BETWEEN THE HEDGES

- Initial Jobless Claims for this week fell to 357K versus estimates of 375K and 375K the prior week.

- Continuing Claims fell to 3093K versus estimates of 3110K and 3109K prior.

BOTTOM LINE: The number of Americans filing first-time jobless claims unexpectedly fell last week to the lowest level in more than a month, Bloomberg reported. The four-week moving average of jobless claims fell to 368,500 from 371,250 the prior week. During the mild 2001 recession, about 415,000 workers filed jobless claims on average per week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at a historically low 2.3%. ICSC Chain Store Sales for May rose 3.0% versus estimates of a 1.8% gain and a 3.5% increase in April. (BKE +34.7%), (BJ +13.4%), (JWN +10.9%), (PLCE +10.0%), (COST +7.0%), (ROST +7.0%), (ARO +6.0%), (CACH +5.0%), (MWRK +4.3%) and (WMT +3.9%) were retailers posting notable same-store-sales % gains in May. I expect jobless claims to continue to trend modestly lower through year-end.

Late-Night Headlines
Bloomberg:
- Unprecedented growth in electronic and worldwide trading may be overwhelming commodities markets and raising prices, said Walter Lukken, the acting head of the US commodity trading watchdog or CFTC. Senator Richard Lugar said the work the commission is doing has ``worldwide implications,'' adding that energy costs could ``cause a catastrophe in our own economy.'' The Indiana Republican questioned if the commission had the authority to ensure the stability of commodity markets. ``A lot of money is flowing into these markets, potentially creating a bubble,'' Lukken said. ``We don't have the regulatory tools needed to spot that sort of situation.'' The commission is drafting a proposal to require more detailed information from index traders and swaps dealers in the futures markets. It also may reclassify these traders so that it can gain more information about their activities.
- Antoin Rezko, an ex-fundraiser for Democratic presidential candidate Barack Obama, was found guilty in Chicago federal court for his role in a scheme to extract kickbacks in exchange for influencing awards of state contracts.
- Boston Properties(BXP) to Seek Higher Rents in GM Building.
- Offshore oil fields in Brazil’s so-call pre-salt region have a “high potential of production,” said Jose Sergio Gabrielli, CEO of Petrobras(PBR).
- Softbank Corp., Japan’s third-largest mobile-phone carrier, will introduce the iPhone in Japan this year to help maintain its lead in user addition over NTT DoCoMo Inc. and KDDI Corp.
- The US dollar traded near a two-week high against the euro after Fed Chairman Bernanke said an increase in inflation expectations is a “significant concern” for the central bank. ``The fundamental outlook is changing in favor of the dollar,'' said Win Thin, a New York-based currency strategist at Brown Brothers Harriman & Co., in an interview on Bloomberg Television. ``The U.S. economy is holding up much better than expected.''
- Lehman Brothers(LEH) isn’t under pressure from the Fed and SEC to boost capital.
- Asian governments are falling behind in their battle against record oil prices, risking public protests, higher interest rates and slower growth.

MarketWatch.com:
- Yahoo(YHOO) rebuts Icahn’s criticisms. Company says Microsoft(MSFT) not interested in merger, defends severance plan.
- Verizon(VZ) reportedly in talks to acquire Alltel. Purchase would cost around $27 billion, report says.

CNBC.com:
- Today’s Cars And Trucks Really Are Made Better.

Housing Wire:
- Hedge Fund Looks to Snap up Abandoned Land in California.

NY Times:
- Wal-Mart’s(WMT) Detractors Come In From the Cold. After waging an aggressive public relations campaign against Wal-Mart for three years, the company’s union-backed critics are lowering their pitchforks.
- Food is Gold, and Investors Pour Billions Into Farming. Huge investment funds have already poured hundreds of billions of dollars into booming financial markets for commodities like wheat, corn and soybeans. But a few big private investors are starting to make bolder and longer-term bets that the world’s need for food will greatly increase – by buying farmland, fertilizer, grain elevators and shipping equipment. One has bought several ethanol plants, Canadian farmland and enough storage space in the Midwest to hold millions of bushels of grain. By owning land and other parts of the agricultural business, these new investors are freed from rules aimed at curbing the number of speculative bets that they and other financial investors can make in commodity markets.

Forbes.com:
- Short-sellers take a lot of heat for allegedly doing bad things to stocks, and their defense always has been that they do exhaustive research and offer superior insight. There is evidence, however, that some are profiting from advance tips. Researchers at George Mason Univ. have detected a pattern of abnormally high short-selling in the three days immediately before a research downgrade is made public – four times the normal level of trading – and the trading isn’t linked to earnings or other news. The George Mason group concludes that investment banks tip trading clients about the upcoming downgrades, giving them a chance to put on bearish trades and profit from the inevitable stock decline.

MiamiHerald.com:
- Venezuela’s ruling party is pledging to push through reforms that would allow President Hugo Chavez to run for re-election indefinitely.

Newsweek:
- The iPhone ‘Secret’ How Apple(AAPL) has kept a lid on the latest version.

Cleantech Blog:
- Electric Cars for 2010. Millions will be driving full-featured freeway-speed four-door sedan electric vehicles. Look for a shift away from foreign oil to riding on local renewable energy.

AgricultureOnline:
- Is the grain bull market ending? By Ray Grabanski, President of Progressive Ag, a marketing and risk management firm for farmers. Pro Ag is getting more and more bearish as the 2008 season turns around to more normal planting progress and dramatically improving crop conditions. Its starting to look more and more likely that 2008 will be a average to above average crop yield potential, so the bull trend could come to an end this summer, and soon (the next 2-4 weeks???). If so, that would end a 20 month bull market that has been impressive to say the least. It might be time to advance sales significantly in grains. Overall, Pro Ag thinks the inflationary cycle in commodities may be 1-3 months from ending (even in crude oil), so its time to reverse the strategies now, selling product in advance and not buying inputs (the opposite of what worked the past 21 months). Could fertilizer prices DROP 30% in the coming 6 months? If they drop at all, fertilizer companies may not sell another stitch of fertilizer for another year as most farmers have already purchased the next year's supply. Beware! The trade winds appear to be changing! (very good article)

Energy Current:
-Ottawa-based biotechnology company and industrial enzyme producer Iogen Corp. plans to build Canada’s first commercial scale cellulosic ethanol plant in Saskatchewan. The cellulosic ethanol producer is backed by Royal Dutch Shell and Goldman Sachs(GS).

Reuters:
- Investment manager Loomis Sayles, one of the biggest and most widely followed US bond fund managers, has been buying Lehman Brothers(LEH) debt over the past several days and is not shy about transacting with the investment bank, its vice chairman said. Dan Fuss, vice chairman of Boston-based Loomis Sayles, said he considers Lehman common shares to be “dirt cheap.” Fuss is also buying corporate bonds of other investment banks, he said. “We have no hesitation whatsoever at all in dealing with Lehman,” Fuss said, adding: “They are a fine firm and financially strong.”

Financial Times:
- Many investors are continuing to bet heavily against Lehman Brothers(LEH), lifting the percentage of the bank’s shares sold short to a record level. David Einhorn, the high-profile principal of Greenlight Capital, said Lehman was his biggest short position. He has mounted a highly public campaign against Lehman.

TimesOnline:
- Kuwait eyes US banks as Lehman Brothers seeks cash. Kuwait Investment Authority is preparing to make further investments in American financial institutions such as Merrill Lynch and Citigroup to profit from fears that banks are still short of cash.

Les Echos:
- France may expand a reward system to encourage consumers to use fuel-efficient cars to 20 other products by 2009, citing Environment Minister Jean-Louis Borloo. France will announce steps that will also increase production from renewable energy sources over the next 15 years. A solar energy plan is being completed and zones for wind farms at sea are also in the works.

Late Buy/Sell Recommendations
Citigroup:
- (NUAN) placed $100M of primary shares overnight thus partially replenishing its cash balance after using net $200M for the eScription acquisition. We believe NUAN was opportunistic in raising cash and the core business trends remain generally healthy. At today’s close of $18.80 NUAN trades at a NTM P/E of 21x vs. 3-year EPS CAGR of 25%. Any pressure in the stock tomorrow would make valuation more attractive and present an entry opportunity vs. our $24 target.

Morgan Stanley:
- Reiterated Overweight on (NVS), target $58.
- Accelerating results and improving profitability are indicative of a healthy carrier spending environment of which (ADCT), as usual, is an early beneficiary. Higher growth and profitability estimates suggest risk-reward remains skewed to the upside, and we think continued solid execution could push shares towards our new base case valuation of around $20, or 20% upside from where the stock was trading in the aftermarket.

Night Trading
Asian Indices are -1.25% to -.25% on average.
S&P 500 futures +.01%.
NASDAQ 100 futures -.05%.

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Earnings of Note
Company/EPS Estimate
- (SFD)/.06
- (DPS)/.41
- (DLM)/.26
- (MTN)/2.36
- (CIEN)/.36
- (JTX)/2.05
- (BF/B)/.71
- (NSM)/.27
- (COO)/.49
- (FMCN)/.33
- (TTWO)/.95
- (ZQK)/.00
- (IART)/.50

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for this week are estimated to rise to 375K versus 372K the prior week.
- Continuing Claims are estimated to rise to 3110K versus 3104K prior.

Other Potential Market Movers
- The ICSC Chain Store Sales report, 1Q Mortgage Delinquencies report, weekly EIA natural gas inventory report, (CSC) investor meeting, (JNJ) Medical Business Review, (KLAC) analyst day, (HD) analyst conference, Jeffries Global Clean Tech Conference, Sandler O’Neil Global Exchange Conference, BMO Healthcare Staffing Forum, Stephens Investment Conference, CSFB Engineering Services Conference, Keefe Bruyette Woods Financial Services Conference, Merrill Ag Chemicals Conference and Citigroup Power/Gas/Utilities Conference could also impact trading today.

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

BETWEEN THE HEDGES

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Thursday, June 05, 2008

Bear Radar

Initial Jobless Claims Drop, Retail Sales Exceed Estimates

Bull Radar

Links of Interest

Wednesday, June 04, 2008

Thursday Watch

Stocks Finish Mostly Higher, Boosted by Technology, Airline, Biotech, Medical, Restaurant and Utility Shares