BETWEEN THE HEDGES

Tuesday, April 04, 2006

Wednesday Watch

Posted by Gary .....at 11:37 PM

Late-Night Headlines
Bloomberg:
- Hyundai Heavy Industries, the world’s largest shipbuilder, got a 15% discount on steel plates from Japanese steelmakers including Nippon Steel Corp.
- Japanese stocks rose, with the Topix index headed for its best level in more than 14 years. Exporters such as Matsushita Electric Industrial and Honda Motor paced gains after US Fed officials said inflation in the world’s biggest economy is under control and crude oil prices dropped, prompting a rally in US shares.
- The US dollar declined for a third day against the yen on speculation the Fed is getting close to ending a 21-month policy of raising interest rates.
- The US economy will expand this year at about the same pace as 2005 and inflation will stay in check, while employers may add fewer jobs, said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City.

Xinhua News Agency:
- Some 50,000 US companies have invested $50 billion in China since the two nations normalized ties in 1979.

South China Morning Post:
- Las Vegas Sands(LVS) is considering a Hong Kong real estate investment trust listing for the shopping mall of its Macau casino.

Edaily:
- LG Electronics of South Korea cut prices of plasma and liquid-crystal display televisions to spur demand ahead of soccer’s World Cup.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.09%.

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Earnings of Note
Company/EPS Estimate
- (AYI)/.36
- (BBBY)/.65
- (CBK)/.17
- (BLUD)/.23
- (MON)/1.52

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- ISM Non-Manufacturing for March is estimated to fall to 59.0 versus a reading of 60.1 in February,

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 1,000,000 barrels. Gasoline inventories are estimated to fall 1,900,000 barrels, and distillate supplies are expected to decrease by 1,400,000 barrels. Refinery utilization is expected to rise .30%.

BOTTOM LINE: Asian indices are higher, boosted by exporting stocks in the region after US Fed members made more dovish comments. I expect US equities to open modestly lower and to trade higher into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Near Session Highs as Oil Falls and Rates Stabilize

Posted by Gary .....at 6:35 PM

Indices
S&P 500 1,305.93 +.63%
DJIA 11,203.85 +.53%
NASDAQ 2,345.36 +.37%
Russell 2000 762.32 +.41%
Wilshire 5000 13,203.10 +.55%
S&P Barra Growth 613.69 +.51%
S&P Barra Value 689.19 +.74%
Morgan Stanley Consumer 610.05 +.02%
Morgan Stanley Cyclical 826.91 +.71%
Morgan Stanley Technology 553.47 +.59%
Transports 4,681.81 +1.29%
Utilities 394.75 +1.12%
Put/Call .79 +17.91%
NYSE Arms .75 +18.15%
Volatility(VIX) 11.14 -3.72%
ISE Sentiment 166.00 +14.48%
US Dollar 88.83 -.89%
CRB 332.43 -.95%

Futures Spot Prices
Crude Oil 66.32 +.14%
Unleaded Gasoline 190.40 +.45%
Natural Gas 7.05 -.14%
Heating Oil 186.15 +.31%
Gold 591.03 +.12%
Base Metals 179.66 -1.77%
Copper 253.55 unch.
10-year US Treasury Yield 4.86% +.04%

Leading Sectors
Oil Service +1.68%
I-Banks +1.62%
Internet +1.46%

Lagging Sectors
REITs -.68%
Networking -.82%
Broadcasting -1.49%

Evening Review
Detailed Market Summary
Market Gauges
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Style Performance
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In Play

Afternoon Recommendations
Piper Jaffray:
- Rated ALXN Outperform, target $51.
- Rated CBST Outperform, target $30.
- Rated IDIX Underperform, target $9.
- Rated CELG Outperform, target $50.

Afternoon/Evening Headlines
Bloomberg:
- The cash on US corporate balance sheets is near levels that followed stock market plunges – not rallies – making equities today crash-proof, said Citigroup Investment Research’s Tobias Levkovich.
- Wal-Mart Stores(WMT) will open more than 50 locations in areas of higher unemployment and crime in the next two years.
- A record number of candidates plan to take the Chartered Financial Analyst exams as surging profits at investment banks boost hiring and attract more job seekers to the financial services industry.
- The US economy is expanding this year at a “solid pace” and will withstand a slowdown in the housing market, said Jeffrey Lacker, president of the Fed Bank of Richmond. “Growth is proceeding on a solid pace this year, and inflation is low and stable,” he said.
CNBC:
- Biomet(BMET) has hired Morgan Stanley to explore alternatives that may include a possible sale of the company.

Nikkei English News:
- NEC Corp. agreed to jointly develop and manufacture data-storage devices with EMC Corp.(EMC).

BOTTOM LINE: The Portfolio finished slightly higher today as gains in my Retail longs, Internet longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly positive today as the advance/decline line finished almost unchanged, sector performance was positive and volume was above-average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was mildly bullish. However, breadth was poor throughout the day. As well, the 10-year T-note finished near session lows and oil rebounded off session lows. On the positive side, the bears were once again unable to capitalize on downside momentum. The CRB Index declined 1% today despite the fall in the U.S. dollar, which is a negative for commodities. I still expect stocks to consolidate recent gains further before another substantial push higher. There may even be a short period of weakness in the broad market as investors begin anticipating slower economic growth, thus rotating out of more cyclical sectors.

Stocks Higher into Final Hour as Rates Stabilize and Oil Declines

Posted by Gary .....at 3:03 PM

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Semi longs and Biotech longs. I covered some of my (QQQQ) and (IWM) shorts, thus leaving the Portfolio 75% net long. The tone of the market is neutral as the advance/decline line is modestly lower, most sectors are higher and volume is above average. The Johnson Redbook same-store sales index rose 1.7% year-over-year last week vs. a 2.4% rise the prior week. The long-term average is a gain of around 2.5%. The Morgan Stanley Retail Index is 21.6% higher since late October, almost double the 11.5% gain for the S&P 500 (SPX) over the same time period. I expect retail to perform more in line with the market going forward. Stock selection will become even more important as consumer spending slows to average levels. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, stable long-term rates and lower energy prices.

Today's Headlines

Posted by Gary .....at 1:10 PM

Bloomberg:
- Manhattan apartment prices rose at the slowest pace in three years during the first quarter, more evidence that an increase in mortgage rates has cooled off the most expensive urban real estate market in the US.
- Microsoft(MSFT) won its biggest-ever contract for mobile-phone software, an order form the US Census Bureau that covers 500,000 handsets.
- The Iraqi Special Tribunal will file genocide charges against former ousted dictator Saddam Hussein for the Anfal campaign against the Kurds.
- Kuwaiti women are voting today for the first time, in municipal elections.
- International Paper(IP) agreed to sell 5.1 million acres of forestlands in the US to two investor groups for about $6.1 billion.
- The US Fed reversed a year-old order that effectively barred Citigroup(C) from making big acquisitions.
- Caterpillar(CAT) stands to gain as much as $5 billion in sales as a boom in oil squeezed from Canadian sand boosts demand for mining trucks and parts.
- French student groups and labor unions began their fifth nationwide protest against a new labor law today, with police looking out for the violence that marred earlier demonstrations.
- Crude oil is falling on speculation that a government report will show US inventories rose for the seventh time in eight weeks.

Wall Street Journal:
- Finland’s Nokia Corp.(NOK) said the company missed its own deadline for shipments of its E-series mobile phones, designed to compete with Research in Motion’s(RIMM) BlackBerry devices.
- Goldman Sachs(GS) was the investment bank that did the most business in the Asia-Pacific region excluding Japan in the first quarter of the year, with estimated revenue of $95 million, citing Dealogic Plc.
- Franklin Templeton Investments plans to launch the US’s first mutual fund focused on the populous emerging markets of Brazil, Russia, India and China, known as a BRIC, citing a filing with the SEC.
- Computer Sciences(CSC) is in talks that could lead to a sale of the business.
- The FCC accepted five offers for its May 10 sale of airwaves used to provide high-speed Internet access on planes, at the same time ruling that an application by Verizon(VZ) Airfone Inc. is incomplete.
- US investor Carl Icahn has dropped plans to take control of Blockbuster Inc.(BBI).
- Citigroup(C), agreed with 7-Eleven to put its brand on 5,500 ATMs within the convenience-store chain’s US outlets.
- The US would incite “geopolitical disaster and a moral calamity” if it caved into pressure from critics to withdraw troops from Iraq immediately, Pete Wehner, director of the White House’s Office of Strategic Initiatives said.

Washington Post:
- News Corp.’s(NWS) MySpace.com, Google’s(GOOG) Blogger.com, Wikipedia and CitySearch ranked top among Internet sites for visitor growth.

NY Times:
- Venezuelan President Hugo Chavez is spending billions of dollars garnered from oil revenue in a bid to set up his socialist government as a contrast to US President Bush’s conservative administration.
- IBM(IBM) will work with Rapport, a Silicon Valley start-up that has designed a flexible microprocessor to perform video processing for less than a tenth the power of existing chips.
- New York state allocated $479 million in the state budget for “pork-barrel spending” by lawmakers in the past three years.

Financial Times:
- Emerging-market bonds have not been especially volatile so far, even though global interest rates are rising and risks may be rising in markets such as Poland, Ukraine, and Hungary.

Economic Releases

Posted by Gary .....at 11:14 AM

- None of note