Wednesday Watch

Late-Night Headlines
Bloomberg:
- Asian takeovers reached a record $119 billion in the first quarter, as Japan's Mitsubishi Tokyo Financial Group and UFJ Holdings announced plans to merge and form the world's biggest bank by assets.
- Crude oil is falling for a third day on speculation global stockpiles may rise because of increased output by the OPEC.

Washington Post:
- Wal-Mart Stores would be required to spend more on employee health care under legislation approved today my Maryland lawmakers.

AP:
- HealthSouth sued its former auditors, Ernst & Young LLP, for failing to detect a $2.7 billion accounting fraud.

Commercial Times:
- Taiwan central bank's US dollar assets rose after the bank bought the unit to stop the local currency's gain. US dollar assets now account for about 70% of the island's foreign-currency reserves, up from about 60% in the second half of last year.

Hong Kong Economic Journal:
- China's National Development and Reform Commission urged the central bank to raise interest rates to curb property prices.

Shanghai Daily:
- Prices for new apartments in Shanghai fell last month as government efforts to cool the property market start to take effect.

Economic Daily News:
- Taiwan Semiconductor Manufacturing and United Microelectronics are likely to see their March sales rise from February as demand for chips used in flat panel displays is climbing.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on GOOG, IBM, DKS and YHOO.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated +.07%.

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
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
AA/.39
BBBY/.55
BLUD/.14
CBK/.11
MON/1.28
NDC/.12
SCHN/1.00

Splits
None of note

Economic Releases
None of note

BOTTOM LINE: Asian indices are mostly higher as another decline in energy prices is boosting exporting shares in the region. I expect US equities to open mixed as optimism over lower energy prices offsets worries over Tech sector earnings. The Portfolio is 50% net long heading into tomorrow.

Tuesday Close

Indices
S&P 500 1,181.39 +.45%
DJIA 10,458.46 +.36%
NASDAQ 1,999.32 +.41%
Russell 2000 614.50 +.12%
DJ Wilshire 5000 11,644.49 +.40%
S&P Barra Growth 570.47 +.59%
S&P Barra Value 606.53 +.31%
Morgan Stanley Consumer 581.22 +1.0%
Morgan Stanley Cyclical 743.85 +.19%
Morgan Stanley Technology 453.99 -.04%
Transports 3,721.18 +.36%
Utilities 363.61 +.67%
Put/Call .86 -1.15%
NYSE Arms .86 -17.68%
Volatility(VIX) 13.68 -3.05%
ISE Sentiment 185.00 +11.45%
US Dollar 84.66 -.14%
CRB 308.77 -.43%

Futures Spot Prices
Crude Oil 55.76 -2.19%
Unleaded Gasoline 168.20 -2.30%
Natural Gas 7.56 -.45%
Heating Oil 161.80 -1.47%
Gold 427.20 +.14%
Base Metals 127.35 -.45%
Copper 148.25 -.13%
10-year US Treasury Yield 4.46% +.27%

Leading Sectors
Airlines +3.17%
Papers +2.66%
Drugs +2.31%

Lagging Sectors
Oil Service -.87%
Software -.92%
Energy -1.31%

After-hours Movers
HOTT +3.12% on Jeffries upgrade to Outperform, target $27.
SEBL -7.65% after lowering 1Q outlook substantially.
RIMM -5.38% after beating 4Q eps estimates, missing 4Q revenue estimates and lowering 1Q/2Q outlook.
DRTE -4.34% after cutting 1Q forecast.
JDAS -4.57% on SEBL news.
EP -4.87% after saying that it intends to offer approximately $750 million of convertible perpetual preferred stock.
MMSI -5.34% after lowering 05 outlook.

Evening Review
Detailed Market Summary
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
Futures Recap
S&P 500 Gallery View
Timely Economic Charts
PM Market Call
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on PFE and KO.
- Rated SIRI Underperform, target $4.
- Rated ROIAK Underperform, target $12-$13.
- Rated CCU Outperform, target $40-$43.
- Rated WON Outperform, target $25-$27.
- Initiated Radio broadcasting sector with Cautious view.

Afternoon/Evening Headlines
Bloomberg:
- Thomas H. Lee Partners LP, a US buyout firm that earned more than 10 times its investment on Snapple Beverage Group, plans to raise a $7.5 billion fun, its biggest.
- Lehman Brothers Holdings CEO Fuld said the No. 5 US securities firm may set up an oil-trading business, following market leaders Goldman Sachs and Morgan Stanley.
- Rising oil inventories may “damp the current price frenzy,” Fed Chairman Greenspan said.
- General Motors’ debt rating was lowered by Moody’s one level to Baa3, one step above non-investment grade.
- Hain Celestial Group, a maker of organic grooming products and foods, bought Zia Cosmetics to enter the natural cosmetic business.
- Research In Motion reported a fourth-quarter net loss of $2.57 million from costs to settle a patent dispute. Sales missed analysts’ estimates and the shares fell after-hours.
- Qwest Communications gave MCI directors a deadline of noon tomorrow to publicly declare whether they back Qwest’s takeover offer.
- Banc of America cut Morgan Stanley’s bonds to Sell, citing the uncertainty posed by the efforts of former executives to fire CEO Purcell.

CNBC:
- Cablevision Systems is joining buyout firms including Providence Equity Partners and KKR in a $16.5 billion to $17 billion bid for the television assets of Adelphia Communications.

AP:
- The US military will expand its role in fighting Afghanistan’s narcotics trade by training police and providing transportation and intelligence for anti-drug forces.

Consumer Reports:
- The effectiveness of ionizing air cleaners such as Sharper Image’s Ionic Breeze is being questioned because the indoor ozone they can expose users to is higher than recommended levels.

BOTTOM LINE: US stocks rose modestly today on optimism over lower energy prices and a rebound in pharmaceutical stocks. The Portfolio finished unchanged as losses in my Base Metal shorts and Software longs offset gains in my Retail and Computer longs. I took profits in a trading long in the afternoon and added DECK long, thus leaving the Portfolio 50% net long. I am using a $32.5 stop-loss on this position. The tone of the market remained modestly positive into the afternoon as the advance/decline line rose slightly, sector performance was mixed and volume stayed light. Energy-related stocks and Tech underperformed into the afternoon, while Consumer shares outperformed and measures of investor anxiety were lower. Overall, today’s market action was slightly negative, considering the drop in energy prices and the market’s oversold state. On the positive side, the CRB Index appears to have broken its parabolic uptrend that has been in place since February even with energy prices near highs.

Mid-day Scoreboard

Indices
S&P 500 1,180.75 +.39%
DJIA 10,453.15 +.31%
NASDAQ 1,996.60 +.28%
Russell 2000 614.53 +.13%
DJ Wilshire 5000 11,576.77 +.38%
S&P Barra Growth 569.68 +.45%
S&P Barra Value 607.08 +.40%
Morgan Stanley Consumer 580.96 +.96%
Morgan Stanley Cyclical 743.49 +.14%
Morgan Stanley Technology 453.85 -.07%
Transports 3,724.74 +.48%
Utilities 363.62 +.68%
Put/Call .83 -4.60%
NYSE Arms .81 -22.68%
Volatility(VIX) 13.71 -2.83%
ISE Sentiment 179.00 +7.83%
US Dollar 84.81 +.04%
CRB 309.09 -.33%

Futures Spot Prices
Crude Oil 56.15 -1.42%
Unleaded Gasoline 169.20 -1.72%
Natural Gas 7.49 -1.30%
Heating Oil 162.40 -1.11%
Gold 430.426.80 +.19%
Base Metals 127.35 -.45%
Copper 148.50 -.67%
10-year US Treasury Yield 4.47% +.46%

Leading Sectors
Airlines +2.64%
Papers +2.50%
Drugs +2.01%

Lagging Sectors
Energy -.37%
Networking -.61%
Software -.84%

BOTTOM LINE: US stocks are modestly higher mid-day on optimism over falling energy prices. The Portfolio is unchanged again as gains in my Computer and Retail longs are offsetting losses in my Software longs and Base Metal shorts. I have not traded today, thus leaving the Portfolio’s market exposure at 50% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, sector performance is mostly positive and volume is light. Defensively oriented Consumer stocks are outperforming again, while Tech is underperforming and measures of investor anxiety are lower. Today’s overall market action is modestly negative considering the pullback in energy prices and the market’s oversold state. Greenspan just referred to energy prices as being “frenzied”, which implies he believe current levels are unsustainable. The CRB Index is breaking down through its recent parabolic uptrend even with energy near highs, which is also a positive. I expect US stocks to trade mixed into the close as optimism over falling energy prices is offset by concerns over slowing global growth.

Today's Headlines

Bloomberg:
- OPEC may raise its production to 30 million barrels a day, or as much as 95% of the group’s capacity.
- The US won allies in the European Parliament in a bid to defeat French and German attempts to end the European Union’s 15-year embargo on the sale of weapons to China.
- Oil and metals prices may fall as US consumer spending slows, ending a rally similar to the technology-stock bubble that burst in 2000.
- Greenhill Capital Partners LLC, the investment unit of merger and restructuring advisers Greenhill & Co., raised $558 million for its second US buyout fund.
- Pfizer said earnings will fall to $8.6 billion because of no revenue growth and expenses related to restructuring and repatriated profits.
- High gas prices aren’t causing most consumers to cut back on spending on clothes, electronics, and other goods, a private survey found.

Wall Street Journal:
- Google, Yahoo and other Internet companies are accused of complicity in overcharging for ads, so-called “click fraud,” by a group of advertisers.
- Spain’s sale of arms to Columbia and Venezuela has added to strains in US-Spanish relations following Madrid’s decision to pull its troops out of Iraq last year.
- The SEC will vote tomorrow on new rules governing stock trading in the US.
- AIG, Chubb, Liberty Mutual and other major US insurers have dropped support for a $140 billion federal trust fund to pay asbestos-related claims.
- ChevronTexaco, Exxon Mobil and Royal dutch/Shell will jointly develop several natural gas fields off Australia.
- Google’s customers will be able to see driving directions and pinpoint locations on detailed satellite maps starting today.
- Quiksilver, which makes surf-inspired clothing and sells under the brands Roxy and Radio Fiji, risks alienating hip customers by trying to boost sales by becoming a broader “lifestyle” company.
- Caterpillar and Gannett’s shareholders will vote next week whether to switch to majority voting from plurality voting in its board selection procedures.
- Turnover among Chief Financial Officers of Fortune 500 companies increased 23% in 2004 from the year before.
- US carmakers and the Canadian government are expected to say today that they have reached an agreement to reduce global-warming emissions from autos and trucks they sell in Canada.
- US regulators plan to widen their probe of contracts that mix insurance and financing techniques after they complete an investigation of such transactions at AIG.

The New York Times:
- As many as 800 US remote-controlled defense aircraft are being flown in Iraq and Afghanistan, up from less than 10 four years ago.
- Coca-Cola is attempting to improve its marketing and development of new beverages, as the company seeks to lure traditional soda drinkers that may switch to other drinks.

Links of Interest

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