Monday Watch

Weekend Headlines
Bloomberg:
- Australia warned its nationals that there was a “very high” threat of terrorist attacks in Indonesia, including on the popular tourist resort island of Bali, and that attacks could be “imminent.”
- KBR Inc.(KBR) won a $2.85 billion contract to build Algeria’s largest liquefied natural gas plant, according to Sonatrach, the state oil company of the North African state.
- Roger Federer beat Rafael Nadal to become the first player since Bjorn Borg in 1980 to win five straight Wimbledon tennis titles.
- China’s yuan is rising at the fastest pace since the nation’s central bank abandoned its link to the dollar in 2005, and US lawmakers still aren’t satisfied.
- Boeing Co.(BA) today unveils its 787 Dreamliner at an event hosted by former television news anchor Tom Brokaw before 15,000 people and broadcast live by satellite in nine languages.
- There are an estimated 25 billion barrels of oil in the Kurdish-controlled region of Iraq and 10 billion more around the city Kirkuk.
- Japan’s machinery orders, a key indicator of corporate spending plans, rose for a second month in May, supporting the central bank’s case that interest rates need to increase.
- The yen fell to a record low against the euro and a 16-year low against the Australian dollar as signs of stronger global growth gave investors more confidence to buy higher-yielding assets with money borrowed in Japan.
- French President Nicolas Sarkozy has a message for European finance ministers and central bankers criticizing his plans to revive France’s economy: Back off.

Wall Street Journal:
- Washington state drivers now pay 36 cents in taxes for each gallon of gasoline after an increase of about 6% in the tax, the most of any in the nation, citing a survey.
- John Riccitiello, who became CEO of Electronic Arts(ERTS) in April, said video-game makers need to draw an audience beyond hard-core players.
- Intercontinental Exchange(ICE) won’t raise its bid to acquire the Chicago Board of Trade(BOT).
- Clearinghouse Faulted On Short-Selling Abuse; Finding the Naked Truth.
- As negotiations with News Corp.(NWS/A) continue, Dow Jones(DJ) is making one last push to find other possible buyers for itself, according to people familiar with the matter.

NY Times:
- Representative John Dingell, chairman of the US House Energy and Commerce Committee, said he plans to introduce a bill proposing a “carbon tax” to spur change in the use of fossil fuels.
- Sears(SHLD) Responds to Its Critics With a Call for Patience.
- Snack-food makers including PepsiCo’s(PEP) Frito-Lay and Campbell Soup’s(CPB) Pepperidge Farm are rolling out smaller, more profitable packages of chips, cookies and crackers as their popularity balloons.
- Residents on the Massachusetts island of Nantucket are seeking approval to spend at least $25 million of their own money to replenish the beach and help save 300-year-old homes from erosion.

iLounge:
- All Things iPhone: Add-Ons and Third-Party Software.

Washington Post:
- US Senate Majority Leader Harry Reid has assured Democrats who oppose the Iraq war that they will have a chance to vote on anti-war amendments when the Senate debates Defense Department spending legislation next week.
- The Federal Reserve will “probably” cut interest rates by the end of the year as the housing slump weighs on the economy, according to Bill Gross, manager of the world’s biggest bond fund.

MarketWatch.com:
- Gilead Sciences(GILD) is one of those rare companies that appears to be in a position to do some good for the world, while at the same time keep investors happy with high earnings and a strong stock performance.
- Betting on ‘bio-refineries’ to harvest new fuels. Worried that corn can’t fill up gas tanks? Make way for cellulosic ethanol.

Chicago Tribune:
- The vacancy rate for suburban office space around Chicago fell to 18.5% at the end of June from 19.6% six months ago, citing an analyst report.

Crain’s Chicago Business:
- Madison Dearborn Partners LLC CEO John Canning wants to raise $10.5 billion to create the private-equity firm’s largest fund.

Financial Times:
- AT&T(T), the largest US phone company, will offer its first municipal wireless Internet service in Riverside, California.
- Institutional Investor’s list of the top 20 rising hedge fund stars.
- The New York Mercantile Exchange(NMX) on Monday will call for it main rival in energy derivatives trading, the Intercontinental Exchange(ICE), to be brought under the full jurisdiction of federal regulators amid growing concern over light regulation in the rapidly growing over-the-counter markets.
- A Chinese city where residents recently held mass protests against a planned chemicals plant is preparing to tighten controls on the internet and force users to use their real names when posting messages on local websites.
- Hedge funds and private equity have one big thing in common. Both charge whopping fees – typically 2% of assets under management and 20% of investment profits. Otherwise, the differences are huge.
- The UK government will not soften its stance on Iran’s nuclear ambitions and may take steps to toughen sanctions on the country, according to British Foreign Secretary David Miliband.
- News Corp.(NWS/A) has set up a video-gaming league that will debut tomorrow on DIRECTV satellite television in the US, citing Eric Shanks, executive vp of DIRECTV Entertainment.

Financial Mail of Sunday:
- Virgin Media Inc.(VMED), a UK pay-television operator, was offered for sale by bankers to Comcast Corp.(CMCSA), the world’s largest cable television provider, and DirecTV Group(DTV), the largest US satellite-tv provider.

Sunday Telegraph:
- The UK will face a threat from terrorists for as long as 15 years, Admiral Sir Alan West, the minister for security, said in an interview.

Sunday Times:
- Ford Motor(F) set July 19 as a deadline for indicative bids for its Jaguar and Land Rover units in the UK.

AFP:
- The Great Wall of China and India’s Taj Mahal were named as two of the seven new wonders of the world by nearly 100 million voters taking part in a poll.

Focus:
- Volkswagen AG is considering building a US factory, citing an interview with CEO Winterkorn.

National Business Daily:
- Research In Motion(RIMM) received orders for 5,000 Blackberry e-mail phones from foreign companies based in China.

People’s Daily:
- China’s consumer price index may reach 3% in the first six months of 2007 from a year ago.

Shanghai Daily:
- China needs “decisive” measures to rein in excessive demand and control inflation pressures as its M2 growth has understated the speed of monetary expansion, according to the latest report by Goldman Sachs(GS).

Weekend Recommendations
Barron's:
- Made positive comments on (GILD) and (ITW).
- Made negative comments on (SONO).

Citigroup:
- Reiterated Buy on (MU), (SNDK) and (CELG).

Night Trading
Asian indices are +.50% to +1.0% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated unch.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (AGIL)/.03
- (AA)/.80
- (SCHN)/1.07
- (WDFC)/.46

Upcoming Splits
- (FTK) 2-for-1
- (TPL) 5-for-1

Economic Releases
3:00 pm EST
- Consumer Credit for May is estimated to rise to $7.0 billion from $2.6 billion in April.

Other Potential Market Movers
- The (TTWO) conference call could also impact trading on Monday.

BOTTOM LINE: Asian indices are higher, boosted by technology and energy shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters.

Click here for Stocks in Focus for Monday by MarketWatch.com.

There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Consumer Credit

Tues. – Wholesale Inventories, weekly retail sales reports

Wed. – Weekly EIA energy inventory data, weekly MBA Mortgage Applications report

Thur. – Trade Balance, Initial Jobless Claims, ICSC Chain Store Sales, Monthly Budget Statement

Fri. – Import Price Index, Advance Retail Sales, Univ. of Mich. Consumer Confidence, Business Inventories

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Alcoa Inc.(AA), Schnitzer Steel(SCHN), WD-40(WDFC)

Tues. – Acuity Brands(AYI), Audiovox Corp.(VOXX), Biomet(BMET), Chattem(CHTT), Emmis Communications(EMMS), Greenbrier(GBX), Helen of Troy(HELE), Pepsi Bottling(PBG)

Wed. – AAR Corp.(AIR), Chaparral Steel(CHAP), Genentech(DNA), Resources Connection(RECN), Ruby Tuesday(RT), Wolverine World Wide(WWW), Yum! Brands(YUM)

Thur. – Fastenal(FAST), Fleetwood Enterprices(FLE), M&T Bank(MTB), Marriott(MAR), Progressive Corp.(PGR), Texas Industries(TXI)

Fri. – General Electric(GE)

Other events that have market-moving potential this week include:

Mon. – (TTWO) Conference Call

Tue. – CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference, Roth Capital Semi Conference, Kaufman Defense Technology Conference

Wed. – The Fed’s Plosser speaking, (LIZ) analyst meeting, (MSFT) financial analyst briefing, CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference

Thur. – The Fed’s Yellen speaking, (MU) analyst conference, Pacific Growth Cardiology Conference, CE Unterberg Towbin Emerging Growth Conference, CIBC Consumer Growth Conference, BMO Capital Media/Comm/Tech Conference

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on lower long-term rates, subsiding terrorism fears, diminished sub-prime concerns, lower energy prices, bargain hunting, better-than-expected earnings reports and short-covering. My trading indicators are now giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,530.44 +1.64%*

Click here for What a Week by TheStreet.com.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,530.44 +1.64%
DJIA 13,611.68 +1.41%
NASDAQ 2,666.51 +2.23%
Russell 2000 852.31 +1.58%
Wilshire 5000 15,456.07 +1.77%
Russell 1000 Growth 609.19 +2.14%
Russell 1000 Value 871.56 +1.45%
Morgan Stanley Consumer 735.70 +.73%
Morgan Stanley Cyclical 1,100.52 +2.50%
Morgan Stanley Technology 637.22 +1.87%
Transports 5,231.29 +1.91%
Utilities 505.16 +1.80%
MSCI Emerging Markets 137.60 +4.89%

Sentiment/Internals
NYSE Cumulative A/D Line 77,548 +4.35%
Bloomberg New Highs-Lows Index +561 +289.6%
Bloomberg Crude Oil % Bulls 44.0 -9.3%
CFTC Oil Large Speculative Longs 197,493 -1.63%
Total Put/Call .86 unch.
NYSE Arms .62 -50.79%
Volatility(VIX) 14.72 -5.28%
ISE Sentiment 140.0 -17.6%
AAII % Bulls 43.8 +12.3%
AAII % Bears 32.88 -8.1%

Futures Spot Prices
Crude Oil 72.81 +4.57%
Reformulated Gasoline 230.96 +4.39%
Natural Gas 6.44 -3.17%
Heating Oil 209.51 +3.26%
Gold 654.80 +.55%
Base Metals 257.77 +2.66%
Copper 359.45 +4.84%

Economy
10-year US Treasury Yield 5.18% +15 basis points
4-Wk MA of Jobless Claims 318,500 +.5%
Average 30-year Mortgage Rate 6.63% -4 basis points
Weekly Mortgage Applications 619.40 +.13%
Weekly Retail Sales +1.6%
Nationwide Gas $2.95/gallon -.02/gallon
US Cooling Demand Next 7 Days 15.0% above normal
ECRI Weekly Leading Economic Index 143.0 +.14%
US Dollar Index 81.46 -1.05%
CRB Index 320.86 +2.59%

Leading Sectors
Alternative Energy +4.77%
Airlines +4.15%
Wireless +4.15%
Oil Service +4.03%
REITs +3.32%

Lagging Sectors
Insurance +.44%
Drugs +.43%
Banks +.40%
Foods +.06%
Biotech -.09%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks at Session Highs into Final Hour on More Economic Optimism, Buyout Speculation and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, I-Banking longs, Semi longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive today as the advance/decline line is higher, most sectors are gaining and volume is below average. Just like last year before oil peaked on July 14 and then proceeded to plunge $28 per barrel in six months, it is just assumed by many that oil will continue heading higher forever. I am already hearing the $100 per barrel oil calls that came last year around this time. The fundamentals for oil are even worse this year, in my opinion. Core inflation is already decelerating meaningfully. I suspect a significant decline in energy prices that begins over the next couple of months will help bring headline inflation readings down even further before year-end, which should also help bring long-term interest rates back down. Significantly lower energy prices, lower long-term rates, higher stock prices, wages continuing to substantially outpace inflation, low unemployment and stabilizing home sales should help boost consumer spending back to above-average rates this fall. Retail stocks have held up very well despite the many perceived headwinds of late. I suspect retailers will begin to outperform the market again this quarter as investors anticipate these catalysts. I remain long Under Armour(UA) and Tractor Supply (TSCO). For the first time in a long time, domestic fund inflows substantially exceeded non-domestic fund inflows this week.

Here is a summary of AMG Data Services fund flows for the week ended July 3:

• Including ETF activity, equity funds reported net cash inflows totaling $5.83 billion, with domestic funds reporting net inflows of $5.15 billion and non-domestic funds reporting net inflows of $680 million.
• Excluding ETF activity, equity funds reported net cash inflows totaling $209 million, with domestic funds reporting net inflows of $269 million and non-domestic funds reporting net outflows totaling -$60 million.
• ETFs reported net inflows of $5.62 billion, with the largest flows being $4.85 billion to the iShares Russell 2000 Index (IWM) fund, -$2.18 billion from the SPDRs (SPY) fund and $640 million to the iShares Nasdaq Biotechnology Index (IBB) fund.
• Excluding ETF activity, international funds reported net outflows of -$46 million.
• Excluding ETF activity, taxable bond funds reported net inflows totaling $1.16 billion.
• Money market funds reported net cash inflows totaling $16.83 billion.

I expect US stocks to trade mixed-to-higher into the close from current levels on more economic optimism, bargain-hunting, buyout speculation and short-covering.

Today's Headlines

Bloomberg:
- Goldman Sachs Group(GS) said law-enforcement authorities don’t consider letters making threats against the company to be credible.
- North Korea may shut its Yongbyon nuclear power plant as soon as it gets one-10^th to 50,000 tons of heavy fuel oil promised in an international agreement, rather than wait for the full amount, its official news agency said.
- Federal Reserve Bank of San Francisco President Janet Yellen said the central bank’s stance of keeping interest rates unchanged is most likely to achieve faster growth and slower inflation.
- Citadel Investment Group LLC almost doubled its stake in Myriad Genetics(MYGN) to 5.5%.
- John Lonski, chief economist at Moody’s Investors Service(MCO) sees US price inflation “well contained.”
- Share sales by wind, solar and biofuels companies attracted 8% more investment in the first six months of 2007 than a year earlier, led by energy-efficiency and service industries, New Energy Finance said.
- Investing in renewable energy could save the world $180 billion a year in fuel costs by 2030 while reducing emissions of carbon dioxide, the main gas blamed for global warming, according to a recent report by Greenpeace and the European Renewable Energy Council.- Crude oil is rising .6% to a 10-month high as speculators bid up prices before the peak in summer driving demand and hurricane season.
- Coffee futures fell for a fourth straight session in New York as warehouse supplies rose and Brazil, the world’s largest producer, received favorable weather for its crop.
- Stainless-steel output rose 15% to 7.58 million metric tons in the first quarter from a year ago, driven by increases in China, the alloy’s largest producer, the International Stainless Steel Forum said.
- Natural gas in NY is falling another 3% after a government report today showed supplies are heading towards a new all-time record by October.

Wall Street Journal:
- US officials fear global growth may be hurt by a wave of protectionism.
- The US Congress needs to respond to Iran’s growing involvement in training and organizing extremists fighting US forces in Iraq, Senator Joseph Lieberman wrote.
- The new US Regulation NMS, which requires brokers to send orders instantly to the market showing the best prices, will help larger securities firms at the expense of smaller ones.
- The White House’s Office of Management and Budget will advise President Bush to veto a bill that would allow members of OPEC to be sued under US antitrust laws, citing OMB spokesman Sean Kevelighan.
- The US and the European Union agreed to share information about the safety of cosmetics and medical equipment.
- Chicago Mercantile Exchange(CME) will increase its offer for CBOT Holdings Inc.(BOT) in an attempt to get shareholders to approve its bid for the parent of the Chicago Board of Trade.

NY Times:
- In 2005, about the time when hedge funds started sprouting like weeds, investors, money managers and the media started to question whether there might be a hedge fund bubble. With hedge funds lining up to go public, the questioning has turned up a notch.

Financial Times:
- The Bank of England’s decision to raise interest rates to 5.75% and perhaps beyond could severely hurt the UK economy.

Financial Times Deutschland:
- Hewlett-Packard(HPQ) may acquire more software companies, citing an interview with Hans Ulrich Holdenried, who heads the company’s German unit.
- Steel production in Germany rose in the first six months of the year to its highest level since the country’s reunification, citing Dieter Ameling, the president of the Steel Association.

The Business:
- Dow Jones’ board is confident that the Bancroft family, which controls the majority of voting shares, will approve an agreement for Rupert Murdoch’s News Corp.(NWS/A) to buy the company.