Monday Watch

Weekend Headlines
Bloomberg:

- Billionaire investor Warren Buffett’s Berkshire Hathaway Inc. added to holdings of lenders Wells Fargo & Co(WFC) and U.S. Bancorp(USB) in the first quarter as the shares traded at their lowest prices in more than a decade. Buffett’s firm, the largest shareholder in San Francisco- based Wells Fargo, increased its stake in the bank by about 4.3 percent in the first quarter to 302.6 million shares, Berkshire said in a regulatory filing yesterday disclosing its U.S. stock portfolio as of March 31. Omaha, Nebraska-based Berkshire increased its holding of U.S. Bancorp by about 2.2 percent.

- Copper prices dropped for the seventh straight session in New York, capping the longest slump since December 2007, as inventories gained in China, the world’s biggest metal user. This week, stockpiles monitored by the Shanghai Futures Exchange jumped 28 percent, the third consecutive increase. A report showed China’s manufacturing output rose in April less than estimated, spurring concern that the economic rebound may be subdued. Copper fell 7.8 percent in the past seven sessions. “Concerns about Chinese demand seem to be figuring more prominently in the equation,” Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said in a report. The outlook for copper continues “to be bearish from current levels on easing Chinese” demand, analysts at Societe Generale in London said in a report on May 8.

- House Speaker Nancy Pelosi should provide proof of her allegation that the Central Intelligence Agency misled her about terrorism-related interrogation tactics or apologize for her accusations, Republican leaders said. “If the speaker is accusing the CIA and other intelligence officials of lying or misleading the Congress then she should come forward with evidence and turn that over to the Justice Department,” House Republican leader John Boehner of Ohio said on CNN’s “State of the Union” today. “If that’s not the case, I think she ought to apologize to our intelligence officials.”

- Bank chief executives will be replaced in the next couple of months as the U.S. scrutinizes financially troubled lenders, Federal Deposit Insurance Corp. Chairman Sheila Bair predicted.

- Iraq, holder of the world’s third- largest oil reserves, said storing crude in floating tankers was “unwise” and OPEC nations may need to make further production cuts, assuming demand continues to drop this year. “We don’t think it’s a wise economic decision” to produce oil from secure underground fields then pay to store it in floating tankers, Iraqi Oil Minister Hussain al-Shahristani said yesterday in an interview at the Dead Sea in Jordan at the World Economic Forum. “Future generations can benefit from it better than we can, if we don’t need it.” Speculation that oil demand may fall further than expected because of the recession were “bad news,” he said. “OPEC will have to reconsider its production levels again,” assuming consumption does continue to decline, he said.

- The U.S. economy is no longer in “freefall,” Lawrence Summers, director of the White House National Economic Council, said today in a pre-recorded video shown at a forum in Shanghai. “Statistics on sentiment and economic activity suggest a more mixed picture than they did two months ago,” Summers said. “The economy appeared to be in freefall, much like a ball rolling off the side of a table, in October. Today, no one will describe the economy in that way.”

- India’s ruling Congress party swept to the biggest election victory since 1991, ensuring a stable government in the world’s largest democracy as Prime Minister Manmohan Singh strives to engineer an economic recovery. “The people of India have spoken, and spoken with great clarity,” Singh, 76, told reporters in New Delhi, applauding the role played by party president Sonia Gandhi and her son, Rahul, whom he urged to join the Cabinet. “It will be our effort to rise up to their expectations.”

Wall Street Journal:

- Executives of Baidu Inc.(BIDU), China's leading Internet search company, held talks over the weekend with striking workers who say they are angry over salary cuts and new sales commission policies that they believe are designed to force them out of their jobs. Hundreds of Baidu employees in southern China have either stayed home or gone to the office and refused to work since May 4.

- For the private-equity industry, the future of BankUnited Financial Corp. might be the most closely watched deal of the year. The Coral Gables, Fla., thrift, with 85 branches scattered mostly in South Florida, could serve as an indicator of how private-equity firms enter the banking industry. Federal regulators earlier this year declared that BankUnited was "critically undercapitalized" and ordered it to find a buyer or raise new capital. Among the bidders expected to make a pitch by Tuesday's deadline is a consortium of private-equity shops led by billionaire investor Wilbur L. Ross. If successful, it would be one of the largest acquisitions in the financial-services sector made by private equity, and could signal a shift in the government's attitude toward private-equity buyers of banks. "Everyone is watching this deal," said Harvard Business School professor Josh Lerner, who tracks the private-equity industry. "This could be a template that will open the floodgates in terms of transactions." He said a winning bid by the consortium might help draw some of the estimated $450 billion of private-equity money off the sidelines and into banks. It also might show a willingness by the government to accept private equity over other banks as new owners.

- The Obama administration is seeking $12.8 billion in new tax revenue from life insurers over the next decade, even as the federal government offers the struggling sector bailout funds.

- The hopes of venture capitalists ride on two planned initial public offerings of stock this week, from software maker SolarWinds Inc. and online-reservation service OpenTable Inc.If they complete the share sales, the pair will be the first venture-backed IPOs in nine months, according to research firm VentureSource.

- The simmering debate over the treatment and mistreatment of terror suspects appears to have reached two stark realities: The controversy will drag on for weeks, perhaps even months, and House Speaker Nancy Pelosi will be at the center of it. Neither development is necessarily good news for the speaker, her party, or her president.

- The criminal investigation into who knew about Bernard L. Madoff's massive fraud has expanded to include some of his highest-profile investors, according to people familiar with the matter. Jeffry Picower and Stanley Chais, two philanthropists who invested heavily with Mr. Madoff, and Carl Shapiro, one of the money manager's oldest friends, are among at least eight Madoff investors and associates being scrutinized by the U.S. attorney's office in Manhattan, these people said.

MarketWatch.com:

- Greed is finally losing out to fear, judging by the mood at this week's Las Vegas Money Show, at which nearly 200 investment gurus offered hundreds of workshops and seminars to thousands of investors. I found those gurus to be surprisingly subdued about the coming year's profit prospects. More often than not, they devoted their talks and workshops to managing risk and avoiding further losses rather than how to make a killing. And that, from a contrarian point of view, is an encouraging sign.

CNBC.com:
- Goldman Sachs(GS) and JPMorgan(JPM) may receive government permission as early as next week to pay back the billions in TARP money they received last fall, sources close to both banks told CNBC.

NY Times:

- Two weeks from now, a seven-year-old hedge fund called Alson Capital Partners will return around $800 million to its investors, and shut its doors for good. The fund was founded and managed by Neil Barsky, 51, a former Wall Street Journal reporter-turned-Morgan Stanley analyst, who started his first hedge fund in 1998, just as the “hedge fund decade” was gaining steam. “When you manage a hedge fund,” Mr. Barsky said, “the cost is the incredible stress you endure. You can never escape it. You are never free. The thing that is different about running a hedge fund is that your investors own you.” “When I first started in 1998, we used to send out quarterly numbers. Now investors want weekly numbers.”

- As energy markets shrink, the same tactics that the Kremlin used to build Gazprom, the giant energy company, into a fearsome economic and political power that could restore Russian influence in the world are now backfiring, slashing both its profits and its influence. Throughout his eight years as president of Russia, Vladimir V. Putin pursued the strategic goal of dominating natural gas supplies to Europe and the pipelines that deliver them. His success was underscored in January, when for the second time in three years a pricing dispute with Ukraine disrupted the flow of natural gas, leaving hundreds of thousands in Eastern Europe shivering in the deep winter cold. But in his zeal to monopolize gas supplies, Mr. Putin, who is now Russia’s prime minister, committed Gazprom to long-term contracts with Central Asian countries for gas at a cost far in excess of current world prices. Now that the world economic crisis has sharply curtailed demand for gas, Gazprom is saddled with a glut of expensive Central Asian supplies that it is forced to sell at a loss.

Business Week:
- AT&T(T) may offer lower-cost data plans for iPhones, which would attract new subscribers and force smartphone rivals to cut prices, too.

LA Times:

- Beverly Hills hedge fund manager Bradley L. Ruderman surrendered to FBI agents Friday after being criminally charged in federal court in Los Angeles with bilking investors out of about $44 million in a wire fraud scheme.

Politico:

- Barely four months into his presidency, Obama is confronting growing dissatisfaction among members of his liberal base, who feel spurned by a series of his early decisions on issues ranging from guns to torture to immigration to gay rights. A few, like MSNBC’s Rachel Maddow, have even hurled the left’s ultimate epithet – suggesting that Obama’s turning into George W. Bush.

Forbes.com:

- Suze Orman is everywhere. On CNBC, dishing out advice on her weekend finance show. In Time magazine, as one of the world’s 100 most influential people. On bestseller lists again, with Suze Orman’s 2009 Action Plan. At the University of Illinois this weekend, getting an honorary doctorate. On the cover of Sunday's issue of The New York Times Magazine. And now in Oakland, Calif., federal court--defending civil fraud, conspiracy and breach of fiduciary duty charges over a long-term care insurance policy sold by the firm bearing her name.

The Economist:

- The ungovernable state. As California ceases to function like a sensible state, a new constitution looks both necessary and likely.

Reuters:

- Forget about bells and whistles. Asians have gone back to basics in the economic slowdown and are opting for no-frills, lower-priced products rather than brand names and items with fancy features that rarely get used.

Telegraph:

- Europe in deepest recession since War as Germany suffers. German economic policy is “bankrupt”, economists have said. The declaration was made as it emerged that Europe's biggest economy has now suffered a worse "lost decade" than Japan and is deeper in recession than any other major economy. On a day of dismal news for the European economy, official figures also showed that Italy, Austria, Spain and the Netherlands are facing their biggest combined slump in post-war history, sparking warnings about the potential for social unrest throughout Europe.

International Business Times:

- Hedge fund and traditional money management firms hard hit by last year's market meltdown are poised for a surge of mergers and acquisitions to bolster depleted assets and widen sources of revenue. "We're going to see a massive wave of consolidation across the entire asset management industry, over the next 12 to 24 months," Brian Reilly, Barclays Capital's head of asset management investment banking, told a gathering of hedge fund executives at the SkyBridge Alternatives Conference.

Sonntag:

- General Motors Corp. won’t be able to achieve $1 billion in debt payments by June 1, citing Vice Chairman Bob Lutz. “We have to come to a settlement with the involved parties or we are in a Chapter 11 process,” Lutz said.

Financial Times Deutschland:

- European Central Bank council member Axel Weber said the bank has done enough to help the economy and shouldn’t consider further measures unless things get a lot worse, citing an interview. “Only if the banking system were to become dysfunctional would we need to review our current strategy,” Weber said.

Berner Zeitung:

- UBS AG is losing employees to the competition, citing the Swiss bank’s Chairman Kaspar Villiger. “In the US the situation has reached an extent that makes us think,” he said. “Recognizable tendencies to enforce state regulation over salaries would be the dumbest thing for a country like Switzerland.”

- Deutsche Bank AG Chief Economist Norbert Walter said the German economy will shrink by 1% to 1.5% this quarter and won’t grow in 2010. Germany remains dependent on exports and the strength of the global economy and the US, Walter said.

China Daily:

- The flow of outbound tourists from China has almost come to a halt because people are afraid of contracting the A(H1N1) flu virus during travel. "Tours to almost all overseas destinations have seen a big drop, though many of these places have not reported even a single case of H1N1 infection," Zhang Qingzhu, marketing manager of China Comfortable Travel Services, said in Beijing on Friday. Group tours to Chinese mainlanders' favorite destinations such as Hong Kong, Japan, South Korea, the US, Europe, Australia and Southeast Asia have dropped the most, she said. "I can't think of any destination that has escaped the slump The decrease (in the number of tourists) is so shocking that I wouldn't like to give any figure," she said. Xiao Hong, manager of Hong Kong tours with China Travel International, said the number of mainlanders signing up for tours to Hong Kong in the first two weeks of May, "has fallen by 80 percent".

Economic Daily News:

- Taiwan Semiconductor Manufacturing Co.’s factory use may rise to 95% next month, citing equipment suppliers. Factory use in the current quarter may average around 75% from 38% in the first quarter. Sales in the April to June period may exceed the company’s guidance, the report said. Taiwan Semi, the world’s largest maker of chips designed by other companies, last month said sales this quarter would be NT$71 billion to NT$74 billion, compared with the median of 15 analysts’ estimates for NT$52.4 billion.

MoneyToday:

- Hynix Semiconductor Inc. is seeking to raise computer memory chip prices by 10% this month, citing an industry official. Hynix raised the price it charges its customers by more than 5% during the first half of the month after a 10% increase in April. The contract price of the benchmark dynamic random acce4ss memory, or DRAM, chip increased 13% to $1.06 in the first half of May, according to Dramexchange Technology Inc. Prices rose 6.8% in the second half of April.

Haaretz.com:

- Prime Minister Benjamin Netanyahu is unlikely to state support for the establishment of a Palestinian state when he meets with U.S. President Barack Obama at the White House Sunday, an aide to the prime minister said. However, in a bid to soften edgy relations with Washington, Netanyahu will propose that joint teams draft a new road map for the Palestinian peace process and a new strategy on Iran. At the meeting with Obama, Netanyahu intends to emphasize his intention to resume the peace talks with the Palestinians soon, but with the participation of the moderate Arab states. Establishing diplomatic relations between Israel and the moderate Arab states could significantly advance the peace process with the Palestinians, he will say.

Weekend Recommendations
Barron's:
- Made positive comments on (CERN), (WMT) and (MDT).

Citigroup:

- Upgraded (LEN) to Buy, target $12.

Night Trading
Asian indices are -1.50% to -.25% on avg.
S&P 500 futures -.72%.
NASDAQ 100 futures -.76%.

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Earnings of Note
Company/Estimate
- (LOW)/.26

Upcoming Splits

- None of note

Economic Releases

1:00 pm EST

- The NAHB Housing Market Index for May is estimated to rise to 16 versus 14 in April.

Other Potential Market Movers
- The Treasury’s Geithner speaking, JPMorgan Tech/Media/Telecom Conference and the Deutsche Bank Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for stocks in focus for Monday by MarketWatch.

Market Week in Review

S&P 500 882.88 -4.99%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 882.88 -4.99%
DJIA 8,268.64 -3.57%
NASDAQ 1,680.14 -3.39%
Russell 2000 475.84 -7.03%
Wilshire 5000 8,928.51 -5.26%
Russell 1000 Growth 387.37 -3.72%
Russell 1000 Value 452.62 -6.62%
Morgan Stanley Consumer 542.05 -3.34%
Morgan Stanley Cyclical 514.70 -10.72%
Morgan Stanley Technology 408.59 -2.60%
Transports 3,053.01 -8.90%
Utilities 329.80 -5.89%
MSCI Emerging Markets 30.13 -3.71%

Sentiment/Internals
NYSE Cumulative A/D Line 28,751 -11.86%
Bloomberg New Highs-Lows Index -53 -82.76%
Bloomberg Crude Oil % Bulls 20.0 -47.37%
CFTC Oil Large Speculative Longs 170,991 -2.54%
Total Put/Call .79 -9.20%
OEX Put/Call 1.24 -28.32%
ISE Sentiment 115.0 %-15.44%
NYSE Arms 2.27 +194.81%
Volatility(VIX) 33.12 +3.33%
G7 Currency Volatility (VXY) 14.14 +5.68%
Smart Money Flow Index 8,172.10 -.07%
AAII % Bulls 43.81 -.64%
AAII % Bears 35.24 +5.73%

Futures Spot Prices
Crude Oil 56.34 -3.92%
Reformulated Gasoline 168.06 -1.26%
Natural Gas 4.10 -5.79%
Heating Oil 141.88 -6.52%
Gold 931.30 +1.51%
Base Metals 132.32 -6.02%
Copper 201.75 -6.31%
Agriculture 325.40 -1.24%

Economy
10-year US Treasury Yield 3.13% -16 basis points
10-year TIPS Spread 1.52% -5 basis points
TED Spread 67.0 -10 basis points
N. Amer. Investment Grade Credit Default Swap Index 156.86 +9.02%
Emerging Markets Credit Default Swap Index 413.99 +6.27%
Citi US Economic Surprise Index +42.70 +15.41%
Fed Fund Futures imply 82.0% chance of no change, 18.0% chance of 25 basis point cut on 6/24
Iraqi 2028 Govt Bonds 61.09 +5.59%
4-Wk MA of Jobless Claims 630,500 +1.0%
Average 30-year Mortgage Rate 4.86% +2 basis points
Weekly Mortgage Applications 895,600 -8.58%
Weekly Retail Sales +.30%
Nationwide Gas $2.29/gallon +.12/gallon
US Cooling Demand Next 7 Days 8.0% below normal
ECRI Weekly Leading Economic Index 111.0 +1.19%
US Dollar Index 82.95 +.51%
Baltic Dry Index 2,544 +14.90%
CRB Index 236.24 -2.87%

Best Performing Style
Large-Cap Growth -3.72%

Worst Performing Style
Small-cap Value -8.17%

Leading Sectors
Education +8.72%
Software +1.67%
Drugs +1.01%
Computer Services -.67%
Biotech -.77%

Lagging Sectors
Steel -12.44%
Coal -13.18%
Gaming -13.31%
Oil Tankers -13.98%
Banks -16.21%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

***Alert***

Blogging will be light over the next few days due to a scheduling conflict. Sorry for the inconvenience and thanks for reading!

Bull Radar

Style Outperformer:
Small-cap Growth (+.05%)

Sector Outperformers:
Road & Rail (+2.75%), Software (+1.51%) and Restaurants (+1.29%)

Stocks Rising on Unusual Volume:
TTEC, NVTL, ERTS, PALM, ELMG, ANW, MICC, CLMT, IOC, BCS, MIDD, SFLY, GHDX, FELE, CORE, AAWW, MGLN, DDRV, CMTL, MNRO, TKLC, MRTN, ODFL, ABFS, CHDN, LORL, PETM, SRCL, MSTR, ENR, PL, AWR, HGR, VAL, JWN, MFB and HIG

Stocks With Unusual Call Option Activity:
1) ONNN 2) VAR 3) JWN 4) JCP 5) GENZ