Stocks Finish Higher on Energy Price Decline, Strong Economic Data and Surging Corporate Profits

Indices
S&P 500 1,305.41 +.28%
DJIA 11,354.49 +.63%
NASDAQ 2,333.63 +.14%
Russell 2000 765.23 +.05%
Wilshire 5000 13,205.88 +.20%
S&P Barra Growth 609.76 +.21%
S&P Barra Value 693.09 +.35%
Morgan Stanley Consumer 606.04 +.61%
Morgan Stanley Cyclical 853.14 +.95%
Morgan Stanley Technology 545.26 +.18%
Transports 4,700.68 -.14%
Utilities 392.39 -1.11%
Put/Call 1.08 +13.68%
NYSE Arms .91 -3.49%
Volatility(VIX) 11.76 +.09
ISE Sentiment 199.00 +2.05%
US Dollar 87.26 -.07%
CRB 352.57 -.10%

Futures Spot Prices
Crude Oil 71.64 -.40%
Unleaded Gasoline 211.60 -.82%
Natural Gas 7.22 -.63%
Heating Oil 202.29 -1.71%
Gold 639.00 +1.24%
Base Metals 224.14 +.81%
Copper 338.00 -.44%
10-year US Treasury Yield 5.10% +.71%

Leading Sectors
Gold & Silver +1.72%
Networking +1.49%
Disk Drives +1.20%

Lagging Sectors
HMOs -1.13%
Energy -1.50%
Gaming -1.83%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Oppenheimer:
- Reiterated Buy on AAP.

Afternoon/Evening Headlines
Bloomberg:
- The US Senate voted to use $1.9 billion from an emergency spending measure to buy more patrol boats, aircraft and other equipment to secure the US borders.
- MediaNews Group, publisher of the Denver Post, agreed to buy four newspapers from McClatchy for $1 billion, including three in California.
- The US Senate is seeking tax returns from the 15 largest US oil and gas companies to ensure they are paying the full amount due on record profits.
- House Republican leaders plan to introduce measures next week to reduce energy costs.
- Chevron(CVX) plans to boost natural-gas production in Colombia by as much as 50%.
- Crude oil prices fell $1.40 from session highs to $71.60/barrel as speculation over a summer gas shortage waned.

Reuters:
- Walt Disney(DIS) will introduce new interactive advertising when it begins showing television programs from ABC’s prime-time lineup on the network’s Web site.

IDG News Service:
- Symantec(SYMC) will announce on May 1 the reintroduction of a project aimed at curbing online identity theft attacks, called phishing.

Canadian Broadcasting Corp.:
- The US has agreed to return almost $4 billion of lumber duties under a preliminary agreement that would give Canada access to about 34% of the US softwood lumber market.

BOTTOM LINE: The Portfolio finished about unchanged as losses in my Semi longs and Biotech longs were offset by gains in my Energy-related shorts, Retail longs and Computer longs. I did not trade in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was neutral today as the advance/decline line finished about even, sector performance was mixed and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was only mildly bearish considering the rise in long-term rates and recent stock gains. The frenzy for cyclicals continued, however energy stocks came under pressure into the afternoon, finishing at session lows. A number of market-leading stocks finished lower on the day. However, given today's news, the fact that the major averages were mostly higher was a big positive. I am surprised by the bond market's muted reaction to such positive economic data.

Stocks Mixed into Final Hour as Lower Energy Prices Offset Higher Long-term Rates

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Biotech longs and Semi longs. I covered some of my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 50% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is above average. Here are the top 10 Nasdaq stocks with the largest percentage increase in short interest relative to their float:

1. (OLAB) +57.8%
2. (NRPH) +20.54%
3. (CROX) +19.5%
4. (RHEO) +14.7%
5. (XING) +13.8%
6. (CONN) +11.9%
7. (WPSC) +11.3%
8. (MFLX) +10.6%
9. (MNTA) +9.7%
10. (TWPG) +9.3%

I expect US stocks to trade mixed-to-lower into the close from current levels on higher long-term rates and profit-taking.

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

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
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%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

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.