Wednesday Watch

Late-Night Headlines
Bloomberg:

- Citigroup Inc.(C) recommended buying shares of eight semiconductor stocks, including International Rectifier Corp.(IRF). Terence Whalen, an analyst at the NY-based bank, also gave “buy” ratings to Fairchild Semi(FCS), ON Semi(ONNN), Analog Devices(ADI), Silicon Labs(SLAB), Semtech(SMTC), Microchip Tech(MCHP) and Maxim Integrated Products(MXIM). Linear Tech(LLTC) and National Semi(NSM) were rated “hold,” while Intersil Corp.(ISIL) received a “sell.” “We know categorically that fundamentals are in a trough and, we believe, poised for some kind of rebound,” the San Francisco-based analyst wrote.

- EBay Inc.(EBAY), the most-visited U.S. e-commerce site, is planning an initial public offering for its Skype Internet-calling unit, which the company bought in 2005 for $2.6 billion. The IPO is slated for the first half of 2010, though the timing will depend on market conditions, the San Jose, California-based company said today in a statement.

- Foreign direct investment into China fell for a sixth month in March as investors cut spending amid the worst financial crisis since World War II. Investment dropped 9.5 percent to $8.4 billion from a year earlier, the commerce ministry said at a briefing in Beijing today. That compares with a 15.8 percent decline in February. For the first quarter, spending fell 20.6 percent to $21.8 billion.

- An Australian leading economic index fell in February to contract at the fastest annual pace since 1982. The index, a gauge of future economic growth, dropped 0.3 percent to 248.6 points from 249.4 in January, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index shrank at an annualized rate of 5.1 percent. Today’s report adds to signs the economy will slide into its first recession since 1991 as a global slump cuts demand for exports from the world’s biggest shipper of coal and iron ore. Central bank Governor Glenn Stevens cut the benchmark interest rate last week to a 49-year low of 3 percent to spur demand.

- China, the world’s second-largest oil user, may increase gasoline and diesel prices by the end of this month as crude prices gained, said CBI China Co., a commodities researcher. The state government may raise gasoline and diesel prices by between 300 yuan and 400 yuan a metric ton based on the new pricing formula, CBI said. China in December launched a fuel pricing mechanism that takes into account the crude price, taxes and an “appropriate profit” for refiners. China increased gasoline and diesel prices as much as 5% on March 25^th.

Wall Street Journal:

- Today American taxpayers in more than 300 locations in all 50 states will hold rallies -- dubbed "tea parties" -- to protest higher taxes and out-of-control government spending. There is no political party behind these rallies, no grand right-wing conspiracy, not even a 501(c) group like MoveOn.org. So who's behind the Tax Day tea parties? Ordinary folks who are using the power of the Internet to organize.

- AT&T(T) May be in Talks with Apple(AAPL) to Extend iPhone Pact.

- The Obama administration is seeking to help Pakistan raise $4 billion to $5 billion at an international aid conference in Tokyo Friday in a bid to stabilize the finances of the key counterterrorism ally. Washington's effort, however, is coming into conflict with Saudi Arabia, which is showing only muted interest in supporting Pakistani Prime Minister Asif Ali Zardari, according to people involved in the deliberations.

- Ben Bernanke became Federal Reserve chairman intent on making the central bank less personality-driven than it was under Alan Greenspan and Paul Volcker. But as he confronts an economic crisis that has pushed the Fed to shatter precedent and lend trillions of dollars, Mr. Bernanke is waging a public-relations offensive that casts him in the starring role.

- Union officials are embarking on what is likely to be a protracted fight with business over the programs that enable immigrants to enter the country for temporary work. On Tuesday, leaders of two rival labor federations announced a framework for overhauling the U.S. immigration system that includes setting up an independent commission to assess how many immigrants should be admitted to fill temporary and permanent jobs without displacing U.S. workers. The AFL-CIO and Change to Win propose that such a commission would analyze regional and industry needs to make recommendations to Congress on annual levels of employment visas. The unions argue that current visa levels are outdated and often keep immigrant workers in temporary status, with fewer benefits and job protections. Business groups say temporary-worker programs are effective and don't disadvantage workers.

- So Goldman Sachs(GS) now wants to repay its $10 billion in taxpayer capital, with its CFO even saying the Wall Street giant has a "duty" to do so now that it is once again turning a nice profit. Congratulations to Goldman on its desire to escape federal bondage. The question taxpayers might still ask, however, is whether Goldie is also willing to forswear a bailout when it next gets into trouble. Is it still "too big to fail"?

- With many REITs trading at distressed levels amid a continuing credit crunch, experts say the stage is being set for merger-and-acquisition plays, with stronger companies taking over weaker rivals.

MarketWatch.com:
- Thailand's local currency credit rating was lowered on Tuesday by Standard & Poor's Ratings Services, which said that the recent political turmoil in the Southeast Asian nation has dealt a significant blow to investor confidence.

NY Times:

- Three longtime media executives are building an automated system to allow newspapers and magazines to charge for online access, including an “all you can read” subscription that would allow access to multiple publications, the executives said on Tuesday. Their company, Journalism Online L.L.C., aims to supply publishers with ready-made tools to charge Internet fees, an idea that has gained currency as advertising revenue plummets, but whose prospects of success are doubted by many media analysts.

- The Obama administration is drawing up plans to disclose the conditions of the 19 biggest banks in the country, according to senior administration officials, as it tries to restore confidence in the financial system without unnerving investors. The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest. While all of the banks are expected to pass the tests, some are expected to be graded more highly than others.

- Eager to escape the long arm of government, Goldman Sachs(GS) is preparing to return $10 billion in taxpayer funds as fast as the ink can dry on the check. But the bank, and a number of others, is quietly holding on to other forms of public support that come with virtually no strings attached. The program has allowed Goldman to issue $28 billion in debt over the last six months. The debt totals more than $40 billion each for Bank of America and JPMorgan Chase, and $23 billion for Morgan Stanley. The F.D.I.C. program does not come with the compensation and other regulatory conditions attached by Congress to the $700 billion bailout, but it charges the banks a small fee.

Business Week:
- Taxing Grandma to Subsidize Goldman Sachs(GS).

- In IBM's(IBM) biggest foray in business consulting since it acquired PricewaterhouseCoopers Consulting in 2002, the company announced on Apr. 14 that it is setting up a 4,000-person organization focused on helping corporations analyze data better and make smarter decisions. The consultants will mine IBM's research and software divisions for innovations. They'll also incorporate products from other companies.

IDDmagazine.com:

- An affiliate of Ellington Fund Management, an Old Greenwich, Conn.-based hedge fund specializing in mortgage bond investments and collateralized debt obligations, plans to go public, the company said in a statement on Tuesday.

Forbes.com:

- Wall Street’s 10 Favorite Senators.

CNNMoney.com:

- The great electric car race.

Reuters:

- CSX Corp (CSX), the No. 3 U.S. railroad, on Tuesday posted a better-than-expected quarterly net profit, sending its stock up 7 percent as it took steps to cut costs and keep prices steady amid a steep drop in freight volumes due to the recession. In after-market trade, CSX shares were up 7.2 percent at $30.60 from their official closing price on the New York Stock Exchange at $28.39.

- Intel Corp(INTC) beat quarterly expectations and declared the worst was over for a battered tech sector, but its shares slid 5 percent after it said economic uncertainty ruled out a clear revenue forecast. The world's top chipmaker said on Tuesday personal computer sales hit a trough in the first quarter but there was still too much market and economic turbulence to allow a precise projection for the second quarter.

- U.S. Interior Secretary Ken Salazar heard hours of Alaskans' opinions about drilling for oil and gas off their state's shores and came away on Tuesday promising a plan to allow development while accounting for environmental risks.

- Defense Secretary Robert Gates said on Tuesday the Pentagon will have a "robust" buy of Lockheed Martin Corp's (LMT) workhorse C-130J transport airplane, the longest-running military aircraft production program.

Financial Times:
- US car parts suppliers are set to ask for more government aid, including incentives to encourage fresh private equity investment in the beleaguered sector. Suppliers also want access to the Treasury department’s term asset-backed securities loan facility (Talf) and similar loans provided by the Small Business Administration. The Treasury last month approved as much as $5bn in government-backed credit insurance for suppliers to General Motors(GM) and Chrysler, the two carmakers being kept afloat by Washington. Suppliers can raise cash by selling receivables to the scheme at a discount. But Neil De Koker, president of the Original Equipment Suppliers Association, said: “There isn’t enough money in the programme to take care of all the suppliers. Many, many suppliers are still desperate.” The association’s members were considering asking for “a small percentage” of government backing for private equity deals, although “we haven’t quite figured out how to do that yet”, Mr De Koker said.

TimesOnline:

- Royal Dutch Shell is in talks with a number of Chinese companies about a possible joint effort to develop Iraqi oilfields. Jeroen van der Veer, chief executive of the Anglo-Dutch group, said yesterday: “We are in the process of forming partnerships for certain bids, and Chinese companies are a part of that.” If signed, a tie-up with Shell would represent China's second big effort to develop Iraq's vast reserves of oil, which, at 115billion barrels, stand as the world's third-largest pool after Saudi Arabia and Iran. CNPC became the first foreign company to sign a significant oil deal with the Iraqi Government after the toppling of Saddam Hussein in 2003, when it signed a $3billion agreement to develop the al-Ahdab field.

Telegraph:
- Pirates have attacked a US-flagged cargo ship off the coast of Somalia with rockets and automatic weapons, but failed to board the craft. The crew of the Liberty Sun was unharmed, but the vessel suffered some damage, according to a statement from Liberty Maritime Corp, which is registered in New York. The ship immediately requested help from the US Navy and was now under escort, the statement said.

21^st Century Business Herald:

- Wal-Mart Stores(WMT) may layoff 1,500 to 2,000 workers in China to cut costs after the company’s expansion in the Asian nation failed to meet expectations. The layoffs may be in the provinces of Guangdong, Hunan, Hubei, Sichuan and Jiangxi and in the municipalities of Beijing and Chongqing, it said.

Asahi:

- Japan’s government may forecast the country’s gross domestic product to contract by as much as 3% for the year that began April 1. The economy will probably contract even after taking into account the effect of the government’s $151 billion economic stimulus plan.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.50% to unch. on average.
S&P 500 futures -.64%.
NASDAQ 100 futures -1.21%.

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Earnings of Note
Company/EPS Estimate
- (ABT)/.70

- (PJC)/-.23

- (PGR)/.43

- (PLCM)/.26

- (CCK)/.22

- (KMP)/.34

- (SCHW)/.16

- (ADTN)/.22

- (AMR)/1.62

- (BTU)/.93

Economic Releases

8:30 am EST

- The Consumer Price Index for March is estimated to rise .1% versus a .4% gain in February.

- The CPI Ex Food & Energy for March is estimated to rise .1% versus a .2% gain in February.

- Empire Manufacturing for April is estimated to rise to -35.0 versus -38.23 in March.

9:00 am EST

- Net Long-term TIC Flows for February are estimated to rise to $14.0B versus -$43.0B in January.

9:15 am EST

- Industrial Production for March is estimated to fall .9% versus a 1.5% decline in February.

- Capacity Utilization for March is estimated to fall to 69.6% versus 70.2% in February.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,750,000 barrels versus a +1,645,000 barrel increase the prior week. Gasoline supplies are expected to fall by -500,000 barrels versus a +656,000 barrel increase the prior week. Distillate inventories are estimated to fall by -1,000,000 barrels versus a -3,354,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise .1% versus a .11% increase the prior week.

1:00 pm EST

- The NAHB Housing Market Index for April is estimated to rise to 10.0 versus a reading of 9.0 in March.

2:00 pm EST

- The Fed’s Beige Book.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly MBA mortgage applications report, (OMX) shareholders meeting, (UBS) annual meeting, (RTP) annual meeting, (BRCD) shareholders meeting, (SHW) shareholders meeting, (FFH) shareholders meeting, (LEN) shareholders meeting, (CBSH) shareholders meeting and the (SON) annual meeting could also impact trading today.

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