Tuesday Watch

Late-Night Headlines
Bloomberg:
- News Corp.'s "Star Wars: Episode III—Revenge of the Sith" opened as the top film in the US and Canada with weekend sales of $108.4 million, the second-largest three-day gross ever, after Sony's 2002 "Spider-Man."
- A bipartisan group of US senators reached agreement to head off a confrontation over President Bush's judicial appointments, averting a showdown on the eve of a historic vote to revise the Senate's rules.

Financial Times:
- The US Treasury told the Chinese government to revalue the yuan by at least 10% against the dollar to prevent protectionist legislation in the US Congress
- PepsiCo has identified as many as 20 potential takeover targets in Europe.

Nihon Keizai:
- Tokyo Steel Manufacturing said yesterday that it plans to reduce steel sheet product prices by up to 14% starting in June to compete with imports.

Beijing Business Today:
- China's 17 makers of SUVs all had declining sales in the first four months of this year, some as much as 97%, as soaring fuel prices eroded demand for the vehicles.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on ADP, EBAY, DNA, PFE and ACN.
- Reiterated Underperform on LSI.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.13%.

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
CSC/1.07
GME/.16
MDT/.53
NTAP/.17
TSA/.25
WSM/.19

Splits
ADBE 2-for-1
JBHT 2-for-1

Economic Releases
10:00 EST
- Existing Home Sales for April are estimated to rise to 6.9M from 6.89M in March.

2:00 EST
- Minutes of May 3 FOMC Meeting

BOTTOM LINE: Asian indices are mixed as continuing losses in China are being offset by gains in Australia and Taiwan. I expect US equities to open mixed ahead of the FOMC minutes release. However, stocks may gain later in the day on more short-covering, strong existing home sales, optimism and lower energy prices. The Portfolio is 100% net long heading into the day.

Stocks Finish Higher as Inflation Fears Diminish

Indices
S&P 500 1,193.86 +.39%
DJIA 10,523.56 +.49%
NASDAQ 2,056.65 +.50%
Russell 2000 612.87 +.57%
DJ Wilshire 5000 11,777.06 +.42%
S&P Barra Growth 577.95 +.45%
S&P Barra Value 611.40 +.32%
Morgan Stanley Consumer 590.55 -.06%
Morgan Stanley Cyclical 719.49 -.11%
Morgan Stanley Technology 478.92 +.60%
Transports 3,626.51 +.15%
Utilities 363.23 -.45%
Put/Call .81 -18.18%
NYSE Arms .81 -29.71%
Volatility(VIX) 12.95 -1.45%
ISE Sentiment 172.00 +20.28%
US Dollar 86.36 -.31%
CRB 296.47 +1.09%

Futures Spot Prices
Crude Oil 49.15 +1.03%
Unleaded Gasoline 140.05 -1.31%
Natural Gas 6.42 +1.29%
Heating Oil 136.65 -.06%
Gold 416.90 unch.
Base Metals 120.29 +.59%
Copper 138.75 -.07%
10-year US Treasury Yield 4.05% -1.63%

Leading Sectors
Disk Drives +2.23%
Energy +1.55%
Homebuilders +1.47%

Lagging Sectors
Banks -.15%
Semis -.32%
Airlines -.78%

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
None of note

Afternoon/Evening Headlines
Bloomberg:
- Eastman Kodak hired Intel’s Sandra Morris to run its online photographic business as the company prepares for President Antonio Perez to take over next week by adding more managers with digital experience.
- Genentech said that almost 95% of patients treated with its experimental Lucentis drug maintained or improved their vision in a study.
- JDS Uniphase agreed to buy Acterna for $760 million in cash and stock to bolster its sales of testing and management products for communications providers.
- Shares of Maytag rose for a second day above the $14-a-share price that buyout firms led by Ripplewood Holdings LLC agreed to pay for the company, suggesting investors expect a higher bid.
- US Treasury notes surged, pushing 10-year note yields near 4% for the second time in a week, on speculation inflation will remain in check.

Wall Street Journal:
- Ray McGuire, Morgan Stanley’s co-head of mergers and acquisitions, is leaving the world’s biggest securities firm by market value to join Citigroup.
- Boeing will announce the official approval tomorrow to begin production of a freighter version of its 777-200LR jetliner.

AP:
- US officials arrested a Pennsylvania man for allegedly trying to build a bomb to sell to an affiliate of the al-Qaeda terrorist network.
- US first lady Laura Bush said Egyptian President Hosni Mubarak’s plan to hold free competitive elections is a “bold and wise” move toward democracy.

Financial Times:
- The US film industry may push for action against China at the WTO over sales of illegal DVDs.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Internet, Computer, Wireless and Homebuilding longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market weakened modestly into the afternoon as the advance/decline finished slightly higher, most sectors rose and volume was below-average. Measures of investor anxiety were lower into the close. Overall, today’s market action was slightly positive considering recent gains and a bounce in energy prices. It appears as though investors are anticipating Fed comments this week suggesting a slowing in the pace of rate hikes. This may be a bit premature. However, I do expect these types of comments closer to the June meeting.

Stocks High Mid-day as Long-Term Rates Drop

Indices
S&P 500 1,194.90 +.48%
DJIA 10,535.75 +.61%
NASDAQ 2,058.84 +.61%
Russell 2000 613.83 +.73%
DJ Wilshire 5000 11,785.38 +.48%
S&P Barra Growth 578.46 +.54%
S&P Barra Value 611.92 +.41%
Morgan Stanley Consumer 592.14 +.25%
Morgan Stanley Cyclical 729.00 +1.30%
Morgan Stanley Technology 479.97 +.80%
Transports 3,644.39 +.64%
Utilities 363.68 -.33%
Put/Call .83 -16.16%
NYSE Arms .86 -25.42%
Volatility(VIX) 12.99 -1.14%
ISE Sentiment 192.00 +34.27%
US Dollar 86.41 -.25%
CRB 296.79 +1.18%

Futures Spot Prices
Crude Oil 48.70 +.10%
Unleaded Gasoline 139.10 -1.98%
Natural Gas 6.37 +.58%
Heating Oil 136.20 -.39%
Gold 416.90 -.19%
Base Metals 120.29 +.59%
Copper 138.85 +.98%
10-year US Treasury Yield 4.05% -1.63%

Leading Sectors
Homebuilders +1.70%
Gold & Silver +1.36%
Steel +1.21%

Lagging Sectors
Semis -.17%
Gaming -.25%
Airlines -.68%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Homebuilding, Internet, Wireless and Computer longs. I exited a Software long this morning and added INSP long, thus leaving the Portfolio 100% net long. I am using a $32 stop-loss on this position. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is below average. Measures of investor anxiety are mostly lower. Today’s overall market action is positive, given last week’s gains and the morning bounce in energy prices. I expect US stocks to rise modestly into the close on short-covering, lower long-term interest rates, declining energy prices and strength in the Tech sector.

Today's Headlines

Bloomberg:
- Donald Trump is beginning Trump University, an online enterprise to provide training for working business professionals.
- The US economy may expand by 3.4% this year, less than the 3.6% projected in February and down from 4.4% in 2004, according to 50 economists surveyed by the NABE.
- Fed Chairman Greenspan, in the last great battle of his career, is waging a war against inflation that bond traders say he’s already won.
- US Treasury notes rose for the first day in three on speculation inflation will remain in check, bolstering the purchasing power of fixed-income payments.

Wall Street Journal:
- San Francisco-based GarageBand.com hopes to cater to users of a new music medium called podcasting who are worried about copyrights.
- Bank of America, Wachovia and other banks have told more than 100,000 customers their accounts and identity information may be compromised after former bank employees may have sold account numbers and balances to somebody who sold the data to collection agencies.
- Walt Disney’s ABC television network is popular with advertisers looking to buy commercials for the fall’s new US television season.
- Apple Computer, the maker of Macintosh computers, may soon begin using Intel chips in its PCs.
- Western Wireless hired Deutsche Bank AG to examine potential offers for the company’s overseas mobile phone assets, which could be worth as much as $2 billion.
- Standard Asset Management plans to start an exchange-traded fund that tracks the price of a barrel of light, sweet crude oil.
- Barnes & Noble’s Sterling Publishing unit has created a simplified line of classic books, such as “The Adventures of Tom Sawyer,” that are geared largely to children with reading problems.
- Newsweek Editor in Chief Richard M. Smith said no writers or editors will lose their jobs because of the May 16 retraction of an incorrect article that said US guards at Guantanamo Bay, Cuba, desecrated a copy of the Koran. At least 17 people lost their lives in riots in Afghanistan related to the inaccurate report.

NY Times:
- Omnicom Group, the world’s largest advertising company by revenue, and other agencies are struggling to stay in business amid narrowing profit margins and falling stock prices.
- Best Buy toughened a policy to detour minors from buying violent or sexually explicit video games amid shareholder pressuring.

AP:
- American Psychiatric Association representatives have approved a statement urging legal recognition of same-sex marriage.
- A bipartisan group of US senators plan to introduce a $611 billion bill this week that would repeal the alternative minimum tax.

NY Post:
- Pfizer’s Viagra is being provided to almost 200 of New York’s worst sexual offenders through Medicaid reimbursements, citing a report by state Comptroller Alan Hevesi.

Washington Post:
- Iraq’s radical Shiite Muslim cleric Moqtada al-Sadr called for a halt to the killing of all Iraqis, following the end of a Sunni Muslim boycott of politics.

LA Times:
- TV Watch, a group partially funded by broadcast networks, has created a Web site to diffuse media watchdog groups in the debate about indecency in television and radio.

Centre Press:
- A rejection to the European Union’s new constitution would weaken the position of France and deal a blow to Europe, French Prime Minister Jean-Pierre Raffrin said.

Financial Times Deutschland:
- SAP AG forecast a partnership with Microsoft will help it double the number of customers using its software on personal computers in three to five years.

Xinhua-PRNewswire:
- Bank of America may buy a 5% stake in China Construction Bank, paying as much as $2 billion.

Economic Releases

None of note