Today's Headlines

Bloomberg:
- President Bush has ordered the Justice Dept. to investigate whether the recent rise in the price of gasoline is the result of illegal manipulation.
- US Treasuries tumbled, with 10-year notes falling the most since July, after gains in consumer confidence and home sales bolstered expectations that the Fed will raise rates at its next two meetings.
- NY gasoline futures are falling for a second day after President Bush said the US may ease fuel regulations to avoid short-term supply disruptions.

Wall Street Journal:
- About 10 Fidelity Investment portfolio manager have reported to the SEC that they have put at least $1 million of their own money into funds they run.
- Cable television companies such as Comcast(CMCSK), Time Warner(TWX) and Cablevision Systems(CVC) are likely to announce excellent first-quarter results.

NY Post:
- EBay’s(EBAY) Skype Technologies signed agreements with four music publishers as the Internet-based phone service prepares to start a Web music store.

NY Times:
- The number of homeless people sleeping on New York’s streets fell 13% in the past year, citing a study by the city’s Department of Homeless Services.

AP:
- The Bush administration plans to temporarily halt deliveries of crude oil to the nation’s strategic reserves to help bring down gasoline prices.

Interfax:
- Chevron Corp.(CVX), BP Plc’s Russian venture and two Russian state companies agreed to build an oil pipeline to bypass Turkey’s congested Bosporus strait, a main route to world markets for Russian crude.

Consumer Confidence Makes Another Cycle High, Existing Home Sales Exceed Expectations

- Consumer Confidence for April rose to 109.6 versus estimates of 106.2 and a reading of 107.5 in March.
- Existing Home Sales for March rose to 6.92M versus estimates of 6.66M and 6.9M in February.

BOTTOM LINE: Consumer Confidence in the US economy unexpectedly jumped to the highest in four years, as an improving labor market helped Americans overcome concerns about high gasoline prices, Bloomberg reported. Wage gains and low unemployment will keep buoying spirits and lift retail sales, economists said. The present situation component of the index rose to 136.2 versus 133.3 in March. The expectations component rose to 91.9 versus 90.3 in March. The percentage of consumers that saw jobs as plentiful rose to 29.1%, the highest since August 2001, versus 28.3% in March. The percentage that said jobs are hard to find fell to 19.6%, the lowest since the 9/11 attacks. The percentage of people planning to by a house over the next six months fell to 2.7%, the lowest since November 2004, versus 4.1% the prior month. According to a recent National Assoc. of Business Economics survey, 44% of companies expect to hire more in the next six months versus 42% in the January survey. I still believe consumer confidence will improve modestly over the intermediate-term as rising stocks, relatively low long-term rates, declining energy prices, a healthy job market and a further lifting of irrational pessimism more than offsets a housing slowdown.

Sales of previously owned homes in the US unexpectedly rose last month at the same time the number of houses on the market increased, signaling that the housing slowdown is likely to be gradual, Bloomberg said. Compared with March of last year, existing home sales fell .7%. The number of unsold homes now represents 5.5 months’ worth at the current sales pace, the highest since 1998. The median price of an existing home rose 7.4% in March from a year ago to $218,000. The median price of a home rose 58% over the last five years as the economy strengthened and interest rates remained low. Sales rose 1.7% in the Northeast and 1.2% in the Midwest. Sales fell .7% in the South and West. I continue to believe housing is slowing to more healthy sustainable levels, which will likely send US economic growth back to average levels from robust rates.

Links of Interest

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- China, the world’s largest importer of soybeans, increased purchases of the oilseed and animal feed by 27% in March as bird flu concerns dropped.

Fox News:
- Fox News commentator Tony Snow is “highly likely” to accept the position of White House press secretary.

Financial Times:
- US investors have put $68 billion in international mutual funds this year, more than twice the amount they have poured into US funds, citing TrimTabs Investment Research. The data suggests that US retail investors are fueling the mania for emerging market equities.

Koran Tempo:
- PT Astra Agro Lestari, Indonesia’s biggest publicly traded agriculture company, expects to start commercial operations on making biodiesel fuel from palm oil within about 3 years.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to unch. on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.07%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (AFL)/.70
- (AGR)/.08
- (AMZN)/.12
- (T)/.48
- (BJS)/.53
- (BYD)/.73
- (EAT)/.61
- (BNI)/1.04
- (CDWC)/.74
- (CEC)/.83
- (CEN)/.23
- (CKFR)/.38
- (COH)/.27
- (CVG)/.25
- (GLW)/.23
- (DBD)/.23
- (ENR)/.73
- (ESV)/.89
- (FRX)/.35
- (HCA)/.89
- (IMCL)/.83
- (IM)/.34
- (JEC)/.73
- (JBLU)/-.20
- (LLL)/1.11
- (LH)/.74
- (LXK)/.69
- (LMT)/1.14
- (LU)/.03
- (MCHP)/.35
- (NOC)/.99
- (SWK)/.44
- (VLO)/1.32
- (VMC)/.65
- (WHR)/1.50

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Consumer Confidence for April is estimated to fall to 106.2 versus a reading of 107.2 in March.
- Existing Home Sales for March are estimated to fall to 6.67M versus 6.91M in February.

BOTTOM LINE: Asian indices are mostly lower, boosted by financial and retail stocks in the region. I expect US equities to open modestly lower and to rally modestly into the afternoon, finishing mixsed. The Portfolio is 50% net long heading into the day.

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%

Evening Review
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In Play

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.