Friday Watch

Late-Night Headlines
Bloomberg:
- Iranian President Mahmoud Ahmadinejad said Iran, which the US accuses of planning to make a nuclear bomb, is willing to comply with any decision the UN takes if the resolution is based on international rules.
- Clearwire Corp., a high-speed wireless company founded by cell-phone pioneer Craig McCaw, plans to raise as much as $400 million in an IPO.
- Congress passed a $69 billion measure to extend lower tax rates on dividends and most capital gains and prevent 15 million households from facing the alternative minimum tax. President Bush said he will sign it into law.

AFP:
- A purported videotape by an al-Qaeda operative appealed to Muslims to avenge the publication of cartoons depicting the Prophet Muhammad by attacking targets in Denmark, France and Norway.

CNBC:
- Four private-equity firms will join investors led by Grupo Televisa SA to bid an undisclosed amount for Univision Communications(UVN), the largest Spanish-language television network in the US.

Financial Times:
- Some commodity traders are being paid fees in excess of $1 million to join trading desks due to a lack of experienced candidates to meet hiring demand.

Late Buy/Sell Recommendations
Business Week:
- Hilton Hotels(HLT) may benefit because outlooks for demand, supply and pricing are positive, citing Robert LaFleur of Susquehanna Financial Group.
- The shares of Champion Enterprises(CHB) may rise as much as 22%, said Avondale Partners’ Barbara Allen.
- Patterson Companies(PDCI), the second-largest North American supplier of products to dentists and their labs, is undervalued and could attract a buyout offer, analysts said.

Night Trading
Asian Indices are -2.0% to -1.0% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.02%.

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
- (BOL)/1.20
- (DRS)/.75
- (LAB)/.15
- (TRY)/-.05

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The trade deficit for March is estimated to widen to -$67.0B versus -$65.7B in February.
- The Import Price Index for April is estimated to rise 1.2% versus a .4% decline in March.
- The Preliminary Univ. of Mich. Consumer Confidence for May is estimated to fall to 86.0 versus a reading of 87.4 in April.

BOTTOM LINE: Asian indices are sharply lower, weighed down by automaker and technology 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 25% net long heading into the day.

Stocks Finish Near Session Lows on Worries Over Future Economic Growth

Indices
S&P 500 1,305.92 -1.28%
DJIA 11,500.73 -1.22%
NASDAQ 2,272.70 -2.07%
Russell 2000 757.47 -2.38%
Wilshire 5000 13,213.34 -1.36%
S&P Barra Growth 602.57 -1.30%
S&P Barra Value 701.80 -1.26%
Morgan Stanley Consumer 611.26 -.93%
Morgan Stanley Cyclical 876.69 -1.43%
Morgan Stanley Technology 525.16 -2.45%
Transports 4,941.69 -.99%
Utilities 404.20 -1.10%
Put/Call .95 +15.85%
NYSE Arms 1.23 +15.79%
Volatility(VIX) 12.49 +6.03%
ISE Sentiment 141.00 -7.24%
US Dollar 84.34 -.19%
CRB 365.35 +1.43%

Futures Spot Prices
Crude Oil 72.72 -.82%
Unleaded Gasoline 220.50 -.66%
Natural Gas 6.63 -.29%
Heating Oil 208.35 -.62%
Gold 716.50 -.69%
Base Metals 256.91 +4.88%
Copper 392.00 -.08%
10-year US Treasury Yield 5.15% +.62%

Leading Sectors
Gaming +.09%
Drugs -.26%
Hospitals -.33%

Lagging Sectors
Networking -3.23%
Steel -3.36%
Disk Drives -3.71%

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
Smith Barney:
- Rated AGN Buy, target $118.
- Rated ACL Buy, target $125.

Afternoon/Evening Headlines
Bloomberg:
- PIMCO, manager of the world’s largest bond fund, is trimming its holdings of emerging-market debt, one of the hottest areas of the fixed-income market in recent years.
- US 10-year Treasuries fell the most in more than a week after the government sold $13 billion of the securities, adding supply at a time when the Fed is signaling that it may raise interest rates further.

BOTTOM LINE: The Portfolio finished lower today on losses in my Retail longs, Internet longs, Networking longs and Semi longs. I covered some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 25% net long. The tone of the market was very negative today as the advance/decline line finished substantially lower, almost every sector fell and volume was heavy. Measures of investor anxiety were higher into the close. Overall, today's market performance was very bearish. After such a large decline, a short-term bounce higher could occur at any time, however I expect measures of investor anxiety to spike higher before a more durable bottom is in place. This will likely coincide with a substantial rotation out of the most economically sensitive stocks.

Stocks Finish Near Session Lows on Worries Over Future Economic Growth

Indices
S&P 500 1,305.92 -1.28%
DJIA 11,500.73 -1.22%
NASDAQ 2,272.70 -2.07%
Russell 2000 757.47 -2.38%
Wilshire 5000 13,213.34 -1.36%
S&P Barra Growth 602.57 -1.30%
S&P Barra Value 701.80 -1.26%
Morgan Stanley Consumer 611.26 -.93%
Morgan Stanley Cyclical 876.69 -1.43%
Morgan Stanley Technology 525.16 -2.45%
Transports 4,941.69 -.99%
Utilities 404.20 -1.10%
Put/Call .95 +15.85%
NYSE Arms 1.23 +15.79%
Volatility(VIX) 12.49 +6.03%
ISE Sentiment 141.00 -7.24%
US Dollar 84.34 -.19%
CRB 365.35 +1.43%

Futures Spot Prices
Crude Oil 72.72 -.82%
Unleaded Gasoline 220.50 -.66%
Natural Gas 6.63 -.29%
Heating Oil 208.35 -.62%
Gold 716.50 -.69%
Base Metals 256.91 +4.88%
Copper 392.00 -.08%
10-year US Treasury Yield 5.15% +.62%

Leading Sectors
Gaming +.09%
Drugs -.26%
Hospitals -.33%

Lagging Sectors
Networking -3.23%
Steel -3.36%
Disk Drives -3.71%

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
Smith Barney:
- Rated AGN Buy, target $118.
- Rated ACL Buy, target $125.

Afternoon/Evening Headlines
Bloomberg:
- PIMCO, manager of the world’s largest bond fund, is trimming its holdings of emerging-market debt, one of the hottest areas of the fixed-income market in recent years.
- US 10-year Treasuries fell the most in more than a week after the government sold $13 billion of the securities, adding supply at a time when the Fed is signaling that it may raise interest rates further.

BOTTOM LINE: The Portfolio finished lower today on losses in my Retail longs, Internet longs, Networking longs and Semi longs. I covered some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 25% net long. The tone of the market was very negative today as the advance/decline line finished substantially lower, almost every sector fell and volume was heavy. Measures of investor anxiety were higher into the close. Overall, today's market performance was very bearish. After such a large decline, a short-term bounce higher could occur at any time, however I expect measures of investor anxiety to spike higher before a more durable bottom is in place. This will likely coincide with a substantial rotation out of the most economically sensitive stocks.

Stocks Sharply Lower into Final Hour on Rise in Oil and Rates

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Retail longs, Internet longs, Computer longs and Semi longs. I added to my (QQQQ), (IWM) and (EEM) today, thus leaving the Portfolio market neutral. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is heavy. Today's losses are a function of investors anticipating slower economic growth as a result of slowing housing, high energy prices and Fed rate hikes. The market will likely find an intermediate-term bottom after the most economically sensitive stocks see losses accelerate to the downside. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, higher energy prices and rising long-term rates.

Today's Headlines

Bloomberg:
- Merrill Lynch(MER), preparing for its biggest expansion since the 1990s, plans to buy a mortgage lender, triple its corporate investments and increase trading bets to boost shareholder returns that trail those of rivals.
- Pfizer won US approval today for Chantix, a new prescription drug to help cut nicotine cravings in millions of Americans trying to quit smoking.
- Pope Benefict XVI denounced gay marriage, saying “only the foundation of complete and irrevocable love between man and woman is capable of forming the basis of a society that becomes the home of all men.”
- Crude oil rose over $73/bbl. on continuing record speculation as geopolitical concerns persist.

Wall Street Journal:
- Verizon Wireless(VZ), Sprint Nextel(S) and other carriers have begun restricting Internet access to customers who use large amounts of wireless transmission capacity.
- US computer companies, such as Affordable Internet Services Online, are developing power-efficient products as they seek to drive down their energy costs.
- US Republicans plan a series of votes in Congress on energy-related proposals including measures to address vehicle fuel efficiency and opening new areas to oil drilling.
- XM Satellite Radio(XMSR) and Sirius Satellite Radio(SIRI) both started broadcasting between four and five years ago, and XM has had more success in getting institutions such as mutual funds to buy its shares.

NY Times:
- Christian leaders, who say author Dan Brown’s “Da Vinci Code” is a slander of Jesus Christ, are preparing a variety of protests against the Sony Pictures movie to be released May 19.

Washington Post:
- Some established immigrants in the US want to restrict newcomers, saying they aren’t properly assimilating with US society.

Reuters:
- The German economy grew .4% in the first quarter from the fourth quarter last year.

MarketWatch:
- Novartis AG plans to build a US plant that will use advanced technology to produce avian-flu vaccine faster for the US market.

Estrategia:
- Grupo Mexico SA, the biggest copper producer in Mexico, plans to begin exploring for new deposits of the metal in northern Chile.

AFP:
- European Union regulators plan to issue a formal complaint against Microsoft(MSFT) regarding the company’s fees for licensing Windows software.

21st Century Business Herald:
- China’s central bank may ask lenders to increase down payments for homes to as much as 50% of their value from a minimum 20% to curb prices.

Retail Sales Healthy, Job Market Strong, Inventories Rise

- Advance Retail Sales for April rose .5% versus estimates of a .8% gain and a .6% increase in March.
- Retail Sales Less Autos for April rose .7% versus estimates of a .9% increase and a .5% gain in March.
- Initial Jobless Claims for last week rose to 324K versus estimates of 315K and 325K the prior week.
- Continuing Claims fell to 2392K versus estimates of 2450K and 2441K prior.
- Business Inventories for March rose .7% versus estimates of a .5% increase and a .1% gain in February.

BOTTOM LINE: Sales at US retailers rose less than forecast in April as near-record gasoline prices drained Americans’ wallets, raising the odds the economy will slow, Bloomberg said. Retail sales account for almost half of all consumer spending, which in turn accounts for about 70% of the economy. The largest declines in sales last month were at auto dealers and building materials stores. Job and wage gains are more than offsetting higher fuel prices so far. I continue to believe retail sales will slow to average levels from robust rates through year-end.

The number of Americans filing first-time claims for unemployment benefits fell last week, a sign the labor market remains firm, Bloomberg said. The four-week average of jobless claims rose to 317,250 from 314,750 the prior week. The unemployment rate for those eligible to collect benefits, which tracks the US unemployment rate, declined to 1.8% from 1.9% the prior week. I still believe the labor market will remain healthy, but slow from recent strong rates.

Businesses in the US added to inventories in March to ensure enough goods were on hand to meet stronger corporate and consumer demand, Bloomberg reported. At the March sales pace, companies had enough goods on hand to last 1.26 months, still near a record low. Inventories at building material retailers rose 1.9% in March. Inventory rebuilding will likely continue to add to economic growth over the intermediate-term