Thursday Watch

Late-Night Headlines
Bloomberg:
- Ford Motor(F) will offer no-interest financing on almost all models, as well as up to $1,000 to pay for fuel.
- Copper may lead a drop in metal prices, falling by as much as 30%, as its surge to a record has outpaced demand, said Richard Elman, CEO of Noble Group Ltd., a supplier of commodities. “It’s fairyland: we think, ultimately, prices will come back to reality,” said Elman.
- Japan’s debt rating outlook was raised to “positive” from “stable” by Moody’s Investors Service, which said the country’s economic prospects have improved under Prime Minister Koizumi’s government.

South China Morning Post:
- China ordered an immediate ban on the approval of land for building villas and low-density housing.

Sankei:
- The US and Japan have heightened surveillance of North Korea because it is preparing to launch a long-range ballistic missile.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.08%.

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

Earnings of Note
Company/EPS Estimate
- (BBOX)/.74
- (BF/A)/.54
- (CIEN)/.00
- (DG)/.16
- (HNZ)/.49
- (JTX)/1.62
- (PLL)/.38
- (NX)/1.08
- (VIP)/.71
- (WIND)/.04

Upcoming Splits
- (CBG) 3-for-1
- (GDI) 2-for-1
- (HOC) 2-for-1
- (UAG) 2-for-1
- (BRY) 2-for-1
- (MFC) 2-for-1

Economic Releases
8:30 am EST
- Final 1Q Non-farm Productivity is estimated to rise 3.9% versus prior estimates of a 3.2% gain.
- Final 1Q Unit Labor Costs are estimated to rise 1.8% versus prior estimates of a 2.5% gain.
- Initial Jobless Claims for last are estimated to fall to 320K versus 329K the prior week.
- Continuing Claims are estimated to fall to 2413K versus 2420K prior.

10:00 am EST
- Construction Spending for April is estimated to remain unchanged versus a .9% gain in March.
- Pending Home Sales for April are estimated to fall 1.0% versus a 1.2% decline in March.
- ISM Manufacturing for May is estimated to fall to 55.6 versus a reading of 57.3 in April.
- ISM Prices Paid for May is estimated to rise to 74.6 versus a reading of 71.5 in April.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 1,000,000 barrels. Gasoline supplies are estimated to rise by 1,400,000 barrels. Distillate inventories are expected to rise by 1,500,000 barrels. Refinery Utilization is estimated to rise .78%. Finally, natural gas supplies are expected to rise by 85 bcf.

Afternoon:
- Total Vehicle Sales for May are estimated to fall to 16.5M versus 16.7M in April.

BOTTOM LINE: Asian indices are higher, boosted by exporting stocks in the region after the US dollar rose. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish Higher on Short-covering, Bargain Hunting and Lower Energy Prices

Indices
S&P 500 1,270.09 +.81%
DJIA 11,168.31 +.67%
NASDAQ 2,178.88 +.65%
Russell 2000 721.01 +1.40%
Wilshire 5000 12,802.45 +.92%
S&P Barra Growth 587.72 +.65%
S&P Barra Value 680.63 +.97%
Morgan Stanley Consumer 605.49 +.59%
Morgan Stanley Cyclical 835.13 +1.06%
Morgan Stanley Technology 501.91 +.48%
Transports 4,669.65 +1.98%
Utilities 406.17 +1.44%
Put/Call .92 -21.37%
NYSE Arms .57 -74.29%
Volatility(VIX) 16.44 -11.90%
ISE Sentiment 90.00 -13.46%
US Dollar 84.67 +.46%
CRB 344.87 -.87%

Futures Spot Prices
Crude Oil 71.36 +.10%
Unleaded Gasoline 209.50 -.03%
Natural Gas 6.40 +.33%
Heating Oil 199.73 +.10%
Gold 650.50 +.23%
Base Metals 230.41 -1.05%
Copper 361.70 -.19%
10-year US Treasury Yield 5.12% +.87%

Leading Sectors
Oil Service +3.13%
Airlines +2.81%
Steel +2.34%

Lagging Sectors
REITs +.01%
Homebuilders -.02%
Networking -.08%

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

Afternoon Recommendations
CIBC:
- Upgraded (T) to Sector Outperformer, target $35.

Deutsche Bank:
- Rated (DTAS) Buy, target $15.
- Rated (FWRD) Buy, target $42.

Afternoon/Evening Headlines
Bloomberg:
- Futures traders raised bets that the Fed will increase its benchmark interest rate to 5.25% in June after minutes of the central bank’s May 10 meeting said inflation was more than the Fed expected.
- US Treasuries fell as minutes of the Fed’s most recent meeting on monetary policy increased concern that policy makers may continue hiking the benchmark Fed Funds rate.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Networking longs, Medical longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was about average. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was mildly bullish. While the major averages finished with decent gains, I would like to see healthier underlying action. Trading was choppy and incoherent throughout most of the day. The concerns I spoke of in my prior post still persist. The 10-year yield finished near session highs at 5.12%. On the positive side, the ISE Sentiment Index made a 52-week low of 89.0. The CRB Index is back below its 50-day moving-average. The SOX finished with a 1.77% gain and Small-caps outperformed the broad market, rising 1.4%.

Stocks Slightly Higher into Final Hour on Bargain Hunting and Falling Energy Prices

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Networking longs and Retail longs. I have not traded today, thus leaving the Portfolio 50% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are gaining and volume is about average. So far, the major averages are holding onto slight gains. However, I am seeing too many negatives to expect this bounce to gain substantial upside traction. Any sustainable rally can't be led by commodity stocks, in my opinion. I find it highly unlikely the Fed will cease raising rates with the 10-year yield approaching recent highs and oil above $70 per barrel. Finally, while breadth is OK today, a number of market-leading stocks are lower or barely rising. I plan to remain nimble, but a test of recent lows still looks likely. I expect US stocks to trade mixed into the close from current levels as lower energy prices offset higher long-term rates.

Today's Headlines

Bloomberg:
- Emerging-market stocks are headed for the biggest monthly drop in more than 3 ½ years as the prospect of higher interest rates and a slump in prices of commodities caused some investors to pull out of the riskiest markets from India to Russia.
- ADC Telecom offered about $2 billion in stock to take over Andrew Corp.(ANDW).
- Mortgage applications in the US declined last week to the lowest level in four year as higher borrowing costs hurt home purchases and refinancing.
- More than 84,000 people in 145 countries will take the CFA exams this year, as record profits drive both investment banks and job candidates to try to boost their competitiveness.
- Crude oil fell for the first time in a week and gold declined after the US offered to join European talks with Iran if the country halts uranium enrichment.
- Fed policy makers were unsure three weeks ago about how much further to raise interest rates.

Wall Street Journal:
- India has the largest number of people with HIV/AIDS, exceeding the previous record set by South Africa, citing a UN report.
- Advanced Micro Devices(AMD) expects some personal-computer makers to soon begin selling systems based on a new group of technologies for managing digital media in the home as its seeks to compete with Intel’s(INTC) Viiv home entertainment product.
- Vonage Holdings(VG), whose shares dropped after an IPO last week, has offered to pay its underwriters back if its Internet phone customers refuse to make good on agreements to buy shares.

Weeden & Co.:
- Bill Gross, manager of the world’s biggest bond fund, cut his holdings of emerging-market debt.

Chicago Manufacturing Very Strong

- Chicago Purchasing Manager for May rose to 61.5 versus estimates of 56.0 and a reading of 57.2 in April.

BOTTOM LINE: Manufacturing in the Chicago area unexpectedly accelerated this month, and orders placed with factories were the highest in more than a year, Bloomberg said. The purchasers’ orders measure rose to 69.6, the highest since March 2005. The employment component of the index rose to 52.8 from 47.2 the prior month. The Prices Paid Index fell to 76.9 from 77.2. I continue to believe manufacturing will decelerate over the coming months as US growth slows to average rates. The Prices Paid component has likely peaked for this cycle.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Fidelity Magellan, the second-largest fund managed by Fidelity Investments, gave up $96.3 million in potential fees because the three-year return trailed its benchmark.
- Fidelity Investments pulled in $5.8 billion in April, its biggest monthly sales tally in a decade, as investors rushed to put money into four funds that were closing.
- Mirant Corp.(MIR) said it is proposing to acquire NRG Energy(NRG) for about $8 billion a week after NRG rejected the takeover proposal without engaging in discussions.
- The London Metal Exchange starting tomorrow will allow screen trading of its contracts during the Asian day to attract more business from countries including China.
- Asian stocks slumped, headed for the biggest monthly slide since the Sept. 11 terrorist attacks in 2001.

Chicago Tribune:
- Chicago asked today for proposals for construction of a citywide wireless Internet service, citing Mayor Daley.

Financial Times:
- GlaxoSmithKline Plc(GSK) will hand management of half of its new drug discovery projects to outside scientists and partners within 10 years, citing the company’s head of research and development.

Shanghai Securities News:
- China’s foreign exchange regulator plans to impose “strict” rules to control capital inflows into real estate.
- The China Foreign Exchange Trade Center and the National Interbank Funding Center may introduce a system for trading dollar-denominated bonds in the country.

Late Buy/Sell Recommendations
Needham:
- Rated (NFLX) Buy, target $37.

Lehman Brothers:
- Raised (SIRI) to Overweight, target $6.50.

Night Trading
Asian Indices are -2.0% to -1.25% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.16%.

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

Earnings of Note
Company/EPS Estimate
- (NDN)/.07
- (ADCT)/.29
- (CMVT)/.19
- (CPRT)/.38
- (DBRN)/.26
- (HOV)/1.43
- (NOVL)/.03
- (TIF)/.28

Upcoming Splits
- (HES) 3-for-1
- (CNX) 2-for-1
- (KEX) 2-for-1
- (MDR) 3-for-2
- (NUE) 2-for-1
- (CBG) 3-for-1
- (GDI) 2-for-1
- (HOC) 2-for-1
- (UAG) 2-for-1

Economic Releases
10:00 am EST
- Chicago Purchasing Manger for May is estimated to fall to 56.0 versus a reading of 57.2 in April.

2:00 am EST
- Minutes of May 10 FOMC Meeting

BOTTOM LINE: Asian indices are sharply lower, weighed down by exporting and commodity stocks in the region. I expect US equities to open lower and to rise slightly into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Finish Sharply Lower on Economic Worries

Indices
S&P 500 1,259.88 -1.58%
DJIA 11,094.43 -1.63%
NASDAQ 2,164.74 -2.06%
Russell 2000 711.04 -2.54%
Wilshire 5000 12,686.26 -1.62%
S&P Barra Growth 583.92 -1.60%
S&P Barra Value 674.11 -1.57%
Morgan Stanley Consumer 601.92 -1.12%
Morgan Stanley Cyclical 826.36 -1.93%
Morgan Stanley Technology 499.49 -2.15%
Transports 4,578.80 -2.07%
Utilities 400.39 -.93%
Put/Call 1.17 +58.11%
NYSE Arms 2.23 +252.05%
Volatility(VIX) 18.66 +30.86%
ISE Sentiment 101.00 -30.82%
US Dollar 84.35 -.81%
CRB 347.88 +.02%

Futures Spot Prices
Crude Oil 71.90 -.18%
Unleaded Gasoline 214.00 -.46%
Natural Gas 6.13 +.20%
Heating Oil 200.39 +1.18%
Gold 662.00 +.23%
Base Metals 232.86 -3.46%
Copper 368.90 +.41%
10-year US Treasury Yield 5.07% +.52%

Leading Sectors
Broadcasting +.12%
HMOs -.38%
Hospitals -.80%

Lagging Sectors
Internet -3.75%
Airlines -3.92%
Steel -5.04%

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

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Emerging-market stocks resumed their decline on concern global growth will slow.
- Engelhard Corp.(EC), inventor of the catalytic converter, accepted a sweetened $5 billion takeover offer from BASF AG of Germany, ending five months of negotiations that began with a hostile bid.
- The US dollar fell the most in six weeks against the euro on speculation Treasury secretary nominee Henry Paulson won’t trey to stop a slide in the US currency.

CNBC:
- Quest Diagnostics(DGX) may make a counteroffer for Fisher Scientific(FSH), which agreed this month to be bought by Thermo Electron, Mergermarket.com reported.

BOTTOM LINE: The Portfolio finished lower today on losses in my Networking longs, Semi longs and Medical longs. I added to my (EEM), (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished substantially lower, almost every sector fell and volume was below average. Measures of investor anxiety were higher into the close. Overall, today's market performance was bearish. The market's inability to even stage a modest bounce today was telling. As well, the 10-year yield remained higher throughout the day, even as stock losses worsened. A retest of recent equity lows appears imminent as economic data disappoint. On the positive side, today's sell-off was accompanied by below-average volume and measures of investor angst were elevated. The NYSE Arms closed at a very high 2.23. Moreover, the ISE Sentiment Index closed down 31%, to a depressed level. Tomorrow's Chicago Purchasing Manager report and Fed minutes may further stoke recession fears. I continue to believe U.S. growth is just slowing, not plunging, and that the recent correction presents a very attractive opportunity for longer-term investors.

Stocks Sharply Lower Into Final Hour on Higher Energy Prices and Long-term Rates

BOTTOM LINE: The Portfolio is lower heading into the final hour on losses in my Semi longs, Networking longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is substantially lower, almost every sector is lower and volume is light. Emerging market stocks are once again underperforming. The iShares MSCI Emerging Markets Index (EEM) is 3.6% lower. I expect EEM to take out its 200-day moving-average over the coming weeks. I am still short EEM. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain hunting.

Today's Headlines

Bloomberg:
- The Nasdaq Stock Market(NDAQ) may eject companies under investigation for possible manipulation of stock options paid to executives.
- Crude oil rose to the highest in two weeks as Iran said it is pressing ahead with its nuclear research.
- Henry Paulson, CEO of Goldman Sachs(GS), was picked by President Bush to succeed John Snow at US Treasury secretary.
- Goldman Sachs(GS) Group President Lloyd Blankfein is the frontrunner to succeed Henry Paulson as CEO of the biggest US securities firm by market value.

Wall Street Journal:
- The US Air Transport Stabilization Board, a loan-guarantee program the government started after the Sept.11 terrorist attacks, has made a $300 million profit for US taxpayers.
- Officials in Calabasas, California, who 10 weeks ago banned smoking outdoors except in designated areas, say the rules are having the desired effect, reducing exposure to secondhand smoke.

NY Times:
- Tourists and the businesses that rely upon them found ways to adapt to unusually high gas prices in the US over the Memorial Day weekend. Families sometimes vacationed closer to home or used kayaks and sailboats rather than motorboats.

Boston Globe:
- Infosys Technologies(INFY), Tata Consultancy Services and other Indian companies are hiring US workers to offset labor shortages in India.

LA Times:
- College computer systems are the No. 1 target in the US for computer hackers looking for sensitive personal information, citing ChoicePoint.

al-Hayat:
- The United Arab Emirates plans to raise oil production capacity to 3.5 million barrels a day by 2011, a 37% increase from current levels.

Consumer Confidence Declines

- Consumer Confidence for May fell to 103.2 versus estimates of 100.9 and 109.8 in April.

BOTTOM LINE: Consumer confidence in the US fell from a four-year high in May by the most since Hurricane Katrina battered the Gulf last year and sent energy prices soaring, Bloomberg reported. Optimism about consumers’ present situation fell to 132.5 from 136.2 in the prior month. The proportion of consumers expecting their incomes to rise was 16.6%, the lowest since July 2003. Rising unit labor costs account for two-thirds of inflation. I continue to believe confidence will rebound later this year to cycle highs as stocks rise, long-term rates remain historically low, the labor market remains relatively healthy, inflation decelerates, gas prices fall and irrational pessimism lifts.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Tuesday Watch

Weekend Headlines
Bloomberg:
- Wal-Mart Stores(WMT) said May same-store sales in the US rose about 2.3%, as higher gasoline and utility prices cut into customers’ paychecks.
- Advanced Micro Devices(AMD), Intel’s only competitor in personal computer microprocessors, will spend $2.5 billion to increase output from its two German plants.
- Richard Kinder, co-founder, chairman and CEO of Kinder Morgan(KMI), owner of 40,000 miles of pipelines in the US and Canada, is leading a group that has proposed to buy the company for $100 a shares or about $13.4 billion.
- Japanese stocks fell after government reports on industrial production and consumer spending pointed to slowing growth in the world’s second-largest economy.

Wall Street Journal:
- Donald Evans, former US commerce secretary, is the favorite to succeed John Snow as the nation’s treasury secretary.

NY Times:
- Some lawmakers say legal charges should be filed against media companies, including newspapers, for publishing classified information that harms national security.
- The US coal industry and utilities are moving ahead with plans to build power plants fueled by coal, which the US has sufficient supplies of for at least 200 years.
- The Internet Movie Database, an online guide to cinema and television, may boost its role in parent Amazon.com’s(AMZN) media retail as it develops a service to download movies and same them to DVDs.
- Senator John Kerry is still fighting to prove his military record is accurate almost two years after it was challenged during his failed 2004 presidential campaign.
- Iranian President Ahmadinejad seeks to consolidate power in the presidential office with full support from Iran’s highest authority, chief cleric Ali Khamenei, in a manner unseen in the 27-year history of the Islamic republic.
- Chicago may pass an ordinance requiring large retailers such as Wal-Mart Stores(WMT) and Home Depot(HD) to pay workers $10 an hour plus 43 an hour of benefits.
- Iran seems to be slowing its drive to enrich uranium, a sign it may be softening its position in the standoff over the country’s nuclear development or running into technical difficulties.

Alpha:
- When it comes to pure wealth creation – arguably the biggest motivation for the majority of hedge fund managers, times have never been better.

Denver Post:
- Qwest Communications(Q), AT&T(T), Sprint Nextel(S) and Verizon Communications(VZ) are bidding on a federal project called Networx worth $20 billion.

Barron’s:
- Small-cap companies are expected to outpace big-caps by 4% to 5% this year on faster growth than their larger counterparts, citing Merrill Lynch’s Satya Pradhuman.

San Jose Mercury News:
- Cisco Systems(CSCO) and other computer network-equipment makers may benefit if Internet service providers split their services into tiers.

Focus Magazine:
- McDonald’s(MCD) CFO Paull said the Chinese market may eventually be able to support as many as 10,000 of its restaurants, more than 13 times the number it already has there.

Les Echos:
- SAP AG(SAP) CEO Henning Kagermann said in an interview that his company held preliminary merger talks with Microsoft Corp.(MSFT).

Sueddeutsche Zeitung:
- Biogen Idec(BIIB) can spend at least $2 billion in cash to grow in cancer and neurology markets.

Financial Times:
- Advertising spending on the Internet may surpass spending on ads in national newspapers this year.
- A World Bank report warns that recent stock market falls have increased investor nervousness about the fragility of emerging markets.

Weekend Recommendations
Barron's:
- Had positive comments on (PHG) and (IDT).
- Had negative comments on (SCI).

Morgan Stanley:
- Rated (FMCN) Overweight.

Night Trading
Asian indices are -.25% to +.25% on average.
S&P 500 indicated -.21%.
NASDAQ 100 indicated -.26%.

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

Earnings of Note
Company/Estimate
- (FRE)/1.39
- (MCDTA)/.04
- (REY)/.36
- (SMTC)/.18
- (SRZ)/.26

Upcoming Splits
- (NICE) 2-for-1
- (TLM) 3-for-1
- (HES) 3-for-1
- (CNX) 2-for-1
- (KEX) 2-for-1
- (MDR) 3-for-2
- (NUE) 2-for-1

Economic Releases
10:00 am EST
- Consumer Confidence for May is estimated to fall to 100.0 versus a reading of 109.6 in April.

BOTTOM LINE: Asian Indices are mostly lower, weighed down by cyclical shares in the region. I expect US stocks to open modestly lower and to rise into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

There are a number of economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - US Markets Closed

Tues. - Consumer Confidence

Wed. - Chicago Purchasing Manager, Minutes of May 10 FOMC Meeting

Thur. - Final 1Q Non-farm Productivity, Final 1Q Unit Labor Costs, Initial Jobless Claims, Continuing Claims, Construction Spending, Pending Home Sales, ISM Manufacturing, ISM Prices Paid, Total Vehicle Sales

Fri. - Change in Non-farm Payrolls, Unemployment Rate, Change in Manufacturing Payrolls, Average Hourly Earnings, Factory Orders

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

Mon. - US Markets Closed

Tues. - Freddie Mac(FRE), McData Corp.(MCDTA), Reynolds & Reyolds(REY), Sunrise Senior Living(SRZ)

Wed. - ADC Telecom(ADCT), Comverse Technology(CMVT), Copart Inc.(CPRT), Dress Barn(DBRN), Hovnanian Enterprises(HOV), Novell Inc.(NOVL), Tiffany & Company(TIF)

Thur. - Ciena Corp.(CIEN), Dollar General(DG), HJ Heinz(HNZ)

Fri. - None of note

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

Mon. - US Markets Closed

Tue. - None of note

Wed. - Bear Stearns Biotech Confab, Citigroup Semi Conference

Thur. - Citigroup Semi Conference, CSFB Environmental & Engineering Services Conference

Fri. - None of note

BOTTOM LINE: I expect US stocks to finish the week mixed as weaker economic data and mixed Fed commentary offset short-covering, bargain hunting and declining long-term rates. My trading indicators are still giving mostly bearish signals and the Portfolio is 100% net long heading into the week.

Chart of Interest

Market Week in Review

S&P 500 1,280.16 +1.04%*



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was modestly bullish. The advance/decline line rose, most sectors gained and volume was above-average on the week. Measures of investor anxiety were mostly lower. However, the AAII % Bulls fell to 33.4% and is approaching depressed levels, which is a big positive.

The average 30-year mortgage rate rose to 6.62% which is 141 basis points above all-time lows set in June 2003. I still believe housing is in the process of slowing to more healthy sustainable levels. Data this week gave more credence to the “soft landing” scenario. This will likely result in the slowing of consumer spending, and thus US GDP growth, back to around average rates over the coming months. US economic growth soared 5.3% during the first quarter.

The benchmark 10-year T-note yield fell 1 basis point on the week as economic data were mixed, inflation readings were around estimates, the US dollar rose and Fed members made mixed comments. I still believe inflation concerns have peaked for the year as investors begin to anticipate slower economic growth, unit labor costs remain subdued and the mania for commodities continues to reverse course.

Unleaded Gasoline futures rose this week and are now 26.6% below September 2005 highs even as refinery utilization remains below normal as a result of the hurricanes last year, a significant amount of Gulf of Mexico oil production remains shut-in and fears over future production disruptions persist. The EIA reported this week that gasoline supplies rose again as demand continued to wane. This is a result of conservation, substitution and demand destruction. The elevated level of gas prices related to shortage speculation and crude oil production disruption speculation should further dampen demand over the coming months, sending gas prices back to reasonable levels.

Natural gas inventories rose less than expectations this week, however supplies are 50% above the 5-year average, near an all-time record high for this time of year, even as some daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged 61.7% since December 2005 highs. Notwithstanding this collapse, industrial demand for natural gas has shown few signs of increasing. US oil inventories are still approaching 9-year highs. Since December 2003, global oil demand is down .24%, while global supplies have increased 4.94%. Moreover, worldwide inventories are poised to begin increasing at an accelerated rate over the next year. I continue to believe oil is priced at extremely elevated levels on fear and record speculation by investment funds, not fundamentals. As the fear premium in oil dissipates back to more reasonable levels and supplies continue to rise, crude oil should head meaningfully lower over the intermediate-term.

Gold fell for the week as the US dollar rose, inflation fears subsided and speculators took profits. The US dollar rose and appears to have made at the very least a short-term bottom.

The Internet and Biotech sectors outperformed for the week. These sectors have likely seen their lows for the year and should continue to outperform the broad market through year-end. S&P 500 earnings growth for the 1st quarter was up 16.7% year-over-year, more than double the long-term average and substantially above expectations of 8-9% growth. This marks the 16th consecutive quarter of double-digit profit growth, the best streak since record-keeping began in 1936. The forward p/e on the S&P 500 has contracted relentlessly during this time period and now stands at a very reasonable 14.9.

The average US stock, as measured by the Value Line Geometric Index(VGY), is still up 4.5% so far this year, notwithstanding the recent correction. Moreover, the Russell 2000 Index is up 8.8% year-to-date. In my opinion, the current pullback has provided longer-term investors very attractive opportunities in many stocks that have been punished indiscriminately. However, the most overvalued economically sensitive and emerging market stocks should continue to underperform over the intermediate-term as the manias for those shares subside.

While the major averages have likely bottomed for the year, a test of recent lows could occur over the coming weeks as economic data disappoint. An ensuing Fed pause, lower commodity prices, decelerating inflation readings, lower long-term rates, increased consumer confidence and the realization that growth is only slowing should provide the catalysts for another substantial push higher in the major averages through year-end as p/e multiples begin to expand. I continue to believe the S&P 500 will return a total of around 15% for the year. The ECRI Weekly Leading Index fell again this week and is forecasting healthy, but decelerating, US economic activity.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,280.16 +1.04%
DJIA 11,278.61 +1.21%
NASDAQ 2,210.37 +.75%
Russell 2000 729.55 +.97%
Wilshire 5000 12,895.75 +.94%
S&P Equity Long/Short Index 1,153.54 -2.94%
S&P Barra Growth 593.44 +1.06%
S&P Barra Value 684.83 +1.01%
Morgan Stanley Consumer 608.71 +1.03%
Morgan Stanley Cyclical 842.62 +.93%
Morgan Stanley Technology 510.49 +1.02%
Transports 4,675.64 +1.07%
Utilities 404.16 +1.87%
S&P 500 Cum A/D Line 7,172 +3.0%
Bloomberg Crude Oil % Bulls 30.4 unch.
Put/Call .74 -40.16%
NYSE Arms .65 -26.74%
Volatility(VIX) 14.29 -16.70%
ISE Sentiment 160.00 +14.29%
AAII % Bulls 33.04 -16.12%
AAII % Bears 45.54 +4.35%
US Dollar 85.22 +.44%
CRB 347.82 +2.71%
ECRI Weekly Leading Index 136.90 -.51%

Futures Spot Prices
Crude Oil 71.38 +3.11%
Unleaded Gasoline 213.00 +4.67%
Natural Gas 6.05 +1.17%
Heating Oil 198.65 +3.41%
Gold 652.70 -.56%
Base Metals 241.20 +8.39%
Copper 378.20 +9.10%
10-year US Treasury Yield 5.04 -.20%
Average 30-year Mortgage Rate 6.62% +.3%

Leading Sectors
Steel +3.43%
Internet +3.13%
Oil Service +3.12%
Biotech +2.97%
REITs +2.06%

Lagging Sectors
Hospitals -1.40%
Computer Hardware -2.04%
Restaurants -2.20%
Disk Drives -2.48%
Semis -4.67%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

Stocks Higher Heading Into Final Hour on Bargain Hunting and Short Covering

BOTTOM LINE: The Portfolio is higher heading into the final hour on gains in my Retail longs, Semi longs and Medical longs. I covered the remainder of my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is higher and volume is below average. The U.S. Dollar Index is rising .6% today. The dollar continues to trade as though at the very least a short-term bottom is in place. This is a positive for equities given the bears' arguments revolving around a collapsing dollar. I expect US stocks to trade mixed-to-higher into the close from current levels on lower long-term rates, a rising dollar, short-covering and bargain hunting.

Today's Headlines

Bloomberg:
- Crude oil may fall on signs that higher refinery output and near-record imports will meet gasoline demand during the US summer driving season, a Bloomberg News survey shows.
- Las Vegas Sands(LVS) beat three rival bids to build Singapore’s first casino-resort with an offer valued at more than $3.2 billion.
- US Capitol Police are investigating a report that gunshots were heard in the garage of the Rayburn House Office Building near the Capitol.
- Shares of Navistar Intl.(NAV) rose as much as 17% after MAN AG, Europe’s third-largest truckmaker, said it was interested in acquiring a stake in its US competitor while expanding across the Atlantic.
- The US dollar is rising against the euro and the yen after a government report reinforced expectations the Fed will lift interest rates next month.
- US Treasuries rose on signs the economy may cool and curb demand for risky assets.

Wall Street Journal:
- Keefe, Bruyette & Woods, which is planning an IPO, will sell about 25% of itself to raise as much as $150 million.
- International funds, which spread their investments across a broad geographical spectrum, may have put more of their money in emerging markets than investors might have expected. Last week, investors withdrew a record $1.9 billion from such funds. The poor performance of international funds is aggravating for investors who may have thought their investment risk to emerging markets was less than it actually is.

NY Times:
- Grief still afflicts many people directly affected by the Sept. 11 terrorist attacks more than four years ago, citing a study by the American Red Cross.

NY Post:
- Microsoft’s(MSFT) negotiations to buy Internet auction site EBay Inc.(EBAY) are waning as the two companies are weighing antitrust concerns.

Interfax:
- Russia will deliver anti-aircraft missiles to Iran as agreed, citing Defense Minister Ivanov.

Incomes Rise, Spending Strong, Inflation Muted

- Personal Income for April rose .5% versus estimates of a .7% gain and a .5% increase in March.
- Personal Spending for April rose .6% versus estimates of a .6% increase and a .5% gain in March.
- The PCE Core for April rose .2% versus estimates of a .2% gain and a .3% increase in March.
- Final Univ. of Mich. Consumer Confidence for May rose to 79.1 versus estimates of 79.0 and a prior estimate of 79.0.

BOTTOM LINE: Consumer spending in the US rose .6% in April, mainly reflecting an increase in prices that suggests inflation is taking a toll on Americans’ buying power, Bloomberg said. The Core PCE, the Fed's favorite inflation gauge, rose 2.1% from year-ago levels. Incomes rose 5.4% in April from the same month last year, almost twice the rate of most inflation measures. Economists expect consumer spending to slow to 2.5% this quarter. I continue to believe spending will slow to average rates through year-end, while incomes will remain relatively healthy and inflation measures decelerate from current levels.

Consumer confidence in the US fell to its lowest in seven months in May as near-record gas prices eroded purchasing power, Bloomberg said. The current conditions index fell to 96.1 from 109.2. The expectations index fell to 68.2 from 73.4 in April. The average price of regular gasoline was $2.88/gallon on May 22 versus $2.14/gallon in May 2005. I continue to believe consumer sentiment is irrationally low and will make cycle highs later this year as stocks rise sharply from current levels, interest rates fall modestly, inflation decelerates, gas prices fall, the job market remains relatively healthy and Iraq improves.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Friday Watch

Late-Night Headlines
Bloomberg:
- An employee of San Jose-based Data Physics was indicted on charges he exported to China equipment used to design and manufacture missiles, federal prosecutors said.
- Nielsen/NetRatings, a global leader in Internet media and market research, today announced that Google(GOOG) accounted for 50% of all searches conducted in April, followed by Yahoo! and MSN, with 22% and 11%, respectively. Year-over-year, Google gained three percentage points in market share, while Yahoo! remained flat and MSN dipped slightly.
- The yen fell, reversing a gain, after Japanese Finance Minister Sadakazu Tanigaki said there still wasn’t enough evidence that seven years of deflation in the world’s second-largest economy has ended.

Financial Times:
- The top two highest paid hedge fund managers in a list of 26 earned around $1.5 billion each last year, citing the Institutional Investor’s Alpha magazine list. Renaissance Technologies Chairman James Simons earned $1.5 billion in 2005, while T. Boone Pickens, chairman of BP Capital LLC, earned $1.4 billion speculating mainly on the rise in energy prices.

Commercial Times:
- AU Optronics(AUO) urged liquid-crystal displays makers to cut production to help clear excess inventory that has caused prices to fall.

Xinhua News Agency:
- China won’t buy crude oil from the international market to fill its strategic reserves because of high prices, citing a senior Chinese government official.

Late Buy/Sell Recommendations
Business Week:
- Anadys Pharmaceuticals(ANDS), a drug developer will see its share price rise later this year as favorable results from early trials of certain drugs come in, citing Eric Schmidt, an analyst with Cowen & Co.
- Sierra Health Services(SIE) may rise as much as 34% because of its earnings and possible acquisition interest from other companies.
- Signature Bank(SBNY), a commercial bank started by 100 former First Republic Bank employees, is growing by targeting the underserved market of smaller private companies, citing David Long of William Blair.

Night Trading
Asian Indices are +.75% to +1.25% on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated +.08%.

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

Earnings of Note
Company/EPS Estimate
- None of note

Upcoming Splits
- (APC) 2-for-1
- (IMO) 3-for-1
- (NICE) 2-for-1
- (TLM) 3-for-1
- (UMBF) 2-for-1

Economic Releases
8:30 am EST
- Personal Income for April is estimated to rise .7% versus a .5% increase in March.
- Personal Spending for April is estimated to rise .6% versus a .6% gain in March.
- The PCE Core for April is estimated to rise .2% versus a .3% gain in March.

9:45 am EST
- The final Univ. of Mich. Consumer Confidence reading for May is estimated at 79.0 versus a prior estimate of 79.0.

BOTTOM LINE: Asian indices are higher, by technology and commodity stocks in the region. I expect US equities to open mixed and to rise into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Finish Sharply Higher on Bargain Hunting and Short-covering

Indices
S&P 500 1,272.88 +1.14%
DJIA 11,211.05 +.84%
NASDAQ 2,198.24 +1.34%
Russell 2000 725.58 +2.01%
Wilshire 5000 12,818.76 +1.24%
S&P Barra Growth 591.12 +1.11%
S&P Barra Value 679.74 +1.16%
Morgan Stanley Consumer 606.95 +.63%
Morgan Stanley Cyclical 834.24 +1.57%
Morgan Stanley Technology 507.20 +1.08%
Transports 4,647.39 +1.05%
Utilities 399.36 +.94%
Put/Call .85 -37.50%
NYSE Arms .58 -46.28%
Volatility(VIX) 15.50 -10.71%
ISE Sentiment 165.00 +55.66%
US Dollar 84.68 -.04%
CRB 346.35 +1.12%

Futures Spot Prices
Crude Oil 71.45 +.18%
Unleaded Gasoline 210.20 -.11%
Natural Gas 6.01 +.59%
Heating Oil 199.25 -.09%
Gold 651.30 +.43%
Base Metals 234.85 +2.03%
Copper 368.00 -.74%
10-year US Treasury Yield 5.06% +.64%

Leading Sectors
Steel +5.49%
Gold & Silver +4.86%
Internet +3.81%

Lagging Sectors
Hospitals +.10%
Broadcasting +.07%
Semis -.44%

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

Afternoon Recommendations
Bear Stearns:
- Upgraded (BT) to Outperform.

Deutsche Bank:
- Rated (TRMP) Buy, target $25.

Raymond James:
- Added (SKYW) to Aggressive Growth category of Focus List.

Oppenheimer:
- Rated (ODP) Buy, target $51.

Afternoon/Evening Headlines
Bloomberg:
- Federal Reserve Chairman Ben Bernanke said consumer price increases, excluding food and energy, have remained stable over the past year and that longer-term inflation expectations are “well contained.”
- Wage inflation may now be less of a concern to Fed policy makers following revised figures form the government today that showed smaller increases in labor costs.
- The Senate approved the most sweeping overhaul of immigration policy in 20 years, voting to create a new guest-worker program and give those illegally in the US a chance to gain legal status.
- Shares of (GM) rose for a second day because of reports that US union workers are taking the company’s buyout and early retirement offers.

New Haven Register:
- The Connecticut Interscholastic Athletic Conference, aiming to end lopsided high school football games, will suspend head coaches for one game if their team wins by more than 49 points.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Networking longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was positive today as the advance/decline line finished substantially higher today, almost every sector rose and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bullish. I expect stocks to build on today's gains tomorrow. I still believe most stocks have seen their lows for the year, however another period of weakness is likely over the coming weeks as economic data come in below estimates, resulting in further selling in the most economically sensitive stocks.

Stocks Higher into Final Hour as Correction Loses Steam

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Networking longs, Computer longs and Medical longs. I covered some of my (IWM), (EEM) and (QQQQ) shorts today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is substantially higher, almost every sector is higher and volume is above average. Theflyonthewall.com is reporting that Apple Computer (AAPL) will redesign the iPod nano to include video playback. I continue to believe Apple is trading at very attractive levels for both short and longer-term investors. I expect the stock to challenge its high of $86.40 by year-end. I remain long Apple. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain hunting.

Today's Headlines

Bloomberg:
- Emerging-market bonds are lagging behind junk-rated debt in the US this month, as the riskiest securities end more than five years of trading in tandem.
- Yahoo! and EBay(EBAY) forged an alliance to challenge Google’s grip on the Internet.
- Ken Lay and Jeffrey Skilling, who built Enron Corp. into the nation’s seventh-largest company and then drove it into bankruptcy, were convicted of orchestrating a fraud that made the energy trader the symbol of corporate deceit in America.
- Crude oil rose above $71/bbl. in NY after the US economy grew at a faster than initially reported and talks to convince Iran to abandon uranium enrichment ended inconclusively.
- Dell Inc.(DELL) agreed to sell computers with Google software(GOOG), making it the pre-installed default search engine on its PCs.

Wall Street Journal:
- US credit card holders are paying off larger amounts and balancing debt more adroitly, cutting into profit card issuers make on unpaid balances.
- Regions Financial Corp. agreed yesterday to combine with AmSouth Bancorp(ASO) in a $10 billion transaction as they seek to compete with larger rivals.
- Intel Corp.(INTC) has been telling computer makers that its new desktop microprocessor, internally called Conroe, won’t be limited to higher-end PCs.
- Nokia Oy(NOK), Samsung Electronics and Sony Ericsson have brought out cell phones with cameras that produce surprisingly high resolution photos.

NY Times:
- A Pakistani immigrant was convicted yesterday on charges of plotting to blow up NYC’s Herald Square subway station.

San Francisco Chronicle:
- California wines beat French ones for the second time in 30 years in an annual tasting of selected vintages from the two regions.

Interfax:
- The Russian government will hold 45% of its windfall oil fund in US dollars and 45% in euros, with the remainder in British pounds, citing Finance Minister Kudrin.

First Quarter Growth Robust, Labor Market Softening Slightly, Housing Slows

- Preliminary 1Q GDP rose 5.3% versus estimates of a 5.8% increase and a prior estimate of a 4.8% gain.
- Preliminary 1Q GDP Price Index rose 3.3% versus estimates of a 3.3% increase and a prior estimate of a 3.3% gain.
- Preliminary 1Q Personal Consumption rose 5.2% versus estimates of a 5.6% gain and a prior estimate of a 5.5% increase.
- Preliminary 1Q Core PCE rose 2.0% versus estimates of a 2.0% gain and a prior estimate of a 2.0% increase.
- Initial Jobless Claims rose 329K versus estimates of 315K and 369K the prior week.
- Continuing Claims rose to 2420K versus estimates of 2405K and 2382K the prior week.
- Existing Home Sales for April fell to 6.76M versus estimates of 6.75M and 6.9M in March.

BOTTOM LINE: US economic growth rose at an annual rate of 5.3% in the first quarter, slower than forecast, Bloomberg reported. The rise in GDP was the biggest since the third quarter of 2003. A slowing housing market and weaker consumer spending should prompt the Fed to stop raising interest rates if data point to a smaller risk of accelerating inflation, according to economists. Morgan Stanley revised their 2Q GDP forecast to 2.8% from 2.9% on the report. Exports added 1.47 percentage points to first-quarter growth. Business fixed investment grew at an annual pace of 14.3% versus a 4.5% increase the prior quarter. I continue to believe US growth is slowing from the scorching 5.3% of the first quarter back down to average rates through year-end.

First-time claims for unemployment benefits in the US fell last week as employees in Puerto Rico returned to work following a temporary shutdown of government offices, Bloomberg said. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, rose to 1.9% from 1.8% the prior month. The four-week moving-average of claims rose to 337,000 from 333,750. I continue to expect the labor market to remain relatively healthy over the intermediate-term without generating substantial unit labor costs increases.

Sales of previously-owned homes in the US fell last month, reinforcing expectations that a slowdown in housing will help cool economic growth this year, Bloomberg said. Compared with year-ago levels, sales fell 5.7%. The median price of an existing home rose 4.2% to $223,000 from year-ago levels. The supply of homes for sale at the current pace rose to 6 months from 5.6 months in March. Recent housing data makes me more optimistic that the market is slowing to more sustainable healthy levels. A “soft landing” in housing still appears to be the most likely scenario.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- CBS Radio has settled its breach-of-contract lawsuit with talk-show host Howard Stern.
- Preakness Stakes winner Bernardini will skip next month’s Belmont Stakes, leaving the last led of horse racing’s Triple Crown without the Kentucky Derby and Preakness winners for the first time in six years.
- MasterCard Inc.(MA), the world’s no. 2 credit-card association, raised $2.39 billion in the second-biggest US IPO this year, selling a 46% stake.
- Japanese stocks are declining on speculation overseas investors are cutting their holdings in Japanese securities.
- Asian-Pacific companies will get a record $200 billion of loans this year as borrowing costs drop to levels before the region’s financial crisis nine years ago.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.25% to -.50% on average.
S&P 500 indicated -.06%.
NASDAQ 100 indicated +.02%.

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

Earnings of Note
Company/EPS Estimate
- (BWS)/.31
- (CHS)/.28
- (BLI)/.05
- (GCO)/.40
- (HRL)/.45
- (JOYG)/.53
- (PDCO)/.41
- (RL)/.57
- (SAFM)/-.47
- (TDS)/.23
- (TTC)/1.50
- (UNFI)/.28

Upcoming Splits
- (ITW) 2-for-1
- (SHOO) 3-for-2

Economic Releases
8:30 am EST
- Preliminary 1Q GDP is estimated to rise 5.8% versus a prior estimate of a 4.8% rise.
- Preliminary 1Q GDP Price Index is estimated to rise 3.3% versus a prior estimate of a 3.3% increase.
- Preliminary 1Q Personal Consumption is estimated to rise 5.6% versus a prior estimate of a 5.5% gain.
- Preliminary Core PCE is estimated to rise 2.0% versus a prior estimate of a 2.0% gain.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 367K the prior week.
- Continuing Claims are estimated to rise to 2405K versus 2389K prior.

10:00 am EST
- Existing Home Sales for April are estimated to fall to 6.75M versus 6.92M prior.

BOTTOM LINE: Asian indices are lower, weighed down by commodity stocks in the region. I expect US equities to open modestly lower and to rise into the afternoon, finishing higher. The Portfolio is 50% net long heading into the day.

Stocks Finish Well Off Session Lows on Fall in Commodity Prices, Short Covering and Bargain Hunting

Indices
S&P 500 1,258.57 +.16%
DJIA 11,117.32 +.17%
NASDAQ 2,169.17 +.48%
Russell 2000 711.27 unch.
Wilshire 5000 12,661.91 +.06%
S&P Barra Growth 584.60 +.37%
S&P Barra Value 671.94 -.05%
Morgan Stanley Consumer 603.17 +.34%
Morgan Stanley Cyclical 821.38 -.36%
Morgan Stanley Technology 501.78 +.81%
Transports 4,599.12 -.35%
Utilities 395.65 +.45%
Put/Call 1.36 +27.10%
NYSE Arms 1.09 +2.10%
Volatility(VIX) 17.36 -4.93%
ISE Sentiment 106.00 -45.92%
US Dollar 85.13 +.08%
CRB 342.51 -2.80%

Futures Spot Prices
Crude Oil 69.44 -.60%
Unleaded Gasoline 201.10 -.40%
Natural Gas 5.92 -.65%
Heating Oil 193.43 -.30%
Gold 642.80 +.83%
Base Metals 230.17 -5.45%
Copper 357.25 -1.83%
10-year US Treasury Yield 5.03% +.48%

Leading Sectors
Tobacco +1.48%
Software +1.07%
Semis +.75%

Lagging Sectors
Oil Service -1.54%
Oil Tankers -1.65%
Gold & Silver -4.0%

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

Afternoon Recommendations
Raymond James:
- Added WHR to Total Return Focus List.

Afternoon/Evening Headlines
Bloomberg:
- The World Health Organization officials don’t have immediate plans to ask that experts recommend raising the alert level for a possible avian influenza pandemic.
- General Motors(GM) began hiring temporary workers for some US plants to replace union employees leaving because of buyouts and retirement incentives.
- Emerging-market stocks resumed their slump after a one-day rebound as investors fled from economies that have benefited from record high commodity prices.
- Crude oil fell below $70/bbl. after a government report showed that US gasoline stockpiles rose for a fourth straight week as imports surged before driving season.
- (GM) shares rose after the company began replacing union employees lost to buyouts and retirements with temporary workers and a Merrill Lynch analyst recommended the stock.
- Analog Devices(ADI) and online publisher Cnet(CNET) Networks became the latest companies under investigation for stock-option grants.
- Commodity prices that reached record highs this month may fall because rising interest rates in Japan and the US will slow economic growth and investor demand wanes, Prudential Equity analyst John Tumazos said.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Internet longs, Semi longs, Base Metal shorts and Energy-related shorts. I covered some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was modestly negative today as the advance/decline line finished slightly lower, sector performance was mixed and volume was heavy. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was mildly bullish. The very sloppy trading in many stocks today usually occurs near sustainable market bottoms. I continue to believe the major averages are close to making their lows for the year. A number of stocks, such as Google (GOOG), trade as though their lows are in place. Due to the elevated state of investor anxiety readings, the magnitude of the forthcoming rally will catch many off guard.

Stocks Mostly Lower into Final Hour on Economic Growth and Bird Flu Worries

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Networking longs and Retail longs. I added to my (IWM), (EEM) and (QQQQ) shorts today, thus leaving the Portfolio 25% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are lower and volume is heavy. Many of the same pundits and analysts that continuously make the case for ever higher commodity prices are the same ones inciting bird flu fears. I personally think the bird flu, which has only killed about 200 people globally (about the same amount that die nightly in Chinese coal mines), is just another symptom of the negativity bubble. However, if you do believe the bird flu is going to kill thousands or millions, I can't think of a more sure bet than to short commodities at current levels. Forget about the pie-in-the-sky small caps that may or may not benefit. A global pandemic would most surely be a demand-destroying event. I expect US stocks to trade modestly higher into the close from current levels on lower energy prices, short-covering and bargain hunting.

Durable Goods Orders Slow, New Home Sales Rise

- Durable Goods Orders for April fell 4.8% versus estimates of a .5% decline and an upwardly revised 6.6% gain in March.
- Durables Ex Transportation for April fell 1.1% versus estimates of a .5% gain and an upwardly revised 3.5% increase in March.
- New Home Sales for April fell to 1198K versus estimates of 1135K and a downwardly revised 1142K in March.

BOTTOM LINE: US orders for durable goods fell more than expected last month as demand for aircraft, computers and defense hardware slowed, raising concern companies plan to curb spending, Bloomberg said. Orders for commercial aircraft slumped 32% after a 68% surge the prior month. Auto bookings declined 1.6%. Bookings for non-defense capital goods excluding aircraft, which tracks future business investment, fell 1.7% versus a 3.6% rise the prior month. Durable goods orders will likely slow more from current levels as economic growth decelerates, however corporate spending should remain relatively healthy.

Sales of new homes in the US unexpectedly rose in April to the highest in four months, Bloomberg reported. A strong job market is boosting the demand for homes, notwithstanding higher borrowing costs. The number of unsold new homes fell to 5.8 month’s worth at the current sales pace from 6.0 the prior month. The median price of a new home rose .9% versus last year to $238,500. Sales rose 8.2% in the Northeast, 7.8% in the South and 2% in the West. Sales fell 1.1% in the Midwest. Today’s data is a positive and lends credence to a slower housing market, not a collapse. I continue to expect housing to slow to more healthy sustainable levels.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Vonage Holdings, a money-losing pioneer in the Internet phone-service business, raised $531.3 million in an IPO today as it seeks to keep ahead of competitors such as AT&T(T) and Comcast(CMCSA).
- The US dollar gained for a second day in Asia after a World Health Organization report said seven Indonesians may have contracted bird flu from other people, bolstering demand for safer assets.
- China raised fuel prices for the second time this year, which may slow demand growth further, according to analysts.

AP:
- Iran shut down a newspaper and detained its chief editor and cartoonist today for publishing a cartoon that has spawned riots by ethnic Azeris. The response, the first since President Ahmadinejad came to power, is a sign the Iranian government does not want a spotlight on the country’s internal divisions in the midst of a showdown with the US and Europe over nuclear issues.

Nihon Keizai:
- Japan and the US will issue a joint statement in June saying they will expand their defense alliance on a global scale.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.20%.
NASDAQ 100 indicated -.14%.

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

Earnings of Note
Company/EPS Estimate
- (CWTR)/.11
- (DLTR)/.30
- (EV)/.32
- (DCI)/.41
- (JLG)/.34
- (NTAP)/.23
- (PETC)/.18
- (WSM)/.17

Upcoming Splits
- (JCOM) 2-for-1
- (UN) 3-for-1
- (NHY) 5-for-1
- (ITW) 2-for-1
- (SHOO) 3-for-2

Economic Releases
8:30 am EST
- Durable Goods Orders for April are estimated to fall .5% versus a 6.4% gain in March.
- Durables Ex Transportation for April are estimated to rise .5% versus a 3.3% rise in March.

10:00 am EST
- New Home Sales for April are estimated to fall to 1135K versus 1213K in March.

BOTTOM LINE: Asian indices are higher, weighed down by commodity stocks in the region. I expect US equities to open modestly higher and to fall modestly into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.