Bear Radar

Style Underperformer:

• Small-Cap Growth (-1.01%)

Sector Underperformers:

• 1) Gold -3.12% 2) Coal -2.98% 3) Airlines -1.94%

Stocks Falling on Unusual Volume:

• VLTR, MNTA, ICLR, SANM, AIXG, PRXL, RBCN, PLT, RRC, NEM, TIN, TMO, CSL and ABC
  

Stocks With Unusual Put Option Activity:

• 1) XRX 2) GENZ 3) FLR 4) TSL 5) WMB
  

Stocks With Most Negative News Mentions:

• 1) SVU 2) X 3) AAN 4) CL 5) TRB
  

Tuesday Watch

Evening Headlines
Bloomberg:

• High-Yield Debt's Best Rally Since March Entices Borrowers: Credit Markets. High-yield, high-risk bonds are rallying the most in four months on speculation defaults among the neediest borrowers will diminish as profits exceed forecasts. Returns of 2.99 percent this month are prompting a surge in U.S. speculative-grade offerings with Advanced Micro Devices Inc., the second-largest maker of microprocessors, and Vantage Drilling Co. leading $12.5 billion of July issuance, according to data compiled by Bloomberg. Junk bonds returned 1.3 percent last month after losing 3.52 percent in May, Bank of America Merrill Lynch index data show. The U.S. speculative-grade default rate will decline to 2.7 percent by the end of the year, from 6.3 percent at the end of the second quarter, according to Moody’s Investors Service. Credit-default swaps on 14 of the world’s biggest banks, including JPMorgan Chase & Co. and Deutsche Bank AG, fell to a 12-week low, according to an index of swaps compiled by Credit Derivatives Research LLC. Credit Derivatives Research’s Counterparty Risk Index of the largest banks fell 7 basis points to 126, the lowest since 124 on May 3. The benchmark has dropped 16.5 basis points the past week. The cost of protecting corporate bonds from default in the U.S. and Europe fell to the lowest in more than 10 weeks, with the Markit CDX North America Investment Grade Index of credit- default swaps, which investors use to hedge against losses on corporate debt or speculate on creditworthiness, falling 3.42 basis points to 103 basis points, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings, dropped 5.61 to 106.69. Spreads on emerging-market bonds tightened 6 basis points to 279 basis points, according to JPMorgan index data, after ranging from as low as 229 on April 15 to as high as 359 on May 25.
• Nose Sniff Technology Enables Paralyzed to Navigate Wheelchairs, Write. A device operated by nose sniffs allows disabled people, quadriplegics and those “locked in” by complete paralysis to use computers or operate wheelchairs, an Israeli study showed. Quadriplegic patients were able to navigate wheelchairs as well as healthy people who used the device created by the researchers, according to the study published today in the Proceedings of the National Academy of Sciences. Two people in the study who were completely paralyzed with intact mental function used the technology to communicate by choosing letters on a computer screen to write. The device may be among the tools to help paralyzed people communicate and get around, said study author Noam Sobel. It may be cheaper than products on the market for the severely disabled such as eye-tracking devices that cost as much as $20,000, he said.
• Credit Ratings Don't Reflect China's Local Government Risks, Dagong Says. Credit ratings assigned to yuan- denominated bonds issued on behalf of local governments in China are misleading and don’t reflect risks investors face, Dagong Global Credit Rating Co.’s chairman said. Local government-backed borrowers shopped around for the best rankings from Chinese ratings companies, Dagong Chairman Guan Jianzhong said yesterday during a Bloomberg Television interview in Beijing. “Whoever gives them a better rating gets the business,” he said. “Local governments are very powerful. The current system doesn’t reflect all the risks.” Local governments in China set up financing vehicles to fund projects such as highways and airports with bonds and loans, due to limits on their ability to directly borrow money. There are concerns Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local infrastructure projects, according to a person with knowledge of data collected by regulator the China Banking Regulatory Commission. “This is very dangerous,” Guan said. “If you look at the financial crisis, it was caused by an accumulation of credit risks. When it gets to a certain point, then a crisis breaks out.”
• Afghan, Pakistan Leaders Warned by U.S. in Advance of Leaked War Documents. Afghan, Pakistani and Indian officials received advance notice from the U.S. that media in the U.S. and Europe were about to publish leaked American military documents about the war in Afghanistan, State Department Spokesman Philip J. Crowley said. Afghan President Hamid Karzai and Pakistani President Asif Ali Zardari were briefed by the U.S. ambassadors in their countries, and senior Pakistani officials met two nights ago with Admiral Michael Mullen, the top U.S. military commander, Crowley told reporters today in Washington. “We wanted to make sure they understood the context under which these documents would be released, that this was the result of a leak of classified documents, not sanctioned, authorized by the United States government,” Crowley said. “The briefing was, in fact, to help them understand that this represents a crime and that we are investigating it.”
• Basel Committee Softens Bank Capital Rules, Sets Leverage Cap. The Basel Committee on Banking Supervision softened some of its proposed capital and liquidity rules while introducing new restrictions on how much lenders can borrow in order to rein in their risk-taking. The panel agreed yesterday to allow certain assets, including minority stakes in other financial firms, to count as capital, according to a statement. The committee set a leverage ratio to apply to banks globally for the first time, which could become binding by 2018, pending further adjustments to the method of calculating banks’ assets. “Even after all the compromises, the banks aren’t off the hook from tighter capital and liquidity rules,” said Frederick Cannon, chief equity strategist at New York-based Keefe, Bruyette & Woods. France and Germany have led efforts to weaken rules proposed by the committee in December, concerned that their banks and economies won’t be able to bear the burden of tougher capital requirements until a recovery takes hold, according to bankers, regulators and lobbyists involved in the talks. The U.S., Switzerland and the U.K. have resisted those efforts.
• California Mayor Regrets 'Indefensible' Salaries as Records Are Subpoenaed. The mayor of Bell, California, whose municipal pay records have been subpoenaed by Attorney General Jerry Brown, apologized for what he called the city’s “indefensible administrative salaries.” Oscar Hernandez, paid almost $100,000 as part-time mayor of the 38,000-population town about 10 miles (16 kilometers) south of Los Angeles, said he’ll serve the remainder of his term, ending in March, without pay, according to a statement today. Brown said he’s subpoenaed hundreds of employment, salary and contract records from the city of Bell, whose manager had an annual salary of almost $800,000 and resigned last week.
• Filmmaker Stone Apologizes for Remark on Holocaust, Jewish Media Influence. Filmmaker Oliver Stone apologized for remarks about the Holocaust and Jewish media influence that were criticized as being anti-Semitic. The apology followed comments Stone made to the Sunday Times of London. In an interview promoting a new documentary, Stone also discussed a project in the works, “Secret History of America.” He told the Times “Hitler was a Frankenstein, but there was also a Dr. Frankenstein. German Industrialists, the Americans and the British. He had a lot of support. Hitler did far more damage to the Russians than the Jewish people.” Stone also discussed in the article what he called “Jewish domination of the media,” and said Israel “f***** up United States foreign policy for years.”
• BP(BP) Asset Sales Win 58% Premium, Show Potential for More Deals. Robert Dudley, poised to be appointed as BP Plc chief executive officer today, may speed asset sales after the company got a 58 percent premium for the $7 billion disposal of oil fields to Apache Corp.
• Plosser Says Weaker Data Don't Yet Justify More Fed Stimulus. Federal Reserve Bank of Philadelphia President Charles Plosser said it’s too soon for the Fed to bolster record U.S. monetary stimulus in response to slower- than-forecast gains in economic growth and employment. “Talk of new efforts to stimulate the economy are premature right now,” Plosser said today in an interview with Bloomberg News in Washington. “I don’t think the data have been sufficiently compelling one way or another.”

Wall Street Journal:

• Course of Economy Hinges on Fight Over Stimulus. Eighteen months after President Barack Obama administered a massive dose of spending increases and tax cuts to a weak economy, a brawl has broken out among economists and politicians about whether fiscal-stimulus medicine is curing the illness or making it worse.
  
• Afghan War Leak Sets Off Effort to Control Damage.
• Reports Bolster Suspicion of Iranian Ties to Extremists. Cooperation among Iran, al Qaeda and other Sunni extremist groups is more extensive than previously known to the public, according to details buried in the tens of thousands of military intelligence documents released by an independent group Sunday.
• Rent a Leaf: Enterprise Buys a Fleet. Purchase of 500 of Nissan's Electric Cars Will Make Them Available in Eight Cities.
• China Fuels Trade Tension With Policies, Report Says. China's drive to support domestic technologies—which has already resulted in high-profile complaints by foreign businesses over government purchasing policies—is likely to continue to cause trade disputes and political tensions with the U.S., says a new report from the U.S. Chamber of Commerce.
• Supply of Homes Set to Grow. Sales of new homes are near 47-year lows, yet the supply of new and existing homes is expected to grow in the months ahead as construction ramps up and a wave of foreclosed homes hits the market.

Bloomberg Businessweek:

• Banks Charge States Millions in Debt Binge to Fix Subprime Bust. “You're basically rewarding those who got you into the mess,” Arizona's Treasurer Dean Martin said in an interview.
• Dow Erasing '10 Loss as S&P 500 Tops Moving Average Fuels Bulls. The rally that erased the Dow Jones Industrial Average’s 2010 loss yesterday and carried the Standard & Poor’s 500 Index above its 200-day average spurred optimism among chart analysts and investors who track earnings. The Dow advanced 1 percent to wipe out an annual slump that reached 7.1 percent on July 2 after U.S. companies beat analysts’ profit estimates at twice the rate they trailed them in the second quarter. The S&P 500 rose above its mean price in the past 200 days for the first time in more than a month, after surging 8.2 percent since June 30. Bullish signals are increasing in equities after the S&P 500 lost 13 percent in May and June, its biggest retreat since the bull market began in March 2009. Projections for the fastest S&P 500 income growth since 1988 are helping investors overcome concern that the economy will sink into its second recession in three years.

CNBC:

• What Financial Reform Means for Municipal Bonds.
• US Senate Democrats Battling for Viable Energy Bill. Senate Majority Leader Harry Reid hopes to unveil his pared-back U.S. energy bill on Tuesday that focuses on reforming offshore oil drilling but Republicans were quick to dismiss its chances of passing.

Business Insider:

• Suddenly, The Obama Administration Loves Elizabeth Warren For The Consumer Financial Protection Agency.
• Dennis Gartman Has Quit Being A Gold Bull.
• Brazil Might Be Overheating.
  

CNNMoney:

• Senator Evan Bayh(D-IN): How Financial Reform Could Impede Growth. There's still a lot of unfinished business, he says. And the law's mark in history will largely depend on how financial regulators apply the new rules. Fortune caught up with Bayh to get his thoughts on the new law as the government's focus shifts to the monumental task of implementing it. Here's an edited transcript.

Forbes:

• Talk On High-Speed Trading Hacks Pulled From Security Conference. Just as important as what's revealed each summer at the Black Hat hacker confab in Las Vegas may be what isn't. Among the talks conspicuously absent from this year's schedule: a presentation exposing security vulnerabilities in banks' high-speed trading systems.

cnet:

• Is Yahoo Japan Poised to Switch to Google(GOOG) Search? In what would be a stunning blow to the massive search alliance between Microsoft and Yahoo, Google is apparently zeroing in on a deal to grab the algorithmic search business for Yahoo Japan, said several sources.

Boortz:

• Decentralizing Healthcare ... In the UK? The passage of ObamaCare fulfilled - or came close to fulfilling - two liberal dreams: It was a big step toward the liberal dream of a government-run healthcare system and it expanded the role of government in hopes of creating a "centrally-planned economy." While we're heading hell bent for leather toward a health care system run by our wonderful federal government, Great Britain is headed in entirely the opposite direction. There is a reason for this - government-run healthcare leads to increased cost, less quality care and ... ta da! ... RATIONING! Coupled with a budget/deficit crisis, the infrastructure of its national health system had become so cumbersome and abysmal that the UK is now ready to dismantle it.

Rasmussen Reports:

• Generic Congressional Ballot: Republicans 46%, Democrats 36%. Republican candidates now hold a 10-point lead over Democrats on the Generic Congressional Ballot for the week ending Sunday, July 25, the widest gap between the two parties in several weeks. A new Rasmussen Reports national telephone survey finds that 46% of Likely Voters would vote for their district's Republican congressional candidate, while 36% would opt for his or her Democratic opponent. Eighty-six percent (86%) of Republicans back their party's candidate, while 74% of Democrats support the candidate of their party. Voters not affiliated with either party prefer the Republican candidate by a 44% to 23% margin.

Politico:

• Rangel Stands His Ground. Facing an ethics trial that may end his 40-year congressional career, Rep. Charles Rangel grew emotional Monday, saying the investigation has “been a very traumatic experience for me and for my family and my constituents.” But it may only get worse for Rangel in the coming days. The House ethics committee will release the detailed results of its Rangel probe Thursday, and a special investigative subcommittee has already concluded there is “substantial reason to believe” that he broke House ethics rules.

Reuters:

• NYSE Short Bets Eased in Mid-July as Market Rose. Bearish bets against stocks on the New York Stock Exchange decreased in mid-July, the exchange said on Monday, suggesting short investors took money off the table as the stock market rallied. Short interest fell 1.2 percent to about 13.76 billion shares as of July 15, compared to a revised 13.93 billion shares as of June 30. The June figure was initially reported as 14.08 billion shares. The short interest on NYSE is equal to 3.6 percent of the total shares outstanding, the exchange said. On the Nasdaq, short interest edged up, suggesting investors remain slightly bearish on companies on the tech-heavy index. Short bets rose 0.4 percent to about 7.42 billion shares, compared to 7.39 billion shares at the end of June. This is 2.99 days' average daily volume, compared with an average of 3.70 days for the previous reporting period, the exchange said.
• Veeco(VECO) Q2 Profit Outpaces Street; Sees Strong Q3. Chip equipment maker Veeco Instruments Inc (VECO) posted a second-quarter profit that surpassed Wall Street expectations, helped by strong light emitting diode (LED) and solar orders, and forecast a strong third quarter. The company, which makes equipment used to produce LEDs, solar cells and data storage, expects third-quarter earnings of $1.23 to $1.43 per share, excluding items, on revenue of $290 million to $315 million. Analysts were looking for third-quarter earnings of $1.05 a share, excluding items, on revenue of $282.6 million, according to Thomson Reuters I/B/E/S.
• Advent Software(ADVS) Q2 Beats Consensus; Ups 2010 Revenue View. Advent Software Inc (ADVS) posted a better-than-expected quarterly profit on strong bookings and revenue from its license, maintenance and other recurring revenue, and raised its full-year revenue outlook. The company, which makes software to automate data and work flows, now expects full-year revenue of $277 million to $281 million, compared with its previous forecast of $272 million to $280 million.

Financial Times:

• Deutsche Bank Yields Over Sovereign Holdings. Deutsche Bank AG will today disclose details of its sovereign debt holdings after European regulators criticized it and other German banks for failing to reveal the information for European stress tests.

Telegraph:

• BP's(BP) Russian Partners Back Bob Dudley to Replace Tony Hayward as Chief. BP's billionaire partners in Russia indicated they are willing to back their old adversary Bob Dudley as its new chief executive, as the oil giant's board met on Monday night to finalise a radical shake-up. The endorsement will be a boost to BP, as it attempts to draw a line under its Gulf of Mexico oil spill by on Tuesday announcing the departure of chief executive Tony Hayward and revealing hefty impairment charges of up to $25bn (£16bn). The board is expected to say that Mr Hayward will leave on October 1 to be replaced by the American managing director now in charge of BP's spill response unit.
• Spain Shines on Stress Test, Germany Flunks. Europe's stress tests for banks have greatly reduced pressure on Spanish lenders but have so far done little to ease broader strains in the interbank credit markets. Three-month Euribor rates have crept up to a one-year high of 0.889pc. The "Libor-OIS spread", watched as a key gauge of stress in the system, also nudged up to 26 basis points. The refusal of some Landesbanken and German lenders to reveal exposure to EMU sovereign debt has raised suspicions that they have something to hide. Credit default swaps measuring bond risk jumped from 140 to 150 points for HSH Nordbank, with smaller rises for LB Berlin (154), West LB (127), Norddeutssche LB (125) and Deutsche Postbank (121). If the original purpose of the tests was to unlock interbank lending and head off an incipient credit crunch, the jury is still out. A report last week by the International Monetary Fund said eurozone lending had "nosedived" during the global crisis and "has yet to recover". The IMF said this was asphyxiating small business, which generates most job growth. As analysts sift through the wealth of new detail from the tests, they are baffled by the chaotic criteria. "We have a ludicrous worst-case scenario that Greek house prices fall by 2pc in 2011: when you first read it you think their must be a typo," said David Owen from Jefferies Fixed Income. Austria's worst-case is a 2.7pc rise in house prices, or zero for Poland, and -2pc for Italy. Mr Owen said these assumptions would be demolished by a serious recession. Yet the tests assume that all eurozone states would contract at the same rate in a downturn. In reality, Club Med states and Ireland would almost certainly fare worse since they are already coping with the triple effects of debt-deleveraging, lost competitiveness, and fiscal tightening. Spain was rewarded by the markets for the high quality of its tests, which cover 95 of its banks and include a 28pc fall from peak-to-trough for finished houses, and 61pc for development land. Yields on 10-year Spanish bonds dropped 11 basis points to 4.24pc on Monday, outperforming the eurozone. The cost of bond insurance fell for Spanish Cajas. Alastair Whitfield from RBC said a large number of lenders would have failed if the Tier 1 capital ratio had been raised from 6 to a more credible 7, including Deutsche Post Bank, Monte dei Paschi, Espirito Santo, Piraeus, and Allied Irish. Credit Suisse said the entire Greek banking system and a string other lenders would have failed if "core" Tier 1 had been used, disallowing hybrid capital. At least the results provide analysts with a wealth of data on Europe's banks, which is a key step to restoring trust. "We can all conduct our own stress tests now," said Mr Owen.

Yonhap News:

• LG Display Co. plans to invest $844 million by 2012 to increase liquid-crystal-display production in South Korea, citing the company.

Economic Information Daily:

• China's 77 largest steelmakers' profit fell 38% in June on a month earlier because of lower prices, citing an unidentified China Iron & Steel Association official.

Evening Recommendations
Citigroup:

• Reiterated Buy on (FTI), target raised to $72.
• Reiterated Buy on (ACL), target raised to $181.
  

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 113.0 -5.0 basis points.
• Asia Pacific Sovereign CDS Index 113.75 -1.25 basis points.
  
• S&P 500 futures -.21%.
  
• NASDAQ 100 futures -.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PCAR)/.21
• (BEAV)/.37
• (ODP)/-.17
• (VLO)/.70
• (LMT)/1.78
• (ABC)/.49
• (LXK)/.93
• (CMI)/.89
• (X)/.66
• (LLL)/1.93
• (DD)/.94
• (UA)/.03
• (CEPH)/1.78
• (JEC)/1.62
• (IGT)/.21
• (PNRA)/.84
• (BRCM)/.62
• (ILMN)/.22
• (BXP/.99
• (CBG)/.09
• (NSC)/.99
• (JLL)/.57
• (AFL)/1.33
• (AET)/.73
• (BWLD)/.42
• (OXY)/1.35
• (DPZ)/.28

Economic Releases
9:00 am EST

• The S&P/CaseShiller 20 City Home Price Index for May is estimated to rise +.2% versus a +.44% gain in April.

10:00 am EST

• Consumer Confidence for July is estimated to fall to 51.0 versus a reading of 52.9 in June.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Richmond Fed Manufacturing Index, $38 Billion 2-Year T-Note Auction, weekly retail sales reports, ABC consumer confidence reading, Keefe Bruyette Woods Community Bank Investor Conference, (BEC) Analyst Event and the (IVZ) Investor Day could also impact trading today.
  

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

Stocks Surging into Final Hour on Plunging Sovereign Debt Angst, Short-Covering, Technical Buying, Less Economic Fear

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Slightly Above Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 23.31 -.68%
  
• ISE Sentiment Index 93.0 -18.42%
  
• Total Put/Call 1.08 +30.12%
  
• NYSE Arms .82 -19.69%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 103.65 bps -3.50%
  
• European Financial Sector CDS Index 103.92 bps -14.31%
  
• Western Europe Sovereign Debt CDS Index 118.33 bps -7.38%
  
• Emerging Market CDS Index 223.19 bps -3.46%
  
• 2-Year Swap Spread 23.0 -1 bp
  
• TED Spread 34.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 240.0 -1 bp
  
• China Import Iron Ore Spot $133.40/Metric Tonne +5.04%
  
• Citi US Economic Surprise Index -37.1 -.1 point
  
• 10-Year TIPS Spread 1.78% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +17 open in Japan
• DAX Futures: Indicating +2 open in Germany

Portfolio:

• Higher: On gains in my Medical, Retail, Biotech and Technology long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades near session highs, despite lingering worries over the usefulness of the European bank stress test results and mixed US economic data. On the positive side, Airline, Road&Rail, Gaming, REIT, Hospital, Biotech, Bank, Networking, Disk Drive and Alt Energy stocks are especially strong, rising 2.0%+. Small-cap and cyclical shares are outperforming again and the Transports continue to surge, rising another +2.31%. Copper is rising another +1.37%. The European Investment Grade CDS Index is plunging another -9.9% to 99.91 bps. The UK sovereign cds is falling another -9.1% to 63.66 bps, which is the lowest level since Nov. 16th, 2009. Moreover, the Japan sovereign cds is falling -4.95% to 72.72 bps and the Portugal sovereign cds is dropping -6.2% to 251.93 bps. The US Municipal CDS Index is dropping -3.9% to 210.0 bps. China Import Iron Ore spot continues its recent move higher after sharp declines and Shanghai copper inventories are falling -8.3% today. On the negative side, Education, Coal and Gold shares are lower on the day. 3-Month Euro Libor is rising slightly today to 82.0 bps. Despite ongoing concerns about the structure of eurozone bank stress tests, the huge declines in key eurozone cds indices and further euro currency strength are big psychological positives for investors. It is also a positive to see some key gauges of equity investor angst rising meaningfully today, despite another stock market advance. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, short-covering, diminishing sovereign debt angst, mostly positive earnings reports, buyout speculation and technical buying.

Today's Headlines

Bloomberg:

• Stock Buying Hits Bull Market Record at Mutual Funds. Mutual funds, pensions and endowments are spending more on stocks than at any time since the start of the bull market, just as individuals grow the most pessimistic in a year. Institutions pushed equities up to 68 percent of their holdings in July, the highest level in 15 months, from 63 percent in April, a Citigroup Inc. survey showed. The ratio of bullish to bearish respondents in a survey by the American Association of Individual Investors has fallen to 0.68, the lowest level since July 2009, based on a four-week average. The last time money managers and individuals were this far apart was in March 2009, before the Standard & Poor’s 500 Index began its 63 percent rally, according to data compiled by Bloomberg. The U.S. equity benchmark has posted an average return of 8.8 percent in the 12 months after individuals’ skepticism rose this high in the past 20 years, according to data compiled by Bloomberg. Profits may rise an average 34 percent in 2010 and 17 percent in 2011, the fastest two-year growth since 1995, according to forecasts tracked by Bloomberg. The AAII measure of pessimism peaked on July 8 at 57 percent, the most since March 5, 2009. Bullishness has averaged 29 percent during the past four weeks, compared with 45 percent who were bearish, according to the weekly survey. The last time optimism fell this low relative to pessimism was July 24, 2009, two weeks after the S&P 500 began a 38 percent rally, data compiled by AAII and Bloomberg show. Investors have withdrawn $22.9 billion from mutual funds that hold U.S. stocks since April 2009, while piling more than $350 billion into bond funds, according to data compiled by the Washington-based Investment Company Institute. Individuals accounted for the majority of U.S. mutual fund assets in 2009, owning 84 percent, the data show. Hedge funds that wager on both gains and losses in equities have boosted speculation shares will fall, according to Bank of America Corp. The lightly regulated private pools of capital have on average 27 percent more money in bets on rising prices than falling prices, below the historical average of 35 percent to 40 percent, based on data from the Charlotte, North Carolina- based bank. The S&P 500 trades at 14.9 times annual earnings, compared with an average of 16.5, according to data compiled by Bloomberg that dates back to 1954. The index is cheaper relative to estimated earnings for the next 12 months, with a multiple of 11.7, the data show. Mutual funds, endowments, hedge funds and pensions say they’re preparing for a rally, according to Citigroup’s questionnaire from 120 respondents among those groups. Fifty- four percent said U.S. equities may gain 10 percent to 20 percent, compared with 50 percent in the previous reading.
• Bank Bond Risk Drops to 13-Week Low on Stress-Test Transparency. The cost of insuring against losses on bank bonds fell to the lowest level in 13 weeks as analysts said European Union stress tests provided greater-than-expected transparency about holdings of sovereign debt. The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers dropped for a fifth day, down 15.5 basis points to 117.5, according to JPMorgan Chase & Co. at 5 p.m. in London. It’s the biggest one-day decline since May 10 and the index is now the lowest since April 26. “They provided a lot of fairly detailed information on the banks so that everyone can do their own stress tests,” said Philip Gisdakis, a Munich-based strategist at UniCredit SpA. “Having the detailed information you don’t need to rely only on the headline figures, you can do it on your own.” The Markit iTraxx Europe Index of swaps 125 companies with investment-grade ratings fell 7.25 basis points to 104.75, and the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 29.5 basis points to 477, JPMorgan prices show.
• June Sales of U.S. New Homes Climb More Than Forecast. Sales of U.S. new homes rose in June more than forecast following an unprecedented collapse the prior month, a signal the worst of the slump triggered by the end of a government tax credit is over. Purchases increased 24 percent from May to an annual pace of 330,000, figures from the Commerce Department showed today in Washington. The rate was the second-lowest in data going back to 1963 after May’s downwardly revised 267,000 pace. Sales are “bouncing along the bottom,” said Eric Green, chief market economist at TD Securities Inc. in New York, who forecast an increase to 335,000. “The future is going to be dependent on job growth. There’s no demand because confidence is weak and employment is weak.” The government had initially estimated May sales at a 300,000 rate and revised down figures for every month since March. The 37 percent plunge in May was the biggest on record. The median price decreased 0.6 percent from June 2009 to $213,400. Purchases increased in three of four regions, led by a 46 percent jump in the Northeast and a 33 [percent surge in the South, the largest area. Demand dropped 6.6 percent in the West to a record low 57,000 pace. The supply of homes at the current sales rate fell to 7.6 months’ worth from 9.6 months in May. There were 210,000 new houses on the market at the end of June, the fewest since 1968.
• FedEx(FDX) Boosts Profit Forecast as Shipment Demand Rises. FedEx Corp. boosted its profit forecast for the quarter and full year, exceeding analysts’ estimates, on rising demand for international express shipments. The shares climbed in New York trading. Earnings for the quarter ending in August will be in a range of $1.05 to $1.25 a share, an increase from the previous outlook of 85 cents to $1.05, the Memphis, Tennessee-based company said today in a statement. Analysts projected $1 a share, the average of 17 estimates in a Bloomberg survey. FedEx said volume for international priority packages, which are among its most profitable offerings, will jump more than 20 percent this quarter, adding to signs of a strengthening global economy.
• Biggs Buys Stocks Three Weeks After Cutting Holdings: Tom Keene. Barton Biggs, the hedge fund manager who sold half his equity holdings at the start of July, said today that signs the U.S. economy will avoid a recession spurred him to build the stakes back up. Biggs, whose Traxis Partners LLC gained 38 percent in 2009 when he bought shares as the Standard & Poor’s 500 Index fell to a 12-year low, said bets that stocks will advance make up 75 percent of his fund, up from about 35 percent three weeks ago.
• Copper Prices Rise to 10-Week High on Improving Demand Outlook. Copper climbed to a 10-week high as shrinking inventories, a rally in equity markets and rising U.S. home sales signaled improving demand. Stockpiles monitored by the London Metal Exchange have slumped 7.7 percent in July, heading for the biggest monthly decline since June 2009. Copper for September delivery gained 4.9 cents, or 1.5 percent, to $3.234 a pound at 11:39 a.m. on the Comex in New York.
• Corn, Soybeans, Wheat Drop as Favorable Weather Aids U.S. Crops. Corn fell to the lowest price in more than three weeks, while soybeans and wheat declined, on speculation that rain is reviving U.S. crops that were threatened by dry weather earlier this month. Weekend rain significantly increased soil moisture in previously dry areas of the Midwest and South, said Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas. Forecasts call for showers and no sustained heat over the next two weeks, which will be good for crops, Lerner said in a report. “Weather conditions are improving,” said Greg Grow, the director of agribusiness for Archer Financial Services Inc. in Chicago. “Farmers are going to be active sellers because they are more confident in raising a big crop.” Corn futures for December delivery fell 6 cents, or 1.6 percent, to $3.785 a bushel at 10 a.m. on the Chicago Board of Trade, after touching $3.78, the lowest level for a most-active contract since July 1.
• CFA Pass Rate for Level 1 and 2 Exams Falls From Year Earlier. A lower percentage of hopefuls for the Chartered Financial Analyst designation passed the first and second level of their three-part exam in June compared with a year earlier, as a record number of people tried to get an edge in Wall Street hiring. Forty-two percent of applicants passed the exam’s first test, CFA Institute spokeswoman Kathy King said today, down from 46 percent on the June 2009 exam. Thirty-nine percent of applicants passed the second, compared with 41 percent a year earlier. A record 139,900 candidates enrolled to take CFA exams in June, aiming to capitalize as Wall Street begins to recover from the worst shakeout in decades.
• Utility Companies 'Exhausted' After Climate Defeat.
• Stock Short Sales at 2-Year Low, Data Explorer Says. Investors are exiting bearish bets on global equities, pushing bullish wagers on stocks to a two- year high versus short sales, according to Data Explorers. The firm’s long-short ratio has risen to 9.5, having surged from 5.75 in September 2008 when Lehman Brothers Holdings Inc.’s collapse intensified the financial crisis, the London- and New York-based securities-research company said. The reading is the highest of the data that goes as far back as July 2008.
• Genzyme(GENZ) Said to Rebuff Sanofi-Aventis Buyout Approach. Genzyme Corp., the world’s largest maker of drugs for rare genetic diseases, rebuffed Sanofi- Aventis SA’s takeover approach last week, two people with knowledge of the matter said today. Genzyme can command at least $22 billion, or $80 a share, on the potential for revenue to surge after the company resolves manufacturing defects depressing sales of existing products and introduces new medicines, investors and analysts said today. That is a 48 percent premium over Genzyme’s closing price on July 22, the day before reports of Sanofi’s interest.

Wall Street Journal:

• Report Finds Labor Laws Restraining Europe. European businesses are struggling to compete with their U.S. rivals who are far more agile at maximizing profit from their investment in people according to new research that warns firms in the EU are being hampered by strict labor laws. The findings, from a report on the efficiency of employees by PricewaterhouseCoopers, shows that Western European companies are failing to compete with their global rivals and lack the key skills to operate in the new global business environment.
• Madoff Investors Brace for Lawsuits. Trustee Pursues Account Holders Who Withdrew More Than They Deposited; 'I Will Be Penniless'. The court-appointed trustee recovering money for Bernard L. Madoff's victims is preparing a wave of new lawsuits seeking to wrest funds away from investors who also were duped by the Ponzi scheme. In an interview, Irving Picard said he could wind up suing about half the estimated 2,000 individual investors he has called "net winners" from their dealings with Mr. Madoff. Such investors withdrew more from Mr. Madoff's firm than the amount of principal they invested.

Bloomberg Businessweek:

• Iron Ore Price Jumps Most in 7 Months as China Buyers Return. The spot price of iron ore delivered to China, the biggest buyer of the steelmaking ingredient, jumped the most in almost seven months as buyers from the Asian nation returned to the market. The cost of 62 percent iron ore delivered to the port of Tianjin rose 5 percent to $133.40 a metric ton, the biggest one- day gain since Dec. 30, according to The Steel Index. The price hasn’t posted a decline for nine consecutive days after posting 16 straight days of losses through July 13. The spot price has risen 13 percent since July 15 after dropping to a 2010 low on July 13. It’s unclear whether the gains can be attributed to fundamental buying or are driven by traders, ING’s Hatch said.

CNBC:

• Obama's 'Slamming of Business' Unhealthy: Diller.
• Retail Demand is 'Pretty Good': Jarden CEO. The company is seeing a very tight supply chain, with costs going up. For that reason, more companies are shipping goods to retailers. If "retail demand wasn't pretty good, you wouldn't see that happening," Martin Franklin, CEO of Jarden, said today.
• 10 Ways Government Can Reduce Wasteful Spending.
  

Business Insider:

• The ONLY 10 Things That Are Known About North Korea's Next Leader.
• Chart of the Day: Americans Have a Serious Household Net Worth Problem.
  

Forbes:

• Brace Yourselves, New Macs Are On The Way. Apple(AAPL) could be updating its iMac and Mac Pro computers soon, if depleted stock at some of its retail stores are any indication. MacRumors has been tracking in-store pre-order availability for Apple's desktop Macs, and the fact that many are unavailable at several Apple Stores suggest that new, updated models could be announced soon.

OCRegister:

• Mark Landsbaum: Is It Time to End Climate Alarmism? Five allegedly independent investigations claim to have cleared U.S. and British climate scientists of chicanery in their global warming research. It's more likely the investigations will be among the final nails in the coffin for the global warming alarmist movement. That's a position shared not only among respected skeptics in the scientific community, but increasingly in the mainstream press and even by some global warming believers. Sure, government funding for climate change research probably will continue for a while. And propagandists will continue to crank out new studies claiming we're cooking the planet to death. They will hold more international confabs and issue more dire proclamations, but to less and less avail. Most likely, this was the tipping point. Global warming zealots have lost. It's only a matter of time until they realize it and move on to a new contrived catastrophe, where doubtless they'll be warmly received by a compliant press and amply rewarded with more tax-subsidized grants. It seems there are insatiable appetites and never-ending tax dollars for the proper causes.

NYDailyNews.com:

• Governor Paterson Says Planning for Layoffs to Start Immediately. Gov Paterson had some grim news for state workers - and their union leaders - this morning. It’s time to start planning for layoffs. “I think the planning for layoffs is going to have to begin immediately,” Paterson told reporters after throwing out the first pitch at an Albany t-ball game. Paterson was uncertain how many layoffs would be needed or when they would start. But he was certain about who’s to blame - union leaders for refusing to negotiate concessions such as lag pay or furloughs.

Rasmussen Reports:

• 58% Favor Repeal of Health Care Bill. Most voters continue to favor repeal of the national health care bill, but nearly half see repeal as unlikely. A plurality believes repeal would be good for the economy. The latest Rasmussen Reports national telephone survey finds that 58% of voters favor repeal, including 48% who Strongly Favor it. Thirty-seven percent (37%) are opposed to repeal, with 28% who are Strongly Opposed. Forty-four percent (44%) believe repeal of the health care bill would be good for the economy. Twenty-eight percent (28%) say repeal would hurt the economy.

Politico:

• House Leaders Squeeze Rangel. Increasingly impatient House Democratic leaders are prodding Rep. Charlie Rangel (D-N.Y.) to make a deal with the ethics committee before charges against him are unveiled Thursday, top Democratic officials told POLITICO. Fellow Democrats told POLITICO that they believe he’s dragging his feet in a futile effort at total vindication. Democrats worry that his stubbornness could add to their losses in November by helping Republicans, who have vowed to build a “culture of corruption” narrative using ads, mailings and talking points.

Reuters:

• Onyx Pharma(ONXX) Calls Myeloma Data 'Impressive'. Nearly a quarter of patients with multiple myeloma who had stopped being helped by current medicines responded to Onyx Pharmaceuticals Inc's experimental cancer treatment carfilzomib, according to data from a clinical trial. Onyx (ONXX), whose shares jumped 18 percent, said it planned to use the study results, released on Monday, as the basis for seeking U.S. approval with the Food and Drug Administration before the end of the year.

The Independent:

• Stephen King: Austerity Can Be Postponed by a Fiscal Stimulus - But it Can't Be Avoided Altogether. It is their attachment to models which partially explains the failure of governments, central banks, ratings agencies and banks to see the error of their ways. Some of you may have been following the "austerity versus stimulus" debate in the Financial Times.

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.25%)

Sector Underperformers:

• 1) Education -2.26% 2) Gold -.31% 3) Computer Services -.15%

Stocks Falling on Unusual Volume:

• RDY and DV
  

Stocks With Unusual Put Option Activity:

• 1) MNTA 2) GENZ 3) RMBS 4) NETL 5) CHRW
  

Stocks With Most Negative News Mentions:

• 1) LO 2) PEP 3) GS 4) KO 5) SAFM
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.53%)

Sector Outperformers:

• 1) Biotech +2.69% 2) Hospitals +2.30% 3) Gaming +2.15%

Stocks Rising on Unusual Volume:

• ONXX, MNTA, AIG, OLN, AIXG, APL, RES, MTL, MXWL, IDSA, GENZ, CYOU, CALM, AONE, RNST, DXPE, SOHU, BIIB, MELI, RMBS, BEAV, AAWW, ACOR, ALGN, TSTC, GIII, MSB, KRO, IBB, ROP, MFW, BEC, ACV, PSO, PIQ and SHS
  

Stocks With Unusual Call Option Activity:

• 1) LPX 2) COH 3) PHM 4) GENZ 5) YRCW
  

Stocks With Most Positive News Mentions:

• 1) FDX 2) AAPL 3) RIMM 4) BA 5) GOOG