Stocks Slightly Higher into Final Hour on Light Volume

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Networking longs and Biotech longs. I have not traded today, thus leaving the Portfolio 50% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, most sectors are rising and volume is light. Last night, the world's largest shipbroker, Clarkson Plc, said supertanker fleet capacity will rise 1.3% this quarter and demand will fall 1.8%. Revenue minus fuel and port fees is estimated to average $44,500/day for a 2M barrel carrier on a round-trip to Asia from the Persian Gulf in the second quarter, down 38% from the first quarter. Persian Gulf to the U.S. Gulf Dirty Tanker Rates have now fallen 76% from November 04 highs. The Bloomberg Tanker Index(TANKER) has declined almost 30% during this period. I remain overweight short this group, including OMI Corp. (OMM). I expect US stocks to trade mixed into the close from current levels as higher long-term rates offset short-covering.

Today's Headlines

- Canceled due to technical problems.

Trade Deficit Better Than Estimates

- The Trade Deficit for February came in at -$65.7B versus estimates of -$67.5B and -$68.6B in January.

BOTTOM LINE: The US trade deficit shrank more than expected in February, led by a decline in Chinese imports, Bloomberg reported. The deficit with China narrowed to $13.8 billion in February, the smallest since March 2005. US exports were the second-highest on record. I expect the deficit to only improve modestly over the coming months.

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Legg Mason(LM) will replace Guidant Corp.(GDT) in the S&P 500, S&P said.
- China made several concessions to US demands today, agreeing to start the process to lift its ban on US beef imports, open up its mobile phone and medical devices market and crack down on software and music piracy.
- The cost to lease an oil tanker in the Persian Gulf may drop in the next three months because of an expanded fleet and reduced demand.

Wall Street Journal:
- Steelmakers such as Mittal Steel, the world’s largest producer, are opposed to the London Metal Exchange’s plan to create steel futures.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to unch. on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated -.04%.

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Earnings of Note
Company/EPS Estimate
- (AMD)/.30
- (CC).77
- (CBH)/.40
- (GCI)/.99
- (GTK)/.47
- (HDI)/.86
- (IFIN)/.56
- (LRCX).62

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Trade Deficit for February is estimated to shrink to -$67.5 billion versus -$68.5 billion in January.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 1,200,000 barrels. Gasoline inventories are estimated to fall 2,100,000 barrels, and distillate supplies are expected to decrease by 1,550,000 barrels. Refinery utilization is expected to rise .55%.

2:00 pm EST
- The Monthly Budget Deficit for March is estimated to widen to -$82.1 billion versus -$71.2 billion in February.

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

Stocks Finish Near Session Lows on Heavy Volume and Poor Breadth

Indices
S&P 500 1,286.57 -.77%
DJIA 11,089.63 -.46%
NASDAQ 2,310.35 -.98%
Russell 2000 742.11 -1.44%
Wilshire 5000 12,994.31 -.84%
S&P Barra Growth 604.20 -.76%
S&P Barra Value 679.42 -.79%
Morgan Stanley Consumer 598.57 -.77%
Morgan Stanley Cyclical 822.89 -.30%
Morgan Stanley Technology 547.74 -.66%
Transports 4,619.04 -1.03%
Utilities 384.42 -.98%
Put/Call 1.0 +20.48%
NYSE Arms 1.32 +46.02%
Volatility(VIX) 13.0 +6.64%
ISE Sentiment 151.00 +.67%
US Dollar 89.38 -.30%
CRB 340.48 +.14%

Futures Spot Prices
Crude Oil 68.90 -.12%
Unleaded Gasoline 205.65 +.10%
Natural Gas 6.88 -.33%
Heating Oil 195.55 +.52%
Gold 597.50 -.32%
Base Metals 192.05 +.73%
Copper 271.00 -.42%
10-year US Treasury Yield 4.92% -.58%

Leading Sectors
Gaming -.12%
Restaurants -.26%
REITs -.45%

Lagging Sectors
Oil Tankers -1.84%
Oil Service -1.88%
Gold & Silver -2.46%

Evening Review
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Afternoon Recommendations
Goldman Sachs:
- Upgraded HSY to Outperform.
- Initiated Coal sector with Neutral.

Afternoon/Evening Headlines
Bloomberg:
- News Corp.’s(NWS) MySpace.com appointed a security chief to police its network of 70 million personal Web pages, responding to concerns from child-safety advocates.
- Federal Reserve Bank of Dallas President Richard Fisher said he hasn’t seen evidence that companies are able to pass along increases in the price of metals, oil and other commodities to customers.
- Genentech Inc.(DNA) said first-quarter profit climbed 48% as more doctors prescribed the Avastin and Herceptin cancer drugs.

Nikkei English News:
- Kobe Steel Ltd. is forming a joint US venture with steelmaker Steel Dynamics(STLD) and Cleveland-Cliffs(CLF), an iron ore producer, for a new plant to make low-cost, high-grade steel products.

BOTTOM LINE: The Portfolio finished mixed today as losses in my Semi longs, Networking longs and Medical longs offset gains in my Index ETF shorts and Energy-related shorts. I covered some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was very negative today as the advance/decline line finished substantially lower, sector performance was negative and volume was heavy. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bearish. Afternoon weakness was mainly related to selling in commodity stocks. I continue to believe the major averages will further consolidate recent gains before another push higher commences.