BETWEEN THE HEDGES

Wednesday, April 12, 2006

Thursday Watch

Posted by Gary .....at 11:37 PM

Late-Night Headlines
Bloomberg:
- SanDisk Corp.(SNDK) will replace Chiron Corp.(CHIR) in the S&P 500, S&P said.
- New Orleans may get $2.5 billion more to repair levees damaged by Hurricane Katrina, according to a federal official overseeing recovery efforts.
- Warren Buffett scored lowest in managing his own company’s pension assets, according to a study by consultant Milliman Inc.
- Tiger Woods apologized for using the term “spaz” to describe his putting during golf’s Masters Tournament, a remark that was criticized outside the US as insensitive.
- Americans want to maintain good economic relations with China and are less concerned about the near-record US trade deficit, according to a Bloomberg/LA Times Poll.
- Crude oil in New York fell for a second day after an Energy Dept. report showed US inventories rose to the highest in almost eight years.

China Securities Journal:
- China’s economy grew about 8.5% in the first quarter, slowing from 9.5% in the previous year, citing the investment dept. of the nation’s top economic planning body. For the year, the body expects China’s growth to slow to 7.5%.

BBC:
- At least 15,000 people in the New York area are being treated for illnesses stemming from the attacks on the World Trade Center in September 2001.

AP:
- A group of supporters of the Duke University lacrosse team hired President Bill Clinton’s former attorney as a spokesman in the wake of rape allegations against team members.

Nihon Keizai:
- Sony Corp.(SNE) may say its operating profit last business year was better than its most recent forecast, thanks to an increase in sales of liquid display televisions.

Late Buy/Sell Recommendations
Wachovia:
- Rated (LAD) Outperform.

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated +.01%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (GE)/.39
- (HTLD)/.23
- (JBHT)/.31
- (MTG)/1.62
- (NYT)/.27
- (PII)/.26
- (RMBS)/.07
- (TRB)/.35

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Import Price Index for March is estimated to rise .2% versus a .5% fall in February.
- Advance Retail Sales for March are estimated to rise .4% versus a 1.4% decline in February.
- Retail Sales Less Autos for March are estimated to rise .5% versus a .6% decline in February.
- Initial Jobless Claims for last week are estimated to rise to 305K versus 299K the prior week.
- Continuing Claims are estimated to rise to 2450K versus 2440K prior.

9:45 am EST
- The preliminary Univ. of Mich. Consumer Confidence reading for April is estimated to rise to 89.0 versus a reading of 88.9 in March.

10:00 am EST
- Business Inventories for February are estimated to rise .3% versus a .4% gain in January.

BOTTOM LINE: Asian indices are mostly lower, weighed down by auto and financial 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 Modestly Higher, Boosted by Small-cap Shares

Posted by Gary .....at 5:15 PM

Indices
S&P 500 1,288.12 +.12%
DJIA 11,129.97 +.36%
NASDAQ 2,314.68 +.19%
Russell 2000 747.77 +.76%
Wilshire 5000 13,016.55 +.17%
S&P Barra Growth 604.38 +.03%
S&P Barra Value 680.86 +.21%
Morgan Stanley Consumer 599.00 +.07%
Morgan Stanley Cyclical 827.93 +.61%
Morgan Stanley Technology 548.01 +.05%
Transports 4,630.64 +.25%
Utilities 384.91 +.13%
Put/Call .81 -19.0%
NYSE Arms .82 -36.94%
Volatility(VIX) 12.76 -1.85%
ISE Sentiment 135.00 -11.76%
US Dollar 89.60 +.18%
CRB 340.63 +.04%

Futures Spot Prices
Crude Oil 68.41 -.31%
Unleaded Gasoline 206.71 -1.15%
Natural Gas 6.76 -.69%
Heating Oil 196.57 -.45%
Gold 601.70 +.07%
Base Metals 196.47 +2.30%
Copper 276.70 -.16%
10-year US Treasury Yield 4.97% +1.18%

Leading Sectors
Gold & Silver +2.42%
HMOs +1.92%
Biotech +1.15%

Lagging Sectors
Oil Service -.78%
Homebuilders -1.03%
Oil Tankers -4.54%

Evening Review
Detailed Market Summary
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In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Sears Holdings(SHLD) Chairman Ed Lampert said he is committed to building the retailer and does not plan to sell large portions of real estate.
- China is concerned about Iran’s decision to accelerate uranium enrichment and wants the government in Tehran to heed international criticism of the move, China’s ambassador to the UN said.
- Google(GOOG) may buy companies in China to expand in the world’s second-largest online market.
- Advanced Micro Devices(AMD) posted its biggest profit in more than five years in the first quarter after taking sales from Intel Corp.(INTC).
- US Treasuries fell on speculation government reports this week will add to evidence the economy is growing fast enough for the Federal Reserve to keep raising interest rates.
- Crude oil fell after an Energy Department report showed that US Gulf oil inventories surged to the highest since record-keeping began in 1990 and overall US supplies hit an 8 year high.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Networking longs, Biotech longs and Energy-related shorts. I did not trade in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was modestly positive today as the advance/decline line finished slightly higher, sector performance was mostly positive and volume was very light. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was mildly bullish. The fact that stocks rose at all given another jump in long rates and oil still near $70 per barrel is impressive. The rise in the 10-year yield without much market-moving news likely foreshadows higher rates in the near-term. I want to see the market's reaction to tomorrow's economic data before shifting market exposure.

Stocks Slightly Higher into Final Hour on Light Volume

Posted by Gary .....at 3:21 PM

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

Posted by Gary .....at 3:20 PM

- Canceled due to technical problems.

Trade Deficit Better Than Estimates

Posted by Gary .....at 11:48 AM

- 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.