Only a handful of the 33 criminal cases opened by US investigators probing the backdating of stock options are likely to result in criminal charges, citing unidentified lawyers involved in talks with investigators.

Yonhap News Agency:
- South Korea eased its military alert on North Korea as it sees no “immediate” signs of more missile tests by the communist country.

Consumer Confidence Rises, Home Sales Above Estimates

- Consumer Confidence for July rose to 106.5 versus estimates of 104.0 and a reading of 105.4 in June.
- Existing Home Sales for June fell to 6.62M versus estimates of 6.6M and 6.71M in May.

BOTTOM LINE: Confidence among US consumers unexpectedly rose for a second straight month in July, driven by gains in jobs and incomes, Bloomberg reported. Average Hourly Wages rose 3.9% in June, the most in five years and the unemployment rate is a low 4.6%. The expectations component of the index rose to 88.8 from 87.5 prior. The present situation component of the index increased to 133 from 132.2 in June. Those that plan on purchasing a home rose to 3.4% from 3.2% the prior month. Those that saw jobs as plentiful rose to 28.6% from 28.0% the prior month. I continue to expect consumer confidence to make new cycle highs over the intermediate-term as stocks rise, housing stabilizes, inflation decelerates, energy prices fall, long-term rates remain low, the job market remains healthy and irrational pessimism lifts.

Sales of previously owned homes in the US fell in June to the lowest in five months, Bloomberg said. Inventories of unsold homes are at 1997 levels. The median price of an existing home rose .9% in June to $231,000. Purchases fell 3.5% in the Northeast and 2.3% in the South. Sales were unchanged in the Mid-west and West. I continue to believe housing will stabilize to more healthy sustainable levels over the intermediate-term.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Tuesday Watch

Late-Night Headlines
Bloomberg:
- South Korea’s economy grew at its slowest pace in more than a year in the second quarter as consumer spending cooled and construction fell.
- Motorola(MOT) introduced eight models including new versions of its top-selling Razr, in a push to extend market-share gains.

Financial Times:
- Societe Generale SA expects growth in derivatives to slow over the next five years after a boom in the market for products used by investors to hedge risks.

Wall Street Journal:
- Korea National Oil Corp. signed a $270 million agreement to buy Newmont Mining’s(NEM) BlackGold oil sands leases in Canada to get an entry into the Alberta oil sands region.

Xinhua News:
- China’s ruling Communist Party will crack down on corruption and set policies to curb investments to narrow a widening income gap between the nation’s urban population and 750 million farmers.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.75% to +1.50% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.23%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (MMM)/1.07
- (AFL)/.71
- (ABC)/.53
- (AMZN)/.07
- (MO)/1.37
- (T)/.53
- (AVY)/.98
- (BJS)/.58
- (BYD)/.57
- (BNI)/1.21
- (CME)/3.09
- (CB)/1.16
- (CL)/.72
- (GLW)/.25
- (CFC)/1.13
- (CYMI)/.56
- (DBD)/.34
- (ESV)/1.23
- (FLEX)/.16
- (HMA)/.33
- (JBLU)/.04
- (LM)/1.13
- (LXK)/.84
- (LLTC)/.38
- (LMT)/1.16
- (MCD)/.58
- (MRO)/.92
- (PNRA)/.44
- (QLGC)/.20
- (RBAK)/.07
- (SIRF)/.19
- (SII)/.53
- (SWK)/.86
- (STN)/.63
- (UPS)/1.00
- (WY)/.95
- (WHR)/1.04
- (XLNX)/.26
- (XTO)/.83

Upcoming Splits
- (TNC) 2-for-1

Economic Releases
10:00 am EST
- Consumer Confidence for July is estimated to fall to 104.0 versus a reading of 105.7 in July.
- Existing Home Sales for June are estimated to fall to 6.6M versus 6.67M in May.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity stocks in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Sharply Higher on Strong Earnings, Merger Activity, Short-Covering and Bargain Hunting

Indices
S&P 500 1,260.91 +1.66%
DJIA 11,051.05 +1.68%
NASDAQ 2,061.84 +2.05%
Russell 2000 690.75 +2.80%
Wilshire 5000 12,610.85 +1.78%
S&P Barra Growth 581.93 +1.70%
S&P Barra Value 677.46 +1.62%
Morgan Stanley Consumer 616.66 +1.29%
Morgan Stanley Cyclical 772.74 +1.62%
Morgan Stanley Technology 461.01 +2.18%
Transports 4,568.70 +2.52%
Utilities 432.05 +.94%
Put/Call .67 -46.40%
NYSE Arms .52 -71.15%
Volatility(VIX) 14.98 -13.91%
ISE Sentiment 137.00 +9.60%
US Dollar 86.31 +.44%
CRB 342.71 +.91%

Futures Spot Prices
Crude Oil 75.06 +.01%
Unleaded Gasoline 231.50 +.03%
Natural Gas 6.59 -.18%
Heating Oil 197.34 +.18%
Gold 615.50 +.38%
Base Metals 215.80 +1.59%
Copper 337.50 -.21%
10-year US Treasury Yield 5.04% +.04%

Leading Sectors
Disk Drives +3.22%
Computer Hardware +3.07%
Oil Service +3.01%

Lagging Sectors
Utilities +.94%
Banks +.90%
Foods +.36%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Citigroup:
- Rated (BEAS) and (TIBX) Buy, targets $15 and $9 respectively.
- Rated (WIND) Sell, target $8.

Afternoon/Evening Headlines
Bloomberg:
- The US pledged $30 million in aid to help war-ravaged Lebanon avert a humanitarian crisis as Secretary of State Condoleezza Rice conferred with Israeli leaders after a surprise visit to Beirut.
- Texas Insturments(TXN) said second-quarter profit rose almost fourfold.
- American Express(AXP) said profit climbed 13% in the second quarter as it signed up new clients and existing customers used their cards for more purchases.
- SanDisk(SNDK) said second-quarter net income climbed 36% as the company attracted customers with cards can hold more data.
- Altera(ALTR) reported a 17% gain in second-quarter revenue because of strong sales of new products.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Biotech longs, Semi longs, Retail longs and Medical longs. I took profits in my (NBR) short and an existing trading long in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, every sector rose and volume was above average. Measures of investor anxiety were lower into the close. Overall, today's market performance was bullish. I think bears have overreached to such a large extent that this rally will have legs. This week's housing data will probably dictate the likelihood of this. The fact that the 10-year is holding recent gains despite the large rally in stocks and a somewhat better situation in the Middle East, leads me to believe that investors' inflation expectations are still going down.

Stocks Sharply Higher into Final Hour on Strong Earnings, Mergers and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Retail longs, Biotech longs and Medical longs. I covered my remaining IWM/QQQQ shorts and exited some of my EEM shorts today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, every sector is rising and volume is above-average. Bears argue that geopolitical concerns are not fully appreciated by investors and thus not priced into stock prices. In my opinion, geopolitical concerns are more than priced into stock and commodity prices at current levels. The S&P 500 forward P/E is only 14.5, near long-term average levels, notwithstanding the greatest double-digit profit growth streak in U.S. history. Many other aspects of today's macro backdrop would normally dictate much higher valuations for equities. Just look at the 1980s and all the geopolitical concerns that were present. During this decade, stocks rose on average about 18.2% annually. I continue to expect P/E multiple expansion for U.S. stocks to finally begin later this year. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting and stable long-rates.