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Friday Watch

Late-Night Headlines
Bloomberg:
- Samsung Electronics posted a first-quarter profit drop of 52% on falling prices of chips and liquid crystal displays.
- Oil may fall for a third week because of an increase in US crude and gasoline inventories, a Bloomberg survey showed.
- Japan's government may agree to joint drilling with China in a gas filed in a disputed area in the East China Sea.

Financial Times:
- Increased Iraqi oil production may help meet a rise in global oil demand this year if security in the country continues to improve.

China Securities Journal:
- China's asset regulator said "conditions are right" for pilot programs to start selling government stakes in publicly listed companies.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on TPX and MXT.

Night Trading
Asian Indices are -1.75% to -1.0% on average.
S&P 500 indicated -.16%.
NASDAQ 100 indicated -.35%.

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
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Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
BE/.08
CEN/.16
C/1.02
DECK/.70
GE/.37
GPC/.61
KEY/.61
KRI/.71
MAT/.03
RF/.56
TRB/.40
WB/1.01

Splits
None of note

Economic Releases
8:30 EST
- Empire Manufacturing for April is estimated to fall to 18.0 versus a reading of 19.6 in March.
- The Import Price Index for March is estimated to rise 1.4% versus a .8% gain in February.

9:00 EST
- Net Foreign Security Purchases for February are estimated to fall to $65.0B versus $91.5B in January.

9:15 EST
- Industrial Production for March is estimated to rise .3% versus a .3% increase in February.
- Capacity Utilization for March is estimated to rise to 79.6% versus 79.4% in Februray.

9:45 EST
- Preliminary Univ. of Mich. Consumer Confidence for April is estimated to fall to 91.5 versus a reading of 92.6 in March.

BOTTOM LINE: Asian indices are sharply lower, led down by technology stocks in the region. I expect US equities to open lower on losses in Asia, earnings worries and disappointing economic data, however stocks may rally later in the day on short-covering, lower long-term interest rates and bargain-hunting. The Portfolio is Market Neutral heading into tomorrow.

Thursday Close

Indices
S&P 500 1,162.05 -1.0%
DJIA 10,278.75 -1.20%
NASDAQ 1,946.71 -1.40%
Russell 2000 591.94 -1.76%
DJ Wilshire 5000 11,429.62 -1.08%
S&P Barra Growth 562.17 -.84%
S&P Barra Value 595.51 -1.16%
Morgan Stanley Consumer 585.52 -.17%
Morgan Stanley Cyclical 709.75 -2.71%
Morgan Stanley Technology 439.03 -1.32%
Transports 3,441.30 -3.02%
Utilities 363.40 -1.05%
Put/Call 1.09 +15.96%
NYSE Arms 1.20 -27.24%
Volatility(VIX) 14.53 +9.17%
ISE Sentiment 152.00 -13.14%
US Dollar 85.00 +.71%
CRB 299.38 -.48%

Futures Spot Prices
Crude Oil 51.23 +.20%
Unleaded Gasoline 150.20 -.14%
Natural Gas 7.06 -.06%
Heating Oil 148.30 +.05%
Gold 425.60 unch.
Base Metals 123.55 -1.46%
Copper 142.85 unch.
10-year US Treasury Yield 4.31% -1.01%

Leading Sectors
Drugs +.51%
Foods -.13%
Energy -.25%

Lagging Sectors
HMOs -3.86%
Airlines -3.97%
Steel -6.42%

After-hours Movers
NUTR +5.0% after a US judge overturned the FDA’s ban on low-dose ephedra diet supplements.
CREE +6.3% after beating 3Q estimates and reiterating 4Q guidance.
LLY +6.9% after winning a court ruling that will prevent generic-drug makers from selling low-cost versions of its $4.4 billion-a-year Zyprexa schizophrenia drug before 2011.
CCRN -5.8% after announcing 3M share secondary.
IBM -3.75% after reporting first quarter profit rose 3%, less than expected, as the firm’s key computer-services business fell short of its sales goals and higher pension costs hurt it’s bottom line.

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
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Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on MDT, GNW, IDIX, GD and Underperform on DJ.

Afternoon/Evening Headlines
Bloomberg:
- A weeklong sweep led by the US Marshals Service resulted in the capture of 10,340 fugitives in the largest such operation in US history.
- Emerging market bonds had their biggest decline in 11 months as losses in General Motors bonds curbed demand worldwide for high-yield, high-risk securities.
- Arizona regulators approved an air-pollution permit for an investor group planning a new $2.5 billion oil refinery, a milestone no other US project has reached in three decades.
- The US Congress passed legislation to force some consumers to pay part of their debts in bankruptcy.
- Members of the Chicago Board of Trade, the second-biggest US futures market, today approved a plan to convert to a for-profit company, paving the way for a possible IPO.
- GM and the United Auto Workers Union will work within their current contract to reduce health-care costs, company and labor officials said.

Reuters:
- The White House budget office told federal agencies this week to stop specifying brand names in procurement contracts, a move applauded by Intel Corp. rival AMD.

Financial Times:
- Nasdaq Stock Market is negotiating to buy Reuters Group’s Instinet.

Financial Times Deutschland:
- SAP AG isn’t considering buying US-based competitor Siebel Systems.

BOTTOM LINE: US stocks finished sharply lower today as energy prices bounced and worries over slowing economic growth and earnings shortfalls rose. The Portfolio finished substantially higher on gains in my Base Metal, Oil Tanker and Chinese ADR shorts. I added a new Medical Information Systems short in the afternoon and added LLY long in after-hours trading, thus leaving the Portfolio Market Neutral. I am using a stop-loss of $56 on this new position. The tone of the market weakened into the afternoon as the advance/decline finished sharply lower, almost every sector fell and volume was above-average. Measures of investor anxiety were mostly higher into the afternoon. Overall, today’s market action was negative, considering another decline in the CRB Index, the market’s oversold state and another fall in long-term interest rates. While stocks may weaken a bit further over the coming weeks into earnings outlooks, I continue to believe the major averages are very close to meaningful bottoms for the year. I do not believe the US is falling into recession, which is what recent price movements seem to suggest. Longer-term investors should use any further weakness to begin building positions in favorite longs.

Mid-day Scoreboard

Indices
S&P 500 1,177.11 -.90%
DJIA 10,441.28 -.64%
NASDAQ 1,981.76 -1.17%
Russell 2000 604.91 -1.32%
DJ Wilshire 5000 11,586.50 -.93%
S&P Barra Growth 568.20 -.82%
S&P Barra Value 604.37 -1.0%
Morgan Stanley Consumer 585.65 -.15%
Morgan Stanley Cyclical 731.76 -1.55%
Morgan Stanley Technology 446.57 -1.37%
Transports 3,563.20 -2.28%
Utilities 367.55 -.62%
Put/Call .79 -33.05%
NYSE Arms 1.45 +50.50%
Volatility(VIX) 12.42 +9.91%
ISE Sentiment 183.00 +16.56%
US Dollar 84.45 +.01%
CRB 300.51 -.69%

Futures Spot Prices
Crude Oil 50.85 +1.25%
Unleaded Gasoline 148.20 -3.44%
Natural Gas 7.07 +1.39%
Heating Oil 147.60 +2.36%
Gold 425.60 -1.25%
Base Metals 123.55 -1.46%
Copper 142.85 -2.12%
10-year US Treasury Yield 4.36% +.19%

Leading Sectors
Drugs +.78%
Energy +.20%
Broadcasting +.10%

Lagging Sectors
HMOs -3.75%
Airlines -3.78%
Steel -6.20%

BOTTOM LINE: US stocks are lower mid-day on continuing worries over slowing growth and a bounce in energy prices. The Portfolio is higher on gains in my Oil Tanker, Steel and Chinese ADR shorts. I added a few new shorts this morning, thus leaving the Portfolio Market Neutral. One of my new shorts is OMM and I am using an $18.5 stop-loss on this position. The tone of the market is negative as the advance/decline line is very weak, almost every sector is lower and volume is above-average. Measures of investor anxiety are mixed. However, the AAII % Bulls plunged to 16.5% this week, the lowest level since Sept. 4, 1992. This is a very positive development. Today’s overall market action is negative, considering the continuing decline in commodity prices, the market’s oversold state and the rising US dollar. While the extent of the market’s recent weakness caught me off guard, things continue to shape up very well for a much better second half of the year. I continue to expect lower energy prices, low interest rates and modestly improving employment prospects to boost economic growth and stocks prices over the intermediate-term. I expect US stocks to trade mixed into the close as higher energy prices offset bargain-hunting.

Today's Headlines

Bloomberg:
- General Reinsurance Australia Ltd., a unit of Warren Buffett’s Berkshire Hathaway, will be investigated by Australia’s insurance regulator over its reinsurance practices.
- Copper fell to an eight-week low in London on speculation that production from mines and smelters may catch up with demand in China.
- German Chancellor Gerhard Schroeder said he is determined to see the European Union’s 16-year-old arms embargo on China lifted, dismissing criticism from lawmakers in his own coalition and opposition parties.
- Southwest Airlines said first-quarter profit almost tripled as the airline added flights and carried more passengers.
- UnitedHealth Group said first-quarter profit rose 41% as the company added customers through acquisitions.
- Stephen Cutler, who spearheaded the SEC’s crackdown on the corporate fraud and trading scandals that rattled US investors following the collapse of Enron Corp., is resigning as the agency’s enforcement chief.
- US indictments in the UN/Iraq oil-for-food program charged three people and two companies with scheming to pay kickbacks to former Iraqi dictator Saddam Hussein.

The Wall Street Journal:
- Intel and Advanced Micro Devices, which will soon offer “dual-core” semiconductors need modifications in personal computer programs if the chips’ potential is to be fully exploited.
- Benchmark steel prices have dropped for six straight months in the US, as demand for steel is slowing because of the weakening US car industry and slowing economic growth in China.
- China said it has “never, and will never” recognize the boundary market drawn by Japan in an area of the East China Sea, which is claimed by both countries, a day after the Japanese government allowed oil and gas drilling.
- Callaway Golf, TaylorMade Golf and Nike Golf have been asked by the US Golf Assoc. to supply prototype balls that fly shorter distances than the current ones.

Financial Times:
- China’s leaders are preparing to end the yuan’s peg of 8.28 to the dollar.

NY Times:
- Neiman Marcus Group, Saks Inc. and other retailers may not have a better time to put themselves up for sale as interest rates rise and billions of dollars in investments wait spending.

Nihon Keizai:
- Sony Corp. seeks to sell more than 1 million liquid crystal display television sets in Europe this year, triple the number of last year.