Today's Headlines

Bloomberg:
- Saudi Arabia and the rest of OPEC can do little to lower record crude oil prices as banks, hedge funds and investors pile into “overheated futures markets,” said Saudi Arabia’s oil minister.
- The number of US workers filing initial jobless claims for unemployment benefits fell last week to a 10-week low of 296,000, a figure that was distorted by this year’s early Easter holiday, the Labor Dept. said.
- Shire Pharmaceuticals said it will buy US biotech company Transkaryotic Therapies for $1.6 billion to acquire treatments for a rare illness and anemia.
- Anheuser-Busch said Warren Buffett’s Berkshire Hathaway has become a “significant shareholder” of the company.
- Manufacturing in the Philadelphia region unexpectedly expanded at a faster pace this month as orders and shipments accelerated. The benchmark 10-year T-note fell the most in a month on the news.

Wall Street Journal:
- China’s 60 million retail investors, many of whom lost their life savings after stock markets declined, are stepping up pressure on the government to tighten market regulation.
- US high school students are taking summer trips to Senegal to work on AIDS projects and special courses to bolster their resumes years before they apply to college.
- Altria Group is nearing a deal with the Chinese government to allow Marlboro cigarettes to be made and sold in China.
- Sony will be closely watched by rivals when the company starts selling a new line of rear-projection televisions based on a light-reflecting semiconductor chip later this year.
- The FCC faces opposition form the broadcasting industry to tougher enforcement of rules against profanity and sexual content.
- News Corp. plans to offer television spots on its Fox channel that can be digitally changed to include content familiar to particular viewers.

NY Times:
- Clothing sellers in NY’s Garment District are unable to predict costs and maintain steady supplies because of potential tariffs on imports from China factories.

NY Post:
- DoubleClick is close to being bought by the San Francisco buyout firm Hellman & Friedman for about $1.2 billion.

AFP:
- France will continue to push the European Union to lift its arms embargo against China and doesn’t object to the Chinese government’s Taiwan anti-secession law.

Xinhua News Agency:
- China’s government will spend $15 billion of foreign reserves to bail out Industrial & Commercial Bank of China to help boost the lender’s core capital adequacy ratio to 6%.

Economic Releases

- Initial Jobless Claims for last week fell to 296K versus estimates of 330K and 332K the prior week.
- Continuing Claims fell to 2638K versus estimates of 2655K and 2655K prior.
- Leading Indicators for March fell .4% versus estimates of a .3% decline and a .1% rise in February.

Links of Interest

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Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- SAP AG said first-quarter profit rose 11% as the company gained market share and increased sales in the US and Asia.

AP:
- Two investigators working on the UN/Iraq oil-for-food scandal quit in protest, saying they felt the conclusions played down criticisms of Secretary General Kofi Annan.

Financial Times:
- Liberty Media International may use $6 billion of its cash and liquid assets for investments in cable-television businesses in Japan and Europe.

Electronic Times:
- MasterCard International will team up with South Korean mobile phone operator SK Telecom to offer payment services via mobile phones.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on UTX, MSFT, EBAY, MDT, COF, YUM, TMK, AWA, ALL, FORM, CVD, ACN, DOX, EBAY and CAL.
- Reiterated Underperform on BE, AZR and TER.

Night Trading
Asian Indices are -.1.0% to +.25% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.25%.

Morning Preview
US AM Market Call
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Asian Indices
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Earnings of Note
Company/EPS Estimate
ADP/.57
ATI/.46
AT/.82
ABC/.79
AMGN/.67
T/.59
BAX/.34
BEBE/.18
BLS/.38
BRCM/.22
CZR/.22
CMI/1.57
DAL/4.76
GOOG/.92
GDT/.62
HCA/.88
IR/1.18
IGT/.31
KRB/.46
MCD/.43
MRK/.59
NUE/2.05
ODP/.41
SNDK/.32
SGP/.01
SIRI/-.14
UPS/.73
VLO/1.97
WY/1.14
WHR/1.11
XLNX/.20
YELL/.91

Splits
None of note

Economic Releases
8:30 EST
- Initial Jobless Claims for last week are estimated to remain at 330K.
- Continuing Claims are estimated to fall to 2655K versus 2664K prior.

10:00 EST
- Leading Indicators for March are estimated to fall .3% versus a .1% increase in February.

12:00 EST
- Philadelphia Fed. for April is estimated to fall to 10.7 versus a reading of 11.4 in March.

BOTTOM LINE: Asian indices are mostly lower on concerns over hawkish comments by the US Fed. I expect US equities to open modestly lower on a continuation of today's sell-off and worries over slowing growth. The Portfolio is 25% net long heading into tomorrow.

Wednesday Close

Indices
S&P 500 1,137.50 -1.33%
DJIA 10,012.36 -1.14%
NASDAQ 1,913.76 -.96%
Russell 2000 584.96 -1.68%
DJ Wilshire 5000 11,215.84 -1.34%
S&P Barra Growth 549.78 -1.27%
S&P Barra Value 583.47 -1.38%
Morgan Stanley Consumer 568.13 -1.38%
Morgan Stanley Cyclical 695.92 -1.35%
Morgan Stanley Technology 429.14 -.79%
Transports 3,395.26 -1.55%
Utilities 360.36 -.92%
Put/Call .81 -14.74%
NYSE Arms 1.88 +70.84%
Volatility(VIX) 16.92 +13.10%
ISE Sentiment 134.00 -14.10%
US Dollar 83.47 -.35%
CRB 306.99 +.97%

Futures Spot Prices
Crude Oil 53.50 -.98%
Unleaded Gasoline 156.85 -.81%
Natural Gas 6.98 -1.09%
Heating Oil 149.80 -.71%
Gold 436.30 -.09%
Base Metals 128.48 +1.73%
Copper 150.50 -.30%
10-year US Treasury Yield 4.18% -.61%

Leading Sectors
Internet +.34%
Networking +.08%
Wireless -.36%

Lagging Sectors
Homebuilders -2.43%
I-Banks -2.74%
Gaming -2.80%

Evening Review
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Market Wrap CNBC Video(bottom right)
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on GD, MO, MERQ and DOX.

Piper Jaffray:
- Rated GOOG Outperform, target $250.

Afternoon/Evening Headlines
Bloomberg:
- President Bush urged Congress to send him comprehensive energy legislation by early August to help counter rising oil and gas prices, which he said are becoming a “tax on jobs.”
- Hertz may be sold by parent Ford Motor to raise money as the automaker tries to halt a decline in US automotive market share.
- The NYSE agreed to merge with Archipelago Holdings and make the 212-year-old institution a public, for-profit company.
- Delta Air, Northwest and other US carriers could defer pension payments and avoid bankruptcy filings to resolve pension shortfalls under a bill introduced in the US Senate today.
- BearingPoint said it found errors in financial statements spanning the past two years and the SEC began an investigation into its accounting.
- Brazil’s central bank unexpectedly raised its benchmark lending rate for an eighth straight month in a bid to stem inflation in South America’s largest economy.
- US factories, retailers and service companies were able to pass on to consumers some of the higher costs of energy and other raw materials, the Federal Reserve said in its Beige Book report.

Interfax:
- Russian ministries proposed a plan to stockpile supplies of oil products to meet swings in demand.

BOTTOM LINE: US stocks finished lower today after the Fed’s Beige Book report spooked investors. The Portfolio finished slightly lower on losses in my Homebuilding, Gaming and Computer longs. I added a few new shorts and exited a number of longs from various sectors in the afternoon as they hit stop-losses, thus leaving the Portfolio 25% net long. One of my new shorts is X and I am using a $47 stop-loss on this position. The tone of the market deteriorated into the afternoon as the advance/decline finished at its daily lows, almost every sector fell and volume was above average. Measures of investor anxiety were mostly higher. Overall, today’s market action was negative, considering recent positive earnings reports, stabilizing energy prices and lower long-term interest rates. The Fed’s Beige Book report rekindled fears that the Fed is misinterpreting recent data. The economy is slowing and inflation is not a problem. The bond and stocks markets are looking through the temporary rise in measures of inflation and signaling a return to a deflationary environment. I continue to believe the Fed will realize this and slow their rate of hikes over the next couple of months. While stocks may head marginally lower through earnings season, I continue to believe the major averages are close to a meaningful bottom and that the second-half of the year will be much better for US equities.