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- None of note

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Kerry Killinger, CEO of Washington Mutual(WM), said the company “weathered” the subprime storm.
- CNOOC Ltd.(CEO) will nearly double its oil and gas output at Bohai Bay within 3 years.

Wall Street Journal:
- Blackstone Group LP is selling Extended Stay America for $8 billion to Lightstone Group LLC in one of the largest hotel deals.
- Toyota Motor(TM) will expand collaboration with other carmakers and suppliers in areas of advanced technology, citing Senior Managing Director Jim Press. The company would consider cooperative relationships to develop lithium-ion batteries for gasoline-electric hybrid cars and possibly pure electric cars.

Financial Times:
- The European Union will consider introducing legislation making denying or trivializing the Holocaust a criminal offence. Those charged under the legislation could face up to three years in prison.

AFP:
- Officials from religious schools in Pakistan, known as madrassas, said suicide attacks are un-Islamic and rejected the imposition of Sharia law by force. A group of about 2,000 scholars, teachers and administrators issued a declaration at a gathering yesterday in Peshawar. The six-page statement said aggressive acts are illegal, bring madrassas into disrepute and shouldn’t be encouraged.

-Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (SCHW), target $22.
- Downgraded (DRC), (CAM), (FTI), (NOV), (SLB) and (SII) to Hold from Buy.

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated -.14%.
NASDAQ 100 indicated -.32%.

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Earnings of Note
Company/EPS Estimate
- (ABT)/.52
- (ADS)/.91
- (ALL)/1.88
- (AOS)/.61
- (BK)/.57
- (CIT)/1.25
- (CTXS)/.34
- (CBH)/.39
- (CYMI)/.66
- (DSL)/1.74
- (ETFC)/.38
- (EBAY)/.30
- (GILD)/.81
- (ITW)/.71
- (ILMN)/.08
- (RX)/.34
- (JPM)/1.02
- (KMI)/1.59
- (KFT)/.41
- (LRW)/.16
- (MOT)/.02
- (NVLS)/.43
- (PNC)/1.32
- (SOV)/.32
- (SYK)/.58
- (TER)/.05
- (TMK)/1.29
- (TRB)/.31
- (UTX)/.81

Upcoming Splits
- (NRP) 2-for-1

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 650,000 barrels versus 678,000 barrel increase the prior week. Gasoline supplies are expected to fall by -1,900,000 barrels versus a -5,476,000 barrel drawdown the prior week. Distillate inventories are expected to fall by -925,000 barrels versus a 170,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to rise .33% versus a 1.34% gain the prior week.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker stocks 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.

DJIA Close to Another Record on Poistive Earnings and Economic Reports

Indices

S&P 500 1,471.48 +.20%

DJIA 12,773.04 +.41%

NASDAQ 2,516.95 -.05%

Russell 2000 828.96 -.30%

Wilshire 5000 14,858.68 +.13%

Russell 1000 Growth 581.05 +.35%

Russell 1000 Value 847.90 +.05%

Morgan Stanley Consumer 727.38 +.54%

Morgan Stanley Cyclical 986.05 -.19%

Morgan Stanley Technology 583.73 +.20%

Transports 5,082.22 -.43%

Utilities 516.72 +.80%

MSCI Emerging Markets 123.29 -.17%

Sentiment/Internals

Total Put/Call .90 +9.76%

NYSE Arms .93 +45.11%

Volatility(VIX) 12.14 +1.34%

ISE Sentiment 151.0 +46.6%

Futures Spot Prices

Crude Oil 63.14 -.74%

Reformulated Gasoline 205.70 -2.77%

Natural Gas 7.44 -1.09%

Heating Oil 180.50 -2.92%

Gold 691.20 -.49%

Base Metals 268.90 -.90%

Copper 366.55 +3.49%

Economy

10-year US Treasury Yield 4.68% -5 basis points

US Dollar 81.79 -.33%

CRB Index 313.20 -.50%

Leading Sectors
Homebuilders +1.53%
REITs +1.29%
Restaurants +.76%

Lagging Sectors
Steel -1.24%
I-Banking -1.48%
Coal -1.67%

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In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Better-than-expected economic and earnings reports enabled the DJIA to close within 14 points of a record.
- NY harbor wholesale gasoline fell 3.5%, the biggest drop in more than two months, and its premium to NYMEX futures narrowed, on signs imports may rise in the coming weeks.
- Yahoo!’s(YHOO) profit and sale trailed analysts’ estimates in the first quarter after a new advertising program failed to generate the revenue gain some investors were expecting. The stock fell 6.3% after-hours.
- Intl. Business Machines(IBM) said first-quarter profit increased 8% because of new contracts and software acquisitions. The stock is down slightly after-hours.
- Intel Corp.(INTC) said first quarter-profit rose 19% after it paid less in taxes and stemmed a slide in revenue. The stock is just slightly higher after-hours on the report.
- US Treasuries rose the most in more than a month after a government report showed the pace of inflation rose less than economists expected in March.
- Evergreen Solar(ESLR) announced expansion plans and the signing of an agreement to secure supplies of polysilicon. The stock rose 4.5% after-hours.
- Ethanol in Chicago fell a third straight day as gas and corn futures declined.
- Linear Tech(LLTC) announced revenue for its quarterly period ended April 1 was $255.0 million, a decrease of 9%. The stock soared 9% after-hours.
- Domino’s Pizza(DPZ) announced today that it had completed its recapitalization as planned. The stock rose 9% after-hours.
- Washington Mutual(WM) said first-quarter profit dropped 20%. The stock rose 3% after-hours.
- Seagate Technology(STX) said third-quarter profit fell 23% and gave a forecast for the current period that trailed analysts’ estimates. The stock fell 5% after-hours.

-

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Telecom longs and Computer longs. I didn’t trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was mildly negative today as the advance/decline line finished mildly lower, sector performance was mixed and volume was about average. Measures of investor anxiety were about average into the close. Today's overall market action was neutral. The 10-year yield and oil are at session lows. The gasoline crack spread fell another 8% but remains very elevated. While we have heard about food inflation most of the day, the Goldman Agricultural Commodity Index peaked in February and has declined -9.1% since. Corn fell another 3% today and appears poised to take out its recent low. Housing-related stocks paced today's gainers. I would classify today's overall action as a healthy consolidation of yesterday's gains. I suspect the market will react positively to tonight's earnings, unless they are "bad," which I do not expect.

DJIA Hits Another All-Time High on Positive Economic Data, Earnings Reports and Falling Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Computer and Telecom longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is mildly lower, sector performance is mixed and volume is about average. The DJIA hit another new all-time high today, and its chart continues to resemble 1983 rather than 1937. It appears as though the peak in subprime fears, which occurred the day the market bottomed on March 14, was in fact another excellent buying opportunity. I believe that most high net worth and institutional investors, much like the public at large, believe the U.S. is in a secular bear, or trading range, environment. I do not believe for a second that the parabolic move of assets into negative/low correlation U.S. stock strategies, especially market-neutral and commodity funds, will persist when psychology shifts away from this "irrational pessimism." I believe a major positive psychological shift will begin to occur, back toward the belief that the U.S. is in a secular bull, around the time when the S&P 500 convincingly takes out its all-time high of 1,552. We are 5.2% away from this level right now. I still expect this to occur later this year. I expect US stocks to trade mixed into the close as rising earnings optimism, lower long-term rates and lower energy prices offsets profit-taking.

Today's Headlines

Bloomberg:
- The Dow Jones Industrial Average surged to a record after earnings beat analysts’ estimates, inflation rose less than forecast and housing starts gained.
- US Treasuries are rising the most in more than a month after a government report showed the pace of inflation excluding food & energy rose less than economists forecast in March.
- Catalina Marketing(POS), a research company that tracks consumer shopping habits, agreed to be acquired by buyout firm Hellman & Friedman LLC for about $1.7 billion after abandoning a deal it reached last month.
- Carl Icahn, the billionaire investor who is fighting for a seat on Motorola’s(MOT) board, said CEO Zander needs to be held responsible for his efforts to revive the mobile-phone company.
- Fortress Investment Group(FIG), a publicly traded manager of private equity and hedge funds, said net income more than doubled in 2006, driven by increases in investment profits and asset-management fees.
- Cho Seung-Hui, a South Korean citizen studying at Virginia Tech University, carried out the shooting rampage yesterday that claimed 32 victims, police said.
- US business bankruptcies plunged by 50% last year to their lowest level since at least 2000, according to federal court stats. Personal bankruptcies plunged 71%, the court administrator said.
- Citidel Investment Group is on track to acquire subprime lender ResMae Mortgage Corp.
- The US would save enough electricity to power 4.8 million homes for a year and would cut gasoline use by 50%, according to sponsors of legislation introduced today in the Senate.
- Gasoline futures fell to a two-week low on speculation inventories will soon begin to rise as annual refinery slowdowns come to an end.
- China, the world’s biggest steel producer, may reduce tax breaks further, impose export tariffs and cap steelmakers’ exports, to rein in overseas sales.

Wall Street Journal:
- Time Warner(TWX) executives are considering reducing the NYC-based company’s stake in cable television
- Large-cap “growth” stocks, which have lagged “value” stocks so far this decade, have come into their own this year.
- Fannie Mae(FNM) and Freddie Mac(FRE), the biggest sources of money for US home loans, plan to assist homeowners who can’t make payments on their mortgages, citing congressional testimony.
- YouTVpc.com, Peekvid.com and other guerrilla video Web sites that provide access to copyrighted material from servers outside the US represent a new threat to big media companies.
- Coca-Cola’s(KO) Coke Zero is the Atlanta-based company’s best new-product introduction in 20 years, and could be a precursor of a larger turnaround.

NY Times:
- New York state’s Medicaid spending has been raised to $300 million a year, the highest in the country, because of drug addicts and alcoholics who repeatedly check-in to hospital detoxification centers.
- Hedge fund managers are able to defer paying some taxes for 10 years or more by taking money they earn oversees and reinvesting it in their funds where it appreciates tax-free. The hedge fund managers are able to avoid paying the taxes by setting up overseas funds that also are attractive to investors such as pension funds, endowments, and foreign investors. The practice, which is legal, is being evaluated by the US Congress, which is considering legislation that would limit the deferrals to $1 million or the five-year average of a person’s income.
- Home Depot(HD) will begin putting labels on its products that indicate their environmental-friendliness.

Detroit News:
- DaimlerChrysler AG(DCX) plans to build a $700 million axle plan in Marysville, Michigan, to replace an older plant in Detroit.

Vatan:
- Cukurova Holding AS, which controls Turkey’s biggest cell-phone company, is building a $130 million oil refinery in northern Iraq with Gulf Petroleum Investment SA, a Kuwait-based oil and gas company.

Caijing Magazine:- News Corp.(NWS/A) plans to open a Chinese version of its MySpace.com social-networking Web site in May.