Today's Headlines

Bloomberg:
- Airline bonds are staging their biggest rally in nine years as demand for travel rises and carriers emerge from bankruptcy with less debt.
- Angola passed Saudi Arabia to become China’s top oil supplier in February.
- The US government raised fuel-economy standards for light trucks such as sport-utility vehicles an average 11% over four years starting in 2008 and for the first time included the biggest SUVs.
- Apple Computer(AAPL), which has sold more than 42.2 million iPod players since October 2001, released software that lets parents set the volume on the music devices to protect their children’s hearing.

Wall Street Journal:
- Citigroup(C) will start today Citibank Direct, an Internet bank offering online, high-yield savings accounts.
- The SEC said it expects to take action this year to stop late trading in mutual funds and will decide whether to make proposals stipulating the use of interactive data for corporate reports.
- Japan’s economy is getting new and more sustainable support from an increase in household spending, a shift that could have important implications for global trade.
- Southwest Air(LUV) may be one of the weaker prospects for investors hoping to profit from a rebound in the aviation business.
- GlaxoSmithKline Plc(GSK) and Colgate-Palmolive(CL) are among companies that are expected to present bids for Pfizer’s(PFE) consumer products unit in first-round auctions today.
- EBay(EBAY) plans today to contest a 19th-century Supreme Court ruling that infringement of a patent could lead to an injunction against using an invention even if the patent holder never did.
- Time Warner(TWX) is changing the way it manages publishing, to focus more on the Internet.

AP:
- A plan to expand a guest worker program for immigrants who want jobs in the US is a “bad idea,” AFL-CIO labor union President Sweeney said.
- The Bluetooth wireless telecom standard will adopt a new radio technology known as ultra-wideband, allowing it to accommodate high-definition video and files for digital music players.

Oil Supplies Rise

- The EIA reported crude oil inventories rose 2,030,000 barrels vs. estimates of a 950,000 barrel increase. Gasoline supplies fell 5,337,000 barrels vs. estimates of a 1,450,000 barrel decline. Distillate inventories fell 2,500,00 barrels vs. estimates of a 1,250,000 barrel decline. Refinery utilization rose 0.32% vs. estimates of a 0.5% rise.

BOTTOM LINE: Overall, these numbers are bullish for the energy complex. Normally, I would expect traders to sell the news, but with the oil ETF coming next week, this is unlikely.

Links of Interest

Market Snapshot
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Today in IBD
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Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- US Commerce Secretary Carlos Gutierrez called on China to crack down harder on copyright piracy and open its markets further to US products or risk a protectionist backlash that would hurt both economies.

Late Buy/Sell Recommendations
Citigroup:
- Downgraded (RDY) to Sell from Buy.

Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
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Rasmussen Consumer/Investor Daily Indices
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Earnings of Note
Company/EPS Estimate
- (ARRO)/.29
- (RECN)/.28
- (RI)/.46
- (SCS)/.11
- (UTIW)/.23

Upcoming Splits
- (BUCY) 3-for-2

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 950,000 barrels. Gasoline inventories are estimated to fall 1,450,000 barrels, and distillate supplies are expected to decrease by 1,250,000 barrels. Refinery utilization is expected to rise .50%.

BOTTOM LINE: Asian indices are higher, boosted by exporting shares in the region. I expect US equities to open mixed and to trade modestly lower into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Near Lows after Fed Rate Hike and Rise in Oil

Indices
S&P 500 1,293.23 -.64%
DJIA 11,154.54 -.85%
NASDAQ 2,304.46 -.48%
Russell 2000 751.27 -.37%
Wilshire 5000 13,060.13 -.54%
S&P Barra Growth 609.39 -.58%
S&P Barra Value 680.59 -.71%
Morgan Stanley Consumer 610.99 -.67%
Morgan Stanley Cyclical 810.59 -.47%
Morgan Stanley Technology 536.60 -.64%
Transports 4,532.17 -.57%
Utilities 393.92 -.57%
Put/Call 1.01 +20.24%
NYSE Arms 1.34 +46.16%
Volatility(VIX) 11.57 +.96%
ISE Sentiment 140.00 +2.19%
US Dollar 90.20 +.14%
CRB 331.66 +1.21%

Futures Spot Prices
Crude Oil 65.95 -.18%
Unleaded Gasoline 187.90 -.29%
Natural Gas 7.24 +.49%
Heating Oil 183.10 +.18%
Gold 567.00 unch.
Base Metals 178.17 -.30%
Copper 242.85 unch.
10-year US Treasury Yield 4.78% +1.63%

Leading Sectors
Oil Service +1.98%
REITs +1.08%
Gaming +.63%

Lagging Sectors
Semis -2.05%
Gold & Silver -2.24%
Airlines -2.70%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Former Defense Secretary Casper Weinberger, who oversaw the US military buildup under President Reagan that helped win the Cold War with the Soviet Union, died at the age of 88.
- Israel’s Acting Prime Minister Ehud Olmert and his Kadima Party won today’s election, tapping voters’ desire to abandon talks with the Palestinians and fix the country’s borders unilaterally, exit polls showed.
- General Motors(GM) said it will restate several years of financial statements for its home-mortgage unit.
- TD Ameritrade Holding(AMTD) said earnings for the fiscal second quarter will exceed its earlier estimate of as much as .28/share due to a surge in trading volume.
- The IRS audited 11,715 US millionaires in 2005, providing a rare glimpse of its efforts to ensure wealthy taxpayers comply with tax laws.
- Shares of companies based in developing countries are rising for a seventh quarter, extending the longest string of advances since the 1980s. The p/e ratio of so-called emerging market stocks is the highest since 1999, relative to developed countries.
- US Treasuries declined, driving the 10-year yield up the most in two months, after the Fed raised interest rates for the 15th straight time and signaled additional increases are likely.

CNBC:
- The Federal Reserve may boost its benchmark interest rate to 5% and stop there, former Dallas Federal Reserve Bank President Robert McTeer said.

BOTTOM LINE: The Portfolio finished lower today on losses in my Computer longs, Semi longs, Biotech longs and Energy-related shorts. I added (QQQQ) and (IWM) shorts in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bearish. The bond market's reaction to the Fed hike and commentary is disappointing considering investor expectations. As well, oil may bounce further in the short-run on the new ETF scheduled for this Monday. Given how good this quarter has been to many, I expect to see more profit-taking into quarter-end.

Stocks Lower into Final Hour as Bonds Weaken

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Biotech longs, Computer longs, Semi longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is below average.
The Johnson Redbook same-store sales index rose 2.4% year over year last week vs. a 2.5% rise the prior week. This week's gain is up from a 1.5% increase in late April 2005. The long-term average is a gain of around 2.5%. The Morgan Stanley Retail Index is 22.2% higher since late October, almost double the 11.6% gain for the S&P 500 (SPX) over the same time period. The Fed’s move and statements were about what most expected. The bond market appears to have overreacted. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain-hunting.