Today's Headlines

Bloomberg:
- Texas Pacific Group, a US buyout company, agreed to buy British Vita Plc, the UK’s largest maker of foam rubber.
- Global recorded music sales halted a four-year slide last year as digital downloads made up for a 1.3% decline in sales of compact discs.
- General Motor’s borrowing costs rose to the highest in almost two years after the world’s largest carmaker lost financial support from General Electric.
- Oracle Corp. won the takeover battle for Retek with a $643.3 million bid, beating SAP AG.
- ChevronTexaco Corp. may invest more than $1 billion to begin oil production in Brazil, capping six years of exploration and seeking to boost by a third its output from Latin America.
- IBM agreed to pay as much as $400 million to Compuware to settle lawsuits over software and patents.
- Kohlberg Kravis Roberts and Blackstone Group are among buyout firms that are increasingly teaming up to acquire bigger companies and avoid competing with each other.
- Wyeth, the maker of the antidepressant Effexor, said today that first-quarter profit excluding some items will exceed analysts’ estimates and reaffirmed its full-year forecast of $2.70 to $2.80 a share.

The Wall Street Journal:
- American International Group and a unit of Warren Buffet’s Berkshire Hathaway reversed at least half of a transaction that is being probed by US and state regulators.
- International Business Machines plans to use new technology to fight junk e-mail by sending back spam to the computer and the account that sent it
- TXU Corp., the largest Texas power producer, is taking advantage of deregulation to boost fees and rates and disconnect slow-paying customers.
- The US Consumer Product Safety Commission issued the largest civil penalty in its history, against Newell Rubbermaid’s Graco unit, a maker of car seats, cribs, and other children’s products.
- IGN Entertainment, a closely held maker of video games, may be sold for more than $800 million.
- The US Postal Service asked its governing board for permission to increase all rates by 5% to 6%.

The New York Times:
- The European Union delayed removing an arms embargo on China because of US pressure as well as China’s authorization to use force if Taiwan tries to secede.
- The New York Jets offered the state $720 million for the Manhattan site where the NFL team wants to build a $1.7 billion stadium.

Interfax:
- Primorsk oil port, Russia’s largest, exported 60% more crude in January and February than in the same period last year.

Vilaggazdasag:
- Motorola’s venture capital business wants to invest in East European technology development companies.

Economic Releases

- The Producer Price Index for February rose .4% versus estimates of a .3% increase and a .3% gain in January.
- The PPI Ex Food & Energy for February rose .1% versus estimates of a .1% gain and a .8% increase in January.
- At 2:15 EST the Fed is expected to raise the Fed Funds rate by 25 basis points to 2.75% and retain the phrase “measured pace” with respect to the pace of future hikes.

Morning Buy/Sell Recommendations

- Goldman Sachs: Reiterated Outperform on RIO and PAYX. Reiterated Underperform on NDC and SKS.
- Smith Barney: Reiterated Buy on CTSH, target $54. Reiterated Buy on BNI, target $60. Reiterated Buy on ERTS, target $67. Reiterated Buy on RCL, target $59. Rated NTGR Buy, target $20.
- Banc of America: Upgraded MOT to Buy, target $20.
- UBS: Raised CY to Buy, target $26. Raised MRVL to Buy, target $46. Raised NSM to Buy.
- JP Morgan: Raised FMD to Overweight.
- Piper Jaffray: Rated PBH Outperform, target $21. Rated TIBX Outperform, target $10. Rated HORC Outperform, target $47.
- Jeffries: Rated CHH Buy, target $75. Rated CERN Buy, target $59. Rated IDXC Buy, target $42.
- Bear Stearns: Rated SVR Outperform, target $19.
- Deutsche Bank: Rated SVR Buy, target $24.
- Prudential: Rated MHS Overweight, target $54.

Tuesday Watch

Late-Night News
Asian indices are lower, led down by exporters in the region on worries over the US Fed accelerating their pace of rate hikes. The UK is seeking diplomatic support for postponing a European Union decision to lift an arms embargo on China, the Financial Times said. State Street Corp., the largest US pension fund manager, plans an alliance with Bank of China Group Insurance to offer retirement plans in China, the South China Morning Post said. China will change the yuan's peg from the dollar to a basket of eight currencies and widen the band in which it is traded starting in May, the Nihon Keizai newspaper said. Microsoft and Symbian Ltd. will today announce an agreement allowing Symbian cell phone users to access Microsoft's Exchange e-mail system, the Financial Times said. Samsung Electronics forecast its first-quarter semiconductor sales will rise from a year earlier because of better-than-expected demand for flash memory chips, Edaily reported. Sony expects US sales of the PlayStation Portable, its biggest game product debut in almost 5 years, to top 1 million units within days of the release, Bloomberg said.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on PAYX. Reiterated Underperform on SKS and NDC.

Night Trading
- Asian Indices are -.75% to -.25% on average.
- S&P 500 indicated +.02%.
- NASDAQ 100 indicated +.03%.

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
Analyst Actions
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/Estimate
BMET/.40
CMC/.88
FDS/.33
FDO/.48
FRED/.27
GIS/.70
LEN/1.01
ORCL/.15
SONC/.20
WSM/.95

Splits
AMMD 2-for-1

Economic Releases
- The February Producer Price Index is estimated to have risen .3% versus a .3% increase in January.
- The February PPI Ex Food & Energy is estimated to have risen .1% versus a .8% increase in January.
- The FOMC is expected to raise the Fed Funds rate by 25 basis points to 2.75%.

BOTTOM LINE: I expect US equities to open mixed-to-lower in the morning on a higher-than-expected PPI report. However, stocks may rally later in the afternoon after the Fed raises the Fed Funds rate 25 basis points and maintains their current policy of hiking rates at a "measured pace." The Portfolio is 50% net long heading into tomorrow.

Monday Close

Indices
S&P 500 1,183.78 -.49%
DJIA 10,565.39 -.60%
NASDAQ 2,007.51 -.01%
Russell 2000 621.57 -.16%
DJ Wilshire 5000 11,678.83 -.42%
S&P Barra Growth 569.88 -.38%
S&P Barra Value 609.58 -.60%
Morgan Stanley Consumer 573.51 -.41%
Morgan Stanley Cyclical 763.95 -.22%
Morgan Stanley Technology 457.73 -.27%
Transports 3,749.47 -.03%
Utilities 358.91 -.08%
Put/Call .77 -39.37%
NYSE Arms .90 +1.97%
Volatility(VIX) 13.61 +3.58%
ISE Sentiment 132.00 +.76%
US Dollar 82.97 +1.12%
CRB 313.49 -1.79%

Futures Spot Prices
Crude Oil 56.62 -.18%
Unleaded Gasoline 159.20 -.23%
Natural Gas 7.32 +.03%
Heating Oil 157.35 unch.
Gold 431.30 -.02%
Base Metals 130.28 -.29%
Copper 148.75 -.10%
10-year US Treasury Yield 4.52% +.36%

Leading Sectors
Computer Service +2.28%
Airlines +1.83%
Broadcasting +.48%

Lagging Sectors
Defense -.97%
Tobacco -1.03%
Insurance -1.79%

After-hours Movers
WYE +3.44% after boosting 1Q forecast and reaffirming 05 outlook.
ERTS -11.92% after lowering 05 guidance.
TTWO -5.84%, ELBO -5.25%, THQI -5.53% and ATVI -5.26% on ERTS news.

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
PM Market Call
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- Goldman Sachs: Reiterated Outperform on MO.
- Wachovia: Rated EMAG Outperform. Rated VVUS Outperform.

After-hours News
US stocks finished lower today on continuing worries over future economic growth. After the close, Quicksilver Inc., a US maker of ski clothing, will say tomorrow it’s buying a controlling stake in French ski equipment maker Skis Rossignol SA, AFP reported. Rubert Murdoch’s News Corp. may gain a license to broadcast directly in India, avoiding the monopoly of local cable operators, the Financial Times reported. Southwest Airlines plans to expand capacity by 10% in 2005 without boosting staff levels, the Financial Times reported. Huawei Technologies is seeking partnerships with Nortel Networks and Lucent Technologies to bolster sales in the US and Europe, China Daily said. The US opposed UN Secretary-General Annan’s call for new guidelines on the use of military force in a report that recommends expansion of the Security Council and dozens of other steps designed to make the world body more effective after recent evidence of massive fraud and sexual abuse, Bloomberg reported. President Bush said Congress must be willing to debate all ideas about how to solve Social Security’s future funding shortfall to come up with a “permanent fix” for the system, Bloomberg said. Goldman Sachs Group agreed to buy Zilkha Renewable Energy, a developer of wind power projects, to expand its electricity-generating business, Bloomberg reported. Gasoline climbed an average of 5.3 cents to $2.109 a gallon for the week ended today, surpassing the previous high of $2.064 reached May 24, Bloomberg said. Time Warner agreed to pay $300 million to settle US SEC allegations its AOL unit overstated ad revenue and subscriber numbers, Bloomberg reported. GM CEO Wagnor, who last week forecast the company’s biggest quarterly loss since 1992, bought $1.5 million of GM shares today, boosting his stake in the company by 25% in what he said was a vote of confidence, Bloomberg reported.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Chinese ADR shorts and Wireless longs. I took profits in a few Tech shorts in the afternoon and added a few new Tech longs, thus leaving the Portfolio 50% net long. One of my new longs is YHOO and I am using a $30.75 stop-loss on this position. The tone of the market improved slightly into the afternoon as the advance/decline line rose from daily lows, most sectors trimmed losses and volume remained light. Small-caps, Techs and Transports outperformed throughout the day and measures of investor anxiety were mixed. Overall, today’s market action was negative, considering recent losses, a firming US dollar, a declining CRB Index and the stabilization of energy prices/ interest rates. The CRB Index has likely topped for the year after its recent “blow-off” style run-up. However, a test of its recent highs may occur over the next couple of months before a more significant decline occurs in this index in the second half of the year.

BOTTOM LINE: The Portfolio is unchanged mid-day as gains in my Steel and Semi longs are offsetting losses in my Wireless longs. I have not traded today, thus leaving the Portfolio’s market exposure 25% net long. The tone of the market is modestly negative as the advance/decline line is lower, most sectors are declining and volume is light. Measures of investor anxiety are mostly lower, which is a negative. Today’s overall market action is negative, considering the major indices’ oversold state and the stabilization of energy prices and interest rates. The decline in the CRB Index and gains in the US dollar are also positives that are being ignored today. I expect US stocks to trade modestly higher into the close on optimism over merger activity, short-covering and bargain-hunting.