Bear Radar

Style Underperformer:
Large-cap Value (+.58%)

Sector Underperformers:
Banks (-2.20%), Education (-1.62%) and Hospitals (-1.56%)

Stocks Falling on Unusual Volume:
OMTR, ITG, SCSC, ABV, TNDM, SIVB and R

Stocks With Unusual Put Option Activity:
1) TXT 2) CHRW 3) DNDN 4) TWX 5) S

Bull Radar

Style Outperformer:
Small-cap Value (+1.39%)

Sector Outperformers:
Networking (+4.18%), Insurance (+3.71%) and Airlines (+2.79%)

Stocks Rising on Unusual Volume:
PFG, WBSN, JNPR, PEGA, PRU, TM, BBBY, JOSB, FFIV, BLUD, WMGI, CSTR, PEGA, OSIP, SEPR, SAFM, NTAP, NVEC, CHTT, RRGB, BIIB, RIMM, PSMT, ROK, HIG, PFG and FDO

Stocks With Unusual Call Option Activity:
1) BBBY 2) OSIP 3) PHM 4) ALL 5) NTAP

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Wednesday Watch

Late-Night Headlines
Bloomberg:

- The Federal Reserve’s requests from borrowers for loans to buy asset-backed securities fell 64 percent from last month as investors balked at visa limits and possible political efforts to tax earnings. Investors sought $1.71 billion from the Term Asset-Backed Securities Loan Facility to purchase securities backed by auto and credit-card loans, the New York Fed bank said today on its Web site. The Fed provided $4.7 billion in loans last month to purchase securities in the TALF’s first monthly round. The decline hinders Fed Chairman Ben S. Bernanke’s efforts to lower borrowing costs and extends a slow start for a program that the Obama administration is using as a cornerstone of plans to revive credit and end the recession. The Fed is struggling to lure investors, such as hedge funds, that are wary of government restrictions or the risk of future intervention. “It is a big disappointment,” said Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut. “There are some folks who have decided they just don’t want to play in any government programs.”

- China’s housing prices will be stagnant through 2010 as government efforts to spur purchases through economic stimulus measures and lower interest rates fail to cut into a glut of homes, said E-House (China) Holdings Ltd, a Shanghai-based real estate broker and consultant. “Prices won’t rise until inventory is cleared,” E-House Chief Financial Officer Li-Lan Cheng said in an interview in New York. “I don’t see such a scenario until sometime in 2010.” China’s economy, the world’s third largest, faces its biggest threat from the real estate sector, Fan Jianping, head of the State Information Center’s economic forecasting department, said March 18. Home prices fell for a third straight month in February, dropping a record 1.2 percent, the National Development and Reform Commission said March 10. Housing prices in China’s top 20 cities probably declined 5 percent in March, Cheng said. He said oversupply was the worst in Beijing and Shanghai while the southern cities of Guangzhou and Shenzhen were “bottoming out.”

- China’s shipbuilding industry may be about to get a bailout -- from its customers. The government may force state-owned shipping groups to buy more vessels as foreign carriers scrap orders, according to Steve Man, an HSBC Holdings Plc analyst in Hong Kong. That risks increasing costs and overcapacity among shipping lines grappling with a collapse in global trade. “They ‘encourage,’ but my thinking is it’s more of a directive,” said Man. “It hurts every player in the industry and creates excess capacity that will take longer to absorb after an upturn.” A collapse in shipping rates led to a worldwide 95 percent decline in new vessel orders in March, according to Clarkson Plc, the world’s largest shipbroker. In response to the drop in demand, China is drawing up plans to aid state-owned China State Shipbuilding Corp. and China Shipbuilding Industry Corp. that will likely force state-owned shipping groups to pick up orders abandoned by overseas lines, driving rates down further, analysts say. China’s shipbuilding industry may be about to get a bailout -- from its customers. The government may force state-owned shipping groups to buy more vessels as foreign carriers scrap orders, according to Steve Man, an HSBC Holdings Plc analyst in Hong Kong. That risks increasing costs and overcapacity among shipping lines grappling with a collapse in global trade. “They ‘encourage,’ but my thinking is it’s more of a directive,” said Man. “It hurts every player in the industry and creates excess capacity that will take longer to absorb after an upturn.” A collapse in shipping rates led to a worldwide 95 percent decline in new vessel orders in March, according to Clarkson Plc, the world’s largest shipbroker. In response to the drop in demand, China is drawing up plans to aid state-owned China State Shipbuilding Corp. and China Shipbuilding Industry Corp. that will likely force state-owned shipping groups to pick up orders abandoned by overseas lines, driving rates down further, analysts say. China’s biggest shipbuilders, who construct more than 70 percent of dry-bulk carriers, haven’t won an order since October, according to Morgan Stanley. The shipyard stimulus may worsen the overcapacity that contributed to the Baltic Dry Index’s biggest decline in more than two decades. Only nine new vessels of any type were ordered worldwide last month, according to data compiled by Clarkson Plc. More cancellations are likely, as yards worldwide hold orders for dry-bulk ships with a combined capacity equal to 69 percent of the existing global fleet. As much as 65 percent of bulk ships due for delivery next year may be axed or delayed, followed by as much as 60 percent in 2011, according to HSBC.

- Bed Bath & Beyond Inc.(BBBY), the largest U.S. home-furnishings retailer, gained 14 percent in late Nasdaq trading after fourth-quarter profit fell less than some analysts estimated. Bed Bath & Beyond climbed $3.58 to $29.09 at 5:57 p.m. after the close of Nasdaq Stock Market composite trading.

- Defense Secretary Robert Gates said the spate of deadly bombings in Baghdad this week may signal an end to al-Qaeda’s attacks in Iraq. “These are spectacular events that are basically al- Qaeda’s last gasp, I hope,” Gates told reporters in Washington today.

- Manhattan office rents fell the most in at least 25 years in the first quarter as financial companies slashed jobs and relinquished space in the U.S. recession. Rents dropped 6 percent from the fourth quarter to $65.01 a square foot, commercial property broker Cushman & Wakefield Inc. said in a report today. The decline is the most in records dating back to 1984, Cushman said, and shows how much the fallout from the September bankruptcy of Lehman Brothers Holdings Inc. hurt the New York property market.

- North Korea warned it will take “strong steps” if the United Nations Security Council censures the communist state over its long-range rocket launch. Pak Tok Hun, the country’s deputy ambassador to the UN, said yesterday his nation had every right to fire a satellite into space and shouldn’t be punished. “Every country has the right, the inalienable right to use the air space peacefully,” Pak told reporters in New York. If the Security Council takes “any kind of steps whatever, we’ll consider this infringes upon the sovereignty of our country and the next option will be ours.”

- Alcoa Inc.(AA) reported a $497 million net loss in the first quarter, the second straight for the largest U.S. aluminum producer, as the global recession reduced demand for the metal used in automobiles and appliances. Chief Executive Officer Klaus Kleinfeld said Alcoa’s efforts to reduce its dividend, workforce and production helped the company cope with a “historic” drop in aluminum prices. Excluding some items, the loss was 59 cents a share, trailing the average estimate of 14 analysts for a loss of 56 cents. “While things are bad, they are not getting a lot worse,” James O’Mealia, chief investment officer of Sunnymeath Asset Management, said in an interview with Bloomberg Television.

Wall Street Journal:

- Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national-security officials. The spies came from China, Russia and other countries, these officials said, and were believed to be on a mission to navigate the U.S. electrical system and its controls. The intruders haven't sought to damage the power grid or other key infrastructure, but officials warned they could try during a crisis or war. "The Chinese have attempted to map our infrastructure, such as the electrical grid," said a senior intelligence official. "So have the Russians."

- Two environmental groups say they will ask the Canadian government to halt Royal Dutch Shell PLC's planned expansion of production in the oil sands after they claim the energy giant reneged on environmental promises. The groups says Shell agreed to take steps to limit greenhouse-gas emissions from two expansion projects and received government approval based on those pledges, but failed to meet them. The groups plan to ask the federal government and Alberta Energy Resources Conservation Board to revisit permits grants to expand production by the Shell-led Athabasca Oil Sands Project. Shell's Canadian affiliate owns 60% of the project, while Chevron Corp. and Marathon Oil Corp. each own 20%. The two projects being contested -- called Jackpine and the Muskeg River expansion -- would each add 100,000 barrels of daily oil production to existing facilities.

- The Case for Buying a Home Right Now.

- In the current wave of pitchfork populism, it would be easy to assume that the rich are riding out the crisis in relative comfort–with their private jets, bonuses and five-figure commodes–while the rest of us struggle. But consider this stunning statistic: the world’s rich have lost $10 trillion, or a quarter of their wealth, in the global financial crisis, according to Oliver Wyman, a consulting firm. That is about equal to the combined economic output of Japan, Germany and China.

- The Treasury Department plans to extend the Troubled Asset Relief Program to certain eligible life insurers, according to people familiar with the matter. Several life insurers have been burdened lately by capital constraints amid ailing markets. The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift, these people said.

- U.S. companies, after months of watching unsold goods mount in stores and warehouses, are reducing inventories enough to offer hope they can soon ramp up production and give the U.S. economy a needed boost.

- China on Tuesday repeated its call for calm after North Korea's latest test of a multistage rocket, attempting to defuse anger in the U.S. and elsewhere at a time when its own economic interest in the neighboring state is soaring. Since North Korea's test of a rocket similar to a long-range missile on Sunday, Chinese diplomats have refused to criticize Pyongyang and forestalled penalties against it in the U.N. Security Council, where China is a permanent member with veto power.

- Manhattan District Attorney Robert M. Morgenthau said Tuesday that a Chinese company and its manager were indicted on criminal charges for allegedly engaging in illegal financial transactions through U.S. banks to help Iran import a variety of banned materials, including metal alloys that could be used for nuclear weapons and ballistic missiles. At a news conference Tuesday, Mr. Morgenthau announced a 118-count criminal indictment against Li Fangwei, a Chinese citizen, and his company, Limmt Economic and Trade Co., and its various affiliates. The charges include falsifying business records and conspiracy. The falsifying business records counts carry a sentence of up to four years in prison.

- All the buzz about “netbooks”–low-end laptops often powered by Intel’s(INTC) Atom chip–has overshadowed another piece of jargon the Silicon Valley giant helped propagate, low-end desktop systems it calls “nettops.” Taiwan’s Acer Tuesday showed off a new example of such a system, but the news is more positive for rival Nvidia(NVDA) than for Intel.

- Mosaic Co.'s(MOS) fiscal third-quarter net income fell 88% as the fertilizer company was squeezed by rising materials costs and falling sales volumes. The company also warned potash sales would continue to be weak in the fourth quarter, though it did seem more optimistic on phosphates. For the quarter ended Feb. 28, Mosaic reported net income of $58.8 million, or 13 cents share, down from $520.8 million, or $1.17 a share, a year earlier. The latest quarter included an inventory write-down of five cents a share and a derivative loss of five cents a share. Net sales fell 36% to $1.38 billion. Analysts expected per-share earnings of 24 cents on revenue of $1.89 billion, according to a poll by Thomson Reuters. Gross margin plunged to 10% from 34%. The average price for a common phosphate fertilizer during the quarter fell 15%, while the price for a potash version more than doubled. Net sales in the phosphates business dropped 56%, as the segment swung to a loss and sales volume fell by half. In the potash segment, net sales fell 12% and earnings fell 5%. Sales volume fell by 63%.

MarketWatch.com:
- White House ponders: Are some hedge funds too big to fail? Expect regulatory battle over who would pay to unwind hedge funds, buyouts.

- Under pressure from lawmakers and financial institutions, the Securities and Exchange Commission will release a proposal on Wednesday that has a number of different approaches to reinstating the so-called uptick rule, a provision that limits short selling.

CNBC.com:
- If there’s one thing in the market Cramer can’t stand, it’s Ultrashort ETFs. And the worst of the bunch is the SKF, the Ultrashort Financials Proshares(SKF), which Cramer calls “an ETF of mass destruction.” Instruments like the SKF allow you to short a basket of stocks in one fell swoop, and Cramer argues that the SKF in particular is just a tool for day traders and market manipulators who want to put pressure on the banks. (video)

NY Times:

- The inspector general of the government’s financial bailout program said Tuesday it was looking into the $62 billion paid to banks like Goldman Sachs(GS) and Deutsche Bank(DB) to settle trades they had with the American International Group, the giant insurance company that nearly collapsed last fall. The inquiry, which a group of lawmakers had requested, will examine how A.I.G.’s 16 counterparties for its credit default swap portfolio were paid the full value for securities that, at the time, had a market value of about half that amount. The difference between the market value and the par value that was paid out to A.I.G.’s counterparties is about $30 billion, according to the A.I.G. data. Some critics of the A.I.G. rescue saw these payments as a backdoor bailout for banks that held the securities. Without A.I.G as a backstop or other hedges in place, those financial institutions would presumably have had to write down those securities on their books. “What was the benefit of the decision to pay 100 percent of face value to the American taxpayers who provided the bailout funds and how did it support the goal of ensuring the stability of the economic system?”, Mr. Cummings and the other lawmakers said in the letter. So far, the government has pledged more than $180 billion to prop up A.I.G. Mr. Barofsky said Tuesday that his office would examine the extent to which A.I.G. paid counterparties claims’ at 100 percent of face value and whether there was any attempt made to renegotiate the claims to reflect their diminished market value. Of the nearly $30 billion that the government paid for the securities in excess of their market value, two-thirds flowed to foreign institutions like Société Générale of France and Deutsche Bank of Germany.

The Hill:

- Lawmakers are just beginning to consider details of a new systemic regulator to oversee the entire financial system, but the new authority will likely reach into the yet unregulated world of derivatives. The Obama administration and leading lawmakers in Congress, including Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, back a proposal to set up a systemic risk regulator to prevent large financial institutions from toppling the broader system. They also support greater restrictions on derivatives now mostly traded simply between parties rather than on a public market.

LA Times:

- Wine drinkers in France, Italy and across Europe uncorked fewer bottles last year as the global economy slowed dramatically, leaving the United States as the world's largest consumer, an industry group said Tuesday. After years of non-stop growth, global wine consumption contracted by 0.8% last year, according to the International Organization of Vine and Wine's first estimate. That is the first drop since records began in 2004. Falling wine consumption in Europe offset growth in other countries, such as the U.S., which for the first time surpassed Italy in terms of total consumption, the organization said in its annual report on the market. In another shift in the industry, European vineyards accounted for less than half of the world's grape production for the first time, the organization's director general Federico Castellucci said.

FINalternatives:

- Is last year’s most provocative hedge fund launch just another fraud? Sources close to AdultVest Inc., which manages the Priapus Investment Fund, an adult entertainment hedge and private equity fund, say that it is spending investor money on more than just investments, and that what investments there are don’t account for the returns it claims. A former investor says that founder Francis Koenig is looting the fund to pay for fine art, expensive wines, cars, personal trips and alimony. Meanwhile, a former employee tells FINalternatives “there was no capital being generated” during his time at the firm. “There is almost no money left in the fund,” the investor, who said he was privy to some of AdultVest’s financials via a court order, alleges. “Koenig has an American Express black card through the company that he uses on partying, girls and high living. Most money is missing and iPorn.com is not worth what he says it is.”

Forbes.com:

- The Recovery Begins. Home, retail and auto sales point to a turnaround.

Financial Times:
- Businesses must not sink money into high-carbon infrastructure unless they are willing to lose their investments within a few years, the US lead negotiator on climate change has warned. In the Obama administration’s starkest rebuke yet to industry over global warming, Todd Stern, special envoy for climate change at the state department, said “high-carbon goods and services will become untenable” as the world negotiates a new agreement to cut carbon emissions. Investors should take note, he warned, that high emissions must be curbed, which would hurt businesses that failed to embark now on a low-carbon path. “How good will the business judgment of companies that make high-carbon choices now look in five, 10, 20 years, when it becomes clear that heavily polluting infrastructure has become deadly and must be phased out before the end of its useful life?” Companies investing in such goods and services – such as coal-fired power plants and gas-guzzling cars – could start to incur heavy economic penalties for their greenhouse gas output. These could include buying carbon permits under a US cap-and-trade system, for which the administration of President Barack Obama is currently attempting to gather support in Congress. Mr Stern, in an interview with the Financial Times, said a new treaty – which he insisted could be negotiated this year, at a United Nations climate change meeting in Copenhagen in December – must include developing countries. Under the 1997 Kyoto protocol, emerging economies such as China and India were spared the obligation to reduce their greenhouse gas emissions. But their output has grown rapidly since, with China overtaking the US as the world’s biggest emitter. “Exactly what form those [commitments] take is unclear, but there will need to be substantial action on the part of leading developing countries if we are going to have any chance of getting in the vicinity of what the science says we need to do,” he said.

- The International Monetary Fund is likely to raise its estimate of total credit losses on US assets from $2,200bn to about $2,800bn when it releases its Global Financial Stability report later this month. The new estimate, while up significantly from January, will almost certainly be lower than a $3,100bn (€2,350bn, £2,111bn) figure circulating on Tuesday, which contributed to pressure on US bank stocks. The IMF is also expected to release for the first time an estimate of total losses on European assets, which is likely to exceed $1,000bn. The fund is likely to put total losses globally at slightly above $4,000bn, including some additional losses on Asian assets. Experts think that up to three-quarters of these losses will fall on banks globally, with the balance hitting other financial institutions.

TimesOnline:

- For the first time in nearly 30 years, there are more people selling gold jewelry as scrap than buying new items. The high price of gold combined with the economic downturn has encouraged people to raise extra cash by selling everything from family heirlooms to tooth fillings. GFMS, the leading precious metals analyst, said yesterday that an estimated 500 tons of gold had been sold as scrap during the first three months of this year. Demand for new jewelry had nearly halved to 420 tons, the first time since 1980 that more scrap was being sold than customers were buying new rings and bracelets.

Economic Daily News:

- AU Optronics Corp. and Chi Mei Optoelectronics Corp. have raised their factory usage to 80%, citing executives. AU Optronics CEO Chen Lai-Juh said in March that its first-quarter factory use may exceed the 50% it expected in January. Chi Mei said at an investors’ conference in February that its usage would rise to 40% in the first quarter from 35% in the fourth quarter. AU and Chi Mei are Taiwan’s two biggest makers of liquid-crystal displays.

Late Buy/Sell Recommendations
Citigroup:

- Rated (ABX) Buy, target $40.

- Rated (CSC) Sell, target $30.

Night Trading
Asian Indices are -1.75% to -.50% on average.
S&P 500 futures -.87%.
NASDAQ 100 futures -.53%.

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Earnings of Note
Company/EPS Estimate
- (JOSB)/1.51

Economic Releases

10:00 am EST

- Wholesale Inventories are estimated to fall .7% in February versus a .9% decline in January.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +2,844,000 barrel build the prior week. Gasoline supplies are expected to fall by -1,400,000 barrels versus a +2,225,000 barrel increase the prior week. Distillate inventories are estimated to fall by -600,000 barrels versus a +221,000 barrel increase the prior week. Finally, Refinery Utilization is expected unch. versus a -.28% decline the prior week.

2:00 pm EST

- Minutes of March 17-18 FOMC Meeting.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Fisher speaking, weekly MBA mortgage applications report, (TROW) shareholders meeting, (TIBX) shareholders meeting, (UTX) shareholders meeting and the (WDR) shareholders meeting could also impact trading today.

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

Stocks Finish Sharply Lower, Weighed Down by Education, Gaming, REIT, Semi and Homebuilding Shares

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In Play

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

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Retail longs and Technology longs. I added (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is below average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising .22% and is very high at 41.02. The ISE Sentiment Index is slightly below average at 131.0 and the total put/call is about average at .89. Finally, the NYSE Arms has been running above average most of the day, hitting 2.52 at its intraday peak, and is currently .84. The Euro Financial Sector Credit Default Swap Index is dropping .09% today to 156.33 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 .82% to 191.97 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is falling 1.3% to 96 basis points. The TED spread is now down 367 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is up .42% to 59.75 basis points. The Libor-OIS spread is falling .11% to 94 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 10 basis points to 1.36%, which is down 128 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 .19%, which is unch. today. Healthcare-related stocks are relatively strong today, with HMO and Medical Equipment shares actually higher on the day. The US sovereign debt credit default swap index is plunging 12.3% to 57.0 basis points, which is a multi-month low and a big positive. As well, weekly retail sales fell .8% this week, which is up from a 1.1% decline the prior week and up from a 2.3% decline the week of Feb. 3^rd. Weekly retail sales are now at levels last seen during the week of Dec. 9, which is a positive. On the negative side, investor angst isn’t as high as I would like to see given today’s losses. As well, (IYR) is under meaningful pressure and trades “heavy.” This pullback in the broad market looks like it could go a bit further before another move higher commences. Nikkei futures indicate a -37.0 open in Japan and DAX futures indicate a -22.0 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and lower energy prices.