Money Market Fund Assets Graph

(Click on image to enlarge)

BOTTOM LINE: According to the Investment Company Institute(ICI), money market mutual fund assets are currently $3.5 trillion, which is greater than the gross domestic product of China. Money market fund assets are up a mind-boggling 88.2% from levels seen in May 2005. This is yet more evidence of the current "US negativity bubble." Investors have been scared out of their minds. ``Investors don't even care at this point,'' Deborah Cunningham, Federated's chief investment officer, said in a March 31 interview. ``There's no real concern about yield in the market at this moment, only safety.'' There is absolutely massive bull firepower available on the sidelines at a time of deep-seeded historic pessimism and a parabolic rise in short interest, which bodes very well for substantial broad market gains over the intermediate- to long-term.

Non-Farm Payrolls Decline More Than Estimates, Unemployment Rises, Average Hourly Earnings Healthy

- The Change in Non-farm Payrolls for March was -80K versus estimates of -50K and -76K in February.

- The Unemployment Rate for March rose to 5.1% versus estimates of 5.0% and 4.8% in February.

- Average Hourly Earnings for March rose .3% versus estimates of a .3% rise and a .3% gain in February.

BOTTOM LINE: The US lost jobs for a third consecutive month in March and the unemployment rate rose to the highest level since September 2005, Bloomberg reported. The decline in payrolls included a loss of 24,000 jobs in the auto manufacturing and parts industries, which the government said largely reflected the effects of the strike at American Axle, a supplier to General Motors(GM). A walkout by workers at American Axle over pay and benefits that started on Feb. 26 has idled almost 50% of GM’s North American workforce. Builders eliminated 51,000 jobs versus 37,000 in February. Service industries, which include banks, insurance companies, restaurants and retailers, added 13,000 workers versus a 6,000 gain in February. Average Hourly Earnings for March rose a very healthy 3.6% year-over-year versus the 20-year average of 3.3% and up from 1.6% in February 2004. The Unemployment Rate rose to 5.1%, but remains below the 20-year average of 5.4% and is down from 6.3% in June 2003. After a four-month downturn, the Monster Employment Index rose for the second month in a row in March. While overall the jobs report was weaker than I had expected, a loss of 80K jobs is still well below the 200K+ monthly losses normally associated with recessions. I expect the job market to improve over the coming months.

Bull Radar

Style Outperformer:

Mid-cap Growth (+.66%)

Sector Outperformers:

Oil Service (+1.84%), Alternative Energy (+1.83%) and Biotech (+1.13%)

Stocks Rising on Unusual Volume:

CPL, MMR, SWN, STP, BHP, AZN, ZOLL, STRA, DAKT, WSCI, CECO, SHLM, APOL, SCHN, ANGO, CPLA, COIN, CENX, FSLR, CEPH, SQM, MAR, MEE, ESI, MOS and CPL

Stocks With Unusual Call Option Activity:

1) MAR 2) EQIX 3) HK 4) SEPR 5) USU

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Friday Watch

Late-Night Headlines
Bloomberg:
- The SEC takes “very seriously” allegations that stock manipulators spread lies about Bear Stearns(BSC), forcing its sale to JPMorgan Chase(JPM), Chairman Christopher Cox said. The rumors were “too big to miss,” Cox said, when asked whether the SEC is investigating. “Your hopes will be met and exceeded with respect to the agency’s response to these concerns.” The SEC opened probes last month into whether hedge funds and other investors spread false rumors in seeking to profit from declines in stocks of companies including Bear Stearns and Lehman Brothers. “It looked like more than just fear, it looked like people wanted to induce a panic,” Bear Stearns CEO Alan Schwartz told the Senate panel today. The possibility investors might seek to profit by undermining public confidence in other firms has prompted warnings from a growing list of regulators, including the UK’s Financial Services Authority. On March 31, three US market watchdogs said they will “vigorously and aggressively” investigate such cases.
- Federal Reserve Bank of San Francisco President Janet Yellen said the US economy faces “significant” risks, and policy makers must be ready to respond “in a timely manner.”
- Lehman Brothers Holdings(LEH), seeking to get high-risk, high-yield loans off its books, created a $2.8 billion collateralized loan obligation.
- Secretary of State Condoleezza Rice said a Chinese court’s decision to sentence a human-rights activist to 3 ½ years in prison was “deeply disturbing” as the two countries prepare to resume talks on civil liberties.
- The number of babies born with the virus that causes AIDS or infected by breast milk decreased by 20% in six years, according to a United Nations report that credited treatment programs.
- Australia’s economic growth is cooling and will quell the fastest inflation in 16 years, Reserve Bank Governor Glenn Stevens said, indicating he may have finished raising interest rates.

Wall Street Journal:
- US Sought Low Price In Bear Sale, Officials Say.
- MF Global Ltd.(MF) is seeking financing for debt due in June after losing about two-thirds of its market value.
- The ACLU is spearheading a high-profile effort to defend Khalid Sheikh Mohammed and other alleged 9/11 conspirators from conviction by the Bush administration’s military commissions at Guantanamo Bay.
- Fifth Third Bancorp(FITB) is considering a bid to buy its larger rival National City Corp.(NCC).
- Obama Raised Twice as Much as Clinton in March.

MarketWatch.com:
- Aerospace giant Boeing Co.(BA) said Thursday that it has successfully flown the first aircraft powered by fuel-cell technology, as part of an in-house research project.
- Former UBS AG(UBS) president pushing for break-up.
- Apple(AAPL) displaces Wal-Mart as top US music seller.

CNBC.com:
- Should US Crack Down on Fuel Speculators? “Excessive speculation on energy trading facilities is the fuel that is driving this runaway train in crude prices,” said heating oil executive Sean Cota. He supports a bill from Rep. John Larson that would widen the regulatory framework and make it harder for speculators to participate in the energy market.

Forbes.com:
- Special Report: Virtualization. Virtualization is sweeping the business world, promising to transform corporate computing and reduce IT costs.

CNNMoney.com:
- AQR Capital to Close Hedge Fund by End of April. After months of poor performance, Goldman Sachs(GS) has stopped offering an investment that AQR Capital Management created for the bank’s 401(k) lineup. AQR’s flagship $2.9 billion Absolute Return Fund was down almost 15% through Feb. 15. AQR was among the first firms to create quantitative or “black box” hedge funds.

SmartMoney:
- Developers Help Home Buyers Fix Their Credit.
- Electronics Retailers Offering Range of Deals.

Portfolio.com:
- Corporate America may fear recession, but startups are flourishing and financiers are confident.

USA Today.com:
- Marketing gold could be found in Web video. You don’t need a pan and stream in California to join the next gold rush. A video camera, computer and high-speed internet connection will do.

Reuters:
- China Investment Corp., the nation’s $200 billion sovereign wealth fund, agreed to start a $4 billion private-equity fund with JC Flowers focusing on US financial assets.
- General Motors(GM) on Thursday showed off its progress in developing the highly anticipated Chevrolet Volt and detailed its road map for bringing the rechargeable car to the market by 2010.
- THQ Inc.(THQI) is looking at buying other video game developers, but the publisher of games like “Cars” and “Saints Row” can grow without making acquisitions, CEO Farrell said.
- Venezuelan President Hugo Chavez on Thursday announced the immediate nationalization of the country’s cement industry.

Financial Times:
- New cloud on horizon for hedge funds. Hedge funds are still reeling after banks unexpectedly pulled credit lines and demanded more security against loans, forcing firesales and heavy losses. Now they face a new threat: investors are abandoning them, raising the risk that the funds will have to sell assets at any price to raise the cash to meet withdrawals.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (FACE), target $14.

Lehman Brothers:
- Copper, lead, nickel and zinc prices may decline on average next year as production increases faster than consumption, said Michael Widmer, a metals analyst.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 futures -.01%.
NASDAQ 100 futures +.07%.

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Earnings of Note
Company/EPS Estimate
- (AZZ)/.59
- (FDO)/.42
- (MOS)/.95

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for March is estimated at -50K versus -60K in February.
- The Unemployment Rate for March is estimated at 5.0% versus 4.8% in February.
- Average Hourly Earnings for March are estimated to rise .3% versus a .3% gain in February.

Other Potential Market Movers
- The Fed’s Pianalto speaking and Fed’s Kroszner speakingcould also impact trading today.

BOTTOM LINE: Asian indices are mixed as gains in commodity stocks in the region are being offsets by weakness in automaker shares. 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.

Stocks Finish Higher, Boosted By Technology, Homebuilder, REIT and Construction Shares

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