Today's Headlines

Bloomberg:
- The number of mortgage applications filed in the US jumped last week as a drop in borrowing costs caused refinancing to almost double.
- Commodities rallied for the third straight day on a decline in the US dollar, a decline in US energy stockpiles and continuing historic speculation by investment funds.
- Emerging-market bonds are falling, led by Argentine securities, after a worse-than-expected report on US durable goods. The so-called spread on Argentine debt swelled 17 basis points, the most in emerging markets, to 5.52 percentage points.
- Apple Inc. has placed a manufacturing order for 109 million updated iPhones that can download from the Internet at a faster rate than current models, Gartner Inc. said. The new phones operated on third-generation, or 3G, wireless networks, analyst Ken Dulaney said today.
- Google Inc.(GOOG) led US search engines in market share for February with 58.7%. Yahoo! came in second at 17.6%.

Wall Street Journal:
- Barack Obama is drawing fire for pledging to hold direct talks with foreign adversaries, an approach both Hillary Clinton and John McCain say they will hit hard. Critics in the foreign-policy establishment and from rival presidential camps said his idea could undercut pro-Western forces and legitimize leaders whose power the US wants to undermine, including Iranian President Mahmoud Ahmadinejad. Increasingly, they are presenting his ideas as a radical departure from standard US doctrine.
- Iraqi Religious Leader Talks Helpful, McFarlane Says.

NY Times:
- Many US Muslims Turn to Home Schooling.

NY Post:
- TV journalist Charlie Gasparino has inked a $400,000 advance for a book on the collapse of Bear Stearns(BSC).

Bear Radar

Style Underperformer:

Mid-cap Value -1.69%

Sector Underperformers:

Airlines (-7.2%), Banks (-4.0%) and Homebuilders (-4.0%)

Stocks Falling on Unusual Volume:

CHIC, AMN and CCU

Stocks With Unusual Put Option Activity:

1) SIRI

2) SHPGY

3) CMI

4) IR

5) JBL

Durable Goods Orders Fall, New Home Sales Exceed Estimates

- Durable Goods Orders for February fell 1.7% versus estimates of a .7% rise and an upwardly revised 4.7% decline in January.

- Durables Ex Transports for February fell 2.6% versus estimates of a .3% decline and an upwardly revised 1.0% decline in January.

- New Home Sales for February were 590K versus estimates of 578K and an upwardly revised 601K in January.

BOTTOM LINE: Orders for US durable goods unexpectedly fell in February, Bloomberg said. Bookings for non-defense capital goods excluding aircraft, a gauge of future business spending, fell 2.6%, the most since October. Shipments of these items, used in computing GDP, fell 2.1%, the most since January 2007. Bookings for military equipment fell 10%. Orders for computers, communications equipment and electrical equipment all rose in February. I had expected GDP growth to average about 1% during the first half of the year. However, recent data suggest GDP will likely be flat during the first half, before accelerating meaningfully during the second half of the year. I expect Durable Goods Orders to bounce back sharply next month.

Sales of new homes in the US fell less than economists had forecast, Bloomberg reported. The median price declined 2.7% from a year earlier to $244,100. Sales in the Northeast fell, while sales in the South and West rose. The number of new homes for sale at the end of February fell to 471,000, the lowest since July 2005. At the current sales pace, the supply of new homes remained at 9.8 months worth. Mortgage Applications surged 48.1% as refis soared 82% and purchase applications jumped 10.6%. According to Bankrate.com, the average 30-year fixed rate mortgage has declined 36 basis points over the last two weeks to 5.72%. I continue to expect home sales to surprise on the upside this spring on pent-up demand, lower prices and lower mortgage rates.

Bull Radar

Style Outperformer:

Small-cap Growth (-.67%)

Sector Outperformers:

Oil Service (+2.8%), Energy (+2.5%) and Utilities (+.27%)

Stocks Rising on Unusual Volume:

ANR, CRK, TESO, BJS, RIO, FCX, CLWR, WSCI, CYBX, VTIV, ICLR, RMBS, ACGY, UTHR, TRAK and WAT

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Japan’s export growth unexpectedly accelerated in February.
- Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, scrapped a proposal to buy Xstrata Plc for cash and shares through the world’s biggest mining takeover.
- Clear Channel(CCU) Drops as Journal Says Buyout May Fail.
- Orange-juice futures fell for a fourth session on signs consumer demand for the beverage isn’t keeping up with the harvest in Florida, the world’s second largest orange grower.
- Bear Stearns(BSC) Worsens China’s Hot-Money Quandary.
- Bear Stearns(BSC) investors seeking a higher price than JPMorgan Chase’s(JPM) bid of $10 a share asked a Delaware judge to halt a stock transaction that may prevent opponents from blocking the takeover.

Wall Street Journal:
- McCain Talks Economy, Picks up Reagan Nod.
- China Taking Aim at Media Over Tibet. The Chinese government bans CNN in most homes. The talk of China in recent days? The news coverage on CNN.

MarketWatch.com:
- Consumer confidence is a lagging, not leading, indicator. “Low consumer confidence is followed by high stock returns more often than it is followed by low stock returns.”
- Was that the bottom? Contrarians growing more confident that bottom has been seen.
- Big Blue’s shares have outperformed market; Wall Street sees further upside.

CNBC.com:
- Credit Disaster? Maybe It’s Not So Bad After All. Maybe, just maybe, the financial world is not about to implode. Such is the level of disaster mongering surrounding the latest phase of the eight-month-old credit crisis that you could be forgiven for thinking we will all soon be hoarding food and reverting to a barter economy.
- Wall Street’s biggest firms, battered by the breakdown in mortgage and other debt markets say there’s money to be made among the wreckage.
- Buying at the Bottom.
- BlackRock’s Doll: Market Has Turned a Corner.

BusinessWeek.com:
- Joocing the Next Billion Internet Users. Paris startup Jooce has an idea: Instead of one laptop per child, why not many virtual desktops per public computer? It’s catching on.

Forbes.com:
- World’s Most Desirable Luxury Brands.
- Markets Bet On Sweetened Deal for Countrywide(CFC).

macnn:
- Apple(AAPL) granted patents for iPod Click Wheel, iMac Flex Arm, more.

Financial Times:
- JPMorgan Chase(JPM) lures Bear brokers. JPMorgan Chase is offering Bear Stearns’ best brokers annual bonuses of more than $500,000 in an effort to prevent an exodus of talent as a result of its planned takeover of the stricken investment bank.
- The Federal Home Loan Baking system, a government-sponsored network of US banks, is seeking to enter the so-called “monoline” insurance market to help local governments that have been hurt by the credit market storm.

TimesOnline:
- The day Wall Street pulled $10 billion from Bear Stearns(BSC) and forced sale. Bear’s liquidity pool, which stood at $21 billion early this month, fell dramatically from $18.1 billion to $11.5 billion on March 10 “as rumors spread about liquidity problems at Bear Stearns, which eroded investor confidence,” wrote Christopher Cox, chairman of the SEC. Bear’s collapse was “the result of a loss of confidence, not a lack of capital.” “Counter-party withdrawals and credit denials, resulting in loss of liquidity – not inadequate capital – caused Bear’s demise,” Mr. Cox said.

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (CMC), raised target to $40.
- Reiterated Buy on (RIMM), target $140.

Morgan Stanley:
- We view Apple’s(AAPL) building momentum in higher education as another key growth lever. In the near term, it sets the company up for a strong September quarter. Longer-term, we see an “aging phenomenon” that will put Apple in a more mainstream market share position as students enter the work force, much like Linux adoption in the 1998-2003 time frame. Apple currently holds 3% global PC market share, compared to 8-20% share for each of the top 3 PC vendors. Even our above-consensus forecast assumes just 4.6% Apple PC market share by 2010 – and every incremental point of market share adds $6 billion to revenue and $1 to EPS. A recent higher education survey shows Apple’s mindshare(roughly 40% of college students plan to buy a Mac) tracks well ahead of current market share(15%) and we compare the potential for related market share gains to Linux adoption that also started at universities. Mac March quarter results are likely to buck the normal PC seasonal unit trend(typically -10% QoQ), supporting our thesis of secular growth.

Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 futures -.29%.
NASDAQ 100 futures -.19%.

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Earnings of Note
Company/EPS Estimate
- (RBN)/.43
- (CKR)/.06
- (RECN)/.20
- (PAYX)/.39
- (ORCL)/.30
- (PBY)/-.08

Upcoming Splits
- (STLD) 2-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for February are estimated to rise .7% versus a -5.3% decline in January.
- Durables Ex Transports for February are estimated to fall -.3% versus a -1.6% decline in January.

10:00 am EST
- New Home Sales for February are estimated to fall to 578K versus 588K in January.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,800,000 barrels versus a 133,000 barrel increase the prior week. Gasoline supplies are expected to fall by -1,150,000 barrels versus a -3,447,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,625,000 barrels versus a -2,910,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by .48% versus a -1.15% decline the prior week.

Other Potential Market Movers
- The (WNC) analyst meeting, (WIND) analyst day, (SRP) analyst meeting, weekly MBA Mortgage Applications report, CSFB Global Leveraged Finance Conference, Sidoti Emerging Growth Conference, JPMorgan Gaming/Lodging/Restaurants Conference and Banc of America SMid Cap Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial 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.