Tuesday Close

Indices
S&P 500 1,171.71 -1.02%
DJIA 10,470.51 -.90%
NASDAQ 1,989.34 -.91%
Russell 2000 618.58 -.48%
DJ Wilshire 5000 11,570.94 -.92%
S&P Barra Growth 565.65 -.74%
S&P Barra Value 601.72 -1.29%
Morgan Stanley Consumer 570.62 -.50%
Morgan Stanley Cyclical 758.78 -.68%
Morgan Stanley Technology 450.70 -1.54%
Transports 3,754.23 +.13%
Utilities 351.89 -1.96%
Put/Call .98 +27.27%
NYSE Arms 1.04 +16.28%
Volatility(VIX) 14.27 +4.85%
ISE Sentiment 166.00 +25.76%
US Dollar 83.44 +.57%
CRB 313.02 -.15%

Futures Spot Prices
Crude Oil 55.68 -.62%
Unleaded Gasoline 156.63 -.55%
Natural Gas 7.21 -.51%
Heating Oil 153.95 -.46%
Gold 427.00 -1.07%
Base Metals 130.36 +.06%
Copper 148.25 -1.0%
10-year US Treasury Yield 4.64% +2.61%

Leading Sectors
Airlines +1.03%
Computer Service +.56%
Oil Service +.56%

Lagging Sectors
Utilities -1.96%
Insurance -2.10%
Software -2.44%

After-hours Movers
ATPL +36.0% after announcing a special, one-time cash dividend of $12.50 per common share.

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 PAYX.
- Said BenQ’s newly developed ink cartridges will pressure printer margins of established printer vendors.

Legg Mason:
- Raised MKC to Buy, target $41.

Morgan Stanley:
- Raised SDS to Overweight.

Afternoon/Evening Headlines
Bloomberg:
- US Treasuries are still overvalued even after the recent rise in yields, said Bill Gross, chief investment officer at PIMCO.
- American International Group may have a “serious problem” if executives refuse to answer questions in an accounting investigation, NY Attorney General Eliot Spitzer said.
- The US dollar rose to the highest in a month against the euro and yen after the Fed raised its target interest rate a quarter point to 2.75% and suggested the pace of rate hikes may accelerate.
- US Treasury notes tumbled the most since November after the Fed raised its benchmark interest rate.
- AOL Latin America said it may file for bankruptcy protection because it doesn’t have enough cash to fund its business beyond September and pay its debt.
- Oracle Corp. said third-quarter profit fell 15% on costs to buy PeopleSoft and revenue lagged behind analysts’ expectations.

Financial Times:
- Hyundai Motor aims to increase sales in the US by one-sixth this year, mostly at the expense of Japanese rivals.

Sydney Morning Herald:
- Rio Tinto Group and Xstrata Plc may be studying a joint bid for WMC Resources Ltd. to top BHP Billiton’s A$7.85 a share offer.

China Daily:
- China’s central bank may raise interest rates again in the second quarter.

SportsBusiness Daily:
- General Motors will become the exclusive automobile partner of Major League Baseball as part of a $50 million agreement.

BOTTOM LINE: US stocks fell today on worries over rising interest rates and inflation. The Portfolio finished higher on gains in my Chinese ADR shorts, Homebuilding shorts and Gaming longs. I took profits in a number of Tech longs in the afternoon and added a few new Homebuilding shorts, thus leaving the Portfolio 25% net long. One of my new shorts is HOV and I am using a $54 stop-loss on this position. The tone of the market deteriorated meaningfully into the afternoon as the advance/decline line dropped substantially, almost every sector fell and volume increased. Tech and interest-rate sensitive sectors underperformed, while small-caps outperformed and measures of investor anxiety were mostly higher. Overall, today’s market action was negative, considering recent losses, a firming US dollar and declining energy prices. The Bloomberg Crude Oil % Bulls is now at 64%, the highest reading since oil peaked in Oct. of last year. The bond market’s reaction to the Fed’s policy statements leads me to believe the 10-year T-note yield will test its highs set in June of last year. While today’s action was disheartening for the Bulls, a further spike in measures of investor anxiety from current levels will likely result in a much more durable and tradable bottom in the near future.

Mid-day Scoreboard

Indices
S&P 500 1,187.74 +.33%
DJIA 10,591.32 +.24%
NASDAQ 2,010.95 +.17%
Russell 2000 625.56 +.64%
DJ Wilshire 5000 11,720.97 +.36%
S&P Barra Growth 572.14 +.39%
S&P Barra Value 611.20 +.27%
Morgan Stanley Consumer 575.81 +.40%
Morgan Stanley Cyclical 769.49 +.73%
Morgan Stanley Technology 456.60 -.25%
Transports 3,793.59 +1.17%
Utilities 359.55 +.18%
Put/Call 1.02 +32.47%
NYSE Arms .86 -4.51%
Volatility(VIX) 13.35 -1.91%
ISE Sentiment 172.00 +30.30%
US Dollar 82.75 -.28%
CRB 313.54 +.02%

Futures Spot Prices
Crude Oil 57.05 -.71%
Unleaded Gasoline 159.00 -.35%
Natural Gas 7.32 +.03%
Heating Oil 156.50 -.54%
Gold 431.40 unch.
Base Metals 130.36 +.06%
Copper 149.90 +.67%
10-year US Treasury Yield 4.48% -.94%

Leading Sectors
Oil Service +2.67%
Iron/Steel +2.24%
Homebuilders +1.90%

Lagging Sectors
Papers -.12%
Insurance -.51%
Software -1.38%

Links of Interest
Market Internals
Movers & Shakers
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon
Real-time Intraday Chart/Quote

BOTTOM LINE: US stocks are modestly higher mid-day as long-term interest rates decline and energy prices stabilize. The Portfolio is higher on gains in my Chinese ADR shorts, Energy-related longs and Steel longs. I added a few longs from various sectors this morning, thus leaving the Portfolio’s market exposure 75% net long. One of my new longs is STN and I am using a $65 stop-loss on this position. The tone of the market is modestly positive as the advance/decline line is slightly higher, almost every sector is gaining and volume is very light. Commodities, Cyclicals and Small-caps are outperforming, while Tech is once again underperforming. Measures of investor anxiety are mostly lower, which is a negative. Today’s overall market action is decent ahead of the Fed’s commentary. I will closely monitor the bond market’s reaction to the news before further shifting the Portfolio’s market exposure. I expect US stocks to trade modestly higher into the close as volatility and volume increase on short-covering and bargain-hunting .

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.