Today's Headlines

Bloomberg:
- The UNs’ nuclear agency cleared the way for the Security Council to weigh possible political or economic sanctions against Iran after 3 years of inspections failed to declare the Islamic Republic’s atomic work peaceful.
- Exxon Mobil(XOM) said it will raise capital spending 13% this year to about $20 billion to boost reserves and expand refineries.
- OPEC will maintain oil production near 20-year highs as violence in Nigeria and a dispute with Iran over nuclear research keep prices above $60/bbl.
- Shares of the NYSE(NYX) climbed as much as 12% in their trading debut, underlining investor confidence in the future of the world’s largest equity market as a public company.
- Micro Tech(MU) agreed to buy Lexar Media(LEXR) for about $680 million in stock to expand a push into the fastest-growing part of the flash-memory market.
- Biogen(BIIB) and Elan(ELN) won the backing of a US regulatory panel to resume sales of Tysabri, the MS drug withdrawn a year ago because it was linked to a rare, fatal brain infection.
- Copper, zinc, and nickel dropped in NY and London on speculation rising interest rates will slow economic growth, curbing demand for industrial metals.
- Oil is falling for a third day after a report showed a larger-than-expected gain in US stockpiles left inventories at 7-year high levels.
- Brazil’s currency, bonds and stocks tumbled, leading declines throughout Latin America, as rising interest rates in the US, Europe and Japan lured money from riskier developing country assets that are heavily dependent on commodities.

Wall Street Journal:
- A US federal grand jury is looking into possible price-fixing and collusion in the air-freight business, indicating that the Justice Department might seek criminal charges against some airlines.
- XM Satellite Radio Holdings(XMSR) will soon have to carry advertising on four of its stations, citing the company’s chairman.
- GM(GM) failed to follow US consumer trends and regional preferences, running ads in Miami showing cars driving in snow and starting Spanish-language advertising later than rivals.
- Verizon Communications(VZ) CEO Seidenberg is betting that high-speed lines will help the company win against rivals in the race to supply televisions, Internet and voice services.
- Prime brokers, which offer preferred-customer services for hedge funds that include financing trading, helping with paperwork and introducing potential clients, may have too free a rein.
- David Tepper, who heads Appaloosa Management LP, a hedge-fund firm, has acquired 14.8% of Dana Corp.(DCNAQ), a vehicle parts maker that went into Chapter 11 last week, but individual investors would be wise not to emulate him.


Market News Intl.:
- Fed Bank of Minneapolis President Gary Stern said he doesn’t see any “material” acceleration of inflation.

USA Today:
- The US government plans to test almost eight times as many wild birds this year as in the past decade in efforts to stave off the spread of the deadly H5N1 bird flu virus.

NY Times:
- Chinese Web sites are home to scam artists selling products from date rape drugs to stolen cars.
- New York State regularly sends patients from mental hospitals to nursing homes, where it illegally houses hundreds of patients without the required care and in conditions comparable to imprisonment.

Washington Post:
- Harold Ickes, an adviser to Senator Hillary Rodham Clinton, is leading a group of Democrats in raising millions of dollars to start a private firm named Data Warehouse that plans to gather data on Americans in an attempt to find Democratic voters.

Reuters:
- Boston Scientific(BSX) plans to appoint new management and may adopt another name for Guidant’s(GDT) heart-rhythm unit after closing its $27 billion acquisition of Guidant next month.

AP:
- Arizona Governor Janet Napolitano said she signed an executive order to put more of the state’s National Guard troops on the border with Mexico to assist federal efforts to curb illegal immigration.

BBC’s Brazilian News:
- Brazil may build as many as seven nuclear power plants in 15 years as part of a plan to diversify energy sources, citing Science and Technology Minister Rezende.

Economic Releases

- None of note

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Merck Inc.(MRK) has cut the price for its Stocrin AIDS drug by 20% in developing countries.
- Pearson Plc’s Penguin Group purchased the rights to former Federal Reserve Chairman Alan Greenspan’s book on the world economy and its future for an undisclosed amount.
- Google Inc.(GOOG) said it mistakenly posted a revenue forecast in notes prepared ahead of a meeting last week. The estimate would trail some projections.
- Prudential Financial(PRU) may buy Allstate’s(ALL) variable annuities unit for as much as $750 million.
- Japan’s bank lending rose for the first time in more than nine years, adding to evidence that deflation is ending in the world’s second-biggest economy.
- The US House, by a vote of 280-138, passed a new version of the USA Patriot Act, removing the last barrier to renewal of the law that gave the FBI expanded powers to investigate terrorism after the Sept. 11 attacks.
- Namco Bandai Holdings, Japan’s second-biggest toys and game software maker, said Sony(SNE) won’t be able to release its PlayStation 3 console as scheduled this spring.

Financial Times:
- Gillette’s new Fusion razor, which went on sale four weeks ago, has accounted for 55% of new razor purchases.

Automotive News:
- Mississippi is offering $240 million in federal tax breaks for Kia Motors to build an assembly plant as the US state tries to lure investment after the ravage left by Hurricane Katrina.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (STX), (SYMC) and (MRVL).

Night Trading
Asian Indices are -1.0% to -.50% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.18%.

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Earnings of Note
Company/EPS Estimate
- (ASVI)/.24
- (CWTR)/.17
- (CMTL)/.33
- (DYN)/-.12
- (GMST)/-.05
- (HUG)/.46
- (L)/.04
- (MIK)/.85
- (REM)/.36
- (TECD)/.67
- (WIND)/.12

Upcoming Splits
- None of note

Economic Releases
- None of note

BOTTOM LINE: Asian indices are lower, led down by technology and energy shares in the region. I expect US equities to open lower and to rally into the afternoon, finishing slightly lower. The Portfolio is 50% net long heading into the day.

Stocks Finish Mostly Lower on Weakness in Commodity and Tech Sectors

Indices
S&P 500 1,275.88 -.19%
DJIA 10,980.69 +.20%
NASDAQ 2,268.38 -.77%
Russell 2000 721.06 -1.38%
Wilshire 5000 12,835.58 -.41%
S&P Barra Growth 603.43 -.17%
S&P Barra Value 668.95 -.21%
Morgan Stanley Consumer 602.07 +.14%
Morgan Stanley Cyclical 778.92 -.43%
Morgan Stanley Technology 531.83 -.75%
Transports 4,434.62 -.80%
Utilities 399.30 -.40%
Put/Call 1.02 +13.33%
NYSE Arms .92 -4.28%
Volatility(VIX) 12.66 -.63%
ISE Sentiment 135.00 -6.25%
US Dollar 90.79 +1.0%
CRB 321.44 -1.17%

Futures Spot Prices
Crude Oil 61.50 -.13%
Unleaded Gasoline 162.57 -.47%
Natural Gas 6.73 +.84%
Heating Oil 171.60 -.36%
Gold 554.50 unch.
Base Metals 162.42 -2.94%
Copper 217.60 -.05%
10-year US Treasury Yield 4.72% -.51%

Leading Sectors
HMOs +.95%
Banks +.59%
Insurance +.41%

Lagging Sectors
Alternative Energy -2.83%
Disk Drives -3.08%
Steel -3.30%

Evening Review
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on (KR).
- Reiterated Underperform on (LSI).

Afternoon/Evening Headlines
Bloomberg:
- The US Navy has ended combat deployments for Northrop Grumman’s(NOC) F-14 Tomcat fighter-bomber, the plane glamorized in the movie “Top Gun.”
- The LA Times will shrink weekday listings of stock and mutual fund prices to a single page starting March 14 to cut costs and free up space for expanded coverage of Southern California.
- US Defense Secretary Rumsfeld today accused Iran of sending its Revolutionary Guards into Iraq to foment violence.
- Russia and Turkey led a slump in emerging stock markets worldwide on concern that rising US interest rates will slow the global economy.
- The US and Russia told Iran to obey international demands to limit its nuclear program, with VP Cheney pointing to “meaningful” consequences for defiance and a top Russian official saying his government has no new solutions to offer.
- The US dollar strengthened the most against the euro since December as expectations increased that the Fed will raise interest rates to slow brisk US growth and stem inflation.
- Oil fell almost $1/bbl. on speculation that OPEC will leave production targets unchanged at a meeting tomorrow.

Financial Times:
- The US risks “profound” consequences if it pursues a “crazy” protectionist policy over DP World’s $6.8 billion acquisition of Britain’s Peninsular & Oriental Steam Navigation, citing transportation industry leaders at the Trans-Pacific Maritime Conference.

AP:
- The US Homeland Security Dept. will keep close tabs on some cargo containers handled at Port Authority of NY and New Jersey facilities. “Black box” devices that can sense traces of radiation or carbon monoxide, as well as whether a door on the container has been opened, will be stowed in some containers.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my technology longs more than offset gains in my energy-related shorts. I covered some of my (QQQQ) and (IWM) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished substantially lower, sector performance was mostly negative and volume was about average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bearish. A continuation of today’s rally in bonds should help equities rebound. The U.S. Dollar Index broke up through its recent downtrend line, which could further pressure commodities over the coming weeks.

Stocks Lower into Final Hour, Pressured by Energy and Tech Shares

BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my technology longs are more than offsetting gains in my energy-related shorts. I added to my (IWM) and (QQQQ) shorts, thus leaving the Portfolio 25% net long. The tone of the market is negative as the advance/decline line is substantially lower, sector performance is mostly negative and volume is about average. It is short-term bearish that stocks have continued to weaken even as oil trades near session lows and the 10-year Treasury note yield has reversed 7 basis points lower. I expect US stocks to trade mixed-to-lower into the close from current levels on continuing weakness in energy and tech shares.