Wednesday Watch

Late-Night Headlines
Bloomberg:
- Bill Gross said on CNBC that Federal Reserve Chairman Bernanke’s decision to say the central bank will “carefully monitor” the dollar was intended to stabilize the relationship between oil and the currency. Pimco is avoiding US government debt and is instead investing in bonds sold by “banks and investment banks that have come under the guarantee – quote, unquote – of the Fed’s discount window,” Gross said.
- Yahoo Inc.(YHOO) CEO Yang is facing increasing shareholder pressure to sell the Internet company he helped found or step aside.
- Moody’s Investors Service, S&P and Fitch Ratings are near an agreement with NY Attorney General Andrew Cuomo to end an investigation into the credit-rating companies’ role in the subprime-mortgage crisis.
- Trichet Foiled as European Consumers Reduce Spending, Except on Lipstick.
- New Zealand central bank Governor Alan Bollard may be pushing the economy into a recession by keeping interest rates at a record to fight inflation, ignoring factory closures and slumping consumer spending.
- Lehman Brothers(LEH) denied borrowing from the Federal Reserve today and said the firm’s cash holdings have increased.
- Barack Obama was poised to clinch the Democratic presidential nomination tonight as Hillary Clinton told colleagues she is open to running as the party’s vice presidential candidate.

Wall Street Journal:
- Is there an oil bubble that is about to burst? Some big voices on Wall Street think so, predicting the oil market could tilt sharply south soon if the US dollar strengthens and demand for crude oil weakens in some key consuming countries. Tightness on the supply side could also ease, they say, as some big refineries and new oil fields come onstream over the next few months and the outlook for the Chinese economy clouds over.
- China Restricts Protests And Media in Quake Zone.
- Lehman Brothers(LEH), facing a sharp decline in its stock that will make it more difficult to raise fresh capital, did an about-face and began using its own money to buy back its plummeting shares.

MarketWatch.com:
- The investment flood into commodity indexes bears eerie similarities to the craze for portfolio insurance that led to the stock-market crash of 1987, according to hedge fund investor George Soros, who warned that the rush into oil has created a “bubble.” “In both cases, the institutions are piling in on one side of the market and they have sufficient weight to unbalance it,” said Soros. “If the trend were reversed and the institutions as a group headed for the exit as they did in 1987, there would be a crash.” Traders took today’s moves by the CFTC, which will make it more difficult for financial investors to sidestep limits on speculation, as possibly curbing demand. “These kinds of dramatic moves” surprised traders, said Mike Zuzolo, senior analyst at brokerage Risk Management Commodities. “At first glance it looks like they’re targeting long-only index funds.”

CNBC.com:
- Dennis Gartman, of the Gartman Letter, thinks the CFTC will change the definition of “hedger”, which could send oil to $100 "so fast it will make your head spin." Gartman would be very careful about being outright long commodities. (video)

c/net:
- Shell station in LA to offer hydrogen.

NY Times:
- In Hiring, Europeans Go Global. As pressure grows on European businesses to go global, European companies are breaking down the glass ceiling that has long reserved their top spots for a local.

FinancialWeek:
- The SEC announced two new deputy enforcement directors on Tuesday, bolstering the division’s management as it grapples with subprime mortgage-related fraud and continues to crack down on insider trading. SEC Chairman Christopher Cox said the enforcement division is putting a special focus on subprime-related investigations, as well as illegal hedge fund activity and insider trading.

AM New York:
- Former President Carter said Tuesday he will endorse Democrat Barack Obama. “The fact is the Obama people already know they have my vote when the polls close tonight,” Carter said.

Reuters:
- With oil prices at historic highs, China is moving full steam ahead with a controversial process to turn its vast coal reserves into barrels of oil. Known as coal-to-liquid (CTL), the process is reviled by environmentalists who say it causes excessive greenhouse gases.
- The market for large leveraged buyouts, virtually stalled by a Wall Street credit crisis, may take a year or more to revive itself, but buyout executives said at a conference on Tuesday they are finding new strategies to deploy cash.
- McCain launches general election bid with eye on oil. “The next president must be willing to break completely with the energy policies not just of the Bush Administration, but the administration that preceded his, and lead a great national campaign to put us on a course to energy independence,” McCain said.

Financial Times:
- Lehman Brothers(LEH) lost $500 million to $700 million on certain hedging positions in the second quarter. The hedging failures will increase overall losses at the bank, which may lead to Lehman raising capital by selling a stake to an outside investor. Insiders said Lehman had opened talks with potential investors including asset managers and Asian banks.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AMAT), target $25.

Morgan Stanley:
- Reiterated Overweight on (ALTR), boosted estimates, target $26.

Night Trading
Asian Indices are -.50% to +.75% on average.
S&P 500 futures -.03%.
NASDAQ 100 futures +.01%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (WSM)/.01
- (MATK)/.25
- (ADCT)/.30
- (CMTL)/.56
- (BLUD)/.23
- (VIP)/.49

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Final 1Q Non-farm Productivity is estimated to rise 2.5% versus a prior estimate of a 2.2% increase.
- Final 1Q Unit Labor Costs are estimated to rise 2.0% versus prior estimates of a 2.2% gain.

10:00 am EST:
- The ISM Non-Manufacturing Composite for May is estimated to fall to 51.0 versus a reading of 52.0 in April.

10:30 am EST:
- Bloomberg consensus estimates call for a weekly crude oil inventory build of 400,000 barrels versus an 8,883,000 barrel decline the prior week. Gasoline supplies are expected to rise by 825,000 barrels versus a 3,258,000 decline the prior week. Distillate inventories are estimated to rise by 1,675,000 barrels versus a 1,641,000 barrel increase the prior week. Finally, Refinery Utilization is expected to rise by .50% versus a -.2% decline the prior week.

Other Potential Market Movers
- The Fed’s Lockhart speaking, (NFP) analyst meeting, (SPR) investor day, (BOBE) analyst meeting, ADP Employment Change report, Challenger Job Cuts report, weekly MBA mortgage applications report, Keefe Bruyette Woods Financial Services Conference, JPMorgan Basics/Industrials Conference, KeyBanc Transports Conference, Stephens Investment Conference, Oppenheimer Communications/Tech Conference and UBS Electronic Payments Summit could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.