Stocks Finish Only Slightly Lower after Late-day Rally

Indices
S&P 500 1,289.14 -.16%
DJIA 11,025.51 -.25%
NASDAQ 2,311.11 -.15%
Russell 2000 740.16 -.30%
Wilshire 5000 13,002.67 -.13%
S&P Barra Growth 609.34 -.17%
S&P Barra Value 676.32 -.15%
Morgan Stanley Consumer 603.10 -.41%
Morgan Stanley Cyclical 792.26 -.72%
Morgan Stanley Technology 542.88 +.30%
Transports 4,482.05 -.71%
Utilities 411.66 -.04%
Put/Call .96 +35.21%
NYSE Arms .95 +31.54%
Volatility(VIX) 11.72 +1.56%
ISE Sentiment 171.00 +12.50%
US Dollar 89.55 -.74%
CRB 329.21 +1.35%

Futures Spot Prices
Crude Oil 63.51 +.24%
Unleaded Gasoline 169.90 +.38%
Natural Gas 6.76 +.04%
Heating Oil 181.50 +.56%
Gold 571.60 %
Base Metals 169.09 +2.35%
Copper 226.75 unch.
10-year US Treasury Yield 4.62% +.95%

Leading Sectors
Gold & Silver +2.67%
Oil Service +2.39%
Energy +1.49%

Lagging Sectors
Gaming -1.06%
Retail -1.20%
Airlines -1.33%

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Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on (WCC).

Afternoon/Evening Headlines
Bloomberg:
- Chevron Corp.(CVX) said it acquired five oil sands leases, boosting its holdings in the Athabasca region of northern Alberta.
- Google Inc.(CEO) Schmidt said he sees no limit to the Internet search engine’s ability to increase advertising revenue, a bullish outlook that allayed investor concerns about slowing growth.
- Fidelity Investments, the world’s largest mutual fund company, said earnings rose 20% last year, helped by rising stock prices and its brokerage business.
- The US Senate voted 89-10 to renew the USA Patriot act, ending a 2 1/2 –month stalemate over the law that gave the FBI expanded powers to investigate terrorism suspects after the Sept. 11 attacks.
- Crude oil rose as speculation increased that OPEC would cut production after the President of the group warned of a potential “dramatic” price decline in oil.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Computer longs and Networking longs. I existed an existing long and added (CIEN) long in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was just slightly bearish. However, the bears failed to gain traction once again, even as oil and long-term rates rose. I expect stocks to make another push higher soon on another round of short-covering.

Stocks Slightly Lower into Final Hour as Oil Bounces and Long-term Rates Rise

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Networking longs. I added to my (ANF) long this morning and to an existing short, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are lower and volume is above average. The AAII percentage of Bulls fell to 40.94% this week from 43.21% the prior week. This reading is now below average levels. The AAII percentage of Bears rose to 29.13% this week from 28.40% the prior week. This reading is still around average levels. I expect bullish sentiment to rise modestly next week. These readings are still not near levels associated with short-term tops. Since the average stock is already up about 6.7% for the year, these numbers continue to bode well for a continuation of recent strength. I expect US stocks to trade modestly higher into the close from current levels on short-covering, tech stock gains and stabilizing long-rates.

Today's Headlines

Bloomberg:
- Wal-Mart Stores(WMT) said February sales rose 3.2%.
- World oil markets are oversupplied and pose the risk of “dramatic” price declines, OPEC President Daukoru said.
- Shoppers curbed spending at US retailers in February after a very strong January and the onslaught of colder weather.
- Russian Economy Minister Gref said the quality of economic growth is declining and he is “very afraid” there may be a sudden drop in stock prices.
- Microsoft Corp.(MSFT) accused European Union regulators of arranging “secret contacts” between its competitors and cast doubt on the independence of an EU-appointed monitor.
- US health officials have drafted guidelines to help speed approvals of new vaccines against pandemic and seasonal flu.
- Natural gas is falling again, down 58% from highs, as traders focus on a supply surplus that is 48.2% above the five-year average

Wall Street Journal:
- Cooperation between the US SEC, the Federal Reserve Bank of NY and Britain’s Financial Services Authority in the area of credit derivatives illustrates the extent to which regulators are cooperating across national boundaries.
- The possible offer by investor Carl Icahn and Steel Partners Ltd. for South Korea’s KT&G Corp. shows how US hedge funds ad other investors are taking corporate-raider tactics to the rest of the world as the cash they have to spend grows.
- The FDA distributed its first safety instructions for makers of fresh-cut fruit and vegetables.
- Del Monte Foods(DLM) is in the last stages of negotiating for the acquisition of Meow Mix.
- Morgan Stanley(MWD), HSBC Holdings PLC, Standard Chartered PLC and other global banks are expanding in Dubai as the United Arab Emirates sheikhdom builds a world-class financial center.
- BellSouth(BLS) and other US telecom companies are reviewing new rates for high-speed Internet access that would require consumers to pay extra if they use more services.
- James Gorman, new head of Morgan Stanley’s(MWD) retail brokerage unit, has changed its name to Global Wealth Management Group.
- An earnings restatement this week by Doral Financial(DRL), Puerto Rico’s biggest mortgage lender, has persuaded many that some of the island’s banks are run more like private clubs than public companies.
- Honeywell(HON), which has lost its position as the main supplier of standard cockpit equipment for Boeing(BA) jets, hopes new aviation-safety technologies will boost its profits and stock price.
- Cartier, the luxury goods unit of Cie. Financiere Richemont AG, Italy’s Bulgari S.p.A and other jewelry makers are copying fashion cycles with seasonal collections of jewelry.

USA Today:
- The US Congress may require every job applicant in the country to show a Social Security card with personal data coded into it electronically.

NY Post:
- More than 24 million Americans between the ages of 15 and 29 identify with hip-hop culture, and their spending power may rise 30% by 2010, citing a report released yesterday from MarketResearch.com.

NY Times:
- Yahoo!(YHOO) is scaling back plans to introduce original television-style shows on its Web site, citing Lloyd Braun, the head of its media group.
- The percentage of US women working outside the home has fallen since the terrorist attacks in 2000, helping to push the overall labor participation rate lower.
- TiVo Inc.(TIVO) plans to begin offering parents an option in June to enable their digital video recorders to limit the shows their children can watch based on certain family programming ratings.

Newark Star-Ledger:
- Atlantic City casinos will ask New Jersey legislators to approve hand-held gaming devices that let gamblers play away from the casino floor.

New Scientist:
- Sharks could be used as “spies” if a research project funded by the US Defense Department bears fruit.

El Moudjahid:
- Algeria’s state-owned energy group Sonatrach discovered a crude-oil field in eastern Algeria. It is the second new discovery this year in the nation.

AppleInsider:
- Apple Computer(AAPL) may add a movie download service to its iTunes online store.

Job Market Still Healthy

- Initial Jobless Claims for last week rose to 294K versus estimates of 285K and 279K the prior week.
- Continuing Claims fell to 2486K versus estimates of 2450K and 2488K prior.

BOTTOM LINE: First-time claims for unemployment benefits rose last week, while total jobless rolls dropped to a five-year low, evidence of plentiful jobs that will keep consumers in a mood to spend, Bloomberg reported. The four-week moving average of initial claims rose to 287,250 versus 282,000 the prior week. The unemployment rate for those eligible for benefits, which tracks the unemployment rate, remained at 1.9%. I continue to believe the labor market will remain healthy without generating substantial unit labor costs increases.

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Thursday Watch

Late-Night Headlines
Bloomberg:
- ImClone Systems(IMCL) won US approval to sell its Erbitux cancer medicine as a treatment for patients with head and neck tumors, the first medicine for people with the disease in 45 years.
- Google Inc.(GOOG) which operates the most-used Internet search engine, is switching its servers to run on Advanced Micro Devices(AMD) chips instead of those made by Intel Corp.(INTC), according to a Morgan Stanley report.
- Honda Motor, buoyed by a 38% jump in sales of its Civic small car, helped Japanese and South Korean automakers widen their share of the US auto market in February.

Wall Street Journal:
- BellSouth Corp.(BLS) is considering charging customers on a so-called pay-as-you-go basis for its broadband Internet service, citing Chief Technology Officer Smith.

Financial Times:
- Former President Bill Clinton advised the United Arab Emirates’ DP World on its $6.8 billion acquisition of London-based Peninsular & Oriental Steam Navigation.
- General Motors Corp.’s(GM) board will not select a buyer for an $11.5 billion stake in its GMAC financial-services unit when it meets on March 6, citing an interview with Rick Wagoner.

Quitio daily el Comercio:
- Ecuador’s government aims to reach a free-trade agreement with the United States by April, after negotiating partners Peru and Colombia reached similar accords.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (AMLN), (ARO), (PETM) and (SGMS).
- Reiterated Underperform on (KEA).

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

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Earnings of Note
Company/EPS Estimate
- (BBG)/.59
- (CKP)/.36
- (CIEN)/-.02
- (DLM)/.21
- (KCS)/.80
- (NOVL)/.03
- (UVN)/.23

Upcoming Splits
- (PHLY) 3-for-1
- (QLGC) 2-for-1

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 285K versus 278K the prior week.
- Continuing Claims are estimated to fall to 2450K versus 2495K prior.

BOTTOM LINE: Asian indices are mostly higher, led by exporting shares in the region after better-than-expected US economic reports. I expect US equities to open mixed and to rise modestly into the afternoon. The Portfolio is 100% net long heading into the day.