Mid-day Report

Indices
S&P 500 1,208.43 +.40%
Dow 10,810.87 +.42%
NASDAQ 2,063.49 +.57%
Russell 2000 637.02 +.47%
DJ Wilshire 5000 11,914.71 +.46%
S&P Barra Growth 582.20 +.38%
S&P Barra Value 622.91 +.60%
Morgan Stanley Consumer 589.18 +.67%
Morgan Stanley Cyclical 773.69 +.23%
Morgan Stanley Technology 475.09 +.42%
Transports 3,757.05 +.42%
Utilities 353.03 +.04%
Put/Call .89 +30.88%
NYSE Arms .91 -36.81%
Volatility(VIX) 12.01 -.58%
ISE Sentiment 134.00 -33.66%
US Dollar 82.82 +.38%
CRB 305.51 +.17%

Futures Spot Prices
Crude Oil 51.60 -.29%
Unleaded Gasoline 139.50 -1.19%
Natural Gas 6.66 -.97%
Heating Oil 145.90 +.33%
Gold 433.70 -.91%
Base Metals 128.00 -.23%
Copper 146.40 -2.30%
10-year US Treasury Yield 4.36% -.32%

Leading Sectors
Airlines +3.49%
Retail +2.06%
Semis +1.34%

Lagging Sectors
Iron/Steel -1.76%
Energy -2.05%
Oil Service -2.32%

Market Movers
BIIB +4.0% on rebound after yesterday’s decline and Smith Barney upgrade to Buy.
OVTI -15.5% after beating 3Q estimates, raising 4Q eps guidance, lowering 4Q revenue outlook and Jefferies downgrade to Hold.
PSS +17.83% after beating 4Q estimates and reporting strong February same-store-sales.
ESLR +14.38% after beating 4Q estimates and California Governor Schwarzenegger said he would support a bill that provides funding for 1 million solar roofs in the state.
NETL +11.48% after saying that its NL5000 processors are shipping in production volume in the Extreme Networks’ BlackDiamond 10K core switch.
UVN +12.7% after beating 4Q estimates and maintaining 1Q outlook.
COGT +11.74% after announcing new follow-on contracts from the Italian National Police and Los Angeles County Sheriff’s Department.
FD +6.02% on multiple upgrades.
BJ +8.7% after beating 4Q estimates.
NTES +4.04% on positive comments from Piper Jaffray Conference.
SPW +4.27% on Merrill Lynch upgrade to Buy.
INCX -37.0% after meeting 4Q estimates and lowering 1Q outlook substantially.
MSA -16.98% after missing 4Q estimates and multiple downgrades.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Construction Spending for January rose .7% versus estimates of a .4% increase and a 1.2% rise in December.
- ISM Manufacturing for February fell to 55.3 versus estimates of 56.9 and a reading of 56.4 in January.
- ISM Prices Paid for February fell to 65.5 versus estimates of 68.0 and a reading of 69.0 in January.

Recommendations
- Goldman Sachs: Reiterated Outperform on DEX and USB. Reiterated Underperform on MMC.
- Smith Barney: Said the market has overreacted to the BIIB/ELN news. Upgraded BIIB to Buy, target $49. Upgraded SONS to Buy, target $7.10. Reiterated Buy on NT, target $4. Reiterated Buy on SCH, target $14.50. Reiterated Buy on FD, target $80. Reiterated Buy on CD, target $28. Reiterated Buy on MGA, target $95. Reiterated Buy on PLUG, HYGS and Sell on FCEL, BLDP.
- Prudential: Rated SAPE Overweight, target $11.
- Oppenheimer: Raised ECA to Sector Outperform, target $82.
- JP Morgan: Raised CY, ONNN, INTC and FCS to Overweight. Rated OPEN Overweight.
- Deutsche Bank: Downgraded PCU to Sell, target $47. Raised FD to Buy, target $68. Rated SHO to Buy, target $24.
- Bear Stearns: Rated GENZ Outperform, target $65. Raised FD to Outperform.
- UBS: Raised XMSR to Buy, target $40.50. Raised SIRI to Buy, target $6.75.
- CSFB: Rated GWR Outperform, target $30.
- Merrill Lynch: Raised JNJ to Buy, target $75. Raised SPW to Buy, target $55.

Mid-day News
US stocks are higher mid-day as reports showed a measure of inflation declined and construction gained steam. US shopping mall developers are planning to have fewer department stores per mall, as sales have fallen in recent years, the NY Times reported. Toys “R” Us has shortlisted four potential bidders for its retail business and is asking them to raise their offers, the Wall Street Journal reported. JP Morgan will announce today that it’s spinning off its private-equity unit into an independent arm, the Wall Street Journal reported. Federated Department Stores’ $11 billion acquisition of May Department Stores will probably reduce advertising revenue at US newspapers, the Wall Street Journal reported. The FDA’s procedure for approving promising treatments for serious conditions quickly is under review, the Wall Street Journal said. US shopping malls are using discounters such as Target and Wal-Mart, or high-end retailers, as anchors to replace traditional department stores, the Wall Street Journal reported. E*Trade Financial plans to give clients with $50,000 or more in assets or that make 15 trades per quarter a second layer of security when accessing their accounts, the Wall Street Journal reported. Life expectancy of men and women in the US has risen to a record 77.6 years in 2003, as death rates from the most common illnesses such as heart disease and cancer declined as medical technology improved, the National Center for Health Statistics reported. News Corp.’s Fox television network probably had the highest number of viewers for primetime programming in February, the Wall Street Journal said. Time Warner’s CNN has agreed to air commercials for Grey Goose vodka, making it the first national cable news channel to advertise for liquor, the NY Times reported. Hollywood’s two big acting unions approved a new contract that calls for a raise of 9% over three years, the LA Times reported. Biogen Idec’s board approved $4.6 million in bonuses and some officials sold stock before providing the FDA with information of a death related to its Tysabri drug, Reuters reported. French President Chirac’s approval rating fell by 3 percentage points to 45% in February, the Liberation reported. Israel’s plan to withdraw from the Gaza Strip is boosting investment and tourism that may push 2005 economic growth as high as 6%, Bloomberg reported. Exxon Mobil plans to sell its stake in China Petroleum & Chemical for as much as $1.4 billion, twice the investment cost four years ago, Bloomberg said. Toyota Motor is introducing today its first Lexus luxury car equipped with a diesel engine to capture sales in the fastest growing segment of the European car market, Bloomberg reported. Brazil’s economy grew 4.9% in the fourth quarter, capping the strongest annual expansion in a decade, Bloomberg reported. IAC/InterActiveCorp agreed to buy Cornerstone Brands for $720 million to expand its catalog and Internet retail offerings, Bloomberg said. Trading at the Chicago Mercantile Exchange rose 50% form a year earlier to a daily record last month as the biggest US futures market handled more interest-rate futures contracts, Bloomberg reported. US construction spending rose .7% in January to a record as residential, commercial and public building increased, Bloomberg said. Manufacturers said business cooled in February for the third straight month, Bloomberg reported. US corporate leaders plan to invest more in new plants and equipment as confidence in the economy rises to the highest level in at least two years, a survey of CEOs found. Intel will outline plans today to speed up work on new processors and convince customers the company has recovered from delays that hurt sales last year, Bloomberg reported. Fidelity Investments said it made permanent expense reductions on six US stock index funds in a continued bid to undercut competitors’ prices, Bloomberg said. Ford Motor said US sales of cars and trucks fell 2.9% in February, while DaimlerChrysler said sales rose 5.5%, Bloomberg said. Iran refused to let UN inspectors make another visit to a military base that the US says is being used in nuclear weapons research, the IAEA said. US steel prices may fall this year because distributors of the metal bought more than they need from producers including Nucor and US Steel, traders and executives said. The euro is falling the most in a week against the US dollar as German unemployment rose to a post WWII high, Bloomberg reported.

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my biotechnology, alternative energy and semi longs. I have not traded today, thus the Portfolio’s market exposure remains 50% net long. The tone of the market is modestly positive today as the advance/decline line is higher, almost ever sector is gaining and volume is decent. Losses are almost completely confined to commodity-related shares, which is a positive. Measures of investor anxiety are mixed. I continue to expect alternative energy stocks to outperform on multiple catalysts. As well, semi and retail should strengthen through week’s end on positive commentary from conferences and stronger-than-expected economic reports. I expect US stocks to trade mixed-to-higher from current levels into the close as optimism over US economic growth and stabilizing long-term interest rates mostly offsets worries over stubbornly high energy prices.

Tuesday Watch

Late-Night News
Asian indices are mixed as weakness in Hong Kong is being offset by strength in Taiwanese shares. Taiwan Semiconductor Manufacturing's factory use will exceed 80% in the second quarter because customers have eliminated excess inventory, the Commercial Times reported. US Deputy Defense Secretary Paul Wolfowitz is among the leading candidates to succeed James Wolfensohn as president of the World Banks, the Financial Times reported. Three men convicted of the 1993 bombing of the World Trade Center in NYC have sent letters out of prison praising Osama bin Laden and encouraging other terrorists, MSNBC reported. Cablevision Systems will close the Voom satellite-tv business after talks to sell the unit to company Chairman Charles Dolan failed, Bloomberg reported. Palestinians want to win support today from international leaders, including the "Quartet" of the UN, European Union, US and Russia at talks in London on building institutions in the occupied territories, Bloomberg reported. OPEC is producing enough oil to meet higher-than-expected demand in the first quarter, acting Secretary-General Adnan Shihab-Eldin said two weeks before the group meets to debate calls for increased output to stem prices that are above $50/bbl. in NY, Bloomberg reported. OPEC won't consider cutting production at the meeting, Bloomberg said. The euro weakened by the most in a week against the US dollar in Asia on expectations reports today will show German unemployment rose to a post WWII high and US manufacturing growth accelerated in February, Bloomberg said. Residents in the northeastern US were hit with another round of winter weather overnight as heavy snow and strong winds combined to create almost "white-out" conditions in parts of New England, Bloomberg reported. According to Nielsen Media Research, 2 million fewer people watched this year's Academy Awards, hosted by controversial comedian Chris Rock, compared to last year's, the Boston Globe reported. DaimlerChrysler AG's Chrysler unit and GM's Cadillac division are preparing to expand sales of their American brands in Europe, the Wall Street Journal reported. Google and Yahoo! are pursuing different strategies to attract more online advertising, the Wall Street Journal reported.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on RIG, BHI and PETC.

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.03%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
BJ/.71
CDIS/.63
FL/.54
HSIC/.85
MMC/-.60
PSUN/.53
SMTC/.16
SFD/.87
SBL/.10
WIND/.05

Splits
HSIC 2-for-1

Economic Data
- Construction Spending for January is estimated to rise .4% versus a 1.1% gain in December.
- ISM Manufacturing for February is estimated to rise to 56.9 versus a reading of 56.4 in January.
- ISM Prices Paid for February is estimated to fall to 67.0 versus a reading of 69.0 in January.
- Total Vehicle Sales for February are estimated to rise to 16.6M versus 16.2M in January.
- Domestic Vehicle Sales for February are estimated to rise to 13.4M versus 13.0M in January.

BOTTOM LINE: I expect US equities to open modestly lower on a further rise in long-term interest rates. However, stocks may gain later in the day on optimism over good earnings/economic reports and a decline in energy prices. The Portfolio is 50% net long heading into tomorrow.

Monday Close

Indices
S&P 500 1,203.60 -.64%
Dow 10,766.23 -.70%
NASDAQ 2,051.72 -.66%
Russell 2000 634.06 -.54%
DJ Wilshire 5000 11,859.80 -.61%
S&P Barra Growth 579.99 -.47%
S&P Barra Value 619.17 -.82%
Morgan Stanley Consumer 585.28 -.38%
Morgan Stanley Cyclical 771.85 -.61%
Morgan Stanley Technology 473.04 -.07%
Transports 3,726.65 +.31%
Utilities 352.89 -.89%
Put/Call .68 -18.07%
NYSE Arms 1.44 +77.78%
Volatility(VIX) 12.08 +5.13%
ISE Sentiment 202.00 +39.31%
US Dollar 82.51 -.18%
CRB 305.00 +1.59%

Futures Spot Prices
Crude Oil 51.81 +.12%
Unleaded Gasoline 124.56 unch.
Natural Gas 6.72 -.21%
Heating Oil 149.14 unch.
Gold 436.70 -.21%
Base Metals 128.29 +1.20%
Copper 149.30 -.37%
10-year US Treasury Yield 4.38% +2.64%

Leading Sectors
Computer Hardware +1.40%
Internet +.55%
Computer Service +.40%

Lagging Sectors
Airlines -1.56%
Homebuilders -1.59%
Biotech -4.32%

After-hours Movers
OVTI -9.45% after beating 3Q estimates, raising 4Q eps guidance and lowering 4Q revenue outlook.
LTON +11.59% after beating 4Q estimates and raising 1Q guidance.
ADIC +4.69% after reporting a director purchased an additional 250,000 shares on 2/24/05.
CAL +3.93% after reaching agreements on about $330 million in pay and other reductions with unions for pilots, attendants, mechanics and dispatchers.
INCX -35.48% after meeting 4Q estimates and lowering 1Q outlook substantially.
FNLY -5.47% on continuing worries over Federated/May merger.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Outperform on XOM and LIZ.
- Raymond James: Reiterated Strong Buy on WGR, target $45. Reiterated Strong Buy on RDC, target $42.
- Morgan Stanley: Upgraded JTX to Overweight.
- CIBC: Upgraded XMSR to Sector Outperform, target $55.

After-hours News
US stocks finished lower today on worries over higher interest rates and weakness in the biotechnology sector. The US Dept. of Homeland Security has notified state and local law enforcement about a “credible” threat of terrorist operations outside of Iraq, Bloomberg reported. Johnson & Johnson CEO Weldon told CNBC that it’s “very important” for the US to set up post-marketing drug surveillance. HJ Heinz, the world’s largest ketchup maker, said third-quarter sales rose the most in two years, led by gains in North America, Bloomberg reported. Univision Communications, the largest US Spanish-language tv and radio broadcaster, said fourth-quarter profit rose 14% as its TeleFutura network boosted audience ratings and advertising sales, Bloomberg reported. Biogen Idec’s suspension of its Tysabri multiple sclerosis drug today after a patient died represents a setback to about 5,000 others who were taking it and many more who hoped the treatment would ease their symptoms, Bloomberg reported. A federal judge in South Carolina said the US must charge or free Jose Padilla, a US citizen held as an enemy combatant since his arrest in 2002 on suspicion he plotted to explode a radioactive “dirty bomb” in the US, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my homebuilding, semi and pharmaceutical longs. I exited a homebuilder long in the afternoon and added BIIB long, thus leaving the Portfolio 50% net long. I am using a $35.75 stop-loss on this new position. The tone of the market improved modestly into the afternoon as the advance/decline line rose, several more sectors registered gains and volume remained healthy. Measures of investor anxiety were mixed on the day and technology shares outperformed. Finally, the CRB Index made another new high today, which is a negative. I am not worried about a significant correction in housing stocks at this point. The weakness in New Home Sales is likely the result of the extraordinarily wet weather most of the country is seeing this winter. However, these shares will likely remain under pressure near-term on rising long-term interest rates.

Mid-day Report

Indices
S&P 500 1,200.49 -.90%
Dow 10,750.05 -.84%
NASDAQ 2,041.83 -1.14%
Russell 2000 629.58 -1.25%
DJ Wilshire 5000 11,821.06 –.94%
S&P Barra Growth 578.96 -.64%
S&P Barra Value 616.80 -1.20%
Morgan Stanley Consumer 584.18 -.58%
Morgan Stanley Cyclical 768.45 -1.05%
Morgan Stanley Technology 471.26 -.44%
Transports 3,722.82 +.21%
Utilities 352.13 -1.11%
Put/Call .67 -19.28%
NYSE Arms 1.98 +144.44%
Volatility(VIX) 12.31 +7.31%
ISE Sentiment 213.00 +46.90%
US Dollar 82.44 -.28%
CRB 304.40 +1.38%

Futures Spot Prices
Crude Oil 51.58 +.17%
Unleaded Gasoline 121.60 -3.07%
Natural Gas 6.69 -.37%
Heating Oil 149.50 +2.81%
Gold 437.50 +.32%
Base Metals 128.29 +1.20%
Copper 149.80 +.81%
10-year US Treasury Yield 4.37% +2.60%

Leading Sectors
Computer Hardware +.07%
Foods +.07%
Computer Services -.02%

Lagging Sectors
Airlines -2.22%
Homebuilders -2.36%
Biotech -4.90%

Market Movers
BIIB -44.4% after it and Irish partner Elan Corp.(ELN) suspended sales of the MS drug Tysabri after one death was reported. ELN -65.8%.
RETK +40.33% after announcing SAP AG agreed to buy it for about $496M.
TEVA +6.56% on BIIB/ELN news.
USFC +24.0% after Yellow Roadway(YELL) agreed to buy it for about $1.37B. YELL -4.0%.
PACT +36.0% after raising 4Q revenue guidance.
SRA +18.1% on BIIB/ELN news.
JDAS +14.2% on RETK news.
XMSR +10.3% after saying it will raised the price of its basic subscription package to $12.95/month, include the Internet service XM Radio Online and SunTrust upgrade to Buy.
BBY +4.68% on JP Morgan upgrade to Overweight.
BDY -27.2% after saying the SEC started an informal inquiry into possible violations of securities laws.
VLO -6.0% on profit-taking.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Personal Income for January fell 2.3% versus estimates of a 2.6% fall and a 3.7% increase in December.
- Personal Spending for January was unchanged versus estimates of a .1% increase and a .8% gain in December.
- The PCE Deflator for January rose 2.2% versus estimates of a 2.2% rise and a 2.4% increase in December.
- The PCE Core for January rose 1.6% versus estimates of a 1.5% increase and a 1.5% gain in December.
- New Home Sales for January fell to 1106K versus estimates of 1125K and an upwardly revised 1218K in December.
- Chicago Purchasing Manager for February rose to 62.7 versus estimates of 60.5 and a reading of 62.4 in January.

Recommendations
- Goldman Sachs: Reiterated Outperform on MDT, CSCO, LVS and TMK.
- Smith Barney: Said Asia Handset Tour indicated order acceleration ahead, favorite beneficiaries are NSM, MCRL, ADI and SMTC. Said soft-line retailers positioned to post the best February same store sales increases include ANF, AEOS, PLCE and TJX. Said hard-line retailers AZO and BBW experienced better-than-expected comp trends in February. Said within their coverage universe, NMGA and SKS face the most difficult comps vs. last year while MAY and WMT face the easiest. Reiterated Buy on PG and G, while reiterating Sell on CLX. Reiterated Buy on NOI, target $53. Reiterated Buy on WMT, target $65. Said BAC, WB and WFC should exceed quarterly estimates and FHN, MTB may be worse than expected.
- Banc of America: Cut F to Sell, target $10. Cut GM to Sell, target $27.
- JP Morgan: Raised BBY to Overweight. Cut MTA to Underweight. Raised HZO to Overweight.
- Morgan Stanley: Raised GP to Overweight, target $39.
- Oppenheimer: Downgraded DDS to Sell. Cut MAY to Sell.
- Legg Mason: Raised EEEE to Buy, target $16.50.
- Thomas Weisel: Raised TXN to Outperform.
- Merrill Lynch: Raised TCB to Buy, target $31.
- Bear Stearns: Cut BIIB to Underperform.
- CSFB: Downgraded DNR to Underperform, target $33. Cut POT to Underperform, target $79.
- Prudential: Raised STT to Overweight, target $49. Downgraded NOVL to Underweight, target $7.
- Deutsche Bank: Cut BIIB to Sell, target $38. Raised SLH to Buy, target $20.

Mid-day News
US stocks are lower mid-day on losses in the biotechnology sector and worries over higher long-term interest rates. Charter Communications’ fourth quarter earnings might not be as bad as some have feared, the Wall Street Journal reported. German Chancellor Schroeder called on the Saudi Arabian government to allow more democracy, Financial Times Deutschland reported. The new Palestinian leadership won’t tolerate attacks like the Feb. 25 bombing in Tel Aviv that killed at least 4 people and injured dozens, Palestinian Authority President Abbas told the Independent. Lebanese anger against Syria’s occupation of the country has exploded since a bombing killed former Prime Minister Hariri two weeks ago, the Wall Street Journal reported. ABN Amro NV, JP Morgan Chase and Goldman Sachs are among about a dozen investment banks competing for a contract to advise the Australian government how to sell its majority stake next year in Telstra, the Wall Street Journal reported. Pathmark Stores, which owns 142 supermarkets in the northeastern US, will probably be acquired by C&S Wholesale Grocers, New England’s biggest food wholesaler, the NY Post reported. Time Warner’s Money Magazine will revamp the April issue to increase its appeal among women and younger readers, the NY Times reported. BellSouth wants to boost revenue through wireless and broadband services, rather than join industry merger talks, the NY Times reported. Movielink, which is owned by five movie studios, and Blinkx, a search-engine provider, are working on a way to enable Internet surfers to buy or rent movies and television shows on the Web, the LA Times reported. Lebanese Prime Minister Karami announced the resignation of his Syrian-backed government today, the AP reported. A study of HIV-infected teens in San Francisco, Los Angeles, New York and Miami showed they were twice as likely to engage in risky sexual behavior as teens in similar research a decade ago, Bloomberg reported. Copper rose to a record in London on speculation demand may pick up after Japan, the world’s third-largest user of the metal, reported a bigger-than-expected increase in industrial production, Bloomberg reported. Mylan Labs, the generic drug maker that pursued a takeover of King Pharmaceuticals for six months, abandoned the proposed $4 billion transaction yesterday, Bloomberg said. Ericsson AB had its debt rating raised one level to so-called investment grade level by Standard & Poor’s Corp, Bloomberg reported. Biogen Idec and Elan said they’ve voluntarily suspended marketing their new MS drug Tysabri after one death was reported, Bloomberg said. The CRB Index is hitting a 24-year high as demand for raw materials remains strong from the US and China, Bloomberg reported. Chicago-area business expanded at an accelerated pace in February, Bloomberg said. US new home sales unexpectedly declined in January and the median price dropped to the lowest in a year, Bloomberg reported. US Treasury notes are falling after a government index on inflation rose the most in 2 years, Bloomberg said.

BOTTOM LINE: The Portfolio is lower mid-day on losses in my homebuilding, pharmaceutical and semi longs. I exited a number of longs as they hit stop losses this morning, thus bringing the Portfolio’s market exposure to 50% net long. The tone of the market is poor as the advance/decline line is weak, almost ever sector is declining and volume is stronger. Measures of investor anxiety are mixed. The rise in long-term rates will likely continue in the near-term as economic reports continue to exceed expectations. I expect US stocks to trade mixed-to-higher from current levels into the close as optimism over economic growth and short-covering mostly offsets worries over rising rates.

Monday Watch

Weekend News
US and European Union officials reacted with dismay to Saudi Arabia's forecast that oil prices will remain at between $40 and $50 a barrel for the rest of this year, the Financial Times reported. Egyptian President Mubarak will allow parliament to amend the constitution to allow direct presidential polls, AFP reported. European regulators oppose Microsoft's proposed changes to its Windows operating system, Intl. Herald Tribune reported. The "BTK" serial killer suspect arrested by Wichita, Kansas, police confessed to at least six murders, the AP reported. Iran's ability to enrich uranium is "non negotiable," Hassan Rohani, the country's chief negotiator told European officials on a trip last week, Agence France-Presse reported. Sabawi Ibrahim al-Hassan, a half-brother of ousted Iraqi dictator Saddam Hussein, has been arrested, Fox News reported. Electronic Data Systems is likely to win a $7.6 billion contract for the UK's Ministry of Defense, the Sunday Telegraph reported. Billionaire investor George Soros plans to invest $3.8 billion in the commercial property market in London, the Observer reported. Reuters Group Plc, which owns 62% of Instinet Group, may receive $1.3 billion from the sale of its stake in the US-based electronic brokerage and trading business, the Telegraph said. CIA officers are increasingly fearful of punishment in connection with their interrogations of suspected terrorists, the NY Times reported. Martha Stewart is expected to return to work at the company she founded on March 7 after her release from prison, the NY Times reported. Medical malpractice lawyers will be the next target in President Bush's efforts to curb litigation, the NY Times reported. At least 13 states have agreed to raise graduation requirements at US high schools to better prepare students for college and the workforce, the AP reported. China announced measures for capital flows across its boarders designed to stem gains in the yuan, the Financial Times reported. PepsiCo, maker of food brands Pepsi-Cola and Doritos chips, is setting voluntary limits to advertising aimed at children due to obesity levels in the US and western Europe, the Financial Times said. Shanghai Baosteel Group, China's largest steel producer, expect national growth in production of the metal to slow by half this year as mills focus on high-quality steel for shipbuilding and trim output of steel for construction, the Asian Wall Street Journal reported. Universal Music and Sony BMG are among music labels that may be in talks with online retailers to raise wholesale prices for digital music downloads in the wake of the success of Apple Computer's iTunes service, the Financial Times said. Wal-Mart Stores said February sales at US stores open at least a year rose about 4%, at the high end of estimates, as shoppers purchased more groceries, Bloomberg reported. President Bush said he will intensify his campaign to win public support for his plan to restructure Social Security, and he called on lawmakers to share ideas on improving the system, Bloomberg said. OPEC isn't likely to raise output when it meets in Iran next month, the Qatari oil minister said, even though crude in NY has pushed through $50/bbl. and demand forecasts for 2005 have been revised upwards, Bloomberg reported. The US National Weather Service expects a "significant nor-easter" to begin showering snow and sleet on the mid-Atlantic region tomorrow morning, Bloomberg said. Royal Dutch/Shell Group, Europe's second-largest oil company, signed a contract to build a $7 billion liquefied natural gas plant in Qatar as it seeks to profit from surging global demand for the fuel, Bloomberg said. European pharmaceutical stocks, the region's worst performers last quarter, are poised to rise on reduced speculation about an increase in acquisitions, Bloomberg reported. North Korea's government told South Korean officials the communist country is willing to return to international disarmament talks in June, the Sankei newspaper reported. Yellow Roadway, the biggest US trucker, agreed to buy No. 2 regional carrier USF Corp. for about $1.37 billion to add next-day regional transportation services, Bloomberg reported. Federated Department Stores agreed to buy May Department Stores for about $36/share and may announce the deal tomorrow morning, Bloomberg reported. Wynn Resorts Ltd. and MGM Mirage submitted bids to develop a resort in Singapore that may include the city-state's first casino, Bloomberg said. France's Areva SA, US-based Westinghouse Electric and Russia's AtomStroyExport will bid for contracts to build nuclear reactors in China, Bloomberg reported. Templeton Asset Management's Mark Mobius is betting corporate governance improvements in South Korea and political stability in Taiwan will help drive stock prices in those markets higher, Bloomberg reported. Qwest Communications would amend its latest offer for MCI if necessary, the Wall Street Journal reported. China should widen the yuan's trading band against the US dollar to 5% before shifting to a peg against a basket of currencies, China Business Post reported.

Weekend Recommendations
-Bulls and Bears: Had guests that were positive on MO, MON, UN, NVS, TMX, RIO, SYY, TWX, RL, CAG, mixed on MCD and negative on RGC, MSO.
-Cashin' In: Had guests that were mixed on GLG, DUK and negative on RHAT.
-Cavuto on Business: Had guests that were positive on FDX, HOC, TOL, RYL, WPPGY and negative on FNM.
-Barron's: Had positive comments on GYI, CVCO, GM bonds and energy stocks. Had negative comments on tech and banks.
-Goldman Sachs: Reiterated Outperform on AVP, PAYX, BSX, WAG, AMGN, DNA, CL and EBAY.

Night Trading
Asian Indices are higher, +.50% to +1.0% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.03%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
CTIC/-.53
DY/.18
HNZ/.59
MVSN/.26
OVTI/.27
TIF/.79
UVN/.20

Splits
- AAPL 2-for-1

Economic Data
- Personal Income for January is estimated to fall 2.6% versus a 3.7% increase in December.
- Personal Spending for January is estimated to rise .1% versus a .8% increase in December.
- The PCE Deflator for January is estimated to rise 2.2% versus a 2.4% gain in December.
- The PCE Core for January is estimated to rise 1.5% versus a 1.5% increase in December.
- New Home Sales for January are estimated to rise to 1125K versus 1098K in December.
- The Chicago Purchasing Manager for February is estimated at 60.2 versus a reading of 62.4 in January.

BOTTOM LINE: I expect US stocks to open modestly higher in the morning on optimism over merger activity, strong economic reports and gains in Asia. The Portfolio is 100% net long heading into the week.