Today's Headlines

Bloomberg:

- The Federal Reserve refrained from increasing its $1.75 trillion bond-purchase program, said the pace of economic contraction is slowing and predicted inflation will remain “subdued for some time.” “Substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time,” the Federal Open Market Committee said in a statement after a two-day meeting in Washington where it also kept the benchmark interest rate between zero and 0.25 percent. The rate will stay at “exceptionally low levels” for an “extended period.”

- Mortgage applications in the U.S. increased last week for the first time in a month as purchases climbed, adding to evidence the market is stabilizing. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 6.6 percent to 548.2 in the week ended June 19, from 514.4 the prior week. The group’s purchase index advanced to the highest level in two months, and its refinancing gauge improved for the first time in five weeks.

- The Baltic Dry Index fell to its lowest level in almost two weeks in London on speculation demand is weakening. Global trade will plunge 16% this year before expanding 2.1% in 2010, the Paris-based Organization for Economic Cooperation and Development said today. Iron Ore is the biggest single dry-bulk commodity hauled at sea and China its largest user. Chinese imports fell 6.2% last month. “We expect the physical market to decline further this week on the back of lower activity and weaker freight market sentiment,” Rikard Vabo and Lars Erich Nilsen, analysts at Oslo-based Fearnley Fonds ASA, a specialist investment bank, wrote today. The index dropped 123 points, or 3.2%, to 3,751 points on the Baltic Exchange.

- A benchmark gauge of corporate credit risk in the U.S. fell as a government report showing an increase in durable-goods orders bolstered speculation the recession is moderating. Credit-default swaps on the Markit CDX North America Investment-Grade Index Series 12, which is used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, fell 4.9 basis points to a mid-price of 140.4 basis points as of 12:40 p.m. in New York, according to CMA DataVision. Credit swaps on retailers including J.C. Penney Co. and Nordstrom Inc. declined. Swaps on Plano, Texas-based J.C. Penney fell 23 basis points to 239 basis points, according to CMA. Contracts on Nordstrom, a Seattle-based department store chain, dropped 18 basis points to 237 basis points. Contracts on Miami-based Ryder System Inc., the largest U.S. truck-leasing company, fell 17 basis points to 227 basis points, according to CMA.

- Wheat prices were inflated by index investors and the Commodity Futures Trading Commission should enforce limits on positions to curb speculation, a congressional investigation reported. Index traders pushed futures beyond levels justified by supply and demand, Senator Carl Levin said yesterday as he released a report by the Senate Subcommittee on Investigations into price movements in 2008 wheat trading. The Chicago Board of Trade needs to eliminate waivers that allow funds to hold more than 6,500 contracts at any one time, which would lower the influence of non-agricultural buyers, Levin said. Speculation “created unwarranted costs and risks for wheat farmers, grain merchants, grain processors and consumers,” Levin told reporters. Index traders “have undermined the futures market” and can sometimes force consumers to pay more for food and limit the ability of farmers to manage risk, said Levin.

- Metals prices may decline in the next three months as China, the world’s biggest user, begins to run down inventories that were built up earlier this year, according to Francisco Blanch at Merrill Lynch & Co. “China has been accumulating inventories of commodities for the last six months or so,” Blanch, head of global commodity research at Merrill, said today in an interview. “This accumulation of inventories now needs to be cleared off. End-user demand in China has not really picked up.” “Inventories in relation to demand will probably prove, in my opinion, to be a bit overdone in the short run, which is why we expect commodity prices to come off,” Blanch told Bloomberg Television. “Oil and the metals markets will start to suffer because of large inventory accumulation.” Stockpiles of copper monitored by the Shanghai Futures Exchange rose last week to the highest in 21 months, totaling 68,536 tons, nearly quadruple the level at the start of the year. The exchange’s tally does not include material held by the State Reserve Bureau. The stockpiling comes amid complaints lodged with the World Trade Organization by the European Union and the U.S. about Chinese export restrictions on magnesium, coke and zinc. China is unfairly using export taxes to keep materials costs lower for domestic steel and manufacturing companies, hurting overseas competitors, according to the U.S. and the EU. “The story in China in this particular case could obviously result in restrictions in other parts of the trading world,” Blanch said. An increase in protectionism may be “a key driver of a further downturn in trading, which could be quite negative,” he said.

Wall Street Journal:

- A major union this week called on Morgan Stanley(MS) -- which repaid $10 billion in government bailout funds last week -- to reverse recent salary increases for senior executives and other top earners. The raises, part of an effort to reduce the importance of annual bonuses, were awarded this year amid executive-pay restrictions associated with the aid. The raises "weakened the link between top executive pay and performance," wrote Gerald McEntee, international president of the American Federation of State, County and Municipal Employees in a letter to Morgan Stanley, also provided to The Wall Street Journal.

NY Times:

- Lawyers for President Obama are quietly drafting first-of-their kind guidelines barring workplace discrimination against transgender federal employees, officials said Tuesday. The guidelines will be in an updated federal handbook for managers and supervisors to be distributed and posted online in the next couple of months, and they could also be included in other materials for managers. They will list transgender people — those who identify their gender differently from the information on their birth certificates — as among several groups protected by antidiscrimination laws. Though transgender men and women are not believed to make up more than a fraction of a percent of the federal work force, their inclusion in the discrimination guidelines is seen as a breakthrough by transgender and gay rights advocates.

MarketWatch:
- All derivatives dealers should have capital and leverage limits, be subject to new fraud penalties, reporting and recordkeeping regulations, said a key regulator on Wednesday. "By fully regulating the institutions that trade or hold themselves out to the public as derivative dealers we ensure that all OTC products, both standardized and customized, are subject to robust oversight," Commodity Futures Trading Commission Chairman Gary Gensler told the Managed Funds Association in Chicago.

NY Post:

- After making billions off the backs of rich people, a growing number of hedge funds are betting they can strike gold by morphing into mutual funds and targeting the middle class. An example of the shift came this week when New York firm Bull Path Capital Management opened its doors to mutual fund investors after successfully converting one of its hedge funds into a mutual fund. AQR Capital, under Cliff Asness, launched a mutual fund using some of his firm's hedge-fund strategies, and more AQR mutual funds are on track to be launched later this year. One of the earliest adopters was Highbridge Capital, which began such offerings in 2005.

LA Times:

- For years, the powerful Service Employees International Union has played a lead role in the campaign for a landmark federal law that would allow workers to join a labor organization simply by signing petitions. Now, as part of a high-stakes battle in California, the union is urging federal officials to throw out petitions signed by tens of thousands of its own members who have asked to be represented by a rival upstart group. The David-vs.-Goliath face-off pits the SEIU, its $300-million annual budget and its legions of staffers, lobbyists and lawyers against a band of about 150 insurgents who are either volunteers or being paid from donations. Most have defected from the SEIU's 2-million-strong ranks. In lodging legal challenges to the roughly 80 petitions filed by its fledgling competitor, the SEIU has moved to block organizing elections at hospitals, clinics and nursing homes up and down the state. And it has used some of the same tactics that employers often use to thwart union drives.

Miami Herald:

- Addressing hundreds of the nation's sheriffs in Fort Lauderdale, Homeland Security Secretary Janet Napolitano said Tuesday that her department would work to secure the nation's border and enforce immigration laws. ''Make no mistake about it. We are a law enforcement department. We will enforce the nation's immigration laws.'' Napolitano said. As the keynote speaker at the National Sheriffs' Association annual conference on Tuesday, Napolitano discussed immigration and other issues facing law enforcement. Napolitano said she would take legal action against employers who make money from the labor of illegal immigrants, creating the demand for undocumented workers. Napolitano has been pushing for tougher national laws against such employers since she was governor of Arizona.

USA Today:

- Construction company CEO David Dominguez no longer worries about inadvertently hiring workers who are in this country illegally. That's because he uses E-Verify, the federal program that allows him to quickly check the legal status of potential employees. Dominguez, who builds residential interiors in Arizona and California, said that as word gets around about the program, job applicants without legal status avoid businesses such as his, Andrew Lauren Co., which use E-Verify. "The system works," Dominguez said. His San Diego-based company has been using E-Verify for several years in hiring office workers and laborers. The voluntary federal program has seen a rapid growth in use this year, Department of Homeland Security records show. More than 1,000 employers are signing up each week on average, and employment checks are approaching 200,000 a week.

Publico:

- Jose Manuel Gonzalez-Paramo, a member of the European Central Bank’s executive board, said the central bank will wait and see how its latest unconventional measures work, citing an interview. “We are going to wait and see how the latest measures work,” he said, when asked if there was room for further rate cuts and more unconventional measures. Policy makers haven’t decided if 1% is the lowest level for interest rates, he said. “We are no longer in free fall, but we are still falling,” he said.

China Knowledge Online:

- China Telecom Corp Ltd, the nation's largest fixed-line operator, is in talks with Canada's Research In Motion Ltd (RIMM) to introduce BlackBerry devices into the market China, said a senior executive from the Chinese operator, sources reported.

The National:
- In the normally staid and conservative world of Saudi Arabian business, controversy rarely comes to light. The rulers and the big families that dominate commercial life there usually ensure any “delicate” situations are dealt with, well, delicately. So the goings-on at the Al Gosaibi conglomerate and its vaguely related Saad Group have brought some unwelcome attention to the kingdom’s corporate culture and apparatus. Outside investors have not liked what they have heard so far. What began as a little local difficulty for The International Banking Corporation (TIBC) of Bahrain has had knock-on effects in the UAE and Oman, and could have even more serious consequences in other financial sectors, including the global banking giant HSBC.

Bear Radar

Style Underperformer:
Large-cap Value (+1.03%)

Sector Underperformers:
HMOs (-.36%), Defense (-.12%) and Restaurants (+.13%)

Stocks Falling on Unusual Volume:
BA, ROS, OSIR, SVU, WXS and AGP

Stocks With Unusual Put Option Activity:
1) RMBS 2) CBS 3) TEL 4) XCO 5) MON

Bull Radar

Style Outperformer:
Small-cap Value (+2.41%)

Sector Outperformers:
Alt Energy (+4.62%), Hospitals (+4.42%) and Gaming (+3.50%)

Stocks Rising on Unusual Volume:
VIP, ORCL, CHA, DB, SNP, AVAV, CTCM, MYRG, CHDX, CRMT, RBCN, PETM, AAUK, SHPGY, HMIN, RYAAY, HIBB, APOG, PALM, CSIQ, STEC, UEIC, ELS and GNI

Stocks With Unusual Call Option Activity:
1) WYN 2) TSM 3) ESI 4) AMT 5) ZMH

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Wednesday Watch

Late-Night Headlines
Bloomberg:

- General Motors Corp., seeking to become a more nimble automaker when it emerges from bankruptcy, plans to eliminate about 4,000 U.S. salaried jobs by Oct. 1. The company began notifying U.S. salaried workers today that it will offer retirement and buyout incentives, Tom Wilkinson, a GM spokesman, said in an interview. If the company doesn’t receive enough volunteers by early August, it will make involuntary cuts, he said.

- China may begin a “crackdown” on speculation in domestic commodity markets after suggestions that companies are stockpiling raw materials beyond their needs in the hope of selling them later at higher prices, UBS AG said. The premium on Shanghai copper prices, adjusted for local tax, over London Metal Exchange rates disappeared after rising to a record in April. At the same time, stockpiles rose to an almost two-year high, suggesting the State Reserve Bureau is selling or lending metal to curb prices. “We have heard anecdotal evidence that Chinese companies with no need or use for copper have bought and stockpiled the metal,” John Reade, UBS’s chief metals strategist in London, wrote in a note. “The actions of the SRB in copper, if true, could represent the first signs of a government crackdown on physical commodity speculation.”

- Oracle Corp.(ORCL), the world’s second- largest software maker, reported fourth-quarter profit that topped analysts’ estimates after customers renewed contracts for product updates and support. Oracle climbed 63 cents, or 3.2 percent, to $20.50 in late trading. The stock, up 12 percent this year, closed at $19.87 today on the Nasdaq Stock Market.

- Bjorn Moller, chief executive officer of shipowner Teekay Corp., expects rates to transport oil to be weak until the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s crude, increases output as the recession eases. “2009 is going to be tough,” Moller, 51, said in an interview in New York today. “We’ve had a significant event, with OPEC cutting 7 or 8 percent of seaborne oil.” Shipping rates have tumbled as the recession cut global demand for crude and oil-based fuels. Rates for the benchmark Persian Gulf-to-Japan supertanker route have fallen 76 percent in the past year, according to the London-based Baltic Exchange.

- Crude oil dropped more than 1 percent after an industry report showed an increase in gasoline inventories and a small drop in crude stockpiles. Gasoline supplies increased by 3.7 million barrels last week, the industry-funded American Petroleum Institute said today.

- Japan’s export slump deepened in May, casting doubt on the nation’s growth prospects as the economy struggles to emerge from its worst postwar recession. Shipments abroad dropped 40.9 percent from a year earlier, more than April’s 39.1 percent decline, the Finance Ministry said today in Tokyo.

Wall Street Journal:

- Next week, Iraqi officials plan a welcome-back party for Big Oil. The government intends to auction off oil contracts to foreign companies for the first time since Iraq nationalized its oil industry more than three decades ago. If all goes according to plan in the first round, foreign oil companies will move in to help Iraq revive production at six developed fields that have suffered from years of war and neglect. Mr. Shahristani's oil deals are crucial to this war-torn country's economy. Iraq is thought to have one of the world's largest supplies of crude oil, with 115 billion barrels in proven reserves. But foreign know-how is key to its plans to boost oil output to four million barrels a day within four to five years, from 2.4 million barrels currently. Despite security risks, Western oil companies are clamoring to get in. Iraq is still relatively unexplored, offering big companies a potentially easy-to-tap source of growth. Some are touting Iraq as the most important opening of petroleum fields since the discovery in 2000 of the giant Kashagan field in the Caspian Sea. Some 120 companies expressed interest in bidding for the contracts at the June 29 and 30 auction, according to the oil ministry. Thirty-five companies qualified to bid, including Exxon Mobil Corp., Royal Dutch Shell PLC, Italy's Eni SpA, Russia's Lukoil and China Petroleum & Chemical Corp., or Sinopec. The six oil fields at stake are believed to hold reserves of more than 43 billion barrels. Just over 20 of Iraq's roughly 80 known oil fields have been fully or partially developed, and most of its production comes from just three giants, North and South Rumaila and Kirkuk. Because lots of the black gold is considered relatively easy to extract, oil experts estimate that exploration and development in Iraq costs $1.50 to $2.25 a barrel, compared with about $5 in Malaysia or $20 in Canada. "We're talking about a huge volume of crude flowing through their system for the companies who win the bids," says Samuel Ciszuk, IHS Global Insight's Middle East Energy analyst. "On the other side, Iraq desperately needs technology, and these companies can bring it."

- Iran's top election-review board ruled out an annulment of June 12 presidential election results -- the latest in a series of moves by the Islamic Republic to try to put the contested polls and their violent aftermath behind it. Authorities appear to be conducting a two-front assault on supporters of the election's opposition candidates. They have increased efforts to boost the legitimacy of the vote, while simultaneously cracking down on street protesters and on journalists.

- The pursuit of cheap stocks has drawn a flood of investors to the Russian equities market this year, but the novelty seems to have worn off. With weaker commodities prices and gloomy economic data weighing on sentiment, additional upside for Russian stocks seems unlikely in the near term, analysts say. "It's hard to get excited about the market," Citigroup strategist Andrew Howell said. "The downside may be less than it was (earlier this year), but it's going to be challenging to move higher from here, barring a surge in oil prices." Russia's benchmark Micex index is down more than 24% from its 2009 peak on June 1, effectively putting it in a bear market. A drop of 20% or more is typically defined as a bear market.

- When markets tanked late last year, many hedge-fund managers barred or limited frantic investors from withdrawing money. Yet now that there has been a rebound, a lot of those restrictions are still in place -- pressuring funds to explain why they aren't returning money to investors. The market rebound means many assets are now easier to sell, and investors say they are increasingly demanding their money back. Among funds that continue to tie up investor money are Chicago's Citadel Investment Group LLC and New York's Harbinger Capital Partners LLC, as well as London-based GLG Partners LP and Polygon Investment Partners LLP. These funds plan to release at least some investor money over the coming months, people familiar with the matter say. "There is a feeling that some managers are sitting on restrictions in order to sustain their business" as opposed to acting in the best interests of their clients, says Stephen Oxley, the European head of Pacific Alternative Asset Management Co., an Irvine, Calif., fund-of-hedge-funds manager.

- House Speaker Nancy Pelosi has scheduled a vote Friday on a sprawling climate-change bill, signaling the Democratic leadership's confidence that it can overcome objections from Farm Belt Democrats. Opponents and supporters of landmark climate legislation are ramping up their public-relations campaigns ahead of the planned vote. The Obama administration is pushing the measure as a job-creator, while critics, including many Republicans, are portraying the bill as an energy tax that could slow the economy. The legislation, co-sponsored by House Energy and Commerce Committee Chairman Henry A. Waxman (D., Calif.) and Rep. Edward Markey (D., Mass.), had stalled last week because of opposition from Farm Belt Democrats concerned their states will face heavier costs under the proposed law to curb greenhouse-gas emissions. The bill aims to cap greenhouse-gas emissions at 17% of 2005 levels by 2020 and at roughly 80% by 2050, creating a market for companies to buy and sell the right to emit carbon dioxide and other gases. It also mandates a new renewable electricity standard and establishes new national building codes.

- Best Buy Co.(BBY) , which began testing the sale of used videogames in some of its Canadian stores a year ago, is expanding the effort to the U.S. The largest U.S. consumer electronics retailer by sales is testing a kiosk-based model in several of its Dallas and Austin, Texas, stores starting this week, Chief Marketing Officer Barry Judge said Tuesday. The kiosk scans used games to make sure they work, then immediately issues a voucher redeemable for a Best Buy gift card that can be used for anything in the store, Mr. Judge said in a posting on his blog.

MarketWatch.com:
- Worsening unemployment is putting pressure on President Barack Obama to make more progress in improving the economy. Polls show that dissatisfaction with his $787 billion stimulus plan -- which was always considerable -- is growing. In the latest Washington Post-ABC News poll, the percentage of Americans who think the stimulus will help the economy has dropped to 52% from 59% in April. Nearly as many, 46%, say the stimulus will not help. The honeymoon is over. The unemployment rate has shot up from 7.6% when Obama took office to 9.4% in May. More than 2 million people have lost their jobs, seemingly at odds with his promise to create or save 3.5 million jobs in the next two years.

CNBC.com:
- After all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up. The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan. The shift means that most Citigroup employees will make as much money as they did in 2008, although some might earn more and others less. The company also plans to award millions of new stock options to employees in an effort to retain workers and neutralize a precipitous drop in the value of their stock holdings. The Citigroup proposals, discussed internally this week, present a crucial test for the Obama administration, which has vowed to rein in runaway compensation at companies that have received large taxpayer-financed bailouts. Citigroup has gotten not one but two rescues from Washington. This month, the government assumed a 34 percent stake in the company, whose share price has plunged nearly 84 percent in the last year.

NY Times:

- Contrary to the popular assumption that the new swine flu pandemic arose on factory farms in Mexico, federal agriculture officials now believe that it most likely emerged in pigs in Asia, but then traveled to North America in a human.

- China has begun a concerted effort to keep its export economy humming, even as demand for its goods has plummeted with the global downturn. Risking the ire of the United States and other trading partners, the Chinese government has quietly started adopting policies aimed at encouraging exports while curbing imports, even though China, as one of the world’s largest exporters, has aggressively criticized protectionism in other countries. The government has sharply expanded three programs to help exporters, giving them larger tax rebates, more generous loans from state-owned banks to finance trade, and more government-paid travel to promote themselves at trade shows around the world. At the same time, Beijing has banned all local, provincial and national government agencies from buying imported goods except in cases where no local substitute exists.

- Like newspaper owners, media moguls are looking for new ways to protect their investment from the ravages of the Internet. And, as with the newspaper industry, the answer remains elusive. What is at stake is perhaps the last remaining pillar of the old media business that has not been severely affected by the Internet: cable television.

- Documents gathered by lawyers for the families of Sept. 11 victims provide new evidence of extensive financial support for Al Qaeda and other extremist groups by members of the Saudi royal family, but the material may never find its way into court because of legal and diplomatic obstacles. The case has put the Obama administration in the middle of a political and legal dispute, with the Justice Department siding with the Saudis in court last month in seeking to kill further legal action. Adding to the intrigue, classified American intelligence documents related to Saudi finances were leaked anonymously to lawyers for the families. The Justice Department had the lawyers’ copies destroyed and now wants to prevent a judge from even looking at the material. The Saudis and their defenders in Washington have long denied links to terrorists, and they have mounted an aggressive and, so far, successful campaign to beat back the allegations in federal court based on a claim of sovereign immunity.

- Methodist University Hospital in Memphis acknowledged Tuesday that it had performed a liver transplant on Steven P. Jobs, the chief executive of Apple(AAPL). In a statement posted on its Web site, the hospital said Mr. Jobs had received the organ because he had the most urgent need for a new liver when one became available. “Mr. Jobs is now recovering well and has an excellent prognosis,” Dr. James D. Eason, the hospital’s chief of transplantation, said in the statement.

IBD:

- The medical lab test business was rocked by a billing fraud scandal in the 1990s. The result was a massive industry shake-up that left Quest Diagnostics (DGX) and LabCorp (LH) as the two giants. Somewhat smaller, but often nimble enough to outflank its larger rivals, is Bio-Reference Laboratories (BRLI).

Business Week:
- Can Tesla Become a Real Automaker? Even with $465 million of freshly minted taxpayer funds, the spunky US startup faces a steep road to develop and market its electric cars. Once again, the federal government is handing billions of dollars to auto companies. The last round of loans raised the question, can General Motors and Chrysler shake off their creaky ways and survive to pay the money back? This time, the question is: Can Tesla Motors become enough like one of those old car companies? The latest round of handouts is coming from U.S. Energy Dept. funds to boost development of greener vehicles. The department issued $8 billion in loans on June 23, granting Ford Motor (F) $6 billion, Nissan Motor (NSANY) $1.6 billion, and tiny electric-car startup Tesla $465 million. While it's fair to say that Ford and Nissan have staying power, Tesla is a riskier bet.

- Eager to place itself at the forefront of technology considered crucial to transportation's future, Big Blue is throwing its weight behind batteries. On June 23, IBM announced a multiyear effort to increase the performance of rechargeable batteries by a factor of 10. The aim is to design batteries that will make it possible for electric vehicles to travel 300 to 500 miles on a single charge, up from 50 to 100 miles currently.

CNNMoney.com:

- The number of mass layoffs by U.S. employers rose last month to tie a record set in March, according to government data released Tuesday that suggested the labor market has yet to stabilize. The Labor Department said the number of mass layoff actions - defined as job cuts involving at least 50 people from a single employer - increased to 2,933 in May from 2,712 in April, resulting in the loss of 312,880 jobs. It was the largest loss of jobs connected to mass layoffs on records dating to 1995.

TheDeal.com:

- As if Google weren't menace enough, newspaper companies are finding themselves undermined by another modern innovation: the credit default swap. In the cover story for the The Deal magazine published Monday, Richard Morgan tells about the dire situation Gannett Co. (NYSE:GCI) finds itself in after nearly three-quarters of bondholders, hedged with credit default swaps, declined an exchange offer that expired May 5. Thanks to the CDSs, they stand to get a better payoff if Gannett defaults.

USA Today.com:

- The nation's foreclosure crisis — once largely confined to only a few corners of the country — is spreading to new areas as the economy teeters. The foreclosure rates in 40 of the nation's counties that have the most households have already doubled from last year, a USA TODAY analysis of data from the listing firm RealtyTrac shows. Most were in areas far removed from the avalanche of bad mortgages and lost homes that have hammered the U.S. housing market. Among the new areas: Boise and Green Bay, Wis. "The ripple effect is just broadening out to cover a lot more places," says Susan Wachter, who studies real estate and finance at the University of Pennsylvania's Wharton School.

Reuters:

- JPMorgan(JPM) tops a list of the world's strongest banks, while Royal Bank of Scotland suffered the biggest loss of any lender last year, according to new industry rankings on Wednesday.

- The outspoken head of a U.S. Congressional watchdog panel will strongly urge lawmakers on Wednesday to set up a new government agency to protect consumers from "tricks and traps" set by banks. "We can help fix the broken credit market. And I can sum it up in four words: Consumer Financial Protection Agency," said Elizabeth Warren, chairman of the Congressional Oversight Panel of the Troubled Asset Relief Program, in prepared remarks.

- The Federal Reserve began a two-day meeting on Tuesday at which it is expected to dampen expectations for interest rate hikes this year, while holding steady on its plans for asset purchases. A Fed official said the meeting got under way at around 1 p.m. A statement announcing the policy decision is expected at about 2:15 p.m. on Wednesday.

- ABC News on Tuesday released its weekly index on consumer confidence in the United States. The Consumer Comfort Index fell in the latest report to -53 from -49 the prior week. The index is now just one point above its all-time low of -54, which was reached in the week ended Jan. 25, 2009.

TimesOnline:

- Drax, the operator of Britain’s biggest power station, said that there had been no sign of a recovery in demand for electrical power in Britain, despite talk of “green shoots” and an early return to economic growth. Tony Quinlan, Drax’s finance director, said that electricity demand was still 6 per cent below a year ago.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (HEW), target $45.

- Reiterated Buy on (ORCL), target $24.

Night Trading
Asian Indices are -.50% to +.50% on average.

Asia Ex-Japan Inv Grade CDS Index -1.82%.
S&P 500 futures -.17%.
NASDAQ 100 futures -.16%.

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Economic Releases

8:30 am EST

- Durable Goods Orders for May are estimated to fall .9% versus a 1.9% gain in April.

- Durables Ex Transportation for May are estimated to fall .5% versus a .8% gain in April.

10:00 am EST

- New Home Sales for May are estimated to rise to 360K versus 352K in April.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -950,000 barrels versus a -3,874,000 barrel decline the prior week. Gasoline supplies are expected to rise by +1,000,000 barrels versus a +3,385,000 barrel increase the prior week. Distillate inventories are estimated to rise by +850,000 barrels versus a +308,000 barrel increase the prior week. Finally, Refinery Utilization is expected to rise by +.05% versus a +.05% gain the prior week.

2:15 pm EST

- The FOMC is expected to keep the fed funds rate at .25%.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly MBA mortgage applications report, (POL) Investor Day, Bernanke testimony on BAC/MER Deal, $27 billion 7-year Treasury Note Auction, (FSLR) investor meeting and the Wachovia Equity Conference could also impact trading today.

BOTTOM LINE: Asian indices are mixed, as gains in technology stocks are being offset by losses in financial shares in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Mostly Lower, Weighed Down by Healthcare, Defense, Airline, Retail and Gaming Shares

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