Tuesday Watch

Late-Night Headlines
Bloomberg:
- Federal prosecutors are seeking to schedule a trial for former Enron Corp. Chairman Ken Lay on bank fraud charges as soon as next month, at least 6 months before his separate trial on broader fraud and conspiracy charges stemming from Enron's collapse.
- The Shanghai and Shenzhen stock exchanges will start a unified benchmark index that will include China Petroleum & Chemical Corp., Asia's largest oil refiner, and Baoshan Iron & Steel Co., a unit of the world's sixth-largest steelmaker.

Financial Times:
- Kohlberg Kravis Roberts is among a group of three private equity firms which may have offered $1.3 billion for 60% of General Motors' commercial mortgage unit.

Wall Street Journal:
- Goldman Sachs Group acquired a 24-story office tower in Shanghai for $107.6 million from Singapore's CapitaLand.

South China Morning Post:
- The Vatican plans to cut diplomatic ties with Taiwan to resume relations with China.

Chosun Ilbo:
- North Korea told China that it was agreeing "in principle" to resume six-nation talks over its nuclear weapons program.

Late Buy/Sell Recommendations
None of note

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.12%.
NASDAQ 100 indicated +.13%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
AM/.47

Splits
COH 2-for-1
CMTL 3-for-2
ORCT 3-for-1

Economic Releases
None of note

BOTTOM LINE: Asian indices are mostly higher as a decline in energy prices spurred shares in the region. I expect US equities to open modestly higher in the morning on a follow-through from today's afternoon strength and stabilizing energy prices. The Portfolio is 50% net long heading into tomorrow.

Monday Close

Indices
S&P 500 1,176.12 +.27%
DJIA 10,421.14 +.16%
NASDAQ 1,991.07 +.32%
Russell 2000 613.76 +.36%
DJ Wilshire 5000 11,597.85 +.24%
S&P Barra Growth 567.11 +.36%
S&P Barra Value 604.67 +.18%
Morgan Stanley Consumer 575.45 +.59%
Morgan Stanley Cyclical 742.44 +.09%
Morgan Stanley Technology 454.17 +.43%
Transports 3,707.79 +.57%
Utilities 361.18 +.24%
Put/Call .87 -16.35%
NYSE Arms 1.05 -45.49%
Volatility(VIX) 14.11 +.14%
ISE Sentiment 166.00 +50.91%
US Dollar 84.80 +.02%
CRB 310.10 -.57%

Futures Spot Prices
Crude Oil 56.67 -.60%
Unleaded Gasoline 171.25 -.53%
Natural Gas 7.56 -.38%
Heating Oil 163.85 -.23%
Gold 426.80 +.19%
Base Metals 127.92 -.01%
Copper 149.10 -.27%
10-year US Treasury Yield 4.45% +.14%

Leading Sectors
Insurance +2.02%
Airlines +1.90%
Telecom +1.35%

Lagging Sectors
Energy -.81%
Iron/Steel -.92%
Papers -2.80%

After-hours Movers
MSSN +4.5% after Moody's placed its ratings under review following the announcement that HAWK is acquiring it. HAWK +5.6%.
ATRS -4.1% after cutting 1Q forecast.
PLCM -5.6% after cutting 1Q outlook.
NAVR -10.2% after saying that is previously announced offering of senior notes has been terminated due to the recent weakness of the bond market.
RSAS -20.0% after cutting 1Q forecast.
MENT -21.25% after cutting 1Q outlook and saying book-to-bill was "extremely weak."

Evening Review
Detailed Market Summary
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
Futures Recap
S&P 500 Gallery View
Timely Economic Charts
PM Market Call
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on AET, UTX, WAG and WLP.
- Reiterated Underperform on CVH.

Afternoon/Evening Headlines
Bloomberg:
- Microsoft offered to make it easier for rivals to get its proprietary information to allay regulatory concerns the company isn't doing enough to comply with a European antitrust order.
- Shares of Morgan Stanley rose as much as 5.7% after Dow Jones Newswires reported that the company's board backed the sale of the Discover credit card unit.
- Verizon said it will abandon an effort to purchase MCI Inc. if MCI says a competing offer from Qwest Communications is superior.
- The US Commerce Dept. launched an investigation of imports from China of trousers, knit shirts and underwear, following a first-quarter surge in those imports.
- Billionaire investor Warren Buffett's re-election to Coca-Cola's board should be opposed by the company's shareholders because his business ties pose a conflict, Institutional Shareholder Services, the biggest adviser to funds on proxy votes, said today.
- Major League Baseball suspended 38 minor-league players who failed tests for steroids, a day after announcing the first penalty against a major-leaguer involving the muscle-building drugs.
- President Bush pledged US support for Ukraine's quest to enter the WTO and join the North Atlantic defense alliance to help nurture democracy in Eastern Europe.
- Crude oil futures fell a second day after the European Union cut its growth forecast and OPEC began talks on another output increase to swell stockpiles and lower prices.
- Shares of AIG rose 4.6% after New York AG Spitzer said a civil resolution of his accounting probe was "achievable."

Berliner Zeitung:
- Germany's BDI industry group, which represents 107,000 companies including DaimlerChrysler AG and Siemens AG, cut its 2005 growth forecast for the German economy to about 1%.

BOTTOM LINE: US stocks rose modestly today as energy prices fell from early morning highs and AIG rebounded. The Portfolio finished unchanged as gains in my Base Metal shorts offset losses in my Software longs. I took profits in a few shorts from various sectors in the afternoon and added a few new Tech longs, thus leaving the Portfolio 50% net long. One of my new longs is AAPL and I am using a $40 stop-loss on this position. The tone of the market strengthened into the afternoon as the advance/decline improved substantially, almost every sector advanced and volume was light. Consumer-oriented stocks and Tech outperformed, while Commodity-related stocks underperformed and measures of investor anxiety were mostly lower. Overall, today’s market action was modestly positive. I would like to see the advance/decline line continue to improve before adding any additional trading longs.

Mid-day Scoreboard

Indices
S&P 500 1,174.76 +.16%
DJIA 10,421.37 +.16%
NASDAQ 1,987.02 +.11%
Russell 2000 610.93 -.10%
DJ Wilshire 5000 11,576.77 +.07%
S&P Barra Growth 566.17 +.20%
S&P Barra Value 604.18 +.10%
Morgan Stanley Consumer 574.95 +.50%
Morgan Stanley Cyclical 741.25 -.06%
Morgan Stanley Technology 453.11 +.19%
Transports 3,696.34 +.26%
Utilities 360.01 -.08%
Put/Call .87 -16.35%
NYSE Arms 1.08 -45.16%
Volatility(VIX) 14.44 +2.48%
ISE Sentiment 144.00 +30.91%
US Dollar 84.86 +.51%
CRB 310.90 -.31%

Futures Spot Prices
Crude Oil 57.70 +.66%
Unleaded Gasoline 173.10 unch.
Natural Gas 7.66 -1.15%
Heating Oil 166.50 +.07%
Gold 430.425.90 -.56%
Base Metals 127.92 -.01%
Copper 149.50 +.71%
10-year US Treasury Yield 4.44% -.04%

Leading Sectors
Insurance +2.56%
Airlines +1.08%
Telecom +1.01%

Lagging Sectors
Energy -1.44%
Oil Service -1.57%
Papers -3.04%

BOTTOM LINE: US stocks are mixed mid-day as worries over slowing economic growth and corporate scandals are being offset by lower energy prices and long-term interest rates. The Portfolio is unchanged as gains in my Base Metal shorts and Internet shorts are offsetting losses in my Software longs. I have not traded today, thus leaving the Portfolio’s market exposure at Market Neutral. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is light. Consumer-related stocks are outperforming, while Energy-related shares are underperforming and measures of investor anxiety are mostly lower. Today’s overall market action is negative considering another decline in long-term interest rates, the market’s oversold state, a pullback in energy prices from highs and rising US dollar. I continue to believe the lows for the year will be made over the coming weeks, making for a much more positive second half in equities. I expect US stocks to trade mixed into the close as optimism over falling long-term interest rates is offset by concerns over slowing global growth.

Today's Headlines

Bloomberg:
- ChevronTexaco Corp. agreed to buy Unocal Corp. for $16.4 billion, the biggest oil-company merger in three years, to increase its reserves in Asia.
- Oil tanker rates, which usually fall in the second quarter, may climb in the next three months as OPEC boosts production to meet demand from the US and China.
- The European Commission cut its 2005 growth forecast, for the second time in six months, to 1.6% as record oil prices and rising unemployment weigh on the economy of the dozen countries that use the euro.
- Krispy Kreme Doughnuts got $225 million in loans from a group led by CSFB and hede fund Silver Point Capital, pulling the company back from the brink of bankruptcy.
- The US Supreme Court buttressed the ability of people who file for bankruptcy to shield money in their Individual Retirement Accounts from creditors.
- Crude oil is climbing to an inflation-unadjusted record, exceeding $58/bbl. in NY, on speculation that US refiners will be unable to produce enough gas to meet peak demand this summer.
- The US dollar is rising after Fed Bank of St. Louis President Poole reinforce speculation policy makers will keep raising interest rates.

The Wall Street Journal:
- Owens Corning will face $7 billion in potential liabilities for asbestos damages.
- The US Justice Dept. is investigating the gift donations involving staff at Jefferies Group and an unidentified mutual fund.
- Inamed Corp. and rival Mentor Corp. are boosting efforts to persuade the FDA to reauthorize silicone implants.
- Best Buy CEO Anderson said higher gas and home fuel prices may depress sales because they would restrain consumer spending.
- An investment group led by former US vice-president Al Gore plans to use a recently acquired cable channel to start a program for viewers 18-34 years old. The channel will start Aug. 1 under the name Current.

Financial Times:
- Pfizer may say it plans to cut as much as $3 billion in costs to overcome the loss of patents on some of its best-selling medicines.

Dow Jones:
- The governors of California, Nevada, Utah and Wyoming plan to give their backing today for a massive electricity grid to supply added power by as early as 2011.

The New York Times:
- Tutoring companies supported by the US government’s No Child Left Behind law, which pays for tutoring students at schools classified as failing, will make as much as $200 million in revenue during the current school year.
- The ACLU is representing 21 Michigan same-sex couples who are challenging Attorney General Mike Cox’s March ruling that November 2004 legislation defining marriage prohibited same-sex partners from being eligible for health benefits.
- Comcast Corp. is testing speech-recognition technology from OneVideo Technology and Agile TV that lets television viewers change channels by vocal cues.
- Giving by US foundations hit a record $32.4 billion in 2004.

Chicago Sun-Times:
- UAL’s United Airlines wants to focus on Asia’s growing middle class to help boost profit.

Links of Interest

Market Internals
Movers & Shakers
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon
Real-time Intraday Chart/Quote

Economic Releases

None of note