Jobless Claims Fall, Inventories Decline, Retail Sales Surpass Estimates

- Initial Jobless Claims for this week fell to 365K versus estimates of 370K and 383K the prior week.

- Continuing Claims fell to 3020K versus estimates of 3020K and 3030K prior.

- Wholesale Inventories for March fell .1% versus estimates of a .5% gain and a .9% increase in February.

- ICSC chain store retail sales rose 3.6% in April versus estimates of a 2.0% gain.

BOTTOM LINE: Initial jobless claims fell last week more than economists expected, Bloomberg reported. The four-week moving average for initial claims rose to 367,000 from 364,500 the prior week. The unemployment rate among those eligible for jobless benefits, which tracks the US unemployment rate, held steady at a historically low 2.3%. I still expect jobless claims to trend lower from current levels through year-end as exports continue to boom, housing-related job losses subside and consumer spending picks up.

Inventories at US wholesalers unexpectedly fell in March as sales rose, Bloomberg reported. Sales jumped 1.6% versus a .5% decline in February. Distributors had enough goods on hand to last 1.09 months at the current sales pace, down from 1.11 months in February. Stockpiles at auto wholesalers fell .7% as sales surged 4.5%. Inventories should trend lower over the coming months as demand strengthens.

The UBS-International Council of Shopping Centers retail sales for April rose 3.6 percent, exceeding the 2 percent growth estimate. Moreover, 19 retailers beat estimates, while nine missed. Wal-Mart(WMT) reported a 3.2 percent gain in same-store sales. Analysts polled by Thomson Financial expected a 2.1 percent gain. The world's largest retailer said business was helped by strong sales in healthcare and food items as well as entertainment products like flat-panel televisions, video games and gaming consoles. The company said apparel sales also improved, despite cold weather, but home furnishings sales were weak. As well, Costco(COST) reported an 8 percent increase in same-store sales, surpassing the 6.1 percent estimate. Teen apparel sales were also brisk. Abercombie & Fitch Co.(ANF) reported a 6 percent gain in same-store sales, versus the 2.3 percent estimate. Aeropostale Inc.(ARO) reported a 25 percent surge in same-store sales for the month. The figure surpassed the 7.1 percent estimate. I expect retail sales to improve again this month on warmer weather, less economic pessimism and consumers spending their tax rebate checks.

Bull Radar

Style Outperformer:

Large-cap Growth (+.57%)

Sector Outperformers:

Steel (+2.1%), Hospitals (+1.72%) and Construction (+1.47%)

Stocks Rising on Unusual Volume:

ATPG, THS, GLBL, NOV, CRZO, BHP, BBL, UL, NFP, SWS, ENER, NVEC, CROX, AMSC, BAGL, ROCK, STST, BBBB, CCRN, SOHU, RBCN, GENC, CRYP, VOLC, DLTR, DISCA, IPAR, DRS, MR, GLP, WW and PCR

Stocks With Unusual Call Option Activity:

1) PSUN 2) ENER 3) HANS 4) WCG 5) ARO

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Thursday Watch

Late-Night Headlines
Bloomberg:
- The euro fell to a six-week low against the US dollar before a meeting today at which traders expect the European Central Bank will keep rates unchanged while signaling concern that economic growth is slowing.
- The US should maintain its current biofuels policy because it’s a bridge to second-generation fuels that won’t rely on food crops, according to cellulosic ethanol producers. “Now isn’t the time to waffle,” Verenium Corp. CEO Carlos Riva said. “We’re right on the doorstep of deployment. We’ve taken a space-race approach to it.” US ethanol production climbed to a high of 518,000 barrels a day in February. There are 147 ethanol distilleries in the US, with the capacity to produce about 8.5 billion gallons of the fuel annually. “This is paving the way for cellulosic fuel,” said Steen Riisgaard, CEO of Novozymes A/S, the world’s biggest maker of enzymes to make biofuel. Development of grain-based ethanol “infrastructure is necessary for cellulosic ethanol to take off.”
- David Leaver, senior trader at Gain Capital Group’s Forex.com sees the US dollar rising to $1.40 versus the euro. (video)
- President Bush will ask Saudi Arabia to increase oil production when he visits Riyadh, the Saudi capital, next week. Bush asked the Saudis to increase oil production when he last visited Saudi Arabia in January. Oil prices have climbed 31% since that appeal.
- Google Inc.(GOOG), owner of the most popular Internet search engine, is considering running illustrated advertisements alongside the results of Web queries for pictures, moving beyond its text-based ad business.
- Advanced Micro Devices(AMD) plans to sell semiconductors with six processors built into one piece of silicon, part of an effort to wrest sales away from Intel(INTC).
- India Expands Ban on Trading of Food Futures to Curb Inflation.
- New Zealand’s employment fell by the most in 19 years in the first quarter as plunging business confidence prompted companies to fire workers, adding to signs economic growth has stalled.
- The yuan fell the most in more than a week on speculation China’s economic growth will slow as demand for its exports wane.

Wall Street Journal:
- About a dozen of the nation’s largest oil companies agreed to settle litigation with 153 public water providers in 17 states that sued over groundwater contaminated by the gasoline additive MTBE.
- Clinton Vows to Press Ahead As Obama Camp Maps Strategy.
- The White House’s top economist said he’s confident the US economy hasn’t dipped into recession, and expressed optimism that stimulus checks could bolster growth in the current quarter, earlier than expected. NBER says a recession is marked by a significant decline in economic activity, lasting more than a few months and seen in real gross domestic product, real income, employment, industrial production and wholesale-retail sales. “I would be very surprised if the NBER, looking back at this period, would date this as a recession,” Mr. Lazear said.

MarketWatch.com:
- The US wind power industry remains on tract to continue its record run in 2008 after the sector installed 1,400 megawatts of new generating capacity in the three months ended March 21. The new wind power plans installed in the first quarter of this year produce enough electricity to serve the equivalent of 400,000 homes.
- In its partnership unveiled Wednesday with Sprint Nextel(S) on a next-generation wireless network, Google Inc.(GOOG) has tapped yet another route to ensure itself a prominent place in the mobile-Internet marketplace.

NY Times:
- Wave of Lawsuits Over Losses Could Hit a Wall. Finding someone to sue over losses in the mortgage market and the credit crisis is easy. Winning in court, lawyers say, will be hard.

BusinessWeek.com:
- Chip Equipment: Hitting Bottom? After a year of suffering, and a sharp decline for the year, makers of semiconductor equipment are gearing up for a new spending cycle in 2009.
- What’s Right with Biofuels. Recent hand-wringing about the costs associated with ethanol and other biofuels overlooks the urgency of finding alternatives to petroleum.

CNNMoney.com:
- 10 fastest growing real estate markets.

SmartMoney:
- Top 5: Strong Housing Markets.

Portfolio.com:
- Here is some good, old fashioned irrational exuberance: I don’t think travel this summer will be as arduous or as infuriating as it was last year.

USA Today.com:
- As fuel prices rise, some speedometer needles fall.

Reuters:
- InterContinental Hotels Group, the world’s largest hotelier, wants to hire almost 50,000 people in the United States over the next three to five years.

Financial Times:
- EU trade chief hits at Democrat hopefuls. Peter Mandelson, European trade commissioner, has said the protectionist stances taken by the US presidential candidates risk taking the world trading system back by decades. Mr. Mandelson said: “It is irresponsible to be pretending to people you can erect new protection, new tariff barriers around your economy in this 21^st century global age and still succeed in sustaining peoples’ living standards and jobs. It is a mirage and they know it.”
- The US and Europe now have a united desire to see the dollar strengthen against the euro, senior officials told the Financial Times.
- The chairman and CEO of BlackRock(BLK), the US asset manager, has donated $10 million to one of the world’s leading business schools to foster better understanding between the academic and financial worlds in the wake of the credit squeeze.

The Guardian:
- Burma death toll could reach 100,000.

South China Morning Post:
- Hongkong & Shanghai Hotels Ltd., owner of the luxury Peninsula chain, expects business in Asia to be hurt by the global economic slowdown, citing Chairman Michael Kadoorie.

Shanghai Securities:
- China should watch for a possible large-scale exit of so-called “hot money,” which may impose “huge downward pressure” on the yuan, citing a researcher a the commerce industry. Capital outflows from China may be triggered by the collapse of the US subprime mortgage market and as overseas investors sell local assets after returns peak, citing Mei Xinyu, who works at the Research Institute of the Ministry of Commerce.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MCCC), target $11.
- Reiterated Buy on (GME), target $66.
- Reiterated Buy on (AMT), target $51.
- Reiterated Buy on (MFE), target $42.

Night Trading
Asian Indices are -1.0% to +.50% on average.
S&P 500 futures +.18%.
NASDAQ 100 futures +.24%.

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Earnings of Note
Company/EPS Estimate
- (FIG)/.14
- (ENER)/-.05
- (MIC)/.62
- (OMG)/1.95
- (PDX)/.68
- (DYN)/.04
- (NDAQ)/.49
- (AMSC)/-.11
- (CELG)/.34
- (CPKI)/.07
- (VRSN)/.20
- (SGMS)/.23
- (ATVI)/.05
- (AIG)/-.21
- (MIR)/.66
- (PCLN)/.59
- (GLBC)/-1.15
- (NVDA)/.38
- (EP)/.30
- (BRL)/.78
- (MYL)/.08
- (CVC)/.02

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for this week are estimated to fall to 370K versus 380K the prior week.
- Continuing Claims are estimated to rise to 3020K versus 3019K prior.

10:00 am EST
- Wholesale Inventories for March are estimated to rise .5% versus a 1.1% increase in February.

Other Potential Market Movers
- The ICSC chain store sales, (SYK) analyst meeting, (ASF) analyst day, (ASYT) analyst day, (TXN) analyst meeting, (MTSN) analyst meeting, Needham Internet Conference, DA Davidson Financial Services Conference, Bank of America Basics/Industrials Conference, Merrill Lynch Technology Conference and Merrill Lynch Global Industries Conference could also impact trading today.

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

Stocks Finish at Session Lows, Weighed Down by Financial, Airline, Homebuilding Shares

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In Play

Stocks Sharply Lower into Final Hour on Jump in Energy Prices, Shorting, Profit-taking

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Alternative Energy longs, Computer longs and Software longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is bearish as the advance/decline line is sharply lower, almost every sector is falling and volume is about average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 6.6% and remains above average at 19.4. The ISE Sentiment Index is a low at 114.0 and the total put/call is slightly above average at .95. Finally, the NYSE Arms has been running high most of the day and is currently 1.59. The rise in oil to another record is a large negative, especially considering the huge US inventory build this week, a sharp rise in the US dollar and Exxon said that it lifted its Force Majeure in Nigeria. The financials ETF(XLF) has a -.9 correlation with the United States Oil Fund(USO). I don’t expect the S&P 500 to break meaningfully above its 200-day moving-average until oil reverses lower. The Shanghai Composite fell 4.1% last night. It is now down 32% for the year and 42% from its October high of last year. On the positive side, the TED spread is falling another 6 basis points today to 107.0 basis points, which is the lowest since February 25^th and down from 204.0 on March 19^th, which is a significant positive. Two of my longs, (PWR) and (WMS), reported earnings that exceeded expectations. Both are up big today and I would be a buyer on any meaningful pullbacks. Nikkei futures indicate a -162 open in Japan and DAX futures indicate a -9 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, record energy prices and profit-taking.