Today's Headlines

Bloomberg:
- Iraq’s daily oil production is the highest since March 2003. A $34 million security system of ditches, fences and concertina wire has stopped attacks since July 2007 on the pipeline from Kirkuk in the north to a major refinery in Baiji, central Iraq, according to the report. The result has been a substantial rise in crude oil exports from the north, Bowen said. ``Iraq's burgeoning oil windfall, which has yielded more than $33 billion in revenues to date in 2008,'' may result in another $7 billion that could be spent on reconstruction as U.S. spending winds down, Bowen said. Analysts say Iraq has the world's third-largest reservoir of untapped crude oil. Contributing to Iraq's improved security was the so-called surge of almost 30,000 U.S. military personnel that ended this month plus operations of the Iraq Security Forces, who cleared Muslim militias from Basra, Baghdad's Sadr City, Mosul and Amara, said Bowen, who for the third time this year reported increasing improvements in Iraq's security and economy. The Iraqi government plans to build similar protection systems for the pipelines between Baghdad and Karbala and between Baiji and Baghdad, the Pentagon said.
- Spain's economy expanded the least in 15 years in the second quarter as record oil prices and the collapse in homebuilding destroyed jobs and sapped spending, the central bank said.
- Crude oil rose more than $3 after the US Energy Dept. reported the first decline in inventories in five weeks. U.S. fuel consumption averaged 20.2 million barrels a day in the past four weeks, down 2.4 percent from a year earlier, the department said. The drop in gasoline inventories last week left stockpiles 3 percent higher than the five-year average for the period, the department said. Gasoline demand in the U.S. peaks during the summer, when Americans take to the highways for vacations. The so-called driving season lasts from the Memorial Day weekend in late May to Labor Day in early September.
- Gold traded near a three-week low in Asia as a stronger dollar and falling energy costs eroded demand for bullion as an inflation haven.
- Israeli Prime Minister Ehud Olmert said today he will step down ``with honor'' when the ruling Kadima party chooses a new chief in September, ending 2 1/2 years in power amid a corruption scandal.
- Europeans' confidence in the outlook for the economy dropped the most since the Sept. 11 terrorist attacks as soaring energy costs and the euro's advance against the dollar rattled consumers and executives.
- Nintendo Co., the world's second- largest maker of home video-game players, reported first-quarter profit rose 34 percent as the Wii console extended its lead over Sony Corp.'s PlayStation 3 and Microsoft Corp.'s Xbox 360.

Wall Street Journal:
- Target Corp.(TGT) is offering its Web site customers who buy consumer electronics next-day installation services through a new third-party supplier, Zip Express. It's the first time Target has offered installation services.

Washington Post:
- The House of Representatives issued an apology to black Americans for slavery more than 140 years after its abolition. Senator Tom Harkin, an Iowa Democrat, is considering introducing a similar resolution in the Senate.

VentureBeat:
- Google(GOOG) is the sleeping giant when it comes to advertising in video games. While the company dominates search advertising, it has yet to make a big splash in video games. That could change soon, as the company has been quietly testing its “AdSense for Games” product for months.

Politico:
- Seeking to both elevate and diminish his rival's status, John McCain is up with a new ad featuring images of Paris Hilton and Britney Spears but declaring that they take a back seat to Barack Obama. "He's the biggest celebrity in the world," says the announcer of Obama, set to images from his massive Berlin speech. "But is he ready to lead?" (video)

Boston Globe:
- The House today voted 118 to 35 to repeal a 1913 state law that prevents gay and lesbian couples from most other states from marrying in Massachusetts. The measure, which the Senate passed earlier this month, will head to the desk of Governor Deval Patrick, who is expected to sign it into law. The move will clear the way for out-of-state couples to marry in Massachusetts, making it the second state to allow gay and lesbian couples to marry regardless of their place of residence.

Reuters:
- Pacific Investment Management Co.(PIMCO) plans to offer its first bond exchange-traded fund, citing documents filed with the SEC.

Daily Telegraph:
- The Italian economy is getting so bad that the country may face pressure to withdraw from the European Union’s monetary union, according to a report by Capital Economics. Business confidence has fallen to the lowest since October 2001, following the 9/11 terrorist attacks. The country is disproportionately hit by the high euro because it relies heavily on "mid-tech" exports that compete toe-to-toe with Asian goods.

Independent.ie:
- None of the office space that's earmarked for completion in Dublin's city centre during the second half of this year has been pre-let to clients and less than 18pc of the space built during the second quarter of this year was pre-let. The figures released by estate agent Lisney suggest a sharp reversal is occurring in the fortunes of the country's commercial property developers.

International Herald Tribune:
- Nearly 4.8 billion passengers took to the air last year, with Atlanta's Hartsfield International atop the list of the world's busiest terminals, followed by Chicago's O'Hare and London's Heathrow.

Andina:
- Newmont Mining Corp.’s(NEM) new gold mill may boost output by 11% at its Yanacocha mine in Peru. The $250 million facility could increase annual gold production at Yanacocha to 2 million ounces from 1.8 million ounces this year.

Bear Radar

Style Underperformer:

Small-cap Value -1.07%

Sector Underperformers:

Airlines irlind (-5.22%), Oil Tankers (-3.77%) and REITs (-2.30%)

Stocks Falling on Unusual Volume:

ELN, ULTI, GRMN, ELON, JLL, WYE, ONXX, CTV, ALGN, SPSS, ERTS, HWAY, TTMI, EEFT, LFG, CBG and HBI

Stocks With Unusual Put Option Activity:

1) URI 2) KFT 3) WYE 4) ELN 5) CEPH

ADP Jobs Report Much Better Than Estimates

- The ADP Employment Change for July was +9K versus estimates of -60K and -77K in June.

BOTTOM LINE: Companies in the US unexpectedly added an estimated 9,000 jobs in July, Bloomberg reported. Service providers added 74,000 workers, with financial firms increasing jobs by 4,000. Construction employment fell by 16,000. Large companies cut payrolls by 32,000, while small companies increased payrolls by 50,000. The US Dollar Index is rising another .13% and the 10-year yield is 5 basis points higher on today’s reports. I expect the change in non-farm payrolls to come in better than estimates of -75K this Friday.

Bull Radar

Style Outperformer:

Large-cap Value (+1.41%)

Sector Outperformers:

Semis (+2.64%), Energy (+2.59%) and Steel (+2.42%)

Stocks Rising on Unusual Volume:

TKC, HES, WB, TIN, MBT, RIO, SI, BAC, RTP, MDVN, VPHM, JNPR, AMMD, BWLD, ADVS, PRSC, BBSI, NATI, ACLI, SAIA, RSYS, KEYN, XLTC, HTCH, SVVS, STAR, BECN, LRCX, APEI, SDXC, ALXN, FISV, AVP, LZ, SSD, TWP, JNY, ROC and STE

Stocks With Unusual Call Option Activity:

1) HA 2) KFT 3) ELN 4) CMI 5) ERTS

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Oil Price at $90 Is Enough to Save Global Economy. Oil at a more sustainable $80 to $90 a barrel would suddenly make the economic weather feel a lot sunnier. With inflation under control, central banks could cut interest rates again. Property markets would stabilize, helping banks to begin lending and to reinvigorate the global economy. Cheaper oil wouldn't necessarily be beneficial to everyone. We can be sure that many investment banks and hedge funds have speculated wildly in the oil market, and that some of them will make horrendous losses. Expect some shocks to emerge on the way down, just as they did on the way up. Likewise, a soaring oil price was helping the environment. The world needs to wean itself off its addiction to fossil fuels, and the markets certainly delivered an incentive to do that. Arguably, much of that work has now been done. You don't need $300-a-barrel oil to get people to trade in their gas-guzzling sport-utility vehicles.
- India's 10-year government bonds will tumble this year, boosting yields to the highest since 2001, as the central bank raises interest rates to curb inflation, according to JPMorgan Chase & Co. Yields may climb to 11 percent by the end of December as the central bank boosts rates from a seven-year high to slow the fastest inflation in 13 years, Vikas Agarwal, a strategist in Mumbai at the third-biggest U.S. bank, said. ``We haven't yet seen peaks in inflation, policy rates or bond yields in India,'' Agarwal said in an interview. ``Monetary-policy prospects remain decidedly hawkish.''
- The cost to protect Australian corporate bonds from default fell by the most in a week, credit- default swaps show. The Markit iTraxx Australia Series 9 Index declined 7.5 basis points to 131.5 basis points at 8:49 a.m. in Sydney, according to Citigroup Inc. prices.
- Hong Kong's apartment transactions may fall to a 10-month low in July, then drop further, on concerns that accelerating inflation and a slumping stock market may push prices down, analysts said.
- Wheat fell for a second straight day on speculation the biggest U.S. crop in a decade will overwhelm demand. Domestic growers may harvest 66.97 million metric tons (2.46 billion bushels), up 19 percent from last year and the most since 1998, the U.S. Department of Agriculture said on July 11. The nation's reserves before next year's harvest will soar 76 percent to 14.6 million tons. U.S. exports probably will decline as global production climbs, the agency said.
- Crude oil was little changed below $122 a barrel after closing at its lowest in 12 weeks yesterday because of a strengthening U.S. dollar and signs that gasoline demand may extend declines. Oil has dropped 17 percent since its July record as the rising dollar curbed the appeal of commodities as an inflation hedge. U.S. motorists drove less for a seventh consecutive month in May, as vehicle-miles traveled on all U.S. roads fell 3.7 percent during the month from a year earlier, the Federal Highway Administration said in a report July 28. The seven-month slide is the longest downward streak since 1979. ``This demand thing has some bite,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``I can really see a crude market here that could drop down to $100 by the end of summer or early fall.''
- The U.S. dollar may extend gains to C$1.0865 against the Canadian dollar should it close above so- called resistance at C$1.0340, said Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc. in London.
- The Australian dollar fell to the lowest in three weeks as prices of commodities the nation exports declined and the U.S. currency rallied in New York.
- Winthrop Smith Jr., the former head of Merrill Lynch & Co.'s international brokerage unit, said he's buying the firm's shares again after Chief Executive Officer John Thain announced plans to shed risky assets and raise capital. Smith, who left the firm in 2001, sold all his shares before Thain took charge of the third-biggest U.S. securities firm last year, he said in a Bloomberg Television interview today.
- Traders who bought Merrill Lynch & Co. options yesterday betting the biggest U.S. brokerage would extend its worst slide in 21 years may have been tipped off, options analysts say. Merrill options rose to the highest in almost two weeks yesterday and traders increased bearish bets hours before the firm said that it would take $5.7 billion in writedowns.
- The International Monetary Fund urged the Bank of Japan to refrain from raising interest rates for now as the world's second-largest economy heads for a ``soft landing.''
- India's central bank put the battle against inflation before economic growth in Governor Yaga Venugopal Reddy's final interest-rate decision, spurring speculation of further increases in borrowing costs. The Reserve Bank of India yesterday raised its benchmark repurchase rate by half a percentage point to 9 percent, more than economists forecast. The rate will climb to between 9.25 percent and 9.5 percent in the next three months.
- Japan's industrial production fell last month after a global slowdown caused overseas shipments to decline for the first time in four years. Factory output dropped 2 percent from May, when it rose 2.8 percent, the Trade Ministry said today in Tokyo.
- An experimental Alzheimer's drug made by Wyeth(WYE) and Elan Corp.(ELN) only helped about half of patients in a study and was linked with a brain-swelling side effect. The company's shares fell 9.9 percent in after-market trading.
- Buffalo Wild Wings Inc.)BWLD), the restaurant chain specializing in multiflavored chicken wings, gained the most in 18 months in Nasdaq trading after saying it will meet its annual profit-growth forecast of 25 percent.
- MetLife Inc.(MET), the biggest U.S. life insurer, cut its full-year earnings forecast and said second- quarter profit declined 19 percent on investment losses, sending the shares down 9.1 percent.

Wall Street Journal:
- The Bush administration's embrace of a flexible timeline for pulling U.S. troops from Iraq has accelerated negotiations between Washington and Baghdad over a long-term security pact, officials from both sides said.

MarketWatch.com:
- Timers’ optimism may bode ill for gold. They don’t seem to be worried; that’s a bad sign to contrarians.
- Tight budgets or not, college students will spend more money on electronics in their back-to-school purchases this year than on apparel and apartment furnishings, underscoring the lofty place PCs, iPhones and other gadgets have taken on students' must-have lists.

NY Times:
- The number of chronically homeless people living in the nation’s streets and shelters has dropped by about 30 percent — from 175,914 to 123,833 — from 2005 to 2007. Researchers who study the issue say they believe the decline is the most significant in years.
- Amazon(AMZN) Offers Other Sites Use of Its Payment Service.
- An Investment Firm That Prospered From Past Crises Turns to Mortgages. John P. Grayken made a fortune buying investments no one else seemed to want during the savings and loan debacle in the early 1990s. Now he is trying to repeat that feat by buying the detritus of today’s mortgage crisis. On Monday night, Mr. Grayken’s private investment company, Lone Star Funds, agreed to pay $6.2 billion for most of the toxic, mortgage-linked investments held by Merrill Lynch.

BusinessWeek.com:
- Federal regulators on Tuesday extended through mid-August a temporary order banning a certain kind of short-selling of the stocks of mortgage finance companies Fannie Mae, Freddie Mac and 17 large investment banks. The Securities and Exchange Commission said the ban on so-called "naked" short selling will be in effect until 11:59 p.m. EDT on Aug. 12 and will not be extended. "In addition to continuing the existing order against naked short selling, the commission will continue exploring other remedies for the broader marketplace to further protect investors from 'distort and short' artists," Cox said in a statement. After ban runs out, regulators will move to draw up formal rules to provide additional protections against abusive naked short selling in the broader market, while allowing legitimate short selling, the SEC said.

LA Times:
- The International Olympic Committee ruled today that Iraq could participate in the Beijing Games, reversing itself after Baghdad pledged to ensure the independence of its national Olympics panel.

USA Today.com:
- An increasing number of top economists say the U.S. economy is likely to narrowly avoid a recession this year, according to a new quarterly survey by USA TODAY.

Washington Post:
- Olympic organizers are backtracking on another promise about coverage of the Beijing Games, keeping in place blocks on Internet sites in the Main Press Center and venues where reporters will work. The blocked sites will make it difficult for journalists to retrieve information, particularly on political and human rights stories the government dislikes.

San Jose Mercury News:
- The American Wind Energy Association is expected to release a survey next month that says the United States has become the world's leading wind producer, and that the industry expects rapid growth to continue in places like Texas, the Great Plains and California. The survey calculates that the U.S. wind industry now tops Germany in terms of how much energy is being produced from wind.

Reuters:
- China has installed Internet-spying equipment in all the major hotel chains serving the 2008 Summer Olympics, a U.S. senator charged on Tuesday. "The Chinese government has put in place a system to spy on and gather information about every guest at hotels where Olympic visitors are staying," said Sen. Sam Brownback. The U.S. senator made a similar charge a few months ago but said that since then, hotels have come forward with detailed information on the monitoring systems that have been required by Beijing. Brownback refused to identify the hotels, but said "several international hotel chains have confirmed the existence of this order."

The Australian:
- US conglomerate GE(GE) says it could sign a deal within months to build a $US3 billion ($3.13 billion) "clean coal" power plant in NSW or Queensland that would store carbon dioxide underground.

Straits Times:
- Rents in Singapore have begun to fall at most apartment projects because of new supply, citing data from the government.

Hong Kong Economic Journal:
- Hong Kong investors bought 29% fewer residential units in China during the first half, the first year-on-year decline since 2003, citing a report by a real estate agency. Shenzhen in the southern province of Guangdong was the worst-performing city, with prices falling 35% in the nine months from June last year.

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (TXN), target $36.
- Reiterated Buy on (HS), boosted estimates and raised target to $25.

Night Trading
Asian Indices are +1.0% to +2.0% on average.
S&P 500 futures -.03%.
NASDAQ 100 futures +.11%.

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Earnings of Note
Company/EPS Estimate
- (GLW)/.48
- (CMCSA)/.23
- (IT)/.22
- (IACI)/.31
- (STE)/.25
- (MCO)/.47
- (TIN)/-.05
- (TBL)/-.31
- (AMT)/.12
- (SO)/.56
- (SPW)/1.57
- (DIS)/.60
- (OII)/.90
- (HOLX)/.29
- (THQI)/-.38
- (SPF)/-1.49
- (ESRX)/.72
- (FSLR)/.56
- (OI)/1.22
- (CVD)/.78
- (ITRI)/.82
- (AVB)/1.24
- (GMR)/.56
- (PSYS)/.50
- (SBUX)/.18
- (CLF)/1.99
- (DRIV)/.33
- (V)/.49
- (FLS)/1.49
- (NBL)/2.05
- (ODP)/.00
- (SYMC)/.35
- (NLY)/.61
- (AKAM)/.41
- (AVP)/.45
- (AGN)/.63
- (SEE)/.40
- (CMI)/1.23
- (ENR)/1.27
- (IPG)/.16
- (JNY)/.13
- (MUR)/2.20
- (LVS)/.11
- (HES)/2.74
- (OC)/.21

Upcoming Splits
- None of note

Economic Releases
8:15 am EST
- The ADP Employment Change for July is estimated at -60K versus -79K in June.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -1,300,000 barrels versus a -1,558,000 barrel decline the prior week. Gasoline supplies are expected to rise by 350,000 barrels versus a 2,847,000 barrel increase the prior week. Distillate inventories are estimated to rise by 2,050,000 barrels versus a 2,419,000 barrel increase the prior week. Finally, Refinery Utilization is expected unch. versus a -2.35% decline the prior week.

Other Potential Market Movers
- The weekly MBA mortgage applications report and the Keefe Bruyette Woods Community Bank Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and transportation 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.