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Tuesday Watch

Late-Night Headlines
Bloomberg:

- Goldman Sachs Group Inc.(GS), JPMorgan Chase & Co.(JPM) and Morgan Stanley(MS) applied to repay the combined $45 billion they received in October from the government’s Troubled Asset Relief Program, said people familiar with the matter. The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn’t public.

- Abu Dhabi’s Mubadala Development Co. said it owned 65.8 million shares of General Electric Co. through March, bringing the state-owned investment company closer to its goal of becoming a top 10 shareholder.

- VF Corp.(VFC) Chief Executive Officer Eric Wiseman said the world’s largest clothing maker is in “active discussions” on possible acquisitions to increase revenue from outdoors and action-sports brands. “There are lots of really interesting discussions about brands that may be appropriate,” Wiseman, 53, said in a May 15 interview at VF’s headquarters in Greensboro, North Carolina. “I hope we can make an interesting acquisition this year.”

- The cost of protecting Asia-Pacific bonds from default declined, according to traders of credit-default swaps. The Markit iTraxx Japan index fell 20 basis points to 230 at 10 am in Tokyo, Barclays Plc prices show. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 13 basis points to 211 as of 9 am in Hong Kong, according to ICAP Plc. The Markit iTraxx Australia index was quoted 15 basis points lower at 230 as of 9:33 am in Sydney, Citigroup Inc. data show.

- China’s economy is “struggling” and may fall short of the government’s 8 percent growth forecast this year as export demand slumps, said Katherine Lu, director of China equity research at Oppenheimer & Co. “The economy is struggling,” Lu said. “The biggest concern is export demand.” “I’m not as bullish on the economy,” said Hong. “Less than 25 percent of the stimulus package is new spending.”

- American Express Co.(AXP), the largest U.S. credit-card company by purchases, will cut about 6 percent of its workforce as cardholders squeezed by rising unemployment fail to pay debts. American Express rose $1.90, or 7.8 percent, to $26.13 at 4 p.m. on the New York Stock Exchange today, trimming its loss for the past year to 46 percent. The stock dropped 13 cents to $26 in extended trading after the announcement.

Wall Street Journal:

- The squabble between hedge funds and their investors over fees may be heading for a compromise -- just in time for a new round of fund raising. As outflows continue, more hedge funds are beginning to give ground. Some are offering to let investors pull money out of their funds at short notice if they can keep charging their juicy 2% management fees and 20% incentive fees. Others are asking investors to lock up their money for extended periods, and to charge lower fees in return. Heavyweight SAC Capital, run by Steven Cohen, for example, has told its investors that it will allow them to take their money out of the firm's flagship fund every quarter, rather than after three years. But SAC isn't budging on its sky-high management fees of 3% and 50% performance fees, even though the fund lost money last year. SAC is up so far in 2009. Meanwhile, some are willing to give ground on both fronts to get back into the game. Dwight Anderson's Ospraie Management, which closed its main commodity fund last year after deep losses, is launching two new funds that won't have lockups and will charge investors lower management fees of 1%, as well as 10% of any profits. It isn't clear what model will become the new standard.

- The Obama administration plans to order auto makers to increase the fuel economy of automobiles sold in the U.S. to 35.5 miles per gallon by 2016, four years faster than current federal law requires, people familiar with the matter said. The move, part of a broader overhaul of fuel-economy rules aimed at cutting greenhouse-gas emissions, would accelerate the largest government-mandated transformation of vehicles on the American road since the late 1970s and early 1980s, when the first federal fuel-economy standards took effect. A senior administration official said late Monday that the regulations would save 1.8 billion barrels of oil and reduce emissions of greenhouse gases by 900 million metric tons over the lifetime of the more efficient vehicles, equivalent to taking 177 million cars off the road or shutting down 194 coal-fired power plants.

- The Obama administration has decided to accept an appeals-court ruling that could undermine the military's ban on service members found to be gay.

- Gloomy news about Russia's economy -- figures on Monday showed April industrial production plunged 17% year-on-year -- has been mixed with some rare positives in recent weeks. Oil prices are surging, the ruble is up and Russian stocks have taken off. But even the good news has economists worried. "Oil prices now are as awful as they could be -- not low enough to force real reform and not high enough to allow free spending like before," says Vladimir Mau, a prominent economist who heads an advisory panel to a government team dealing with the financial crisis.

MarketWatch.com:
- Bloom fades on Chinese stocks. Gloomy forecast points to sharp drop for recovering market.

CNBC.com:
- As Americans grow accustomed during the recession to spending more time at home and living in the same places longer, home-improvement companies are regaining momentum.

- CEOs from several regional banks around the country told CNBC they are seeing some signs of “green shoots” in the housing market.

- A bill to overhaul credit-card practices was on track for approval by the U.S. Senate as early as Tuesday, with President Barack Obama expected to sign it into law before the end of the month. Enactment of the legislation would mark the crest of a political backlash rising for years against the card industry amid sudden interest rate increases, hidden fees and aggressive marketing programs that have angered consumers, analysts said.

NY Times:

- The financial crisis has ravaged many a Wall Street giant, but it has also produced a handful of winners. BlackRock(BLK), a money manager that is much admired but little known outside financial circles, is fast emerging as one of the nation’s financial powerhouses. BlackRock, which started in a one-room office 21 years ago, now manages $1.3 trillion in assets for big private clients, including hedge funds and foreign governments. But it is the company’s highly prized role as a government adviser and contractor that is now drawing attention. By dint of its expertise and track record, it has won contracts to help the government manage the complex rescues of Bear Stearns, the American International Group and Citigroup. It also won a bid to carry out a Federal Reserve program to stimulate the moribund housing market, and it has been hired to help evaluate Fannie Mae and Freddie Mac, the government-created mortgage finance giants.

Business Week:
- One gaming play that continues to draw crowds is WMS Industries (WMS), a major designer and manufacturer of video and reel spinning slot machines, as well as video lottery terminals. Its machines differ from the traditional slots in that they offer secondary bonus rounds, enhanced colorful graphics, and bang-up digital sounds.

CNNMoney:

- U.S. home prices are their most affordable in at least 18 years, according to a report released Monday. Nearly 73% of all homes sold in the United States during the first three months of 2009 were considered affordable. That was the highest percentage ever reported by the 18-year-old Housing Opportunity Index, an analysis of markets compiled quarterly by the National Association of Homebuilders and Wells Fargo Bank.

- Fannie Mae and Freddie Mac, charged with helping lead the nation out of its housing crisis, are facing "critical" financial problems, federal regulators said Monday. The companies suffer from severe financial, operational and compliance weaknesses, the Federal Housing Finance Agency said a report to Congress detailing its annual examinations of the firms. Taken over by the government in September, Fannie and Freddie are not able to operate without federal assistance.

Seeking Alpha:

- Barron’s Top 100 Ranking Hedge Funds for 2009.

Politico:

- CIA Director Leon Panetta warned Monday against making his agency a pawn in the nation’s partisan political battles, even as House Speaker Nancy Pelosi’s claim that she was lied to by the CIA continues to reverberate in Washington. “If they start to use these issues as political clubs to beat each other up with, that’s when we not only pay a price but this country pays a price,” Panetta said during a question-and-answer session following a lunchtime speech in Los Angeles.

Reuters:

- After 100 years in business and 10 months of frenzied but failed restructuring, General Motors Corp is weeks from the bankruptcy filing experts say will be required to complete the Obama administration's bid to reshape a fallen icon of American industry. Facing a government-imposed June 1 deadline to restructure, GM is scrambling to slash some $27 billion of bond debt, win sweeping cost concessions from the United Auto Workers union and eliminate almost 1,600 U.S. dealers. But with the clock ticking, experts see it as all but certain GM will follow its smaller rival Chrysler into federal bankruptcy court

- U.S. homebuilder sentiment jumped to its highest level in eight months in May, a private survey showed on Monday, supporting views that the three-year housing slump might be close to an end. The National Association of Home Builders/Wells Fargo Housing Market Index rose to 16 from 14 in April, in line with market expectations. The NAHB also said its measure of housing affordability surged 10 points to a record 72.5 in the first quarter of this year.

Financial Times:

- With non-performing loans and investment losses on equities and real estate expected to mount, the industry faces, for the first time, the possibility that Islamic banks could incur significant losses. “I doubt Islamic banks have set up large equalization reserves in the good times, as it would have affected returns on equity,” says Sameer Abdi, head of Ernst & Young’s Islamic practice in the Gulf. “If the downturn means that impairments rise significantly, it could mean that depositors risk losing their money.” If bank losses hit depositors it could spur a run on the entire industry, warns one expert.

- Britain has begun taking soundings with sovereign wealth funds and other investors about selling stakes in its part-nationalized banks as it seeks to tap into a revival of stock market confidence in the financial sector.

- Companies using trillions of dollars of derivatives contracts to hedge interest rate, currency and commodity price risks could face higher costs under the proposed overhaul of US rules on derivatives, industry officials say. Derivatives are widely used by the world’s biggest companies to manage all kinds of financial risks. Most of these hedging activities are done between companies and banks in the over-the-counter market.

- Ospraie Management is launching two funds focusing on commodities and other liquid securities just eight months after it was forced to close its flagship fund amid huge losses on commodities trades. The US hedge fund’s move, announced in a letter to investors, is a sign of growing confidence within the hedge fund industry.

- Barack Obama offered Benjamin Netanyahu a trademark dose of warmth and conciliation on Monday while politely distancing himself from many of the Israeli premier’s hardline positions on the Arab-Israeli conflict. But Mr Obama did not succeed in persuading Mr Netanyahu to sign up to a two-state solution

- US banks are scrambling to be in the first wave of lenders to repay Washington bail-out funds after the authorities told Wall Street executives they would allow five or six big financial groups to return taxpayers’ money before the rest of the industry. Bankers said they expected the Treasury and Federal Reserve – which doled out billions of dollars from the $700bn troubled assets relief programme to lenders last year – to name the first repayers in the next few weeks.

TimesOnline:

- Economists called the end of the credit crunch yesterday as the short-term interest rate that banks charge to borrow from each other fell to a record low on dollar, euro and pound-denominated loans. The continuing decline in the London interbank offered rate (Libor) signalled a return to normality for the credit markets for the first time since May 2007, according to Peter Chatwell, an interest rate strategist at Calyon, the investment banking unit of Crédit Agricole. “This marks a return to normal territory and gives us hope that we can cope with anything that comes now. It indicates that the banks are well capitalised, with no more surprises. It gives us hope that we have a functioning banking system and that we can now go about the job of running the broader economy,” Mr Chatwell said. David Buick, of BGC Partners, said: “The trust is returning. This is very encouraging.”

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (SCHW), target $20.

Night Trading
Asian Indices are +1.0% to +3.0% on average.
S&P 500 futures +.25%.
NASDAQ 100 futures +.14%.

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Earnings of Note
Company/EPS Estimate
- (SKS)/-.26

- (HD)/.29

- (DKS)/.07

- (MDT)/.82

- (TJX)/.49

- (ADI)/.08

- (HPQ)/.86

- (PVH)/.48

Economic Releases

8:30 am EST

- Housing Starts for April are estimated to rise to 520K versus 510K in March.

- Building Permits for April are estimated to rise to 530K versus 516K in March.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Stern speaking, weekly retail sales reports, Deutsche Bank Healthcare Conference, Global Tech/Media/Telecom Conference, UBS Oil & Gas Conference, (MO) shareholders meeting, BIO Intl Convention, (PFG) shareholders meeting, (JPM) shareholders meeting and the (ALL) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by automaker and technology 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.

Stocks Finish Sharply Higher, Boosted by Gaming, REIT, Homebuilding, Financial and Steel Shares

Evening Review
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Bull Radar

Style Outperformer:

Small-cap Value (+3.20%)

Sector Outperformers:

Banks (+5.87%), Homebuilders (+5.57%) and Gaming (+5.05%)

Stocks Rising on Unusual Volume:

IBN, HDB, KWK, GMXR, BAC, MBT, PTR, LUX, INFY, STEC, QSII, HRBN, FFIN, CCMP, CTSH, DDRX, VPRT, CYMI, CPTS, USTR, CSCO, DIOD, DRIV, IFN, IBN, HDB, BGH, LOW, RDY, WIT, WBK, GLP, CEO, IXP and HEP

Stocks With Unusual Call Option Activity:

1) ADI 2) KMX 3) BDK 4) STT 5) CTX

Links of Interest

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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%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

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

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.