Mid-day Scoreboard

Indices
S&P 500 1,160.37 +.72%
DJIA 10,231.74 +.73%
NASDAQ 1,945.40 +.68%
Russell 2000 594.11 +.78%
DJ Wilshire 5000 11,433.25 +.76%
S&P Barra Growth 561.50 +.67%
S&P Barra Value 594.68 +.79%
Morgan Stanley Consumer 576.48 +.36%
Morgan Stanley Cyclical 712.10 +.72%
Morgan Stanley Technology 442.37 +.76%
Transports 3,469.94 +.87%
Utilities 368.42 +.57%
Put/Call .78 -15.22%
NYSE Arms .71 -50.82%
Volatility(VIX) 15.05 -2.08%
ISE Sentiment 158.00 +23.44%
US Dollar 83.83 +.41%
CRB 309.61 +.75%

Futures Spot Prices
Crude Oil 55.15 -.43%
Unleaded Gasoline 167.40 +1.31%
Natural Gas 7.25 +.76%
Heating Oil 153.40 -.72%
Gold 435.90 +.07%
Base Metals 125.15 -1.0%
Copper 148.50 +.07%
10-year US Treasury Yield 4.24% unch.

Leading Sectors
Homebuilders +2.17%
I-Banks +1.53%
Gaming +1.48%

Lagging Sectors
Biotech -.13%
Drugs -.19%
Gold & Silver -.38%

BOTTOM LINE: US stocks are higher mid-day on a bounce after Friday’s sell-off and a strong home sales report. The Portfolio is higher on gains in my Homebuilding, Networking and Internet longs. I exited a few shorts this morning and added a few new homebuilding and tech longs, thus leaving the Portfolio 75% net long. One of my new longs is BZH and I am using a $45 stop-loss on this position. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is very light. Measures of investor anxiety are lower. Today’s overall market action is modestly positive, considering Friday’s sell-off, stabilizing energy prices, a rising US dollar and merger activity. Banc of America made positive comments on the homebuilders this morning:

1. Inventories of homes for sale decreased 0.2% in March, the first decline since December.
2. Inventories represent just 4.0 months supply, substantially below the six-month level that NAR (National Association of Realtors) says is a balanced market.
3. The months' supply remains just above the record low of 3.8 set in January 2005.
4. February inventories were revised 2.0% lower.
5. Absolute inventories are 3.7% below year-ago levels.

I expect US stocks to trade modestly higher into the close on short-covering, lower energy prices and bargain-hunting.

Today's Headlines

Bloomberg:
- The euro dropped the most in more than a week against the US dollar and tumbled versus the yen after an industry survey showed German business confidence fell to the lowest in 19 months in April.
- Boeing won an order valued at as much as $6.1 billion from ACE Aviation Holdings’ Air Canada unit for 32 jets that will cut the airline’s fuel costs.

Wall Street Journal:
- General Electric is in talks to sell its self-storage unit to Prudential Financial and Extra Space Storage Inc. for about $2.5 billion.
- The backlog of US IPOs waiting to be priced is smaller than a year ago, showing that the IPO environment may be worsening, citing deal tracker Dealogic.
- JP Morgan Chase plans to tighten lending guidelines to curb loans and underwriting for industrial projects that may damage the environment.
- Some US mutual funds that concentrate on undervalued stocks have held back from the market lately, perceiving prices to be too high.
- Starz Entertainment Group’s operating income, which has dropped in half during the past two years, may fall another 50% this year as the cost of buying movies rises.

NY Times:
- Arianna Huffington, columnist and former candidate for governor in California, plans to introduce a new blog to discuss politics and entertainment on May 9 to compete with the Drudge Report.
- American Indians have started investing in Hollywood.
- The price of oil will likely take center stage at a scheduled meeting today between President Bush and Saudi Crown Prince Abdullah at Bush’s ranch in Texas.
- Former US President Clinton campaigned yesterday by satellite for UK Prime Minister Tony Blair, President Bush’s key ally in the liberation of Iraq, ahead of the May 5 parliamentary elections.

LA Times:
- Oil companies are reworking wells and considering reviving platforms off California’s coast as record oil prices push companies to develop new sources.

Chicago Sun-Times:
- Chicago Board Options Exchange Chairman Brodsky said the CBOE isn’t planning to buy the ISE because the move wouldn’t diversify its products.

Metal Bulletin:
- Jinlong Copper increased annual production capacity at its Tongling City, Anhui province smelter by 40% to 210,000 metric tons after metal prices rose.

ElConfidencial:
- Kohlberg Kravis Roberts offered $16.3 billion for Grupo Auna, owner of Spain’s third-largest wireless company and the nation’s largest cable-tv company.

Financial Times Deutschland:
- Pfizer’s Liptor cholesterol-reducer lost more than two-thirds of its German sales in the first three months of the year after a government policy change that requires patients to pay some prescription costs.

Economic Releases

- Existing Home Sales for March rose to 6.89M versus estimates of 6.79M and an upwardly revised 6.82M in February.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Monday Watch

Weekend Headlines
Bloomberg:
- Japanese Prime Minister Koizumi meets Chinese President Jintao today, after three weekends of anti-Japan rallies in China tattered relations between Asia's two biggest economies.
- Wal-Mart Stores today said April sales at US stores open at least one year are rising within its forecast range.
- EU Trade Commissioner Mandelson will consider limiting imports of nine categories of Chinese products from men's trousers to socks and stockings in an attempt to protect producers in Europe.
- Syria will complete the pullout of its forces from Lebanon tomorrow, complying with international demand after three decades in the country.
- Crude oil is rising, heading for its biggest five-day rally in four months, on speculation US refiners may increase demand to boost gasoline stockpiles before the peak summer motoring season.
- Hellman & Friedman LLC, a San Francisco buyout firm, agreed to buy Internet ad company DoubleClick for $1.1 billion.

Wall Street Journal:
- Ken Langone, Home Depot's co-founder, is considering making a bid for Archipelago Holdings, rivaling an offer made by the NYSE.
- Valero Energy agreed to buy Premcor Inc. for $8.7 billion including debt.
- Google is to make changes designed to help it attract more big, brand-name advertising, which is 98% of the US ad market.

New York Times:
- The expiration of the US ban on assault weapons last September didn't have the much-feared result of boosting weapons sales or increasing gun crimes.
- Dell and Microsoft are among the technology stocks liked by Chip Dickson, chief US strategist at Lehman Brothers.

Washington Post:
- Chinese President Hu Jintao is trying to tighten the Communist Party's grip on power and is willing to curb freedom of speech and other civil liberties to do it.

San Francisco Chronicle:
- Yahoo! and Google probably will expand their ad networks to television and mobile phones as the two media converge.
- San Francisco-area average monthly rents and occupancy rates were unchanged in the first quarter from the year-earlier period and when compared with the fourth quarter.

LA Times:
- New Mexico Governor Bill Richardson yesterday filed a lawsuit to stop the US Bureau of Land Management from allowing oil and gas drilling on Otero Mesa, a stretch of desert grassland on federal land.

Philadelphia Inquirer:
- More than half of the state legislatures in the US are considering measures that would prohibit lawsuits that claim a person's obesity problem is linked to fast food consumption.
- AstraZeneco Plc CEO McKillop said that US regulators are becoming excessively careful about drug safety, a problem that drove pharmaceutical companies out of Europe.

Financial Times:
- Auditors fees resulting from the introduction of the Sarbanes-Oxley act may fall by as much as 25% in 2005.
-French rejection of the EU's constitutional treaty in a national referendum on May 29 would "be a catastrophe for France" and result in "the fall of Europe," said former EU Commission President Romano Prodi.
- US tech entrepreneur Ed Iacobucci, who co-founded Citrix Systems, will today announce an air taxi service called DayJet that seeks to offer passengers the ability to fly to cities not served by scheduled services.

Reuters:
- BMW AG's sales fell 10% in China in the first quarter from a year ealier.

London-based Times:
- Walt Disney Studios Chairman Cook wants a new agreement with Pixar on their film-distribution partnership.

Cinco Dias:
- EADS will announce a US partner in the next two months with which it will bid for US military contracts.

Daily Telegraph:
- GlaxoSmithKline Plc is creating a new unit that will seek agreements with smaller biotechnology companies and academic institutions to develop drugs.

Observer:
- ICAP Plc, the world's largest broker of trades between banks, plans to expand in the US by starting a new broker dealer operation there.
- Constellation Brands hired NM Rothschild & Sons to advise it on a possible rival bid for Allied Domecq Plc.

Journal du Dimanche:
- Illycafe SpA, a closely held Italian coffee maker, plans to open 500 coffee bars by 2008 to keep market share as Starbucks expands in Europe.

JoongAng Newspaper:
- MCI Inc., via a subsidiary, agreed to pay $2 billion for telecommunications technology rights from South Korea's Exscoms.

Business Standard:
- Indian steelmakers such as Tata Steel Ltd. plan to spend as much as $18 billion to double capacity.

Weekend Recommendations
Bulls and Bears:
- Had guests that were positive on STLD, ATVI, DRS, GM, GOOG, CME, DAL, LSI, FO, mixed on ATI and negative on BUD.

Forbes on Fox:
- Had guests that were positive on ADP, CREE, MSFT, DLM, PFE and mixed on CMX.

Cashin' In:
- Had guests that were positive on NXTP, SO and mixed on TRB, JPM.

Cavuto on Business:
- Had guests that were positive on EBAY, C, CHL and mixed on AX.

Forbes:
- Ken Fisher has a positive column, recommending KRB, FISV, BG and TLD.

Barron's:
- Had positive comments on ZQK, INTC and PLT.
- Had negative comments on LZB, ETH, WSM, PIR and RSTO.

Night Trading
Asian indices are -.50% to +.50% on average.
S&P 500 indicated -.07%.
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
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/Estimate
ALTR/.15
ACI/.23
BYD/.52
CD/.24
CB/1.95
KMB/.93
IVX/.14
PVN/.38
RBK/.69
SBC/.33
SII/.62
TRI/.74
ZMH/.67

Splits
LNG 2-for-1

Economic Releases
10:00 EST
- Existing Home Sales for March are estimated at 6.79M versus 6.79M in February.

BOTTOM LINE: Asian Indices are mostly higher on optimism over earnings in the region. I expect US stocks to open modestly higher in the morning on a bounce from Friday's sell-off and merger activity. However, rising energy prices will likely mute gains. China's Shanghai A-Share Index is falling 1.5% again tonight and is trading at fresh six-year lows. The index is now down 28% over the last 12 months and 44% from its all-time high. The Portfolio is 25% net long heading into the week.

Weekly Outlook

There are several important economic reports and a number of significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - Existing Home Sales
Tues. - Consumer Confidence, New Home Sales
Wed. - Durable Goods Orders
Thur. - Advance 1Q GDP, Initial Jobless Claims, Help Wanted Index
Fri. - Personal Income, Personal Spending, 1Q Employment Cost Index, Final Univ. of Mich. Consumer Confidence, Chicago Purchasing Manager

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - Altera Corp.(ALTR), Cendant Corp.(CD), Chubb Corp.(CB), Kimberly Clark(KMB), SBC Communications(SBC), Zimmer Holdings(ZMH)
Tues. - Aflac(AFL), Amazon.com(AMZN), American Express(AXP), BJ Services(BJS), Chicago Merc.(CME), Coach Inc.(COA), ENSCO Intl.(ESV), Express Scripts(ESRX), Hilton Hotels(HLT), ImClone Systems(IMCL), Infospace Inc.(INSP), Lockheed Martin(LMT), Medco Health Solutions(MHS), Monster Worldwide(MNST), Schlumberger(SLB)
Wed. - Allergan(AGN), Anheuser-Busch(BUD), Baker Hughes(BHI), Biogen Idec(BIIB), Boeing(BA), Chiron(CHIR), Colgate-Palmolive(CL), ConocoPhillips(COP), Diamond Offshore(DO), JDS Uniphase(JDSU), Newmont Mining(NEM), Phelps Dodge(PD), Pulte Homes(PHM), Starbucks(SBUX), Verizon Communications(VZ), XM Satellite Radio(XMSR)
Thur. - Barrick Gold(ABX), Beazer Homes(BZH), Black & Decker(BDK), Bristol-Myers(BMY), Comcast(CMCSA), Dow Chemical(DOW), Estee Lauder(EL), Exxon Mobil(XOM), Kellogg(K), Kla-Tencor(KLAC), Microsoft(MSFT), Northrup Grumman(NOC), Procter & Gamble(PG), Sirius Satellite(SIRI), Starwood Hotels(HOT)
Fri. - Archer-Daniels(ADM), Cardinal Health(CAH), ChevronTexaco(CVX), Clear Channel(CCU), Electronic Arts(ERTS)

Other events that have market-moving potential this week include:

Mon. - Fed's Pianalto speaks
Tue. - Lehman Brothers Annual Retail Seminar
Wed. - Lehman Brothers Annual Retail Seminer
Thur. - CSFB Power Producers/Utilities Conference, Smith Barney Software Conference, Fed's Hoenig speaks, Fed's Santomero speaks
Fri. - Smith Barney Software Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on bargain hunting, short-covering, good earnings reports and low long-term interest rates. While I believe that US growth is slowing, an imminent recession is highly unlikely. As well, inflation measures are in the process of peaking, in my opinion. Thus, the chances of a period of stagflation are even more remote. Sentiment is currently near levels normally associated with meaningful market bottoms. Given the overall positive fundamentals and the p/e on the S&P 500's forward earnings estimates is at 15.63 and falling daily, stocks are becoming too cheap to ignore. I continue to expect the second half to be much better for US equities than the first half as inflation decelerates, commodities prices fall, long-term interest rates remain low, low valuations tempt investors, growth accelerates, the US dollar remains firm, employment continues to improve and merger activity continues. As I have stated previously, it is my belief that longer-term investors should use any further weakness over the coming weeks to begin building positions in favorite longs. Homebuilder, Retail, Biotech, Airline, Financial, Internet and Gaming shares should outperform in the second half of the year, given my outlook. My trading indicators are still bearish and the Portfolio is 25% net long heading into the week.