Today's Headlines

Bloomberg:
- Iberdrola SA, the largest owner of wind-power plants, bought a US developer and will study building projects in China.
- The United Nations Security Council is preparing a “stiff message” for Iran on its nuclear program, a senior US diplomat said today, as Iran announced that its scientists have raised their uranium enrichment to 4.8%.
- General Motors(GM) and Ford Motor(F) said US sales fell in April and their biggest Japanese rivals gained as rising gasoline prices pushed buyers toward models with increased fuel economy.
- Ford reported a 15% plunge in truck sales and a 8% increase in car sales during April as sales of hybrid vehicle reached all-time highs.

Wall Street Journal:
- Intel Corp.(INTC) said it will invest $1 billion over five years to help offer more access to technology and education in developing countries.
- Smith Barney, Citigroup’s(C) brokerage subsidiary, plans to reorganize its supervision of foreign investors’ accounts, upsetting brokers at the firm.
- US regulators are looking at the propriety of some so-called life settlements, or arrangements where companies buy the right to death benefits from a stranger’s insurance policy.
- US auto dealers and automakers are boosting sales incentives including free gas as high interest rates and fuel prices curb sales.
- US researchers are finding that marijuana may be more addictive than is generally perceived, citing a compilation of studies published by Cambridge University Press.
- A US SEC official said that there are no legal hurdles to separating the fees mutual fund managers pay brokerage companies for research on investments.
- Salaried lawyers at big US law firms are working fewer hours or dropping plans to make partner, as more and more associates are leaving firms altogether to focus on their families.

Pending Home Sales Fall

- Pending Home Sales for March fell 1.2% versus estimates of a .5% decline and a .8% fall in February.

BOTTOM LINE: Contracts to purchase previously owned US homes decreased in March to a two-year low as buyers were deterred by rising mortgage rates and selling prices that remain higher than a year ago, Bloomberg said. Last week, the average 30-year mortgage rate rose to 6.58%, almost a four-year high. Pending re-sales fell 7.4% in the Midwest and 1.2% in the South. Pending re-sales rose 5.2% in the Northeast and .7% in the West. I continue to believe housing is in the process of slowing to more healthy sustainable levels, which will likely sending consumer spending back to average levels.

Links of Interest

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Today in IBD
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Real-time Intraday Chart/Quote

Tuesday Watch

Late-Night Headlines
Bloomberg:
- The US Treasury is less likely to label China a currency manipulator in a report on exchange-rates that it may publish this week after the G-7 last month called for faster yuan gains, Bank of America said.

Financial Times:
- Apple Computer(AAPL) has renewed contracts with Vivendi SA’s Universal Music Group, Warner Music Group, EMI Group and Sony BMG Music Entertainment to offer songs through its iTunes digital store for 99 cents each.
- Walt Disney(DIS) has agreed to distribute movies and consumer products in Vietnam as part of its global expansion drive.
- PricewaterhouseCoopers LLP, the world’s biggest accounting firm, wants a plan to harmonize US and international accounting standards to be abandoned.
- Acer Inc., the world’s fourth-biggest personal-computer maker, plans to sell flat-screen televisions worldwide within nine months as global PC growth slows.

Ming Pao Daily:
- Yanzhou Coal Mining Co.(YZC), China’s largest coal producer, plans to almost triple its annual production by 2010.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated +.25%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
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Before the Bell CNBC Video(bottom right)
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Earnings of Note
Company/EPS Estimate
- (ASF)/.34
- (ADM)/.46
- (BWNG)/-.24
- (CMX)/.50
- (CBG)/.36
- (CEPH)/.62
- (CKP)/.15
- (CNA)/.86
- (DWA)/.00
- (DUK)/.49
- (EDS)/.08
- (EMR)/1.00
- (ETR)/.87
- (EOP)/.23
- (FPL)/.48
- (IT)/.03
- (GET)/.07
- (GNSS)/.05
- (HLT)/.18
- (IACI)/.27
- (IRM)/.21
- (LTR)/2.18
- (MLM)/.56
- (MAS)/.46
- (PPC)/-.32
- (KWK)/.35
- (SAFC)/1.37
- (SIRI)/-.35
- (JOE)/.28
- (STA)/1.29
- (TBL)/.45
- (TXU)/1.08
- (VZ)/.59
- (VNO)/.87

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Pending Home Sales for March are estimated to fall .5% versus a .8% drop in February.

Afternoon
- Total Vehicle Sales for April are estimated to remain at 16.6M versus 16.6M in March.
- Domestic Vehicle Sales for April are estimated to rise to 13.3M versus 13.1M in March.

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

Stocks Finish at Session Lows on Increasing Worries Over Fed Rate Hikes

Indices
S&P 500 1,305.19 -.41%
DJIA 11,343.29 -.21%
NASDAQ 2,304.79 -.77%
Russell 2000 761.12 -.45%
Wilshire 5000 13,203.34 -.37%
S&P Barra Growth 606.69 -.40%
S&P Barra Value 696.34 -.43%
Morgan Stanley Consumer 609.36 -.02%
Morgan Stanley Cyclical 853.32 +.43%
Morgan Stanley Technology 541.85 -.42%
Transports 4,669.91 +.12%
Utilities 394.02 -.87%
Put/Call .89 +3.49%
NYSE Arms 1.01 -7.31%
Volatility(VIX) 12.53 +8.11%
ISE Sentiment 176.00 +5.39%
US Dollar 86.28 +.20%
CRB 355.22 +1.52%

Futures Spot Prices
Crude Oil 73.70 unch.
Unleaded Gasoline 214.66 +2.75%
Natural Gas 6.69 +2.14%
Heating Oil 205.88 +2.28%
Gold 656.50 -.56%
Base Metals 215.77 -.16%
Copper 330.70 -.41%
10-year US Treasury Yield 5.14% +1.75%

Leading Sectors
Oil Service +2.19%
Energy +1.55%
Defense +.87%

Lagging Sectors
Oil Tankers -1.02%
REITs -1.31%
I-Banks -3.17%

Evening Review
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Market Wrap CNBC Video(bottom right)
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PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Merrill Lynch:
- Added (ADBE) to Focus List.

Afternoon/Evening Headlines
Bloomberg:
- Federal Reserve interest-rate policy is “very close” to a level that’s “properly calibrated” to the outlook for moderating economic growth, Atlanta Fed President Guynn said.
- Left-wing Bolivian President Evo Morales took control of the country’s oil and gas fields and gave foreign energy companies operating in the country 180 days to agreed to new contracts with state-run Petroliferos Fiscales Bolivianos.
- Supporters of immigrant rights rallied across the US today to demand that Congress give millions of undocumented workers a change to gain legal status.
- UnitedHealth Group(UNH) said its board discontinued equity-based awards for CEO McGuire and COO Hemsley.
- The percentage of speculative-grade bonds at distressed levels fell to an eight-year low last month as economic growth helped companies improve their creditworthiness, S&P said.
- About 11% of Americans age 12 to 19 have high blood glucose levels that may increase their risk of developing Type 2 diabetes, heart disease or stroke, a study said.

CNBC:
- “Federal Reserve Chairman Ben Bernanke told me over the weekend that the media and the markets basically got it wrong last week in speculating that the Fed is done raising interest rates,” said Maria Bartiromo.

BOTTOM LINE: The Portfolio finished lower today on losses in my Internet longs, Networking longs and Energy-related shorts. I added to my (IWM) and (QQQQ) shorts 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 above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bearish. I continue to believe the Fed has their finger on the “pause trigger,” but won’t pull until signs of slowing economic growth are evident.

Stocks Modestly Higher into Final Hour Even as Oil and Long-term Rates Rise

BOTTOM LINE: The Portfolio is about even into the final hour as gains in my Semi longs and Retail longs are offsetting losses in my Energy-related shorts. I added to my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 50% net long. The tone of the market is neutral as the advance/decline line is modestly lower, sector performance is mostly positive and volume is about average. The energy sector saw the greatest increase in net insider selling in the S&P 500 last week. Insiders sold $364,392,555 worth of stock, while only buying $4,734,854. The industrial sector saw the second-greatest amount of net insider selling. Insiders sold $265,133,591 worth of stock, while purchasing $5,045,250. This corresponds with my view that the most economically sensitive stocks, which have recently seen huge price spikes, will underperform as economic growth slows over the coming months. I expect US stocks to trade mixed into the close from current levels as strong economic data offset the rise in energy prices and long-term rates.