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Friday Watch

Late-Night Headlines
Bloomberg:
- Hong Kong’s stock market has replaced Canada’s as the world’s sixth biggest, as more Chinese companies such as China Construction Bank carried out initial public offerings in the city.
- General Motors Corp.(GM) said its China affiliate more than doubled its profit in the period, helping the world’s largest carmaker improve its performance.

Business Week:
- The shares of Sprint Nextel Corp.(S) are cheap and may produce an annual return of 27% for the next three years, citing Ivan Krsticevic, senior portfolio manager at Elliott Management.

Late Buy/Sell Recommendations
Goldman Sachs:
- Raised AUO to Neutral from Underperform.

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.24%.

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Earnings of Note
Company/EPS Estimate
- (MMM)/1.14
- (ACI)/.58
- (BSG)/.17
- (F)/.25
- (FO)/1.02
- (GDT)/.33
- (IR)/.72
- (MYG)/-.02
- (MCD)/.49
- (RSH)/.17
- (RCL)/.48
- (SLB)/.54
- (PCU)/3.07
- (WYE)/.73

Upcoming Splits
- (CW) 2-for-1

Economic Releases
- None of note.

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

***Alert***

I will be unable to post the Thursday Close due to a scheduling conflict. I will post the Friday Watch later this evening.

Stocks Mixed into Final Hour as Commodity Decline is Offset by Healthcare Rise

BOTTOM LINE: The Portfolio is about even into the final hour as gains in my Computer longs and Energy-related shorts are offsetting losses in my Networking longs. I added back IWM and QQQQ shorts today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is heavy. The AAII percentage of Bulls fell to 33.73% this week from 45.36% the prior week. This reading is now at below average levels. The AAII percentage of Bears jumped to 40.83% this week from 27.84% the prior week. This reading is now at above average levels. Considering the major averages are approaching six-year highs, these numbers are somewhat stunning and bode well for further gains. I expect bullish sentiment to rise next week. I expect US stocks to trade mixed into the close from current levels as short-covering offsets profit-taking.

Today's Headlines

Bloomberg:
- Russia today rejected a call from the US to halt construction of a nuclear plant in Iran.
- Hedge funds around the world pulled in a net $24 billion during the first quarter as investors flocked to companies such as Convexity Capital Management LP, owned by former Harvard Univ. endowment manager Jack Meyer.
- The US will crack down on companies that hire undocumented immigrants, Homeland Security Secretary Chertoff pledged today, telling businesses to expect stepped-up raids and criminal sanctions against executives.
- Manufacturing in the Philadelphia area strengthened this month as companies geared up in response to rising domestic and overseas demand, a Fed survey showed.

Wall Street Journal:
- A Goldman Sachs Group(GS) hedge fund led by ex-academics using techniques developed at the Univ. of Chicago was a big contributor in a group of alternative investments increasing profit at the NYC-based brokerage.
- Scott McNealy, Sun Microsystems’(SUNW) chairman and CEO, hasn’t hitherto enjoyed the best of relationships with Wall Street, but that may be changing.
- Weyerhaeuser(WY), the world’s biggest lumber company, said it will realign its wood, paper and pulp units as part of a broader reorganization the company expects will allow the businesses to respond more quickly to market demand.
- The US Office of the Director of National Intelligence will make safeguarding individual privacy rights a top priority.

NY Times:
- Strong demand for super-sized tires used by earthmover machines has caused a shortage, and spurred companies such as France’s Michelin & Cie. to build new plants to keep up with up with customers’ orders.

USA Today:
- Construction of the US Embassy in Iraq is on schedule and within budget.

Peninsula:
- Qatar plans to raise oil production capacity at its Shaheen field by 54% to 525,000 barrels a day in 2009 to account for half the country’s total output.

Job Market Healthy, Leading Indicators Forecast Slower Growth

- Initial Jobless Claims fell to 303K last week versus estimates of 309K and 313K the prior week.
- Continuing Claims rose to 2439K versus estimates of 2440K and 2421K prior.
- Leading Indicators for March fell .1% versus estimates of unchanged and a downwardly revised .5% decline in February.

BOTTOM LINE: First-time claims for US unemployment benefits fell more than forecast last week and the number of Americans on jobless rolls stayed close to a five-year low, signaling a strengthening labor market, Bloomberg said. The 4-week moving average of continuing claims fell to 2.44 million, the lowest since Feb. 3, 2001. The unemployment rate among those eligible to receive benefits, which tracks the US unemployment rate, remained at 1.9%. I continue to expect the labor market to remain healthy without generating substantial unit labor cost increases.

An index of US leading indicators fell for a second month in March, suggesting the slowdown in housing and record energy prices will chip away at economic growth,
Bloomberg said. This is the first back-to-back decline since February and March 2001. Leading Indicators historically forecast economic activity about 3-6 months out. The coincident indicators component, a measure of current economic activity, rose .2% for the month. I continue to believe US economic growth peaked for the year during the first quarter and will head back to average levels through year-end.