Stocks Finish Modestly Lower on Growth Worries and Profit-taking

Indices
S&P 500 1,308.11 -.24%
DJIA 11,336.32 -.10%
NASDAQ 2,333.38 -.40%
Russell 2000 766.14 -.77%
Wilshire 5000 13,237.91 -.29%
S&P Barra Growth 610.86 -.25%
S&P Barra Value 694.71 -.23%
Morgan Stanley Consumer 603.85 -.08%
Morgan Stanley Cyclical 850.16 -.24%
Morgan Stanley Technology 546.23 -.42%
Transports 4,730.47 +.52%
Utilities 401.44 +.77%
Put/Call .93 +2.20%
NYSE Arms 1.15 +6.72%
Volatility(VIX) 11.75 +1.38%
ISE Sentiment 204.0 +43.66%
US Dollar 87.54 -.58%
CRB 352.55 -1.68%

Futures Spot Prices
Crude Oil 73.18 -.20%
Unleaded Gasoline 216.25 -.52%
Natural Gas 7.50 -.74%
Heating Oil 203.00 -.08%
Gold 622.90 -.14%
Base Metals 213.14 -.57%
Copper 308.10 -.96%
10-year US Treasury Yield 4.98% -.54%

Leading Sectors
Airlines +3.97%
Steel +1.71%
Coal +1.69%

Lagging Sectors
Energy -1.62%
Homebuilders -1.62%
Internet -3.19%

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Afternoon Recommendations
Deutsche Bank:
- Rated (TOA) Outperform, $29 target.

Smith Barney:
- Rated (CRM)Buy, target $45.
- Rated (ADSK)Buy, target $52.
- Upgraded (ADBE) to Buy, target $45.
- Rated (RHAT) Buy, target $40.

Afternoon/Evening Headlines
Bloomberg:
- Gold and silver fell after crude oil dropped, easing concern that rising fuel prices will stoke inflation in the world’s biggest economies.
- Venezuelan President Hugo Chavez may rewrite the rules for ventures run by oil companies including Total SA and ConocoPhillips(COP) in the Faja, a region that rivals Canada’s oil sands as the Western Hemisphere’s biggest deposit.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Medical 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 negative today as the advance/decline line finished lower, sector performance was mostly negative and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was mildly bearish considering the fall in energy prices and long-term rates. I suspect most bulls and bears are unhappy with today's performance. I expect volume and volatility to increase over the next few days. Tomorrow's consumer confidence and existing home sales reports should lead to more bond market strength.

Stocks Slightly Lower Heading into Final Hour on Worries Over Slowing Growth

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Medical longs and Energy-related shorts. I added a (TLT) long and an (EEM) short today, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is about average. It continues to appear investors are viewing the recent parabolic rise in many commodity prices as a future hindrance to economic growth, rather than a catalyst for accelerating inflation. Weaker housing data should also prompt lower long-term rates. With 1Q economic growth poised to come in around 4.5% during 1Q and a media frenzy over the recent rise in commodity prices, long-term rates are likely near an intermediate-term peak. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices and long-term rates.

Today's Headlines

Bloomberg:
- Washington Mutual(WM) agreed to buy Commercial Capital Bancorp for about $983 million to increase returns from real-estate banking in California.
- Blackstone Group agreed to buy Deutsche Telekom AG(DT) shares for $3.3 billion from Germany, its first stake in a government-controlled company.
- Plans Exploration & Exploration(PXP), a US oil and natural-gas producer, agreed to buy Stone Energy(SGY) for about $1.46 billion to boost output in the Rocky Mountains and the Gulf of Mexico.
- Iran’s President Ahmadinejad said Israeli Jews should return back to the European countries from which they came.
- A federal jury awarded Rambus(RMBS) almost $307 million in a patent dispute with Hynix Semiconductor, the world’s second largest chipmaker.
- Crude oil fell from a record as OPEC said that the producer group is providing consumers with adequate supplies.
- US Treasuries are rising, pushing the benchmark 10-year note’s yield below 5%, amid speculation that high oil prices will restrain consumer spending.

Wall Street Journal:
- Cendant Corp.(CD) may put its travel unit up for sale today after some private equity firms said they would pay about $4.5 billion for it.
- TIAA-CREF CEO Allison is planning to regain lost business by introducing an online brokerage and other changes.
- The US is stepping up efforts to block funding to Hezbollah from concern that the Shiite organization is helping Iran stage terrorist attacks.
- A startup venture, DayJet Corp., will start air-taxi passenger services later this year between small cities in the southeastern US.
- Toyota Motor(TM) and News Corp’s(NWS) Fox network have reached an agreement for the automaker to sponsor and be featured in a spin-off series of the drama “Prison Break” for mobile phones.
- More companies are selling bonds convertible into shares, boosting profits at hedge funds that trade the securities.

NY Times:
- Intel Corp.(INTC) will introduce a new line of business products to manage large groups of personal computers as it tries to reverse its loss of market share to Advanced Micro Devices(AMD)
- Seven Roman Catholic cardinals and about a half-dozen archbishops are among some 50 religious leaders who have signed a petition to support a constitutional amendment banning same-sex marriage.

Economic Releases

- None of note

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Monday Watch

Weekend Headlines
Bloomberg:
- President Bush today praised the Iraqis for making progress toward the formation of the first permanent unity government since the fall of dictator Saddam Hussein.
- President Bush said the US must reduce its dependence on oil and invest in alternatives, including hydrogen fueled vehicles.
- OPEC should agree at a meeting tomorrow to offer all its idle capacity to the market as soon as possible in an attempt to lower prices, Kuwait’s oil minister said.
- People’s Bank of China Governor Xiaochuan said the opening of the country’s economy to market forces, including changes to the exchange rate, can be accelerated.
- Pakistan invited OAO Gazprom and other Russian companies to explore for oil and natural gas and build pipelines.
- The G-7 said the world economy is in “strong” shape and called on some Asian nations, especially China, to allow their currencies to appreciate.
- President Bush urged Congress to take action on his immigration, energy and economic proposals, as he highlighted his top legislative priorities.

Fortune:
- Net companies are on fire again. Here’s the smart way to invest without getting burned.

NY Times:
- Former President Bill Clinton could earn tens of millions of dollars from his share of the profits of funds run by billionaire investor and friend Ron Burkle’s Yucaipa Cos.
- A Georgia Tech student and another man traveled to Canada to meet Islamic extremists to plan a terrorist attack against US facilities, citing federal court documents unsealed yesterday.
- Saudi Arabia is turning to China as an alternative trading partner to the US and Europe.
- A former Miller beer brewery in Fulton, NY, is being converted into the northeastern US’s first ethanol plant.
- Jawad al-Maliki, the Shiite Muslim politician who was nominated yesterday to be the first permanent prime minister of Iraq, is known for being decisive and direct.
- CIA Director Porter Goss ordered employees to submit to polygraph tests in the past three months as he sought to discover the sources of unauthorized leaks of information.

Washington Post:
- Real estate speculators are exiting the Washington housing market, reducing the demand for homes, particularly condos.

LA Times:
- Southern California Edison began operations at the first large power plant built in the LA area in almost three decades.

Mercury News:
- The number of people without jobs in California’s Silicon Valley declined to 4.8% in March from 5.1% in February. The gains would have been greater except for an unexpected drop in housing construction jobs.

Barron’s:
- Mark Curtis, who manages $12 billion at Citigroup’s(C) Smith Barney unit, topped the list of the 100 best financial advisers compiled by RJ Shook for Barron’s.

Advertising Age:
- Online ad revenue soared 30% in 2005.

AP:
- Exxon Mobil(XOM), Royal Dutch Shell and other oil and gas producers are increading efforts to recruit engineers and geologists from US colleges. Job offers to undergraduate petroleum engineers recently averaged $62,236, up more than 6%.

Financial Times:
- Time Warner’s(TWX) Chinese joint venture CAV Warner has started trials of DVD films priced at $1.50 in a bid to counter sales of pirated DVDs in China.

Mail on Sunday:
- Prince Harry, third in line to the British throne, told UK army commanders he wants to be deployed to a war zone and will quit if they refuse.

South China Morning Post:
- Hong Kong’s new apartment sales fell 40% in the first three months of this year, from the previous quarter, citing the Housing, Planning and Lands Bureau.

Hong Kong Economic Journal:
- China’s Lenovo Group Ltd. plans to delay selling its own brand personal computers in the US until next year.

Nihon Keizai:
- Sumitomo Corp. and Sojitz Corp. will jointly buy a 3% stake in a $6.86 billion liquefied natural gas project in Nigeria. The trading houses aim to take advantage of growing demand for LNG as crude oil prices rise by joining Nigerian National Petroleum, Chevron(CVX) and European energy firms in the project.

Xinhua:
- The US trade deficit with China is lower than is being reported because the figures don’t reflect income earned by US companies overseas as well as royalties, particularly from technology patents, citing a retired Chinese statistics official.

Weekend Recommendations
Barron's:
- Had positive comments on (LOW), (EOG), (DVN), (GDW), (JPM), (AIG), (WPP) and (TYC).
- Had negative comments on (PPD) and (MO).

Night Trading
Asian indices are -1.25% to +.50% on average.
S&P 500 indicated -.17%.
NASDAQ 100 indicated -.12%.

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Earnings of Note
Company/Estimate
- (ACL)/.90
- (AXP)/.69
- (BEAV)/.16
- (BRO)/.36
- (CAT)/1.05
- (CHKP)/./31
- (CB)/1.11
- (RE)/3.06
- (ETH)/.56
- (HAS)/.00
- (KMB)/.92
- (LNCR)/.48
- (NBIX)/-.63
- (PBI)/.63
- (PCL)/.42
- (SLAB)/.32
- (SUNW)/-.06
- (AMTD)/.21
- (WFT)/.51
- (YUM)/.57

Upcoming Splits
- (CW) 2-for-1

Economic Releases
- None of note

BOTTOM LINE: Asian Indices are mostly lower, weighed down by exporting shares in the region. I expect US stocks to open modestly lower and to trade mixed into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.