Friday Watch

Late-Night Headlines
Bloomberg:
- The US House of Representatives voted 257-171 to extend provisions of the USA Patriot Act, the law passed after the 2001 terrorist attacks to strengthen law enforcement's surveillance authority.
- Chartered Semiconductor Manufacturing, Singapore's largest chipmaker, reported a smaller-than-expected second-quarter loss as demand started to recover.

London-based Times:
- Samsung Electronics has become the world's most valuable consumer electronics brand, overtaking Sony Corp., citing research by Interbrand.
- Prime Minister Tony Blair has been urged by senior police officers for greater powers to tackle the threat of terrorism.

Financial Times:
- London's tourism industry may suffer from the threat of further terrorist attacks, citing British Hospitality Association Chief Executive Bob Cotton.

Economic Daily News:
- China's move to end its decade-old peg to the dollar to let the yuan strengthen may move the Taiwan dollar, and Taiwan's central bank doesn't rule out stabilizing the Taiwan currency.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on NUE, ODP, TPX, SBC, ROH, GOOG and DHR.
- Reiterated Underperform on AZR.

Business Week
- American International Group(AIG) will likely recapture its business momentum and boost its share price.
- Shares of Intrado Inc.(TRDO), which provides emergency phone services to US carriers, may benefit because the company may be sold.

Night Trading
Asian Indices are -.50 to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.06%.

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
BDX/.68
CMI/2.40
FLIR/.27
FPL/.70
KMB/.94
MYG/.10
OXY/2.27
SLB/.67
SII/.65
SLAB/.27

Upcoming Splits
None of note

Economic Releases
None of note

BOTTOM LINE: Asian indices are mixed as strength in China is being offset by weakness in Japan. I expect US equities to open modestly lower and to rise later in the day on short-covering. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower as Long-term Rates Close Near Session Highs

Indices
S&P 500 1,227.04 -.66%
DJIA 10,627.77 -.57%
NASDAQ 2,178.60 -.46%
Russell 2000 667.10 -1.54%
DJ Wilshire 5000 12,234.24 -.76%
S&P Barra Growth 589.77 -.53%
S&P Barra Value 632.84 -.79%
Morgan Stanley Consumer 584.42 -.47%
Morgan Stanley Cyclical 755.88 -.97%
Morgan Stanley Technology 498.53 -1.16%
Transports 3,779.59 +.27%
Utilities 388.62 -1.86%
Put/Call .92 +3.37%
NYSE Arms 1.40 +20.21%
Volatility(VIX) 10.97 +7.23%
ISE Sentiment 208.00 +36.84%
US Dollar 88.93 -.46%
CRB 300.76 -.86%

Futures Spot Prices
Crude Oil 57.32 -1.21%
Unleaded Gasoline 167.60 unch.
Natural Gas 7.30 -3.25%
Heating Oil 157.40 -1.48%
Gold 426.00 +.92%
Base Metals 124.47 +.13%
Copper 157.00 -1.35%
10-year US Treasury Yield 4.27 +2.84%

Leading Sectors
Gold & Silver +2.29%
Steel +2.03%
Defense +.56%

Lagging Sectors
Disk Drives -2.15%
Airlines -3.07%
HMOs -6.28%

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
Goldman Sachs:
- Reiterated Outperform on MSFT, GOOG, ACN and ALK.
- Reiterated Underperform on DJ, SGP, JBLU and EMC.

Afternoon/Evening Headlines
Bloomberg:
- China’s decision to end its currency peg to the dollar is unlikely to give Asia’s export-driven economies a boost, according to economists at Morgan Stanley and Deutsche Bank AG.
- Iraqi security forces are improving their capability to conduct combat operations on their own, with decreased US support, the Pentagon said in a report to Congress released today.
- German President Horst Koehler dissolved parliament, paving the way for an early election requested by Chancellor Gerhard Schroeder to avoid a year of political deadlock.
- Four of Saddam Hussein’s nephews were identified today by the US Treasury Department as having financed and directed groups carrying out attacks against Iraqi and coalition forces.

Financial Times:
- Volkswagen AG will boost its sales discounts and advertising in North America to regain market share and improve relations with its US and Canadian dealers.
- Russia’s levels of corruption have increased tenfold in four years, and is now worth $316 billion, citing a survey by Indem.

Golfweek:
- Teenage golfer Michelle Wie will turn professional in October and sign a multiyear endorsement contract with Nike’s golf division worth $10 million to $12 million.

BOTTOM LINE: The Portfolio finished lower today on gains in my Networking, Semiconductor, Homebuilding and Retail longs. I added to my GOOG long in after-hours trading with the stock down 27 and trimmed another tech long, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was heavy. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was neutral. The reaction to China's revaluation in the bond market seems overdone at this point. Ninety-five percent of China's foreign trade is denominated in dollars. Due to the political and economic ramifications, I seriously doubt any significant U.S. Treasury sell-down will occur.

Stocks Lower Mid-day on Terrorism Fears and Higher Long-Term Rates

Indices
S&P 500 1,227.54 -.62%
DJIA 10,632.15 -.53%
NASDAQ 2,180.19 -.38%
Russell 2000 669.69 -1.16%
DJ Wilshire 5000 12,247.56 -.66%
S&P Barra Growth 590.16 -.48%
S&P Barra Value 633.45 -.70%
Morgan Stanley Consumer 584.43 -.47%
Morgan Stanley Cyclical 757.51 -.73%
Morgan Stanley Technology 499.35 -1.0%
Transports 3,786.85 +.46%
Utilities 389.07 -1.74%
Put/Call .96 +7.87%
NYSE Arms 1.24 +1.13%
Volatility(VIX) 10.02 -4.11%
ISE Sentiment 234.00 +53.95%
US Dollar 88.70 -.71%
CRB 300.75 -.85%

Futures Spot Prices
Crude Oil 57.40 -1.07%
Unleaded Gasoline 167.50 +.12%
Natural Gas 7.28 -3.58%
Heating Oil 157.50 -1.42%
Gold 426.00 +.92%
Base Metals 124.47 +.13%
Copper 157.00 -1.35%
10-year US Treasury Yield 4.27% +2.75%

Leading Sectors
Gold & Silver +2.30%
Steel +1.88%
Broadcasting +.78%

Lagging Sectors
Networking -2.06%
Airlines -2.68%
HMOs -6.40%

BOTTOM LINE: The Portfolio is lower mid-day on losses in my and Networking longs. I exited a few longs this morning as they hit stop-losses, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is below average. Measures of investor anxiety are mixed so far. Today’s overall market action is neutral considering the rise in long-term rates and more terrorism in London. The decline in commodities today is likely signaling that China's economy, already on thin ice, will further weaken as a result of the yuan revaluation. The potential for a chronic terrorism problem in the U.K. is also weighing on the CRB. As I have said many times before, the CRB has been the main source of inflation worries. The 10-year T-note yield looks higher in the short term; however, I continue to see lower long-term interest rates in the intermediate term. I expect stocks to trade modestly higher into the close on short-covering and lower energy prices.

Today's Headlines

Bloomberg:
- Google is likely to report today that profit rose more than fourfold as it lured Web surfers from Yahoo! and attracted advertisers with a popular new online map.
- China loosened its fixed-exchange rate against the dollar for the first time in a decade, letting the yuan fluctuate versus a basket of currencies.
- Alcoholism should be treated with drugs, much like depression, a US scientific institute said for the first time, a suggestion that could help prompt a shift in treatment emphasis from counselors to doctors.
- Treasury notes dropped after China let its currency strengthen, boosting speculation the country will reduce purchases of US government debt.
- Manufacturing in the Philadelphia region rebounded this month after a first-quarter inventory build prompted companies to place few orders.
- Three London subway trains and a bus were targets of attempted bombings today, leaving parts of the Underground network paralyzed, two weeks after the worst attack on the capital since WWII.
- Crude oil is falling for a second day after a government report yesterday showed that US inventories fell less-than-expected last week and traders speculated that China’s demand for the commodity will decline after the yuan revaluation.

Wall Street Journal:
- Dow Jones said it will sell its stake in CNBC’s television channels in Asia and Europe to NBC Universal to cut costs.
- Barclays Global Investors, the biggest provider of exchange-traded funds, will shift all but one of its products now traded on the American Stock Exchange to the NYSE and the electronic market run by Archipelago Holdings, which the NYSE is buying.
- Delta Air Lines senior management is debating whether the carrier might be forced to file for Chapter 11 bankruptcy protection.
- Gemstar-TV Guide International, the publisher of TV Guide, may cut the circulation guarantees it gives advertisers by at least a third.
- Comcast and other cable suppliers including Time Warner and Cox Communications are developing transmissions to give customers a bigger array of channels.
- Nike and Bausch & Lomb plan to introduce a new type of tinted prescription contact lenses next month for athletes who don’t want to wear sunglasses.

NY Times:
- Medicare will begin giving doctors record-keeping computer software for patient records as soon as next month.

AP:
- US cyclist Lance Armstrong’s success has helped boost sales of closely held Trek Bicycle, the nation’s top bike manufacturer.

Globe and Mail:
- Biovail is in talks with investors to have them buy the company and take it private.

Initial Jobless Claims Fall by Most in Almost 3 Years, Leading Indicators Rise More Than Expectations

- Initial Jobless Claims for last week fell to 303K versus estimates of 325K and 337K the prior week.
- Continuing Claims fell to 2577K versus estimates of 2589K and 2618K prior.
- Leading Indicators for June rose .9% versus estimates of a .5% rise and an upwardly revised 0.0% reading in May.

BOTTOM LINE: The number of US workers filing first-time applications for state jobless benefits fell to 303,000 last week, the lowest level since April, as automakers completed factory retooling more quickly than government statisticians expected, Bloomberg reported. The decline was the largest since December 2002. The four-week moving-average of claims fell to 318,000 from 321,250. The insured employment rate, which tracks the US unemployment rate, fell to 2.0% from 2.1%.

The Leading Indicators report shows the first major revision in how the index is compiled since 1996. Higher consumer confidence, building permits and stock prices spurred gains in the index.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
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