Economic Releases

- None of note

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- Australia, the world’s sixth-largest exporter, may almost double output of the grain as farmers boost plantings to a record to benefit from higher prices.
- Intel Corp.(INTC), the world’s biggest maker of semiconductors, cut its first-quarter profit forecast after an industry glut in flash-memory chips hurt efforts to expand in that market. The stock fell .44 to $19.57 in after-hours trading.
- The Bush administration will release within weeks proposals that address deficiencies in the regulation and functioning of US financial markets, Treasury Secretary Henry Paulson said.
- Colombia’s police chief alleged Venezuelan President Hugo Chavez helped fund Latin America’s biggest guerrilla group and has ties to the rebels going back more than 15 years.
- Australia’s central bank increased its benchmark interest rate for the second time in four weeks and said there are signs the highest borrowing costs in 12 years are prompting consumers and businesses to temper spending.
- The cost to protect Asia-Pacific corporate bonds from default fell after HSBC Holdings Plc said its earnings from lending in emerging markets like China and India offset other losses. The Markit iTraxx index of credit default swaps tied to 20 high-risk, high-yield borrowers in Asia outside Japan fell 10 basis points to 595 basis points, according to ICAP Plc.

Wall Street Journal:
- Goldman Sachs(GS) Is Close To Making Investment In Futures Exchange.
- Clinton Aims to Push Beyond Ohio and Texas.
- In separate lawsuits filed in a New York federal court, a $58-million-asset hedge fund alleges that Citigroup Inc. and Wachovia Corp., respectively, improperly required the fund to pay out more money from insurance derivatives contracts known as "credit default swaps" amid a steep decline in the value of mortgage-backed bonds.

MarketWatch.com:
- Sony Corp.(SNE) and Samsung Electronics will jointly invest an additional $5 billion to expand LCD panel production at their joint venture in South Korea.

CNBC.com:
- The Transportation Department said Monday that surface-transportation trade between the US and Canada and Mexico rose 4.9% to $797.3 billion for all of 2007.

NY Times:
- The increase over the last decade in the amount of cash, as a percent of total assets, for the companies in the Standard & Poor’s 500-stock index has been steep. One study shows that the average cash ratio doubled from 1998 to 2004 and the median ratio more than tripled, while debt levels fell. According to S.& P., the total cash held by companies in its industrial index exceeded $600 billion in February, up from about $203 billion in 1998.

BusinessWeek.com:
- Chavez Picks a New Fight, with Colombia.
- CEO Guide to Widgets. The customizable bits of software on Facebook and other social networking sites are the latest trend in viral marketing.
- IBM’s(IBM) director of R&D is shifting the tech giant’s focus – and making a few enormous bets.

CNNMoney.com:
- Top 20 Most Admired Companies.
- Hope Now: We’ve helped 1 million home owners. Hope Now, the foreclosure prevention coalition put together with the Bush administration’s support, claims dramatic success in helping at-risk mortgage borrowers stay in their homes.

Portfolio.com:
- Internal rifts widen at the New York Times as the news organization faces a re-energized rival.

AP:
- The FBI is investigating whether the torching of three multimillion-dollar model homes in the Seattle area was the work of eco-terrorists. A spray-painted sign near the homes said “Built Green? Nope, Black,” with the initials for the Earth Liberation Front, a radical environmental group. Explosive devices were also found in the houses.

Reuters:
- Cisco Systems(CSCO) on Monday unveiled a new router that helps phone companies and large businesses handle growing Internet traffic faster, and said it won a deal to supply Japanese phone provider NTT Corp’s next-generation network.
- Alaska's political climate, with the state hiking oil taxes and asserting claims against oil companies, is discouraging investment needed to offset the decline in oil production as Alaska fields age, the head of BP's Alaska unit said on Monday.
- Top-20 selling vehicles in US through February.

Financial Times:
- Ambac Financial Group(ABK), the US bond insurer, will not divide its operations as the company completes a recapitalization.
- Wal-Mart(WMT), one of the biggest corporate charitable donors in the US, is overhauling how it gives its money to ensure philanthropic efforts are more closely linked to its brand positioning.
- GE(GE) gains from EADS contract win. General Electric is to earn at least $5 billion over the next two decades from providing jet engines to the European-led consortium that beat Boeing(BA) in the race for a $35 billion contract for US Air Force refueling tankers.
- Big hedge funds tighten grip. The top 350 hedge funds control almost half the industry, a new study shows.

TimesOnline:
- Concerns about Chinese restrictions on foreign financial news providers escalated into a trade dispute yesterday when the European Union and the US filed a joint formal complaint at the World Trade Organization. The row centers on Beijing’s decision two years ago to require companies such as Reuters, Dow Jones and Bloomberg to distribute their information through a branch of Xinhua, the state news agency, rather than deal directly with their clients, such as banks.

Shanghai Securities News:
- China may allow investors to sell individual stocks short this year, citing Fan Fuchun, vice chairman of the China Securities Regulatory Commission. Fan also said the regulator is “actively putting effort” into introducing stock index futures and preparing for allowing red-chip companies to sell yuan-denominated shares.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (PLCE), target $33.
- Reiterated Buy (MCHP), target $38.

Pacific Growth:
- Rated (VMW) Buy.

Night Trading
Asian Indices are -1.0% to unch. on average.
S&P 500 futures -.05%.
NASDAQ 100 futures -.30%.

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Earnings of Note
Company/EPS Estimate
- (TECD)/.90
- (JTX)/.98
- (KCP)/.14
- (CHS)/-.15
- (AES)/.32
- (WCG)/1.62
- (SPLS)/.47

Upcoming Splits
- None of note

Economic Releases
- None of note

Other Potential Market Movers
- The Fed’s Bernanke speaking, Fed’s Fisher speaking, Fed’s Mishkin speaking, weekly retail sales reports, (EAC) analyst meeting, (JAH) analyst meeting, (ARRS) analyst meeting, (RTIX) analyst dinner, (OMTR) analyst meeting, CSFB Under Followed Opportunities Conference, Bear Stearns Retail/Restaurants/Consumer Conference, Citigroup Global Property Conference, Morgan Stanley Tech Conference and Merrill Lynch Global Auto Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by utility and financial stocks in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower, Weighed Down by Tech, Airline, Homebuilder and Financial Shares

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In Play

Stocks Lower into Final Hour on Economic Worries, Rising Credit Market Angst

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs and Computer longs. I have not traded 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 declining and volume is about average. Investor anxiety is high again. Today’s overall market action is bearish. The VIX is rising 2.1% today to a high 27.1. The ISE Sentiment Index hit a depressed 48.0 and the total put/call hit a high 1.54 today. Finally, the NYSE Arms has been running above average most of the day. The severe declines in a number of market-leading stocks are a bad sign. The TED spread is rising another 10 basis points today to 1.32, the highest since January 22 and up from .78 on February 14^th. The three-month t-bill yield is down to 1.69%, the lowest since September 2004. The odds for a 75 basis point rate cut at the upcoming Fed meeting have risen to 74.0%. I also think the odds that a cut occurs before the scheduled meeting have risen substantially of late. On the positive side, retail, REIT, biotech, road&rail, drug, medical equipment, telecom, computer service, steel, energy, utility and defense shares are higher or flat on the day. Nikkei futures indicate an +148 open in Japan and DAX futures indicate an +4 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as rising rate cut speculation and bargain-hunting offsets economic worries and increasing credit market angst.

Today's Headlines

Bloomberg:
- Freddie Mac(FRE), the world’s second-largest mortgage buyer, said the average US fixed mortgage rate in 2008 probably will tumble more than three-quarters of a percentage point to the lowest in at least 45 years.
- Irrational Pessimism Pummels US Bond Market.
- Crude oil is unch. on the day, giving up early gains, after OPEC said supplies were high and demand would slow further.
- MBIA(MBI) will restructure in a way that allows it to raise capital at a lower cost.
- Diebold(DBD) Rejects Acquisition Proposal From United Technologies.
- Hillary Clinton Blasts Obama Over Canadian Memo About Nafta Meeting.
- China’s CSI 300 Index May Fall 20% More as Gap Closes.

Wall Street Journal:
- Americans Start to Curb Their Thirst for Gasoline. In the past six weeks, the nation’s gasoline consumption has fallen by an average 1.1% from year-earlier levels. That is the most sustained drop in demand in at least 16 years.
- Walt Disney’s(DIS) ABC Television Network and other media companies expect stronger “upfront” ad sales this year as buyers purchase commercial spots earlier because later season prices are 40% higher than last year’s early rates.
- US Senator John McCain, who is close to gaining the Republican nomination for president, would cut the corporate income-tax rate to 25 from 35%. The US currently has the second highest corporate tax rate in the world.

NY Times:
- IEA, Europeans Pressure Iran Over Nuclear Projects.
- Schwarzman Donates $5 Million to NY Scholarship Fund.

CNBC:
- Ambac Financial Group(ABK) may opt for just one AAA ranking from a single ratings company.

Le Monde:
- International Monetary Fund Managing Director Dominique Strauss-Kahn said the euro is overvalued.

Bahrain Tribune:
- Bahrain plans to drill 700 new oil wells over the next 15 years, citing Bahrain’s oil minister.