Friday Watch

Late-Night Headlines
Bloomberg:
- Twenty-nine state attorneys general urged Anheuser-Busch Cos.(BUD) to warn buyers of its alcoholic drinks spiked with caffeine about the dangers of mixing the two drugs. They also said the “starter drinks” appeal to teenagers. Anheuser’s Tilt, Spykes and Bud Extra should have labels saying the drinks may make people feel less impaired than they really are, the officials said today in a letter to the company.
- CPC Corp., Taiwan’s state-owned refiner, plans to more than double oil and gas reserves in five years to shield the island against the rising cost of importing almost all its supplies of crude. Annual exploration spending will more than triple to $300 million within 3 years.
- Lead prices may fall as much as 41% this year as rising supply from China boosts stockpiles and demand growth slows, according to industry forecaster Beijing Antaike Information Development.
- Copper futures are falling in Shanghai for a second day as international prices continued to drop amid concern that demand from China may slow.
- Former Fed chairman Greenspan said he still sees about a one-third chance of a recession in the US economy this year. “My arithmetic says if there’s a one-third probability of a recession, then there’s a two-thirds probability there won’t be a recession,” he said. Greenspan said “asset-related” problems are more likely in Asia than a repeat of the 1997 financial crisis that depleted the region’s foreign-exchange reserves.
- China’s stock trading volume surged to $970 billion in the first quarter, up 580% from a year earlier, as more people opened trading accounts.

NY Times:
- Facebook Inc., the second-most popular social-networking site behind MySpace Inc., will begin posting free classified ads, citing founder Mark Zuckerberg.

Financial Times:
- As many as 35 Chinese companies are expected to list in the US this year, equal to the combined total for the past three years, citing Eric Landheer, Asia Pacific head for Nasdaq Stock Market(NDAQ).

Reuters:
- Valero Energy Corp.(VLO), the largest US refiner, reduced rates on a fluid catalytic cracking unit at its Delaware refinery because of a “problem with a boiler,” citing state regulators. Rates were reduced to 55,000 barrels a day from 82,000 barrels a day. The Delaware refinery can process 210,000 barrels of oil a day. Low refinery utilization as a result of a rash of nationwide “outages” has been the main reason for the recent surge in gas prices.

Shanghai Securities News:
- China’s central bank sold about $14 billion of additional three-year bills to selected banks yesterday to absorb cash from the financial system. The sale of the additional bills, together with an increase in the required reserve ratio effective May 15, will remove almost 300 billion yuan from the banking system.

Dong-a Ilbo:
- The US government is prepared to announce an end to the Korean War, formally ending hostilities with North Korea, by September, before the Asia-Pacific Economic Cooperation summit. The US is also prepared to establish ties with North Korea, if the country acts to end its nuclear program.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MGA), target raised to $100.
- Reiterated Buy on (FLR), target raised to $126.
- Reiterated Buy on (URBN), target $30.

Business Week:
- Combinatorx Inc.(CRXX) shares are likely to rise because the company has many promising drugs in development.
- News Corp.’s(NWS/A) stock could reach $30 a share with a purchase of Dow Jones(DJ), citing Sarat Sethi, a partner at Douglas C. Lane & Assoc.

Night Trading
Asian Indices are -1.25% to -.75% on average.
S&P 500 indicated -.01%.
NASDAQ 100 indicated +.03%.

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Earnings of Note
Company/EPS Estimate
- (DRS)/1.00
- (PBY)/.05

Upcoming Splits
- (VIVO) 3-for-2

Economic Releases
8:30 am EST
- The Producer Price Index for April is estimated to rise .6% versus a 1.0% gain in March.
- The PPI Ex Food and Energy for April is estimated to rise .2% versus unch. in March.
- Advance Retail Sales for April are estimated to rise .4% versus a .7% gain in March.
- Retail Sales Less Autos for April are estimated to rise .5% versus a .8% gain in March.

10:00 am EST
- Business Inventories for March are estimated to rise .3% versus a .3% gain in February.

Other Potential Market Movers
- The Goldman Sachs Power/Utility Conference and Deutsche Bank Hospitality/Gaming Conference could also impact trading.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and technology stocks in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.