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Tuesday Watch

Late-Night Headlines
Bloomberg:
- General Motors(GM) revised its first-quarter results to reflect a change in accounting, resulting in its first profit in six quarters.
- Samsung Electronics and Hynix Semiconductor, which make about 67% of the memory chips used in music players and mobile phones, said they raised prices for the first time this year as a glut of the chips eased.
- Sony Corp.(SNE) demonstrated the PlayStation 3 for the first time and pledged again to have the new console on store shelves by November. The new system will cost at least $100 more than Microsoft’s(MSFT) Xbox 360.

Wall Street Journal:
- Overseas banks may be required to incorporate their branches in China as the nation prepares to set up a deposit insurance system to protect investors.
- With six days left for American retirees to sign up for a federal prescription drug benefit, some 6 million have yet to enroll, and legislators may extend the deadline.

Financial Times:
- GlaxoSmithKline Plc(GSK) private investors have been sent a threatening letter from an animal rights group telling them to sell their shares within 14 days or face public exposure.

Digitimes:
- Quanta Computer Inc. won 60% of Dell’s(DELL) 2007 notebook-computer orders, becoming the US company’s biggest laptop supplier.

Maeil Business Newspaper:
- Three out of every 10 of South Korea’s non-financial listed companies didn’t earn enough to pay the interest on their debt last year, citing data from the Bank of Korea.

Late Buy/Sell Recommendations
Banc of America:
- Rated OMC Buy.

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.01%.

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Earnings of Note
Company/EPS Estimate
- (BIDU)/.12
- (CELL)/.18
- (CVC)/-.08
- (CRL)/.57
- (CHD)/.53
- (CSCO)/.26
- (DYN)/-.12
- (ENER)/-.16
- (HANS)/.71
- (HB)/.84
- (KCS)/.65
- (LAMR).03
- (MRX)/.20
- (MYL)/.24
- (PXD)/.48
- (SLE)/.25
- (SINA)/.15
- (SNHY)/.37
- (SYMC)/.25
- (ELOS)/.42
- (URI)/.18
- (DIS)/.31
- (WPI)/.32
- (WTW)/.55
- (WGR)/.74

Upcoming Splits
- (ANST) 2-for-1

Economic Releases
10:00 am EST
- Wholesale Inventories for March are estimated to rise .5% versus a .8% gain in February.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology stocks in the region after Dell(DELL) lowered guidance. I expect US equities to open modestly lower and to trade modestly higher into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Finished Mixed, Consolidating Recent Gains Ahead of FOMC Meeting

Indices
S&P 500 1,324.66 -.08%
DJIA 11,584.54 +.06%
NASDAQ 2,344.99 +.10%
Russell 2000 781.60 -.03%
Wilshire 5000 13,420.79 -.03%
S&P Barra Growth 612.77 -.04%
S&P Barra Value 710.11 -.12%
Morgan Stanley Consumer 616.98 +.02%
Morgan Stanley Cyclical 886.30 +.08%
Morgan Stanley Technology 549.30 -.31%
Transports 4,957.91 unch.
Utilities 407.90 -.77%
Put/Call .92 +16.46%
NYSE Arms .92 +22.36%
Volatility(VIX) 12.00 +3.27%
ISE Sentiment 206.00 +38.26%
US Dollar 85.18 +.05%
CRB 350.35 -.45%

Futures Spot Prices
Crude Oil 69.93 +.23%
Unleaded Gasoline 200.90 +.27%
Natural Gas 6.71 +.28%
Heating Oil 195.80 +.18%
Gold 680.80 +.13%
Base Metals 230.48 -.09%
Copper 350.85 +.20%
10-year US Treasury Yield 5.11% +.21%

Leading Sectors
Broadcasting +2.18%
HMOs +1.65%
Retail +.83%

Lagging Sectors
Gold & Silver -.90%
Homebuilders -1.12%
Defense -1.70%

Evening Review
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Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- President Bush asked Sudan to back UN peacekeepers for Darfur and is sending Secretary of State Condoleezza Rice to the world body tomorrow to seek a resolution on speeding up their deployment.
- Saudi Prince Alwaleed bin Talal, Citigroup’s(C) biggest individual shareholder, said he and Goldman Sachs Group(GS) CEO Henry Paulson may consider investing together, and offered to help Goldman win business in the kingdom.
- Man Group’s US brokerage and seven of its employees were sued for fraud and racketeering by a court-appointed receiver seeking to recoup investor assets lost in the collapse of a Philadelphia hedge fund.
- A decline in US newspaper circulation accelerated in the six months through March, led by drops at the LA Times and San Francisco Chronicle, as more readers got their news from Web sites.
- Chipotle Mexican Grill(CMG) said first-quarter profit more than tripled as it opened new stores and margins rose.
- Dell Inc.(DELL) said price cuts caused first-quarter profit to miss its forecast and revenue to hit the bottom of a previously announced range.

Nikkei English News:
- Toyota Motor(TM) plans to develop an inexpensive compact car, the company’s cheapest yet, for sale in India and other emerging markets.

Financial Times Deutschland:
- Time Warner’s(TWX) AOL Germany Internet unit plans to stop charging users for content as it forecasts increased revenue from online advertising.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Networking longs and Software longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was about average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was neutral considering recent gains. The 10-year yield was stable ahead of Wednesday's FOMC meeting. I expect the yield to head lower later this week as shorts cover. I am still long (TLT).

Stocks Slightly Higher Into Final Hour as Energy Prices Fall

BOTTOM LINE: The Portfolio is about even into the final hour as gains in my Networking longs are offsetting losses in my Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is slightly lower, sector performance is mixed and volume is average. For the second week in a row, the energy sector saw the greatest amount of net insider selling in the S&P 500 last week. Insiders sold $1,161,986,392 worth of stock, while purchasing $1,043,576 worth. This is the greatest insider selling I have seen in any S&P 500 sector in quite some time. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices and short-covering ahead of Wednesday’s FOMC meeting.

Today's Headlines

Bloomberg:
- Ford Motor(F) and General Motors(GM), seeking to boost sales, want the federal government to force NY and California to let solo drivers of their hybrid vehicles join those of Honda and Toyota cars in highway carpool lanes.
- Iranian President Ahmadinejad, who said last month his country has successfully produced nuclear fuel, has written a letter to President Bush proposing new ways to ease tensions over Iran’s nuclear program.
- Apple Computer(AAPL) won a trademark dispute with the Beatles over the use of the apple name and logo on its iTunes music store.
- China’s government settled most of its wrong-way bets on copper as the metal climbed to a record this year, extending its losses to hundreds of millions of dollars.
- Thermo Electron(TMO) agreed to buy Fisher Scientific International(FSH) for $10.6 billion to become the largest supplier of lab equipment form beakers to sterilizers.
- Intel Corp.(INTC) separated the production of memory chips from other processors, signaling the company may be preparing to jettison its memory unit.
- Crude oil is falling $1.44/bbl. to a three-week low of $68.75 on easing tensions with Iran as US supplies approach 9-year highs and gasoline demand wanes.

Wall Street Journal:
- University of California officials said on May 5 that they will restart human cloning work. Advanced Cell Technology Inc. also said it will announce cloning plans soon.
- Multigig Inc., a closely held California company, says it has come up with a new way of synchronizing silicon-chip operations, a move that it says could reach a 75% power savings.
- Charles Koch, chairman and CEO of Kansas-based Koch Industries, said requirements such as Sarbanes-Oxley audit rules hinder publicly traded companies and will lead to more takeovers by closely held companies.
- US health experts from the Food and Drug Administration, Centers for Disease Control and Prevention and National Institute of Allergy and Infectious Disease are to meet Thursday in Atlanta to focus on deadly infections that may have been caused by the RU-486 abortion pill.
- The US Centers for Disease Control and Prevention plans to recommend that doctors provide voluntary HIV tests as a part of routine medical care for all patients in the US between the ages of 13 and 64.
- Several US investment banks have begun offering advice and funding to activist hedge funds, encouraged by Lazard’s role advising Carl Icahn in his effort to split up Time Warner(TWX).
- ValueClick(VCLK) and aQuantive(AQNT), two Internet ad companies, almost agreed to merge in recent days.
- Microsoft(MSFT), Google(GOOG) and Yahoo!(YHOO) are striking deals with wireless phone providers including AT&T(T) and Vodafone Group(VOD) to extend their search engines to cell phones.

LA Times:
- Walt Disney(DIS) won’t renew its decades-long cross-promotional agreement with McDonald’s(MCD) in part because of concern about childhood obesity.

NY Times:
- The Forbes family, publishers of the NYC-based Forbes financial magazine, is talking to investors as it considers expanding its publishing ventures into Europe and online.
- (IBM) plans to introduce software tools, academic programs and support for outside developers today as part of its efforts to add customers and programmers for its mainframe unit.

NY Post:
- A group of media companies is developing a 24-hour children’s television network that won’t show commercials for junk food and other products that have drawn objections from parents.

Economic Releases

- None of note