Friday Watch

Late-Night Headlines
Bloomberg:
- America West Holdings and US Airways Group agreed to merge to create a national low-fare carrier, with $1.5 billion in funding from new investors, vendors and others.
- Crude oil prices may fall for a third week as rising OPEC output boosts inventories and on signs of slowing global economic growth, a Bloomberg survey showed.
- China said it plans to increase export tariffs on textiles and enlarge the list to include single-ply linen yearn.

Wall Street Journal:
- US appliance maker Maytag Corp. agreed to be acquired by buyout firm Ripplewood Holdings LLC for about $1.13 billion.

China Business News:
- Citigroup agreed to buy a stake in China Construction Bank and Bank of America will invest in Bank of China.

Kyodo News Agency:
- Japan yesterday warned North Korea against conducting a nuclear test.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on AAP and LIZ.
- Reiterated Underperform on PSS.

Business Week:
- Exelon Corp.(EXC), a producer of nuclear power, may benefit from coming shortages of fossil fuel and generating capacity.
- Shares of Rent-Way(RWY), which owns stores that rent out merchandise such as furniture and computers, may be worth $13 in a possible acquisition by competitor Aaron Rents.
- North Fork Bancorp(NFB), a banking holding company with branches in NY, New Jersey and Connecticut, is an attractive buyout target, possibly for a big rival like Wachovia, Ryan Beck managing director Jacqueline Reeves said.

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.02%.
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)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
DDS/.52

Splits
None of note

Economic Releases
None of note

BOTTOM LINE: Asian indices are mixed as more optimism for exporters in the region is offsetting higher energy prices. I expect US equities to open mixed. However, stocks may rise modestly later in the day on short-covering, Fed comments and more optimism. The Portfolio is 100% net long heading into the day.

Stocks Finish at Session Highs

Indices
S&P 500 1,191.08 +.47%
DJIA 10,493.19 +.27%
NASDAQ 2,042.58 +.59%
Russell 2000 610.46 +.42%
DJ Wilshire 5000 11,741.81 +.49%
S&P Barra Growth 576.60 +.48%
S&P Barra Value 609.98 +.45%
Morgan Stanley Consumer 590.71 +.22%
Morgan Stanley Cyclical 719.49 -.11%
Morgan Stanley Technology 474.51 +.52%
Transports 3,621.03 +.44%
Utilities 364.55 +.58%
Put/Call .78 -2.50%
NYSE Arms .76 +.80%
Volatility(VIX) 13.32 -2.27%
ISE Sentiment 178.00 +54.78%
US Dollar 86.14 +.43%
CRB 293.54 -.44%

Futures Spot Prices
Crude Oil 46.90 -.63%
Unleaded Gasoline 143.75 +1.63%
Natural Gas 6.37 -.27%
Heating Oil 139.00 +2.34%
Gold 420.70 -.02%
Base Metals 120.03 -.05%
Copper 136.10 -.15%
10-year US Treasury Yield 4.11% +.52%

Leading Sectors
Oil Service +1.85%
Energy +1.67%
Gaming +1.23%

Lagging Sectors
Gold & Silver -.62%
Steel -1.11%
Oil Tankers -1.60%

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

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on BLS.

Afternoon/Evening Headlines
Bloomberg:
- DuPont said it received a subpoena in a grand jury probe related to an ingredient used to make Teflon non-stick coatings that has been found to cause cancer in animals.
- US regulators voted to require Internet-calling companies such as Vonage Holdings to improve the way they connect customers to emergency services.
- Michael Price, whose mutual funds were among the industry’s best performers during the 1980s and 1990s, bought shares of AIG for the first time and said Morgan Stanley is worth $75/share.
- Crude oil in NY fell to a three-month low on speculation that US inventories will be sufficient to meet peak demand during the summer driving season.

BOTTOM LINE: The Portfolio finished higher today on gains in my Software, Computer, Wireless and Internet longs and Oil Tanker, Base Metal shorts. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market strengthened into the afternoon as the advance/decline finished modestly higher, almost every sector rose and volume was average. Measures of investor anxiety were lower into the close. Overall, today’s market action was positive considering recent gains and weaker economic reports. The fact that the dollar rose today on weaker economic reports suggests further gains for the currency near-term.

Stocks Mixed Mid-day on Lower Volume

Indices
S&P 500 1,186.55 +.08%
DJIA 10,452.25 -.11%
NASDAQ 2,035.56 +.25%
Russell 2000 607.82 -.01%
DJ Wilshire 5000 11,698.11 +.11%
S&P Barra Growth 574.46 +.07%
S&P Barra Value 607.34 +.01%
Morgan Stanley Consumer 588.48 -.16%
Morgan Stanley Cyclical 715.76 -.63%
Morgan Stanley Technology 473.26 +.25%
Transports 3,595.46 -.27%
Utilities 363.12 +.18%
Put/Call .80 unch.
NYSE Arms .90 +18.98%
Volatility(VIX) 13.74 +.81%
ISE Sentiment 194.00 +68.70%
US Dollar 86.09 +.37%
CRB 294.03 -.28%

Futures Spot Prices
Crude Oil 47.25 unch.
Unleaded Gasoline 143.10 +1.17%
Natural Gas 6.34 -.81%
Heating Oil 139.30 +2.56%
Gold 421.10 -.21%
Base Metals 120.03 -.05%
Copper 136.30 -.94%
10-year US Treasury Yield 4.09% +.28%

Leading Sectors
Nanotechnology +1.38%
Gaming -1.03%
Internet +.98%

Lagging Sectors
Drugs -.69%
Oil Tankers -1.48%
Steel -1.94%

BOTTOM LINE: The Portfolio is higher mid-day on gains in my Internet, Wireless and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, most sectors are higher and volume is average. Measures of investor anxiety are mostly lower. Today’s overall market action is positive, given the weaker economic reports and yesterday’s sharp gains. I expect US stocks to trade modestly higher into the close on short-covering and bargain hunting.

Today's Headlines

Bloomberg:
- Ted Waitt, who started Gateway in an Iowa farmhouse in 1985 and built it into one of the world’s biggest personal-computer makers, is resigning as chairman to pursue other business and charitable activities.
- Morgan Stanley faces potential legal costs of more than $1 billion, the latest setback for Philip Purcell as he fends off calls for his ouster as CEO of the world’s biggest securities firm by market value.
- Wal-Mart Stores and Netflix agreed to promote each other’s online movie businesses.
- John Bolton’s prospects of being confirmed by the Senate as US ambassador to the UN appear strong at this time with at least four Democrats saying they might support him.
- Visteon, the money-losing auto-parts supplier spun off from Ford Motor in 2000, may sell as many as 15 US factories to shed union employees who cost it $60/hour in wages and benefits.
- Manufacturing in the Philadelphia region declined more than forecast in May.
- The US dollar is rising against the euro on speculation the Fed will keep raising rates while the European Central Bank makes no change.

Wall Street Journal:
- Disney plans to re-launch “The Muppet Show” 1970s television favorite in a bid to create a following for classics such as Mickey Mouse.
- US Fed officials expressed increased concern over the rise in domestic housing prices as a result of speculative buying.
- Time Warner’s cable services are testing a program where EBay users will be able to monitor their Internet auctions over the television.
- Global computer software piracy fell slightly last year.
- Time Warner’s America Online plans a new version of its Netscape Web browser with security and safety features.
- Southwest Airlines’ hedging program, which locked in lower fuel costs while oil prices soared, produced profits while other carriers languished in the red, but the benefits may diminish from now on.
- US banking regulators are considering new guidelines for mortgage lenders, because they are concerned about home buyers taking on bigger loans.

NY Times:
- About 4,000 overweight Americans seek treatment each year in Durham, North Carolina, which is sometimes billed as the “Diet Capital of the World.”
- L-3 Communications is negotiating to buy military contractor Titan Corp. for about $1.8 billion.

AP:
- California scientists have created a mapping system to provide real-time information about the likelihood of earthquakes in the state.

Reuters:
- Blockbuster is advertising a monthly fee of $17.99 for its unlimited DVD rental service.

Job Market Still Healthy, Leading Indicators Fall Modestly

- Initial Jobless Claims for last week fell to 321K versus estimates of 330K and 341K the prior week.
- Continuing Claims rose to 2601K versus estimates of 2583K and 2596K prior.
- Leading Indicators for April fell .2% versus estimates of a .2% decline and a .6% fall in March.

BOTTOM LINE: New claims have averaged about 325,000 in the first four months of the year, down from 350,000 a year ago. The four-week moving-average of claims increased to 329,750 from 324,250 the prior week. The four-week moving-average of continuing claims dropped to 2.58M, a four-year low. The insured unemployment rate, which tends to move with the US unemployment rate, held at a four-year low of 2.0%.

The Leading Economic Indicators Index fell for a fourth straight month in April as high gas prices weighed on consumer sentiment. March’s number was revised down to a .6% decline, the largest decrease since September 20001. Strong job growth, healthy retail sales, booming home sales, low interest rates and a smaller trade deficit should keep growth from slowing too much. As well, declining energy prices this month should help boost confidence among consumers and corporations going forward.