Wednesday Watch

Late-Night Headlines
Bloomberg:
- The Dow Jones Industrial Average climbed for an eighth consecutive day, its longest streak since March 2003, propelled by improved profit outlooks.
- North Korea will start to implement a nuclear disarmament agreement within 30 days, after a dispute over $25 million of previously frozen funds was resolved yesterday.
- Most Americans expect a recession within a year even though the unemployment rate is at a five-year low, Americans’ net worth is at an all-time high and the DJIA is just off a record high, according to a new Bloomberg/LA Times poll. Nonetheless, 57% said the economy is doing well. 64% of those polled said their own finances are very or fairly secure. “People tend to be pretty optimistic about their own situation, but when it comes to the larger economy they’re much more pessimistic,” said Karlyn Bowman, a polling expert at the American Enterprise Institute in Washington. More than half of Americans expect homes in their neighborhood to hold their value over the next six months. Twice as many respondents said home prices will increase as those who predicted a decline, according to the poll.
- Alcoa(AA), the word’s largest aluminum company, reported its most profitable first-quarter ever as rising metal demand from China and the aerospace industry boosted prices. The stock rose .82 to $35.72 after-hours.
- The yen fell to a record low against the euro as signs of slower corporate spending in Japan raised speculation the interest-rate gap with Europe will widen.
- Chinese Premier Wen Jiabao and Japanese Prime Minister Shinzo Abe will discuss improved ties and environmental and energy issues today as Wen becomes China’s first leader to visit Japan in almost seven years.
- Japan’s machinery orders fell 5.2%, more than expected in February, highlighting concern among manufacturers that growth may slow this year.
- Luxury home prices in London rose at a record monthly pace in March as Russians and Middle Eastern buyers competed for a smaller number of properties with financiers from the City of London, real estate broker Knight Frank said.
- Standard & Poor’s plans in May to begin using a revised rating system for 2,000 high-yield secured loans and bonds that seeks to provide creditors with more detailed estimates of how much they may lose in a bankruptcy.
- LG.Philips LCD Co. led liquid-crystal display maker stocks higher after the company reported a loss that was smaller than some analysts estimated, fueling optimism industry profitability will improve.

Wall Street Journal:
- Nasdaq Stock Market(NDAQ) is in talks to acquire the Philadelphia Stock Exchange as it tries to enter the options-trading market. The Philadelphia exchange, the third-largest US options exchange by contracts traded, could be valued at $250 million to $300 million.
- Media entrepreneur John W. Kluge is expected to donate at least $400 million to Columbia University.

Reuters:
- Thomas H. Lee Partners LP hasn’t decided against increasing its $19 billion bid to acquire broadcaster Clear Channel Communications(CCU) with Bain Capital Partners LP.

Financial Times:
- Deputy finance ministers from the world’s seven leading industrial nations will meet with 20 hedge fund representatives this week to discuss targets for increasing transparency.
- Nielsen Media Research, whose television ratings are used to set advertising prices, will next month release ratings that measure the number of viewers during commercial breaks.

Xinhua News Agency:
- Microsoft Corp.(MSFT) signed agreements to use content from four Chinese Internet companies including Ctrip.com(CTRP) on its Web site in the Asian nation.

China Business News:
- China will scrap trade subsidies that clearly violate World Trade Organization rules, citing the Chinese Commerce Ministry’s director of foreign trade Wang Shouwen.

Late Buy/Sell Recommendations
Citigroup:
- Rated (AKAM) Buy, target $68. Our extensive and proprietary survey of over two dozen Internet content, commerce, software, and ad network companies, including the leading global Internet companies gives us confidence in AKAM’s ability to deliver sustainable revenue growth of 35-45% over the next few years. Three takeaways support our positive thesis: 1)The CDN market is robust and can support multiple players 2)AKAM’s position in Retail, Software, and Online Ad Network verticals is extremely strong 3) Its iTunes deal and exclusive provisioning of CBS’s March Madness, arguably the largest annual streaming event, show AKAM’s differentiation is valued by even the competitive Media & Entertainment segment.
- Reiterated Buy on (JCP), raised target to $114.
- Reiterated Buy on (MNST), target $55.

Piper Jaffray:
- Rated (SAPE) Outperform, target $9.

CSFB:
- AU Optronic’s(AUO) LCD panel shipments exceeded October peak: AU Optronics and Chi Mei Optoelectronics announced their March sales figures. Sales volume has recovered significantly since March. Panel prices have started turning higher in April, and we maintain our view that profitability for the panel makers will rebound from the Jan-Mar lows.

Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.01%.

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Earnings of Note
Company/EPS Estimate
- (BBBY)/.79
- (CBK)/.05
- (DNA)/.67
- (PGR)/.46
- (RI)/.53

Upcoming Splits
- (GEF) 2-for-1

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,700,000 barrels versus a 4,307,000 barrel increase the prior week. Gasoline supplies are expected to fall by -1,400,000 barrels versus a -5,030,000 barrel drawdown the prior week. Distillate inventories are estimated to fall by -850,000 barrels versus a -77,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise .5% versus a .02% increase the prior week.

2:00 am EST
- Minutes of March 21 FOMC Meeting
- The Monthly Budget Deficit for March is estimated to shrink to -$90.0 billion versus -$120.0 billion in February.

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

DJIA Rises for 8th Consecutive Day, Longest Winning Streak in Over 4 Years

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In Play

Stocks Slightly Higher into Final Hour as Long-term Rates Ease

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Telecom longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is slightly higher, sector performance is mixed and volume is about average. Johnson Redbook weekly retail sales surged 4.2% last week vs. a 4.1% gain the prior week and a 3.3% gain during this week last year. This is well above the long-term average and the highest weekly increase since early May of last year. Weekly retail sales have gained 3.4%, 3.7%, 3.9%, 4.1% and 4.2% over the last five weeks vs. weekly gains of around 2.75% the prior 3 months. Retail sales are clearly trending higher even as the record number of U.S. stock market bears continue say sales should be falling off a cliff right now. I continue to believe retail sales are bouncing back sharply into the spring, notwithstanding the drag from housing and higher gas prices. This is likely the result of the facts that wage growth is almost double the recent CPI reading, interest rates are still very low, about 2 million new jobs have been created over the last year, unemployment is historically low and Americans' net worth is at record high levels. These large positives continue to be ignored. My intraday gauge of investor angst is elevated, considering today’s overall action, which bodes well for further market strength into week’s end. I expect US stocks to trade mixed-to-higher into the close on short-covering, buyout speculation, lower long-term rates and bargain-hunting.

Today's Headlines

Bloomberg:
- Florida will produce more orange juice than previously forecast, even with a smaller crop, because of a higher yield from each box, the US Dept. of Agriculture said.
- John Wilson, chief technical strategist at Morgan Keegan, see “positive” outlook for US equities.
- Rising gasoline prices prompted Arizona Governor Janet Napolitano to send a letter to Energy Secretary Bodman last month seeking his explanation for the increases. Napolitano asked him to conduct an investigation of the refinery industry as to why so many refiners have been very slow to come back online after recent “outages,” which curtails the supply of gasoline and sends prices higher.
- Crude oil is rising .44/bbl., pulled higher by gasoline, on speculation by investment funds that a government report tomorrow will show US gasoline supplies fell for a ninth straight week.
- Valero Energy(VLO), the largest US oil refiner, scheduled maintenance for units at three of its refineries. The work will affect fuel production at the plants, which are located in California, New Jersey and Texas, spokesman Bill Day said.
- March sales at US retailers had the largest gain in six months as shoppers scooped up Easter presents, the International Council of Shopping Centers said. Sales rose 4% to 5% from a year earlier.
- Summer US retail gasoline prices will average $2.81/gallon, down $.03/gallon from last summer’s average, according to the EIA.
- The US will export 3.6% less cotton than forecast a month ago as sales and shipments lag behind year-ago levels, especially to China.
- US ethanol production will average 399,000 barrels per day, up from last summer’s average of 313,000 bpd, according to the EIA. US distillate demand growth was revised lower by 10,000 bpd for Q2/Q3. Summer gasoline demand will rise 1.2% from year-ago levels on average.
- US corn supplies before the next harvest will be larger than forecast a month ago as some livestock producers choose to feed wheat to their animals.
- Natural gas is rising 4.1% on colder weather despite the fact that inventories are 27.4% above the 5-year avg. for this time of year, near all-time times.
- China, the world’s biggest steel producer, said it will cut tax breaks on exports of some steel products as the nation seeks to reduce a record trade surplus.
- ImClone Systems(IMCL) said its Erbitux medicine failed to help pancreatic cancer patients live longer in a study, a setback for the company’s plan to expand the market for its only drug. The stock is falling 10% on the news.
- Rising Delinquencies among US subprime mortgages are unlikely to cause a “major dislocation” in the broader market for mortgage-backed securities, the IMF said.
- President Bush said he will invite congressional leaders to the White House next week to break the impasse over $100 billion in emergency funding for the wars in Iraq and Afghanistan.
- DR Horton(DHI) said orders for houses tumbled by more than a third in the first three months of this year. The stock is down 1.5%.
- Office rents in Manhattan surged to an all-time high in the first quarter as job growth pushed the vacancy rate below 6% for the first time in six years, real estate services provider Cushman & Wakefield said.
- Sun Capital Partners, the private equity firm that owns Lee Cooper jeans and Wonderbra lingerie, raised a $6 billion leveraged buyout fund, giving the firm four times more firepower for acquisitions.

Wall Street Journal:
- A mysterious price move in New York Mercantile Exchange after-hours oil futures trading on March 27 may show how electronic trading makes tracking price moves harder. Futures contracts rose 8%, or $5/bbl., in only 7 minutes, then dropped back again in another 5. The cause of the jump, which triggered other preset orders, is unclear. Electronic crude-trading volume has grown from less than 20% of trades to 79% last month.
- Chevron Corp.(CVX), ConocoPhillips(COP) and other oil companies may find their profit margin eroding over the next few years even if oil prices were to rise because oil-producing countries are increasingly keeping a bigger share of profit.
- Tom Ford, the former creative director of Gucci Group(GUCG), is trying to build a new business in menswear.
- Exchange-traded funds that track crude-oil futures have fallen even more than oil prices themselves in the past year. The reason is that near-term futures have been cheaper than those the next month out, a phenomenon known in the futures market as “contango,” so the ETFs have had to sell low and buy high each month.
- TXU Corp.(TXU) and several other power companies may build nuclear plants in Texas, making the state a proving ground for a likely nuclear renaissance.
- Kohlberg Kravis Roberts’ $26 billion acquisition of First Data Corp. payment-processing company may show that private equity firms no longer need to band together to make leveraged buyouts.

NY Times:
- Sony Corp.(SNE) has begun a $20 million television, radio, online, outdoor and print advertising campaign to promote its consumer camcorders and digital cameras.
- Consumer Reports named Kimberly Kleman as editor in chief and plans to redesign the magazine’s format to include more information about its product-testing methods.

USA Today:
- As much as $7 billion would be set aside to upgrade baggage screening at the nation’s major airports as part of legislation the House and Senate recently approved.

Washington Post:
- Senators Hillary Rodham Clinton and Barack Obama have declined to participate in a Fox News debate scheduled for September and co-sponsored with the Congressional Black Caucus. Liberal activists, including the online group, Moveon.org, asked Democratic presidential candidates to skip the Fox debate.

Mysteel.com:
- China’s steel product exports rose 23% in March from the previous month, citing customs data. Imports in the first three months of the year fell 7.4%.

Financial Times:
- The SEC is considering changes that would end 12(b)1 mutual fund fees, in which investors are charged for marketing expenses.
- Iran’s economy is so vulnerable to lower oil prices that its government may be interested in boosting international tensions whenever energy prices dip too low. Oil and gas generate 80% of Iran’s export revenue.

Daily Telegraph:
- Dow Jones(DJ) may buy the Financial News, a London-based newspaper, for $53.3 million.

Handelsblatt:
- Eurex AG, Europe’s largest derivatives exchange, plans to introduce securities derived from commodities and derivatives in foreign currencies.

China Securities Journal:
- China’s consumer price index, a key indicator for inflation, accelerated to 3.3% last month.

Emirates News Agency:
- The United Arab Emirates plans to increase oil production to more than five million barrels a day in the next seven years, from 2.46 million now, citing a minister.

Economic Releases

- None of note

***Alert***

Blogging will be light today due to a scheduling conflict. Sorry for the inconvenience.