BETWEEN THE HEDGES

Wednesday, May 10, 2006

Thursday Watch

Posted by Gary .....at 10:55 PM

Late-Night Headlines
Bloomberg:
- Toyota Motor(TM) said growth in vehicle sales will slow to 6% this fiscal year, held back by smaller increases in the US and Asia.

Financial Times:
- The increase in price of gold and silver cannot be maintained, citing an interview with Heraeus Holding GmbH CEO Helmut Eschwey. Heraeus Holding is a closely held German processor of precious metals.
- Baidu.com(BIDU) launched an online encyclopedia similar to Wikipedia in China that omits information censored by the government.

Dow Jones Newswires:
- Lehman Brothers Holdings(LH) is in talks to hire George Walker from Goldman Sachs Group(GS) to run its asset-management division.

San Francisco Chronicle:
- California’s record $11.3 billion take in personal income taxes was aided by Google Inc.(GOOG) as employees profited from its share growth.

AFP:
- France has rejected military action to stop Iran’s nuclear program, citing Prime Minister Dominique de Villepin.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated +.03%.

Morning Preview
US AM Market Call
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Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
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European Indices
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Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (ADI)/.40
- (DISH)/.46
- (GES)/.32
- (JCP)/.88
- (KSS)/.45
- (NVDA)/.28
- (PSUN)/.16
- (URBN)/.15
- (VIA)/.39

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Advance Retail Sales for April are estimated to rise .8% versus a .6% increase in March.
- Retail Sales Less Autos for April are estimated to rise .9% versus a .4% increase in March.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 322K the prior week.
- Continuing Claims are estimated to fall to 2450K versus 2462K prior.

10:00 am EST
- Business Inventories for March are estimated to rise .5% versus unchanged in February.

10:30 am EST
- Bloomberg consensus estimates call for a weekly natural gas build of 79 bcf versus a 53 bcf build the prior week.

BOTTOM LINE: Asian indices are mostly lower, weighed down by exporting stocks in the region. I expect US equities to open modestly lower and to trade modestly higher into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish Near Session Lows as Fed Hikes Rates for 16th Time

Posted by Gary .....at 4:41 PM

Indices
S&P 500 1,322.85 -.17%
DJIA 11,642.65 +.02%
NASDAQ 2,320.74 -.75%
Russell 2000 775.94 -.61%
Wilshire 5000 13,394.86 -.20%
S&P Barra Growth 610.48 -.30%
S&P Barra Value 710.78 -.05%
Morgan Stanley Consumer 616.99 -.22%
Morgan Stanley Cyclical 889.37 +.13%
Morgan Stanley Technology 538.35 -1.22%
Transports 4,991.24 -.15%
Utilities 408.70 +.69%
Put/Call .82 -1.20%
NYSE Arms 1.04 +18.57%
Volatility(VIX) 11.80 -1.58%
ISE Sentiment 151.00 -26.34%
US Dollar 84.47 -.42%
CRB 360.21 +1.49%

Futures Spot Prices
Crude Oil 72.15 +.03%
Unleaded Gasoline 216.60 -.16%
Natural Gas 6.90 unch.
Heating Oil 206.26 -.10%
Gold 709.30 +.54%
Base Metals 244.96 +3.60%
Copper 371.00 +.53%
10-year US Treasury Yield 5.12% +.04%

Leading Sectors
HMOs +1.88%
Homebuilders +.79%
Gold & Silver +.69%

Lagging Sectors
Biotech -1.35%
Wireless -1.72%
Semis -2.49%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
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Economic Calendar
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GuruFocus.com
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In Play

Afternoon Recommendations
Morgan Keegan:
- Upgraded COGT to Outperform.

Afternoon/Evening Headlines
Bloomberg:
- The US government’s April budget surplus rose to $118.9 billion, the largest for any month since 2001, as the fastest economic growth in more than two years buoyed tax revenue. The US budget deficit in fiscal 2005 narrowed for the first time since the stock market bubble burst and tax receipts began plunging in 2000. It finished 2005 at 2.6% of GDP, around the long-term average. The budget deficit is projected to come in at 2.2% of US GDP this year.
- Morgan Stanley(MS) violated federal law by destroying e-mails, comprising probes into IPOs and analysts’ research, the SEC said.
- Federal Reserve policy makers raised the main US interest rate to 5% and suggested they may not be finished with the nearly two-year run of increases.
- Oil rose above $72/bbl. in NY after the EIA reported US gasoline consumption increased last week. However, gasoline demand has now declined .1% over the past 4 weeks.
- The US Treasury today declined to brand China a manipulator of its currency.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Retail longs and Semi longs. I added to my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% 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. Stocks temporarily rallied after the 10-year yield reversed lower, but could not maintain gains, which is a negative. It is also a negative that the U.S. dollar did not rally on the FOMC policy statement. Finally, a number of market-leading stocks remained weak throughout the day.

Stocks Mixed into Final Hour after Fed Hikes Another 25 Basis Points and Hints at More

Posted by Gary .....at 3:26 PM

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Retail longs and Semi longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is above average. As I speculated yesterday, the Fed’s policy statement was more hawkish than most expected. This should calm fears that inflation will become a problem, thus helping to send the 10-year yield lower. I expect US stocks to trade modestly higher into the close from current levels on short-covering and stable long-term rates.

Today's Headlines

Posted by Gary .....at 2:10 PM

Bloomberg:
- China will find gold bullion too expensive to buy at current 25-year highs, traders said.
- Mortgage applications in the US fell last week by the most since February as higher borrowing costs slowed purchases and pushed refinancing to its lowest level this year.
- The Bank of England lowered its forecast for economic growth next year to about 2.75%.
- Nasdaq Stock Market(NDAQ) bought $239.4 million of London Stock Exchange Plc shares, raising its stake to 22.7% and strengthening its hand against potential rival bidders.
- Almost half of US population growth last year was Hispanic, adding the equivalent of a city the size of Phoenix, US Census Bureau stats showed.

Wall Street Journal:
- Verizon Communications(VZ) is soliciting offers for two large sets of traditional telephone lines with a combined value of about $8 billion.
- Recent patent cases in which Eli Lilly(LLY) has been involved point up the difficulties pharmaceutical companies face in research work.
- Yahoo!’s(YHOO) Internet service and GE’s(GE) Telemundo broadcast network will merge their Spanish-language Web sites in the US as they try to zero in on a growing Hispanic market.
- The Internet Corp. for Assigned Names and Numbers may vote today to decide if “.xxx” will become a suffix for adult Web sites.
- TiVo Inc.(TIVO) has agreed with Brightcove Inc. on a system that will let TiVo viewers download and watch video from the Internet on their televisions.
- ImClone Systems(IMCL) and Bristol-Myers Squibb(BMY) are developing a price cap for the Erbitux cancer drug amid public concern about the price of caner medications.

Washington Post:
- The Republican Party is seeking to garner black votes, historically a Democratic constituency, by fielding black candidates in three significant races.
- VaxGen’s(VXGN) $877.5 million contract to supply the US government with 75 million doses of anthrax vaccine faces new delays that may push delivery to late 2008 or kill the program.

LA Times:
- California Governor Arnold Schwarzenegger plans to use a $5 billion surge in tax revenue to pay down the state’s debt and build a reserve fund.

HandelsZeitung:
- Microsoft(MSFT) may develop a hardware device that integrates media functions such as taking photos, making phone calls and listening to music, citing CEO Ballmer.

Sarmayeh:
- Iran is pushing ahead with plans to crack down on people who use satellite dishes to receive foreign television channels, saying the broadcasts are “threatening society’s psychological security,” citing Interior Minister Mostafa Pour Mohammadi.

AP:
- The US House of Representatives approved a bill that restricts anti-war demonstrations at military funerals.

CNBC:
- Electronic Data Systems(EDS) may boost its forecast for 2006 contracts at the end of this quarter, CEO Jordan said.

Economic Releases

Posted by Gary .....at 9:59 AM

- None of note