BETWEEN THE HEDGES

Monday, April 03, 2006

Tuesday Watch

Posted by Gary .....at 11:54 PM

Late-Night Headlines
Bloomberg:
- Congressman Tom DeLay, former majority leader of the US House of Representatives, plans to quit his post “within months,” Time magazine reported on its web site.
- The Univ. of Florida beat UCLA 73-57 in the championship game of the national men’s college basketball tournament for the school’s first title.

USA Today:
- A growing number of US doctors are making house calls under a three-year Medicare pilot program in California, Texas and Florida.

Nikkei English News:
- Hitachi Ltd. will increase production of flat-panel screens to better match demand and improve its position in the market.

Xinhua News Agency:
- Chinese Internet search firm Baidu.com(BIDU) had a 56.6% share of China’s Internet search market in 2005, ahead of Google’s(GOOG) 32.8% market share.

Wen Wei Po:
- China should gradually reduce its holdings of US debt, citing Cheng Siwei, vice chairman of the Standing Committee of the National People’s Congress.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are unch. to +.25% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.04%.

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
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (DLP)/.46
- (DRC)/.39
- (PQE)/.52
- (TDS)/.31

Upcoming Splits
- (PVR) 2-for-1
- (BER) 3-for-2

Economic Releases
- None of note

BOTTOM LINE: Asian indices are mostly higher, on gains in commodity stocks in the region. I expect US equities to open mixed and to trade modestly lower into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Finish Mixed, Closing Near Session Lows

Posted by Gary .....at 6:29 PM

Indices
S&P 500 1,297.81 +.23%
DJIA 11,144.94 +.32%
NASDAQ 2,336.74 -.13%
Russell 2000 759.22 -.77%
Wilshire 5000 13,131.27 +.07%
S&P Barra Growth 610.55 +.10%
S&P Barra Value 684.14 +.36%
Morgan Stanley Consumer 609.95 +.35%
Morgan Stanley Cyclical 821.11 +.89%
Morgan Stanley Technology 550.25 +.39%
Transports 4,622.04 +1.18%
Utilities 390.37 +.35%
Put/Call .67 -16.25%
NYSE Arms .63 -61.77%
Volatility(VIX) 11.57 +1.58%
ISE Sentiment 141.00 +17.50%
US Dollar 89.64 -.10%
CRB 335.61 +.73%

Futures Spot Prices
Crude Oil 66.37 -.55%
Unleaded Gasoline 185.60 -.39%
Natural Gas 7.17 -1.02%
Heating Oil 185.65 -.31%
Gold 592.80 -.25%
Base Metals 182.91 +3.21%
Copper 254.55 -.08%
10-year US Treasury Yield 4.86% +.25%

Leading Sectors
Steel +1.17%
Semis +1.11%
Wireless +.91%

Lagging Sectors
Retail -1.29%
Biotech -1.44%
REITs -1.96%

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
Banc of America:
- Rated (ISE) Buy, target $50.

Cowen:
- Rated (FLEX), (JBIL) Outperform.

Afternoon/Evening Headlines
Bloomberg:
- BKF Capital Group plans to shut down its hedge funds that generated about 20% of its revenue last year because two senior managers quit over a disagreement about long-term compensation.
- Continental AG, which provides vehicle-stability systems to GM and Porshe AG, agreed to buy the car-electronics unit of Motorola(MOT) for $1 billion to become the world’s biggest provider of in-vehicle communications.
- Novartis AG increased its offer for the rest of Chiron Corp.(CHIR) to about $5.33 billion from about $5.1 billion to win backing from shareholders who opposed the deal because the price was too low.

CNBC:
- General Motors(GM) is negotiating with lenders for an $8 billion to $9 billion loan.

Reuters:
- Clear Channel Communications(CCU) signed an agreement with Google(GOOG) to use Google’s software for Internet searches and advertising on radio Web sites.

Financial Times:
- McDonald’s Corp.(MCD) will put photographs of customers on the side of its burger packaging as part of a marketing competition.

BOTTOM LINE: The Portfolio finished unchanged today as gains in my Semi longs and Networking longs offset losses in my Retail longs and Medical longs. I did not trade 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 lower, sector performance was mixed and volume was above-average. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was mildly bearish. Oil is continuing its late afternoon reversal lower in electronic trading. I still believe that U.S. economic growth will slow back to average levels later this year, likely leading to a period of sustained underperformance for the cyclicals that have recently spiked higher. I expect more healthy consolidation near-term for the averages.

Stocks Higher Heading into Final Hour, Led by Tech and Commodities

Posted by Gary .....at 2:57 PM

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Networking longs, Semi longs and Biotech longs. I added to my (QQQQ) and (IWM) shorts, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is above average. Breadth has deteriorated throughout the day even as oil fell and long-term rates stabilized. It appears to be than more consolidation is necessary in the near-term before another push higher can commence. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking.

Today's Headlines

Posted by Gary .....at 1:17 PM

Bloomberg:
- Warren Buffett, struggling to find acquisitions big enough to boost Berkshire Hathaway’s(BRK/A) returns, is making a $14 billion bet on the global stock market.
- Emerging market debt, up an average of 16.7% a year since 2002, will have difficulty continuing to rally, said Mohamed El-Erian, who runs Harvard University’s endowment.
- General Motors(GM) sold a majority of its GMAC unit to a group led by Cerberus Capital Management LP for $7.4 billion.
- Verizon Communications(VZ) agreed to sell its Caribbean and Latin American operations to Carlos Slim’s America Movil SA for $3.7 billion to reduce debt.

Wall Street Journal:
- Iraq may be better positioned to set up a government of national unity after a split among Shiite political parties and the increasing isolation of the radical cleric Muqtada al-Sadr.
- Hewlett-Packard(HPQ) CEO Hurd has made reorganizing the company’s corporate sales force a top priority after complaints from customers they didn’t know whom to contract.
- Constellation Brands(STZ) is close to an agreement to buy Canadian winemaker Vincor Intl. for about $1.05 billion.
- ProFunds’ Ultrashort Japan fund is aimed at helping investors to bet against Japan’s stock market by rising twice as much on a percentage basis as any decline in the US-traded, dollar-based Nikkei 225 futures contract.
- Movielink LLC, a movie downloading service, will allow broadband Internet users to legally purchase and retain electronic copies of new and catalog films starting tomorrow.

Boston Globe:
- Mercury levels in yellow perch near certain Massachusetts incinerators fell 32% in the past seven years, since the state enacted the nation’s toughest emission laws for the toxic metal.

NY Times:
- China’s trade surpluses may move toward a balance as labor shortage at factories push up wages.
- Conde Nast Publications upgraded Brides.com and plans magazine Internet sites for teenage girls and business as it increases its commitment to the Web to compete with rivals.

Construction Spending Rises, Pending Home Sales Fall Again, Manufacturing Slow, Prices Paid Rises

Posted by Gary .....at 11:22 AM

- Construction Spending for February rose .8% versus estimates of a .5% increase and a .4% gain in January.
- Pending Home Sales for February fell .8% versus estimates of a .5% decline and an upwardly revised .9% increase in January.
- ISM Manufacturing for March fell to 55.2 versus estimates of 57.7 and a reading of 56.7 in February.
- ISM Prices Paid for March rose to 66.5 versus estimates of 60.9 and a reading of 62.5 in February.

BOTTOM LINE: Construction spending in the US rose more than expected in February as homebuilding remained buoyant and companies spent more on hospitals and power plants, Bloomberg reported. Healthcare and power project construction rose 2.7% and 3.6% respectively. Construction spending will likely decelerate to average levels this year as slowing residential construction is mostly offset by increasing commercial building.

Contracts to buy previously owned US homes declined in February as sellers held out for the same high prices that helped undermine the housing boom, Bloomberg said. Re-sales fell .1% in the South and declined 7.6% in the West. Signings increased 6.8% in the Northeast and were unchanged in the Mid-west. The National Assoc. of Realtor’s is forecasting home prices to rise another 5.8% this year versus a 12.5% gain last year. I continue to believe housing is in the process of slowing to more healthy sustainable levels.

US manufacturing expanded at a slower pace in March as prices increased and new orders fell, suggesting companies are scaling back production in the face of cost pressures, Bloomberg said. The Prices Paid component of the index rose to 66.5 from 62.5 the prior month. The New Orders component of the index fell to 58.4 from 61.9 in February. I continue to believe manufacturing is slowing to average levels. As well, the Prices Paid component should begin decelerating again later this quarter.