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Friday Watch

Late-Night Headlines
Bloomberg:
- China said a resolution by the US House of Representatives calling for an end to a crackdown on protesters in Tibet is a “rude interference” in Chinese internal affairs.
- CV Therapeutics(CVTX) and Astellas Pharma won US approval for a new drug that helps doctors detect coronary artery disease by identifying areas of poor blood flow in the heart. The share soared 18.3% in after-hours trading.
- PDL BioPharma(PDLI), the developer of technology to make cancer drugs more effective, said it will spin off and separately list its biotech business, paying shareholders a special $500 million dividend. The shares surged 14.0% in extended trading.
- The yen fell against the euro as a rally in Asian stocks gave investors confidence to buy higher-yielding currencies with loans from Japan.
- UK Chancellor of the Exchequer Alistair Darling will urge the International Monetary Fund, which a year ago said subprime mortgage defaults wouldn’t cause widespread damage, to have a greater role in policing global financial markets.
- Delta Air Lines(DAL) and its pilots agreed on a tentative contract to clear the way for a merger with Northwest Airlines(NWA) that would create the world’s largest carrier.
- Wall Street bond dealers bid for less than the $50 billion of Treasuries that the Fed offered at an auction today, a sign that strains in credit markets may be easing.
- PIMCO’s Bill Gross lifted holdings of mortgage debt in the world’s largest bond fund to the highest since 2000, while putting on the biggest bet against government debt since at least the same year.

Wall Street Journal:
- Chinese Firms Might Struggle To Keep Up Blazing Profit Growth.
- Senior Bush administration officials have reached out to reassure international trade officials and trade partners rattled by a setback to the US push for open markets, as the House of Representatives sidelined a free-trade deal with Colombia.
- Bank of Nova Scotia, Canada’s third-largest bank by stock-market value, has jumped into the bidding fray for National City Corp.(NCC), which is under regulatory pressure to bolster its capital or find a buyer before the troubled Midwestern lender reports first-quarter results in about 10 days.

MarketWatch.com:
- Marketwatch Forecaster of the Month. Two-time honoree David Resler of Nomura looks at the odds of recession and whether we’ll call it that. “The puzzle about the recession-question is whether or not the decline we are experiencing will last long enough,” Resler said. Resler predicts the economy will grow at a .3% rate for the first two quarters of this year. One wildcard, says Resler, is the impact of tax rebates that will start arriving in mailboxes of 130 million households next month. He predicts those rebates, which range from $300 to $600 for individuals, plus extra credits for children, will provide a significant boost to third quarter GDP. Resler sees it snapping back to a 4% pace.

CNBC.com:
- Bank Earnings Will Be Bad, But the Worst May Be Past.

BusinessWeek.com:
- Americans Don’t Love Trucks Anymore.

IBD:
- Chip Stocks Revive As Analysts Declare Cycle Near Bottom.

Forbes.com:
- Fidelity Management & Research, acts as an investment adviser to Fidelity Investment’s family of mutual funds, and is Ambac’s(ABK) largest shareholder. It disclosed in a SEC filing that it raised its stake in Ambac to 11.8% from 3.4%. It now owns 34.2 million shares.
- US Biotechs On Sale.

Politico:
- Wealthy Democrats are preparing a four-month, $40 million media campaign centered on attacks on Senator John McCain. It will be led by David Brock, the ex-conservative founder of the liberal group Media Matters.

CNNMoney.com:
- The Bush administration has urged former President Jimmy Carter not to go forward with plans to meet with the leader of Hamas, the US State Dept. said.

SmartMoney:
- Surgical-Robot Make Intuitive Surgical(ISRG) Has More Room to Operate.

c/net:
- Yahoogle? Microspace? It makes Google(GOOG) look good.

Reuters:
- Google(GOOG) using Quattrone as merger adviser: source.

Financial Times:
- Chinese consumers have been urged to boycott French goods in response to the raucous protests that accompanied the Olympic torch through Paris.
- Australia aims regulatory fire at hedge funds. Hedge fund managers who thought they had escaped blame for the credit crunch should take a look Down Under if they want to find out what politicians have in store for them. Hedge funds operating in Australia have been put on notice that a crackdown on short-selling is on the way, to deal with fears that the current rules could encourage the spreading of false and misleading rumors.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to +2.0% on average.
S&P 500 futures +.33%.
NASDAQ 100 futures +.34%.

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Earnings of Note
Company/EPS Estimate
- (GE)/.43
- (FAST)/.51

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Import Price Index for March is estimated to rise 2.0% versus a .2% gain in February.
- The Preliminary Univ. of Mich. Consumer Confidence reading for April is estimated at 69.0 versus 69.5 in March.

Other Potential Market Movers
- The Fed’s Fisher speaking and (DNR) analyst meeting could also impact trading today.

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

Stocks Finish Higher, Boosted by Biotech, Technology and Airline Shares

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In Play

Stocks Higher into Final Hour on Lower Energy Prices, Short-Covering, Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Software longs, Computer longs and Biotech longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The overall tone of the market is bullish as the advance/decline line is higher, most sectors are rising and volume is around average. Investor anxiety is above-average, despite today’s market strength. Today’s overall market action is very bullish. The VIX is falling 4.7%, but remains above average at 21.7. The ISE Sentiment Index is a low 101.0 and the total put/call is an above-average .99. Finally, the NYSE Arms has been running above average most of the day and is currently .99. North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation. A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil. The ISE Sentiment Index hit the second lowest level on record this morning at 32.0. The all-time low of 20.0 was seen on January 17, three days before the market’s January low. This is a significant positive. One of my largest long positions, Intuitive Surgical(ISRG), is rising 5.4% today and is near its record high of $359.59. Lazard Capital Markets rated the company a “buy” today and put a $420 target on the stock. I said a few years ago that (ISRG) would likely be one of the greatest growth stocks over the next decade and that analysts vastly underestimated its potential. I still believe this to be the case. The stock is up 601.8% over the last three years. Nikkei futures indicate an +155 open in Japan and DAX futures indicate an +70 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close on short-covering, bargain hunting, less economic pessimism and lower energy prices.

Today's Headlines

Bloomberg:
- Goldman Sachs Group(GS) CEO Lloyd Blankfein said the credit crisis that’s forced almost $250 billion in losses and writedowns at the world’s biggest finance companies may be approaching an end.
- Markit Group Ltd. has bought UK NTC Economics, becoming the owner of the purchasing managers index series for the manufacturing and retail industries.
- Crude oil fell in NY on signs that high prices and a slowing economy will curb US fuel consumption.
- Republican presidential candidate John McCain offered a plan to help homeowners shed burdensome mortgages.
- The Bank of England cut the benchmark interest rate for the third time since December as higher credit costs and the worst housing slump in 16 years threatened to push the economy into a recession.
- Wal-Mart(WMT), the world’s largest retailer, said March sales rose .7% and increased its forecast for first-quarter profit after price cuts spurred demand for groceries, drugs and flat-panel televisions.
- Bernanke Says Fed to Review Guidance on Bank Capital, Liquidity.

Wall Street Journal:
- Stock picker Charles Jobson has sailed through past bear-market tempests, quietly amassing $2.4 billion in assets and reinvesting millions of dollars in personal profit into his Boston hedge funds. The recent stock-market turbulence has turned out to be the test of his career. His biggest funds, called Prism, which started the quarter with assets of more than $2 billion, had losses of 24% to 29% last quarter.
- British Prime Minister Gordon Brown will be on the growing list of world leaders absent at the opening ceremony of the Beijing Olympics.

CNBC:
- Mohamed El-Erian, co-chief executive officer of PIMCO, told CNBC that the Fed would like to halt reductions in its target rate for overnight loans between banks at 2%.

NY Post:
- As banks big and small continue to reel from the pain of the credit crunch, private-equity firms are circling with an eye toward taking advantage of the financial sector’s pain and gobbling up assets on the cheap.
- A Republican presidential ticket of John McCain and Secretary of State Condoleezza Rice would beat a Democratic ticket of Hillary Rodham Clinton and Barack Obama – in either combination – in heavily “blue” New York, a surprising poll showed yesterday.

MarketWatch:
- White House to allow FHA to insure more mortgages.

Washington Post:
- President Bush is expected to announce today a reduction in Army combat tours to 12 months from the current 15 months, citing officials.

Economist:
- The comeback of private equity. Private equity funds grow 32% in 2008. Are private-equity firms calling the end of the credit crunch?
- Danger ahead for the mighty euro. Euro-zone economies face external woes and internal tensions.

Financial Times:
- Banks are introducing contracts allowing them to protect against hedge funds and other counterparties failing to pay what they owe. The so-called contingent credit-default swaps will be offered within the next three months with the approval of the International Swaps and Derivatives Association. The contracts can be used to protect, or lock in, mark-to-market gains on the value of derivative trades, as well as protect dealers against counterparty risk.

International Herald Tribune:
- JPMorgan(JPM) is still bringing Bear Stearns into its fold, but that is not stopping JPMorgan from looking for more deals, according to analysts and investors.
- Forecast is grim for hedge funds in Asia.

Dagens Industri:
- Volvo AB forecasts the North American market won’t deteriorate from today’s levels, citing CEO Leif Johansson. Johansson also told shareholders at the company’s annual general meeting yesterday that the company will see continued strong growth this year and increased profitability. Gothenburg, Sweden-based Volvo is the world’s second-largest truckmaker.

Arab news:
- Real estate prices in Riyadh, Saudi Arabia have increased by 40-90% in recent months.

Bear Radar

Style Underperformer:

Large-cap Value +.12%

Sector Underperformers:

Gold (-.63%), Papers (-.57%) and I-Banks (-.49%)

Stocks Falling on Unusual Volume:

VMED, PTRY, FMCN, XRAY, TWB and RAH

Stocks With Unusual Put Option Activity:

1) DAL 2) OTEX 3) WFT 4) VIP 5) FAST