Wednesday Watch

Late-Night Headlines
Bloomberg:

- Fewer companies in the U.S. plan to begin cutting jobs, signaling efforts to slash costs during the recession may have peaked, a private survey found. The share of companies planning initial staff cuts in the next 12 months fell to 5 percent in April from 13 percent in February, according to a report today by Watson Wyatt Worldwide Inc., an Arlington, Virginia-based workforce consulting firm. Seventy-two percent of the 141 employers surveyed have already trimmed their workforces, up from 52 percent two months earlier. “Companies have started to move into the next stage of their cost-cutting actions, but are also looking ahead to an eventual recovery,” Laura Sejen, global director of strategic rewards for Watson Wyatt, said in a statement. Employers recognize that “continuing some cost-cutting measures such as reductions in force can put them at a disadvantage once the economy improves,” she said.

- Treasury Secretary Timothy Geithner said banks found to need additional capital at the conclusion of regulators’ stress tests will have a range of options for shoring up their balance sheets. The Treasury chief, testifying before a congressional oversight panel today, said lenders will be able to take taxpayer money, raise funds from private investors or convert previous government investments from preferred to common shares. Each bank can chose the “best mix” of alternatives and will likely make different choices, Geithner said.

- The Markit iTraxx Australia index fell 5 basis points to 330 as of 11:16 am in Sydney, according to Australia & New Zealand Banking Group data. The Markit iTraxx Japan index was 5 basis points lower at 335 as of 10:12 am in Tokyo, BNP Paribas SA prices show.

- Elpida Memory Inc., Japan’s largest maker of computer-memory chips, said it plans to raise prices as much as 50 percent next month after industry-wide production cuts eased the glut that drove chipmakers to record losses. “The left-over inventory at personal-computer and module makers that was skewing the demand-supply balance is finally gone,” President Yukio Sakamoto, 61, said in an interview in Tokyo yesterday. Elpida plans to charge customers about $1.50 per gigabit of memory starting next month to bring prices in line with production costs, he said. Elpida jumped as much as 18 percent in Tokyo trading on mounting speculation that the industry is rebounding from a glut that forced Qimonda AG to seek bankruptcy protection. Computer- memory chipmakers may remove excess supply this quarter and face a shortage in the second half after they slashed capital spending 58 percent last year, according to Barclays Capital.

- Japan’s export slump slowed in March, ending a four-month streak of record drops and adding to signs the recession may start to ease.

- BHP Billiton Ltd.(BHP), the world’s largest mining company, said buyers of its Western Australian iron ore asked to defer long-term sales accords, forcing the company to sell it at cheaper spot rates. All the deferred ore was sold on the spot market, reducing the share of the more profitable contract sales to 72 percent, Melbourne-based BHP said in a statement. The spot market for the steelmaking raw material is currently trading at about 35 percent less than annual contract prices set last year. Chinese steelmakers are pushing for the first iron ore price cut in seven years as the global recession crimps sales to carmakers and builders. Slower demand for steel will have a “pronounced impact” and a weak outlook for the global economy will affect earnings this half, Chief Executive Officer Marius Kloppers said Feb. 4. “In the medium term, we expect that market conditions will remain uncertain,” the company said in today’s statement. “All our operations will remain under review.”

- House Speaker Nancy Pelosi pledged to push legislation through the chamber this year that would for the first time place a cap on carbon dioxide emitted from power plants and factories. The measure will be the most complex Congress will face and “will pass,” Pelosi, a California Democrat, told reporters at a press conference. Climate change is a “national security issue, it is an environmental health issue, it is an economic issue and it is a moral issue,” she said. The Energy and Commerce Committee is holding a hearing today on draft legislation by Chairman Henry Waxman, a California Democrat, and Democrat Edward Markey of Massachusetts to establish a cap-and-trade system. Some Republicans, including Representative Ralph Hall, a Texas Republican, say such a system would increase energy costs to businesses and consumers and harm the economy. The draft legislation lacks detail and “leaves American businesses and consumers in the dark as to just how much this bill is going to cost,” Hall said today.

- Drivers for FedEx Corp.’s(FDX) small- package delivery unit are independent contractors, not employees, a federal appeals court said, in a victory for the carrier over the National Labor Relations Board.

- Gilead Sciences Inc.(GILD), the biggest U.S. supplier of AIDS drugs, said first-quarter profit rose 21 percent on increased demand for its medicines. Net income was $589.1 million, or 63 cents a share, compared with $488.3 million, or 51 cents a share, a year earlier, the Foster City, California-based company said today in a statement. Earnings beat analysts’ estimates by 4 cents. Revenue rose 22 percent to $1.53 billion, led by increased use of AIDS drugs, which accounted for about 85 percent of revenue last year, according to the company. Gilead’s shares rose as much as $1.87, or 4.3 percent, to $45.60 in extended trading on the Nasdaq Stock.

- SanDisk Corp.(SNDK), the biggest maker of flash-memory cards, reported sales that topped analysts’ estimates in the first quarter after demand rebounded, sending the shares up 7.9 percent. Revenue was $659.5 million, Milpitas, California-based SanDisk said today in a statement. That compared with the $536.3 million average of analysts’ estimates in a Bloomberg survey. Demand for flash memory, which stores data in cameras and other portable devices, increased last quarter after a slow Christmas season, said Edwin Mok, an analyst at Needham & Co. in San Francisco. SanDisk’s storage sales, measured in megabytes, rose 9 percent from the previous three months.

- Yahoo! Inc.(YHOO), owner of the second- most popular U.S. search engine, reported profit and sales that met analysts’ estimates. The company will cut almost 700 jobs, or 5 percent of its workforce, after online-ad sales dropped. Yahoo, based in Sunnyvale, California, rose 74 cents, or 5.1 percent, to $15.12 in extended trading after closing at $14.38 on the Nasdaq Stock Market. The shares have gained 18 percent this year.

- Banks’ reluctance to lend has dropped to the lowest since before the collapse of Lehman Brothers Holdings, signaling efforts by the Federal Reserve Chairman Ben S. Bernanke to thaw credit markets are working. The Libor-OIS spread narrowed to .90 percentage4 point yesterday, the least since the difference was .87 percentage point on Sept. 12. Lehman filed for bankruptcy protection on Sept. 15, prompting the spread to widen to 3.64 percentage points on Oct. 10. Former Fed Chairman Alan Greenspan said in June that the measure was the best way to tell when lending returned to “normal.”

- China’s stock market rally has driven valuations too high and increased the risks of an asset “bubble,” the nation’s largest fund manager said. “Valuations have overshot corporate fundamentals with the help of ample liquidity,” Wang Yawei, who oversees more than $29 billion as chairman of the investment committee at China Asset Management Co., said in a fund report released yesterday. “Speculative trading is now driving the market.” The benchmark Shanghai Composite Index has rallied 39 percent this year, driving valuations to 22.4 times reported earnings from 12.78 times on Oct. 31. The stocks are now valued the highest among the biggest emerging economies including Brazil, Russia and India. Wang, who has increased his cash allocation more than threefold this year and pared equities, joined an expanding group of skeptics on China’s rally. George Hoguet, Boston-based global investment strategist at State Street Global Advisors Inc., last week advised caution after a “sustained run.” “Liquidity will remain loose and the market lively in the second quarter, but it’s worth guarding against risks of the formation of an asset bubble,” Wang said in the report. “The strong rally in the stock market has fairly reflected investors’ optimistic expectations for a rapid economic recovery.” Profits of companies on the CSI 300 Index, measuring stocks in Shanghai and Shenzhen, will tumble an average 15.4 percent in 2009, Morgan Stanley said last month. Goldman Sachs Group Inc. ended its recommendation last week to be “long” on China’s local-currency shares as the Shanghai Composite was nearing its 2,600-point target set when the bank initiated the strategy in December.

Wall Street Journal:

- The Obama administration plans to create a new military command to coordinate the defense of Pentagon computer networks and improve U.S. offensive capabilities in cyberwarfare, according to current and former officials familiar with the plans. The initiative will reshape the military's efforts to protect its networks from attacks by hackers, especially those from countries such as China and Russia. The new command will be unveiled within the next few weeks, Pentagon officials said.

- The Obama administration's nascent proposals to tax offshore profits could have an impact on the likes of Pfizer Inc., Cisco Systems Inc., Coca-Cola Co. and Hewlett-Packard Co., which shelter tens of billions in income offshore annually. Under current law, U.S. companies can defer taxes indefinitely on the profits they say they have earned overseas until they "repatriate" that money back to the U.S. The administration has proposed changing this law, and has already baked in the new tax receipts into its budget figures for 2011.

- Regulators will begin briefing banks Friday about how they fared in government-performed "stress tests," giving lenders an opportunity to debate the findings before they're made public a week later, according to government officials. The discussions will signal to some banks whether they'll need to seek additional capital, either from private investors or the Treasury Department. The stress tests seek to measure a bank's ability to continue lending under extreme economic conditions. To help shore up confidence in the banking sector, the government is expected to distinguish between banks that need more capital and those able to withstand a worse and prolonged economic downturn. On Tuesday, Treasury Secretary Timothy Geithner said "the vast majority" of banks could be considered well-capitalized. But he also said the impact of the government's efforts to ease the financial crisis so far had been "mixed."

- For the first time since the recession began more than a year ago, a host of major companies on Tuesday said the economy is approaching a bottom. But their tentative optimism triggered a debate with other firms that say it's far too early to call a floor.

- President Barack Obama raised the possibility of prosecuting Bush administration lawyers who approved so-called enhanced interrogation techniques on terror suspects. Mr. Obama, speaking to reporters Tuesday in the Oval Office, also laid out the parameters for a bipartisan commission to examine government tactics used in the wake of the Sept. 11, 2001, terrorist attacks, although he was careful to say he wasn't endorsing such a panel. Together, the remarks put the president squarely in the center of a growing battle between liberals, who want to hold Bush administration officials accountable for what they call torture, and conservatives, who say Mr. Obama has damaged national security by revealing interrogation secrets.

- The images of that trip, in which Mr. Obama dazzled ecstatic Europeans with citations of the offenses against international goodwill and humanity committed by the nation he leads, are now firmly imprinted on the minds of Americans. That this is so, and that it is not good news for him, is truth of a kind not quite fathomable to this president and his men.

- Nintendo(NTDOY) Freshens a Game Player

- The banking industry is aggressively lobbying the Treasury Department to make it less costly for financial institutions to get out of the Troubled Asset Relief Program. The move could prove controversial for the banking industry, which is busy deflecting criticism about higher fees it is charging consumers for credit cards and other products and services.

Marketwire:

- “Alpha” Magazine Announces 2009 Hedge Fund 100, the World’s Largest Hedge Funds.

MarketWatch.com:
- Investors in actively managed mutual funds the last five years have reason to wonder what they've been paying for: A new study from Standard & Poor's finds that 70% of large-cap fund managers who use the S&P 500 as a benchmark for comparison have failed to match the performance of the index over that time.

NY Times:

- They say they could have opted for Dubai, Saudi Arabia or even Europe. But Baghdad is the destination of choice for a rising number of foreign workers, a jarring sight in a city where, not long ago, they were unlikely to keep their freedom or lives long enough to collect a paycheck. “Sometimes I hear loud booms, but I don’t care,” said Zahandwir Aloui, a 25-year-old waiter with a wife and two children at home in Bangladesh. “I like working here.” Recently he was clearing dishes at the upscale restaurant where he works, one of scores of better restaurants, homes and hotels where the waiters, cooks, clerks and housekeepers and attendants are increasingly likely to be from India, Uganda, Bangladesh, Nepal and Ethiopia.

Newsweek:

- The Rise of the ‘Empty Creditor’. They’d rather drive good companies into bankruptcy than save them. Why? One key economic assumption is that people act to preserve their economic interests. Those who have lent money to troubled companies, for example, generally prefer the company remain solvent; otherwise, they can't get paid back. Similarly, lenders to troubled firms frequently favor swift, out-of-court restructuring deals, in which they swap debt for stock, instead of pushing companies into Chapter 11 bankruptcy. That's because companies in Chapter 11 can languish there for years and waste scarce company assets on huge fees to lawyers, consultants, and accountants. But if a lender or creditor believes it can profit more from a complete failure—i.e., if it has an insurance policy that pays off only in the event of utter devastation—that creditor might be more inclined to push a company toward bankruptcy. And thanks to the financial innovations of recent years—the rampant use of hedging and credit-default swaps, the ability of investors to purchase insurance on debt—that's exactly what seems to be happening. Creditors are acting to protect their economic self-interest by encouraging companies to destroy themselves. For Hu, Exhibit A was the case of Goldman Sachs(GS) and the troubled insurer AIG. Goldman, it was reported this spring, was one of the AIG counterparties to whom government money was funneled last fall. AIG posted $2.5 billion in collateral to Goldman under credit-default-swap obligations and made payments of more than $10 billion to the firm to settle credit-default and securities-lending obligations. Hu notes that forcing a troubled company like AIG to pony up billions of dollars in cash as collateral would have been a contributing factor to further erosion of AIG's financial situation, which, in turn, would have rendered many of the financial arrangements Goldman had entered with AIG worthless. But Goldman didn't care that it would wipe out its AIG arrangements, because it had already hedged its exposure to AIG—through contracts, credit-default swaps, or other derivatives. In the words of Goldman's CFO, the firm was "fully protected and didn't have to take a loss." In other words, although Goldman was a significant creditor to AIG, it appeared to have nothing to lose from AIG's demise and potential failure to make good on debt, which is why it was happy to force AIG to disgorge billions of dollars in collateral.

Investors.com:

- Companies Without Much Debt Are Hammering Levered Rivals.

Restaurant News:

- McDonald’s Corp.(MCD) would neither confirm nor deny on Tuesday the reported national introduction this summer of its long-tested Angus Third Pounder, a product rollout that sources say could spark some franchisee tension.

Politico:

- The Pentagon’s senior military leaders are worried that the security situation in Afghanistan is stalemated or deteriorating, and now are preparing a far-reaching plan that would prepare the U.S. military for a war that could last three to five more years, officials said.

Boston Globe:

- There's still gold in California's Sierra Nevada foothills and a new rush to find it. Not since the Great Depression have so many hard-luck people been lured by prospecting, hoping to find their fortune tumbling down a mountain stream. The recession and high gold prices are helping to fuel the latest gold craze, especially among workers who have lost jobs. "I guess there's always hope. At home, I don't have any right now," said Steve Biorck, a concrete finisher who headed west because construction work dried up in Tennessee. Now he spends days standing knee-deep in an icy creek coaxing gold flakes from a swirling pan of gravel.

Reuters:

- U.S. scientists have combined a discovery from a French garbage dump with breakthroughs in synthetic biology to come up with a novel method for turning plant waste into gasoline, without the need of any food sources. A synthetic biology lab at the University of California San Francisco identified a compound able to use biomass to produce a gas that can be converted into a gasoline chemically indistinguishable from fossil-fuel based petroleum. Their method allows for a variety of feedstocks to be used that are nonfood sources, such as agricultural waste products like corn stover and sugar cane bagasse. The scientists said gasoline they were able to produce carried the same chemical and molecular makeup as gasoline from oil refineries. "You could fill your car up with it right now, so there's no difference in engine technology or anything like that," said Chris Voigt, who led the research. Voigt added that the United States could look to biological sources for a large percentage of its gasoline when oil prices are high. "Then if the sugar price goes high and the oil price goes down, you could flip it and the consumer would not know any difference," he said. "You can't do that with ethanol." With improvements in the rate of production from genetic engineering, Voigt estimates that gasoline could be produced at $1.65 per gallon from sugar cane bagasse. He expects fuel from cellulosic sources like poplar would be cheaper at $1.10 to $1.30 a gallon.

- Some top executives said they saw signs of parts of the global economy stabilizing, when they reported their companies' earnings on Tuesday, but they are mostly declining to predict a full-fledged recovery. Here is a compilation of comments:

- New York City's pension funds are probing whether private equity fund Quadrangle "intentionally misled" it about placement agents used to win pension fund business, a spokesman for the city's comptroller said Tuesday. New York City's pensions invested $85 million with Quadrangle in 2005 and $40 million in 2006, Jeff Simmons, the spokesman for Comptroller William Thompson, said by email. Quadrangle was formerly led by Steven Rattner, who is now the U.S. auto bailout chief.

- After one of the worst slumps in memory, the housing market in the Northeast United States is stirring to life with more buyers on the prowl and bigger crowds at home showings.

Financial Times:
- Managers of some of the world’s leading hedge funds say they are reaping a benefit from the financial crisis in the form of substantially less competition from the once-mighty proprietary trading desks of investment banks. Daniel Och, founder of publicly traded Och-Ziff Capital Management, said in an interview with the Financial Times that his company is currently seeing less competition for investments, making it easier to capitalize on opportunities. “The proprietary trading desks at banks are substantially less active,” he said. Mr Och added that bank cutbacks were also expanding the talent pool for established hedge funds. “There is no doubt the number of incoming calls we are getting from senior people across the world has increased,” he said.

Shanghai Securities News:

- China’s textile industry continues to be “grim” due to weak export demand, citing Assistant Commerce Minister Lu Jianhua.

Kyodo News:

- Japan’s government may forecast the economy to contract about 3% this fiscal year because of the global slowdown. In December, the government forecast zero economic growth for the year that began April 1.

ISDA:

- At its Annual General Meeting in Beijing today, the International Swaps and Derivatives Association, Inc. (ISDA) announced the results of its Year-End 2008 Market Survey of privately negotiated derivatives. The notional amount outstanding of credit default swaps (CDS) was $38.6 trillion at year-end, down 29 percent from $54.6 trillion at mid-year 2008. CDS notional outstanding for the whole of 2008 was down 38 percent from $62.2 trillion at year-end 2007.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (COH), target $24.

- Reiterated Buy on (NYT) 5-year credit default swaps.

- Reiterated Buy on (MAN), target $42.

- Reiterated Buy on (LXK), target $32.

.

Night Trading
Asian Indices are -.25% to +1.50% on average.
S&P 500 futures -.60%.
NASDAQ 100 futures -.34%.

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Earnings of Note
Company/EPS Estimate
- (APD)/.82

- (GENZ)/1.04

- (SY)/.42

- (FCX)/.12

- (MS)/-.08

- (KMB)/.97

- (MCD)/.82

- (NOC)/1.08

- (TIN)/.05

- (WLP)/1.24

- (PFCB)/.33

- (MO)/.39

- (STJ)/.58

- (BA)/.92

- (T)/.49

- (R)/.234

- (WFC)/.42

- (CAL)/-1.18

- (RHI)/.06

- (QCOM)/.40

- (CMG)/.55

- (FFIV)/.38

- (STLD)/-.40

- (NE)/1.46

- (XLNX)/.18

- (AB)/.30

- (ADS)/1.10

- (VMW)/.20

- (NVLS)/-.51

- (YUM)/.40

- (EBAY)/.34

- (AAPL)/1.07

- (LRCX)/-.65

Economic Releases

10:00 am EST

- The House Price Index for February is estimated to fall .7% versus a 1.7% gain in January.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,500,000 barrels versus a +5,671,000 barrel increase the prior week. Gasoline supplies are estimated to fall by -700,000 barrels versus a -944,000 decline the prior week. Distillate inventories are expected to fall by -1,000,000 barrels versus a -1,170,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.65% versus a -1.47% decline the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly MBA mortgage applications report, (JCP) analyst meeting, (KO) shareholders meeting, (GE) shareholders meeting, (ISRG) shareholders meeting and the (CI) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Sharply Higher, Boosted by Financial, Hospital, REIT, Airline, Homebuilding and Networking Shares

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In Play

Stocks Surging into Final Hour on Less Financial Sector Pessimism, Diminishing Economic Fear, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Retail longs, Medical longs and Financial longs. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is above average. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling 5.23% and is very high at 37.13. The ISE Sentiment Index is low at 95.0 and the total put/call is around average at .82. Finally, the NYSE Arms has been running high most of the day, hitting 2.32 at its intraday peak, and is currently .60. The Euro Financial Sector Credit Default Swap Index is falling 2.66% 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 3.16% to 191.11 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 2.24% 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 rising 9.18% to 66.88 basis points. The Libor-OIS spread is falling .68% to 90 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 2 basis points to 1.24%, which is down 140 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 .14%, which is up 2 basis points today. The abrupt rebound today in financial and reit shares after recent sharp gains and yesterday’s swoon, is a large positive. I think it is indicative of how many large hedge funds are trapped short in these shares. As well, the most economically sensitive stocks are significantly outperforming today with the MS Cyclical Index surging 4.1%. Most news continues to be interpreted in a positive light. (CAT), for example, lowered its 2009 operating eps guidance significantly from $1.77 to $1.25, yet the stock is near session highs, rising 3%. After 22 consecutive weeks of declines, weekly retail sales gained for the second week in a row, rising .5%. This remains a big positive. Nikkei futures indicate an +159 open in Japan and DAX futures indicate an +38 open in Germany tomorrow. I expect US stocks to trade modestly mixed-to-higher into the close from current levels on short-covering, diminishing economic fear, less financial sector pessimism and bargain-hunting.

Today's Headlines

Bloomberg:

- Treasury Secretary Timothy Geithner said the “vast majority” of U.S. banks have more capital than needed, stoking a rally in stocks as investors await results of stress tests on the balance sheets of the biggest lenders. “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators,” Geithner said in testimony to a congressional oversight panel on the government’s financial-rescue program. Geithner also said there are signs of “thawing” in credit markets and some indication that confidence is beginning to return. His remarks reflect an improvement in earnings in several lenders’ results for the first quarter, and a reduction in benchmark lending rates this month. The Treasury chief also said in comments released today that the government has sufficient funds remaining in the $700 billion Troubled Asset Relief Program to aid U.S. banks. The comments reinforced indications the administration doesn’t currently intend to ask Congress for more money. Geithner also said there are signs of “thawing” in credit markets and some indication that confidence is beginning to return. His remarks reflect an improvement in earnings in several lenders’ results for the first quarter, and a reduction in benchmark lending rates this month. The Treasury chief also said in comments released today that the government has sufficient funds remaining in the $700 billion Troubled Asset Relief Program to aid U.S. banks. The comments reinforced indications the administration doesn’t currently intend to ask Congress for more money.

- Delta Air Lines Inc.(DAL) and United Airlines parent UAL Corp.(UAUA) rose in U.S. trading after posting first-quarter losses that beat analysts’ estimates as fuel prices fell. Delta, the world’s largest carrier, said it sees “signs of stabilization” in demand, based on recent bookings, echoing comments by American Airlines last week that declines in travel may have hit bottom. Jet fuel prices averaged 52 percent less last quarter than a year earlier. “Stabilization is the first step toward improvement, and it will be enough for investors to feel better” about the rest of 2009, said Matthew Jacob, an analyst at Majestic Research LLC in New York. “It’s certainly encouraging.”

- Jim O’Neill, chief economist at Goldman Sachs(GS), reiterated in an interview with Bloomberg TV that his firm sees the US economy growing about 1% in the third quarter of 2009.

- DuPont Co.(DD), the third-biggest U.S. chemical maker, said demand will improve from first-quarter lows because most customers have used up inventories and are increasing purchases. The shares gained in New York trading. March sales were higher than in the preceding two months, and industrial demand will rise through the year, resulting in a “moderate” decline in full-year sales volumes, Chief Financial Officer Jeff Keefer said.

- Technology stocks in the S&P 500 are off to the best start to a year since 1998 as investors buy companies with the most cash during the worst credit crisis since the Great Depression. The Information Technology Index of 75 software and computer makers in the S&P 500 rallied 9.7% this year, the steepest gain since 1998 and the most among 10 industries. The last time the gauge began a year faster, it went on to climb another 42%, spurring a 27% advance for the S&P 500. Technology companies in the S&P 500 on average have the most cash and least borrowings relative to total assets among 10 industries, according to Bloomberg data. Eighteen of them are debt free, including Apple Inc.(AAPL), Google(GOOG) and Qualcomm(QCOM), twice the number in all other industries combined.

- Piracy attacks worldwide almost doubled in the first quarter, led by a surge in incidents around Somalia, a group that monitors sea hijackings said. There were 102 attacks in the first three months, compared with 53 a year ago, the International Maritime Bureau said in a statement on its Web site today. The Gulf of Aden and eastern coast of Somalia accounted for 61 of the seizures or attempted hijackings worldwide, from six last year, the group said.

- Caterpillar Inc.(CAT), the bulldozer manufacturer President Barack Obama used to help push his $787 billion stimulus plan, called the program disappointing and less effective than measures approved by China. “The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure,” Caterpillar said in economic commentary with today’s first-quarter earnings report. Chief Executive Officer Jim Owens, 63, is a member of the president’s Economic Recovery Advisory Board.

- New York Times Co.(NYT) posted a wider first-quarter loss after advertising revenue dropped 27 percent and said the rate of decline in ad sales will be similar in the second quarter. The shares slumped. The net loss expanded to $74.5 million, or 52 cents a share, from $335,000 a year earlier, the newspaper publisher said today in a statement. Sales fell 19 percent to $609 million, trailing the $634.3 million average of four analysts’ estimates compiled by Bloomberg.

- Assets owned by hedge funds including borrowings may have fallen by 75 percent to a decade- low, with less competition paving the way for better returns, said Blaine Tomlinson, chairman of Financial Risk Management Ltd. The total book size of assets owned by hedge funds may have declined to $2 trillion, from $8 trillion, he said at the GaimAsia 2009 hedge fund conference in Hong Kong today, reducing the industry to a level last seen a decade ago. Tomlinson founded Financial Risk Management, a London-based fund of funds manager overseeing $10 billion, in 1991. “This is pretty important because it means that there’s far less competition for alpha opportunities,” which refers to the premium that an investment earns over a certain benchmark, said Tomlinson.

- Shipments form the California ports of Los Angeles and Long Beach, which together handle about 40% of US container traffic, grew on a month-to-month basis in February and March, indicating a decline in exports may be bottoming out. “March improved meaningfully from February, after February improved from January,” Thomas Wadewitz and Alexander Johnson, analysts at JPMorgan wrote in a report. Outbound traffic from the two ports, when calculated on a two-year basis to account for the holidays, showed an increase in March of 1.6%, whereas February’s decline was 10% and January’s 17.1%, JPMorgan said. Inbound shipments, reflecting US imports, showed March improved from February.

Wall Street Journal:

- Broadcom Corp.(BRCM) Monday night was readying a roughly $800 million unsolicited cash offer for Emulex Corp.(ELX), according to a person familiar with the matter, in a sign that dealmaking continues unabated in the technology sector.

- Nearly 60% of China's semiconductor manufacturing capacity went unused in the first quarter, according to market researcher iSuppli Corp., which said it was the highest amount since it began tracking the market in 2000. Capacity utilization fell to 43%, marking a huge drop over the past several years from a high of 92% in the second quarter of 2004.

- President Barack Obama left open the possibility of legally pursuing the Bush administration officials who formulated the policies that led to "enhanced interrogation techniques" -- which critics have called torture.

CNBC:

- Price Is Right: Home Buyers Are Testing the Market Again.

- US junk bonds are posting their best start to a year since 1991 as hopes that the worst of a global financial crisis may be over entice investors back into riskier bonds. Boosted by a 7.1 percent gain in April to date, junk bonds have posted a 12.5 percent year-to-date total return, by far the best performance of any major category of U.S. bonds, according to Merrill Lynch data.

Barron’s:
- Nintendo(NTDOY) is cheap, especially for a company whose profits could jump 40% this year. Waning Japanese demand needs to be put in perspective.

NY Times:

- The Treasury Department’s most ambitious plans to rescue troubled banks — partnerships between the government and private investors, backed by the Federal Reserve — are inherently vulnerable to fraud and should not be started without stronger safeguards, a top government investigator warned in a report to be released Tuesday. The report also warned that the Treasury’s $700 billion Troubled Asset Relief Program has evolved into a $3 trillion effort of “unprecedented scope, scale and complexity” and comes with too little oversight and too little information about what companies are doing with the taxpayer money they are getting. “The American people have a right to know how their tax dollars are being used,” wrote Neil M. Barofsky, the special inspector general assigned to monitor the bailout program, in his second report to Congress.

MarketWatch:
- Coach Inc.(COH) on Tuesday said third-quarter profit fell 29%, hurt by costs related to job cutting and store closings and consumers paring back on spending. However, results were better than Wall Street had expected after the company noted improvement in North American comparable sales and traffic from the holiday quarter, and the decline in the region handily exceeded analysts' estimates.

- Jack Bauer can’t stop ‘The Goldman Conspiracy’ 10 reasons why Wall Street has absolute power over America’s democracy.

Washington Post:

- As Congress returns to begin an intense debate over reshaping the nation's $2.2 trillion health-care system, prominent left-leaning organizations and liberal House members are issuing a warning to their Democratic allies: Don't cave on us. The early skirmishing -- essentially amounting to friendly fire -- is perhaps the clearest indication yet of the uphill battle President Obama faces in delivering on his promise to make affordable, high-quality care available to every American. Disputes over whether to create a new government-sponsored insurance program to compete with private companies shine a light on the intraparty fissures that may prove more problematic than any partisan brawl. More than 70 House Democrats recently warned party leaders that they will not support a broad health reform bill that does not offer consumers a government-sponsored policy, and two unions withdrew from a high-profile health coalition because it would not endorse a public plan.

Miami Herald:

- A top House Republican will unveil legislation Tuesday that could open the door to the first oil and gas drilling off Florida's coast in decades. Rep. Dean Cannon, the Orlando Republican who is slated to become House leader in 2010, will ask the House Policy Council on Tuesday to pass a bill that lifts Florida's ban on oil drilling off state waters. If lawmakers agree to pass the bill, it would be a complete reversal in state policy since the state imposed a virtual ban on drilling nearly 30 years ago. But after years of resisting oil and gas drilling off Florida shores, the state's fiscal straits have made it politically practical for Cannon to pursue the change. The measure, which drew howls of protest from environmentalists, would replace the ban with a plan to allow the governor and Florida Cabinet to charge $1 million per application to explore state-controlled waters that stretch between 3 and 10 miles offshore.

Washington Times:

- On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband's real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms. Mrs. Feinstein's intervention on behalf of the Federal Deposit Insurance Corp. was unusual: the California Democrat isn't a member of the Senate Committee on Banking, Housing and Urban Affairs with jurisdiction over FDIC; and the agency is supposed to operate from money it raises from bank-paid insurance payments - not direct federal dollars.

Politico:

- Sen. John McCain (R-Ariz.) is calling on the Obama administration to apologize to veterans over a recently released Department of Homeland Security report warning that “right-wing extremists” will attempt to “radicalize returning veterans.” “The last people on Earth we need to worry about are our veterans,” McCain said during an interview Monday night with Fox News’ Greta Van Susteren. “It’s insulting.” “Timothy McVeigh didn't learn to make that huge bomb while he was in the military. He learned it afterwards,” McCain added. “So to point out one veteran who committed an act of atrocity I think is outrageous.”

- Connecticut Sen. Joe Lieberman has been a good Democratic soldier since Barack Obama covered his back during the kick-him-out-of-the-caucus imbroglio earlier this year. But the hawkish independent, who questioned Obama's experience level from the podium of the RNC last summer, is taking issue with the administration's release of the torture memos, telling Fox host Greta Van Susteren it was "a bad idea" that helps America's enemies.

USAToday:

- The plastic bag industry has an Earth Day surprise: less plastic. Under pressure from consumers, environmental advocates and retailers, the companies that make more than 80% of plastic bags used by the nation's big retailers on Tuesday will announce plans to make the plastic bags from 40% recycled content by 2015.

- A government watchdog has launched "almost 20" criminal investigations related to the $700 billion financial bailout program, according to a report to Congress to be released Tuesday. Neil Barofsky, the special inspector general for the rescue program, says in the report that the probes involve possible public corruption; corporate, stock and tax fraud; insider trading; and mortgage fraud. Barofsky provided no information on who is being investigated or why, saying details will not be released "until public action is taken."

Reuters:
- Honda Motor Co President Takeo Fukui said on Tuesday the U.S. market has shown signs of having bottomed out since the start of April.

- Citigroup Inc (C) Chief Executive Vikram Pandit said he expects the No. 3 U.S. bank to rebound from its current woes and pledged that it would repay "every dollar" it owes to the U.S. government.

- TD Ameritrade Holding Corp (AMTD) reported better-than-expected quarterly revenue driven by near-record trading volumes in March, lifting its shares, but low interest rates continued to pinch earnings.

- The Treasury Department is considering giving banks and investors billions of dollars in fresh incentives to modify troubled mortgages and save homeowners from foreclosure, sources familiar with official deliberations said. Under one scenario, investors in second liens would receive a cash payment if they agree to ease the terms of troubled loans and accept a smaller return on their mortgage investment, the sources said.

TimesOnline:

- Investors withdrew a near-record $104 billion from the hedge fund industry during the first quarter, according to research published today, as doubts persist about the beleaguered sector's ability to perform. A full $85 billion of the redemptions, the second highest on record, came from fund of fund investments, after the Bernard Madoff ponzi scandal blew a hole in investors' confidence in the approach. Redemptions in the first quarter were the second highest on record, according to HFR, second only to the four quarter last year, when more than $152 billion was pulled out of the sector worldwide. After peaking at about $2 trillion, hedge funds currently manage around $1.33 trillion of assets, HFR said. About $525 billion of this is invested in fund of funds, according to HFR.

Maeil Business:

- South Korea and the US may jointly develop and invest in a “smart” power grid to improve energy efficiency, citing a government official. Both countries will sign a preliminary agreement in June when US and South Korea hold a summit.

Bear Radar

Style Underperformer:
Large-cap Growth (+.76%)

Sector Underperformers:
Education (-8.20%), Gold (-2.47%) and Medical Equipment (-1.39%)

Stocks Falling on Unusual Volume:
ZION, PNFP, BK, OLN, COCO, APOL, GOLD, MRK, STJ, OMI, KNDL, ICLR, JDAS, FWRD, PFWD, NTRS, BRCM, MYGN, LINC, PPDI, OTEX, STRA, NFLX and AME

Stocks With Unusual Put Option Activity:
1) ZION 2) COH 3) CAT 4) ANN 5) PFE

Bull Radar

Style Outperformer:
Small-cap Value (+.25%)

Sector Outperformers:
Airlines (+5.28%), Hospitals (+5.10%) and Networking (+4.05%)

Stocks Rising on Unusual Volume:
BAS, NBR, CVLT, ERTS, UTX, STO, MICC, CMED, ASTE, QLGC, LNCR, HWAY, DNDN, YHOO, ORCL, SHOO, LMDIA, UMBF, SCHN, STBA, PALM, ARST, EVY, COH, MAN, PKG, ROG and DGX

Stocks With Unusual Call Option Activity:
1) WPI 2) COH 3) KEY 4) ALTR 5) CMA