Today's Headlines

Bloomberg:
- US Secretary of State Condoleezza Rice today joined Defense Secretary Donald Rumsfeld in Baghdad on an unscheduled visit to support the country’s new government.
- Tony Snow, a Fox News radio host and former presidential speechwriter, has accepted the job of White House press secretary.
- Exxon Mobil(XOM) CEO Tillerson plans to spend $100 billion on oil exploration to increase production and profits.
- US Treasuries are falling for a second day after government reported showed orders for durable goods and new home sales rose more than forecast, bolstering speculation the Fed will continue raising interest rates.
- The US economy expanded across most parts of the country with “tightening” labor markets as companies struggled with higher energy costs, the Federal Reserve said today.
- Crude oil is falling for a third day after the EIA reported that US refineries increased output of gasoline and other fuels.

Wall Street Journal:
- Microsoft(MSFT) plans to acquire Massive Inc., a closely held company that places ads in video games, for $200 million to $400 million.
- Bank of America(BAC) is considering starting a new credit-card brand and processing network to compete with Visa USA and MasterCard Inc.
- Anheuser-Busch’s(BUD) goal of selling a beer that appeals to millions of people is out of step with rising demand for niche products.
- US mutual funds, buoyed up by rising stock markets in the past year, are increasing their advertising expenditure and trumpeting their performance.
- Iran’s oil minister said in an interview that oil exports won’t be used as a political weapon in the confrontation over the country’s nuclear program.

Washington Post:
- Power plants in Alabama and North Dakota will be required to spend more than $300 million to reduce emissions as the result of two air pollution cases settled by the US Justice Dept. and the Environmental Protection Agency.

NY Times:
- A GlaxoSmithKline Plc(GSK) executive who is leading marketing efforts for an over the counter weight-loss drug to be introduced in the US has lost 60 pounds in the past three years by using the prescription version of the treatment.

AP:
- The top US general in Iraq said the country’s progress in forming a new government is a “major step” toward the US implementing a planned reduction in troops this year.

Capital:
- Google’s(GOOG) German Web site will start a new search function that allows users to locate restaurants, doctors and other businesses in their neighborhood.

San Antonio Express:
- Drivers in Bee County in southeast Texas are being urged by elected officials to boycott Exxon Mobil(XOM) gasoline pumps to protest prices that have climbed above $3 gallon.

Durable Goods Orders and New Home Sales Soar

- Durable Goods Orders for March rose 6.1% versus estimates of a 1.8% increase and an upwardly revised 3.4% gain in February.
- Durables Ex Transportation for March rose 2.8% versus estimates of a 1.0% increase and a 1.1% fall in February.
- New Home Sales for March rose 1213K versus estimates of 1110K and 1066K in February.

BOTTOM LINE: Orders for long-lasting goods rose the most in 10 months in March as US businesses invested in new equipment to meet demand, Bloomberg said. Companies are using record profits to replace outdated equipment, add workers and factory space. Bookings for non-defense capital goods excluding aircraft, a gauge of future business spending, increased 3% in March versus a .8% fall in February. According to economists, business spending probably increased at a 13% annualized rate during 1Q, the fastest since the second quarter of 2004. Orders for computers and electronic equipment rose 7.5%, the best since September 2004. Unfilled orders, a measure of future production, surged 2.8%, the largest increase since last November. I expect increased business spending to help offset slower consumer spending going forward.

Sales of new homes in the US rose 13.8% in March, the most in 13 years, led by demand for less-expensive houses, Bloomberg said. The median price dropped 2.2% from the same month last year to $224,200. The fall in the median selling price was the first since 2003 and reflects a surge in the sales of homes priced between $150,000 and $299,999 and few sales of high-priced homes. The number of unsold homes declined to 5.5 months’ worth at the current sales pace from 6.3 months the prior month. Sales rose 36% in the West, 11% in the Midwest, 6.9% in the South and 4.7% in the Northeast. I still expect housing to slow to more healthy sustainable levels through year-end.

Links of Interest

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Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Nippon Steel Corp., the world’s third-largest steelmaker, will probably report a 3.8% drop in second-half profit on higher raw material costs and a decline in exports.

China Daily:
- Plantronics Inc.(PLT), which makes computer and communications headsets, opened its first manufacturing plant in China yesterday.

DigiTimes:
- Quanta Computer will give back to Dell Inc.(DELL) 1.5% of its 2006 revenue from the personal computer maker as a condition of securing 2007 orders from Dell.

Sydney Morning Herald:
- James Packer is part of a group of investors led by Nelson Peltz who have built a 5.4% stake in HJ Heinz(HNZ).

Reuters:
- Cargill Inc., the largest US agriculture company, will close seven meat processing plants on May 1 to allow workers to participate in immigration rallies around the US.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated +.04%.

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Earnings of Note
Company/EPS Estimate
- (AMG)/1.27
- (ATI)/.70
- (AKAM)/.16
- (ABK)/1.82
- (AHC)/4.79
- (AMT)/.00
- (ABC)/.54
- (BUD)/.56
- (AV)/.12
- (BHI)/.79
- (BDX)/.77
- (BIIB)/.46
- (CD)/.14
- (CTX)/3.11
- (CL)/.66
- (COP)/2.35
- (EXC)/.70
- (ESRX)/.70
- (FCL)/.50
- (HAR)/.98
- (INSP)/.05
- (MXIM)/.45
- (MNST)/.27
- (NSC)/.67
- (PEP)/.58
- (PX)/.65
- (PHM)/.96
- (COL)/.63
- (RDC)/.53
- (SOHU)/.15
- (TROW)/.82
- (TIN)/.49
- (TRID)/.16
- (WY)/.84
- (XLNX)/.28
- (ZMH)/.81

Upcoming Splits
- (RSP) 4-for-1
- (TS) 5-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for March are estimated to rise 1.8% versus a 2.7% gain in February.
- Durables Ex Transportation for March are estimated to rise 1.0% versus a 1.2% decline in February.

10:00 am EST
- New Home Sales for March are estimated to rise to 1110K versus 1080K in February.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 600,000 barrels. Gasoline inventories are estimated to fall 3,000,000 barrels, and distillate supplies are expected to decrease by 1,800,000 barrels.

2:00 pm EST
- Fed’s Beige Book

BOTTOM LINE: Asian indices are higher, boosted by technology stocks in the region. I expect US equities to open modestly higher and to fade into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

Stocks Finish Modestly Lower on Profit-taking and Higher Long-term Rates

Indices
S&P 500 1,301.74 -.49%
DJIA 11,283.25 -.47%
NASDAQ 2,330.30 -.13%
Russell 2000 764.82 -.17%
Wilshire 5000 13,180.07 -.44%
S&P Barra Growth 608.46 -.39%
S&P Barra Value 690.67 -.58%
Morgan Stanley Consumer 602.36 -.25%
Morgan Stanley Cyclical 845.10 -.60%
Morgan Stanley Technology 544.26 -.36%
Transports 4,707.38 -.49%
Utilities 396.81 -1.15%
Put/Call .95 +2.15%
NYSE Arms .95 -24.32%
Volatility(VIX) 11.75 unch.
ISE Sentiment 195.00 -2.99%
US Dollar 87.35 -.11%
CRB 352.93 +.10%

Futures Spot Prices
Crude Oil 72.78 -.14%
Unleaded Gasoline 212.80 -.05%
Natural Gas 7.27 +.21%
Heating Oil 205.81 +1.30%
Gold 634.70 +.08%
Base Metals 222.34 +4.31%
Copper 333.00 +.29%
10-year US Treasury Yield 5.07% +1.89%

Leading Sectors
Networking +1.63%
Disk Drives +1.38%
Airlines +1.11%

Lagging Sectors
HMOs -1.41%
Papers -1.54%
Steel -2.30%

Evening Review
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Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
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GuruFocus.com
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After-hours Movers
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In Play

Afternoon Recommendations
Deutsche Bank:
- Downgraded (CTRP) and (SINA) to Hold.

Afternoon/Evening Headlines
Bloomberg:
- Amazon.com(AMZN) said first-quarter profit fell 35% after increasing spending. The shares rose as much as 6.4% after the company raised its sales and profit forecast for the year.
- Corning Inc.(GLW) said sales rose 20% as customers bought more LCD televisions.
- Felipe Calderon, the former energy minister for Mexican President Vicente Fox, took the lead in a presidential poll for the first time, surpassing former Mexico City Mayor Andres Lopez Obrador.

AP:
- An Israeli spy satellite was launched into orbit from Russia today. The satellite is capable of monitoring Iran’s nuclear program. Iran’s President said again yesterday that Israel should be destroyed.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my Internet longs and Biotech longs more than offset gains in my Energy-related shorts, Networking longs and Index shorts. I did not trade in the final hour, thus leaving the Portfolio 25% 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 heavy. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was only mildly bearish considering the rise in long-term rates and recent stock gains. The bears were again unable to capitalize on morning weakness. I will wait to see the bond market's reaction to tomorrow's new home sales and durable goods reports before further shifting market exposure.

Stocks Lower into Final Hour as Long-term Rates Rise

BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my Internet longs and Biotech longs are more than offsetting gains in my Index shorts, Energy-related shorts and Networking longs. I added to my (IWM), (QQQQ) and (EEM) shorts today, thus leaving the Portfolio 25% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is heavy. The Johnson Redbook same-store sales index rose a robust 4.6% year-over-year last week vs. a 4.3% rise the prior week. This is the strongest reading since August 2005. The long-term average is a gain of around 2.5%. Notwithstanding this strong reading, I still believe retail sales growth is peaking for the year right about now. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices and short-covering.