Morning Update

"Hold fast to dreams, for if dreams die, life is a broken-winged bird that cannot fly." - Langston Hughes

Morning News of Note:

• MWD: Morgan Stanley to Cut 10% of Its Broker Force Morgan Stanley, which has been struggling to increase the size and productivity of its brokerage force, has pulled back its horns and plans to eliminate about 10% of its brokers. In a memo from acting president Zoe Cruz to employees Thursday, Morgan Stanley said it will slash about 1,000 of its lowest-producing brokers from its force of about 10,000 over the next few months. It (Full Story) WSJ
• MSFT: Microsoft Plans To Step Up Pace Of Acquisitions Microsoft Corp. will find growth from a broad range of new products over the next two years while increasing its pace of acquisitions, company executives told a meeting of Wall Street analysts. The company also is bullish on the growth potential of software services that are delivered over the Internet, said Microsoft Chief Executive Steve Ballmer in a presentation at Microsoft's annual meeting with financial analysts. Those services, which would include Internet search and security capabilities Microsoft gained through its recent acquisition of FrontBridge Technologies Inc., are a "job-one priority" at Microsoft, he said. (Full Story) WSJ
• GDP Growth: U.S. Economy Grew at 3.4% Pace in 2nd Qtr The U.S. economy grew at a 3.4 percent annual pace from April through June, the ninth straight quarter in excess of 3 percent, as consumers didn't let record gasoline prices stop them from buying more cars and clothes, economists said before a government report today. The forecast for gross domestic product, the sum of all goods and services produced in the U.S., is based on the median estimate of 66 economists in a Bloomberg News survey. (Full Story) Bloomberg
• XMSR SIRI: XM, Still One Step Ahead of Sirius Rivals Vie for Audience's Divided Attention Until recently, XM Satellite Radio Holdings Inc. and its rival Sirius Satellite Radio Inc. were engaged in a tit-for-tat, deal-for-deal face-off. Sirius landed the NFL; XM responded with baseball. XM signed an exclusive deal with General Motors Corp.; Sirius partnered with DaimlerChrysler AG. XM scored former NPR Morning Edition host Bob Edwards; Sirius lured away shock jock Howard Stern from terrestrial radio giant Infinity Broadcasting. (Full Story) Washington Post
• OVEN SBUX: TurboChef-OVEN speed cooking becoming popular-Business Week: OVEN is a maker of high-speed, cook-to-order ovens that are already in use at 20,000 Subway restaurants. SBUX is also testing them at 100 locations. "It is very possible that SBUX and other major chains will sign up for the OVEN ovens," says Robert Stovall, managing director at Wood Asset Management. Also, OVEN will be releasing speed ovens for the home next year. The U.S. potential home market is estimated at $6B, while the commercial market is estimated at $1.5B.

Market Comments: The market is relatively flat in early trading, after another strong day yesterday. This market sure is like the Energizer bunny, isn't it?

GDP came in this morning at +3.4% (vs. 3.5% consensus), and the Chicago PMI was much stronger at 63.5 (vs. 55.0 consensus). So the economy is doing well, and manufacturing may be rebounding from the soft patch earlier this year. Slowing money supply growth, higher interest rates, and a flattening yield curve have me thinking economic growth will slow soon. But I have yet to see any real signs of it.

long MSFT, OVEN