Economic Releases

- None of note

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Friday Watch

Late-Night Headlines
Bloomberg:
- Two members of the panel charged with dating US economic cycles said while increasing evidence of a downturn has drawn their attention, it’s too early to declare whether a recession has begun. “Notwithstanding the darkening clouds, we are still far from the point where the committee would act,” Roberta Hall, a Stanford University economist who leads the National Bureau of Economic Research’s business cycle dating committee, said in an interview.
- Crude oil fell for a second day in NY after an Energy Dept. report showed that US inventories rose almost twice as much as forecast and refiners slowed processing to perform seasonal maintenance. “There comes a point where fundamentals can no longer be ignored,” said Michael Fitzpatrick, vp for energy risk management at MF Global. “You can’t justify $100 oil when inventories are up six weeks, demand is weak and the economy is slowing.” Crude oil supplies have risen 7.9% in just the last six weeks. “Refineries are curtailing output for economic reasons. There’s weak product demand and they are responding by reducing output,” said Tim Evans, an energy analyst at Citigroup Global Markets. Total implied fuel demand is down 1.1% over the last four weeks from a year earlier. Gasoline inventories climbed 1 million barrels to 230.3 million, the highest since February 1994. “Gasoline supplies are near the highest level ever, and crude oil supplies are still gaining,” said Kyle Cooper, director of research at IAF Advisors in Houston.

Wall Street Journal:
- Obama, Clinton Trade Jabs on Health Care. One of the most anticipated debates of the primary season unfolded largely without drama early on, but a hint of the snarling tone that has marked the race between Sens. Hillary Clinton and Barack Obama rose up as the debate progressed.

MarketWatch.com:
- RIM shares jump on raised subscriber forecast. BlackBerry maker says seasonal slowdown didn’t occur in Feb. quarter.

CNBC.com:
- Amid ‘Stagflation’ Fear, Opportunities Abound.

NY Times:
- AOL Prods Users to Switch to Firefox, Drop Netscape.
- At Toyota, a Global Giant Reaches for Agility.
- A Short-Selling Savior? Does William Ackman want to save troubled bond insurers or to bury them? A break-up proposal raises questions.

BusinessWeek.com:
- Microsoft(MSFT) Pledges Fail to Move the EU.
- Google(GOOG) Goes to the Doc’s Office. The search giant’s pilot program with the Cleveland Clinic is aimed at giving patients and doctors better access to electronic medical records.

Portfolio.com:
- Google’s(GOOG) Video AdSense: Just the Beginning?

Silicon Alley Insider:
- New York Times Co.(NYT) investor Harbinger Capital Partners may raise its stake in the newspaper company to as much as 20% stake by the end of the week, Henry Blodget said on his Silicon Alley Insider Web site today. The group believes that, without aggressive restructuring, the company could go out of business, Blodget wrote, citing a person familiar with the plans. The investors want New York Times to sell its headquarters, stakes in professional sports teams and its regional newspapers. They want the company to consider selling the Boston Globe and About.com and use the proceeds to buy digital assets.

Reuters:
- MBIA(MBI) says municipal, corporate units should split.

Financial Times:
- NY hedge fund DB Zwirn & Co is winding down its principal funds after investors – rattled by lapses in internal controls, including the expense of a private jet used by the firm’s founder – said they would withdraw more than $2 billion.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (JCP), target $58.

Night Trading
Asian Indices are -3.0% to -.50% on average.
S&P 500 futures -.30%.
NASDAQ 100 futures -.14%.

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Earnings of Note
Company/EPS Estimate
- (AYR)/.39
- (ENDP)/.44
- (HTV)/.30
- (HUN)/.25
- (LTM)/.48
- (HUN)/.25
- (SYNT)/.35
- (PCG)/.55
- (GAS)/1.10

Upcoming Splits
- None of note

Economic Releases
- None of note

Other Potential Market Movers
- The Fed’s Fisher speaking, CIBC Institutional Investor Conference, DA Davidson Electronic Systems Design Conference and EnerCom Oil Service Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and automaker stocks in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

Stocks Finish Near Session Lows, Weighed Down by Financial, Energy Shares

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Stocks Lower into Final Hour on Shorting, Economic Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs, Biotech longs and Medical longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is about average. Investor anxiety is just slightly above average. Today’s overall market action is bearish. The VIX is rising 4% today to a high 25.4. The ISE Sentiment Index is a below average 96.0 and the total put/call is a slightly above-average .92 today. Energy and financial stocks are under the most pressure today. Energy investor T. Boone Pickens said this morning that he is short oil and natural gas and the EIA reported gasoline inventories are now at 14-year highs, which also contributed to a $2/bbl decline in oil. Vietnam(VNINDEX), which I cautioned was in a bubble last year, fell another 4.6% last night despite strength in the rest of Asia. This index is now down 39.3% from its highs in March of last year. On the positive side, Hewlett Packard(HPQ) said today that it isn’t even seeing the traditional seasonal slowdown in Europe. Tech stocks, while lower, are significantly outperforming the broad market. Semis and Disk Drives are especially firm. Disk drive maker Western Digital(WDC) hit the highest level since November 1997 today. The 10-year swap spread, which had been climbing, has reversed 10 basis points lower over the last 2 days. As well, the 10-year TIPS spread has reversed 8 basis points lower since yesterday. Nikkei futures indicate a -150 open in Japan and DAX futures indicate a -28 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting and rising economic worries.

Jobless Claims Decline, Philly Fed Weak, Leading Indicates Slightly Lower

- Initial Jobless Claims for this week fell to 349K versus estimates of 349K and 358K the prior week.

- Continuing Claims rose to 2736K versus estimates of 2760K and a downwardly revised 2736K prior.

- Philly Fed for February fell to -24.0 versus estimates of -10.0 and a reading of -20.9 in January.

- Leading Indicators for January fell .1% versus estimates of a .1% decline and an upwardly revised .1% decline in December.

BOTTOM LINE: The number of Americans filing first time jobless claims fell this week, Bloomberg reported. The four-week moving average of claims rose to 360,500. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, held steady at a historically low 2.1%. Jobless claims and the unemployment rate still remain well below levels normally associated with economic contraction. I continue to believe the job market will strengthen to more healthy levels over the intermediate-term.

The Philly region gauge of manufacturing contracted more than economists expected this month, Bloomberg reported. The New Orders component of the index rose to -10.9 from -15.2 the prior month. The Inventories component of the index fell to -13 from -11.7 the prior month. The Employment component rose to 2.5 from 1.5 the prior month. The Prices Paid component fell to 46.6 from 49.8 in January. I expect this gauge to rebound in March on inventory rebuilding as exports continue to boom.

The Conference Board’s index of leading US economic indicators fell slightly in January on weakness in stocks and housing, Bloomberg reported. The Conference Board’s index of coincident indicators rose .1% for a second consecutive month. Yesterday, the Conference Board said that a US recession was unlikely and that the housing sector correction was nearly over. Fed funds futures now imply a 96% chance for a 50 basis point cut at the March 18^th meeting and a 4% chance for a 25 basis point cut. I still expect US growth of around 1% this quarter, with a slight pick-up next quarter. I continue to believe US growth will average about 2% for the year as the effects of the stimulus take hold in the second half, inflation decelerates, exports continue to boom and companies rebuild depleted inventories.