BETWEEN THE HEDGES

Wednesday, June 25, 2008

Thursday Watch

Posted by Gary .....at 5:13 PM

Late-Night Headlines
Bloomberg:
- Oracle Corp.(ORCL) posted a 27% increase in fourth-quarter profit and overtook IBM as the second-largest software maker.
- Nike Inc.(NKE) fell as much as 6% in late NY trading after the world’s largest athletic-shoe maker spent more to market new sneakers than analysts estimated.
- Research In Motion(RIMM), the maker of the BlackBerry e-mail phone, missed analysts’ profit estimates for the first time in five quarters and gave a disappointing forecast amid higher spending to take on Apple’s(AAPL) new iPhone.
- Bed Bath & Beyond(BBBY), the largest US home-furnishings retailer, climbed 8.3% in trading following the close of US markets after reporting profit that fell less than analyst estimated because of higher sales.
- The House voted to boost taxes for executives of investment funds and many other kinds of partnerships to generate revenue to match money lost by preventing a $61.5 billion tax increase for 25 million American households this year. The House voted 233-189 to send the bill to the Senate, where Republicans object to a provision that would more than double tax rates for certain partners of buyout, real estate, hedge fund, venture capital, and oil and gas firms.
- Fischer Francis Trees & Watts plans to buy more US commercial mortgage-backed securities relative to government bonds in coming months, Tokyo-based fund manager Naruki Nakamura said in an interview.
- India’s central bank will likely add to its biggest interest-rate increase since 2000 as inflation quickens at the fastest pace in 13 years, Merrill Lynch(MER) forecast, citing record-high swap levels. Two-year swap rates surged 1.3 percentage points in the week through yesterday to a record 9.85%.

Wall Street Journal:
- Anheuser-Busch Cos.(BUD) is prepared to reject InBev NV’s $46.3 billion takeover offer, possibly this week, paving the way for a possible higher bid for the maker of Budweiser.

NY Times:
- New York’s High Court Sides With Grasso. The court affirmed a ruling that dropped claims against the former chairman of the NYSE.

LA Times:
- You can fill’er up with hydrogen. A West LA station becomes the first in California to be able to dispense the fuel in addition to gasoline.

CNNMoney.com:
- McCain’s economic gurus. From ex-Senators to CEOs, McCain has tapped a wide range of advisers to bring him up to speed on the economy.

Portfolio.com:
- Senate Ethics Committee may not conclude its probe into VIP mortgages for months. A key issue: What constitutes a “gift”?

Reuters:
- More mergers seen in US defense space.
- Google(GOOG) names Bell Canada exec as its new CFO.

Financial Times:
- Barack Obama has again called on Tesco, the UK supermarket group, to let unions represent workers at its new US chain. The move comes as the Democratic candidate seeks to reinforce he labor support ahead of November’s presidential election.
- The world’s biggest maker of consumer goods, Procter & Gamble(PG) has urged Barack Obama and John McCain to ease up on the gloomy economic rhetoric.

Daily Telegraph:
- Plans for a massive expansion of a wind energy program in the UK are to be unveiled by the government. They will include the building of 7,000 wind turbines both in the countryside and around the coast.

Late Buy/Sell Recommendations
Citigroup:
- Rated (ALTH) Buy, target $11.
- Reiterated Buy on (SLGP), raised target to $32.
- Reiterated Buy on (WW), target $64.

Morgan Stanley:
- Reiterated Overweight on (MON), target $170.

RBC:
- Rated (BRCM) Outperform, target $36.

Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 futures -.20%.
NASDAQ 100 futures -.35%.

Morning Preview
US AM Market Call
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Today in IBD
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Earnings of Note
Company/EPS Estimate
- (MKC)/.39
- (LEN)/-.68
- (WOR)/.45
- (CAG)/.36
- (DFS)/.37
- (PALM)/.18
- (CBK)/.26
- (MU)/-.30
- (ACN)/.69
- (PAYX)/.38

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Final 1Q GDP is estimated at 1.0% versus a .9% prior estimate.
- Final 1Q Personal Consumption is estimated at 1.0% versus a 1.0% prior estimate.
- Final 1Q GDP Price Index is estimated at 2.6% versus a 2.6% prior estimate.
- Final Core PCE is estimated to at 2.1% versus a 2.1% prior estimate.
- Initial Jobless Claims for this week are estimated to fall to 375K versus 381K the prior week.
- Continuing Claims are estimated to rise to 3105K versus 3060K prior.

10:00 am EST
- Existing Home Sales for May are estimated to rise to 4.95M versus 4.89M in April.

Other Potential Market Movers
- The weekly EIA natural gas inventory report, (GT) investor meeting, (XLNX) analyst meeting, (BRCD) technology day, (AUXL) analyst call, Jeffries Healthcare Conference, Wachovia Nantucket Equity Conference and UBS Global Insurance Conference could also impact trading today.

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

Stocks Finish Higher, Boosted by Restaurant, Retail, Homebuilding, Technology, Steel Shares

Posted by Gary .....at 4:03 PM

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In Play

Stocks Higher into Final Hour on Lower Energy Prices, Short-Covering, Bargain-Hunting

Posted by Gary .....at 3:51 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Software longs, Internet longs, Computer longs and Gaming longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is slightly below average. Today’s overall market action is mildly bullish. The VIX is falling 6.3% and remains above average at 21.03. The ISE Sentiment Index is above average at 176.0 and the total put/call is below average at 1.02. Finally, the NYSE Arms has been running below average most of the day and is currently .84. The Euro Financial Sector Credit Default Swap Index is plunging 16.2% today to 76.0 basis points. This is a large positive. This index is still up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is rising 2.78% today to 129.38. The TED spread is rising 3.0% to 1.00. The fact that oil is falling over $2/bbl. today despite mixed inventory data and a falling US dollar is a positive. I expect (RIMM) to exceed estimates after the close and give conservative guidance, which could pressure the shares given how much they have risen of late. I expect any related weakness in (AAPL) shares to be mild and temporary in nature. Nikkei futures indicate an +236 open in Japan and DAX futures indicate an +48 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on lower energy prices, short-covering and bargain-hunting.

Today's Headlines

Posted by Gary .....at 2:56 PM

Bloomberg:
- The cost to protect US corporate bonds from default fell for the first time in six days amid speculation the Fed may signal today it’s in no hurry to raise interest rates.
- Crude oil is falling $3/bbl. after a US government report showed that inventories rose for the first time in six weeks. Gasoline demand has averaged 9.28 million barrels a day over the last four weeks, down by 2.1% form the same period last year. Demand for distillate fuel averaged 4.06 million barrels, down 1.1% from year ago levels. “Prices shrugged off weakening demand but it has probably gotten to a point where it can be ignored no longer,” said Tim Evans, an energy analyst for Citi Futures Perspective. The United Arab Emirates, OPEC's third-biggest oil producer, is ready to boost supplies to the market if needed, Oil Minister Mohamed al-Hamli said today.
- Lead, the worst performer on the London Metal Exchange this year, fell for a third consecutive day on speculation the restart of the Magellan mine in Australia will add to bulging stockpiles.
- The Federal Reserve left its benchmark interest rate at 2%, ending the mo0st aggressive series of rate cuts in two decades.

Wall Street Journal:
- Hedge-Fund Honcho Paulson and the Slings & Arrows of a Canadian Judge. Justice Romaine didn’t buy Paulson’s testimony, calling him a “not credible” witness and implying that he was essentially trying to greenmail the company. His valuation methodology was “unpersuasive in someone of his credentials and level of financial sophistication.” His selective judgment of risk in an oil-sands company was “self-serving.” And as a minority shareholder, Paulson’s “limited and skewed interpretation” of Total’s intention to buy the whole company was “self-serving and patently erroneous.”

NY Times:
- In Overhaul, Disney.com Seeks a Path to More Fun.
- From the Department of Damned-With-Faint-Praise, a group going by the regal-sounding name of the Presidential Memorial Commission of San Francisco is planning to ask voters here to change the name of a prize-winning water treatment plant on the shoreline to the George W. Bush Sewage Plant.

CNBC.com:
- European Governing Council member Christian Noyer said there is "no second wave" in the financial crisis, arguing that additional losses announced by banks are "the mechanical result of market developments." "We are in a normal cycle of risk provision, without the danger this time of contamination of other areas of bank credit," he said in an interview to appear in Wednesday afternoon's edition of Le Monde.

IEA:
- Oil prices will fall to $70 a barrel by 2015 as new production begins in countries such as Azerbaijan, Canada, Brazil and Kazakhstan, the US Energy Dept. said.

LA Times:
- Chrysler LLC will make Internet access an option in its 2009 models, the first car manufacturer to do so.

Frankfurter Allgemeine Zeitung:
- Intel Corp.(INTC) said the market for low-cost notebook PCs was “red hot,” creating demand for its Atom chip, citing Chief Technology Officer Justin Rattner. Demand for the Atom chip was “enormous,” he said. Intel will focus more on consumer electronics as buyers of set-top boxes and televisions want their gadgets to be Internet-enabled. The company aims to produce chips using 32 nanometer technology by 2009.

Bear Radar

Posted by Gary .....at 1:32 PM

Style Underperformer:

Mid-cap Growth +.25%

Sector Underperformers:

Coalirlind (-4.34%), Oil Service (-1.68%) and Energy (-1.41%)

Stocks Falling on Unusual Volume:

BA, ARJ, APOG, ROYL, SONC, JRCC, CLNE, APOL, GMXR, STAR, BEAV, AM, ROK and MON

Stocks With Unusual Put Option Activity:

1) MAR 2) LEN 3) PM 4) DRI 5) RMBS