Monday, February 28, 2005

Monday Close

Indices
S&P 500 1,203.60 -.64%
Dow 10,766.23 -.70%
NASDAQ 2,051.72 -.66%
Russell 2000 634.06 -.54%
DJ Wilshire 5000 11,859.80 -.61%
S&P Barra Growth 579.99 -.47%
S&P Barra Value 619.17 -.82%
Morgan Stanley Consumer 585.28 -.38%
Morgan Stanley Cyclical 771.85 -.61%
Morgan Stanley Technology 473.04 -.07%
Transports 3,726.65 +.31%
Utilities 352.89 -.89%
Put/Call .68 -18.07%
NYSE Arms 1.44 +77.78%
Volatility(VIX) 12.08 +5.13%
ISE Sentiment 202.00 +39.31%
US Dollar 82.51 -.18%
CRB 305.00 +1.59%

Futures Spot Prices
Crude Oil 51.81 +.12%
Unleaded Gasoline 124.56 unch.
Natural Gas 6.72 -.21%
Heating Oil 149.14 unch.
Gold 436.70 -.21%
Base Metals 128.29 +1.20%
Copper 149.30 -.37%
10-year US Treasury Yield 4.38% +2.64%

Leading Sectors
Computer Hardware +1.40%
Internet +.55%
Computer Service +.40%

Lagging Sectors
Airlines -1.56%
Homebuilders -1.59%
Biotech -4.32%

After-hours Movers
OVTI -9.45% after beating 3Q estimates, raising 4Q eps guidance and lowering 4Q revenue outlook.
LTON +11.59% after beating 4Q estimates and raising 1Q guidance.
ADIC +4.69% after reporting a director purchased an additional 250,000 shares on 2/24/05.
CAL +3.93% after reaching agreements on about $330 million in pay and other reductions with unions for pilots, attendants, mechanics and dispatchers.
INCX -35.48% after meeting 4Q estimates and lowering 1Q outlook substantially.
FNLY -5.47% on continuing worries over Federated/May merger.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Outperform on XOM and LIZ.
- Raymond James: Reiterated Strong Buy on WGR, target $45. Reiterated Strong Buy on RDC, target $42.
- Morgan Stanley: Upgraded JTX to Overweight.
- CIBC: Upgraded XMSR to Sector Outperform, target $55.

After-hours News
US stocks finished lower today on worries over higher interest rates and weakness in the biotechnology sector. The US Dept. of Homeland Security has notified state and local law enforcement about a “credible” threat of terrorist operations outside of Iraq, Bloomberg reported. Johnson & Johnson CEO Weldon told CNBC that it’s “very important” for the US to set up post-marketing drug surveillance. HJ Heinz, the world’s largest ketchup maker, said third-quarter sales rose the most in two years, led by gains in North America, Bloomberg reported. Univision Communications, the largest US Spanish-language tv and radio broadcaster, said fourth-quarter profit rose 14% as its TeleFutura network boosted audience ratings and advertising sales, Bloomberg reported. Biogen Idec’s suspension of its Tysabri multiple sclerosis drug today after a patient died represents a setback to about 5,000 others who were taking it and many more who hoped the treatment would ease their symptoms, Bloomberg reported. A federal judge in South Carolina said the US must charge or free Jose Padilla, a US citizen held as an enemy combatant since his arrest in 2002 on suspicion he plotted to explode a radioactive “dirty bomb” in the US, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my homebuilding, semi and pharmaceutical longs. I exited a homebuilder long in the afternoon and added BIIB long, thus leaving the Portfolio 50% net long. I am using a $35.75 stop-loss on this new position. The tone of the market improved modestly into the afternoon as the advance/decline line rose, several more sectors registered gains and volume remained healthy. Measures of investor anxiety were mixed on the day and technology shares outperformed. Finally, the CRB Index made another new high today, which is a negative. I am not worried about a significant correction in housing stocks at this point. The weakness in New Home Sales is likely the result of the extraordinarily wet weather most of the country is seeing this winter. However, these shares will likely remain under pressure near-term on rising long-term interest rates.

Mid-day Report

Indices
S&P 500 1,200.49 -.90%
Dow 10,750.05 -.84%
NASDAQ 2,041.83 -1.14%
Russell 2000 629.58 -1.25%
DJ Wilshire 5000 11,821.06 –.94%
S&P Barra Growth 578.96 -.64%
S&P Barra Value 616.80 -1.20%
Morgan Stanley Consumer 584.18 -.58%
Morgan Stanley Cyclical 768.45 -1.05%
Morgan Stanley Technology 471.26 -.44%
Transports 3,722.82 +.21%
Utilities 352.13 -1.11%
Put/Call .67 -19.28%
NYSE Arms 1.98 +144.44%
Volatility(VIX) 12.31 +7.31%
ISE Sentiment 213.00 +46.90%
US Dollar 82.44 -.28%
CRB 304.40 +1.38%

Futures Spot Prices
Crude Oil 51.58 +.17%
Unleaded Gasoline 121.60 -3.07%
Natural Gas 6.69 -.37%
Heating Oil 149.50 +2.81%
Gold 437.50 +.32%
Base Metals 128.29 +1.20%
Copper 149.80 +.81%
10-year US Treasury Yield 4.37% +2.60%

Leading Sectors
Computer Hardware +.07%
Foods +.07%
Computer Services -.02%

Lagging Sectors
Airlines -2.22%
Homebuilders -2.36%
Biotech -4.90%

Market Movers
BIIB -44.4% after it and Irish partner Elan Corp.(ELN) suspended sales of the MS drug Tysabri after one death was reported. ELN -65.8%.
RETK +40.33% after announcing SAP AG agreed to buy it for about $496M.
TEVA +6.56% on BIIB/ELN news.
USFC +24.0% after Yellow Roadway(YELL) agreed to buy it for about $1.37B. YELL -4.0%.
PACT +36.0% after raising 4Q revenue guidance.
SRA +18.1% on BIIB/ELN news.
JDAS +14.2% on RETK news.
XMSR +10.3% after saying it will raised the price of its basic subscription package to $12.95/month, include the Internet service XM Radio Online and SunTrust upgrade to Buy.
BBY +4.68% on JP Morgan upgrade to Overweight.
BDY -27.2% after saying the SEC started an informal inquiry into possible violations of securities laws.
VLO -6.0% on profit-taking.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Personal Income for January fell 2.3% versus estimates of a 2.6% fall and a 3.7% increase in December.
- Personal Spending for January was unchanged versus estimates of a .1% increase and a .8% gain in December.
- The PCE Deflator for January rose 2.2% versus estimates of a 2.2% rise and a 2.4% increase in December.
- The PCE Core for January rose 1.6% versus estimates of a 1.5% increase and a 1.5% gain in December.
- New Home Sales for January fell to 1106K versus estimates of 1125K and an upwardly revised 1218K in December.
- Chicago Purchasing Manager for February rose to 62.7 versus estimates of 60.5 and a reading of 62.4 in January.

Recommendations
- Goldman Sachs: Reiterated Outperform on MDT, CSCO, LVS and TMK.
- Smith Barney: Said Asia Handset Tour indicated order acceleration ahead, favorite beneficiaries are NSM, MCRL, ADI and SMTC. Said soft-line retailers positioned to post the best February same store sales increases include ANF, AEOS, PLCE and TJX. Said hard-line retailers AZO and BBW experienced better-than-expected comp trends in February. Said within their coverage universe, NMGA and SKS face the most difficult comps vs. last year while MAY and WMT face the easiest. Reiterated Buy on PG and G, while reiterating Sell on CLX. Reiterated Buy on NOI, target $53. Reiterated Buy on WMT, target $65. Said BAC, WB and WFC should exceed quarterly estimates and FHN, MTB may be worse than expected.
- Banc of America: Cut F to Sell, target $10. Cut GM to Sell, target $27.
- JP Morgan: Raised BBY to Overweight. Cut MTA to Underweight. Raised HZO to Overweight.
- Morgan Stanley: Raised GP to Overweight, target $39.
- Oppenheimer: Downgraded DDS to Sell. Cut MAY to Sell.
- Legg Mason: Raised EEEE to Buy, target $16.50.
- Thomas Weisel: Raised TXN to Outperform.
- Merrill Lynch: Raised TCB to Buy, target $31.
- Bear Stearns: Cut BIIB to Underperform.
- CSFB: Downgraded DNR to Underperform, target $33. Cut POT to Underperform, target $79.
- Prudential: Raised STT to Overweight, target $49. Downgraded NOVL to Underweight, target $7.
- Deutsche Bank: Cut BIIB to Sell, target $38. Raised SLH to Buy, target $20.

Mid-day News
US stocks are lower mid-day on losses in the biotechnology sector and worries over higher long-term interest rates. Charter Communications’ fourth quarter earnings might not be as bad as some have feared, the Wall Street Journal reported. German Chancellor Schroeder called on the Saudi Arabian government to allow more democracy, Financial Times Deutschland reported. The new Palestinian leadership won’t tolerate attacks like the Feb. 25 bombing in Tel Aviv that killed at least 4 people and injured dozens, Palestinian Authority President Abbas told the Independent. Lebanese anger against Syria’s occupation of the country has exploded since a bombing killed former Prime Minister Hariri two weeks ago, the Wall Street Journal reported. ABN Amro NV, JP Morgan Chase and Goldman Sachs are among about a dozen investment banks competing for a contract to advise the Australian government how to sell its majority stake next year in Telstra, the Wall Street Journal reported. Pathmark Stores, which owns 142 supermarkets in the northeastern US, will probably be acquired by C&S Wholesale Grocers, New England’s biggest food wholesaler, the NY Post reported. Time Warner’s Money Magazine will revamp the April issue to increase its appeal among women and younger readers, the NY Times reported. BellSouth wants to boost revenue through wireless and broadband services, rather than join industry merger talks, the NY Times reported. Movielink, which is owned by five movie studios, and Blinkx, a search-engine provider, are working on a way to enable Internet surfers to buy or rent movies and television shows on the Web, the LA Times reported. Lebanese Prime Minister Karami announced the resignation of his Syrian-backed government today, the AP reported. A study of HIV-infected teens in San Francisco, Los Angeles, New York and Miami showed they were twice as likely to engage in risky sexual behavior as teens in similar research a decade ago, Bloomberg reported. Copper rose to a record in London on speculation demand may pick up after Japan, the world’s third-largest user of the metal, reported a bigger-than-expected increase in industrial production, Bloomberg reported. Mylan Labs, the generic drug maker that pursued a takeover of King Pharmaceuticals for six months, abandoned the proposed $4 billion transaction yesterday, Bloomberg said. Ericsson AB had its debt rating raised one level to so-called investment grade level by Standard & Poor’s Corp, Bloomberg reported. Biogen Idec and Elan said they’ve voluntarily suspended marketing their new MS drug Tysabri after one death was reported, Bloomberg said. The CRB Index is hitting a 24-year high as demand for raw materials remains strong from the US and China, Bloomberg reported. Chicago-area business expanded at an accelerated pace in February, Bloomberg said. US new home sales unexpectedly declined in January and the median price dropped to the lowest in a year, Bloomberg reported. US Treasury notes are falling after a government index on inflation rose the most in 2 years, Bloomberg said.

BOTTOM LINE: The Portfolio is lower mid-day on losses in my homebuilding, pharmaceutical and semi longs. I exited a number of longs as they hit stop losses this morning, thus bringing the Portfolio’s market exposure to 50% net long. The tone of the market is poor as the advance/decline line is weak, almost ever sector is declining and volume is stronger. Measures of investor anxiety are mixed. The rise in long-term rates will likely continue in the near-term as economic reports continue to exceed expectations. I expect US stocks to trade mixed-to-higher from current levels into the close as optimism over economic growth and short-covering mostly offsets worries over rising rates.

Monday Watch

Weekend News
US and European Union officials reacted with dismay to Saudi Arabia's forecast that oil prices will remain at between $40 and $50 a barrel for the rest of this year, the Financial Times reported. Egyptian President Mubarak will allow parliament to amend the constitution to allow direct presidential polls, AFP reported. European regulators oppose Microsoft's proposed changes to its Windows operating system, Intl. Herald Tribune reported. The "BTK" serial killer suspect arrested by Wichita, Kansas, police confessed to at least six murders, the AP reported. Iran's ability to enrich uranium is "non negotiable," Hassan Rohani, the country's chief negotiator told European officials on a trip last week, Agence France-Presse reported. Sabawi Ibrahim al-Hassan, a half-brother of ousted Iraqi dictator Saddam Hussein, has been arrested, Fox News reported. Electronic Data Systems is likely to win a $7.6 billion contract for the UK's Ministry of Defense, the Sunday Telegraph reported. Billionaire investor George Soros plans to invest $3.8 billion in the commercial property market in London, the Observer reported. Reuters Group Plc, which owns 62% of Instinet Group, may receive $1.3 billion from the sale of its stake in the US-based electronic brokerage and trading business, the Telegraph said. CIA officers are increasingly fearful of punishment in connection with their interrogations of suspected terrorists, the NY Times reported. Martha Stewart is expected to return to work at the company she founded on March 7 after her release from prison, the NY Times reported. Medical malpractice lawyers will be the next target in President Bush's efforts to curb litigation, the NY Times reported. At least 13 states have agreed to raise graduation requirements at US high schools to better prepare students for college and the workforce, the AP reported. China announced measures for capital flows across its boarders designed to stem gains in the yuan, the Financial Times reported. PepsiCo, maker of food brands Pepsi-Cola and Doritos chips, is setting voluntary limits to advertising aimed at children due to obesity levels in the US and western Europe, the Financial Times said. Shanghai Baosteel Group, China's largest steel producer, expect national growth in production of the metal to slow by half this year as mills focus on high-quality steel for shipbuilding and trim output of steel for construction, the Asian Wall Street Journal reported. Universal Music and Sony BMG are among music labels that may be in talks with online retailers to raise wholesale prices for digital music downloads in the wake of the success of Apple Computer's iTunes service, the Financial Times said. Wal-Mart Stores said February sales at US stores open at least a year rose about 4%, at the high end of estimates, as shoppers purchased more groceries, Bloomberg reported. President Bush said he will intensify his campaign to win public support for his plan to restructure Social Security, and he called on lawmakers to share ideas on improving the system, Bloomberg said. OPEC isn't likely to raise output when it meets in Iran next month, the Qatari oil minister said, even though crude in NY has pushed through $50/bbl. and demand forecasts for 2005 have been revised upwards, Bloomberg reported. The US National Weather Service expects a "significant nor-easter" to begin showering snow and sleet on the mid-Atlantic region tomorrow morning, Bloomberg said. Royal Dutch/Shell Group, Europe's second-largest oil company, signed a contract to build a $7 billion liquefied natural gas plant in Qatar as it seeks to profit from surging global demand for the fuel, Bloomberg said. European pharmaceutical stocks, the region's worst performers last quarter, are poised to rise on reduced speculation about an increase in acquisitions, Bloomberg reported. North Korea's government told South Korean officials the communist country is willing to return to international disarmament talks in June, the Sankei newspaper reported. Yellow Roadway, the biggest US trucker, agreed to buy No. 2 regional carrier USF Corp. for about $1.37 billion to add next-day regional transportation services, Bloomberg reported. Federated Department Stores agreed to buy May Department Stores for about $36/share and may announce the deal tomorrow morning, Bloomberg reported. Wynn Resorts Ltd. and MGM Mirage submitted bids to develop a resort in Singapore that may include the city-state's first casino, Bloomberg said. France's Areva SA, US-based Westinghouse Electric and Russia's AtomStroyExport will bid for contracts to build nuclear reactors in China, Bloomberg reported. Templeton Asset Management's Mark Mobius is betting corporate governance improvements in South Korea and political stability in Taiwan will help drive stock prices in those markets higher, Bloomberg reported. Qwest Communications would amend its latest offer for MCI if necessary, the Wall Street Journal reported. China should widen the yuan's trading band against the US dollar to 5% before shifting to a peg against a basket of currencies, China Business Post reported.

Weekend Recommendations
-Bulls and Bears: Had guests that were positive on MO, MON, UN, NVS, TMX, RIO, SYY, TWX, RL, CAG, mixed on MCD and negative on RGC, MSO.
-Cashin' In: Had guests that were mixed on GLG, DUK and negative on RHAT.
-Cavuto on Business: Had guests that were positive on FDX, HOC, TOL, RYL, WPPGY and negative on FNM.
-Barron's: Had positive comments on GYI, CVCO, GM bonds and energy stocks. Had negative comments on tech and banks.
-Goldman Sachs: Reiterated Outperform on AVP, PAYX, BSX, WAG, AMGN, DNA, CL and EBAY.

Night Trading
Asian Indices are higher, +.50% to +1.0% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.03%.

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

Earnings of Note
Company/Estimate
CTIC/-.53
DY/.18
HNZ/.59
MVSN/.26
OVTI/.27
TIF/.79
UVN/.20

Splits
- AAPL 2-for-1

Economic Data
- Personal Income for January is estimated to fall 2.6% versus a 3.7% increase in December.
- Personal Spending for January is estimated to rise .1% versus a .8% increase in December.
- The PCE Deflator for January is estimated to rise 2.2% versus a 2.4% gain in December.
- The PCE Core for January is estimated to rise 1.5% versus a 1.5% increase in December.
- New Home Sales for January are estimated to rise to 1125K versus 1098K in December.
- The Chicago Purchasing Manager for February is estimated at 60.2 versus a reading of 62.4 in January.

BOTTOM LINE: I expect US stocks to open modestly higher in the morning on optimism over merger activity, strong economic reports and gains in Asia. The Portfolio is 100% net long heading into the week.

Sunday, February 27, 2005

Weekly Outlook

There are a number of important economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports for the week include:

Mon. - Personal Income, Personal Spending, PCE Deflator, New Home Sales, Chicago Purchasing Manager
Tues. – Construction Spending, ISM Manufacturing/Prices Paid, Total Vehicle Sales
Thur. - Non-farm Productivity, Unit Labor Costs, Initial Jobless Claims, ISM Non-Manufacturing
Fri. - Unemployment Rate, Average Hourly Earnings, Change in Non-farm Payrolls, Average Weekly Hours, Univ. of Mich. Consumer Confidence, Factory Orders

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. -HJ Heinz(HNZ), Tiffany & Co.(TIF), Univision Communications(UVN)
Tues. - Marsh & McLennan(MMC), Pacific Sunwear(PSUN)
Wed. - American Eagle Outfitters(AEOS), Michaels Stores(MIK), Autozone(AZO), Chico's FAS(CHS), Costco Wholesale(COST), Hovnanian Enterprises(HOV), Liz Claiborne(LIZ), Petsmart(PETM)
Thur. - Neiman-Marcus Group(NMG/A), Saks Inc.(SKS)
Fri. - Mandalay Resort Group(MBG)

Other events that have market-moving potential this week include:

Mon. - CIBC Israeli Tech Conference, Bear Stearns Media Conference, Merrill Lynch Global Automotive Conference
Tue. - Banc of America Energy & Utilities Forum, Bear Stearns Media Conference, Prudential Semi/Equip. Conference, Fed's Lacker speaks, Fed's Moscow speaks, Fed's Santomero speaks, Wells Fargo HealthCare Conference
Wed. - CSFB Semi/Equip. Conference, Fed's Greenspan testifies before House Budget Committee
Thur. - CSFB Semi/Equip. Conference, CIBC Gaming/Lodging/Leisure/Travel Forum
Fri. - CSFB Semi/Equipment Conference, Fed's Moscow speaks

Bottom Line: I expect US stocks to finish the week modestly higher as strong earnings/economic reports and rebounding technology shares offset slightly higher long-term interest rates. The conferences this week and technical improvement should further spur interest in semiconductor/equipment shares. As well, I expect Retailers to outperform on robust earnings reports, stabilizing energy prices and a strong employment report. Homebuilders may take a breather as long-term rates rise. Moreover, the US dollar should gain modestly this week as rates increase, sentiment improves and US economic growth continues to outshine other industrialized nations. My short-term trading indicators are still giving mixed signals and the Portfolio is 100% net long heading into the week.

Economic Week in Review

ECRI Weekly Leading Index 133.90 -.30%

Consumer Confidence for February fell to 104.0 versus estimates of 103.0 and an upwardly revised reading of 105.1 in January. However, Americans were the most optimistic about their current conditions than at any time since September 2001 and the fewest number in almost three years described jobs as hard to get, Bloomberg said. Consumers were less optimistic going forward. "Perhaps all the discussion in the media concerning potential shortfalls in Social Security has made individuals apprehensive about the future," said Michael Moran, chief economist at Daiwa Securities. US consumers spent at the fastest pace in more than four years during the last six months of 2004. Retail sales excluding autos rose twice as much in January as they did a month earlier, evidence shoppers are keeping their wallets open, Bloomberg reported. "Sales trends have improved in 2005, and I believe sales momentum will accelerate as the year progresses," Wal-Mart CEO Scott said.

The Consumer Price Index for January rose .1% versus estimates of a .2% increase and no change in December. The CPI Ex Food & Energy rose .2% versus estimates of a .2% increase and a .2% rise in December. "The inflation numbers today were quite tranquil," former Fed Governor Gramley, now an economic adviser at Stanford Washington Research Group, said in an interview. "We're in great shape," he said. Companies keep offering discounts to lure customers amid competition, excess capacity and rising costs, Bloomberg said. Consumer prices rose 3.0% the past 12 months, right at the historical long-term average. Fed Chairman Greenspan last week told lawmakers "the economy seems to have entered 2005 expanding at a reasonably good pace, with inflation and inflation expectations well anchored." John Shin, an economist at Lehman Brothers said, "One thing we haven't seen is wage pressure, so we're more sanguine about inflation." Finally, David Resler, chief economist at Nomura Securities said, "There is very little reason for the Fed to do anything different than they've been doing: raise rates a little at a time until they get to a neutral rate."

Durable Goods Orders for January fell .9% versus estimates of no change and an upwardly revised 1.4% gain in December. Durables Ex Transportation for January rose .8% versus estimates of a .3% increase and an upwardly revised 2.8% gain in December. The .8% rise in orders excluding transportation equipment prompted economists at Morgan Stanley and JP Morgan to boost first-quarter economic growth forecasts, Bloomberg reported. Except for transportation, "strength predominated" in today's report, said Stephen Stanley, chief economist at RBS Greenwich Capital. Concern that business spending would slow after tax incentives expired at the end of 2004 "can now be officially put to bed," Stanley said. Orders for electrical equipment, appliances and components rose 13% last month, the largest jump ever, Bloomberg reported. As well, orders for non-defense capital goods excluding aircraft, a sign of business investment, increased 2.9% and are up 20% from January 2004. "Almost everything we have got for January so far is coming in at the high side of expectations," said Robert Mellman, an economist at JP Morgan. Economist Bill Mulvihill at Griffin, Kubik, Stephens & Thompson in Chicago said US GDP growth may be about 4.5% during this quarter, Bloomberg reported.

Initial Jobless Claims for last week rose to 312K versus estimates of 309K and 303K the prior week. Continuing Claims fell to 2650K versus estimates of 2693K and 2712K prior. The four-week moving-average of claims, a less volatile measure, fell to 309K, the lowest since the week of Nov. 4, 2000, Bloomberg reported. "The low level of initial claims and the drop in continuing claims point to a pickup in hiring in February," said Wesley Beal, chief US economist at IDEAglobal. The economy probably added 225,000 jobs in February, the most in four months, according to the median forecast in a recent Bloomberg survey. "There are lots of jobs out there, but employers can't find the qualified employees they need," said Gina Martin, an economist at Wachovia Corp. "There is a disconnect between the education of the people that are unemployed and the skills that employers are looking for," Martin said.

The Help Wanted Index for January rose to 41, the highest level in almost 2 years, versus estimates of 38 and a reading of 38 in December. "There is now clear evidence that the labor market has shifted up a gear over the past couple of months," said Ian Shepherdson, chief US economist at High Frequency Economics. "Both jobless claims and the help wanted index improved materially in February," said Jay Feldman, an economist at CSFB. "We are revising up our payroll forecast to 275,000 from an earlier forecast of 190,000." Finally, Conference Board economist Ken Goldstein said, "If new jobs continue to open up, consumer expectations could turn even more positive this spring."

Preliminary 4Q GDP rose 3.8% versus estimates of a 3.7% increase and a prior estimate of a 3.1% gain. The Preliminary 4Q GDP Price Deflator rose 2.1% versus estimates of a 2.0% increase and a prior estimate of a 2.0% gain. Preliminary 4Q Personal Consumption rose 4.2% versus estimates of a 4.6% increase and a prior estimate of a 4.6% gain. The better-than-expected GDP number was a result of a smaller trade deficit and increased business spending on equipment and software, Bloomberg reported. "Capital expenditures are developing a head of steam," said former Fed Governor Gramley. "First-quarter GDP is going to be well above 4%, maybe 4.5%," he said. Ted Wieseman, an economist at Morgan Stanley said, "There is good reason to believe that not only capital spending but hiring is picking up, and that is going to be a key driver for the economy." "The strength of the recovery in the face of a 25% run-up in oil prices is a testament to the recovery's resilience," said Robert DiClemente, chief US economist at Citigroup. Spending on equipment and software grew at an 18% annual rate in the fourth quarter, following a 17.5% increase in the prior quarter. The back-to-back gains are the strongest since the six months that ended in September 1997, Bloomberg reported. Finally, the core personal consumption expenditures price index, Greenpan's favorite measure of inflation, rose 1.6% during the fourth quarter, within the Fed's preferred range of 1-2%, Bloomberg said.

One-Family Home Re-sales for January fell to 5.94M versus estimates of 6.7M and a downwardly revised 5.97M in December. Sales were strongest in the South, rising 3.5% for the month. The median price of a previously owned home fell to $189,000 last month from $191,000 in December, Bloomberg said. However, the median price was up 10.5% from January 2004. "We do have characteristics of bubbles in certain areas, but not, as best as I can judge, nationwide," Greenspan said during Congressional testimony Feb. 17. "I don't expect that we will run into anything resembling a collapsing bubble," he said. Moreover, the supply of homes available for sale, another gauge of housing demand, declined to a record-low 3.7 months' worth in January, Bloomberg reported. The 30-year fixed mortgage rate in January averaged 5.66%, near its 40-year low reached in June of 2003 and down from 5.81% in December, Bloomberg said. "We're seeing a lot of first-time home-buyers on the market," said Scott Jones, a loan officer at Weichert Realtors in Oakton, Virginia.

Bottom Line: Overall, last week's economic data were positive. Consumer Confidence is definitely being dampened by the negative political rhetoric surrounding Social Security and talk of nuclear proliferation, even as consumer spending remains strong. However, as time passes the effects of this should subside. In the near-term, I expect confidence to rise modestly as increasing gas prices mostly offset better job prospects, low long-term interest rates and improvements in Iraq. The modest rises in the CPI and the Core PCE show that inflation is well in check. Companies are finding other ways to absorb rising costs, as evidenced by their very strong profit growth, without passing these increases on to the consumer. As well, the overcapacity generated during the 90's and global competition still makes it incredibly hard for companies in many sectors to raise prices. The airline, telecom, auto, technology and retail sectors are some of the main areas still facing immense pressure to keep prices low. Rising home values do not have the same negative effect on consumer psyche as increases in goods and services due to the fact that homes are an investment. I am still keeping a close eye on unit labor costs, which comprise two-thirds of inflation, as the job market appears to be accelerating. Any substantial increases in labor costs for a sustained period would prompt the Fed to accelerate their pace of rate hikes. I currently do not anticipate this to be a problem. The fact that Durable Goods Orders are as strong as they are so far this year is remarkable considering the many forms of stimulus that hit the US economy during the fourth quarter of 2004. I had expected that 4Q/04 growth stole from 1Q/05 growth, but this does not appear to be the case. This bodes very well for another strong year for the US economy. I now expect US GDP growth of a healthy 3.5% for the year. While the housing market in some areas of the country is exhibiting bubble-type characteristics, many other areas are not. Considering this winter has been one of the wettest on record, the housing market remains quite robust. I continue to expect a slowing from record levels to more sustainable healthy levels. Finally, the ECRI Weekly Leading Index fell .30% for the week, staying near its highest level since May of 2004.

Saturday, February 26, 2005

Market Week in Review

S&P 500 1,211.37 +.88%

Click here for the Weekly Wrap by Briefing.com.

Bottom Line: Overall, last week's market performance was positive. The advance/decline line was stronger, most sectors rose and volume was decent. The CRB Index rose to an all-time high, resulting in substantial outperformance by most commodity-related stocks. Moreover, better-than-expected economic reports spurred cyclical shares to gains for the week. However, consumer stocks underperformed as energy prices approached highs set in October of last year. Technology was mixed on the week. The semiconductor index rose 3.24% and closed above its 200-day moving-average, while the internet sector underperformed substantially, falling 2.25%. Measures of investor anxiety were mostly lower on the week, but the AAII % Bulls fell to 31.82%, a relatively low level. Worries over South Korea's one sentence statement about their diversifying out of US assets are overdone, in my opinion. It is highly unlikely that South Korea would risk damaging their relationship with the US given current circumstances. Just 10 days ago a report showed the strongest 2 month accumulation of US assets by international investors in 2 years. Finally, it was a big psychological positive for the Bulls that the significant rise in crude oil, heating oil and natural gas didn't result in any follow-through declines from Tuesday's sharp sell-off. As well, the fact that strong economic reports and worries over the US dollar didn't result in higher long-term interest rates is also a boost to psychology.

Friday, February 25, 2005

Weekly Scoreboard*

Indices
S&P 500 1,211.37 +.88%
Dow 10,841.60 +.81%
NASDAQ 2,065.40 +.20%
Russell 2000 637.53 +1.01%
DJ Wilshire 5000 11,933.02 +.88%
S&P Equity Long/Short Index 1,023.04 -.68%
S&P Barra Growth 582.70 +.98%
S&P Barra Value 624.26 +.79%
Morgan Stanley Consumer 587.54 -.09%
Morgan Stanley Cyclical 776.62 +1.65%
Morgan Stanley Technology 473.35 +.87%
Transports 3,715.17 +3.08%
Utilities 356.06 -.04%
Put/Call .83 -1.19%
NYSE Arms .81 -35.20%
Volatility(VIX) 11.49 -2.38%
ISE Sentiment 145.00 +2.11%
AAII % Bulls 31.82 -12.49%
US Dollar 82.66 -.98%
CRB 300.23 +3.53%

Futures Spot Prices
Crude Oil 51.49 +6.71%
Unleaded Gasoline 125.45 +1.42%
Natural Gas 6.72 +11.73%
Heating Oil 145.41 +10.75%
Gold 436.10 +1.73%
Base Metals 126.77 -.17%
Copper 148.60 -.60%
10-year US Treasury Yield 4.27% unch.
Average 30-year Mortgage Rate 5.69% +1.25%

Leading Sectors
Energy +7.36%
Iron/Steel +7.35%
Homebuilders +4.00%

Lagging Sectors
Gaming -1.56%
Disk Drives -1.75%
Internet -2.25%

*% Gain or loss for the week

Mid-day Report

Indices
S&P 500 1,207.86 +.64%
Dow 10,801.63 +.49%
NASDAQ 2,057.15 +.27%
Russell 2000 632.93 +.86%
DJ Wilshire 5000 11,890.47 +.64%
S&P Barra Growth 580.66 +.47%
S&P Barra Value 622.58 +.77%
Morgan Stanley Consumer 586.41 -.09%
Morgan Stanley Cyclical 773.33 +.75%
Morgan Stanley Technology 470.68 +.45%
Transports 3,695.86 +.42%
Utilities 355.78 +1.93%
Put/Call .83 -11.70%
NYSE Arms .79 +2.60%
Volatility(VIX) 11.30 -2.33%
ISE Sentiment 132.00 -26.26%
US Dollar 82.72 -.23%
CRB 298.96 +.31%

Futures Spot Prices
Crude Oil 51.40 +.06%
Unleaded Gasoline 125.50 -2.24%
Natural Gas 6.68 +3.50%
Heating Oil 144.70 -1.23%
Gold 436.40 +.14%
Base Metals 126.77 -.40%
Copper 148.50 +.34%
10-year US Treasury Yield 4.25% -.73%

Leading Sectors
Iron/Steel +3.15%
Energy +2.24%
Homebuilders +2.14%

Lagging Sectors
Networking -.25%
Software -.43%
Broadcasting -1.50%

Market Movers
SYNA +13.66% after saying its touch-screen technology is being used in Apple Computer’s new iPod models.
JLG +25.8% after beating 2Q estimates and raising 05 guidance.
BOOM +22.53% on continuing optimism over strong 4Q results.
MANT +12.28% after meeting 4Q estimates and raising 1Q guidance.
APC +7.55% after Business Week reported the company may be valued as high as $117/share in a takeover.
PD +6.11% on optimism over US economic growth and technical breakout.
BCSI -13.25% after meeting 3Q estimates and lowering 4Q guidance.
TKLC -9.7% after meeting 4Q estimates and lowering 1Q guidance.
WON -6.99% after missing 4Q estimates and lowering 05 outlook.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Preliminary 4Q GDP rose 3.8% versus estimates of 3.7% rise and prior expectations of a 3.1% increase.
- Preliminary 4Q GDP Price Deflator rose 2.1% versus estimates of a 2.0% increase and prior expectations of a 2.0% rise.
- Preliminary 4Q Personal Consumption rose 4.2% versus estimates of a 4.6% gain and prior expectations of a 4.6% rise.
- Existing Home Sales for January fell to 5.94M versus estimates of 6.7M and a downwardly revised 5.97M in December.

Recommendations
- Goldman Sachs: Reiterated Outperform on JNPR, MRVL, NEM, AMGN, GILD, IBM, EMC and MERQ. Reiterated Underperform on GPI and HRB. Downgraded MCDTA to Underperform.
- Smith Barney: Said crude-oil prices may fall during the second quarter because of high inventories. Said shares of INTC and CSCO may rally, fueling gains in the S&P 500. Reiterated Sell on CPN, target $3. Reiterated Buy on MRO, target $47. Reiterated Buy on INTU, target $54. Reiterated Sell on TIVO, target $3.50. Reiterated Buy on SPLS, target $37. Reiterated Buy on HD, target $48. Reiterated Buy on WTS, target $335. Reiterated Buy on ASD, target $50. Reiterated Buy on ROP, target $70. Reiterated Buy on CYH, target $39. Reiterated Buy on APCS, target $15. Reiterated Buy on JCP, target $63. Reiterated Buy on BEAS, target $11.50. Reiterated Sell on CEI, target $12.
- Prudential: Raised XOM to Overweight, target $70.
- CSFB: Raised MAS to Outperform, target $37.

Mid-day News
US stocks are modestly higher mid-day on optimism over US economic growth and lower long-term interest rates. The expansion of the liquefied natural gas tanker fleet is causing a shortage of qualified crewmembers, putting safety at risk, TradeWinds reported. Executives from Federated Department Stores, the owners of Macy’s and Bloomingdale’s, will meet May Department Stores board members to agree on a merger, the Wall Street Journal said. The US venture-capital business is seeing the emergence of firms that concentrate on particular regions or industries, rather than investing in a range of business ideas, the Wall Street Journal reported. Onyx Pharmaceuticals licenses a therapy it developed to Shanghai Sunway Biotech, a Chinese biotech company, after stopping work on the virus-aided treatment in 2003, the NY Times reported. US mutual funds are pushing for cuts in the commissions brokers charge for trading stocks, the Wall Street Journal said. Medical-device makers including Advance Neuromodulation Systems are facing greater scrutiny from regulators regarding sales and promotional tactics, the Wall Street Journal reported. The SEC will vote on new rules to open the credit ratings industry to competition, the Washington Post reported. Alcan, the world’s second-largest aluminum producer, may shut its three plants in France if costs for electricity rise further, Liberation reported. Vail Resorts is interested in buying California’s popular Mammoth Mountain Ski Area, valued by analysts at about $300 million, the Rocky Mountain News reported. The French unemployment rate unexpectedly rose to a five-year high of 10% in January and manufacturers in the country became more pessimistic, Bloomberg said. Optimism in the US over the stability of Iraq is growing, while most Americans think their troops will remain in the Middle Eastern country for at least two more years, according to a Pew Research Center Poll. Iran is seeking greater involvement from the US in talks with European countries aimed at limiting its nuclear program, Bloomberg reported. Residents of the northeastern US braced for another blast of winter, as a second storm forecast to hit the region Monday may form a nor’easter and dump snow and rain along the coast, Bloomberg said. Record coal prices will be higher than forecast for at least the next three years, buoyed by surging steel production in China, said Merrill Lynch. Credit Suisse First Boston economists raised their February job forecast as “new cycle low” jobless claims and a surprise improvement in help-wanted advertising suggest hiring is accelerating, Bloomberg reported. The US economy grew at a 3.8% annual rate in the fourth quarter of 2004, faster than earlier estimated, because the trade deficit turned out to be smaller than thought and businesses spent more on equipment and software, Bloomberg reported. MCI will do its “utmost” to complete a combination with Verizon after receiving a revised bid from Qwest, MCI CEO Capellas said. American Airlines, Delta Airlines and America West raised fares as much as $20 on round-trip flights in the US and Canada, matching a fare increase by Northwest, Bloomberg said. The European Union should regulate hedge funds to protect inexperience investors, EU Financial Services Commissioner McCreevy said. US sales of previously owned homes, including condominiums and co-ops for the first time, declined .1% in January, Bloomberg reported.

BOTTOM LINE: The Portfolio is higher mid-day on gains in my homebuilding, semiconductor and alternative energy longs. I added a few new longs this morning, thus bringing the Portfolio to 100% net long market exposure. One of my new longs is GE and I am using a $35 stop-loss on this position. The tone of the market is modestly positive as the advance/decline line is higher, almost ever sector is rising and volume is light. Measures of investor anxiety are mixed. Homebuilders, steel producers and energy-related stocks are once again leading the way. As well, small-caps and interest-rate sensitive sectors are outperforming and most technology-related sectors are underperforming. It is a psychological positive that long-term rates are falling today after a better-than-expected GDP report. I expect US stocks to trade mixed from current levels into the close as rising energy prices offsets optimism over US economic growth and lower long-term interest rates.

Friday Watch

Late-Night News
Asian indices are higher as exporters in the region rise on optimism over US growth. China will allow more industries to receive private investment as China becomes more market oriented, state-owned Xinhua News Agency said. Wal-Mart de Mexico SA, Latin America's largest retailer, plans to spend $737 million to open 70 stores within the next 12 months, Reuters reported. Microsoft's proposed measures to ensure it complies with the terms of last year's European Commission antitrust ruling are insufficient and will require more concessions from the world's largest software maker, the Financial Times said. Fed Governor Bernanke said inflation in the US is stable and central bankers should continue lifting the benchmark interest rate at the current pace, Bloomberg reported. Microsoft Chairman Bill Gates and Nike Chairman Phil Knight invested in a new buyout fund of as much as $2.5 billion being raised by Oak Hill Capital Partners LP, a firm started by Texas billionaire Robert Bass, Bloomberg said.

Late Recommendations
- Goldman Sachs: Said Offshore Oil Drillers are entering the sweet spot of the cycle, favorites are RIG, DO and ESV. Reiterated Outperform on KSS, IR and MSFT. Reiterated Underperform on WGR and MRO.
- Business Week: Shares of AFC Enterprises(AFCE) may reach $33 in a year, said Steven M. Cohen, chief investment officer at Kellner Dileo Cohen & Co. Microvision(MVIS), which makes optical scanners, will almost double revenue this year from last year as it sells products to companies such as Johnson & Johnson and Honda Motor.

Night Trading
Asian Indices are +.50% to +1.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated +.03%.

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
CNBC Guest Schedule

Earnings of Note
Company/Estimate
CCU/.37
GMRK/.13
KSE/.83
MCIP/.45
NOI/.36
PDLI/-.15

Splits
None of note.

Economic Data
- Preliminary 4Q GDP is estimated to rise 3.7% versus a 3.1% prior estimate.
- Preliminary 4Q GDP Price Deflator is estimated to rise 2.0% versus a prior estimate of 2.0%.
- Preliminary 4Q Personal Consumption is estimated to rise 4.6% versus a 4.6% prior estimate.
- Existing Home Sales for January are estimated to rise to 6.7M versus 6.69M in December.

BOTTOM LINE: I expect US equities to open modestly higher on good earnings/economic reports and gains in Asia. However, rising long-term interest rates may temper gains. The Portfolio is 75% net long heading into tomorrow.

Thursday, February 24, 2005

Thursday Close

Indices
S&P 500 1,200.20 +.79%
Dow 10,748.79 +.70%
NASDAQ 2,051.70 +1.01%
Russell 2000 627.56 +1.13%
DJ Wilshire 5000 11,814.51 +.82%
S&P Barra Growth 577.95 +.96%
S&P Barra Value 617.85 +.62%
Morgan Stanley Consumer 586.95 +.75%
Morgan Stanley Cyclical 767.54 +1.12%
Morgan Stanley Technology 468.55 +1.22%
Transports 3,680.25 +1.90%
Utilities 349.06 +1.07%
Put/Call .94 +9.30%
NYSE Arms .77 +2.67%
Volatility(VIX) 11.57 -6.62%
ISE Sentiment 179.00 +20.13%
US Dollar 82.90 +.27%
CRB 298.04 -.37%

Futures Spot Prices
Crude Oil 51.40 +.02%
Unleaded Gasoline 127.95 -.33%
Natural Gas 6.30 -.11%
Heating Oil 146.40 -.07%
Gold 435.00 -.16%
Base Metals 127.28 -1.03%
Copper 148.00 unch.
10-year US Treasury Yield 4.28% +.51%

Leading Sectors
Homebuilders +3.57%
Iron/Steel +3.09%
Semis +2.39%

Lagging Sectors
Insurance +.24%
Drugs +.21%
Internet -.18%

After-hours Movers
GPS +4.65% after beating 4Q estimates and boosting dividend.
HRB +6.51% after beating 3Q estimates.
NDAQ +5.91% after beating 4Q estimates.
SRNA -7.02% after meeting 4Q estimates and lowering 1Q guidance.
BCSI -6.33% after meeting 3Q estimates and lowering 4Q guidance.
MRVL +3.62% after beating 4Q estimates.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Underperform on RAI, HMT, AG, DE and CNH. Reiterated Outperform on FS, HOT, MO, A and SYK.
- Merrill Lynch: Raised AV to Buy, target $17.50.
- Deutsche Bank: Downgraded AFR to Sell, target $12.
- UBS: Rated GENZ Buy, target $67.
- Business Week: Anadarko Petroleum(APC) may be acquired by a larger oil company, citing Oppenheimer analyst Fadel Gheit.

After-hours News
US stocks finished higher today on optimism over President Bush’s trip to Europe and short-covering in the homebuilding and steel sectors. After the close, China’s population will be overtaken by that of India “without a doubt” before 2030, five years earlier than predicted, as China’s fertility rates decline, the Financial Times reported. IBM reduced it 2004 revenue by $260 million after discovering some employees in Japan booked sales improperly, Bloomberg reported. A US government agency recommended that the Air Force hold a competition for a portion of a Boeing contract valued at as much as $4 billion to upgrade avionics on C-130 transport planes, Bloomberg said. Gap Inc., the largest US clothing chain, said fiscal fourth-quarter earnings rose 3.9% amid better-than-expected holiday sales at its Gap, Old Navy and Banana Republic stores, Bloomberg said. Qwest Communications, seeking to outbid Verizon Communications for MCI, sweetened its $8 billion cash-and-stock offer by giving MCI shareholders a hedge against falling share prices, Bloomberg reported. North Korea must return to six-nation negotiations over the communist nation’s nuclear weapons program in order to fulfill is request for direct talks with the US, South Korea’s foreign minister said. Microsoft hired the creator of the top-selling “Final Fantasy” series for Sony’s PlayStation device to develop games for the next version of Xbox, Bloomberg said. IBM may repatriate as much as $8 billion in foreign earnings, taking advantage of a US law that gives companies a year to bring back profits earned in other countries at a lower tax rate, Bloomberg reported. Japan’s consumer prices fell in January, extending more than six years of deflation and making it difficult for the central bank to end its zero-rate policy anytime soon, Bloomberg said. A federal judge in Houston ruled that OAO Yukos Oil is not entitled to remain under the protection of US bankruptcy laws while it fights the Russian government, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my computer hardware and steel shorts more than offset gains in my alternative energy and semi equipment longs. I added a few new longs in the afternoon, thus leaving the Portfolio 75% net long. One of my new longs is AMAT and I am using a $16.50 stop-loss on this position. The tone of the market strengthened into the afternoon as the advance/decline line finished near its daily highs, volume rose and almost every sector gained. Technology, small-caps and cyclicals led the way and measures of investor anxiety remained mixed. As well, Homebuilding stocks outperformed substantially on positive guidance from PHM. The Housing Sector Index(HGX) may consolidate over the next few days on a modest rise in long-term interest rates, however it should see all-time highs over the coming weeks as fundamentals remain strong, valuations are reasonable and shorts cover.

Mid-day Report

Indices
S&P 500 1,192.62 +.15%
Dow 10,684.12 +.09%
NASDAQ 2,033.17 +.09%
Russell 2000 622.10 +.25%
DJ Wilshire 5000 11,736.01 +.15%
S&P Barra Growth 573.54 +.19%
S&P Barra Value 614.72 +.11%
Morgan Stanley Consumer 584.42 +.31%
Morgan Stanley Cyclical 760.98 +.25%
Morgan Stanley Technology 463.28 +.08%
Transports 3,647.19 +.98%
Utilities 347.39 +.58%
Put/Call 1.10 +27.91%
NYSE Arms 1.08 +44.0%
Volatility(VIX) 11.94 -3.63%
ISE Sentiment 184.00 +23.49%
US Dollar 82.82 +.17%
CRB 298.68 -.16%

Futures Spot Prices
Crude Oil 51.55 +.84%
Unleaded Gasoline 129.00 -1.63%
Natural Gas 6.45 +2.20%
Heating Oil 146.50 -1.22%
Gold 435.50 -.14%
Base Metals 127.28 -1.03%
Copper 147.80 -1.14%
10-year US Treasury Yield 4.27% +.32%

Leading Sectors
Iron/Steel +2.47%
Homebuilders +1.98%
Semis +1.28%

Lagging Sectors
Gaming -.31%
Drugs -.41%
Internet -.78%

Market Movers
YHOO -5.0% on RBC Capital downgrade to Sector Perform.
GOOG -4.7% on RBC Capital downgrade to Sector Perform.
ANIK +35.29% after beating 4Q estimates substantially.
JOYG +17.66% after substantially beating 1Q estimates and raising 05 forecast.
PRST +11.97% on strong 4Q results.
YELL +5.2% after saying it successfully launched its next-day service with a 98% on-time performance record.
MATK +4.83% after saying it will replace Banknorth Group(BNK) in the S&P MidCap 400 after the close of trading on March 1.
FWHT -21.48% after missing 1Q revenue estimates and lowering 05 outlook.
ASKJ -7.82% on YHOO, GOOG and FWHT news.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Durable Goods Orders for January fell .9% versus estimates of unch. and an upwardly revised 1.4% rise in December.
- Durables Ex Transportation for January rose .8% versus estimates of a .3% increase and an upwardly revised 2.8% gain in December.
- Initial Jobless Claims for last week rose to 312K versus estimates of 309K and 303K the prior week.
- Continuing Claims fell to 2650K versus estimates of 2693K and 2712K prior.
- Help Wanted Index for January rose to 41 versus estimates of 38 and a reading of 38 in December.

Recommendations
- Goldman Sachs: Reiterated Outperform on HD, MO, NEM, YUM, MSFT, DELL, GILD, BSX, JTX, ECA, CEN and JTX. Reiterated Underperform on INFA.
- Smith Barney: Reiterated Buy on PLUG, target $13. Reiterated Buy on ROP, target $70. Reiterated Buy on WTS, target $35. Reiterated Sell on JBX, target $34. Reiterated Sell on CIEN, target $2.40. Reiterated Buy on ESV, target $48. Reiterated Buy on LOW, target $70. Reiterated Buy on EEFT, target $35. Reiterated Buy on EFD, target $27. Reiterated Buy on BLS, target $25.41.
- UBS: Raised KRB to Buy, target $30.
- JP Morgan: Raised PLD to Overweight. Downgraded RPM to Underweight. Raised MDG to Overweight.
- Bear Stearns: Raised NTAP to Outperform.
- Legg Mason: Raised ANT to Buy, target $46.
- Oppenheimer: Rated RHB Buy, target $35.
- CIBC: Raised LAMR to Sector Outperform, target $50.
- Merrill Lynch: Rated BVN Buy, target $28. Raised MWV to Buy, target $36.
- Raymond James: Raised WCN to Strong Buy.

Mid-day News
US stocks are modestly higher mid-day on gains in transportation and homebuilding stocks. IBM is starting to provide shorter more limited technology service contracts because they are more profitable and favored by customers, the Wall Street Journal reported. Honeywell International, Philips Electronics, Motorola are among more than 100 companies that have agreed to make devices using ZigBee wireless technology, the Wall Street Journal reported. A NYC-based developer dropped plans to include a Wal-Mart Stores outlet in its planned Queens shopping center, ending the world’s largest retailer’s plans to open its first NYC store, the NY Times reported. GM, AT&T, Alcoa and other US companies may hold software vendors such as Microsoft responsible for flaws in their systems, the Wall Street Journal reported. Utah’s system of partial health insurance may become a model for changing the US Medicaid system, the NY Times said. Coca-Cola has allocated $125 million of a $400 million increase in marketing and innovation spending to North America, the Wall Street Journal reported. A Maryland House of Delegates committee voted to pass a slot-machine gambling bill, bringing closer the prospect of for-profit slots coming to the state for the first time since 1968, the Washington Post said. Gangsta rap star 50 Cent is joining Sirius Satellite Radio to host his own show called “G Unit Radio,” the NY Post reported. Cablevision Systems, the largest cable-tv operator in NY, may put its cable systems up for sale later this year, the NY Post reported. Saudi Arabian Oil Minister al-Naimi said oil prices are likely to trade between $40-$50/bbl. this year, Dow Jones Newswires reported. Demand in the US for debt with maturities of 30 years or more may be spurred on expectations changes to legislation will be made to ensure company pension plans are properly funded, the Financial Times said. The number of unemployed in Germany rose to 5.2 million in February, the highest since WW II, Die Welt reported. Ryanair Holdings, Europe’s biggest low-cost airline, ordered 70 Boeing single-aisle planes worth more than $4 billion to more than double its capacity by 2012, Bloomberg reported. Wal-Mart CEO Scott said the company plans to expand in California because prices of food and household supplies are too high, Bloomberg said. China’s fixed-asset investment growth is at risk of rebounding and raw material and service price increases my push up inflation, the central bank said, signaling policies aimed at slowing the economy are unlikely to be relaxed, Bloomberg reported. The US and Russia pledged to extend previous agreements to prevent terrorists from obtaining nuclear weapons as President Bush met with President Putin to express concern about Putin’s commitment to democracy, Bloomberg said. Duke Energy is selling its interests in pipeline owner Teppco Partners LP to a company controlled by billionaire Dan Duncan and will use the proceeds to buy back up to $2.5 billion in stock, Bloomberg reported. Crude oil is nearly unchanged after the Energy Department reported that US stockpiles rose less than some forecast, Bloomberg said. IBM offered US national-security regulators concessions aimed at overcoming objections to the sale of its personal-computer unit to China’s Lenovo Group, Bloomberg reported. President Bush said he and Russian President Putin agreed that Iran and North Korea shouldn’t develop nuclear weapons, in talks he described as “open and candid,” Bloomberg said. US durable goods orders fell .9% in January, the first drop in three months, as lower demand for planes and autos offset a surge in capital equipment demand, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly lower mid-day as losses in my computer hardware and steel shorts are more than offsetting gains in my alternative energy longs and software shorts. I exited a few shorts this morning as they hit stop-losses, thus leaving the Portfolio 50% net long. The tone of the market is mixed again as the advance/decline line is nearly unchanged, sector performance is mixed and volume is better. Measures of investor anxiety are also mixed, however the AAII % Bulls fell 12.49% this week to 31.82% which is a positive. As well, while the Help-wanted Index is not widely followed anymore, it jumped out of its trading range and to the highest levels since Feb.03. However, it is a negative that crude oil isn’t declining on today’s inventory data and OPEC seems happy with oil at $50/bbl. I expect US stocks to trade modestly higher into the close on short-covering ahead of tomorrow’s economic data.

Between the Hedges Wins Best Financial Industry/Investment Blog Award



Thank you very much for your support and taking the time to vote. Also, a special thanks to TraderMike, Seeking Alpha and Phat Investor for all the visitors they have sent my way over the past year. Finally, take a minute to go to the awards site and check out the other winning blogs.

Wednesday, February 23, 2005

Thursday Watch

Late-Night News
Asian indices are mostly higher as exporters in the region gain on a report showing US consumer prices remained tame. The number of US companies with debt rated at the lowest end of the junk bond scale is reaching record levels, suggesting companies may default on their payments and bankruptcies will rise, the London-based Times said, citing S&P. AIDS patients taking a cocktail of antiviral drugs to control the disease may have an increased risk of a heart attack, the Wall Street Journal reported. Policy makers from Japan, China, South Korea and the Association of South East Asian Nations met in Bangkok two days ago to discuss ways to stem the weak dollar, the Korea Times reported. Benon Sevan, the former head of the UN/Iraq oil-for-food program, has asked the UN for more time to answer charges against him, Reuters reported. Russia offered India's state-run Oil & Natural Gas Corp. stakes in 11 oil and gas projects, the Press Trust of India reported. Taiwan is close to allowing Chinese financial institutions to set up representative offices on the island of 23 million people for the first time since both sides split 55 years ago, Bloomberg reported. Google added a feature for searching movie showtimes and reviews, Bloomberg said. SAC Capital raised its stake in Google from 539,300 to 1.32 million shares, Bloomberg reported. Clear Channel Communications and Howard Stern agreed to dismiss their lawsuits over the company's decision to drop the disc jockey's show last year, Bloomberg said. The world economy is becoming too dependent on the US and China to carry its momentum, said Rodrigo de Rato, head of the IMF. JetBlue Airways plans to expand further into the Los Angeles area with flights between New York and Burbank, California, the NY Times reported. The US government is preparing to test an Asian bird flu vaccine in an effort to reduce the damage of a potential outbreak, the AP reported. President Bush and Russian President Putin plan to announce measures today to counter nuclear terrorism, the Washington Post reported. Boston Scientific will probably pay $70 million to settle a US Justice Department investigation over the recall of defective stents, the Wall Street Journal said.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on DO, RIG, BHI, SLB, CEN and SII. Reiterated Underperform on ELX.

Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.07%.

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
CNBC Guest Schedule

Earnings of Note
Company/Estimate
BEAS/.10
CRDN/.37
CYH/.42
CVTX/-1.27
DNR/.36
DYN/-.24
GPS/.37
HRB/.48
IM/.35
JCP/1.11
KSS/.93
LEXR/-.45
MRVL/.23
MFE/.22
NEM/.32
OCR/.55
OSG/3.89
PDE/.03
SPLS/.50
VIA/.38

Splits
None of note.

Economic Data
- Durable Goods Orders for January are estimated unch. versus a 1.1% rise in December.
- Durables Ex Transportation for January are estimated to increase .3% versus a 2.4% gain in December.
- Initial Jobless Claims for last week are estimated to rise to 309K versus 302K the prior week.
- Continuing Claims are estimated to fall to 2693K versus 2717K prior.

BOTTOM LINE: I expect US equities to open mixed as higher commodity prices and interest rates offset good earnings and economic reports. The Portfolio is 25% net long heading into tomorrow.

Wednesday Close

Indices
S&P 500 1,190.80 +.56%
Dow 10,673.79 +.59%
NASDAQ 2,031.25 +.05%
Russell 2000 620.54 +.42%
DJ Wilshire 5000 11,718.47 +.54%
S&P Barra Growth 572.45 +.48%
S&P Barra Value 614.04 +.64%
Morgan Stanley Consumer 582.51 +.65%
Morgan Stanley Cyclical 759.02 +.82%
Morgan Stanley Technology 462.90 -.18%
Transports 3,611.74 +2.02%
Utilities 345.38 +.72%
Put/Call .86 +13.16%
NYSE Arms .75 -48.98%
Volatility(VIX) 12.39 -5.71%
ISE Sentiment 149.00 +4.93%
US Dollar 82.68 +.33%
CRB 299.16 +.50%

Futures Spot Prices
Crude Oil 51.32 +.29%
Unleaded Gasoline 131.45 +.24%
Natural Gas 6.30 -.10%
Heating Oil 148.74 +.29%
Gold 435.90 -.05%
Base Metals 128.61 -.13%
Copper 149.05 -.30%
10-year US Treasury Yield 4.26% -.55%

Leading Sectors
Transports +2.02%
HMOs +1.76%
Oil Service +1.63%

Lagging Sectors
Semis -.42%
Gaming -.54%
Disk Drives -1.42%

After-hours Movers
APPB +6.88% after better-than-expected same-store-sales.
MATK +4.17% after saying it will replace Banknorth Group(BNK) in the S&P MidCap 400 after the close of trading on March 1.
FWHT -19.03% after missing 1Q revenue estimates and lowering 05 outlook.
SGMS -6.3% after beating 4Q estimates and saying it is working to eliminate a "material weakness" in its accounting.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Underperform on KO. Reiterated Outperform on RAI.
- Lehman Brothers: Reiterated Overweight on CPS, target $46.
- Oppenheimer: Reiterated Buy on RDWR, target $40. Reiterated Buy on OSI, target $52.
- Morgan Stanley: Reiterated Overweight on DDR, target $46. Reiterated Overweight on IPCR, target $44.
- Raymond James: Downgraded MHS and ACDO to Underperform.
- UBS: Reiterated Buy on HYSL, target $60.
- Prudential: Reiterated Overweight on OMC, target $97. Reiterated Overweight on RBK, target $50.
- Banc of America: Upgraded JBL to Buy, target $30.

After-hours News
US stocks finished modestly higher today on optimism over merger activity and strength in energy-related stocks. After the close, Martha Stewart is determined to return as CEO of Martha Stewart Living Omnimedia despite a potential ban by the SEC, Newsweek reported. Hedge funds hold more capital to use for acquisitions and more lucrative incentive structures than private equity groups, the Financial Times reported. “Unless private equity groups recognize the weapons at the disposal of hedge funds they risk becoming dinosaurs,” said David Rubenstein, Carlyle Group co-founder. Playmates Holdings Ltd., which owns the toy rights for the Teenage Mutant Ninja Turtles, is seeking acquisitions in the US, Europe and Japan, the South China Morning Post reported. AT&T may be liable for as much as $500 million in fees related to its prepaid calling cards after US regulators rejected the company’s request for an exemption, Bloomberg reported. Northrop Grumman or General Dynamics may be shut out of production work on the US Navy’s new destroyer program, worth at least $13.5 billion, under a plan submitted to the Pentagon, Bloomberg said. Colombian Foreign Minister Carolina Barco said her country plans to start easing its dependence on US aid in about 2 years as the economy grows fast enough to fund the fight against drug-funded terrorism on its own, Bloomberg reported. Chiron’s John Lambert, president of the company’s vaccine unit, resigned after contamination at a plant in England caused a shortage of influenza shots in the US during the 04-05 season, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my computer hardware and steel shorts more than offset gains in my alternative energy longs. I covered a few shorts in the afternoon, thus leaving the Portfolio 25% net long. The tone of the market weakened modestly into the afternoon as the advance/decline line finished near its daily lows, volume declined and sector performance was mostly positive. Technology stocks underperformed throughout the day and most measures of investor anxiety fell. Today’s action appeared to be the result of a technical bounce from yesterday’s sharp sell-off and I continue to expect weakness to resurface over the coming weeks.

Mid-day Report

Indices
S&P 500 1,188.73 +.39%
Dow 10,658.86 +.44%
NASDAQ 2,028.80 -.07%
Russell 2000 621.87 +.64%
DJ Wilshire 5000 11,703.52 +.41%
S&P Barra Growth 571.41 +.30%
S&P Barra Value 613.03 +.47%
Morgan Stanley Consumer 581.60 +.49%
Morgan Stanley Cyclical 756.83 +.53%
Morgan Stanley Technology 460.17 -.76%
Transports 3,619.43 +2.24%
Utilities 346.16 +.94%
Put/Call .84 +10.53%
NYSE Arms 1.02 -30.61%
Volatility(VIX) 12.67 -3.58%
ISE Sentiment 145.00 +2.11%
US Dollar 82.78 +.45%
CRB 298.98 +.44%

Futures Spot Prices
Crude Oil 51.45 +.06%
Unleaded Gasoline 131.30 +.31%
Natural Gas 6.25 +2.49%
Heating Oil 147.20 +2.21%
Gold 436.00 +.05%
Base Metals 128.61 -.13%
Copper 149.40 +.34%
10-year US Treasury Yield 4.27% -.14%

Leading Sectors
Oil Service +1.47%
Energy +1.36%
Airlines +1.31%

Lagging Sectors
Networking -.63%
Semis -1.15%
Disk Drives -1.36%

Market Movers
MAS -8.81% after beating 4Q estimates and lowering 1Q/05 outlook.
ACDO +38.5% after Medco Health Solutions agreed to buy it for about $2.2 billion to expand into faster-growing specialty drugs.
USFC +11.51% after the Wall Street Journal reported it may be acquired by Yellow Roadway.
OPTN +11.74% after beating 4Q estimates, announcing 3-for-2 split and raising 05 estimates.
IAAI +23.69% after agreeing to be purchased by closely held investment firm Kelso & Co. for about $385M.
YELL +5.33% on USFC news.
PFGC +9.08% after Chiquita Brands agreed to buy its Fresh Express for $855M in cash.
CPS +6.26% on Smith Barney recommendation to Buy on weakness.
LCAV +10.17% after meeting 4Q estimates and raising 05 guidance.
APSG -21.5% after missing 1Q estimates substantially.
COGT -14.2% after beating 4Q estimates and Needham downgrade to Hold.
POSS -9.57% after missing 2Q estimates, lowering 3Q guidance and 05 outlook.
NANO -9.89% after missing 4Q estimates.
LAMR -5.23% after meeting 4Q estimates and lowering 1Q outlook.
ADM -7.34% after saying it won’t be able to increase prices for high fructose corn syrup this year and Merrill downgrade to Neutral.
SNDA -5.6% after SINA introduced a poison pill plan to try to rebuff its takeover attempt.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Consumer Price Index for January rose .1% versus estimates of a .2% increase and unchanged in December.
- CPI Ex Food & Energy for January rose .2% versus estimates of a .2% increase and a .2% rise in December.

Recommendations
- Goldman Sachs: Reiterated Outperform on KSS, JTX, GILD.
- Smith Barney: Upgraded MCCC to Buy, target $7.75. Said to Buy CPS on weakness. Reiterated Buy on BLS, target $32. Reiterated Buy on MRO, target $47. Reiterated Buy on DPZ, target $21. Reiterated Buy on HD, target $48. Reiterated Buy on TYC, target $40. Reiterated Buy on FD, target $70. Reiterated Buy on EEFT, target $33. Reiterated Buy on CVH, target $73.50.
- Morgan Stanley: Raised FD to Overweight, target $65. Raised ONXX to Overweight, target $44.
- UBS: Raised SKYW to Buy, target $20.25. Raised PG to Buy, target $65.
- JP Morgan: Raised CCU to Overweight.
- Thomas Weisel: Raised ARRS to Outperform.
- CIBC: Raised PGNX to Sector Outperform, target $30.
- Banc of America: Upgraded JBL to Buy, target $30.
- Legg Mason: Raised CLDN to Buy, target $25. Raised FWRD to Buy, target $47.

Mid-day News
US stocks are mixed mid-day as gains in energy-related stocks are being offset by losses in the technology sector. OPEC may boost output to lower prices that are trading close to a four-month high, Agence France-Presse reported, citing the group’s president. Macau territory, the only place in mainland China where casinos are allowed, is likely to outstrip Las Vegas as the world’s biggest gambling center, and global investors are looking for ways to profit from that, the Wall Street Journal said. Toymakers such as Mattel and Playmates Holdings are struggling to remain relevant as children gravitate from toys at a younger age, the NY Times reported. Procter & Gamble has been unable to make its Pur water purifying tablets a profitable venture by selling it to poor countries with unclean drinking supplies because of cost, the Wall Street Journal reported. Time Warner plans to sell DVDs at discounted prices in China, to combat the sale of illegally made home videos there, the Wall Street Journal reported. Canadian cattle imports may resume slowly when the US removes a ban on March 7, because rules are so complicated, the Wall Street Journal said. Time Warner’s cable tv unit’s success with its Internet-based telephone service shows that cable companies are able to compete for residential phone customers, the Wall Street Journal said. US amputations of legs, feet and toes have increased as the number of cases of diabetes rises, the Wall Street Journal reported. Fannie Mae will say today that its regulator extended the deadline for the company to increase its capital, the Wall Street Journal said. New Jersey is second only to New York and well above the national average in the amount of cancer-causing diesel soot emitted from buses, trucks and other vehicles, the Star-Ledger reported. CVS Corp. will become a sponsor for the Boston Red Sox in a five-year agreement that will give it a sign at the base of Fenway Park’s famous Green Monster, the Boston Herald reported. California Assemblyman Leno is proposing a law banning the sale of Taser International’s stun guns to civilians and requiring police officers to log all use of Tasers on suspects, the San Francisco Chronicle reported. Harvard University researchers plan to test whether the illegal psychedelic party drug ecstasy can help terminally ill cancer patients, the Boston Globe reported. German Chancellor Schroeder said differences of opinion with the US over the liberation of Iraq are a thing of the past and that Germany is ready to play a larger role in building democracy in the country, Bloomberg reported. Martha Stewart Living Omnimedia, in its last earnings report before the company’s founder leaves prison, posted a fourth-quarter loss because sales at its flagship magazine and tv unit plummeted, Bloomberg said. Fannie Mae said its federal regulator has found additional policies that may violate accounting rules, Bloomberg reported. Prices paid by US consumers rose .1% in January, less than forecast and suggesting companies haven’t been able to pass on their higher raw materials costs, Bloomberg said. Southern California residents face a seventh day of downpours in what may be the region’s wettest season in history, Bloomberg reported. Apple Computer cut the prices of its iPod mini by 20% and introduced new models to capitalize on demand that has made iPods the top-selling digital music players in the US, Bloomberg said. The Fed “still has a ways to go” in raising interest rates as it seeks to thwart inflation, Fed Bank of Atlanta President Guynn said. The FOMC considers interest rates too low to ensure stable prices and future rate decisions will depend on incoming data, according to minutes of their Feb. 1-2 meeting, Bloomberg reported.

BOTTOM LINE: The Portfolio is slightly lower mid-day as losses in my computer hardware and steel shorts are more than offsetting gains in my alternative energy longs. I have not traded today, thus leaving the Portfolio market neutral. The tone of the market is mixed as the advance/decline line is slightly higher, sector performance is mixed and volume is light. As well, measures of investor anxiety are mostly lower. Technology stocks are underperforming, while interest-rate sensitive shares and energy-related stocks are outperforming. Today’s muted gains appear to be just a temporary technical bounce after yesterday’s steep losses. I expect US stocks to trade modestly lower into the close on continuing worries over higher interest rates, increasing commodity prices and slowing global growth.

Wednesday Watch

Late-Night News
Asian indices are mostly lower as concerns over slowing growth and rising energy prices are pressuring the region's exporters. China will announce a bailout for Industrial & Commercial Bank of China, the nation's biggest lender, in the next few days, Hong-based Sing Tao Daily reported. Viacom, which is looking for ways to revive its Paramount Pictures movie studio, can turn to DVD sales of television and movie hits because former studio managers held back many titles, the Wall Street Journal reported. Dyson Appliances Ltd., the UK maker of bagless vacuum cleaners, sells the most floor cleaners in the US, beating competition from Maytag's Hoover, the Guardian said. Walt Disney's Miramax Films will release a number of previously shelved or delayed movies before co-Chairman Harvey Weinstein and Bob Weinstein leave, the NY Times said. A computer virus is being distributed by e-mails that falsely claims to be from the FBI, Bloomberg reported. South Korea's central bank, which holds the world's fourth-largest foreign currency reserves, said it has no plan to sell dollars from those holdings and no plan to change the current portfolio of currencies in its reserves, Bloomberg reported. The yen dropped from near a three-week high against the dollar and weakened versus the euro after a government report showed Japan's exports grew at the slowest pace in more than a year, Bloomberg said. The US government called on North Korea to return to talks about scrapping its nuclear weapons program, saying it wasn't setting conditions for the discussions, Bloomberg said. Manhattan apartment prices in Uptown neighborhoods such as Harlem more than quadrupled over the last decade, outpacing the tripling of prices in the costlier Midtown and Downtown areas, Bloomberg reported. Toshiba Corp. will raise capital spending by as much as $210 million to increase output of displays used in mobile phones and car navigation systems, Bloomberg reported. Visa Intl., MasterCard Inc. and other credit-card companies have lowered the fees they charge high-volume merchants to woo business from purchases of less than $5, the Washington Post reported. McDonald's won't shift its emphasis on hamburgers and french fries in favor of the salads and fruit that it's introduced in recent years, the Wall Street Journal said. MCI Inc., which has agreed to be bought by Verizon Communications for $6.75 billion, is under pressure from hedge funds to look at any revised offer from Qwest Communications, the Wall Street Journal said.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on TYC, MDT, GILD, CL and PXD. Reiterated Underperform on DE, CNH and AG.

Night Trading
Asian Indices are -1.0% to -.25% on average.
S&P 500 indicated +.03%.
NASDAQ 100 indicated -.17%.

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
CNBC Guest Schedule

Earnings of Note
Company/Estimate
CVC/-.34
ESV/.22
LAMR/.03
LIZ/.74
LOW/.59
MSO/-.16
MAS/.54
NAV/.22
PDG/.11
SGMS/.22
TJX/.39
TOL/1.15
WMB/.10

Splits
CHS 2-for-1

Economic Data
- Consumer Price Index for January is estimated to have risen .2% versus no change in December.
- CPI Ex Food & Energy for January is estimated to have risen .2% versus a .2% increase in December.
- Minutes of Feb. 2 FOMC Meeting

BOTTOM LINE: I expect US equities to open mixed and weaken later in the day on a continuation of today's sell-off related to higher commodity prices, rising interest rates and slowing global growth. The Portfolio is market neutral heading into tomorrow.

Tuesday, February 22, 2005

Tuesday Close

Indices
S&P 500 1,184.16 -1.45%
Dow 10,611.20 -1.61%
NASDAQ 2,030.32 -1.37%
Russell 2000 617.93 -1.94%
DJ Wilshire 5000 11,655.73 -1.49%
S&P Barra Growth 569.70 -1.49%
S&P Barra Value 610.15 -1.42%
Morgan Stanley Consumer 578.74 -1.94%
Morgan Stanley Cyclical 752.82 -1.87%
Morgan Stanley Technology 463.73 -.81%
Transports 3,540.15 -2.20%
Utilities 342.91 -2.68%
Put/Call .76 -9.52%
NYSE Arms 1.47 +145.00%
Volatility(VIX) 13.14 +17.53%
ISE Sentiment 142.00 -14.46%
US Dollar 82.41 -1.33%
CRB 297.66 +2.41%

Futures Spot Prices
Crude Oil 51.15 -.53%
Unleaded Gasoline 130.80 -.07%
Natural Gas 6.07 -.46%
Heating Oil 143.20 -.57%
Gold 437.00 +.28%
Base Metals 128.78 +1.58%
Copper 148.90 unch.
10-year US Treasury Yield 4.28% +.55%

Leading Sectors
Drugs -.14%
Networking -.22%
Semis -.45%

Lagging Sectors
Utilities -2.68%
Homebuilding -2.79%
HMOs -2.95%

After-hours Movers
NVEC +6.68% after announcing that it has been awarded a one-year contract for approximately $400,000 by the Defense Advanced Research Projects Agency to develop ultra-sensitive spin-dependent tunneling sensor systems.
MTLG +6.67% after beating 4Q estimates.
NOVL -3.43% on profit-taking after beating 1Q estimates.
APSG -20.06% after missing 1Q estimates substantially.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Underperform on INFA, AG, CVH and THC. Reiterated Outperform on HD and RIO.

After-hours News
US stocks finished sharply lower today on continuing worries over rising commodity prices, slowing global growth and higher interest rates. After the close, Vivendi Universal’s mobile phone unit, Universal Mobile, expects the value of content sold via cell phones to jump as much as threefold to $15.9 billion over the next five years, the Financial Times reported. Sony Corp. will fully withdraw from the PDA business by ending production for the Japanese market as early as July, the Nihon Keizai reported. Taiwan Semiconductor Manufacturing plans to more-than triple its cash dividend payment this year in a move that signals Asian companies are more willing to share cash with shareholders, the Wall Street Journal reported. Sina Corp., which operates China’s No.1 Internet search engine, has introduced a shareholder rights plan that may help rebuff a takeover attempt by Shanda Interactive Entertainment, the Financial Times reported. Beijing’s city government bought Microsoft software after canceling a $3.5 million order for the company’s Office product and Windows operating system last year, the Financial Times reported. China’s passenger car prices may fall by as much as 8% this year from a year earlier because of oversupply, Xinhua News Agency reported. California Insurance Commissioner Garamendi said he is “actively investigating” title insurers Fidelity National Financial and LandAmerica Financial as part of a probe into hidden payments with developers, Bloomberg reported. United Technologies’ Pratt & Whitney unit agreed to buy Boeing’s Rocketdyne rocket engine unit, which makes the reusable main rockets used by the space shuttle, for $700 million in cash to bolster its sales to NASA, Bloomberg said. BHP Billiton and Rio Tinto may have their profit estimates raised by analysts should the two companies obtain the same iron ore price increase as rival Cia. Vale do Rio Doce, Bloomberg reported. Crude oil traded above $51/bbl. in NY, close to its highest price in almost four months, as colder-than-normal weather in the US and Europe raised demand, Bloomberg said.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my homebuilding, steel and medical information systems longs. I added a few new consumer-oriented shorts in the afternoon, thus leaving the Portfolio market neutral. One of my new shorts is ERTS and I am using a $66 stop-loss on this position. The tone of the market weakened further into the afternoon as the advance/decline line finished at its daily lows, volume accelerated and every major sector fell. The US dollar declined and the CRB made new highs, further stoking inflation fears. Interest-rate/energy sensitive sectors and small-cap stocks significantly underperformed throughout the day. On the positive side, most measures of investor anxiety rose and technology stocks outperformed. I expect US stocks to test their January lows over the coming weeks.