Stocks Most;ly Lower into Final Hour on More Shorting, Financial Sector Pessimism, Rising Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Medical longs. I added (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is above average. Investor anxiety is above average. Today’s overall market action is mildly bullish. The VIX is falling 3.65% and is very high at 31.64. The ISE Sentiment Index is below average at 121.0 and the total put/call is about average at .86. Finally, the NYSE Arms has been running high most of the day, hitting 2.16 at its intraday peak, and is currently 1.78. The Euro Financial Sector Credit Default Swap Index is rising 1.28% today to 122.33 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 2.53% to 151.68 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 4.56% to 73 basis points. The TED spread is now down 390 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 3.76% to 44.75 basis points. The Libor-OIS spread is rising 4.11% to 71 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 1.53%, which is down 111 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is up two basis points today. The major averages are rallying from morning lows this afternoon, however bank and tech shares remain somewhat “heavy.” Nikkei futures indicate an +92 open in Japan and DAX futures indicate an +45 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, rising financial sector pessimism and higher energy prices.

Today's Headlines

Bloomberg:

- U.S. stocks erased declines after former Federal Reserve Chairman Alan Greenspan said the nation is seeing a “very significant” increase in the availability of money and he expects continued market improvement.

- Prudential Financial Inc.(PRU), the second-largest U.S. life insurer, plans to seek “opportunistic acquisitions,” Chief Executive Officer John Strangfeld said.

- A clip on Google Inc.’s YouTube of a congressman scolding the Federal Reserve’s inspector general on her oversight of taxpayer funds has garnered more than 166,000 viewings in six days since a hearing on Capitol Hill. Representative Alan Grayson, a Florida Democrat, chastised Inspector General Elizabeth Coleman for what he deemed a lack of oversight of the central bank’s off-balance-sheet transactions. The video titled “Is Anyone Minding the Store at the Federal Reserve?” was posted a day after Coleman’s May 5 testimony to a House Financial Services subcommittee. “Do you know who received that $1 trillion-plus that the Fed extended and put on its balance sheet since last September?” Grayson asked. Coleman responded by saying she didn’t know. “We have not looked at that specific area,” she said in the nearly five-and- a-half minute clip.

- India’s industrial production fell the most in 16 years in March as the worst global recession since World War II damped demand for the nation’s exports. Output at factories, utilities and mines declined 2.3 percent from a year earlier after a revised 0.7 percent drop in February, the statistics agency said in New Delhi today. That was more than three times analysts’ estimates and the worst performance since January 1993, according to Bloomberg data.

- India’s opposition Bharatiya Janata Party will cut spending and increase tax collection if it returns to power this month to plug a revenue shortfall that imperils growth, former finance minister Yashwant Sinha said. “You will have to cut back on whatever expenditure you can without cutting back on essentials,” Sinha, 71, said in an interview in New Delhi yesterday, without specifying how much he would seek to curb expenditure.

- The rally in US stocks may continue as the largest money managers shift their record levels of cash into equities, according to Bank of America Corp. Professional investors had $2.51 trillion in money-market funds on April 27, suggesting they are still shunning risk, Bank of America’s Mary Ann Bartels wrote. “This cash is a future source of demand for US equities and a contrarian bullish signal,” said Bartels, who ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey.

- India’s steelmakers, facing increased competition from producers in China and Russia, have asked the government to raise tariffs on imports they say are being sold at prices that don’t reflect costs. “These countries are willing to sell at any price,” said Seshagiri Rao, joint managing director at JSW Steel Ltd., India’s third-biggest producer. “Chinese steelmakers enjoy subsidies.” China, Russia and Ukraine accounted for 57% of global output in March, from 46% in November. The joint stake of Japan, India, the US, South Korea and Germany fell to 22% from 29%, according to the World Steel Assoc.

- The U.S. reported the first budget deficit for April in 26 years, recording a shortfall in the month that usually sees a jump in tax payments before the Internal Revenue Service’s mid-month deadline. The excess of spending over revenue climbed to $20.9 billion, compared with a surplus of $159.3 billion in the same month a year earlier, the Treasury said today in Washington. For the fiscal year to date, the shortfall totaled $802.3 billion, more than four times the year-to-date gap of $153.5 billion in April 2008. For the fiscal year that ends Sept. 30, the deficit is projected to reach a record $1.75 trillion, according to a Congressional Budget Office forecast, as the recession crimps revenue and President Barack Obama’s administration spends and cuts taxes in a bid to spur growth. That would be almost four times the previous fiscal year’s $454.8 billion shortfall. “When the government can’t post a surplus in April, you know things are dire,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York.

- DigitalGlobe Inc.(DGI), the provider of satellite images to Google Earth and U.S. intelligence agencies, plans to sell $264.6 million in stock, becoming just the third U.S. technology initial public offering this year. The deal, scheduled to price tomorrow, will raise $16.6 million for the Longmont, Colorado-based company, with the rest going to hedge funds and institutional investors, according to a regulatory filing.

Wall Street Journal:

- Senate leaders are considering new federal taxes on soda and other sugary drinks to help pay for an overhaul of the nation's health-care system. The taxes would pay for only a fraction of the cost to expand health-insurance coverage to all Americans and would face strong opposition from the beverage industry. They also could spark a backlash from consumers who would have to pay several cents more for a soft drink. On Tuesday, the Senate Finance Committee is set to hear proposals from about a dozen experts about how to pay for the comprehensive health-care overhaul that President Barack Obama wants to enact this year. Early estimates put the cost of the plan at around $1.2 trillion. The administration has so far only earmarked funds for about half of that amount.

- Inflation-linked U.S. government debt has rallied since the start of this year, but now the market is setting up for a short-term correction with the inflation outlook remaining subdued in coming months. For Mihir Worah, manager of the $12.1 billion Real Return Fund at bond-fund giant Pacific Investment Management Co., that means trimming the fund's short-term position in Treasury inflation-protected securities, or TIPS, "close to neutral" from the bullish view held two months ago.

- Pakistani army commandos on Tuesday landed in the high mountains of the Swat Valley where top militant commanders were believed to be hiding, a significant new move in a conflict the army says has created 800,000 new refugees.

- U.S. oil field service company Weatherford International Ltd. (WFT) has won a deal worth $224.4 million to drill 20 wells in the Buzurgan oil field in southern Iraq, an Iraq cabinet spokesman said Tuesday.

- Microsoft Corp.(MSFT) is developing a new videocamera for its Xbox 360 videogame console that will allow players to control games with the movement of their bodies, according to people familiar with the matter.

CNBC:

- Several large US banks undertook big capital-raising efforts on Tuesday, hoping to satisfy regulators who want to see bigger cushions against a deep recession, or proof they have enough of a buffer already.

- The Standard & Poor's 500 could hit 1,050 within the next year even as the economy struggles to recover, noted Goldman Sachs analyst Abby Joseph Cohen told CNBC.

- Former New York Governor Eliot Spitzer hasn’t learned a thing from his recent ordeals and has destroyed as much value as anybody else in America, Kenneth Langone, former director of the New York Stock Exchange, told CNBC Tuesday.

- This is not a bear market rally but a cyclical bull market, said Barton Biggs, managing partner at Traxis Partners. “I don’t think it’s too late [to get into the market],” Biggs told CNBC. “We’re about half or 60 percent of the way through the upside.” “So we’ve still got significant room on the upside,” he said.

Barron’s:
- While Bank of America (BAC) and others dilute common shareholders with new stock, Bank of New York Mellon (BK), or BONY, looks like a much better bet to us. As a non-traditional bank, BONY owes the government less and could well rise further with a rebound in overall market activity.

MarketWatch:
- Shares of Foundation Coal(FCL) rallied more than 20% Tuesday after it agreed to be bought by Alpha Natural Resources(ANR) in a deal valued at around $2 billion.

NY Post:

- Billionaire corporate raider and activist investor Carl Icahn plans to continue his assaults on companies he feels need change, but he's doing it more through bonds rather than stocks, according to an investor letter obtained by The Post. The 73-year-old agitator said he sees a "once in a generation" opportunity to buy distressed debt, according to the letter from hedge fund Icahn Partners, which is dated May 1 and is signed by Icahn.

Washington Times:

- President Obama's nominee for the Treasury Department's top legal job still can receive almost $3 million in pay over the next three years from one of the nation's largest financial-services companies under a compensation plan approved by government ethics lawyers. If confirmed as the department's next general counsel, George W. Madison would earn a government salary of $153,200 and get an additional $955,000 next year from his previous employer, TIAA-CREF, as a participant in the New York-based company's "long-term compensation plan," according to a government ethics filing. Retirement-planning company TIAA-CREF manages more than $300 billion in retirement and other assets for 3.6 million members, mostly working in the medical, research and academic fields. The company has a big presence in Washington, spending more than $1 million to lobby Congress, the White House, the Treasury Department and other agencies over the past year. Ethics specialists say Mr. Madison's continuing financial relationship with TIAA-CREF, which has lobbied government officials on numerous issues, including the Troubled Asset Relief Program (TARP), deserves close scrutiny, given the company's broad interests on issues in which the Treasury Department holds sway.

Business Insider:

- Lenny Dykstra's creditors are becoming an angry mob, says Keith Kelly at the Post. Especially now that he's lost a self-described $3 million stock-advice deal with TheStreet.com. LENNY "Nails" Dykstra, the former big-league outfielder turned financial-stock picker and glossy-magazine publisher, is drowning in a sea of bad debts and lawsuits that have pushed his total indebtedness to around $50 million, according to one source.

USAToday:

- In a bid to win over Internet-savvy travelers, AirTran Airways (AAI) this summer will become the first large U.S. airline to offer wireless Internet access on every flight nationwide. AirTran plans to have all 136 of its Boeing 737 and 717 jets equipped with in-flight wireless service by late July, CEO Bob Fornaro said Monday. For a fee, the Orlando-based, low-fare carrier will offer Wi-Fi for passengers' wireless-enabled laptops, smartphones and personal digital assistants.

VentureBeat:

- Developers may be making tens of millions of dollars through games and virtual goods on Facebook’s platform, but the social network itself hasn’t had a way to get a share of that money. This may be about to change, as it plans to begin testing a payments system with developers in several weeks, according to industry sources.

Reuters:
- General Motors Corp(GM) stock plunged more than 22 percent to a 76-year low on Tuesday, a day after GM's top executives dumped their shares as the automaker heads toward a bankruptcy or a restructuring that would all but wipe out existing shareholders.

- The risk of Dendreon Corp's (DNDN) Provenge prostate cancer vaccine failing to win U.S. approval in its second attempt is "low," the biotechnology company's CEO said on Tuesday.

Globe and Mail:

- Great-West Lifeco Inc. GWO-T is looking for acquisition opportunities in the U.S., where the life insurance industry will be transformed by a wave of deals, its chief executive officer says. "We are looking there, and we are interested in doing acquisitions," Allen Loney, the head of the Winnipeg-based company, said of the U.S. as well as Britain.

CTV:

- Best Buy Co. Inc. (BBY) is looking to lessons it learned in Canada to help double its annual sales to $100-billion (U.S.) within a decade, as it aggressively pursues the kind of growth that has made it one of the best-performing American stocks over the past two decades.

GulfNews.com:
- A total of 27 real estate projects are up for possible cancellation in Dubai as the Land department review the status of them. Bin Galita had said earlier that he expected around 25 per cent of projects in Dubai would be cancelled, a figure he said is now "almost the same".

Bear Radar

Style Underperformer:
Small-cap Value (-3.76%)

Sector Underperformers:
Banks (-6.10%), Gaming (-5.31%) and Homebuilding (-5.03%)

Stocks Falling on Unusual Volume:
GEOY, PVTB, RTP, TIN, LUK, WFC, STI, FCX, AIPC, QSFT, TTEC, SWSI, ARST, NUAN, FSYS, PZZA, TSRA, CATY, SNDK, APC, GXP, PFG, USB and MR

Stocks With Unusual Put Option Activity:
1) ATVI 2) CY 3) ADSK 4) LRCX 5) MBI

Bull Radar

Style Outperformer:
Large-cap Value (+.45%)

Sector Outperformers:
Drugs (+2.42%), Medical Equipment (+1.15%) and Telecom (+.56%)

Stocks Rising on Unusual Volume:
TWTC, PDA, PFE, VIP, LIHR, GSK, E, RDS/A, CIB, STEC, WINN, CTRP, KNXA, HMIN, FOSL, MTXX, TLEO, JRCC, PRSC, MDCO, APEI, CGRB, MYGN, CWCO, USNA, FCL, PDA, BMA and FLR

Stocks With Unusual Call Option Activity:
1) CTRP 2) STEC 3) ODP 4) AMD 5) USB

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Tuesday Watch

Late-Night Headlines
Bloomberg:

- Federal Reserve Chairman Ben S. Bernanke said he’s encouraged by U.S. banks’ plans to raise capital after government stress tests and indicated firms need to conduct further internal exams to identify other risks. The banks, especially those with “trading and investment banking businesses,” should keep monitoring “operational, liquidity and reputational risks,” which weren’t addressed by the exam concluded last week, Bernanke said in a speech today at a Fed conference in Jekyll Island, Georgia. The remarks signal that the Fed and other U.S. regulators will keep a closer eye on firms such as Goldman Sachs Group Inc.(GS) and Morgan Stanley(MS) after last year’s collapse of Lehman Brothers Holdings Inc. and near-failure of Bear Stearns Cos.

- MBIA Inc.(MBI), the largest bond insurer by total guarantees, posted its second profit in seven quarters as its plunging creditworthiness created an accounting gain. The first-quarter net profit of $696.7 million, or $3.34 a share, compared with a loss of $2.4 billion, or $12.92 a share, a year earlier, the Armonk, New York-based company said today in a filing with the U.S. Securities and Exchange Commission. The shares rose 18 percent to $8.24 at 6:33 p.m. in late trading.

- Investors should be on weakness in both the Canadian and Australian dollars by buying on-year digital options versus the greenback, according to Deutsche Bank AG, the world’s biggest currency trader. The increased demand for riskier assets tied to growth will probably fade as the global economy recovers slowly, pushing down Canada’s loonie and the Aussie, said Adam Boyton, currency strategist at Deutsche Bank in New York.

- Mexico’s credit rating outlook was cut to negative from stable by Standard & Poor’s as the country’s first recession in eight years swells the budget deficit. “Mexico’s fiscal and external positions have deteriorated,” S&P wrote in a statement. This “heightens underlying structural fiscal vulnerabilities, such as a budgetary dependence on oil revenue, the absence of significant fiscal savings and a low non-oil tax base,” S&P said. S&P kept Mexico’s foreign debt rating at BBB+, the third- lowest investment grade rating. The negative outlook means the rating may be lowered. S&P has only cut Mexico’s foreign debt rating once since it initiated coverage 17 years ago -- in February 1995 following the peso devaluation that sparked capital outflows across Latin America.

- Alcoa Inc.(AA), the largest U.S. aluminum producer, said restarting Chinese smelters would harm a market still struggling to cope with a global surplus of the metal. “There are rumors of smelter restarts in China,” Executive Vice President Bernt Reitan said today in an interview at the CRU World Aluminium Conference in Dubai. “There is no need for restarts when you look at the global supply and demand balance. We’re still in a situation of significant oversupply.” China is the world’s largest producer of aluminum. Prices of the metal, used in cars, planes and drinks cans, have fallen 48 percent in the past year as stockpiles monitored by the London Metal Exchange more than tripled to a record 3.9 million metric tons. A government stimulus package may deliver “modest growth” in demand this year in China, the largest consumer, compared with a projected 7 percent drop in world aluminum use, Reitan said. European and North American demand will slide 15 percent.

- Copper fell for a third day on speculation that Chinese import demand may drop, helping to erode a rally that’s boosted the price of the metal used in pipes and wires by almost half this year. “We expect imports to slow in coming months,” Citigroup Inc. analysts led by Alan Heap, wrote in a report today, saying some Chinese demand, especially speculative buying, may not be sustainable. Copper prices may drop “on falling Chinese buying interest,” according to a report from Societe Generale SA. China imported 748,281 metric tons of refined copper in the first three months of the year, 92% more than in the same period last year, according to customs data from the world’s third- largest economy. The surge in overseas shipments had been driven by purchases by China’s State Reserve Bureau, shortages of scrap and the rebuilding of inventories, Citigroup’s Heap wrote. “Some of the copper recently imported has gone into speculative stockpiles, encouraged by the arbitrage and the recent credit expansion,” said Citigroup’s Heap. “This portion of offtake growth is not sustainable.”

- A bipartisan group of lawmakers is reviving legislation that would push China to raise the value of its currency, the yuan, by threatening to raise tariffs on imports.

- China’s export slump worsened in April, making it harder for the government to revive the world’s third-biggest economy. Overseas sales declined 22.6 percent to $91.94 billion from a year earlier, the official Xinhua News Agency said. Imports fell 23 percent. The collapse of world trade has cost millions of jobs in China and dragged growth to its weakest pace since at least 1999. Surging lending and a 4 trillion yuan ($586 billion) stimulus package are yet to establish solid foundations for an economic recovery, the central bank said last week. “The export outlook remains highly uncertain and downbeat,” said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong.

Wall Street Journal:

- Sounding a note of cautious optimism, Honda Motor Co.'s finance chief said the company plans to increase output slightly this quarter. Anticipating that once-bloated inventories probably will ease to appropriate levels by July, Honda plans to increase production at its Japanese factories, Chief Financial Officer Yoichi Hojo said in an interview at the company's headquarters here.

- The number of homes listed for sale in many U.S. cities continued to fall in April in what some analysts see as a sign that the market may be nearing a bottom. But the picture is clouded by uncertainty over how many foreclosed properties will hit the market. The supply of homes for sale in 29 major metropolitan areas at the end of April was down 3.6% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The ZipRealty data cover all single-family homes, condominiums and town houses listed on local multiple-listing services in metro areas where the firm operates. On a national basis, inventories typically increase in April as for-sale signs bloom for the spring home-shopping season. Since 1982, the average increase in April from the prior month has been 4.8%, according to Zelman & Associates, a research firm. Compared with the year-earlier month, the April inventory in the 29 metro areas was down 21%.

- How ObamaCare Will Affect Your Doctor. At the heart of President Barack Obama's health-care plan is an insurance program funded by taxpayers, administered by Washington, and open to everyone. Modeled on Medicare, this "public option" will soon become the single dominant health plan, which is its political purpose. It will restructure the practice of medicine in the process. Republicans and Democrats agree that the government's Medicare scheme for compensating doctors is deeply flawed. Yet Mr. Obama's plan for a centrally managed government insurance program exacerbates Medicare's problems by redistributing even more income away from lower-paid primary care providers and misaligning doctors' financial incentives. Like Medicare, the "public option" will control spending by using its purchasing clout and political leverage to dictate low prices to doctors. (Medicare pays doctors 20% to 30% less than private plans, on average.) While the public option is meant for the uninsured, employers will realize it's easier -- and cheaper -- to move employees into the government plan than continue workplace coverage. The Lewin Group, a health-care policy research and consulting firm, estimates that enrollment in the public option will reach 131 million people if it's open to everyone and pays Medicare rates, as many expect. Fully two-thirds of the privately insured will move out of or lose coverage. As patients shift to a lower-paying government plan, doctors' incomes will decline by as much as 15% to 20% depending on their specialty.

- The Obama administration has backed off plans to bring U.S. Postal Service worker benefits in line with those of other federal workers. A line item in Obama's preliminary budget released in March showed the government would save $752 million in fiscal year 2010, or $9.4 billion over the next decade, by modifying USPS worker benefits.

- Madison Avenue is plowing more resources into a new marketing medium: Apple Inc.'s iPhone. In the past several months, companies such as Burger King Holdings Inc., Zippo Manufacturing Co. and Lions Gate Entertainment Corp. have experimented with promotional software applications that can be downloaded onto the iPhone, or they have created ads that are placed within other popular applications for the device. At the most basic, marketers are taking advantage of the iPhone's advanced video and screen capabilities by creating streaming video ads. But some are taking things further by offering ads disguised as apps.

- Ford Motor Co.(F) will offer 300 million common shares in a public offering designed to shore up the car maker's cash reserves and keep the company out of bankruptcy as its crosstown rivals struggle to restructure. Ford's move -- which could raise $1.7 billion to $2 billion -- indicates the company believes investors will pin their hopes on it as General Motors Corp. and Chrysler LLC are consumed by uncertain reorganizations.

- The Pentagon ousted its top general in Afghanistan and appointed a new leadership team, in an attempt to jump-start a new war strategy that relies more on counterinsurgency tactics and less on conventional warfare.

- Congratulations, taxpayers. Soon GMAC LLC, the money-burning auto and mortgage lender, will likely join Fannie Mae, Freddie Mac, American International Group and Citigroup in your investment portfolio. By the time all the checks have cleared, you may have sunk upward of $20 billion into this former ward of General Motors, an amount equivalent to $210,000 for each of the nation's public schools. GMAC differs from other companies under the government thumb because it isn't too big to fail. So the government doesn't need to save GMAC to safeguard the financial system.

- Target Corp.(TGT), under pressure from an activist shareholder, is using fresh foods and other recession-proof groceries as the cornerstone of a plan to quiet criticism and reverse a slide in sales. The Minneapolis-based retailer, best known for its fashionable merchandise and jazzy marketing savvy, is pinning its rebound hopes on a distinctly unchic notion: transforming a corner of its discount department stores into a grocery store.

NY Times:

- As walk-in clinics at stores like CVS and Wal-Mart offer convenient alternatives to doctors’ offices and hospital emergency rooms, some hospitals are fighting back — with walk-in clinics at some of those same retailers. Around the country, hospitals are now affiliated with more than 25 Wal-Mart clinics. The Cleveland Clinic has lent its name and backup services to a string of CVS drugstore clinics in northeastern Ohio. And the Mayo Clinic is in the game, operating one Express Care clinic at a supermarket in Rochester, Minn., and a second one across town at a shopping mall.

- It’s unlikely that any group of professionals is happier to highlight the dullness of their work than small-town bankers. At a recent conference held here by the Indiana Bankers Association, attendees said it over and over: our business is plodding and boring and we would not have it any other way. “Banking should not be exciting,” said Clay W. Ewing, president of retail financial services at German American Bancorp, a community bank in Jasper. “If banking gets exciting, there is something wrong with it.”

IBD:

- Synaptics (SYNA) makes touch interface devices for notebook PCs, mobile phones and consumer electronics. It has more than 60% of the market for trackpads for notebook computers, and it's the leading provider of capacitive touch-screens — that is, screens that detect the electrical current in the human body — for mobile phones.

CNNMoney:

- Dolby’s(DLB) Sweet Sound.

Wealth Bulletin:

- Funds of funds are facing their biggest challenge. On average, funds of hedge funds returned -21% last year – worse even than their underlying managers, with single hedge funds returning -19%, according to figures from Hedge Fund Research, the data provider. “Going forward, the successful fund of hedge funds is going to look different. It’s going to evolve. You’ll see consolidation around the quality leaders.” Below, Financial News lists some possible solutions for funds of funds to save their businesses.

Washington Post:

- Robert C. Murtha Jr. has made a sizable living for years working with companies that rely on Pentagon contracts over which his uncle, Rep. John P. Murtha (D-Pa.), holds considerable sway. He has maintained that his uncle played no role in his defense-related work, much of it secured without competition. Newly obtained documents, however, show Robert Murtha mentioning his influential family connection as leverage in his business dealings and holding unusual power with the military. The documents add to mounting questions about Rep. Murtha, whose use of federal earmarks to help favored defense companies and his relationship with a former lobbying firm are under scrutiny by federal investigators. The congressman has used his control over Pentagon funds to build a hub of defense-related industry in his congressional district and has also won generous campaign donations from the companies.

Forbes.com:

- Are Short Drug Patents Hurting Patients? Developing drugs takes longer than ever, but patient laws don’t recognize that.

Financial Times:

- The completion of US banking “stress tests” has unleashed a fee bonanza for Wall Street, with financial institutions set to earn more than $500m in just a few weeks for helping rivals raise equity to plug capital shortfalls and repay federal aid. The spike in underwriting fees, which touched a record low in the first quarter of 2009, will boost profits of banks’ securities units at a time when they have been hit by the slump in lucrative markets such as securitizations and mergers. With a number of smaller banks expected to announce equity raisings in the coming weeks, the current quarter could become the biggest on record for underwriting fees from US banks. Morgan Stanley(MS) and Goldman Sachs(GS) - two of Wall Street’s traditional equity powerhouses - are set to gain large slice of the fees as they are underwriting several deals.

- According to the Depository Trust & Clearing Corporation, investors hold $34bn in CDS on GM. Once off-setting positions are considered, the DTCC estimates CDS holders would make a net profit of $2.4bn if GM were to default. The opposition of 10 per cent of bondholders is enough to derail the proposal, which has already triggered protests from investors who argue it unfairly rewards the UAW at the expense of bondholders. “You have every incentive not to agree,” said one bondholder, a large credit hedge fund. “You would be locking in a loss if you did. It isn’t only the ‘shark’ capital; it will be the mom and pop mutual funds who will oppose this deal. ”Prices for GM’s debt and CDS indicate investors believe a bankruptcy filing is highly likely. GM’s bonds are trading at between 6 and 12 cents on the dollar.

- World shipping markets face at least two years of serious problems as excess ship orders depress rates, one of the world's most important shipping executives has said. Tor Olav Troim, a key aide to John Fredriksen, the world's most important shipowner , said it remained "too early" to start buying ships cheaply to prepare for a market recovery.

Frankfurter Allgemeine Zeitung:

- BASF SE’s first-quarter sales fell 34% in China, year over year, and fourth-quarter sales fell 24%, citing the chemical company’s Asia-Pacific head, Martin Brudermueller. Sales may drop more in the coming months as a result of increasing unemployment in developed countries, which will lead to a decline in consumption and demand for products made in China, citing Brudermueller. The company closed two facilities in Korea and one in Japan and may make further cost cuts in the region, he said.

China Daily:

- Beijing authorities quarantined 264 people, including 70 foreigners, after the first A(H1N1) case was confirmed on the mainland, officials said yesterday. A total of 161 people, including 61 foreigners, were placed under medical observation as of 9 pm last night at Beijing's Guomen Hotel, Yu Debin, deputy chief of Beijing municipal tourism bureau, told China Daily.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (PCLN), raised estimates, raised target to $130.

- Reiterated Buy on (ADP), target $44.

- Reiterated Buy on (DISH), target $22.

- Reiterated Buy on (UNFI), raised target to $29, added to Top Picks Live list.

Night Trading
Asian Indices are -1.50% to +.25% on average.
S&P 500 futures -.37%.
NASDAQ 100 futures -.34%.

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Earnings of Note
Company/EPS Estimate
- (WRC)/.74

- (FOSL)/.16

- (BMC)/.63

- (AMAT)/-.10

Economic Releases

8:30 am EST

- The Trade Deficit for March is estimated at -$29.0B versus -$26.0B in February.

2:00 pm EST

- The Monthly Budget Deficit for April is estimated at -$20.0B versus $159.3B in March.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Lockhart speaking, Fed’s Rosengren speaking, weekly retail sales reports, IDB/TIPP Economic Optimism Index, Bank of America Healthcare Conference, UBS Global Financial Services Conference, CSFB Basic Materials Conference, UBS Industrials Conference, (MMM) shareholders meeting, (PRU) shareholders meeting, CSFB Aerospace & Defense Conference, Merrill Pharma/Biotech/Medical Conference and the (INTC) analyst meeting could also impact trading today.

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