Monday Watch

Weekend Headlines
Bloomberg:

- The Standard & Poor’s 500 Index gained for a third week, pushing it toward the biggest monthly advance since 1991, after a government plan to rid banks of toxic assets and improving economic reports ignited a rally that sent the U.S. stocks benchmark into a bull market.

- U.S. Treasury Secretary Timothy Geithner said some financial institutions will need substantial government aid, while warning against any attempt to tax investors who join a federal program to buy tainted assets from banks. “Some banks are going to need some large amounts of assistance,” Geithner said today on the ABC News program “This Week.” The terms of a $500 billion public-private program to aid banks “cannot change” for investors or they’ll lose confidence in the plan, he said on NBC’s “Meet the Press.”

- Bank executives indicated they are willing to hold onto U.S. government aid to help stabilize the financial system and pull the economy out of recession. “No one has an interest in having capital returned prematurely at the expense of banks’ ability to participate in this stimulus,” Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., said in an interview with Bloomberg Television. Officials at his firm have discussed returning the $10 billion it received from the Treasury’s Troubled Asset Relief Program.

- General Motors Corp.(GM) Chief Executive Officer Rick Wagoner will step down after more than eight years running the largest U.S. automaker, people familiar with the situation said. The Obama administration asked Wagoner, 56, to leave the company and he agreed, an administration official said. Wagoner said March 19 that he didn’t plan to resign. The likely replacement, unless the government hires from outside the company, would be Chief Operating Officer Fritz Henderson, said John Casesa, managing partner at New York-based consulting firm Casesa Shapiro Group.

- Federal Reserve Chairman Ben S. Bernanke’s plan to buy $300 billion of Treasuries is driving the world’s biggest bond investors away from government debt and may already be helping him lower consumer borrowing rates. Mortgage and corporate securities are outperforming Treasuries this quarter for the first time since the period ended in June, before the collapse of Lehman Brothers Holdings Inc. drove investors to the safest debt and froze credit markets, Merrill Lynch & Co. index data show. A March 23 Ried, Thunberg & Co. survey said fund managers overseeing $1.19 trillion cut their government securities holdings to the least this year while they increased mortgage assets.

- OPEC members Kuwait and Qatar are comfortable with current oil prices of about $50 a barrel as the global recession saps energy demand. “Of course, yes,” Kuwait’s Oil Minister Sheikh Ahmed al- Abdullah al-Sabah told reporters today when asked if he was happy with current crude prices, which rose above $50 a barrel last week. “It goes with the economic situation.”

- Crude oil fell for a second day in New York on speculation high global stockpiles will persist as the world economy remains in recession. Global demand remains weak and oil is unlikely to reach $60 this year, Qatar’s Oil Minister Abdullah Bin Hamad Al-Attiyah said yesterday. Recent oil price gains were driven by the dollar, not improved supply and demand, Al-Attiyah said in an interview in Kuwait yesterday. “The international economy is still very weak,” he said. “The crisis has not reached the bottom so we have to be very careful.” Current prices are “reasonably fair” and there is no indication the market is expecting another round of output cuts by the Organization of Petroleum Exporting Countries, Commodity Warrants’ Hassall said.

- Japanese makers of cars and electronics slashed production a fifth month in February, the longest losing streak since 2001, adding to evidence that the recession is deepening. Factory output fell 9.4 percent from January, when it plummeted a record 10.2 percent, the Trade Ministry said today in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for a 9.1 percent drop.

- Goldman Sachs Group Inc.’s(GS) top 10 executives received $49.6 million from their investments in hedge funds and private equity funds during 2008, more than most of them earned in compensation after agreeing to forgo bonuses. Chief Executive Officer Lloyd Blankfein’s $1.1 million in total compensation was dwarfed by the $11.3 million he received in profits and other income from his fund investments, the New York-based company’s proxy filing showed. Co-President Gary Cohn’s $3.7 million in pay contrasts with $7.4 million in fund income, the filing showed. While the payouts pale in comparison with Blankfein’s record-setting $67.9 million bonus for 2007, they illustrate that top executives had other sources of income at the sixth- biggest U.S. bank by assets. Two of the executives, Co-President Jon Winkelried and Co-General Counsel Gregory Palm, sold fund stakes back to the firm to raise money in the last four months of the year rather than sell stock in a rocky market.

- The Obama administration plans to give General Motors Corp.(GM) enough government aid to restructure over the next 60 days, while Chrysler LLC is being told it must complete a deal with Italian automaker Fiat SpA, according to a government official.

- The Monetary Authority of Singapore may devalue the city’s currency and allow it to drop 4 percent against the U.S. dollar by June 30 to aid exporters and lift the economy out of the worst recession since independence in 1965.

- Bank of America Corp.(BAC) plans to increase some investment bankers’ salaries by as much as 70 percent following the takeover earlier this year of Merrill Lynch & Co., people familiar with the proposal said.

- Boston Scientific Corp.’s(BSX) heart stent eased patients’ pain and physical limitations at less cost than bypass surgery, a finding that may increase use of the devices as politicians look to cut U.S. health-care spending.

- A thumb-sized screen implanted in the heart to stop blood clots from triggering strokes may offer a safer alternative to the blood thinner warfarin for six million people with irregular heartbeats, researchers said. The experimental device, made by closely held Atritech Inc. of Plymouth, Minnesota, cut the risk of stroke and heart failure by a third compared with warfarin, according to a study presented at a medical conference in Florida today.

- Barclays Plc won’t seek government asset guarantees after regulators said the U.K.’s third-biggest bank doesn’t need capital and as the lender plans to sell its iShares unit, said a person familiar with the situation. London-based Barclays will inform the Treasury of its decision by tomorrow’s deadline, said the person, who declined to be identified because the discussions are confidential. The bank’s board hasn’t made a final decision, the person said.

Wall Street Journal:

- U.S. officials preparing for the Group of 20 economic summit on Thursday in London are playing down fiscal-stimulus targets and focusing on objectives such as new rules for tax havens and coordination of financial regulation. Multiple issues will face President Barack Obama on his first trip away from North America: seeking more civil support from European nations for his "surge" in Afghanistan and Pakistan; confronting Iranian nuclear ambitions; maintaining Chinese support for buying U.S. government debt; and easing tensions with Russia over energy and missile defense. Meanwhile, tens of thousands of people marched in capital cities across Europe over the weekend to protest the economic crisis and urge world leaders to act on poverty, jobs and climate change at the summit. On Saturday, protesters marched through London, waving banners and chanting, "Tax the rich, make them pay." European opposition to additional spending to stimulate economies has grown sharper over the past weeks. Obama administration officials have opted to back off the public spat.

- Welcome, Businessmen, to Government Oversight. Just wait until bureaucrats get their hands on your expense accounts.

- The regulator of Fannie Mae and Freddie Mac is considering giving the government-backed mortgage companies another role: helping to finance small mortgage banks.

- Consumer-lending activity has increased in numerous midsize cities in the U.S., a sign they are riding out the recession better than big cities and rural towns, an analysis of credit data shows.

- Some 200 prominent, moderate followers of anti-American Shiite cleric Moqtada al-Sadr have broken from his movement, forming a splinter group and further weakening his hold on what was once one of Iraq's most influential factions.

- VF Corp.(VFC), the largest apparel company in the world by revenue, is still committed to expanding its retail network and seeking to snap up brands in the "contemporary" apparel space, said Chief Executive Eric Wiseman in an interview. While many of its rivals are retrenching in the economic downturn, VF plans to open 70 stores this year–for a total of 759 stores worldwide–and may add more if conditions improve, Mr. Wiseman said.

- After struggling for years, Boeing Co.'s(BA) commercial-satellite manufacturing business appears poised for a lift by snaring what is likely to be a multisatellite order valued at more than $400 million from Intelsat Ltd., according to people familiar with the matter.

- Defense Secretary Robert Gates on Sunday said only economic sanctions, and not diplomacy, hold any promise of getting North Korea and Iran to back off their nuclear aspirations. The Obama administration has in particular sought to use overtures of openness and dialogue to persuade Iran off the nuclear course. But Mr. Gates, speaking on "Fox News Sunday," said "the opportunity for success is probably more in economic sanctions" in both Iran's and North Korea's cases "than it is in diplomacy. … What gets them to the table is economic sanctions."

MarketWatch.com:

- The Ford(F) Fiesta fell one vote shy of being named Europe's Car of the Year. If it is that successful in the U.S. next year, Ford's future will indeed be a Fiesta.

IBD:
- You won't find the crew at Panera Bread (PNRA) digging up old recipes to tantalize customers.

NY Times:

- Dylan Ratigan, the longtime host of the CNBC program “Fast Money,” abruptly left the cable channel and the show on Friday after a discussion with the network’s general manager, Mark Hoffman. Several CNBC executives suggested Friday that Mr. Ratigan, while talented, was easy to anger and difficult to work with and that he had told people that at some point he envisioned himself heading an entertainment show like David Letterman’s. Mr. Ratigan dismissed the comments about his personality as the kind of thing that always gets leaked when someone leaves a television job. As for wanting to emulate Mr. Letterman, he said, “That’s an idea from two years ago.” He said he was now dedicated to covering the economy, “the story that is affecting every American in every setting.”

- Gov. David A. Paterson and leaders of the Legislature have reached a deal to raise taxes on New York’s highest earners in order to close the state’s yawning budget deficit, lawmakers and officials involved in the talks said on Saturday. The new plan, which would expire after three years, would represent the largest state income tax increase in recent history, significantly larger than the surcharges imposed from 2003 to 2005, when the state last faced a major recession. The plan would raise $4 billion a year by creating two new tax brackets, the highest one affecting those who earn $500,000 or more. If approved by rank-and-file lawmakers in the Assembly and State Senate, the tax increases would be a major victory for unions and liberal advocacy groups and a signal of the new balance of power in Albany, where Democrats won control of both houses of the Legislature and the governor’s office in last year’s election. Although the proposed tax has been called a “millionaires’ tax,” it would affect those with incomes starting at $300,000, who would be taxed at a rate of 7.85 percent. The highest bracket would carry a tax rate of 8.97 percent — the same as New Jersey’s current highest rate.

- When Facebook signed up its 100 millionth member last August, its employees spread out in two parks in Palo Alto, Calif., for a huge barbecue. Sometime this week, this five-year-old start-up, born in a dorm room at Harvard, expects to register its 200 millionth user.

- Some Online Shows Could Go Subscription-Only.

Washington Post:
- It is high time Americans heard an argument that might turn a vague national uneasiness into a vivid awareness of something going very wrong. The argument is that the Emergency Economic Stabilization Act of 2008 (EESA) is unconstitutional. By enacting it, Congress did not in any meaningful sense make a law. Rather, it made executive branch officials into legislators. Congress said to the executive branch, in effect: "Here is $700 billion. You say you will use some of it to buy up banks' 'troubled assets.' But if you prefer to do anything else with the money -- even, say, subsidize automobile companies -- well, whatever."

CNNMoney.com:

- The startup Tuck co-founded with entrepreneur Tim Enwall, called Tendril, has spent four years and $20 million developing a computerized system that helps consumers track their electricity use.

Kansas City Star:

- Obama’s big government express losing steam. President Obama is a man in a hurry. He knows that time is not on his side. He will never be as powerful as he is now, and his opposition — the leaderless GOP — will never be as weak. So he pushes hard to win acceptance of as much of his agenda as possible, but the inevitable erosion has already begun. Last month, his approval rating was in the mid-60s. Now it’s in the high 50s. Last week a Zogby poll had him at 50 percent.

San Francisco Chronicle:

- Amid growing community concern over the future of The Chronicle, San Francisco financier Warren Hellman gathered a group of local powerbrokers this week, including Mayor Gavin Newsom, to discuss the idea of restructuring the newspaper as a primarily philanthropic venture. Hearst Corp., the private New York company that owns the publication, said late last month that it would be forced to sell or close the 144-year-old paper if it couldn't quickly achieve significant savings.

Pension & Investments:

- CalPERS today announced that it intends to restructure terms, information flow and kinds of investment vehicles used with the hedge fund managers in its $5.9 billion Risk Managed Absolute Returns Strategies program. The $167.3 billion California Public Employees’ Retirement System, Sacramento, said it will focus on creating separately managed accounts with hedge funds or customized investment vehicles to replace current commingled fund arrangements to have more control over the assets. The fund also will insist on more timely and deeper transparency about investment portfolios from its hedge fund managers, according to the release. CalPERS also intends to reduce hedge fund fees and change investment terms as part of the portfolio makeover. CalPERS maintained in a news release that “performance fees should be based on long-term performance,” rather than the typical hedge fund’s annual 2% management fee and 20% performance fee model. The fund also said that “mechanisms such as delayed realizations and clawbacks can better align long-term interests of managers and investors. Management fees should better reflect the cost associated with generating performance and not be an invitation for asset-gathering,” the release said.

AP:

- President Barack Obama said that violence from Mexico’s fight against drug cartels poses a threat to US border communities. Obama said the US needs to reduce its demand for drugs, and limit the flow of guns and money with Mexico, citing Obama.

Reuters:

- Latin America faces probably its "worst shock" ever in the global credit crisis, but is better positioned to recover than in past economic meltdowns because of improved fiscal preparation, a top IMF official said on Saturday. The region will slump into negative growth this year, but its recovery depends heavily on industrialized nations unclogging capital, fixing their banks and adequately maintaining stimulus for growth, said Nicolas Eyzaguirre, director for the IMF's Western Hemisphere Department.

- Skype will start service on Apple’s(AAPL) iPhone on Tuesday and on Research in Motion’s(RIMM) Blackberry in May, citing Skype COO Scott Durchslag.

- The United States plans to deploy two missile-interceptor ships from South Korea on Monday, a military spokesman said, days ahead of a North Korean rocket launch seen by many as a test of its longest-range missile. The launch presents the first significant challenge by the prickly state to U.S. President Barack Obama, who makes his first major international appearance this week at the G-20 summit where he will discuss Pyongyang's intentions with global leaders including Chinese President Hu Jintao. The United States, however, has no plans to shoot down the rocket in a test seen by Washington as part of Pyongyang's goal to eventually develop an intercontinental ballistic missile, U.S. Defense Secretary Robert Gates said on Sunday.

Financial Times:

- General Electric(GE) has started to see the first “glimmers of hope” in the world economy, according to a senior executive at the US conglomerate. Nani Beccalli, who as chief executive of GE International is in charge of all its business outside the US, said he saw several encouraging bits of economic data from round the world. These included “signs of life” in the US and European retail sectors and improving profits among European banks as foreign competitors leave the market. Mr Beccalli said: “The first glimmers of hope are there. This is the inversion of trends, which for a long period have been going down. The glimmers weren’t there two months ago”. His comments are among the first from a bellwether company about signs of stabilization in the economy.

- Citigroup(C) is inviting bids for Nikko Cordial, Japan’s third-largest brokerage, in a move that could raise more than $5bn for the troubled US bank and undo one of its most ambitious overseas forays. People close to the situation said that, after holding informal talks with potential bidders, including Japan’s three largest banks, Citi had begun soliciting formal offers for Nikko Cordial and wanted to select a buyer as early as the end of April.

Telegraph:

- As the G20 prepares to regulate the hedge fund industry, London's leading managers have decided to fight back. In a rare show of unity 12 top hedge funds came to The Sunday Telegraph to argue why they must survive. For many of the "anti-capitalist warriors" descending on the G20 summit in London, the excesses of the boom years are epitomized by hedge fund managers. Aggressive, arrogant and seemingly all-powerful, these secretive financiers became known for both for their sporadic attacks on public companies and an opulence that surpassed toffs, bankers and even footballers' wives. Some London-based hedge funds have threatened to move abroad should regulation become too strict and taxes too high, with Switzerland among the options, citing 12 fund managers.

Sonntag:

- UBS AG may cut 8,000 jobs and “write down billions.” UBS may write down about 2 billion in credit redemptions because risk premiums have increased and a “single-digit billion amount” in the “area of credit linked obligations,” citing “insiders.” The bank may announce the writedowns on April 1. The job cuts may be announced “soon” and will also include private banking employees.

Folha de S. Paulo:
- Brazil’s central bank will offer loans in US dollars at auctions next week, citing bank president Henrique Meirelles.

- A third of Brazil’s business leaders plan to reduce their investments in the second half compared to the year-earlier period, citing a study by Serasa Experian. In an earlier study, 14% of those surveyed said they would reduce investments in the first half.

China Securities Journal:
- China’s new loans in March were about 800 billion yuan, citing bankers. New loans in January were 1.62 trillion yuan and were 1.07 trillion yuan in February.

Australian Financial Review:

- Australian Prime Minister Kevin Rudd’s government is preparing its federal budget on the assumption the economy will contract by at least 1% next year. Falling revenue also means the deficit will be larger than the government’s February forecast of A$22.5 billion in fiscal 2009 and A$35.5 billion in the 12 months through June 2010. Figures collected by the Treasury department show business investment is plummeting, the report said.

Sankei:

- North Korea is preparing to launch a short- to medium-range missile in addition to a long-range one the government has said it will launch next month, citing Japanese government officials.

Khaleej Times:

- Dubai - The UAE economy will shrink by 1.7 per cent this year, with an expected steep decline in population leading to more pain for the property sector, a report by EFG Hermes said on Saturday. The outlook contrasts sharply with the 7.4 per cent growth that the UAE achieved in 2008 period. EFG Hermes had originally forecast in January that the UAE economy would contract by only 0.04 per cent. As global economic conditions worsen, droves of expatriates, who make up about 80 per cent of the UAE’s population, are being sent home as companies downsize or close shop altogether. EFG-Hermes, the largest investment bank based in the Middle East, said it estimates the country’s population to fall by 5.5 per cent this year, led by a 17 per cent drop in the population of Dubai alone. The bank predicts that the UAE’s population will shrink to 1.49 million this year from 1.79 million in 2008. It said there will be a sharp 30 per cent contraction in the number of employees in the construction, real estate and financial services sectors. The outflow of non-construction workers, which have a far greater impact on the economy, will curb private consumption by 13 per cent this year, EFG-Hermes said. As a result, the bank expects a price deflation of 2 per cent this year, with housing and rental prices sliding further. Tougher days lie ahead for the property industry, with rents seen falling by as much as 50 per cent in Dubai compared to last year’s increase of 21 per cent. EFG-Hermes forecasts that the downward spiral in Dubai property prices will also continue, with prices in 2009 sliding by as much as 60 per cent from their peak levels last year.

Weekend Recommendations
Barron's:
- Made positive comments on (RIG), (MA), (INTC), (AMZN), (V) and (DO).

- Made negative comments on (FSLR) and (ENER).

Citigroup:

- Reiterated Buy on (GILD), target $56.

- Reiterated Buy on (INTC), target $18.

Night Trading
Asian indices are -2.0% to -1.0% on avg.
S&P 500 futures -1.10%.
NASDAQ 100 futures -1.11%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
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WSJ Intl Markets Performance
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Today in IBD
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Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/Estimate
- (CALM)/1.70

Upcoming Splits

- None of note

Economic Releases

- None of note

Other Potential Market Movers
- The Dallas Fed Manufacturing Index and the Platts Wind Power Development 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 stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for stocks in focus for Monday by MarketWatch.

There are a number of economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Dallas Fed Manufacturing Activity

Tues. – S&P/CaseShiller Home Price Index, Chicago Purchasing Manager, Consumer Confidence, NAPM-Milwaukee, weekly retail sales reports

Wed. – Weekly MBA mortgage applications report, weekly EIA energy inventory data, Challenger Job Cuts, ADP Employment Change, ISM Manufacturing, Pending Home Sales, ISM Prices Paid, Construction Spending, Total Vehicle Sales

Thur. – Initial Jobless Claims, Factory Orders

Fri. – Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, ISM Non-Manufacturing

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Cal-Maine Foods(CALM)

Tues. – Lennar Corp.(LEN), Steelcase(SCS), Apollo Group(APOL)

Wed. – Worthington Industries(WOR)

Thur. – Carmax Inc.(KMX), Monsanto(MON), Micro Technology(MU), Global Payments(GPN), Allscripts(MDRX), Acuity Brands(AYI), Ruby Tuesday(RT)

Fri. – Schnitzer Steel(SCHN)

Other events that have market-moving potential this week include:

Mon. – Platts Wind Power Development Conference

Tue. – The Fed’s Stern speaking, Fed’s Plosser, (CPN) analyst meeting, (KMT) analyst meeting

Wed. – The Fed’s Pianalto speaking, Citi Biotech Day, (NOVL) investor lunch

Thur. – The (NYX) shareholders meeting, (ADSK) investor day, (KBH) shareholders meeting

Fri. – Bernanke speaking at the Richmond Fed’s Credit Markets Symposium, (GAS) analyst meeting

BOTTOM LINE: I expect US stocks to finish the week mixed as less credit market angst, declining economic fear, lower energy prices and diminishing financial sector pessimism offset more shorting and profit-taking. My trading indicators are giving bullish signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 815.94 +6.17%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 815.94 +6.17%
DJIA 7,776.18 +6.84%
NASDAQ 1,545.20 +6.03%
Russell 2000 429.00 +7.22%
Wilshire 5000 8,220.66 +6.22%
Russell 1000 Growth 360.45 +5.50%
Russell 1000 Value 412.86 +7.04%
Morgan Stanley Consumer 503.06 +4.28%
Morgan Stanley Cyclical 401.03 +12.92%
Morgan Stanley Technology 369.43 +4.02%
Transports 2,777.95 +10.37%
Utilities 331.27 +1.19%
MSCI Emerging Markets 25.66 +7.22%

Sentiment/Internals
NYSE Cumulative A/D Line 17,609 +19.15%
Bloomberg New Highs-Lows Index -187 +7.43%
Bloomberg Crude Oil % Bulls 30.0 -16.67%
CFTC Oil Large Speculative Longs 192,871 -1.57%
Total Put/Call .90 +2.27%
OEX Put/Call .86 -25.86%
ISE Sentiment 131.0 +9.17%
NYSE Arms 1.92 +53.60%
Volatility(VIX) 41.04 -10.57%
G7 Currency Volatility (VXY) 17.35 -2.47%
Smart Money Flow Index 7,465.76 +3.05%
AAII % Bulls 39.13 -13.16%
AAII % Bears 42.39 +10.77%

Futures Spot Prices
Crude Oil 52.09 +.48%
Reformulated Gasoline 148.25 +1.99%
Natural Gas 3.76 -12.98%
Heating Oil 142.85 +3.46%
Gold 926.70 -2.98%
Base Metals 117.55 -1.03%
Copper 183.0 +1.69%
Agriculture 284.05 -4.71%

Economy
10-year US Treasury Yield 2.76% +13 basis points
10-year TIPS Spread 1.43% +19 basis points
TED Spread 1.09 +7 basis points
N. Amer. Investment Grade Credit Default Swap Index 181.48 -8.57%
Emerging Markets Credit Default Swap Index 605.10 -19.51%
Citi US Economic Surprise Index -7.0 +69.96%
Fed Fund Futures imply 96.0% chance of no change, 4.0% chance of 25 basis point cut on 4/29
Iraqi 2028 Govt Bonds 50.50 +.87%
4-Wk MA of Jobless Claims 649,00 -.2%
Average 30-year Mortgage Rate 4.85% -13 basis points
Weekly Mortgage Applications 1,159.40 +32.22%
Weekly Retail Sales -1.3%
Nationwide Gas $2.03/gallon +.09/gallon
US Heating Demand Next 7 Days 5.0% below normal
ECRI Weekly Leading Economic Index 106.30 +.47%
US Dollar Index 85.11 +1.51%
Baltic Dry Index 1,741 -3.82%
CRB Index 222.26 -1.69%

Best Performing Style
Small-cap Growth +7.50%

Worst Performing Style
Large-cap Growth +5.50%

Leading Sectors
Alternative Energy +19.62%
Homebuilding +19.55%
Disk Drives +13.19%
Road & Rail +12.36%
Banks +11.98%

Lagging Sectors
Oil Service +1.61%
Utilities +1.19%
Tobacco -.57%
Gold -.73%
Coal -1.74%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Lower, Weighed Down by REIT, Hospital, Computer Service and Commodity Shares

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In Play

Stocks Lower into Final Hour on Profit-taking, More Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Financial longs. I added (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, almost every sector is declining and volume is about average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 1.29% and is very high at 40.88. The ISE Sentiment Index is below average at 125.0 and the total put/call is slightly above average at .88. Finally, the NYSE Arms has been running high most of the day, hitting 7.89 at its intraday peak, and is currently 1.81. The Euro Financial Sector Credit Default Swap Index is rising 1.45% today to 162.67 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 1.41% to 181.48 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is rising .31% to 109 basis points. The TED spread is now down 354 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling another 6.96% to 55.13 basis points. The Libor-OIS spread is falling 1.04% to 98 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 7 basis points to 1.43%, which is down 121 basis points since July 7th. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .12%, which is down 2 basis points today. I think today’s losses are mainly a function of short-term traders taking profits after one of the best months for US stocks in history, as quarter-end approaches. A number of market-leading stocks are maintaining recent gains very well, with some even higher on the day. Telecom, homebuilding, medical, insurance and alternative energy stocks are sources of relative strength. The 2-year swap spread is now down almost 29 basis points in just 2 weeks. As well, the US sovereign debt credit default swap is down another 13.9% today to 68.0 and has dropped about 33 basis points since Fed. 25^th, which is also a huge positive. We could see some more early weakness on Monday, but I suspect another rally will begin to materialize later that day. Nikkei futures indicate a -16 open in Japan and DAX futures indicate an +9 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, lower energy prices and declining economic fear.