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

Monday Watch

Weekend Headlines
Bloomberg:
- President Bush said the new Medicare prescription drug program will save the elderly an average of more than $1,000 a year each and urged them to sign up before a May 15 deadline.
- Barbaro ran to a seven-length victory at the 132nd Kentucky Derby, becoming the sixth undefeated winner of the most prestigious US horse race.
- The Federal Reserve will raise interest rates this week for the last time until at least August as central bankers assess the impact of two years of increases, most of Wall Street’s biggest bond trading firms said.
- Wachovia Corp.(WB), the no. 4 US bank, may offer to buy Golden West Financial(GDW) for more than $25 billion to gain about 280 branches in 10 states, said three people with knowledge of the talks.
- Warren Buffett, , the billionaire chairman and CEO of Berkshire Hathaway, said his son, Howard Buffett, would be “a double-protector of the culture” as the company’s future chairman.

CBS News:
- The US may have enough ethanol fuel stations within three years, citing Daniel Kammen, head of the Renewable Energy Lab at the Univ. of Cal., Berkeley. Kammen estimates it takes $30,000-$40,000 to retrofit a gasoline station to sell E-85, which is 85% ethanol and 15% gas. The retrofitting can be done in “weeks.” Sun Microsystems founder Vinod Khosla, who is investing in ethanol, told Dateline NBC that within five years, the US can be on a path to petroleum independence.

NY Times:
- A study of a recent outbreak of infections among Bausch & Lomb’s(BOL) lens-cleaning solution users may not be caused directly by the product.
- Somme US states and governors are unhappy with the Real ID Act passed by the US Congress last year that requires them to check the legal status of driver’s license applicants.
- Business travelers have driven up prices in Las Vegas as their numbers increased by 5.7% to 6.2 million in 2005.
- The path of Democrats to regain control of the US Congress by winning House and Senate races in Ohio isn’t going to be an easy one, judging by early results in primary elections.
- Former CIA officer Valerie Plame, whose identity was compromised three years ago, has received $2.5 million for her memoir.
- Boeing co.(BA) has received enough orders to fill out the first three years of production for its 787 Dreamliner, the lighter, larger and more efficient commercial airplane due out in 2008,
- New Orleans mayoral candidates Ray Nagin and Mitch Landrieu are courting white conservative voters who may cast the deciding votes in the May 20 runoff election for mayor.

Washington Post:
- Wachovia Corp.(WB) faces protest movements by Muslim activists over its decision in January to shut accounts held by the Foundation for Appropriate and Immediate Temporary Help, a Muslim organization.
- Democrats plan to investigate the White House’s first-term energy task force and its use of intelligence before the war in Iraq should they take control of the US House in November elections, citing Democratic House Minority Leader Nancy Pelosi.

NY Post:
- Nathan’s Famous(NATH) plans to begin selling treats for dogs under its brand name in specialty pet stores later this month.

Barron’s:
- Eastman Kodak(EK) may be able to pay off all its debts from a sale of its health-imaging division, which could fetch as much as $4 billion.
- America’s toll roads and bridges may be worth more than $200 billion if sold to private operators.

San Jose Mercury News:
- Apple Computer(AAPL) applied for a patent for a wireless mobile device in December 2004, citing the US Patent and Trademark Office.

Fortune:
- We will all likely be communicating and being entertained with bandwidth-intensive video. In such a world, the data centers will be vast, many in number, and loaded with servers, storage and switches.

Financial Times:
- US venture capitalists increased investments in internet-based media companies this year, following the popularity of Web sites such as MySpace.com.
- Yahoo!(YHOO) may say it has overhauled its online advertising system and installed new technology designed to deal with ads targeted at specific consumers.

Sunday Telegraph:
- EMI Group is preparing to make a revised offer of $4.4 billion to buy rival Warner Music Group(WMG) within the next few weeks.

Business Standard:
- Reliance Industries of India plans to spend as much as $444.9 million for a refining plant to produce bio-diesel.

Finanz und Wirtschaft:
- Alcon(ACL) has gained customers who switched from using Bausch & Lomb(BOL) products that have been linked to eye infections.

Globe and Mail:
- EnCana Corp.(ECA), Anadarko Petroleum(APC), ConocoPhillips(COP) and Royal Dutch Shell will invest $47 million over five years to explore Canada’s Beaufort Sea for oil and natural gas.

London-based Times:
- Airtricity, Ireland’s largest wind-park operator, and ABB AB plan to create Europe’s first cross-border wind power network.

Weekend Recommendations
Barron's:
- Had positive comments on (PLT), (DGIN), (PFE), (KO), (BUD) and (UTX).
- Had negative comments on (EMC).

Night Trading
Asian indices are +.50% to +1.0% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.10%.

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/Estimate
- (AES)/.21
- (AQNT)/.06
- (BSG)/.17
- (CMG)/.12
- (FLR)/.65
- (GDP)/.34
- (HW)/.44
- (NBR)/.74
- (OSIP)/-.11
- (SBAC)/-.12
- (SVM)/.04
- (SONS)/.01
- (TKLC)/.19
- (VCLK)/.11

Upcoming Splits
- (LTR) 3-for-1

Economic Releases
- None of note

BOTTOM LINE: Asian Indices are higher, technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

There are a few economic reports of note and significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - None of note

Tues. - Wholesale Inventories

Wed. - Monthly Budget Statement, FOMC Rate Decision

Thur. - Advance Retail Sales, Business Inventories, Initial Jobless Claims

Fri. - Trade Balance, Import Price Index, Univ. of Mich. Consumer Confidence

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - AES Corp.(AES), BISYS Group(BSG), Chipotle Mexican(CMG), Flour Corp.(FLR), Guidant Corp.(GDT), Human Genome Sciences(HGSI), Nabors Industries(NBR)

Tues. - Brightpoint Inc.(CELL), Cablevision Systems(CVC), Cisco Systems(CSCO), Energy Conversion Devices(ENER), Hansen Natural(HANS), Lamar Advertising(LAMR), Mylan Labs(MYL), Sara Lee(SLE), Symantec Corp.(SYMC), Walt Disney(DIS)

Wed. - Federated Dept. Store(FD), Legg Mason(LM), News Corp.(NWS/A)

Thur. - Echostar Communications(DISH), Expedia Inc.(EXPE), JC Penney(JCP), Kohl’s Corp.(KSS), Nvidia Corp.(NVDA), Pacific Sunwear(PSUN), Urban Outfitters(URBN), Viacom Inc.(VIA)

Fri. - Bausch & Lomb(BOL), DRS Technologies(DRS), Pacific Ethanol(PEIX)

Other events that have market-moving potential this week include:

Mon. - Jeffries Gaming/Lodging/Media/Entertainment Conference

Tue. - Merrill Lynch Global Metals/Mining/Steel Conference, Bear Stearns Global Transportation Conference, Jeffries Gaming/Lodging/Media Conference, CIBC Media/Internet/Telecom Conference

Wed. - Merrill Lynch Global Metals/Mining/Steel Conference, Bear Stearns Global Transportation Conference, Piper Jaffray Hardware & Communications Conference, CIBC Media/Internet/Telecom Conference, Jeffries Gaming/Lodging/Media/Entertainment Conference

Thur. - Merrill Lynch Global Metals/Mining/Steel Conference, Piper Jaffray Hardware & Communications Conference, Goldman Sachs Power & Utility Conference

Fri. - Goldman Sachs Power & Utility Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on better-than-expected earnings reports, lower energy prices, short-covering and stable long-term rates. My trading indicators are giving bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,325.76 +1.15%*

BOTTOM LINE: Overall, last week's market performance was bullish. The advance/decline line rose, almost every sector gained and volume was above average on the week. Measures of investor anxiety were mostly lower. The AAII % Bulls rose to 45.89%, but is still only around average levels, which is a positive considering the DJIA is only 172 points away from an all-time high. The average 30-year mortgage rate rose to 6.59% which is 138 basis points above all-time lows set in June 2003. I still believe housing is in the process of slowing to more healthy sustainable levels. This will likely result in the slowing of consumer spending, and thus US GDP growth, back to around average rates over the coming months. The benchmark 10-year T-note yield rose 5 basis points on the week as economic data mostly exceeded expectations, the US dollar declined and measures of inflation rose. I still expect inflation concerns to begin declining again later this quarter as economic growth slows, unit labor costs remain subdued and the mania for commodities reverses course. The 10-year yield is probably close to a peak for the year.

Unleaded Gasoline futures fell this week and are 30.1% below September 2005 highs even as refinery utilization remains below normal as a result of the hurricanes last year, 21.6% of Gulf of Mexico oil production remains shut-in and fears over Iranian/Nigerian production disruptions persist. The mandated switch from MTBE-based reformulated gasoline to ethanol-based fuel had been the main reason behind the recent spike in gas prices. President Bush’s decision to authorize the temporary waiver of this mandate should continue to quell gasoline shortage fears.

The American Petroleum Institute recently said US oil demand fell 2.6% in March, notwithstanding blistering economic growth of 4.8% during the first quarter. This is a result of conservation, substitution and demand destruction. Ford Motor reported this week that sales for the Explorer, America’s top-selling SUV, plunged 42% in April. Moreover, sales of Ford’s more fuel-efficient models remained brisk. Demand for gasoline is decelerating markedly and the recent rise related to shortage speculation should further dampen demand over the coming months, sending gas prices back to reasonable levels.

Natural gas inventories rose less than expectations this week, but supplies are still 58.0% above the 5-year average, near an all-time record high for this time of year, even as 12.95% of daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged 57.0% since December 2005 highs. Notwithstanding this collapse, industrial demand for natural gas has shown few signs of increasing. US oil inventories are now approaching 9-year highs. Since November 2004, global oil demand has only increased 1.07%, while global supplies have increased 4.57%. Moreover, worldwide oil inventories are poised to begin increasing at an accelerated rate over the next year as Cambridge Energy Research outlined here. I continue to believe oil is priced at extremely elevated levels on fear and record speculation by investment funds, not fundamentals. As the fear premium in oil dissipates back to more reasonable levels and supplies continue to rise, I still expect crude to head meaningfully lower over the intermediate-term.

Gold rose for the week as the US dollar declined, inflation measures rose and economic data mostly exceeded estimates. The US dollar fell on continuing speculation over a Fed “pause” and hawkish commentary from the European Central Bank. I expect the dollar to begin to firm over the next few months.

The most economically sensitive stocks outperformed substantially for the week as investors continue to extrapolate recent robust economic growth into the future. S&P 500 earnings growth for the 1st quarter is up about 14.3% year-over-year so far, about double the long-term average and substantially above expectations of 8-9% growth just a few weeks ago. As well, 67% of companies have exceeded estimates versus the long-term average of 57%. This is the 16th consecutive quarter of double-digit profit growth, the best streak since record-keeping began in 1936. The forward p/e on the S&P 500 has contracted relentlessly during this time period and now stands at a very reasonable 15.5.

The average US stock, as measured by the Value Line Geometric Index(VGY), is up a very strong 10.8% so far this year. Moreover, the Russell 2000 Index is up 16.53% year-to-date. The S&P 500 is 7.0% higher for the year, about half way to my projection of a 15% gain. This is with oil trading above $70/bbl. and interest rates moving higher. If we get a meaningful reversal lower in either or both, my 15% total return prediction for the year may prove conservative. The ECRI Weekly Leading Index rose this week and is still forecasting healthy US economic activity.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,325.76 +1.15%
DJIA 11,577.74 +1.85%
NASDAQ 2,342.57 +.86%
Russell 2000 781.83 +2.26%
Wilshire 5000 13,425.23 +1.30%
S&P Equity Long/Short Index 1,183.58 -.53%
S&P Barra Growth 613.04 +.64%
S&P Barra Value 710.97 +1.66%
Morgan Stanley Consumer 616.83 +1.20%
Morgan Stanley Cyclical 885.57 +4.22%
Morgan Stanley Technology 551.02 +1.26%
Transports 4,957.91 +6.29%
Utilities 411.05 +3.42%
S&P 500 Cum A/D Line 8,238.0 +1.0%
Bloomberg Crude Oil % Bulls 35.0 +40.0%
Put/Call .79 -8.14%
NYSE Arms .75 -30.56%
Volatility(VIX) 11.62 +.26%
ISE Sentiment 149.00 -8.38%
AAII % Bulls 45.89 +8.98%
AAII % Bears 33.56 -6.67%
US Dollar 85.16 -1.11%
CRB 351.92 +.58%
ECRI Weekly Leading Index 138.50 +1.09%

Futures Spot Prices
Crude Oil 69.98 -5.15%
Unleaded Gasoline 202.78 -5.36%
Natural Gas 6.78 +3.12%
Heating Oil 195.75 -2.71%
Gold 685.00 +3.65%
Base Metals 230.69 +6.91%
Copper 350.75 +5.26%
10-year US Treasury Yield 5.10 +.99%
Average 30-year Mortgage Rate 6.59% +.15%

Leading Sectors
Steel +5.72%
Disk Drives +4.97%
Oil Service +4.75%
Airlines +4.16%
Broadcasting +3.30%

Lagging Sectors
Hospitals +.27%
Biotech +.21%
Telecom -.34%
Software -1.17%
HMOs -2.52%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

Stocks Sharply Higher into Final Hour as Long-term Rates Fall

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail and Biotech longs. I covered the remainder of my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, sector performance is positive and volume is above average. The AAII percentage of Bulls rose to 45.89% this week from 42.11% the prior week. This reading is still around average levels. The AAII percentage of Bears fell to 33.56% this week from 35.96% the prior week. This reading is still at above-average levels. Considering the major averages are still near six-year highs, these numbers are very subdued. I expect bullish sentiment to rise again next week. I expect US stocks to trade mixed into the close from current levels as falling long-term rates offset profit-taking.