Friday, July 31, 2009

Market Week in Review

S&P 500 987.48 +.84%*


Click here for the Weekly Wrap by

*5-Day Change

Weekly Scoreboard*

S&P 500 987.48 +.84%
DJIA 9,171.61 +.86%
NASDAQ 1,978.50 +.64%
Russell 2000 556.71 +1.50%
Wilshire 5000 10,059.19 +.85%
Russell 1000 Growth 438.81 +.31%
Russell 1000 Value 502.32 +1.26%
Morgan Stanley Consumer 584.13 -.29%
Morgan Stanley Cyclical 683.20 +5.49%
Morgan Stanley Technology 493.09 -.23%
Transports 3,579.99 +1.23%
Utilities 369.47 -2.48%
MSCI Emerging Markets 35.95 +2.37%

NYSE Cumulative A/D Line +45,990 +5.84%
Bloomberg New Highs-Lows Index +233 +89.43%
Bloomberg Crude Oil % Bulls 14.0 -46.15%
CFTC Oil Net Speculative Position +4,576 +106.31%

CFTC Oil Total Open Interest 1,173,580 +2.07%
Total Put/Call .81 -11.96%
OEX Put/Call 1.98 +83.33%
ISE Sentiment 142.0 +30.28%
NYSE Arms .77 -21.42%
Volatility(VIX) 25.92 +12.26%
G7 Currency Volatility (VXY) 12.79 -3.18%
Smart Money Flow Index 8,594.05 +1.87%
AAII % Bulls 47.67 +26.78%
AAII % Bears 31.40 -25.94%

Futures Spot Prices
CRB Index 257.45 +2.20%

Crude Oil 69.45 +1.97%
Reformulated Gasoline 201.26 +6.42%
Natural Gas 3.65 -4.87%
Heating Oil 183.25 +1.26%
Gold 955.80 +.21%
Base Metals 170.93 +3.88%
Copper 262.35 +3.72%

US No. 1 Heavy Melt Scrap Steel 221.67 USD/Ton +13.68%

China Hot Rolled Domestic Steel Sheet 4,180 +2.93%

Agriculture 304.79 +3.88%

ECRI Weekly Leading Economic Index 119.60 +1.11%

Citi US Economic Surprise Index +30.90 -5.21%

Fed Fund Futures imply 80.1% chance of no change, 19.9% chance of 25 basis point cut on 8/12

US Dollar Index 78.35 -.51%

10-year US Treasury Yield 3.48% -18 basis points

U.S. Sovereign Debt Credit Default Swap 30.0 -11.76%

10-year TIPS Spread 1.77% -11 basis points
TED Spread 30.0 -2 basis points
N. Amer. Investment Grade Credit Default Swap Index 110.49 -8.95%
Emerging Markets Credit Default Swap Index 328.18 -4.41%
CMBS Super Senior AAA 10-year Treasury Spread 524.0 -3.85%
4-Wk MA of Jobless Claims 559,000 -1.50%

Continuing Claims Unemployment Rate 4.70 unch.
Average 30-year Mortgage Rate 5.25% +5 basis points
Weekly Mortgage Applications 495,400 -6.33%

ABC Consumer Confidence -47 +6.0%
Weekly Retail Sales -5.60%
Nationwide Gas $2.52/gallon +.05/gallon
US Cooling Demand Next 7 Days 9.0% above normal
Baltic Dry Index 3,350 +.15%

Oil Tanker Rate(Arabian Gulf to US Gulf Coast) 27.0 +8.0%

Rail Freight Carloads 193,332 +2.0%

Iraqi 2028 Govt Bonds 66.93 -.18%

Best Performing Style
Small-cap Value +2.27%

Worst Performing Style
Large-cap Growth +.31%

Leading Sectors
Banks +8.36%
HMOs +4.81%

Homebuilders +4.11%
REITs +3.71%
Airlines +3.49%

Lagging Sectors
Energy -1.30%
Gaming -1.64%
Networking -1.85%
Utilities -2.48%
Oil Service -3.64%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Slightly Higher, Boosted by Homebuilding, Construction, Bank, Steel, Coal and Gold Shares

Evening Review
Market Summary

Top 20 Biz Stories

Today’s Movers

Market Performance Summary

WSJ Data Center

Sector Performance

ETF Performance

Style Performance

Commodity Futures
S&P 500 Gallery View

Timely Economic Charts

PM Market Call

After-hours Commentary

After-hours Movers

After-hours Real-Time Stock Bid/Ask

After-hours Stock Quote

After-hours Stock Chart

In Play

Stocks Slightly Higher into Final Hour on Less Economic Fear, Short-Covering, Lower Long-Term Rates and More Earnings Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Technology longs and Financial longs. I added (AKS) long and took profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is higher, sector performance is mixed and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is falling 1.30% and is very high at 25.04. The ISE Sentiment Index is around average at 148.0 and the total put/call is about average at .81. Finally, the NYSE Arms has been running extraordinarily high most of the day, hitting 1.65 at its intraday peak, and is currently 1.02. The Euro Financial Sector Credit Default Swap Index is rising 6.57% today to 76.0 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling 1.24% to 110.49 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is falling 1.22% to 30 basis points. The TED spread is now down 436 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 5.04% to 35.31 basis points. The Libor-OIS spread is falling 3.43% to 27 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 8 basis points to 1.81%, which is down 83 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is unch. today. The MS Cyclical Index is jumping another 2.6% today. Homebuilding, Construction and Steel stocks are all surging 1.5%+. The NYSE Arms has been extraordinarily high for the second consecutive day, which is a positive as the bears remain unable to gain any meaningful traction. Despite more economic optimism and US dollar weakness, the 10-year yield is falling another 12 basis points today, which is a huge positive. The US sovereign credit default swap is falling 6.25% today to 30.0 basis points, which is the lowest since May 13th. It is noteworthy that inflation expectations and long-term rates are falling today, despite a rise in commodity prices and US dollar weakness. Odds are increasing that US economic growth will surprise on the upside during 3Q. Nikkei futures indicate an +59 open in Japan and DAX futures indicate an +10 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, investment manager performance anxiety, less economic fear, lower long-term rates and more earnings optimism.

Today's Headlines


- The worst U.S. economic slump since the Great Depression abated in the second quarter as government spending programs started to kick in, while the deepest retrenchment by consumers since 1980 augured a muted recovery. Gross domestic product shrank at a better-than-forecast 1 percent annual pace after a 6.4 percent drop the prior three months, Commerce Department figures showed today in Washington. A survey of purchasing managers showed separately that business contracted less than estimated this month. Stabilization in homebuilding and the liquidation of unsold goods sets the stage for gains in GDP starting this quarter, analysts said.

- The cost of protecting bank bonds from default headed for its biggest monthly decline since April 2008 in Europe as trading in fixed-income assets, surging stock prices and record bond issuance boosted earnings. The Markit iTraxx Financial index of credit-default swaps on 25 European banks and insurers is on pace for an almost 30 percent decline, according to JPMorgan Chase & Co. It tumbled as much as 33 basis points to 77, the lowest since Aug. 18, and was trading at 79 basis points at 11 a.m. in London. “The assumption is banks have seen the worst of the losses,” said Mehernosh Engineer, a credit strategist at BNP Paribas SA in London. “Since they were the ones to lead us into this crisis, they will be the ones to lead us out.” Investor demand for financial company debt pushed the Markit iBoxx Euro Corporates Financial index, which tracks 533 bonds sold by companies including Bank of America Corp., BNP Paribas and Deutsche Bank, up 4 percent this month, the biggest monthly gain since April. The gauge is at 87.99, the highest since Sept. 15, the day Lehman Brothers Holdings Inc. collapsed. The extra yield investors demand to own investment-grade financial company bonds instead of government debt fell 62 basis points this month to 2.93 percentage points, the smallest gap in 10 months, according to Merrill Lynch & Co.’s Euro Financial Corporate bond index.

- Lone Star Funds founder John Grayken is securing pledges toward his goal of raising $20 billion to invest in distressed commercial real estate and securities, according to two people familiar with the matter. Grayken may garner as much as $2 billion by the end of August, said one person, who asked not to be identified because the information is private. Dallas-based Lone Star last year raised $10 billion to buy real estate assets. Lone Star is doubling the size of its funds as the deepening crisis in commercial real estate increases opportunities to buy at discounts.

- Crude oil rose after a better-than- expected report on U.S. gross domestic product bolstered speculation that the economy of the world’s biggest energy consuming country is recovering from the recession. “The market is getting some support from stocks, but the more salient feature is the weakness of the dollar against the euro,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant.

- China, the world’s largest consumer of potash, may seek lower prices for the fertilizer than India secured from suppliers in Russia, the Middle East and Canada, because of slack domestic demand and high stockpiles.

- The high in New York City today is forecast to hover around 80 degrees, making it only the second time on record that June and July temperatures failed to reach 90, the National Weather Service said. Central Park thermometers haven’t touched 90 degrees Fahrenheit (32.2 Celsius) since April, and if this holds through today the month would be one of the 10 coolest Julys on record, according to the weather service records. The only other time a June and July passed in the city without temperatures reaching the 90s was 1996. “Daily average temperatures have been at or below normal every day but one this month, and for 54 of the 59 days since June 1,” the weather service office in Upton, New York, said in a statement on its Web site. The average temperature for the month in Central Park so far is 72.6, 3.9 degrees below normal, putting it in a tie for sixth place on the list of coolest Julys, along with 1895, the weather service said. The high for this month was 86 on July 17. The coolest July on record was 1888, with an average temperature of 70.7.

- Staples Inc. and Wal-Mart Stores Inc. are slashing laptop prices and expanding their selections for the back-to-school shopping season, banking on the computer demand to sell more profitable accessories and services. Staples, the largest office-supplies retailer, boosted its portable computer selection by 50 percent, while Wal-Mart, the world’s largest retailer, is selling out of a $298 Compaq Presario model in some stores. Those retailers, along with Best Buy Co., are looking to cheaper laptops to entice customers to buy the external hard drives and bags that are three times as profitable as the computers, according to Stephen Baker, an analyst at NPD Group.

- The House of Representatives will combine three different health-care overhaul measures during the August recess and likely vote on the legislation “sometime in September,” Speaker Nancy Pelosi said today.

Wall Street Journal:

- The House voted Friday to transfer $2 billion in emergency funding from the economic stimulus plan to the "cash for clunkers" program, ensuring it has sufficient funds to continue. The move follows a scramble Thursday after it emerged that the initial $1 billion allocated to the clunkers program may have been close to exhausted after just one week. The legislation would shift $2 billion from the $787 billion stimulus plan to the program. The House voted 316 to 109 to approve the extension. Because the measure was placed on the suspension calendar, it required two-thirds of lawmakers' support to carry it.

- I have been battling non-Hodgkin’s lymphoma, an incurable blood cancer, for the past nine years. Last year, I was also diagnosed with uterine cancer. I didn’t run to Canada for treatment. Medicare took care of my needs right here in New York City. To endure, I just need the freedom to choose my insurance, my doctors, and get the diagnostic scans and care I need. And one more thing: I need hope that a treatment will be developed that can control my diseases the way insulin controls diabetes. Every cancer patient needs these things, especially hope. But the government’s plan to reform the health-care system in this country threatens all of this—particularly the development of new treatments.

NY Times:

- As the nation girds for a possible swine flu pandemic, one of the big weapons may come from an unexpected source — a vaccine squirted or dropped into the nose. MedImmune, which already makes the nasal spray vaccine FluMist for seasonal flu viruses, says it is on track to produce about five times as much swine flu vaccine as it had expected — so much, in fact, that it will run out of nasal spray devices and is looking to administer the vaccines with droppers instead.


- The U.S. Commodity Futures Trading Commission said Thursday it plans to regularly include some data it receives from ICE Futures Europe in its weekly large trader reports starting this Friday.


- The California Association of Realtors reported that Orange County’s inventory of houses for sale continued its five-month slide in June, due mainly to fewer homes on the market. CAR reported that: It would take 5.8 months to sell all the houses for sale in June at that month’s sales pace. That’s the lowest “inventory” level for Orange County since the housing slump began in October 2005. That’s down from a maximum inventory of 21.5 months in January 2008 (see chart).

LA Times:

- After months of marching in line as senior Democrats worked with the White House to develop healthcare legislation, liberal lawmakers from solidly Democratic districts are threatening a revolt that could doom President Obama's bid to sign a major bill this year. In the House, liberals are furious at their leaders for striking a deal with conservative Democrats that would weaken the proposal to create a government insurance program, a dream long cherished on the left. On Thursday, 57 of these liberals sent a letter to Speaker Nancy Pelosi (D-San Francisco) warning that they would vote against any bill that contained the terms of the deal. The rising tide of liberal anger sent the White House scrambling, with Obama calling at least one left-leaning lawmaker to offer reassurance before Congress leaves town for its August break. On Thursday, Pelosi and other House Democratic leaders also met privately with a group of labor leaders, consumer advocates and AARP to enlist their support. Scores of liberal Democrats favor a single-payer system similar to those in Canada and Britain, where the government controls the delivery of healthcare. (Eighty-six House Democrats are cosponsoring a bill to create a single-payer system in the U.S.) Senior House and Senate Democrats are contending with a growing cadre of party centrists, many of whom are uneasy about expanding government's role in healthcare. "We're at a point where there's no retreat, and we can and must hold the line," said Rep. Raul M. Grijalva (D-Ariz.), co-chairman of the liberal Congressional Progressive Caucus. "We regard the agreement reached by Chairman Waxman and several Blue Dog members of the committee as fundamentally unacceptable," they wrote. "This agreement is not a step forward toward a good healthcare bill, but a large step backwards."

Washington Post:

- President Obama's $787 billion stimulus plan is having little effect on job creation within the general-construction industry, the trade association for the sector said Thursday. Construction spending was "disappointingly slow" five months into the recovery program, with firms working on stimulus-funded construction projects hiring at no greater rates than those without such work, according to the Associated General Contractors of America, known as AGC. The findings are based on a survey of almost 1,000 construction companies. Polling has shown that confidence is dropping in the measure's ability to reverse the economic decline, and its success or failure could become a central plank in the 2010 midterm elections.

- Jack Shaw, the Hudson County political consultant found dead in his apartment just days after his arrest on bribery charges, had agreed to cooperate with federal authorities in their sweeping government corruption probe, according to two people with knowledge of the investigation. Shaw, 61, was to help develop new information on those already charged in the case and to possibly identify new targets, said the sources, who spoke on condition of anonymity because they were not authorized to discuss the arrangement.


- The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -11 (see trends).


- Once the plucky underdog in the browser battle, Mozilla’s Firefox is today the second most popular browser worldwide, after Internet Explorer. Since it was first released in November 2004, the browser has succeeded not just in dislodging Microsoft’s (MSFT) IE from its dominant market position, but in proving that an open-source project can become a widely used consumer application. Now, it is fast approaching its billionth download and is likely to hit that milestone this afternoon.


- China's economy is growing at 2 percent, not the 7.8 percent its government claims, says economist Marc Faber, publisher of the Gloom, Boom and Doom report. “The Chinese government is one of the few governments in the world that knows its GDP numbers three years in advance,” Faber told CNBC. “I’d be a bit careful about China.” “If you throw money at the system, lots of things go up in value — but maybe they go up for the wrong reasons. What disturbs me today … is that the lows in March and late last year, sentiment was incredibly bearish about everything.” Now, Faber observes, “there’s this incredibly bullish sentiment when insiders are actually selling and the technical picture of the market doesn’t look that great.” Faber believes the market faces headwinds because there’s a huge supply of available shares and a record number of new issues, which dampens share-price increases.

- Government regulators could prohibit incentive-based pay packages at large U.S. financial institutions that encourage "inappropriate risks" under a bill approved on Friday by the U.S. House of Representatives.

- A measure of future U.S. economic growth climbed higher in the latest week while its yearly growth rate hit a fresh five-year high, signaling a stronger recovery than originally forecast, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 119.6 in the week ended July 24 from a downwardly revised 118.3 the previous week, which was originally reported at 118.4. The index's annualized growth rate continued to soar, reaching a new five-year high of 8.8 percent from 7.7 percent the prior week. ECRI Managing Director Lakshman Achuthan has said the recession is already beginning to wane, and that increased stimulus from Washington is not necessary for economic growth. "Not only is the U.S. recession set to end this summer, but the recovery is apt to be stronger than many expect."

Bear Radar

Style Underperformer:
Mid-Cap Growth (+.20%)

Sector Underperformers:
Gaming (-2.02%), Biotech (-.95%) and Alt Energy (-.87%)

Stocks Falling on Unusual Volume:

Stocks With Unusual Put Option Activity:
1) SYNA 2) VIA/B 3) SWY 4) CMED 5) DIS

Bull Radar

Style Outperformer:
Small-Cap Value (+.78%)

Sector Outperformers:
Semis (+1.58%), Homebuilders (+1.53%) and Construction (+1.26%)

Stocks Rising on Unusual Volume:

Stocks With Unusual Call Option Activity:
1) UTHR 2) ZMH 3) HUM 4) SYNA 5) CHKP

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume

Hot Spots

Option Dragon

NASDAQ 100 Heatmap

Chart Toppers
Real-Time Intraday Quote/Chart
HFR Global Hedge Fund Indices

Thursday, July 30, 2009

Friday Watch

Late-Night Headlines

- A Senate panel seeking evidence of fraud tied to last year’s mortgage crisis has issued subpoenas to financial companies including Goldman Sachs Group Inc.(GS) and JPMorgan Chase & Co.(JPM), said U.S. Senator Tom Coburn, a Republican from Oklahoma.

- A panel of British lawmakers said Gordon Brown’s government should do more to tighten financial oversight, saying regulators should consider a ban on proprietary trading by deposit-taking banks. “It would be intolerable if banks took advantage of the implicit government guarantee for deposits to take risky bets on proprietary trading,” said John McFall, a member of Brown’s Labour Party who leads Treasury Committee. “This has to stop.”

- Japan’s consumer prices fell at a record pace in June, adding to signs that deflation may hamper a rebound from the nation’s worst postwar recession. Prices excluding fresh food declined 1.7 percent from a year earlier after sliding 1.1 percent in May, the statistics bureau said today in Tokyo. The decrease, the sharpest since the survey began in 1971, matched the estimate of economists. Bank of Japan board members say price declines will probably accelerate in coming months, signaling the central bank will maintain its extraordinary policy of keeping interest rates near zero.

- China may cut new loans by half in the last six months of this year on concern a rally in the nation’s stocks has grown too fast, according to former Morgan Stanley chief Asian economist Andy Xie. “The government is worried that this bubble is becoming too big so they’re going to cut credit growth by probably half in the second half,” said Xie, now an independent economist, in a Bloomberg Television interview in Hong Kong today. “I think the property and stock markets will come under pressure probably around October time.” China’s banking regulator said yesterday it plans to tighten rules on work capital loans, seeking to prevent misuse of funds. It’s “undeniable” that a portion of this year’s new lending entered the nation’s stock and property markets, Cheng Siwei, former vice chairman of the standing committee of the National People’s Congress, China’s parliament, said in June. An estimated 1.16 trillion yuan of loans were invested in the stock market in the first five months of this year, China Business News reported on June 29, citing Wei Jianing , a deputy director at the Development and Research Center under the State Council, China’s cabinet.

Wall Street Journal:

- Global ad Omnicom Group Inc. and Publicis Groupe SA reported significant declines in revenue and profit but indicated a bottom may be at hand in the global advertising downturn. "We don't see a recovery, but we feel we've hit the troughs," said John Wren, chief executive of Omnicom. He added that it will take a couple of quarters to cycle through the current downturn, and a couple more before growth comes. "We believe the worst is behind us," said Publicis Chief Executive Maurice Lévy.

- For the past few months, we’ve been watching as energy companies report increasing natural gas production in the U.S. without any visible signs that demand is picking up. This has raised an awkward question: where’s it all going to go? It’s filling up underground storage fast. Apparently, it’s also getting packed into pipelines. In other words, there’s so much natural gas it’s getting crammed in anywhere it can fit. Says Chesapeake Energy(CHK): “The company also expects that rising pipeline and gathering system pressures during the next few months will likely result in involuntary natural gas production curtailments across the industry.” In other words, the system is reaching the point where not much gas can be added to the pipelines, which are backing up as storage fills up.

- Despite public anger and political pressure, U.S. banks have been busy raising a variety of fees charged to customers. "All depositories are trying to raise any little fee, whether on loans, deposits or transaction accounts," said Mike Moebs, founder of Moebs Services Inc., which collects data on fees from nearly every U.S. bank and credit union. "The era of low fees is over."

- A proposed tax on generous health-insurance packages presents a challenge to President Barack Obama, who promised during his campaign not to raise taxes on the middle class. A plan under debate in Congress would impose a new tax on insurers or employers who provide so-called gold-plated health-care plans. Many economists say a significant part of the cost would eventually be passed to employees, through higher insurance payments or slower wage growth. That could conflict with Mr. Obama's often-repeated promise not to raise taxes on middle-class families. The challenge for the White House was underscored Wednesday, when John Sweeney, president of labor confederation AFL-CIO, issued a statement citing "real concerns" about the proposed tax, which Mr. Obama has said he is willing to entertain.

- As everyone else’s taxes rise, one favored outfit may not have to pay federal taxes for years: General Motors. In another sweet deal from its benefactors on Pennsylvania Avenue, the government-owned car company is set to profit from billions of dollars in tax breaks not available to other businesses in the same predicament. The new GM will be allowed to claim a tax benefit from some $16 billion of net operating losses carried over from the old company, allowing it to avoid paying taxes on future profits, perhaps for years.

- White House officials and lawmakers were studying late Thursday how to keep alive the government's cash-for-clunkers incentive program because of concerns the program's $1 billion budget may have been exhausted after just one week. Obama administration officials warned congressional leaders Thursday it planned to suspend the program at midnight. But the White House released a statement late Thursday saying that completed deals would be honored and the program is still under review.

- America's retailers are responding to the recession with Christmas in July. A number of retailers and toy makers launched Christmas sales and promotions this month, hoping to boost sagging sales and help cash-strapped consumers stretch out their holiday spending.

- As high frequency trading continues to proliferate, the head of the powerful electronic trading desk at Goldman Sachs Group Inc. (GS) says it may be time to rethink regulation in this new trading landscape. In the wake of a collapsed stock market in 2008 that drastically cut the pocketbooks of all investors and traders, high frequency trading, the use of computers or complex algorithms to trade at lightning speed, is making up roughly half of the daily activity. At the same time, Goldman Sachs has been one of the largest beneficiaries of this new landscape in trading, with its electronic trading desks remaining one of the market's leaders.

- Chances that Congress will vote on a union-organizing bill this year are dimming as lawmakers make health care and appropriations the top priorities. Some Democratic senators have been trying for months to find a way around the bill's most contentious provision, the "card check" rule that would let workers to unionize by simply signing up rather than running a secret-ballot vote. While attempts at a compromise have made headway, less progress has been made on the bill's other divisive element: imposing a government-appointed arbitrator to set contract terms -- including wages and benefits -- if companies and newly formed unions can't agree within 120 days of bargaining. The legislation, known as Employee Free Choice Act, also would increase penalties on employers that violate labor laws during organizing periods.
- There is no way Google(GOOG) will not be the primary beneficiary of the Microsoft-Yahoo search deal. With a market share for search at almost 79%, you can be sure it will go up, not down, after the pact unveiled this week takes effect.
- A hot July for stocks has set the stage for a rally that should run right into August. "The market is overbought, but it's a good overbought," said Andrew Burkly, technical analyst at Brown Brothers Harriman. The Dow is up 8.4 percent for the month, and is on track, at this level, to close out its best monthly performance since October, 2002 and the best July since 1989. The S&P 500 is up 7.3 percent, its best July since 1997. The five-month rally that started in March is setting records of its own. The S&P is up 34 percent, its biggest five-month streak since 1938. The Nasdaq, up 8.1 percent in July, has gained 44 percent for its best five months since the tech rally of 2000. Most of the time, July is good for stocks. Since 1896, the Dow has been up 61 percent of the time with an average gain of 4.5 percent. And when July is a positive month for stocks, most of the time August is also higher. For the Dow, August was higher 64 percent of the time following a positive July, but the gains were more tempered, averaging just 1.6 percent.

NY Times:

- The top 1 percent of taxpayers paid 40.42 percent of total federal income taxes in 2007, according to the most recent data from the Internal Revenue Service. This represents the second year in a row that the richest 1 percent paid more in federal income taxes than the bottom 95 percent.

- The dozens of insurance companies that make up the American International Group show signs of considerable weakness even after their corporate parent got the biggest bailout in history, a review of state regulatory filings shows. Over time, the weaknesses could mean trouble for A.I.G.’s policyholders, and they raise difficult questions for regulators, who normally step in when an insurer gets into trouble. State commissioners are supposed to keep insurers from writing new policies if there is any doubt that they can cover their claims. But in A.I.G.’s case, regulators are eager for the insurers to keep writing new business, because they see it as the best hope of paying back taxpayers. In the months since A.I.G. received its $182 billion rescue from the Treasury and the Federal Reserve, state insurance regulators have said repeatedly that its core insurance operations were sound — that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives. But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good. Insurance examiners working for the states have occasionally flagged these activities, to little effect. More ominously, many of A.I.G.’s insurance companies have reduced their own exposure by sending their risks to other companies, often under the same A.I.G. umbrella.

Business Week:
- When Representative Virginia Foxx (R-N.C.) promoted proposed Republican health-care legislation July 28 by proclaiming it was "pro-life because it will not put seniors in a position of being put to death by their government," it stoked a small but passionate fire already burning over a seemingly obscure provision of a House health-care proposal that, proponents say, would help seniors make educated end-of-life plans but, to some, is an opening wedge into something more sinister. The provision in question is found on page 425 of the 1,000-plus-page H.R. 3200 bill currently being hashed out in Congress. It pertains to "advance care planning" for elderly or terminally ill Americans and calls for "an explanation by the practitioner of the continuum of end-of-life services and supports available, including palliative care and hospice," and allows Medicare to pay for such consultations every five years.


- President Barack Obama’s highly anticipated “beer summit” with Harvard Professor Henry Louis Gates Jr. and Cambridge police Sgt. Jim Crowley came together Thursday night – with Obama declaring it a “positive lesson” on the nature of race in America and the two men saying they want to look forward, not back. A shaky, silent two minute video of the meeting was all the public got to see, but afterwards, Obama and the two men – who unexpectedly found themselves at the center of a racially-charged national controversy – declared the meeting worthwhile. Crowley even told reporters later that he and Gates had agreed to meet again – this time, not over a beer. He called the day “an effort not just to move the city of Cambridge or two individuals past this event, but the whole country beyond this and toward some meaningful discussion in the future.” After the event, Crowley characterized the discussion as “two gentlemen who agreed to disagree on a particular issue. We didn’t spend too much time dwelling on the past. We spent a lot of time discussing the future.” Asked if any apologies were exchanged or offered, Crowley said, “No.”

- A slew of recent polls showing President Barack Obama’s job approval ratings at essentially normal levels and a partisan divide reasserting itself suggest that the political landscape was not as dramatically transformed last November as Democrats had hoped. The question now is whether those numbers will impede the president’s ability to achieve the transformative goals he set out for himself, particularly in the area of health care, where members of Congress crucial to his success may feel they have to respond to shifting public opinion. After months of showing sky-high job approval ratings, polls from major newspapers and from the Pew and Gallup organizations this week gave Obama the lowest numbers of his presidency. He is less popular than either George W. Bush or George H.W. Bush at this point in their presidencies, though more popular than Bill Clinton was after seven months in office.

Hedge Fund Law Blog:

- SEC Approves New Exam for “Limited Representative” Investment Bankers.


- House Democrats have declined to subpoena available records that might reveal whether other members of Congress got discounted VIP mortgages from subprime lender Countrywide Financial Corp. similar to the sweetheart deals given Democratic Sens. Chris Dodd and Kent Conrad.

China Daily:

- China may become a major target of trade protectionism, especially from the US and India, this year, citing Zhou Xiaoyan, deputy director of the China Bureau of Fair Trade for Imports and Exports. The US is “abusing” trade protectionism as a tool to help its own industries amid an economic slowdown and the loss is “huge” huge for Chinese companies, citing Zhou.

Shanghai Securities News:

- China’s new loans in July may be less than 500 billion yuan.

China Business News:

- China has ordered the nation’s small and medium-sized banks to raise their capital adequacy ratios to 12% from 10%, citing a bank official.

Late Buy/Sell Recommendations

- Reiterated Buy on (EXPE), target $25.


- Rated (PLCM) Outperform, target $28.

Night Trading
Asian Indices are +1.0% to +1.5% on average.

Asia Ex-Japan Inv Grade CDS Index unch.
S&P 500 futures +.19%.
NASDAQ 100 futures +.16%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (AGN)/.67

- (AEP).61

- (AN)/.24

- (CVX)/.95

- (CEG)/.76

- (D)/.64

- (HMSY)/.24

- (ITT)/.80

- (MDC)/-.58

- (TOT)/1.00

- (UTHR)/.55

- (WY)/-.71

Economic Releases

8:30 am EST

- 2Q Advance GDP is estimated to fall 1.5% versus a 5.5% decline in 1Q.

- 2Q Advance Personal Consumption is estimated to fall .5% versus a 1.4% increase in 1Q.

- 2Q Advance GDP Price Index is estimated to rise 1.0% versus a 2.8% gain in 1Q.

- 2Q Advance Core PCE is estimated to rise 2.3% versus a 1.6% gain in 1Q.

- 2Q Advance Employment Cost Index is estimated to rise .3% versus a .3% increase in 1Q.

9:45 am EST

- Chicago Purchasing Manager for July is estimated to rise to 43.0 versus a reading of 39.9 in June.

Upcoming Splits
- None of note

Other Potential Market Movers
The NAPM-Milwaukee, (PLCE) shareholders meeting and the (ANR) stockholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by commodity and technolog shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.