Jobless Claims Fall Again, Leading Indicators Decline

- Initial Jobless Claims for last week fell to 316K versus estimates of 323K and 320K the prior week.
- Continuing Claims fell to 2501K versus estimates of 2550K and 2570K prior.
- Leading Indicators for February fell -.5% versus estimates of a -.4% decline and a -.3% fall in January.

BOTTOM LINE: First-time claims for jobless benefits in the US unexpectedly fell last week to the lowest in more than a month, signaling strength in the labor market, Bloomberg said. The four-week moving average of claims fell to 326,000 from 329,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, fell to 1.9% from 2.0% the prior week. Almost half of CEOs surveyed at small and mid-sized companies said they were raising pay and benefits to gain and retain employees, according to a survey by Vistage Intl. last week. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Leading indicators fell last month as consumer sentiment declined and builders scaled back construction plans, Bloomberg reported. The decline in the index was muted by higher stock prices, an increase in the money supply and gains in factory orders for capital goods and consumer goods. The ECRI weekly leading index has moved back to near cycle highs this month. I expect US growth to come in substantially below trend this quarter on significant inventory de-stocking. However, I expect growth to begin accelerating again next quarter on inventory rebuilding, rising auto production and increased consumer spending.

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Thursday Watch

Late-Night Headlines
Bloomberg:
- The US stock market posted its biggest gain in eight months, after the Federal Reserve indicated it is no longer biased toward higher interest rates. The S&P 500 is now 1.6% higher for the year.
- Short interest on the NYSE surged 10% to an all-time high of 10,510,000,000 shares from mid-February through mid-March.
- The ABX-HE-BBB-07-1 sub-prime index, which has been the source of much angst, rose again yesterday to 71.09. It is up from a low of 62.25 a couple of weeks ago.
- Imports of crude oil by Japan, the world’s largest user of the fuel after the US and China, fell for the 10th consecutive month in February, dropping 5.5% from a year earlier. Imports of liquefied natural gas jumped 15% to 5.35 million metric tons.
- Andy Lipow, president of Lipow Oil Assoc. LLC, expects oil to fall to $55.
- Fording Canadian Coal Trust, the world’s second-largest exporter of coal used to make steel, plans to sell coal at an average $91 ton in the year starting April 1, down 15% from a year earlier.
- Farallon Capital Management LLC held talks buy Accredited Home Lenders Holding(LEND) before agreeing this week to give the subprime mortgage company a loan.
- Motorola Inc.(MOT) said profit and sales will be “substantially” below its forecast this year because of falling mobile-phone prices. The company also named a new president and detailed a plan to step up its share buyback program amid a proxy fight with shareholder Carl Icahn. The shares fell 4.8% in after-hours trading.
- Wells Fargo(WFC), whose stock has languished this year amid investor concern about rising defaults at US mortgage lenders, may buy back up to 2.2% more of its shares.
- Roaring 40s Renewable Energy Pty., a venture between Hydro Tasmania and CLP Holdings Ltd. agreed to build three wind farms in China in a joint venture with Guohua Energy Investment, a unit of China Shenhua Energy.
- Japan’s trade surplus unexpectedly widened in February after exports to China and the US grew more than economists anticipated.

Financial Express:
- The Securities & Exchange Board of India may approve short selling of stock by institutional investors.

Efe:
- Cuba, which has increased oil production 700% since 1995, plans to increase drilling another 40% this year, according to a adviser at the Ministry of Basic Industries.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (EQIX), target $115.
- Reiterated Buy on (ROST), target $41.
- Reiterated Buy on (WYE), target $63.
- Raised (SKS) to Buy, target raised to $24.
- Reiterated Buy on (LMT), target $108.

Night Trading
Asian Indices are +.75% to +1.25% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.10%.

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Earnings of Note
Company/EPS Estimate
- (COMS)/.01
- (ATU)/.70
- (BKS)/1.88
- (BGP)/1.60
- (CAG)/.30
- (FRED)/.26
- (GIS)/.70
- (KBH)/.32
- (NKE)/1.32
- (PALM)/.11
- (SCHL)/-.06
- (WSM)/1.04

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 323K versus 318K the prior week.
- Continuing Claims are estimated to fall to 2545K versus 2576K prior.

10:00 am EST
- Leading Indicators for February are estimated to fall -.4% versus a .1% increase in January.

BOTTOM LINE: Asian indices are higher, boosted by technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Finish Sharply Higher as Fed Removes "Tightening" Bias

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Today's Headlines

Bloomberg:
- FedEx Corp.(FDX) said quarterly profit fell for the first time in three years and cut its earnings forecast for the current quarter because of a slowing economy. The shares are 2% lower on the report.
- Fremont General(FMT) will sell $4 billion of loans at a discount to reduce the risk of further losses. The shares are soaring 15% on the report.
- Morgan Stanley(MS) said first quarter profit rose 70% to an all-time high on trading gains and a jump in investment-banking fees. The shares are rising 4.4%.
- Investors in March were the most bearish on US equities since the market bottom in July of last year, a Merrill Lynch survey showed. Cash levels also reached the highest since August of last year.
- Russia is beginning to exert pressure on Iran to obey United Nations demands to stop enriching uranium as a way to disrupt a suspected bomb-development effort.
- Dell Inc.(DELL) said it plans to buy companies to boost its services unit, expanding sales outside its main business of selling PCs.
- Citadel Investment Group LLC, the hedge fund that bought ResMae Mortgage Corp. for $180 million earlier this month, now owns a 4.5% stake in Accredited Home Lenders Holding(LEND).
- Investment firms around the world that take stakes in hedge funds, known as funds of hedge funds, dropped in popularity because of high fees, according to a study by State Street Corp. in Boston. About a third of institutional investors such as pension- and endowment-fund managers said they don’t use funds of funds, up from a quarter a year earlier, State Street said today in its third annual hedge-fund study.
- Monsanto(MON) and BASF AG plan to spend as much as $1.5 billion to develop crops that have higher yields and resist drought.
- Honda, Continental Air, Goldman Sachs and Hewlett-Packard are among the leading companies featured in FORTUNE’s Special Report on “Going Green.”
- Nickel is falling for a third consecutive day in London on speculation the current prices will lead steelmakers to switch to cheaper alternative ingredients.

Wall Street Journal:
- Sales of compact discs plunged 20% to 81.5 million units in the first quarter of this year from a year earlier. Digital sales have risen 54% to 173.4 million songs from a year earlier.
- The US Congress is focusing on improved collection of back taxes.
- A Starbucks Corp.(SBUX) stock drop may set its shares up for a gain as the company’s brand name may be more resilient than investors think.
- Thornburg Mortgage(TMA) top executives have bought more than $5 million in company shares last week after its shares reached a recent low, indicating their confidence in the company.

NY Times:
- Walt Disney’s(DIS) ABC may change the way it interrupts programs for commercials in an effort to retain viewers’ attention when advertising is shown.

NY Daily News:
- Transportation Security Administration officers will board Metro-North and Long Island Rail Road trains to supplement security checks on the busiest US commuter railroads.

AP:
- An Iranian dissident in the US said Iraqi insurgents are being trained for guerrilla warfare in secret camps in Iran with the cooperation of the Islamic Republic’s top leadership.

Financial Times:
- Accredited Home Lenders Holding(LEND) has a chance at survival. A recent loan allows the company to hang onto some of its new loans, rather than selling them at depressed prices.

Economic Releases

- None of note