Tuesday Watch

Late-Night Headlines
Bloomberg:
- The US economy will grow in the second half of 2008, the S&P 500 may climb to a record this summer and commodity prices will retreat as much as 30%, hedge fund manager Barton Biggs said. Companies aren’t expressing “gloom and doom,” and the economy is “not as bad as you would believe from listening to the press and some of the Wall Street commentators,” Biggs said. The Federal Reserve has cut its benchmark lending rate seven times since September, lowering the target for overnight loans between banks to 2% from 5.25%. Once the economy starts benefiting from those reductions later this year, GDP may expand 1 percent to 3 percentage points more than the rate of inflation, Biggs said. Biggs, a former Morgan Stanley strategist who now runs the $1.5 billion hedge fund Traxis Partners LLC, predicted on March 14 that the DJIA would rally 1,000 points, or 8.4%. The 30-company measure has since risen 1,018.45 points. Biggs recommended buying companies that make products consumers purchase with their discretionary income. He said that while financial stocks look attractive at current prices, they will underperform during the next five years. (video)
- Copper pared gains after soaring to a record on speculation that a trader error may have triggered an early surge.
- Contract workers at Chile’s state-run Codelco, the world’s largest copper-mining company, voted to end a strike that curtailed production for almost three weeks and sent prices of the metal soaring to a record.
- Australia Wheat Output May Increase 92%, Bank Says. Australia, the world’s second-biggest wheat exporter before two years of drought ravaged crops, may almost double its harvest this year as higher prices and better weather encourage planting, National Australia Bank Ltd. said.
- Target Corp.(TGT), the second-largest US discounter, will sell 47% of its $8.2 billion in credit-card loans to JPMorgan Chase(JPM) for $3.6 billion to raise cash for stock buybacks and reduce its exposure to consumer defaults.
- Federal Reserve Chairman Ben S. Bernanke, seeking to end the worst housing slump in 25 years, urged the government and mortgage lenders to intensify their efforts to avoid home foreclosures.
- Bank of America(BAC), seeking to quell speculation that it will abandon its $4 billion purchase of Countryside Financial Corp.(CFC), said the takeover is proceeding as planned.

Wall Street Journal:
- US regulators are poised to expand their oversight of oil companies and energy markets in ways that Congress once thought unnecessary. The Federal Trade Commission last week said it would delve into the workings of the oil industry, examining scenarios such as the withholding of supplies from the market, as it prepares to write rules banning market manipulation. Acting under authority granted in a 2007 energy law, the FTC’s powers may be great enough to reach into the oil-trading markets. “They have the power to do something that would create major transparency in these markets,” said Michael Greenberger, who was once the director of the division of trading and markets at the CFTC.
- Wireless provider Sprint Nextel(S) is considering spinning off or selling its ailing Nextel unit.

MarketWatch.com:
- Chinese stocks still aren’t attractive.

CNBC.com:
- 5 Things You Need to Know to Play Videogame Stocks.

IBD:
- US Stock Funds Rallied 4.98% in April, With Growth In The Lead.

USA Today.com:
- IMAX makes a dramatic comeback.

Reuters:
- Merrill CEO: No need to raise more capital.
- Google(GOOG) and Yahoo(YHOO) are still hammering out the intricacies of a potential advertising and search deal, and no final agreement has been reached yet.

ZDNet:
- Fuel cell breakthrough? Gentlemen, start your engines…

Ipsos News Center:
- Senator Hillary Clinton has a seven percentage point lead over Senator Barack Obama among Democrats nationwide the night before the Indiana and North Carolina primaries, according to the latest Ipsos poll. A previous poll by Ipsos, conducted April 23 through April 27, showed Obama winning 46 percent to Clinton’s 43%.

Financial Times:
- BlackRock(BLK), the US asset manager, will pay UBS AG(UBS) $15 billion for a portfolio of subprime mortgage debt in deal that the Swiss bank plans to announce on Tuesday with its first-quarter results.
- India’s finance minister said on Monday he was considering a blanket ban on trading in food futures, underlying growing concerns in Asia over the role of hedge funds and financial market traders in the recent surge in commodities prices. Speaking on the sidelines of the Asian Development Bank annual meeting in Madrid, P. Chidambaram said his worries over market speculation were shared by governments across the region and that India was “facing a very grave crisis on the food front.” The surge in the cost of basic staples has sparked some social unrest in Asian countries such as China and Indonesia. It has also fuelled inflation to the point that it is now threatening to dent the spectacular economic progress of countries such as Vietnam and China. “It is the bid speculators that have taken the oil price to a level that is unacceptable and they just want to ruin the developing countries,” said Ishaq Dar, Pakistan’s new finance minster.

Handelsblatt:
- German insurers, including Allianz Lebensversicherung AG and DEVK Allgemeine Versicherungs AG, plans to invest billions of dollars in securities backed by consumer debt. Allianz Leben plans to invest about $3.1 billion in asset-backed securities. “We plan to seize the day and buy ABS paper,” Bernd Zens, board member in charge of capital investment at DEVK, said. DEVK is especially interested in bonds from 2003 and 2004.

AFP:
- A Chinese government watchdog has warned major state-owned enterprises to brace for tough times given the likelihood of a worsening global economic slowdown, state media reported. Chinese state-owned enterprises(SOEs) must pay more attention to their financial position to avoid a potential capital crunch, the Economic Observer reported, citing Li Rongrong, director of the State-owned Assets Supervision and Administration Commission. Li said the SOEs, some of which have already flagged cash flow shortages, should better prepare themselves for tightening monetary policy lasting at least two years. The meeting was held after figures showed that combined profits of the major SOEs in the first quarter dropped 2.9% from a year earlier. Earnings at oil companies and power generators were worst hit, because of rising raw material costs and the government’s central pricing system for oil products and electricity tariffs.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (HEW), target $48.

Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 futures +.23%.
NASDAQ 100 futures +.19%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (NYX)/.83
- (TAP)/.28
- (COV)/.58
- (EL)/.47
- (JOE)/.14
- (EMR)/.71
- (LAZ)/.52
- (PCP)/1.89
- (LPX)/-.52
- (MGM)/.43
- (SLE)/.24
- (DHI)/-.64
- (MLM)/.69
- (Q)/.09
- (LM)/-.84
- (WBMD)/.07
- (CELL)/.11
- (DIS)/.51
- (GGC)/-.30
- (PZZA)/.44
- (CSCO)/.36
- (WMS)/.30
- (PBI)/.64
- (SNCR)/.17
- (THQI)/-.06
- (CAR)/.00
- (VNO)/1.36
- (NILE)/.14
- (THC)/.00
- (TK)/1.00
- (HAR)/.70
- (TSO)/-.53
- (KCP)/.03
- (ONXX)/-.06

Upcoming Splits
- None of note

Economic Releases
- None of note

Other Potential Market Movers
- The Fed’s Bernanke speaking, Fed’s Hoenig speaking, (YUM) analyst conference, weekly retail sales reports, Deutsche Bank Health Care Conference, Goldman Sachs Alternative Energy Conference, CSFB Basic Materials Conference and Merrill Lynch Technology Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial shares 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.

Stocks Finish Lower, Weighed Down by Airline and Retail Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Lower into Final Hour on Rise in Energy Prices, Profit-Taking

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Computer longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly bearish as the advance/decline line is mildly lower, most sectors are declining and volume is about average. Investor anxiety is about average. Today’s overall market action is mildly bearish. The VIX is rising 3.8% and remains above average at 18.9. The ISE Sentiment Index is slightly below average at 138.0 and the total put/call is around average at .90. Finally, the NYSE Arms has been running around average most of the day and is currently 1.02. Given recent stock gains, a jump in oil to another record and technical resistance, today’s action isn’t too bad. The road & rail, homebuilding, construction, HMO, hospital, wireless, disk drive, computer hardware, software, steel and energy sectors are all flat-to-higher on the day. Moreover, many market-leading growth stocks are substantially outperforming the broad market, with some posting meaningful gains today. The TED spread is falling another 9 basis points today to 118.0 basis points, which is the lowest since February 27^th and down from 204.0 on March 19^th, which is a significant positive. Illumina Inc.(ILMN), one of my larger long positions, continues to trade very well and is poised to make a new closing high. I still see substantial upside in the shares from current levels over the long-term. (ISRG), another one of my larger long positions, is trading better of late and is still providing investors with an excellent entry point. Nikkei futures indicate an +120 open in Japan and DAX futures indicate an +35 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and less economic pessimism.

S&P Goldman Agriculture Commodity Spot Price Index Graph

(click on image to enlarge)

BOTTOM LINE: Despite the recent rise in oil to a new record high, the S&P GSCI Ag Spot Index continues to diverge and has reversed today to session lows, falling another 1.3%. This basket of agricultural commodity prices has plunged 18.9% since its peak on March 12th. This index, which trades very poorly, looks poised to test its 200-day moving average over the coming weeks. Moreover, this bodes very well for a further deceleration in inflation gauges over the coming months.

Today's Headlines

Bloomberg:
- Boeing(BA) and the Government of Iraq today announced an order for 30 Boeing 737-800 commercial airplanes, the first step in re-establishing that country's scheduled commercial aviation operations. Iraq has also contracted options for 10 additional 737s. Valued at $2.2 billion at current list prices, the order was previously accounted for on Boeing's Orders & Deliveries Web site attributed to an unidentified customer.
- Sprott Asset Management’s IPO this week will make a billionaire of the hedge fund company’s founder, spurring speculation Canada’s decade-old commodities boom is ending, investors say. The $226 million IPO is reminiscent of late June’s share sale of US private-equity firm Blackstone Group LP, said Stephen Jarislowsky, CEO of Jarislowsky Fraser in Montreal. That IPO preceded a 56% decline in monthly takeover volume in the US. “I don’t like the kind of stocks he invests in. They’re little companies that may or may not have any substance,” Jarislowsky said.
- Crude oil is rising above $120 barrel in NY after a report showed that US service industries unexpectedly expanded in April, signaling higher energy use.
- Corn and soybeans are falling as farmers accelerated planting of the two biggest US crops after above-average rainfall kept heavy machinery of Midwest fields.
- Hovnanian Enterprises(HOV), New Jersey’s biggest homebuilder, tripled its forecast for positive cash flow in fiscal 2008 as it cut prices on homes to stimulate sales. Shares rose as much as 5.7%.
- Marvel Entertainment(MVL) climbed as much as 9.9% in NY trading after its first self-produced movie, “Iron Man,” topped the US box office, and the company said 2008 sales and profit will be higher than it previously forecast.
- Jose Sergio Gabrielli, CEO of Petrobras(PBR), said the company plans to begin pumping crude from its 8 billion barrel Tupi field next year, a year ahead of schedule. (video)
- Wal-Mart Stores(WMT), the world’s largest retailer, expanded its drug offering with $10 three-month prescriptions, stepping up the fight for US consumers seeking cheaper medicines as fuel and food prices rise.
- Google Inc.(GOOG), owner of the world’s most popular Internet search engine, may benefit from “disarray” caused by Microsoft’s(MSFT) decision to drop its pursuit of Yahoo!(YHOO), according to a Goldman Sachs Group(GS) analyst.
- China’s economy is at risk of overheating and policy makers may raise interest rates and do more to soak up the cash flooding the financial system, officials said. “Growth has started to slow, why take the risk of taking additional cooling measures and risk stalling the economy?” asked Leslie Phang, Singapore-based head of private clients at Schroders Plc, which manages $275 billion.

Wall Street Journal:
- The manufacturing outlook in Europe’s southern economies is deteriorating faster than expected, and German consumers are also starting to scale back their purchases, new data showed. Differences between Europe’s northern and southern economies also appear to be widening, economists said. The PMI for Spain’s factory sector sank to its lowest level in nearly 6 ½ years, at 45.2. Output also contracted in Italy, where the index fell to 48.2 in April from 49.4 in March. Even in Germany, there are signs that economic activity may be slipping. March retail sales fell unexpectedly from February and more sharply than expected from a year earlier.
- Senator Barack Obama won the endorsement of the Teamsters earlier this year after privately telling the union he supported ending the strict federal oversight imposed to root out corruption, according to officials from the union and the Obama campaign. It’s an unusual stance for a presidential candidate. Policy makers have largely treated monitoring of the International Brotherhood of Teamsters as a legal matter left to the Justice Dept. since an independent review board was set up in 1992 to eliminate mob influence in the union.

NY Times:
- Steven A. Ballmer, Microsoft’s(MSFT) CEO, walked away from a Yahoo(YHOO) deal on Saturday still looking for an answer to his company’s fundamental problem: its time-tested recipe for success isn’t working against Google(GOOG), the leader in the current wave of Internet computing.
- Mobile TV Spreading in Europe and to the US.

Forbes:
- UAL merger talks with US Airways intensify.

InvestmentNews:
- Hedge funds, powered by an increasing amount of capital that pension funds and other institutions pour into them, are playing a major role in the unusually high market volatility seen in recent months, according to the Securities Traders Assoc., NY.

USA Today:
- Barack Obama’s national standing has been significantly damaged by the controversy over his former pastor, a USA Today/Gallup Poll finds, raising questions for some voters about the Illinois senator’s values, credibility and electability.

FINalternatives:
- Hedge Fund Horse Wins Kentucky Derby.

c/net:
- Range Fuels expands to speed cellulosic-ethanol production. With a planned plant for next year, Range Fuels will be one of the first providers in operation. Other companies on the hunt to make cellulosic ethanol on a large scale include Coskata and Mascoma.

Financial Times:
- Intel(INTC), the world’s largest maker of semiconductors, will become more acquisitive and expand into areas such as consumer electronics, according to Pat Gelsinger, head of the chipmaker’s Digital Enterprise group.

CEO:
- Julius Baer Holding AG’s private banking chief Alex Widmer said the biggest danger for financial markets is over-production of basic materials such as steel, copper, cement and nickel. “We’re seeing the first sings already today that production exceeds demand,” he said.

China Daily:
- The number of Chinese children infected with hand-foot-mouth disease continues to rise, with reported cases exceeding 8,531 on Monday. 25 children have died of the disease. Anhui Province, in east China, and Guangdong Province, south China were the worst hit areas. The two regions were followed by Beijing, Jiangsu, Hunan and Hubei, according to statistics released by local health departments. Beijing has recorded at least 1,010 cases of the disease.

Bear Radar

Style Underperformer:

Large-cap Value -.73%

Sector Underperformers:

Airlines (-3.21%), Gaming (-1.87%) and Retail (-1.86%)

Stocks Falling on Unusual Volume:

TDW, CZN, HMSY, YHOO, ZOLT, ARGN, FTEK, ACAS, BARE, MNI and HEW

Stocks With Unusual Put Option Activity:

1) CX 2) IP 3) ZOLT 4) MEE 5) BRCD