News of Note
US stocks are lower mid-day on continuing worries that higher interest rates and energy prices will slow economic growth. Taser International’s stock price has been halved, its sales hurt and its marketing and accounting programs subjected to scrutiny because of fears over the safety of stun-guns, the Wall Street Journal said. Yahoo! Inc. has acquired Canada’s Ludicorp Research & Development, developer of the photo-sharing Web site Flickr, the Wall Street Journal said. Jacques Barrot, the European Union’s transportation commissioner, said progress can be made toward an accord under which the US would allow foreign companies to buy stakes of more than 25% in the country’s airlines, La Tribune reported. Iraqi insurgents are attacking less frequently and in smaller numbers on central Baghdad’s Haifa Street in recent months, the NY Times reported. L-3 Communications Holdings is under federal criminal investigation after the company supplied defective parts for emergency pilot search radios, the Wall Street Journal reported. Google Inc., the world’s most-used Internet search engine, is being sued by Agence France Presse for allegedly including copyrighted material on Google’s search site, Reuters reported. UN Secretary General Annan’s proposals to expand the Security Council may help Germany obtain a permanent seat in the committee, which the US is seeking to prevent, Handelsblatt reported. Continental Airlines’ fare boost Friday of $10 on domestic round-trip fares is prompting rivals to push through a third increase within the month, the Wall Street Journal said. Executives at casino companies such as Harrah’s Entertainment, Boyd Gaming and Pinnacle Entertainment are nervous about a Louisiana proposal to raise the state’s gambling tax by half, to 32.5%, the Wall Street Journal reported. SunGuard Data Systems, whose software handles most Nasdaq Stock Market trades, may be acquired for $10 billion by an investment group headed by Silver Lake Partners, the NY Post reported. Advance Publications’ Jersey Journal newspaper is changing to a tabloid from broadsheet format as newspapers seek to find ways offset declining circulation and advertising revenue, the NY Times reported. Sony BMG Music Entertainment and other record labels are beginning to sell CDs in the DualDisc format that includes a DVD on the flip side, the first major new recording format since the CD was introduced more than 20 years ago, the Wall Street Journal reported. Ben Smith and Sheehan Maduraperuma left JP Morgan, where they traded equity derivative with the bank’s capital, to start a hedge fund, Derivatives Week said. General Motors needs new products, labor concessions and federal help containing health costs if Chief Executive Officer Wagnor is to halt the automaker’s decline, say corporate leaders, Bloomberg reported. Medicis Pharmaceutical Corp. agreed to buy cosmetic surgery device maker Inamed for $2.8 billion in stock and cash to add products including facial and breast implants, Bloomberg reported. Infineon Technologies agreed with Rambus to settle all patent claims made by the US company, Bloomberg said. Shares of Schering AG plunged the most in at least 15 years after the colon-cancer pill it was counting on for more than $1 billion in annual sales failed to stop the growth of tumors in a late-stage study, Bloomberg reported. Carnival Corp. said first-quarter profit rose 70% on higher prices and more demand for trips, Bloomberg said.

Morning Recommendations
- Goldman Sachs: Reiterated Outperform on BLS and DNA.
- Smith Barney: Downgraded NTAP to Sell, target $25.50. Reiterated Outperform on CNF, target $60. Added DUK to Recommended List, while removing MAY. JCP reiterated Buy on JCP, target $63. Reiterated Buy on AET, target $86. Reiterated Buy on WMT, target $65. Said to Buy Semi Equipment stocks on pullback, favorites are AMAT, LRCX, WFR and ATMI.
- JP Morgan: Raised BKS to Overweight, target $41, and added it to its Focus List. Raised SYNC to Overweight. Raised NUE to Overweight. Raised STLD to Overweight. Rated HORC Overweight.
- Piper Jaffray: Rated EMAG Outperform, target $19.
- Jeffries: Raised RSAS to Buy, target $18.50.
- Merrill Lynch: Raised GPS to Buy, target $26. Rated VCG to Buy, target $16.50.
- Legg Mason: Rated VCG Buy, target $16.50.
- CIBC: Raised ELOS to Sector Outperform, target $42.
- CSFB: Rated HLF Outperform, target $20.

Mid-day Report

Economy Today
No releases of note

Monday Watch

Weekend News
Cantor Fitzgerald LP, one of the two largest Treasury bond brokers, is in talks to buy a rival brokerage, the London-based Times said. The growth of wireless Internet access throughout the US is helping criminals hide their activities such as accessing child pornography and identity and credit card theft, the New York Times reported. A private retirement plan embraced as an alternative to Social Security in Galveston County, Texas, has been a boon to most public workers, the Washington Post reported. The top Marine in Iraq said the declining number of attacks against US troops in Sunni-dominated western Iraq indicates the insurgency is weakening, the NY Times reported. UN Secretary General Kofi Annan will present a plan on Monday to make the organization more effective and accountable, the LA Times reported. The Lytton Band of Pomo Indians shelved plans to build a Las Vegas-style casino in San Pablo, California, because of opposition from legislators, the San Francisco Chronicle reported. Aluminum Corp. of China is in talks with Yunnan Copper to buy the third-largest copper smelter in the country for at least $121 million, the Economic Observer reported. China's newest curbs on property loans are aimed at speculators, not ordinary citizens, China Central Television reported. Tim Draper, founder and managing director of venture capital firm Draper Fisher Jurvetson, has been investing in developers of peer-to-peer technology, which allows computers to communicate directly without a central system, the San Francisco Chronicle reported. Wal-Mart Stores plans to open stores in Bangkok, the Nation reported. India's economy will probably expand 6.7% next fiscal year, according to the IMF, the Business Standard reported. Barry Diller's IAC/InterActiveCorp is close to buying Ask Jeeves for about $2 billion in stock, the Wall Street Journal reported. Viacom's proposal to split the company into two separate units could double its cable networks' earnings multiple, the Financial Times reported, citing Chairman Redstone. India, China , Brazil and other developing nations urged rich countries to end all farm subsidies in five years, stepping up pressure on the US, Europe and Japan before key global trade talks in December, Bloomberg reported. Wal-Mart Stores said March sales are rising within its forecast as more shoppers in the Northeast bought food from its stores, Bloomberg said. President Bush said two years after the US liberated Iraq, the "Iraqi people are taking charge" of their own government and setting an example that is encouraging democracy in Lebanon and Iran, Bloomberg reported. A 6.4 magnitude earthquake jolted southwestern Japan, halting train services and shaking buildings, NHK Television reported. Bonds of Novartis AG, Europe's fourth-largest drugmaker, and Baxter International, the world's biggest maker of blood-disease treatments, are back in favor as investors shun risk after the worst week for European corporate debt since July 2003, Bloomberg said. Shares of Creative Technology, which competes with Apple Computer and Dell, are falling in Asia to a seven-month low on concern that rising competition and a shortage of parts may hurt the company's first-quarter earnings, Bloomberg reported. Michael Dell is preparing for expansion in India's PC market after the removal of import taxes that have made his company an also-ran in Asia's second-largest market, Bloomberg said. China's government plans to spend $777 million to cut emissions of sulfur dioxide from power plants, China Securities Journal said. US federal investigators are examining a memo to see what officials at Biogen Idec knew about the condition of two patients before the withdrawal of the drug Tysabri, the Wall Street Journal reported. Exxon Mobil and rivals such as Saudi Aramco and Total SA plan at least $11 billion of refinery additions as worldwide demand pushes gas prices to a record, Bloomberg said.

Weekend Recommendations
- Bulls and Bears: Had guests that were positive on SAH, TWX, VTIV, PTEN and mixed on SNE, CREAF, DEO, RCL, PLT, GM.
- Cavuto on Business: Had guests that were positive on DIS, BA and mixed on AIG, HPQ.
- Forbes on Fox: Had guests that were positive on BRK/B, MSFT, DELL and mixed on ECA, SBUX.
- Cashin' In: Had guests that were positive on STTS, IVX, JBLU, SWC, mixed on NLY and negative on GLW, EXTR.
- Business Week: Has a positive cover story on The Digital Hospital. Had a positive column on WDC, STX and EMC.
- Barron's: Had positive comments on LOGI. Had negative comments on Homebuilders AIG and GM.
- Goldman Sachs: Reiterated Outperform on NFX, ZION, EBAY, BAC, AET, BSX, WFC and AHC.

Night Trading
Asian indices are mixed, unch. to +.25% on average.
S&P 500 indicated -.03%.
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
CCL/.40
KBH/2.57
MLS/1.97
PAYX/.24
VTS/.33

Splits
BFAM 2-for-1
CWTR 3-for-2

Economic Data
None of note

BOTTOM LINE: I expect US stocks to open modestly higher in the morning on a bounce from last week's declines and a gain in the US dollar. The Portfolio is 25% net long heading into the week.

Weekly Outlook

There are a few important economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports for the week include:

Mon. - None of note
Tues. - Producer Price Index, FOMC Rate Decision
Wed. - Consumer Price Index, Existing Home Sales
Thur. - Durable Goods Orders, Initial Jobless Claims, New Home Sales
Fri. - Good Friday: All US markets closed

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - Carnival Corp.(CCL), KB Home(KBH), Paychex(PAYX)
Tues. - Biomet Inc.(BMET), Family Dollar Stores(FDO), General Mills(GIS), Lennar Corp.(LEN), Oracle Corp.(ORCL), Williams-Sonoma(WSM)
Wed. - Darden Restaurants(DRI)
Thur. - ConAgra Foods(CAG), Solectron Corp.(SLR)

Other events that have market-moving potential this week include:

Mon. - Morgan Stanley Global Automotive Conference
Tue. - Merrill Lynch Retailing and Household Products/Cosmetics Conference, Goldman Sachs Transportation Conference, Morgan Stanley Global Automotive Conference, Prudential Best Ideas Conference
Wed. - AMAT Analyst Meeting, Goldman Sachs Transportation Conference, Prudential Best Ideas Conference, Merrill Lynch Retailing and Household Products/Cosmetics Conference, Morgan Stanley Global Automotive Conference
Thur. - Merrill Lynch Retailing and Household Products/Cosmetics Conference

BOTTOM LINE: I expect US stocks to finish the holiday-shortened week modestly higher on an oversold bounce and relief rally after the Fed rate hike. Once again, the policy comments from the Fed are more important than the widely anticipated increase. The PPI will likely exceed estimates, however this should already be discounted by investors. The CPI will garner more attention and will likely meet estimates. Home sales could miss expectations, but should begin strengthening again this month. I expect the most oversold sectors such as Biotech, Internet and Networking to outperform this week. While an oversold rally is likely, weakness may resurface soon thereafter on slowing global growth and rising energy prices. I continue to expect the second half of the year to be much better for US stocks than the first half. My trading indicators are bearish and the Portfolio is 25% net long heading into the week.