Today's Headlines

Bloomberg:
- Investors in commodity-tracking indexes withdrew $680 million from agricultural futures last week, a record sixth straight week of outflows, according to UBS AG.
- BP Plc, Europe's second-largest oil company, and the U.S.'s Verenium Corp. plan to collaborate on developing and selling cellulosic ethanol, a biofuel made from non-edible organic material such as woodchips and grass. The companies intend to create production facilities in the U.S. and potentially worldwide. ``Energy crops like sugar cane, miscanthus and energy cane are the best feedstocks to deliver economic, sustainable and scaleable biofuels to the world,'' Sue Ellerbusch, president of BP Biofuels North America, said in the statement. ``We now have the most advanced technology for transforming these energy grasses to biofuels, increasing our ability'' to meet U.S. demand for cellulosic ethanol. The U.S. Energy Independence and Security Act of 2007, known also as the Renewable Fuels Standard plan, mandates that the country use 15 billion gallons a year of ethanol and 1 billion gallons of biodiesel by 2015. It also calls for consumption of 16 billion gallons of cellulosic ethanol by 2022. So-called second-generation biofuels may account for as much as 23 percent of global transport fuels by 2030, according to Novozymes A/S, the biggest maker of enzymes for industrial and biofuel processes.
- Crude oil futures have tumbled more than 20 percent since touching a record $147.27 a barrel in New York on July 11, a threshold often seen as the start of a bear market. Oil fell as low as $117.14 a barrel amid signs of a global economic slowdown likely to curtail already weakening demand. The dollar today touched its highest in more than seven weeks against the euro, lessening the appeal of commodities as an inflation hedge. ``We've been warning about the oil bubble bursting after reaching $150 because of investors pulling money out of the markets and the negative demand reaction,'' said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. ``At the moment we expect a corrective move to continue.'' ``The bubble has burst,'' said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. ``As the dollar continues to stabilize, the excuse for buying commodities is ended. The dollar has been strengthening, and that is one big catalyst that is gone.'' ``It feels like there could be more downside, but we don't think there is more than $18 a barrel downside,'' David Pursell, an analyst at Tudor, Pickering, Holt & Co. in Houston, said in a telephone interview. U.S. fuel demand averaged 20.1 million barrels a day during the four weeks ended Aug. 1, down 2.6 percent from a year earlier, according to Energy Department data released today.
- Corn and soybeans fell for a fifth straight session on speculation warm, wet weather boosted prospects for crops in the U.S. and China, the biggest growers. Soybean output in China will rise 37 percent to 17.5 million metric tons from a year earlier, the China National Grain and Oils Information Center said today. That exceeded last month's forecast by 1 million tons. Corn production may gain 2.8 percent, the center said. Informa Economics Inc. said yesterday U.S. corn and soybean crops will top government estimates. Before today, corn dropped 32 percent from the record $7.9925 on June 27. Before today, soybeans dropped 22 percent from the all-time high of $16.3675 on July 3.
- The US dollar traded near a seven-week high against the euro as the price of a barrel of oil tumbled to the lowest level in three months. The U.S. currency was near its highest versus the yen in more than a month on optimism lower crude prices will bolster economic growth in the world's largest consumer of the fuel. Australia's dollar declined to a four-month low and Canada's traded near its weakest in almost a year as prices of commodities the nations export fell.
- Carrefour SA’s Chinese director, Eric Legros, said inflation in China is a concern for Europe’s largest retailer. Inflation in that country is a “real preoccupation,” Legros said.
- Ireland doesn’t plan to raise taxes as economic growth slows and the country’s budget deficit increase, according to Health Minister Mary Harney. “Clearly the last thing we need is a knee-jerk reaction,” Harney said. “The last thing we need in this economy is to increase taxes and to go on what I call a spending, borrowing and taxing spree.”
- HealthSouth Corp.(HLS), the largest U.S. provider of inpatient rehabilitation services, rose the most in almost five years in New York trading after the company increased its projected earnings for the year.
- Nasdaq OMX Group Inc.(NDAQ) rose the most in more than three years in New York trading after profit exceeded analysts' estimates and the exchange said the purchase of Sweden's OMX AB will add to profits sooner than expected.
- Microsoft Corp.(MSFT) Chief Executive Officer Steve Ballmer, whose botched bid for Yahoo! Inc. helped drive the stock down 20 percent since February, is about to make it up to shareholders with a buyback of as much as $20 billion, according to a top-rated software analyst. Investors should buy now, while Microsoft is trading at the lowest estimated price-earnings ratio since the world's largest software maker went public 22 years ago, said Heather Bellini of UBS AG, ranked the best software analyst by Institutional Investor magazine in 2007. She expects Microsoft to complete the repurchase -- at least five times larger than its average per quarter in the last fiscal year -- over the next three months.
- China’s biggest aluminum smelters, the largest in the world, have cut more than 10% of capacity because of a power shortage and weak export demand, said Wen Xianjun, deputy chairman of China Nonferrous Metal Industry Association. “The production cut will probably extend to the rest of the year,” Wen said.
- Taiwan's dollar fell for a seventh day, the longest losing streak in a year, on speculation the island's economic growth will slow, deterring the central bank from raising interest rates. Government bonds rose.
- Japan's government said the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended. ``There is a high possibility the economy has entered a recession,'' Shigeru Sugihara, head of business statistics at the Cabinet Office said in Tokyo today.

NY Times:
- Blackstone(BX) Thinks Subprime Is Near a Bottom.

BusinessWeek.com:
- Even Hedge Funds Are Hurting. Even some superstar managers suffered, including Harbinger Capital Partners' Phil Falcone, whose flagship fund lost 16% in July when his buy oil/sell financials strategy suddenly fell apart midmonth (to be fair, Falcone is still up 23% on the year). "We should see a significant shrinkage in the number of funds out there." Relative-value funds, which exploit price differences between similar assets, suffered $3.6 billion in outflows during the first half of the year. During the first three months of 2008, 170 funds closed, an increase of roughly 30% over the year-earlier period. At the same time, investors closed their wallets, as inflows dropped 79% year-over-year, to a paltry $12.5 billion, with more than half going to the top-performing macro strategy. With markets gyrating wildly as they fall into bear-market territory, funds that short market drops one day and catch bounces the next are thriving. These types of funds—whether quantitative, with computer programs making trade decisions, or discretionary, with a manager choosing what trades to make—saw inflows of more than $11 billion during the first half of the year.

FINalternatives:
- Asia-focused hedge funds have taken a beating this year and investors are shying away from managers who not too long ago were seeing double-digit returns. Funds investing in India and China produced the worst performance of any specific hedge fund classification after leading all hedge funds for much of 2007, according to HedgeFund.net. The HFN India and China Averages were down 14.97% and 8.87% in June, respectively, leaving them down 36.88% and 18.77% in the first half of 2008. A lot of the gains generated by the India funds in the last few years came from sectors like real estate, power and construction, according to Vishwas founder Matt Mongia. “These sectors have seen a painful unwinding, in some cases 50%,” he told FINalternatives. In the small- and mid-cap arena, Mongia says trading volume and liquidity have dried up to a point where many managers couldn't sell their holdings even if they wanted to. “So many funds have ridden their portfolio names up and all the way back down,” he says. Investors are also pessimistic about Asian hedge funds, committing just $530 million in new capital in the second quarter, a figure offset by a performance-based decline of nearly $320 million, according to data from Hedge Fund Research. This inflow total represents a drop of nearly 50% from the approximately $1 billion in new assets added to Asian hedge funds in the first quarter.

Mondaq:
- A Short Summary Of Short Selling Regulations. The SEC is actively monitoring short selling activities and is seeking to reduce abusive short selling practices through a combination of regulations, enforcement actions, and, most recently, the emergency actions. In particular, the SEC is focused on addressing the issue of naked shorting. The emergency order will expire on August 12 and the SEC has stated that it will "proceed immediately to consideration of rulemaking" which would expand the scope of the prohibitions to the "broader market." Further, the SEC has indicated that it may require disclosure of substantial short positions. The SEC found that its existing regulations on short selling are unable to address market abuses in light of changing market dynamics and is poised to make additional changes to address the perceived abuses.

New York Post:
- John Paulson, the hedge fund manager who pocketed as much as $3 billion last year on bets against subprime mortgages, was shaken by a tough July - though not by much, according to performance data obtained by The Post. Of Paulson's six hedge funds, the hardest hit was one of two merger arbitrage funds, which dropped 3.7 percent for the month, The Post has learned. Paulson was likely hit by bets against financial stocks, but he was saved by having little or no exposure to energy, according to people familiar with his funds. Experts predict July will be the worst month for hedge funds since the tech bubble burst in 2000 as investors got pummeled as the markets reversed course, sending shares of beleaguered Wall Street firms higher and energy prices down.

Dow Jones:
- Nissan Motor Co., Japan’s third-largest automaker, has developed a new battery for fuel-cell cars that it will road test by the end of the year. The new battery is 35% cheaper, 75% smaller and 1.4 times more powerful than the carmaker’s previous-generation battery. Nissan has been working on a new lithium-ion battery to be used in hybrids, fuel-cell vehicles and electric cars that it plans to introduce after 2010. Honda Motor, Japan’s second-largest carmaker, said in June it will start mass production of its FCX Clarity fuel-cell car within 10 years.

Reuters:
- The German economy, Europe’s biggest, contracted between .75% and 1.5% in the second quarter, citing estimates by government experts. A shrinking economy in two consecutive quarter, defined as a recession, can’t be ruled out, the official said.

Interfax:
- Russian grain exports may more than double to 35 million metric tons by 2020 from 16.7 million tons last year, citing a draft forecast prepared by the Economy Ministry. Russia’s total grain harvest in 2020 may reach 125 million tons, up from 81.8 million tons in 2007, citing the forecast.

Kommersant:
- Russian Internet advertising grew 73% to $260 million in the first six months from a year earlier and may top $600 million this year, citing the MindShare Interaction research agency. Companies spent $161 million, or 83% more than last year, on contextual and search advertising, which is calculated separately, citing MindShare.

The Australian:
- Demand for new home loans in Australia suffers biggest hit since 1980s.

Bear Radar

Style Underperformer:

Large-cap Value -.68%

Sector Underperformers:

Papers irlind (-2.71%), Retail (-2.25%) and Telecom (-1.79%)

Stocks Falling on Unusual Volume:

SNCR, CWEI, QSFT, PQ, ALSK, PL, ABCO, MFLX, BMRN, PACR, TTES, PCLN, ONXX, RIGL, MOLX, LAMR, HAIN, ENS, HCP, EAC and FCN

Stocks With Unusual Put Option Activity:

1) IR 2) CIEN 3) ALTR 4) WFMI 5) NVDA

Economic Releases

- None of note

Bull Radar

Style Outperformer:

Large-cap Growth (+.17%)

Sector Outperformers:

Steel (+1.92%), Construction (+1.37%) and Energy (+1.09%)

Stocks Rising on Unusual Volume:

KWK, TSO, FCX, FTK, HERO, TEI, DVR, IPHS, UTR, HCC, RBCAA, SRVY, INSP, MDRX, KNDL, NETL, BIDZ, FWLT, POWL, VOLC, SIRO, OPNT, AFAM, CSCO, NDAQ, TKLC, RSTI, CAVM, CMED, AMRI, NSR, RL, RMD, MYL and VCP

Stocks With Unusual Call Option Activity:

1) JBL 2) MYL 3) WFMI 4) HBAN 5) BBD

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
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In Play
Exchange Volume vs. Average
NYSE Unusual Volume
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Chart Toppers
Real-Time Intraday Quote/Chart
Dow Jones Hedge Fund Indexes

Wednesday Watch

Late-Night Headlines
Bloomberg:
- The cost of protecting corporate bonds from default fell as the Federal Reserve signaled it won't boost borrowing costs anytime soon and U.S. stocks rallied the most since April. Credit-default swaps on the Markit CDX North America Investment Grade Index, a benchmark gauge of credit risk linked to the bonds of 125 companies in the U.S. and Canada, fell 3 basis points to 131 basis points, according to Credit Suisse Group AG.
- The cost to protect Japanese and Australian corporate bonds from default fell the most in a week, credit-default swaps show. The Markit iTraxx Australia Series 9 Index declined 7.5 basis points to 134 at 9:49 a.m. in Sydney, Citigroup Inc. prices show. The benchmark, which falls as perceptions of credit quality improve, is tied to 25 companies including Lend Lease Corp. and Macquarie Group Ltd. The Markit iTraxx Japan index fell 7 basis points to 106.5, according to Credit Suisse Group.
- The US dollar traded near a seven-week high against the euro as the price of a barrel of oil tumbled to the lowest level in three months. The U.S. currency was near its highest versus the yen in more than a month on optimism lower crude prices will bolster economic growth in the world's largest consumer of the fuel. Australia's dollar declined to a four-month low and Canada's traded near its weakest in almost a year as prices of commodities the nations export fell. ``The U.S. dollar should continue to be buoyed,'' said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co. ``The fall in oil is a plus for the U.S. At the same time, it encourages the withdrawal of funds from the commodity currencies.''
- Crude oil fell for a third day in New York, trading near $118 a barrel as demand may be further eroded by economic slowdowns in the U.S., Europe and China. Oil has lost more than $28 since touching a record of $147.27 a barrel in New York on July 11 as unprecedented fuel costs prompted U.S. consumers to limit spending. Oil has also fallen as its appeal as an inflation hedge has been curbed on recent gains by the dollar against the euro and the yen. U.S. gasoline demand fell for a 15th consecutive week, as motorists cope with high fuel prices by driving less, a MasterCard Inc. report yesterday showed. Demand last week dropped 3.4 percent from a year earlier, MasterCard, the second-biggest credit-card company, said in its weekly SpendingPulse report.
- China's soybean production, the world's fourth-biggest, may surge 36.7 percent from year ago after farmers boosted planting and favorable weather improved yields, a state-owned market forecaster said. Output may rise to 17.5 million metric tons, the China National Grain and Oils Information Center said in an e-mailed monthly forecast report. Corn production may surge 2.7 percent to a record 156 million tons, it said. The country's output of wheat, the world's biggest producer, may gain 2.4 percent to 112.5 million tons, while rice production may rise 0.5 percent to 186.5 million tons, the center said. Production of rapeseed may also increase 8.5 percent to 11.5 million tons, it said.
- Gold fell below $900 an ounce for the first time since June as the dollar's rebound and plunging energy costs reduced the appeal of the precious metal as a hedge against inflation. ``The crude bubble looks like it's bursting, and the dollar is moving higher,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. ``The main drivers for gold are reversing course, and you're seeing gold prices suffer for it.'' ``If gold closes weakly today, we will throw the towel in on our strong one-month and three-month views tomorrow,'' said John Reade, a UBS AG metals strategist in London. UBS forecast last month the metal would reach $1,000 in one month and $1,050 in three months.
- Cisco Systems(CSCO) said profit rose 4.4 percent and gave forecasts for the next six months in line with analysts' estimates, suggesting sales are holding up even in the face of an economic slump. The stock surged 7.3 percent in after-hours trading.
- Whole Foods Market Inc.(WFMI), the largest U.S. natural foods grocer, plunged 17.8% following the close of U.S. markets after reporting third-quarter profit that dropped more than analysts estimated.
- Priceline.com Inc.(PCLN), the travel agency that gets about two-thirds of its revenue from the U.S., fell 15.4 percent in late Nasdaq trading after saying bookings may suffer as high gas prices force consumers to cut back on travel.
- U.S. air travelers can keep laptop computers in some types of carry-on bags at security checkpoints starting Aug. 16 as part of an effort to speed up screening.
- General Motors Corp.(GM), Ford Motor Co.(F) and Chrysler LLC should have access by January to $25 billion in government loans to convert factories to build alternative-fuel vehicles, a Michigan lawmaker told U.S. regulators.
- Time Warner Inc.'s(TWX) ``The Dark Knight'' surpassed $400 million in ticket sales in 18 days, cementing the latest Batman movie's place as Hollywood's fastest moneymaker.

Wall Street Journal:
- Beijing Taxis Are Rigged for Eavesdropping.
- The new Muslim-outreach coordinator to the presidential campaign of Barack Obama has resigned amid questions about his involvement in an Islamic investment fund and various Islamic groups. Chicago lawyer Mazen Asbahi, who was appointed as a volunteer national coordinator for Muslim American affairs by the Obama campaign on July 26, stepped down Monday after an Internet newsletter wrote about his brief stint on the fund's board, which also included a fundamentalist imam.
- In an ambitious power grab, President Hugo Chávez has enacted a slew of presidential decrees which formalize the creation of a popular militia and further consolidate state control over key areas of the economy such as agriculture and tourism.

MarketWatch.com:
- Venture-capital and private-equity investments in the clean-technology sector more than doubled to nearly $6 billion across the globe in the second quarter, just as oil traded at record levels near $150 a barrel and the stock market moved lower on economic woes.
- A $550 million trust fund, created under the nation's new housing law, is the first concentrated effort to establish affordable housing for renters in the lowest income brackets since the formation of Section 8 housing in 1974, experts say.
- News Corp.(NWS/A) said Tuesday its quarterly profit rose 27% on improved results at its film studios and cable television networks, as well as gains related to its sale of stakes in Fox Sports Bay Area and Gemstar-TV Guide.

NY Times:
- Big-Dollar Donors Are Major Force in Obama Campaign. In an effort to cast himself as independent of the influence of money on politics, Senator Barack Obama often highlights the campaign contributions of $200 or less that have amounted to fully half of the $340 million he has collected so far. But records show that one-third of his record-breaking haul has come from donations of $1,000 or more: a total of $112 million, more than Senator John McCain, Mr. Obama’s Republican rival, or Senator Hillary Rodham Clinton, his opponent in the Democratic primaries, raised in contributions of that size. Behind those larger donations is a phalanx of more than 500 Obama “bundlers,” fund-raisers who have each collected contributions totaling $50,000 or more. The biggest fund-raisers include people like Julius Genachowski, a former senior official at the Federal Communications Commission and a technology executive who is new to political fund-raising; Robert Wolf, president and chief operating officer of UBS Investment Bank; James A. Torrey, a New York hedge-fund investor; and Charles H. Rivkin, chief executive of an animation studio in Los Angeles. Hedge-fund executives have bundled large sums for Mr. Obama at a time when their industry has been looking to increase its clout in Washington.

AutomatedTrader:
- Bloomberg Tradebook has released REACT, a new opportunistic trading strategy for US equity trading. This algorithm seeks to capture maximum price improvements by trying to predict and react to short-term price direction and by dynamically adjusting the quantity, price and market venues in which to represent an order. REACT makes decisions based on a number of factors including: real-time market trades; intraday stock trading performance; bid/offer spread and volatility; and deviation from historical trading patterns.

TV Squad:
- The presidential debate moderators are chosen.

Financial Times:
- Crude oil and natural gas producers are scrambling to "lock in" prices by buying insurance against further drops in prices, as oil on Tuesday hit a fresh three-month low of $118 a barrel. In the options market over the last week, for every buyer of insurance against a rise in prices in 2009 there were almost 10 buyers of protection against a fall. The number of financial bets providing insurance against a fall in prices below $100 a barrel before the end of the year has more than doubled in the past six weeks, according to the New York Mercantile Exchange. On Tuesday there were more than 46,000 outstanding contracts for Nymex December 2008 put options at $100 a barrel, up about 135 per cent on late June. Traders said a single market participant, believed to be a Latin American national oil company, had in the past 10 days taken a large position in put options to protect itself against a drop below $70 by December 2009.
- Petrol prices boost distance learning.

Caijing:
- China’s securities regulator expanded the information listed banks must disclose in earnings reports to include details of subprime holdings. The China Securities Regulatory Commission will order the banks to inform investors of the type, face value, yield, maturity, and provisions of their financial bond holdings for the first time. The new rules, effective from Sept. 1, also require public banks to disclose investments, acquisitions and asset sales that are worth more than $292 million, or that exceed 5% of last year’s net assets, the report said.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (FCX), added to Top Picks Live list, target $142.
- Reiterated Buy on (ONNN), target $14.
- Reiterated Buy on (HEW), target $50.
- Reiterated Buy on (MXGL), target $33.

Thomas Weisel:
- Rated (SONO) Overweight, target $40.
- Rated (CNMD) Overweight, target $36.

Night Trading
Asian Indices are +1.0% to +2.25% on average.
S&P 500 futures +.14%.
NASDAQ 100 futures +.56%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
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Before the Bell CNBC Video(bottom right)
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Top 25 Stories
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Economic Preview/Calendar
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Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (RIG)/3.21
- (FWLT)/.84
- (EP)/.40
- (MMC)/.35
- (PCG)/.81
- (BX)/.08
- (TWX)/.23
- (LAMR)/.14
- (PWR)/.22
- (DF)/.32
- (DVN)/3.29
- (FRE)/-.54
- (ABK)/-.61
- (Q)/.10
- (S)/.03
- (RL)/.72
- (VRSN)/.23
- (AIG)/.79
- (CECO)/.09
- (AAP)/.72
- (CAR)/.10
- (SUN)/.36
- (HK)/.27

Upcoming Splits
- None of note

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -200,000 barrels versus an -81,000 barrel decline the prior week. Gasoline supplies are expected to fall by -1,500,000 barrels versus a -3,525,000 barrel decline the prior week. Distillate supplies are estimated to rise by +2,000,000 barrels versus a +2,396,000 increase the prior week. Finally, Refinery Utilization is expected remain unch. versus a .3% increase the prior week.

Other Potential Market Movers
- The weekly MBA mortgage applications report, (AXP) analyst meeting, (TXT) analyst call, BMO Capital Healthcare Conference and RBC Capital Tech/Media/Communications Conference could also impact trading today.

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