Thursday Watch

Late-Night Headlines
Bloomberg:
- Nokia Oyj and Motorola won bigger shares of the global market in the second quarter, widening their lead over competitors including Samsung Electronics and Siemens AG.

Wall Street Journal:
- India’s minister for petroleum and natural gas told the country’s oil companies to intensify efforts to buy overseas energy assets as Oil & Natural Gas Corp. considers making a counterbid for Canadian company PetroKazakhstan.

Financial Times:
- Nasdaq Stock Market may today say it will offer its users access to options trading, months ahead of the NYSE.

China Daily:
- 3M Co. plans to invest $300 million in China during the next five years.

Asian Wall Street Journal:
- News Corp’s plans to operate a prime-time television channel in China have unraveled amid a government crackdown on the media industry.
- Tropical Storm Katrina headed toward southeastern Florida, with maximum sustained winds of 50 mph and gusting higher, prompting officials to issue a hurricane warning for parts of the state’s Atlantic coast.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Underperform on GCO.

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.16%.

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Earnings of Note
Company/EPS Estimate
CHS/.27
DG/.21
FRED/.09
JTX/-.31
NOVL/.02
OVTI/.26
PETC/.31
PDCO/.32
NX/1.62
SFD/.44
TOL/1.19

Upcoming Splits
None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated at 315K versus 316K the prior week.
- Continuing Claims are estimated at 2575K versus 2593K prior.

BOTTOM LINE: Asian indices are mixed, as gains in Hong Kong are being offset by losses in Australian shares. I expect US equities to open modestly lower on continuing energy fears. The Portfolio is 50% net long heading into the day.

Stocks Finish at Lows on Energy Concerns

Indices
S&P 500 1,209.59 -.66%
DJIA 10,434.87 -.81%
NASDAQ 2,128.91 -.39%
Russell 2000 655.01 -.07%
DJ Wilshire 5000 12,074.33 -.53%
S&P Barra Growth 579.15 -.64%
S&P Barra Value 626.18 -.67%
Morgan Stanley Consumer 578.72 -.81%
Morgan Stanley Cyclical 729.89 -.86%
Morgan Stanley Technology 492.96 -.75%
Transports 3,665.97 +.13%
Utilities 397.44 -.38%
Put/Call .91 -10.78%
NYSE Arms 1.37 +11.62%
Volatility(VIX) 14.17 +6.22%
ISE Sentiment 120.00 -38.14%
US Dollar 87.92 -.18%
CRB 320.02 +.77%

Futures Spot Prices
Crude Oil 67.75 +3.10%
Unleaded Gasoline 196.25 +5.62%
Natural Gas 10.00 +3.29%
Heating Oil 188.05 +3.36%
Gold 442.40 -.43%
Base Metals 129.98 -.75%
Copper 162.30 -1.22%
10-year US Treasury Yield 4.16% -.32%

Leading Sectors
Oil Tankers +4.24%
Oil Service +1.52%
Homebuilders +.86%

Lagging Sectors
Airlines -2.02%
Gold & Silver -2.11%
Steel -2.12%

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In Play

Afternoon Recommendations
Goldman Sachs:
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Former WorldCom CEO Bernard Ebbers must serve his 25-year sentence in a Louisiana medium security prison instead of a low-security prison near his Mississippi home.
- The Federal Reserve Bank of New York invited 14 of the “major participants” in the credit-derivatives market to a meeting next month amid concern the $8.4 trillion industry is rife with trades lacking key paperwork.
- GM and Ford Motor’s debt were lowered to junk by Moody’s Investors Service following two quarters of losses at both companies’ North American auto operations.
- Johnson Controls will buy York International for $2.4 billion to double its heating-and-cooling systems business.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Oil Tanker shorts and Retail longs. I added back my IWM and QQQQ shorts in the afternoon, thus leaving the Portfolio 50% net long. The tone of the market was modestly negative today as the advance/decline line finished lower, most sectors fell and volume was average. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was slightly negative.

Stocks Slightly Higher Mid-day, Led by Energy and Homebuilders

Indices
S&P 500 1,220.00 +.20%
DJIA 10,521.97 +.02%
NASDAQ 2,150.78 +.63%
Russell 2000 661.10 +.86%
DJ Wilshire 5000 12,178.31 +.33%
S&P Barra Growth 584.56 +.28%
S&P Barra Value 631.45 +.16%
Morgan Stanley Consumer 582.77 -.11%
Morgan Stanley Cyclical 735.65 -.08%
Morgan Stanley Technology 498.55 +.37%
Transports 3,700.93 +1.08%
Utilities 400.34 +.35%
Put/Call .85 -16.67%
NYSE Arms 1.00 -18.49%
Volatility(VIX) 13.16 -1.35%
ISE Sentiment 121.00 -37.63%
US Dollar 87.91 -.19%
CRB 318.32 +.24%

Futures Spot Prices
Crude Oil 66.60 +1.35%
Unleaded Gasoline 189.30 +1.88%
Natural Gas 9.84 +1.62%
Heating Oil 184.00 +1.13%
Gold 441.90 -.52%
Base Metals 129.98 -.75%
Copper 162.50 -1.10%
10-year US Treasury Yield 4.17% -.09%

Leading Sectors
Oil Tankers +5.54%
Oil Service +1.96%
Homebuilders +1.84%

Lagging Sectors
Airlines -.91%
Gold & Silver -1.15%
Steel -1.32%

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Medical Information Systems, Internet and Semiconductor longs. I exited by IWM and QQQQ shorts this morning, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are gaining and volume is about average. Measures of investor anxiety are mostly lower. Today’s overall market action is positive given the rise in oil. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering.

Today's Headlines

Bloomberg:
- Iraq’s southern marshlands, which ousted dictator Saddam Hussein almost destroyed to punish Shiites for an uprising have recovered almost 37% of their former condition.
- Electronic Data Systems said it will get another $1.4 billion in revenue after the UK’s pension agency extended its contracts by two years.
- Crude oil is rising and natural gas reached $10 for the first time in 30 months and the third time ever on concern that a storm heading for Florida may threaten production platforms in the Gulf.

Wall Street Journal:
- United Auto Workers expects 2006 to be a bleak year for General Motors and the union is considering helping the carmaker cut costs, a senior official told a meeting of organized labor leaders.
- International demand for US mortgage-based securities has enabled US lenders to boost lending and sustain housing prices.
- Some US retailers are offering “employee discounts” to customers, hoping to copy the success of GM, DaimlerChrysler AG and Ford with the promotion.
- Lenovo Group of China took over IBM’s unprofitable pc business in May and posted a $33 million operating profit for May and June together.
- Starwood Hotels plans to spend $1.7 billion to put the first of its W brand hotels in Las Vegas.

NY Post:
- The SEC, the NASD and the NYSE have been auditing brokerages to eliminate “naked short selling.”

Detroit News:
- Ford Motor plans to announce its second major restructuring in four years within the next several months.

Austin American-Statesman:
- Texas state and local governments plan to offer Samsung Electronics as much as $225 million of incentives to build a chip plan in Austin.

Gulf News:
- At least 10,000 students from Saudi Arabia are applying to study at US universities this year as the government seeks to encourage the nation’s young people to shun Muslim extremism.

Finanz & Wirtschaft:
- Allergan, the maker of Botox, is looking to buy companies to help it triple in size over the next 10 years, CEO David Pyott said.

Xinhua News:
- China should adopt “forceful” measures to slow growth of industries that have over-expanded.

Durable Goods Orders Slow, New Home Sales Soar, Distillate Inventories Rise

- Durable Goods Orders for July fell 4.9% versus estimates of a 1.5% decrease and an upwardly revised 1.9% gain in June.
- Durables Ex Transportation for July fell 3.2% versus estimates of a .8% fall and an upwardly revised 3.6% gain in June.
- New Home Sales for July rose to 1410K versus estimates of 1328K and 1324K in June.
- The EIA reported crude inventories rose 1.85 million barrels vs. estimates of a 100,000 barrel increase. Gasoline inventories fell 3.25M barrels vs. estimates of a 1.5 million-barrel decline. Distillate inventories rose 1.43 million barrels vs. estimates of a 1.75 million-barrel increase.

BOTTOM LINE: US orders for durable goods declined more than forecast in July after a three-month surge, reflecting less demand for aircraft, computers and communications equipment, Bloomberg reported. Orders for non-defense capital goods excluding aircraft, a proxy for future corporate investment, declined 3.7% last month, the largest amount since October 2004.

US new home sales unexpectedly rose to a another all-time high last month as mortgage rates below 6% and steady employment gains sent American streaming into the housing market, Bloomberg said. The median price of a new home fell to $203,800, the lowest since December 2003. New Home Sales rose 36% in the West and 10.1% in the Northeast. However, they fell 13.5% in the Midwest and 3.5% in the South. Finally, the supply of new homes for sale at the current pace fell to 4 months from 4.1 months in June.

Oil is trading modestly higher on the inventory report. I continue to believe a meaningful decline in crude will begin over the next 6 weeks as terrorism/hurricane fears peak and demand for oil falls more than expected during the fourth quarter.

Links of Interest

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