Tuesday Close

Indices
S&P 500 1,152.78 +.59%
DJIA 10,127.41 +.56%
NASDAQ 1,932.36 +1.02%
Russell 2000 594.94 +1.64%
DJ Wilshire 5000 11,368.29 +.77%
S&P Barra Growth 566.84 +.47%
S&P Barra Value 591.65 +.72%
Morgan Stanley Consumer 576.08 +.09%
Morgan Stanley Cyclical 705.41 +1.01%
Morgan Stanley Technology 432.55 +1.50%
Transports 3,448.73 +1.28%
Utilities 363.70 +1.36%
Put/Call .95 -1.04%
NYSE Arms 1.10 +17.57%
Volatility(VIX) 14.96 -9.66%
ISE Sentiment 156.00 +17.29%
US Dollar 83.76 -.29%
CRB 304.03 +2.13%

Futures Spot Prices
Crude Oil 52.27 -.04%
Unleaded Gasoline 156.75 -.17%
Natural Gas 7.06 +.21%
Heating Oil 149.05 -.17%
Gold 435.20 +.18%
Base Metals 126.30 +1.33%
Copper 147.50 +.24%
10-year US Treasury Yield 4.21% -1.39%

Leading Sectors
Networking +4.49%
Oil Tankers +4.09%
Steel +3.52%

Lagging Sectors
Tobacco +.10%
Drugs +.09%
Airlines -.43%

Evening Review
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Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on WFC, PFE, GILD, USB, UDR and YHOO.

Afternoon/Evening Headlines
Bloomberg:
- Fitch Ratings’ view of GM credit rating did not change after it had a first-quarter net loss of $1.1 billion, its biggest quarterly loss in 13 years.
- Citigroup will consider making acquisitions later this year after addressing Federal Reserve concerns that its internal controls were inadequate.
- GM is prepared to tap into a $20 billion fund for retirees’ health care for the first time in four years if it needs the cash to operate.
- US 10-year Treasury notes surged after a measure of wholesale prices climbed less than forecast, easing concern about faster inflation.
- Yahoo! said first-quarter profit more than doubled as it sold more advertisements that appear on its Web pages and alongside search results.
- Intel Corp. said first-quarter profit rose 25% after demand surged for its Centrino laptop chips and the company boosted production.
- Crude oil rose almost $2 a barrel, the biggest gain in eight weeks, amid speculation that growing gasoline demand will erode US inventories and strain the ability of refineries to make enough of the fuel.

BOTTOM LINE: US stocks finished higher today on lower long-term interest rates, short-covering and bargain-hunting. The Portfolio finished slightly higher on gains in my Homebuilding, Computer, Networking and Gaming longs. I added a few new longs from various sectors in the afternoon, thus leaving the Portfolio 125% net long. One of my new longs is DRIV and I am using a $28 stop-loss on this position. The tone of the market improved into the afternoon as the advance/decline finished near its daily highs, almost every sector rose and volume was about average. Measures of investor anxiety were mostly lower into the afternoon. Overall, today’s market action was positive, considering the rise in energy prices and worries over GM. US stocks are responding well after-hours to several major tech company reports. A decline in energy prices or another decline in long-term rates could result in a more vigorous rally tomorrow than I currently anticipate.

Mid-day Scoreboard

Indices
S&P 500 1,153.81 +.70%
DJIA 10,146.59 +.76%
NASDAQ 1,930.22 +.92%
Russell 2000 593.43 +1.39%
DJ Wilshire 5000 11,379.01 +.86%
S&P Barra Growth 557.72 +.62%
S&P Barra Value 592.29 +.83%
Morgan Stanley Consumer 576.38 +.14%
Morgan Stanley Cyclical 706.60 +1.18%
Morgan Stanley Technology 433.05 +1.61%
Transports 3,447.51 +1.24%
Utilities 364.31 +1.54%
Put/Call .99 +3.13%
NYSE Arms 1.08 +15.57%
Volatility(VIX) 14.84 -10.39%
ISE Sentiment 167.00 +25.56%
US Dollar 83.83 -.20%
CRB 303.66 +2.01%

Futures Spot Prices
Crude Oil 51.95 +3.14%
Unleaded Gasoline 156.50 +4.72%
Natural Gas 7.04 +1.37%
Heating Oil 149.00 +3.31%
Gold 434.60 +1.31%
Base Metals 126.30 +1.33%
Copper 147.15 +1.83
10-year US Treasury Yield 4.20% -1.58%

Leading Sectors
Networking +4.55%
Steel +3.89%
Oil Tankers +3.43%

Lagging Sectors
Hospitals -.02%
Airlines -.17%
Drugs -.19%

BOTTOM LINE: US stocks are higher mid-day on lower long-term interest rates, bargain-hunting and short-covering. The Portfolio is higher on gains in my Homebuilding, Computer, Gaming and Networking longs. I added a few new longs from various sectors this morning, thus leaving the Portfolio 100% net long. One of my new longs is MDC and I am using a $65.75 stop-loss on this position. The tone of the market is positive as the advance/decline line is higher, almost every sector is higher and volume is average. Measures of investor anxiety are mixed. Today’s overall market action is positive, considering the rise in energy prices and worries over GM. I am more confident that we have seen the lows for the year in US equities. The CPI and energy reports tomorrow should result in further short-covering. I expect US stocks to trade mixed-to-higher into the close on short-covering, low long-term interest rates and bargain-hunting.

Today's Headlines

Bloomberg:
- German Cardinal Joseph Ratzinger, who was considered a leading candidate to succeed Pope John Paul II and one of the most conservative voices in the Catholic Church, today was named the leader of the world’s 1 billion Roman Catholics.
- US Treasury notes surged after a measure of the Core PPI climbed less than forecast last month, easing concern about faster inflation.
- Crude oil rose more than $1 amid speculation that growing gasoline demand will erode US inventories and strain the ability of refineries to make enough of the fuel.

Wall Street Journal:
- Eastman Kodak, Atari, Microsoft and other US companies routinely paid tv commentators to recommend their products to the public.
- Exxon Mobil, BP, Royal Dutch/Shell and other big oil companies face increasing competition from smaller and more agile rivals.
- The AP will start charging an extra fee to publishers that post its stories on the Internet.
- Boeing and Lockheed Martin will be the major beneficiaries of some $6 billion in spending by the Air Force on rockets.
- Walt Disney plans to announce two gaming software deals, including the acquisition of Avalanche Software.
- GE and Eli Lilly are developing a process that will help detect Alzheimer’s disease at an earlier stage.

NY Times:
- At least 23 US states are either passing laws or considering legislation related to the obligation of pharmacists to distribute emergency contraception pills.
- Rising oil prices and nervousness in the market is working to Iran’s advantage as it cements relationships with several powerful countries in part to thwart US-imposed isolation.
- GM may soon stop making either Buick or Pontiac cars as the two brands’ sales decline.
- AOL has agreed to buy licenses from Universal Music Group to provide music videos to subscribers.

Washington Post:
- The US Republican National Committee raised a record $32 million in the January-March period, more than double the total collected by Democrats.

CNBC:
- Janet Yellen, president of the Federal Reserve Bank of San Francisco, said in an interview that inflation expectations remain “well contained” and the US economy is still growing.

Economic Releases

- The Producer Price Index for March rose .7% versus estimates of a .6% increase and a .4% gain in February.
- The PPI Ex Food & Energy for March rose .1% versus estimates of a .2% gain and a .1% increase in February.
- Housing Starts for March fell to 1837K versus estimates of 2090K and an upwardly revised 2229K in February.
- Building Permits for March fell to 2023K versus estimates of 2090K and an upwardly revised 2107K in February.

Links of Interest

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