Monday Watch

Weekend Headlines
Bloomberg:

- The U.S. economy appears poised to resume expansion in the second half of this year with “subdued” growth, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said in a commentary in the Atlanta Journal-Constitution. “I see the economy beginning to recover in the second half of this year,” Lockhart said in the printed commentary. “However, I expect growth to be relatively subdued for some time after it turns positive.” Lockhart said he believes the recession is continuing, though “the pace of decline has slowed.” There are “some signs of stabilization” in housing, manufacturing, employment and consumer spending, he said. Employers in the U.S. cut 467,000 jobs in June, more than anticipated by economists, pushing the unemployment rate to the highest in almost 26 years, the Labor Department reported July 2. The jobless rate of 9.5 percent has already met Fed policy makers’ projection in April that unemployment would peak at between 9.2 and 9.6 percent in the fourth quarter.

- Democratic lawmakers in the U.S. House of Representatives want to increase taxes on the highest- earning American families to help pay for an overhaul of the nation’s health-care system. Legislation to be unveiled on July 13 would raise $540 billion over the next decade by setting a 1 percent surtax on couples with more than $350,000 in annual income, said Representative Charles Rangel, chairman of the tax-writing Ways and Means Committee. Higher rates would take effect for those earning $500,000 and $1 million, Rangel said. The New York Democrat said his panel decided this was the simplest means of funding the biggest health-care revamp in more than four decades after considering alternatives ranging from increasing Medicare levies to taxing sugary drinks. The surtax is the “best way” to do it, Rangel told reporters yesterday at the U.S. Capitol, adding that it would take effect in 2011. Republicans disagreed, saying the measure would hit small business owners and depress job growth.

- Bets against the Standard & Poor’s 500 Index rose to the highest since April last month as investors shorted more shares of health-care, technology and financial companies, including Pfizer Inc., Microsoft Corp. and Bank of America Corp. Short interest on the S&P 500 increased to 10.01 billion shares as of June 30, a gain of 2.4 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg yesterday. That’s the most stock sold short since April 15. Wagers against health-care shares rose 8.1 percent, the most among 10 industries, to 962.8 million. “There’s just a lot of bearishness,” said James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “It reflects the brutal recession we’re in. There’s a dominance of doubt and short interest is just a reflection of that.”

- Corn, soybean and wheat stockpiles will be higher than forecast last month after planted-acreage estimates were adjusted, according to the Department of Agriculture. About 1.55 billion bushels of corn will be in storage on Aug. 31, 2010, the USDA said today in a report. That's up 42 percent from 1.09 billion forecast on June 30. Analysts surveyed by Bloomberg News expected 1.572 billion bushels. Soybean stockpiles will total 250 million bushels, the department said, up 19 percent from last month's estimate of 210 million bushels. The consensus among analysts was for 265 million bushels. Wheat supplies on May 31, 2010, will total 706 million bushels, up 9.1 percent from the June forecast, according to the report. Analysts expected 689 million bushels. The USDA on June 30 boosted its estimate for corn acres to 87 million, from a March forecast of 85 million. Soybean acreage was pegged at 77.5 million, up 2.3 percent from March, and the area planted with wheat was projected at 59.8 million acres, up 2 percent. ``The June acreage report was USDA's way of saying, `We messed up in March by lowballing, especially, the soybean and corn acres,''' said Joe Victor, an analyst at Allendale Inc. in McHenry, Illinois. Adding more acres will mean bigger crops and larger stockpiles in storage after the harvest, Victor said.

- The average price of regular gasoline at U.S. filling stations fell to $2.5573 a gallon as supplies of the fuel rose and crude oil prices dropped amid weakened demand. Gasoline dropped 10.4 cents in the two weeks ended July 10, according to a survey of 5,000 filling stations nationwide by Trilby Lundberg, an independent gasoline analyst. “These lower prices are from lower crude oil prices and from reduced demand from the poor economy,” Lundberg said in an interview today. “The unemployment totals are mounting. The biggest determinant in U.S. gasoline demand is a work commute.”

- The Senate Finance Committee will approve a U.S. health-care overhaul plan by early August, said Senator Kent Conrad, a top Democrat on the panel, even though setbacks have slowed the drive for a bipartisan compromise. Conrad said while members of both parties are making substantial progress, Democrats probably won’t reach their goal of getting the bill through the full Senate before Congress’s month-long August recess.

- The last time stocks in developing countries got this expensive was in October 2007, just before the MSCI Emerging Markets Index began a 12-month tumble that erased half its value. The MSCI gauge trades at 15.4 times reported earnings, compared with 14 for the S&P 500, according to weekly data compiled by Bloomberg. When developing nations last commanded a premium, the 22-country benchmark sank 54% in the next year. Groupama Asset Management, Palatine Asset Management and Standard Life Investments say the disparity means investors are paying too much for shares from China to India to Brazil at a time when the global economy is contracting. MSCI’s emerging-market gauge is valued at 1.7 times its companies’ net assets after a 34% surge last quarter, the highest on record compared with the MSCI World Index of 23 advanced economies, which trades for 1.5 times, data compiled by Bloomberg show. Emerging-market funds had $540 million of net outflows in the week ended July 8, the second time in three weeks investors withdrew money, according to Cambridge, Massachusetts-based EPFR Global, which tracks funds with $10 trillion worldwide. Developing nations’ share of global equity value climbed to an all-time high this month as investors poured in a record $26.5 billion last quarter, according to data compiled by Bloomberg and EPFR. Companies in the MSCI emerging-markets index that reported results since the end of the first quarter posted an average earnings drop of 92%, trailing analysts’ estimates by 14%, according to Bloomberg data. That compares with a 46% profit slide for Europe’s Dow Jones Stoxx 600 Index and a 31% fall for the S&P 500, Bloomberg data show.

Wall Street Journal:

- A secret Central Intelligence Agency initiative terminated by Director Leon Panetta was an attempt to carry out a 2001 presidential authorization to capture or kill al Qaeda operatives, according to former intelligence officials familiar with the matter. The precise nature of the highly classified effort isn't clear, and the CIA won't comment on its substance. According to current and former government officials, the agency spent money on planning and possibly some training. It was acting on a 2001 presidential legal pronouncement, known as a finding, which authorized the CIA to pursue such efforts. The initiative hadn't become fully operational at the time Mr. Panetta ended it.

- Crude oil futures ended below $60 a barrel for the first time in nearly two months Friday as the prospects for a resurgence in fuel demand looked increasingly bleak. Light, sweet crude for August delivery settled 52 cents, or 0.9%, lower at $59.89 a barrel on the New York Mercantile Exchange, ending below $60 a barrel for the first time since May 19. Two major summer driving holidays have come and gone in the U.S. without a spike in gasoline demand, and the most recent employment and consumer-confidence data offer little hope for a quick and forceful resumption of growth. Noting both trends, the International Energy Agency predicted Friday that global oil demand would contract by 2.9% this year. While the IEA expects a recovery in 2010, the Paris-based agency left the door open for 2009 to be even worse than currently expected. "June is the month when gasoline demand should pick up in U.S. and it's a slightly worrying sign that we don't see that," said David Fyfe, editor of the IEA report. "If U.S. gasoline demand won't increase in July and August, we might revise downward our oil demand forecast for 2009." The IEA already has downgraded this year's oil demand estimate several times.

- New research has pinpointed a gene that could improve predictions of who will develop Alzheimer's and at what age.

- As Congress writes legislation to fight climate change, a prominent coalition in the debate is divided over the fine print. The U.S. Climate Action Partnership, a broad group of businesses and environmental organizations, was instrumental in building support for capping U.S. emissions of greenhouse gases. Legislation to accomplish that goal recently passed the House and is now before the Senate. But as lawmakers add provisions to win over colleagues, some USCAP members are withholding their support. They say the bill is too burdensome and contains provisions that have little to do with fighting climate change.

- In a rational world, the prognosis for ObamaCare would wait on the evidence in Massachusetts, given that the commonwealth's 2006 program closely resembles what Democrats are trying to do in Washington. If the results were widely known, it might be dead on arrival.

MarketWatch.com:

- CIT Group Inc.(CIT), which specializes in lending to small and medium-sized U.S. businesses, has retained counsel to prepare for a possible reorganization in bankruptcy court, people familiar with the matter told the Wall Street Journal.

- Although optimism over the next slate of tech earnings reports mostly has been muted, Goldman Sachs analyst David Bailey says now is the time to shift to the offensive with tech stocks, due in part to a likely upgrade cycle in corporate tech needs next year.

- Treasury Secretary Timothy Geithner on Friday defended the White House's plan for heightened regulation of over-the-counter derivatives, in anticipation of opposition by some lawmakers who believe there is a loophole when it comes to trillions of dollars in the opaque market of contract swaps. Geithner's plan calls for greater reporting, capital, leverage and disclosure standards for all derivative traders and dealers, especially OTC swaps. However, some lawmakers are seeking to have these specialized derivatives cleared through more transparent clearinghouses, which serve as an intermediary between buyers and sellers in transactions. The Obama administration plan backed by Geithner seeks only to have standardized clearinghouses, not tailored swaps, traded through clearinghouses.

CNBC.com:
- The Treasury Department is selling its financial stakes in bailed-out banks for one-third less than they're worth, potentially shorting taxpayers up to $2.7 billion, a bipartisan congressional watchdog said Friday.

- The recession is the major reason home sales are dragging, of course, but it is not the only one. As Dr. Komarovskaya found, buyers once viewed as perfectly qualified are being denied mortgages. Brokers and bankers say that in past decades, the credit markets would almost certainly have accommodated many of these people. “The credit pendulum is stuck at ‘stupid,’” said Lou S. Barnes, an owner of Boulder West Financial Services, a Colorado mortgage bank. “I am turning down loans every day that my grandfather in his Ponca City, Okla., savings and loan in 1935 would have been happy to make. And he was tough.”

NY Times:

- For a group of students who often met at the school, on the University of Minnesota campus, those words seemed especially fitting. They had fled Somalia as small boys, escaping a catastrophic civil war. They came of age as refugees in Minneapolis, embracing basketball and the prom, hip-hop and the Mall of America. By the time they reached college, their dreams seemed within grasp: one planned to become a doctor; another, an entrepreneur. But last year, in a study room on the first floor of Carlson, the men turned their energies to a different enterprise. “Why are we sitting around in America, doing nothing for our people?” one of the men, Mohamoud Hassan, a skinny 23-year-old engineering major, pressed his friends. In November, Mr. Hassan and two other students dropped out of college and left for Somalia, the homeland they barely knew. Word soon spread that they had joined the Shabaab, a militant Islamist group aligned with Al Qaeda that is fighting to overthrow the fragile Somali government. The students are among more than 20 young Americans who are the focus of what may be the most significant domestic terrorism investigation since Sept. 11.

- Sales of “energy shots” are soaring in the middle of a recession. The two-ounce drinks, which give people a concentrated dose of caffeine, B vitamins and amino acids, were all but unheard-of four years ago. Today they are the hottest drink category in the country, with sales expected to almost double this year from last, to about $700 million. The shots are meant for people who want a jolt of caffeine without having to drink a big cup of coffee or one of the 16-ounce energy drinks that have become ubiquitous. They go down fast, more like medicine than a beverage. That is part of the appeal to their most devoted consumers: students cramming for exams or partying into the night, construction workers looking for a lift and drivers trying to stay awake.

- One of Iran’s most senior clerics issued an unusual decree on Saturday calling the country’s rulers “usurpers and transgressors” for their treatment of opposition protesters in recent weeks, in the strongest condemnation by a religious figure since the contested presidential election a month ago. The decree by Grand Ayatollah Hossein Ali Montazeri, a dissident who has often criticized Iran’s ruling clerics, did not mention by name Iran’s supreme leader, Ayatollah Ali Khamenei, but was clearly aimed at the clerical leadership.

- At least 6 people were killed and 67 others wounded Saturday in bombings in Baghdad and the northern city of Mosul, according to witnesses and Iraqi security officials. The bombing came two days after a double suicide bombing killed 35 and wounded dozens in Tal Afar, a city 40 miles west of Mosul inhabited by another ethnic group, the Turkmens.

- Another Insurgency Gains in Pakistan.

- In a sharply worded critique, the ombudsman of The Washington Post wrote on Saturday that the newspaper’s plan to sell interest groups private access to its journalists and to government officials was “an ethical lapse of monumental proportions” and “a lasting stain” on The Post’s reputation.

- Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs(GS). The obsessive speculation has already begun, along with banter about how Goldman’s rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall. “They exist, and others don’t, and taxpayers made it possible,” said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships. Startling, too, is how much of its profits Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 per employee. Top producers stand to earn millions. “It is, in many respects, business as usual at Goldman,” said Roger Freeman, an analyst at Barclays Capital. Traders said Goldman capitalized on the tumult in the credit markets to reap a fortune trading bonds. It profitably navigated a white-knuckled run in stock markets. It bought and sold volatile currencies, as well as commodities like oil. And it reaped lucrative fees from the high-margin business of underwriting stock offerings, which surged this year as other, more troubled financial institutions raced to raise capital. Goldman has turned the crisis to its advantage. While others are shying away from risks, Goldman is courting them. A common measure of risk-taking at Goldman and other banks is known as value at risk, which estimates how much money a firm might lose on a single day. At Goldman, that figure rose by more than 20 percent in the first quarter. Analysts predict Goldman’s V.A.R. ran high in the second quarter as well. Its bankers and traders are sometimes referred to as the Bandits of Broad Street. An executive at a rival bank characterized Goldman traders as “orcs,” the warlike creatures of Middle Earth in J. R. R. Tolkien’s “The Lord of the Rings.” Even mainstream America is taking notice. An article about Goldman in a recent issue of Rolling Stone, by Matt Taibbi, characterized Goldman as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Goldman dismissed the article as the ramblings of conspiracy theorists. For all its success, Goldman is not impregnable. In addition to the federal money it took last fall, it benefited from the government’s bailout of American International Group, receiving an almost $13 billion subsidy from taxpayers after losing money on counterparty exposure to the insurer and has $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation.

Business Week:
- The Chinese government received an application from Apple(AAPL) today, seeking a Network Access License to sell the iPhone for officially-sanctioned use in the country. So says Wedge Partners, a Colorado-based stock research firm. Maybe more surprising is that the application is for an iPhone that doesn’t include wifi connectivity. This has been a sticking point in negotiations with the Ministry of Industry and Information Technology, which wants the phone to only run on the cellular networks. “Apple was hellbent on having the iPhone be wifi-enabled,” says Wedge analyst Matt Mathison. “The Chinese government has been just as adament that it not be.” This removes one more obstacle towards getting official clearance to sell iPhones in China—beyond the million or more people who are using unlocked versions of the phone brought into the country from elsewhere. Now, that official launch may come three months or so earlier than expected, says Mathison. He says it typically takes four to six months for such an application to be accepted. And he believes the approved license will accelerate talks with China Unicom, one of the three big state-controlled carriers in China. As such, “we now expect it to come before the Spring Festival in [January] 2010.”

USA Today:

- General Motors' online videos featuring gay men in skimpy briefs washing a Chevy Camaro never would have hit the Web if the automaker had taken a look at them, GM's gay community outreach official says. The videos promoted the Camaro and Chevrolet Gay Day at the Movies, a Los Angeles event on June 28 where the new Transformer movie was screened. Bumblebee is a character in the movie played by the Camaro. The videos were produced by GM's Lesbian-Gay-Bisexual-Transsexual outreach unit, but were not circulated through the regular approval channels, LGBT news site The Advocate quotes a GM official as saying.

- Test Drive review: 2010 Ford Taurus is full of surprises.

Politico:

- President Barack Obama on Saturday touted his administration’s economic stimulus spending, saying that it pulled "our financial system and our economy back from the brink." His remarks in an unusually long edition of his weekly radio and internet address came after a week in which unemployment hit 9.5 percent and Republicans increasingly denounced the stimulus as a failure.

galatime:

- Toxic Quant Trading. High frequency trading strategies have become a stealth tax on retail and institutional investors. While stock prices will probably go where they would have gone anyway, toxic trading takes money from real investors and gives it to the high frequency trader who has the best computer. The exchanges, ECNs and high frequency traders are slowly bleeding investors, causing their transaction costs to rise, and the investors don’t even know it.

Crain’s new york business:

- How a limo driver from Brighton Beach became a hedge fund manager and fleeced investors of millions.

Chicago Tribune:

- Lancelot Investment Management, and its Highland Park-based owner, Gregory Bell, were accused Friday by federal securities regulators of aiding a multibillion Ponzi scheme. Lancelot invested more than $2 billion with Tom Petters, a prominent Minnesota businessman who was indicted last fall on fraud, conspiracy and money-laundering charges. Lancelot pocketed tens of millions of dollars in fraudulent fees at the expense of its investors, the U.S. Securities and Exchange Commission claims.

CBSNews:

- Alabama Republican Sen. Jeff Sessions said Sunday that he believes it is not necessary to appoint a special criminal prosecutor to investigate the Bush administration's interrogation policies. Attorney General Eric Holder is reportedly seriously considering making the appointment. "We've had probably in my committees, Judiciary and Armed Services, thirty or more hearings on this," Sessions told CBS News Chief Washington Correspondent Bob Schieffer on "Face the Nation". "The Intelligence Committee has had great numbers of hearings and written reports on it. The military has done a series of independent reports. And I believe that that's sufficient. I don't believe a special commission is necessary. "We were facing some real challenges, and our people tried to do the best they could," explained Sessions. "And I don't think I see the evidence yet to justify any prosecutions."

Reuters:

- Somali government troops backed by African Union peacekeepers battled insurgents on Sunday in clashes that killed at least 43 people in north Mogadishu, residents and officials said.

- U.S. Treasury Secretary Timothy Geithner said it was too soon to decide whether the U.S. economy would need the help of a second round of government stimulus to recover from recession. "I don't think that's a judgment we need to make now, can't really make it now prudently, responsibly," Geithner said in a taped interview with CNN that will air on Sunday.

- Short interest on the Nasdaq and New York Stock Exchange rose in the second half of June, the exchanges said on Friday, suggesting a continued increase in bearish sentiment following a recent run-up in stocks. As of June 30, short interest rose 1.6 percent to about 15.6 billion shares on the NYSE, compared with 15.35 billion shares as of June 15. Short interest made up 4.08 percent of shares outstanding. On Nasdaq, short interest rose 3 percent to about 6.86 billion shares, compared with 6.66 billion shares over the same time frame. The average number of days it would take to cover the outstanding short positions, or the index's short ratio, rose to 2.91 days from 2.85 days.

Financial Times:

- Independent investment firms are taking a greater share of advisory fees than ever as companies turn to old-fashioned skills in an uncertain market. Boutique banks, which provide advice on mergers and acquisitions and restructurings, accounted for 14 per cent of global M&A fees so far this year – the highest level since records began, according to Dealogic.

TimesOnline:
- LLOYDS BANKING GROUP is poised to write off as much as £13 billion on its loans to commercial property, businesses and mortgage holders as the crisis engulfing the taxpayer-backed bank deepens. First-half results due to be posted in three weeks will show that its losses are accelerating, in spite of recent suggestions that the worst of the recession is over.

- DOZENS of bankers at Goldman Sachs in London could be in line for million-pound bonus payouts following another bumper quarter of profits at the giant investment bank. The bank leads an elite group of large financial institutions making huge profits from the disruption in the markets. They are all expected to make large bonus payments to some staff this year. The payouts come in spite of the enormous losses racked up by the banking sector, which have led to taxpayers around the world stumping up huge sums of money to keep the financial system alive. Goldman is one of a clutch of American banks to have repaid money to the US government, freeing itself from some of the threatened restrictions on banker pay. Analysts believe the bank’s bonus pool could double to about £12 billion by the end of the year if the trading performance continues. If that were to happen, Goldman would pay out an average of £430,000 a head to its 5,500 London staff.

The Telegraph:

- Britain is the world's only leading economy unable to budget for any kind of economic rescue package next year, the International Monetary Fund has warned.

Spiegel:

- US President Barack Obama already sees German Chancellor Angela Merkel as the winner of the national elections on September 27, citing partly unreleased footage from Germany’s ZDF broadcaster. Obama said to Merkel in June, while walking to a press conference in the White House, that she didn’t need to worry because she had already won the election, the weekly magazine said.

Il Sole-24 Ore:

- Italy will forecast a deeper contraction for 2009 this week, lowering its outlook to a slump of 5.2% from a previous forecast of a 4.2% decline made in May.

The Commercial Times:

- Apple Inc.(AAPL) plans to introduce a netbook computer in the middle of October. The netbook will be equipped with a 9.7-inch touch panel supplied by Taiwan’s Wintek Corp. Another Taiwan company, Hon Hai Precision Industry, will assemble the device.

South China Morning Post:

- China is considering an adjustment in its economic policies for the remainder of the year amid concern a recovery in the country remains shaky,

Indiatimes Infotech:
- Electronics giant Flextronics will quadruple its notebook PC workforce in Taiwan, in a major push that would pit it against established contract PC makers such as Quanta and Compal Electronics. The addition of 1,500 engineers to the Singapore-based firm's FLEXComputing Taiwan unit will bring the total to 2,000, as it looks to grab a piece of a fast-growing global notebook PC market expected to pass traditional desktop PCs this year in unit sales, sources told media on Monday.

The West Australian:

- The Australian mining executive detained by China and accused of bribing local steel company staff during iron ore contract negotiations could face the death penalty, an expert in international law warned yesterday.

YTN television:

- North Korean leader Kim Jong Il is suffering from pancreatic cancer and has less than five years to live. The South Korean cable news channel cited unidentified intelligence officials in China and South Korea.

Sina.com:

- Apple Inc.(AAPL) agreed to let China Unicom Ltd. offer its iPhone handset in China, citing an official at the carrier. The companies have settled most of their differences on the business model for the iPhone. Unicom, China’s second-biggest mobile operator, faces competition from bigger rival China Mobile Ltd. in offering the handset in the world’s biggest phone market by users. In May, China Mobile Chairman Wang Jianzhou said the carrier was continuing its discussions with Apple on the iPhone.

The National:

- Property sales in Dubai fell in the first half of this year by more than 40 per cent compared with the same period last year. There were 1,724 sales in the first half of the year, a 42.6 per cent drop over the same six months last year, according to REIDIN.com, which tracks property with data from the Dubai Land Department.

- One in 10 people in the UAE say they have lost their jobs in the past six months, according to a poll conducted for The National. Almost half say their companies have trimmed their workforce and a quarter say colleagues have been asked to take unpaid leave.

Weekend Recommendations
Barron's:
- Made positive comments on (WFC), (AAPL), (SCHW), (RRR) and (PZE)

Night Trading
Asian indices are -2.0% to -.25% on avg.

Asia Ex-Japan Inv Grade CDS Index +.08%.
S&P 500 futures -.34%.
NASDAQ 100 futures -.35%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/Estimate
- (FAST)/.33

- (CSX)/.62

- (SCHW)/.18

- (JBHT)/.31

- (NVLS)/-.38

Upcoming Splits

- None of note

Economic Releases

2:00 pm EST

- The Monthly Budget Deficit for June is estimated to widened to -$97.0B versus $33.5B in May.

Other Potential Market Movers
- Geithner’s meeting with British PM Brown and Finance Minister Darling could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and financial stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for US Equity Preview for Monday by Bloomberg.

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. – Monthly Budget Statement

Tues. – Producer Price Index, Advance Retail Sales, IBD/TIPP Economic Optimism, Business Inventories, weekly retail sales reports, ABC Consumer Confidence

Wed. – Bloomberg Global Confidence, weekly MBA mortgage applications report, weekly EIA energy inventory data, Consumer Price Index, Empire Manufacturing, Industrial Production, Capacity Utilization, FOMC June 24^th Meeting Minutes

Thur. – Initial Jobless Claims, Net Long-term TIC Flows, Philly Fed, NAHB Housing Market Index, weekly EIA natural gas inventory report

Fri. – Housing Starts, Building Permits

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

Mon. – Fastenal(FAST), CSX Corp.(CSX), Charles Schwab(SCHW), JB Hunt(JBHT), Novellus Systems(NVLS)

Tues. – Goldman Sachs(GS), Altera Corp.(ALTR), Intel Corp(INTC), Yum! Brands(YUM), Johnson & Johnson(JNJ)

Wed. – Wolverine World Wide(WWW), Gannett Co(GCI), Abbott Labs(ABT), Cintas Corp(CTAS), AMR Corp.(AMR), Kinder Morgan(KMP), Xilinx(XLNX)

Thur. – Harley-Davidson(HOG), Biogen Idec(BIIB), Marriott Intl(MAR), JPMorgan Chase(JPM), Intl Business Machines(IBM), PPG Industries(PPG), Google Inc.(GOOG), Baxter Intl(BAX)

Fri. – BB&T(BBT), Mattel(MAT), Citigroup(C), General Electric(GE), Bank of America(BAC), BlackRock(BLK)

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

Mon. – Geithner Meets with British PM Brown and Finance Minister Darling

Tue. – Geithner Visits Saudi Arabia, (DELL) analyst meeting, Oppenheimer Consumer/Gaming/Lodging/Leisure Conference

Wed. – (VRGY) analyst meeting, (KLAC) analyst briefing, (CPB) presentation to securities analysts, Piper Jaffray Cancer Summit, (KLAC) analyst briefing, SEMICON West

Thur. – Geithner Meets Visits French Finance Minister Lagarde, (ELN) shareholders meeting

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on less financial sector pessimism, falling long-term rates, short-covering, bargain-hunting and mostly positive earnings reports. My trading indicators are giving mixed signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 879.13 -1.93%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 879.13 -1.93%
DJIA 8,146.52 -1.62%
NASDAQ 1,756.03 -2.25%
Russell 2000 480.98 -3.26%
Wilshire 5000 8,920.19 -2.17%
Russell 1000 Growth 396.06 -1.47%
Russell 1000 Value 439.34 -2.67%
Morgan Stanley Consumer 538.83 -1.63%
Morgan Stanley Cyclical 523.83 -3.62%
Morgan Stanley Technology 435.39 -1.81%
Transports 3,111.16 -1.51%
Utilities 346.26 -1.26%
MSCI Emerging Markets 31.11 -3.10%

Sentiment/Internals
NYSE Cumulative A/D Line 31,616 -12.33%
Bloomberg New Highs-Lows Index -96
Bloomberg Crude Oil % Bulls 32.0 +100.0%
CFTC Oil Net Speculative Position +15,357 -62.34%

CFTC Oil Total Open Interest 1,162,597 +.24%
Total Put/Call 1.08 +2.86%
OEX Put/Call .82 -46.05%
ISE Sentiment 104.0 -29.73%
NYSE Arms 1.94 -45.20%
Volatility(VIX) 29.02 +3.83%
G7 Currency Volatility (VXY) 14.10 +6.17%
Smart Money Flow Index 7,968.37 -1.92%
AAII % Bulls 27.91 -26.24%
AAII % Bears 54.65 +22.56%

Futures Spot Prices
Crude Oil 59.68 -10.04%
Reformulated Gasoline 165.12 -7.36%
Natural Gas 3.36 -7.44%
Heating Oil 152.74 -9.99%
Gold 912.50 -1.84%
Base Metals 142.86 -5.01%
Copper 221.60 -3.55%
Agriculture 292.41 -3.49%

Economy
10-year US Treasury Yield 3.30% -20 basis points

U.S. Sovereign Debt Credit Default Swap 40.0 +11.11%

10-year TIPS Spread 1.52% -14 basis points
TED Spread 34.0 -10 basis points
N. Amer. Investment Grade Credit Default Swap Index 145.0 +5.35%
Emerging Markets Credit Default Swap Index 416.75 +7.24%
Citi US Economic Surprise Index +37.90 +1.88%

CMBS Super Senior AAA 10-year Treasury Spread 691.0 -4.56%
Fed Fund Futures imply 75.7% chance of no change, 24.3% chance of 25 basis point cut on 6/24
Iraqi 2028 Govt Bonds 64.02 -.91%
4-Wk MA of Jobless Claims 606,000 -1.6%

Continuing Claims Unemployment Rate 5.1% +2.0%
Average 30-year Mortgage Rate 5.20% -12 basis points
Weekly Mortgage Applications 493,100 +10.86%

ABC Consumer Confidence -52 -1.96%
Weekly Retail Sales -4.4%
Nationwide Gas $2.57/gallon -.06/gallon
US Cooling Demand Next 7 Days 4.0% above normal
ECRI Weekly Leading Economic Index 118.50 +.94%
US Dollar Index 80.30 +.14%
Baltic Dry Index 3,018 -17.81%

Rail Freight Carloads 169,290 -10.22%

No. 1 Heavy Melt Scrap Steel 188.33 USD/Ton +2.73%
CRB Index 233.51 -5.02%

Best Performing Style
Large-cap Growth -1.47%

Worst Performing Style
Small-cap Growth -3.40%

Leading Sectors
Airlines +.88%
Hospitals +.10%
Retail +.05%
Restaurants unch.
Drugs unch.

Lagging Sectors
Construction -6.37%
Steel -6.82%
Gold -7.98%
Oil Tankers -9.93%
Alt Energy -10.35%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Slightly Lower, Weighed Down by Construction, Bank, HMO and Energy Shares

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In Play

Stocks Lower into Final Hour on Tax Hike Worries, Rising Economic Pessimism, Commercial Real Estate Concerns

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs, Defense longs and Commodity/Emerging Market shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is mildly negative as the advance/decline line is mildly lower, most sectors are declining and volume is below average. Investor anxiety is high. Today’s overall market action is mildly bearish. The VIX is falling 1.21% and is high at 29.41. The ISE Sentiment Index is low at 102.0 and the total put/call is above average at .96. Finally, the NYSE Arms has been running very high most of the day, hitting 2.40 at its intraday peak, and is currently 1.87. The Euro Financial Sector Credit Default Swap Index is rising 2.62% today to 112.0 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising .62% to 145.0 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 1.54% to 34 basis points. The TED spread is now down 432 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 4.06% to 38.44 basis points. The Libor-OIS spread is rising 1.62% to 31 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 4 basis points to 1.51%, which is down 113 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is down 1 basis point today. (XLF) is trading heavy today and is near session lows. (JPM) has been especially weak. As well, healthcare shares area a drag on continuing worries over government reform. The S&P 500 has been rangebound for three days after its recent decline, which is a negative. Moreover, the market’s internal action remains a concern. On the positive side, volume is anemic today and the NYSE Arms has been very high. As well, market leading tech stocks have traded well throughout the day. Finally, given today's weak consumer confidence report and emerging markets weakness, today's broad market action isn't too bad. Nikkei futures indicate a -32 open in Japan and DAX futures indicate an +10 open in Germany on Monday. I expect US stocks to trade mixed into the close from current levels as bargain-hunting, tech sector optimism, lower energy prices and lower long-term rates offset commercial real estate worries, tax hike concerns, rising economic pessimism and more shorting.