Stocks Finish Mixed in Choppy Trading

Indices
S&P 500 1,161.17 -.09%
DJIA 10,256.95 +.05%
NASDAQ 1,933.07 +.23%
Russell 2000 584.48 -.24%
DJ Wilshire 5000 11,417.08 -.09%
S&P Barra Growth 561.74 +.04%
S&P Barra Value 595.07 -.21%
Morgan Stanley Consumer 580.09 +.02%
Morgan Stanley Cyclical 702.21 +.08%
Morgan Stanley Technology 439.26 +.45%
Transports 3,462.65 -.61%
Utilities 369.06 -1.11%
Put/Call .84 -10.64%
NYSE Arms 1.08 +16.46%
Volatility(VIX) 14.53 -3.90%
ISE Sentiment 124.00 -24.84%
US Dollar 84.36 -.15%
CRB 299.69 -1.06%

Futures Spot Prices
Crude Oil 49.43 -2.93%
Unleaded Gasoline 145.50 -3.93%
Natural Gas 6.51 -2.82%
Heating Oil 143.50 -1.93%
Gold 429.20 +.35%
Base Metals 122.70 -1.82%
Copper 144.20 -.10%
10-year US Treasury Yield 4.15% -.71%

Leading Sectors
Steel +2.11%
Airlines +2.09%
Gold & Silver +1.10%

Lagging Sectors
Oil Tankers -2.14%
Energy -2.33%
Oil Service -2.63%

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Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on TYC, YHOO and AVP.

Afternoon/Evening Headlines
Bloomberg:
- Crude oil fell $1.42/bbl. in NY to the lowest in more than two months on speculation that US inventories rose last week as increased OPEC shipments arrived and refineries boosted gasoline production.
- Federal Reserve policy markers raised the benchmark US interest rate a quarter-point to 3% and restated a plan to carry out further increases at a “measured” pace to head off faster inflation.

CNBC:
- Bill Gross, CIO at PIMCO and manager of the world’s largest bond fund, said the Fed may stop raising interest rates later this year.
AP:
- NY’s Court of Appeals will allow video lottery terminals because they operate like a traditional lottery rather than a slow machine.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs and Energy-related shorts. I added some QQQQ longs, added ERTS short and added to some of my Energy-related shorts in the afternoon, thus leaving the Portfolio 75% net long. I am using a stop-loss of $55 on the ERTS short. The tone of the market finished mixed into the close as the advance/decline finished slightly higher, sector performance was mixed and volume was average. Measures of investor anxiety were mostly higher. Overall, today’s market action was neutral considering the Fed’s lack of acknowledgement of slowing growth and today’s decline in energy prices. The Fed’s comments were neither hawkish or dovish, but somewhere in between.

Stocks Mixed Ahead of Fed

Indices
S&P 500 1,160.96 -.11%
DJIA 10,249.79 -.01%
NASDAQ 1,933.73 +.27%
Russell 2000 585.90 +.01%
DJ Wilshire 5000 11,419.93 -.06%
S&P Barra Growth 561.22 -.05%
S&P Barra Value 595.37 -.16%
Morgan Stanley Consumer 579.13 -.15%
Morgan Stanley Cyclical 702.64 +.14%
Morgan Stanley Technology 439.32 +.46%
Transports 3,471.46 -.36%
Utilities 369.01 -1.12%
Put/Call .77 -18.09%
NYSE Arms 1.13 +20.75%
Volatility(VIX) 15.08 -.26%
ISE Sentiment 143.00 -13.3%
US Dollar 84.40 -.11%
CRB 300.88 -.66%

Futures Spot Prices
Crude Oil 50.15 -1.51%
Unleaded Gasoline 148.20 -2.15%
Natural Gas 6.58 -1.60%
Heating Oil 145.50 -.56%
Gold 428.30 -.49%
Base Metals 122.70 -1.82%
Copper 144.40 -.76%
10-year US Treasury Yield 4.18% -.09%

Leading Sectors
Steel +2.12%
Airlines +1.27%
Software +.93%

Lagging Sectors
Oil Tankers -1.46%
Oil Service -1.83%
Energy -1.83%

BOTTOM LINE: The Portfolio is higher mid-day on gains in my Internet longs and Energy-related shorts. I have not traded this morning, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is barely higher, most sectors are higher and volume is below average. Measures of investor anxiety are mixed. Today’s overall market action is neutral, considering the better-than-expected factory orders report and decline in energy prices. Stocks have pretty much flat-lined after the open ahead of the Fed announcement at 2:15 EST. I expect US stocks to trade higher into the close after the Fed boosts rates 25 basis points, leaves the “measured” language and makes more dovish comments. Oil breaking back below $50/bbl. should also boost stocks.

Today's Headlines

Bloomberg:
- The government of Afghanistan plans to build its first international railway, linking the former Taliban stronghold city of Kandahar in the south, to Pakistan.
- DaimlerChrysler AG said April sales of Chrysler and Mercedes-Benz vehicles rose 8.7%.
- Ford Motor said US sales of cars and trucks fell 1.5% in April.
- Nissan said US sales of cars and trucks soared 32%.
- Iran rejects US and European efforts to block its development of nuclear technology, and is determined to continue a uranium enrichment program.
- Crude oil is falling in NY on signs that US inventories rose last week as increased OPEC shipments arrived and refineries boosted gasoline production.

Wall Street Journal:
- US companies have been boosting training programs to address shortages in necessary skills among workers and a decline in skilled laborers.
- New scanners made by GE, Philips Electronics, Siemens and Toshiba may help physicians spot coronary artery disease better than traditional angiograms.

NY Times:
- Forstmann Little & Co., the buyout firm run by Theodore Forstmann, agreed to buy 24 Hour Fitness Worldwide, the world’s biggest closely held fitness center chain, for $1.6 billion.
- AIG’s accounting errors may have boosted the insurance company’s operating income figures in the five years by about 3.8%.
- US Congress is likely to pass a law requiring states to verify whether every driver’s license applicant is legally in the country in an effort to prevent terrorist attacks.
- Air Evac Lifeteam, Air Methods Corp. and Petroleum Helicopters Inc. are part of a growing industry of medical helicopters that are becoming routine forms of transportation at public expense.

Philadelphia Inquirer:
- Campbell Soup Co. introduced its new line of Gold Label premium soups at a food show in Chicago.

Boston Globe:
- Massachusetts collected $2 billion in taxes in April, the biggest one-month take ever, and Governor Mitt Romney reacted with another call to trim taxes.

Focus-Money:
- BMW AG will halt production at its US plan in Spartanburg, South Carolina, for longer than usual during this year’s Christmas holiday period amid subdued demand for the X5 and Z4 models.

Factory Orders Exceed Expectations

- Factory Orders for March rose .1% versus estimates of a 1.2% decline and a downwardly revised .5% fall in February.

Bottom Line: The .1% gain in factory orders is more evidence that economic growth is slowing to more sustainable and less inflationary levels. An 18% increase in orders for petroleum and coal products accounted for most of the “better-than-expected number.” However, today’s report also showed orders for capital goods excluding aircraft, a gauge of future business investment rose 10.4% from the first quarter of 2004. While the rate of increase is slower than last year, this is still a healthy gain.

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- GE received a subpoena from the SEC about a type of policy used by its insurance unit that can be misused to smooth earnings.
- Lenovo Group Ltd. appointed IBM's Stephen Ward as CEO after completing the $1.25 billion takeover of IBM's PC division.

Wall Street Journal:
- Fidelity Investments' Abigail P. Johnson, head of the largest US mutual fund company's money management unit, will be transferred to another unit and succeeded by Fidelity executive Stephen P. Jones.

China Times:
- Taiwan is developing long-range missiles.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on MDT, HEP and EMC.
- Reiterated Underperform on MCRL and PFG.

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated -.04%.

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Earnings of Note
Company/EPS Estimate
AG/.24
CMX/.43
CEPH/.52
CVH/1.06
ERTS/.09
EMR/.81
KOSP/.55
LVS/.25
LTR/1.73
MACR/.21
MMC/.49
MXIM/.38
MBI/1.34
MET/.86
NTE/.22
KWK/.20
SHRP/.95
SBL/.11
THC/-.04
RIG/.17
TYC/.47
VRTS/.24

Splits
TBL 2-for-1
HCSG 3-for-2

Economic Releases
10:00 EST:
- Factory Orders for March are estimated to fall 1.2% versus a .2% increase in February.

2:15 EST:
- The FOMC is expected to raise its benchmark rate 25 basis points to 3.0% from 2.75%.

Afternoon:
- Total Vehicle Sales for April are estimated at 16.8M versus 16.8M in March.
- Domestic Vehicle Sales for April are estimated at 13.3M versus 13.5M in March.

BOTTOM LINE: Asian indices are mostly higher, led by technology shares in the region. I expect US equities to open modestly higher on short-covering ahead of the Fed announcement. I expect the Fed to raise their benchmark rate by 25 basis points, keep the "measured" language and make more dovish comments. The market should rally further in the afternoon on the news. The Portfolio is 75% net long heading into tomorrow.