Initial Jobless Claims Rise Slightly, Unemployment Steady, Pending Home Sales 3-Month Avg. Best in Over 4 Years

- Initial Jobless Claims for this week rose to 455K versus estimates of 425K and 448K the prior week.

- Continuing Claims rose to 3311K versus estimates of 3255K and 3280K prior.

- Pending Home Sales for June rose 5.3% versus estimates of a -1.0% decline and a -4.9% decline in May.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits rose slightly last week, Bloomberg reported. Some workers filing for extended benefits under a government-spending bill that was signed by President Bush in June were deemed eligible to enter the program as first-time claimants, according to the Labor Dept. That may have led to the jump in applications over the last few weeks, he said. The government can’t quantify the impact on claims and applications will likely remain elevated for a few more weeks, the spokesman said. The four-week moving average of jobless claims rose to 419,500 from 392,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at 2.5% versus the long-term average of 2.9%. 38 state reported a decrease in jobless claims. Jobless claims will likely trend around current levels for a couple of weeks before decelerating during 4Q.

More Americans unexpectedly signed contracts to purchase previously owned homes in June, a sign that lower prices are drawing buyers back into the market, Bloomberg reported. Purchase contracts jumped 9.3% in the South, 4.6% in the West, 3.4% in the Northeast and 1.3% in the Midwest. The three-month average of Pending Home Sales is +2.5%, which is the best level since March 2004. This is a large positive. I continue to believe overall home sales have bottomed and will trend modestly higher through year-end, which should make a significant dent in inventories.

Bull Radar

Style Outperformer:

Small-cap Growth (-.12%)

Sector Outperformers:

Oil Service (+.70%), Semis (+.63%) and Homebuilders (+.46%)

Stocks Rising on Unusual Volume:

TXCO, ENG, SWSI, GDP, VE, MWA, MPWR, CECO, STM, NFS, CBEY, JCP, AXA, CCOI, DLTR, NAVG, TRLG, HAYN, BAGL, GIVN, PRXL, DGIT, PACR, MSSR, AFAM, ABCO, CNQR, ANSS, TMTA, CLFC, BKD and WG

Stocks With Unusual Call Option Activity:

1) GGP 2) TRLG 3) DYN 4) HSY 5) HANS

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Thursday Watch

Late-Night Headlines
Bloomberg:
- The Bank of Korea raised its benchmark interest rate by a quarter point to the highest in almost eight years, judging the fastest inflation in a decade is a greater threat than slowing economic growth. Governor Lee Seong Tae increased the seven-day repurchase rate to 5.25 percent in Seoul today. Lee joins policy makers in India, Indonesia, Taiwan, Thailand and the Philippines in boosting borrowing costs this year as soaring fuel and food costs fan inflation across Asia.
- Roadside bomb attacks in Iraq dropped to a record low thanks to last year's surge in American troop numbers and the support of local Sunni Muslims battling al- Qaeda, a senior U.S. military officer said.
- The euro traded near a seven-week low against the dollar before a European Central Bank meeting at which President Jean-Claude Trichet may keep borrowing costs unchanged and acknowledge economic growth is slowing. Europe's single currency may decline for a third day versus the dollar after German factory orders unexpectedly fell in June, giving ECB policy makers less reason to raise interest rates from a seven-year high.
- UBS AG cut its growth forecast for the global economy in 2009 to 2.9% from a prior forecast of 3.1%.
- Patients infected with HIV might be able to live symptom free without medicines as aggressive treatment with newer drugs better control the disease, the head of U.S. infectious disease research said today.
- Crude oil futures traded near $119 a barrel in New York after falling yesterday as U.S. supplies unexpectedly gained amid slowing demand, and the dollar climbed, reducing the appeal of commodities as an inflation hedge. Crude oil supplies rose 1.61 million barrels last week, and fuel consumption was 2.6 percent lower in the four weeks ended Aug. 1 from a year ago, the U.S. Energy Department said yesterday. New York oil futures fell as low as $117.11 a barrel yesterday, 20 percent below the record $147.27 on July 11, a threshold commonly seen as the start of a bear market. ``Bullish factors on the supply side are being ignored and the market's all about demand and rising supplies,'' said Tetsu Emori, a fund manager at Astmax Co. in Tokyo. ``News about disruptions in Nigeria and explosion at an oil pipeline in Turkey had no impact at all.''
- Gasoline refinery utilization is currently at 86.95%, the lowest level for this time of the year in 18 years.
- Copper fell in Asia as global stockpiles rose to a six-month high. Copper inventories monitored by the London Metal Exchange climbed for an 18^th straight day to 150,325 metric tons. “LME inventories continue to build, with South Korea now seeing inflows, perhaps owing to slackening Chinese demand ahead of the Olympics,” Leon Westgate, an analyst at Standard Bank Group, wrote.
- Robusta coffee fell in London on speculation that exports from Brazil, the world's biggest grower, will accelerate. Cocoa and white sugar advanced. Brazil will produce 51.1 million bags this year, 36 percent more than last year, because trees are in the higher-yielding part of a two-year cycle, the U.S. Department of Agriculture estimates. Global coffee production may rise 15 percent to a record 139.7 million bags in the year that begins Oct. 1 because of increased Brazilian and Vietnamese supply, German researcher F.O. Licht said July 8.
- American International Group(AIG), the world's largest insurer by assets, said its capital adequacy improved ``significantly'' in the second quarter after it raised $20.3 billion by selling securities.

MarketWatch.com:
- American International Group(AIG) reported a $5.36 billion second-quarter net loss late Wednesday as the insurance giant was hit again by write-downs and impairments on mortgage-related exposures.

IBD:
- Acquisition Gives Booster Shot To Provider Of Home Health Care.

CNNMoney.com:
- Surprises: A tech IPO.
- Gas Prices Fall for 20^th Day. Average price of gasoline down more than 25 cents a gallon from record high.

Chemical Online:
- University of Georgia researchers have developed a new technology that promises to dramatically increase the yield of ethanol from readily available non-food crops, such as Bermudagrass, switchgrass, Napiergrass—and even yard waste. The new technology features a fast, mild, acid-free pretreatment process that increases by at least 10 times the amount of simple sugars released from inexpensive biomass for conversion to ethanol. The technology effectively eliminates the use of expensive and environmentally unsafe chemicals currently used to pretreat biomass.

Reuters:
- High oil prices have caused "dramatic" and longer-term changes in consumer behavior, U.S. Acting Deputy Energy Secretary Jeffrey Kupfer said on Wednesday.
- Hedge funds are known for playing many roles on Wall Street, but last-resort lender to small businesses that are turned down by banks is hardly one of them. Yet with the credit crunch pushing many major U.S. banks to set tougher lending standards for small and medium-sized businesses, hedge funds have stepped in.

Financial Times:
- Blackstone Group(BX), the private equity group, has raised $2bn for Bayview Financial, a distressed mortgage servicer and fund manager in which it holds a stake, to buy portfolios of ailing mortgage assets in the next few months.
- Many of the world's biggest banks are proposing reforms that would limit the size and scope of their businesses in one of the most dramatic responses to the credit crisis. The proposals would hold down the number of investors who can buy complex financial products, bring large swathes of the derivatives markets into regulators' sights and call on banks to spend more on technology and risk management. The consequence would be that many of the securitization businesses that helped fuel the boom on Wall Street and the City of London in the middle years of this decade could face tougher oversight and find far fewer opportunities for growth.
- If something looks unsustainable, it probably is. Even as the rest of the eurozone was grinding to a halt, Germany seemed able to escape the global downturn. No longer. A leaked report on German output growth due out next week shows Germany has finally succumbed to the pressures affecting the rest of Europe.

Sydney Morning Herald:
- The Australian electricity industry is planning to pass on most of the costs of carbon trading to the public, even though it is set to receive taxpayer compensation from the Federal Government, documents seen by the Herald show.

Gulf Times:
- Inflation in the Gulf ‘to remain high’ this year. Inflation - which has become a critical issue for consumers, businesses and policy makers in the GCC region - is expected to remain high this year, according to Al Khaliji. Hence, the GCC governments could undertake measures, including delaying some of the investment projects, curtailing demand, imposing temporary price controls and lowering the fuel price or revaluing their currencies, to mitigate the risks of high inflation, said the bank in a report. Qatar’s consumer price inflation is expected to be at 12% and UAE’s at 9% this year, Al Khaliji chief economist and executive (Treasury and Debt Capital Markets) Zahid Khan said in the report.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MGA), target $73.

CSFB:
- Reiterated Outperform on (PWR), raised estimates, target $44.

Thomas Weisel:
- Rated (FSLR) Overweight, target $344.
- Rated (MEA) Overweight, target $20.

Night Trading
Asian Indices are -1.25% to +.25% on average.
S&P 500 futures -.48%.
NASDAQ 100 futures -.46%.

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Earnings of Note
Company/EPS Estimate
- (DTV)/.40
- (SLE)/.25
- (SFY)/2.36
- (WMB)/.70
- (MLM)/1.84
- (CEP)/.44
- (WRC)/.48
- (BBI)/-.19
- (DYN)/.03
- (WMG)/-.18
- (ATK)/1.66
- (SIRI)/-.07
- (CPKI)/.26
- (HANS)/.51
- (SD)/.16
- (CAH)/.96
- (DECK)/.24
- (FTO)/.53
- (BRL)/.53
- (ED)/.50
- (ACS)/.94
- (DLTR)/.36

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for this week are estimated to fall to 425K versus 448K the prior week.
- Continuing Claims are estimated to fall to 3255K versus 3283K the prior week.

10:00 am EST
- Pending Home Sales for June are estimated to fall 1.0% versus a 4.7% decline in May.
- ICSC Chain Store Sales for July are estimated to rise 4.0% versus a 4.3% gain in June.

3:00 pm EST
- Consumer Credit for June is estimated to fall to $6.3 billion versus $7.8 billion in May.

Other Potential Market Movers
- The weekly EIA natural gas inventory report, Leerink Swann Life Science Tools Conference, Bank of America Specialty Pharma Conference and RBC Tech/Media/Communications Conference could also impact trading today.

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

Stocks Finish Near Session Highs, Boosted by Commodity, Technology and Construction Shares

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In Play

Stocks Rising into Final Hour on Short-Covering, Less Economic Pessimism, Lower Commodity Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Alternative Energy longs, Medical longs and Gaming longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is above average. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling 5.58% and is still above-average at 19.96. The ISE Sentiment Index is slightly below average at 139.0 and the total put/call is above average at 1.0. Finally, the NYSE Arms has been running about average most of the day and is currently .86. The Euro Financial Sector Credit Default Swap Index is rising 1.95% today to 82.33 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is falling .61% today to 130.67 basis points. The TED spread is rising 9.61% to 1.17. The 10-year TIPS spread, a good gauge of inflation expectations, is falling another 2 basis points to 2.23%, which is the lowest since May 1st and down 40 basis points in about a month. Growth stocks are especially strong today, with many leaders posting 2%+ gains. It is very good to see the broad market able to rally without the help of the financials or another substantial decline in oil. The Citi eurozone economic surprise index has fallen to -168.20, while the US index remains in positive territory at +22.6. The US Dollar Index continues to trade very well and is poised to close above its 200-day moving average for the first time since March 2006. The index is in a mild resistance zone right now, but should punch through this area easily over the coming months as US economic data continue to show mild improvement, while other major economies slow further. Even after falling 20% from its high, oil was unable to even bounce today, which bodes well for further declines in the much-loved commodity. As well, agricultural commodities remain very weak, falling another 1.94% today. The S&P Goldman Agriculture Commodity Spot Index is now down 22.9% in less than five months. Inflation gauges should show huge improvement over the coming months, as a result. Two of my longs, (PWR) and (WMS), reported earnings and are trading substantially higher today. I think both are still very attractive at current levels. Nikkei futures indicate an +66 open in Japan and DAX futures indicate an +69 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic pessimism, short-covering and lower commodity prices.