Wednesday Watch

Late-Night Headlines
Bloomberg:
- China joined the US, Japan, South Korea and Australia in telling North Korea to refrain from testing a long-range missile, saying it may damage six-nation talks on ending North Koreas nuclear program.
- Optimism among Japan’s largest manufacturers slipped in the second quarter as a rising yen and falling stock prices created uncertainty over the outlook for the world’s second-largest economy.
- Australia’s government will spend $87 million over three years to provide families with free software to block access to pornography Web sites.

Late Buy/Sell Recommendations
- Deutsche Bank
- Raised (PKX) to Buy.

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated +.02%.

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
- (BBBY)/.35
- (FDX)/1.77
- (JBL)/.37
- (MS)/1.45
- (SRZ)/.26

Upcoming Splits
- (DAKT) 2-for-1

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a 500,000 barrel crude oil drawdown. Gasoline supplies are expected to rise 1,500,000 barrels. Distillate supplies are estimated to rise 1,500,000 barrels. Finally, refinery utilization is expected to rise .13%.

BOTTOM LINE: Asian indices are mixed, as gains by commodities stocks in the region are being offset by losses in exporting shares. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish Mostly Lower on Below-Average Volume

Indices
S&P 500 1,240.12 unch.
DJIA 10,974.84 +.30%
NASDAQ 2,107.06 -.16%
Russell 2000 677.50 -.48%
Wilshire 5000 12,425.64 -.09%
S&P Barra Growth 575.18 -.07%
S&P Barra Value 663.06 +.06%
Morgan Stanley Consumer 601.28 +.25%
Morgan Stanley Cyclical 790.73 -.18%
Morgan Stanley Technology 485.33 unch.
Transports 4,629.98 +.40%
Utilities 406.40 +.47%
Put/Call .95 -10.38%
NYSE Arms 1.0 -30.56%
Volatility(VIX) 16.69 -6.39%
ISE Sentiment 135.0 +6.30%
US Dollar 86.20 -.14%
CRB 333.10 -.14%

Futures Spot Prices
Crude Oil 69.22 -.17%
Unleaded Gasoline 200.85 +.14%
Natural Gas 6.54 +.52%
Heating Oil 191.10 +.19%
Gold 579.70 -.12%
Base Metals 201.09 -.45%
Copper 308.75 -.15%
10-year US Treasury Yield 5.14% +.28%

Leading Sectors
Gold & Silver +2.21%
Airlines +2.0%
I-Banks +.75%

Lagging Sectors
Homebuilders -1.02%
HMOs -1.46%
Oil Service -2.26%

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
SmithBarney:
- Reiterated Buy on (SRZ).

Afternoon/Evening Headlines
Bloomberg:
- Husky Energy, a Canadian oil company, said a hydrocarbon discovery in an oil field offshore Newfoundland and Labrador may boost reserves by about 38%. The discovery in the White Rose field could contain 40 million to 90 million barrels of oil.
- Natural-gas prices fell for the third straight session as temperatures eased in the northern US, trimming demand for the fuel used by power plants to meet air-cooling needs.

Reuters:
- Canadian officials said a gosling that was infected with bird flu in the province of Prince Edward Island didn’t carry the deadly H5N1 Asian strain.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Networking longs and Energy-related shorts. I added to my (EEM), (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 50% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was below average. Measures of investor anxiety were lower into the close. Overall, today's market performance was mildly bearish. The Johnson Redbook same-store sales index rose 3.2% year over year last week vs. a 3.1% rise the prior week. The long-term average is again of around 2.5%. I continue to see little evidence that a significant decline in consumer spending is on the horizon. I do, however, still expect to see retail sales decelerate back to average levels by next month.

Today's Headlines

Bloomberg:
- Emerging market stocks fell for a second day after comments from US and Japanese policy makers heightened speculation that interest rates will increase, luring investors away from riskier assets.
- CBS Corp.(CBS) said Dan Rather, a former correspondent and anchor of “CBS Evening News,” will leave the network after 44 years.
- General Motors(GM) said it plans to amend and extend an unsecured $5.6 billion credit line that would have expired in 2008 to remove uncertainty as to whether GM can use the money if needed.

Wall Street Journal:
- International Business Machines(IBM) and Georgia Institute of Technology demonstrated computer chips that can run as fast as 500 gigahertz.
- Toyota Motor(TM) is seeking to rebuild its sports-car selection as it bids to top General Motors(GM) as the world’s biggest carmaker.
- US banks and small brokerage companies are seeking to take customers from larger brokerages such as Citigroup’s(C) Smith Barney unit by offering separately managed accounts with lower fees and smaller minimum investments.
- Shares of medium-sized telecom companies such as Global Crossing(GLBC), Level 3 Communications(LVLT) and Broadwing Corp.(BWNG) have taken a beating in recent weeks and some investors regard them as bargains.
- About 2.4 million people started taking narcotic pain relievers for non-medical reasons in 2004, about 300,000 more than those who began using marijuana.

NY Times:
- More US Naval Academy midshipmen undergo laser eye surgery to correct vision imperfections, boosting pilot candidates and cutting the number of applicants for other jobs such as submarine officers.
- Wal-Mart’s(WMT) headquarters in Bentonville, Arkansas has attracted a growing number of Jewish families to the area, who relocated to work at the retail giant or one of its suppliers.
- AMR’s American Airlines, the world’s largest airline, is among US carriers redesigning Web sites to win customers from ticket sites such as Expedia(EXPE) and Orbitz.

Washington Post:
- Human Genome Sciences(HGSI) plans to announce today that the US has agreed to buy $165 million worth of an experimental anthrax treatment, the 14-year-old company’s first product sale.
- The Iraqi government aims to have “full control” over the country by the end of 2008 and needs the gradual withdrawal of US and allied forces to legitimize its rule, national security adviser Mowaffak al-Rubaie said.

AP:
- The American Heart Assoc. is urging that the amount of trans fats in diets be limited to less than 1% of total calories.

NY Post:
- Interpublic Group(IPG) may take an equity stake in the social networking Web site Facebook as the advertising company tries to learn the best way to market to young consumers.

Financial Times:
- American Stock Exchange Chairman and CEO Neal Wolkoff told a US House of Representatives subcommittee yesterday that tough US corporate compliance regulations are becoming a “Marshall Plan” for overseas stock exchanges.

Bilanz:
- Nestle SA, the maker of Ralston Purina dog food, has developed an ingredient to fight Alzheimer’s disease in dogs that could eventually be used to treat humans.

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

Housing Starts Exceed Estimates

- Housing Starts for May rose to 1957K versus estimates of 1867K and 1863K in April.
- Building Permits for May fell to 1932K versus estimates of 1932K and 1973K in April.

BOTTOM LINE: Home construction rebounded in May from a 13-month low as builders worked on backlogs and used incentives to win new business in a slowing market, Bloomberg reported. Starts rose 16% in the West, 1.7% in the Northeast and 8.5% in the South. Starts fell 16% in the Midwest. I expect housing starts to decelerate further over the intermediate-term as inventories remain high.

Tuesday Watch

Late-Night Headlines
Bloomberg:
- Copper futures in Shanghai fell amid concern that rising global interest rates will hurt demand growth for the metal. Prices have plunged 33% since reaching a record on May 15.
- The European Commission is “generally supportive” of an agreement between Nokia Oyj(NOK) and Siemens AG to combine their telecommunications network-equipment units, the telecommunications commissioner said.
- Gold and silver in Asia fell as a declining oil price eased concern that inflation may accelerate.
- McDonald’s Corp.(MCD) said it will start a chain of drive-through fast-food outlets in China with oil refiner and gas station operator China Petroleum & Chemical Corp.
- South Korea may be preparing to launch a satellite rather than testing a missile, South Korea's ruling party said, citing Unification Minister Lee Jong Seok.

Financial Times:
- MySpace.com, the on-line social networking site purchased by News Corp.(NWS/A) last year, is targeting 11 countries for international expansion, including France and Germany.

Apple Daily:
- Quanta Computer and Asustek Computer will manufacture 2.3 million MacBook laptop computers for Apple Computer this year, citing an estimate by UBS AG.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.75% to -.50% on average.
S&P 500 indicated +.12%.
NASDAQ 100 indicated +.10%.

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
- (ATU)/.78
- (APOL)/.74
- (CBK)/.37
- (CMC)/.70
- (DRI)/.60
- (FDS)/.39
- (SJM)/.58

Upcoming Splits
- None of note

Economic Releases
8:30 pm EST
- Housing Starts for May are estimated to rise to 1869K versus 1849K in April.

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