Monday Watch

Weekend Headlines
Bloomberg:
- Defense Secretary Robert Gates urged Asian nations to work with the US to help stabilize Afghanistan and its neighbors by promoting economic development and countering terrorism.
- Treasuries declined, pushing 10-year note yields to the highest level in more than nine months, as larger-than-forecast gains in employment and manufacturing suggested US economic growth is accelerating.
- The US dollar rose to a four-month high against the yen as accelerating US job growth and stronger manufacturing added to signs the economy is gaining momentum.
- Genentech Inc.(DNA) said adding its Avastin to a chemotherapy combination slowed the growth of lung tumors at both high and low doses in a study.
- Former Federal Reserve Chairman Alan Greenspan, promoting his forthcoming book, said the 1987 stock market crash and 2001 terrorist attacks taught him the most during his almost two-decade tenure at the Fed.
- Bristol-Myers Squibb’s(BMY) Sprycel stalls tumor growth in previously untreated patients with rare, hard-to-defeat blood cancers, a study found.
- Four people, including a former airport employee and a former member of the parliament of Guyana, were charged with plotting to blow up fuel lines and tanks at JFK International Airport, the US Justice Department said.
- Four men charged with plotting to bomb fuel tanks and a pipeline at NY’s JFK Intl. Airport had no direct ties to al-Qaeda though they had the “same hatred” that motivates the terrorist group, NY’s police commissioner said.
- Qiagen NV, a Dutch maker of tools for gene research, agreed to buy Digene Corp.(DIGE) for $1.6 billion in shares and cash to gain tests for a virus that causes cervical caner and sexually transmitted diseases.
- Democratic presidential candidate John Edwards said Senators Hillary Clinton and Barack Obama showed no leadership when they didn’t explain in advance their vote last month against an Iraq war funding measure. “There is a difference between leadership and legislating,” said Edwards, during the second debate among the eight Democratic presidential candidates.
- Japan’s largest companies increased spending 13.6%, more than expected, the Ministry of Finance said.
- From General Electric(GE) to Mitsubishi Heavy Industries to E.ON AG, the world’s largest companies are investing in wind power, the best-performing energy in the past year.

Wall Street Journal:
- The family that owns a controlling interest in Dow Jones(DJ) will meet with Rupert Murdoch on June 4 to discuss his company’s $5 billion bid for the news service.
- Real-estate values of US skyscrapers may peak soon because prices are rising more rapidly than the rents that buyers are able to charge.
- Behind the Bancrofts’ Shift at Dow Jones(DJ).

NY Times:
- Cadence Design Systems(CDNS) held talks with KKR and Blackstone Group LP about a sale of the company.
- Pornographic video sales and rentals fell 15% last year and are likely to decline more this year in the face of cheap video and photography software that enables easy amateur productions.
- Google(GOOG) Keeps Tweaking Its Search Engine.
- Cars Outsell Light Trucks for First Time Since 2002.

Washington Post:
- NY Senator Hillary Clinton, the frontrunner for the 2008 Democratic presidential nomination, is being portrayed as a “pragmatic Midwesterner” in the same way that her husband, Bill Clinton, was cast by his 1992 campaign as “The Man from Hope.” Introducing biographical information about her childhood and early adulthood, her advisers told the newspaper, will help counter the image of Clinton as an inside-the-Beltway careerist linked to scandal.
- Iran has increased arms shipments to Iraq’s Shiite militias and Afghanistan’s Taliban in recent weeks, citing US and European officials.

All Things Digital:
- Transcript – Bill Gates and Steve Jobs at D5.

AP:
- Siebel Systems Inc. founder Thomas Siebel pledged $100 million to his alma mater, the University of Illinois, upon his death.

Google:
- Google Maps new Street View.

Financial Times:
- Highbridge Capital Management LLC has taken on Scott Kapnick, formerly co-head of Goldman Sachs Group investment banking division, to run a new private equity arm of the hedge fund.
- The Chicago Board of Trad(BOT) plans to mount a new campaign to gain backing for its merger with the Chicago Merc(CME) after US antitrust officers have reviewed the deal, citing CBOT President Dan.

Sunday Telegraph:
- Baidu.com Inc.(BIDU), China’s most-used Internet search site, is poised to enter the European market, competing with rival Google(GOOG).

BBC:
- Mohamed ElBaradei, head of the UN’s nuclear watchdog agency, said those who want to bomb Iranian atomic facilities are “new crazies.”

Corriere della Sera:
- Russian President Vladimir Putin said his country may target Europe with missiles if the US goes ahead with plans for missile defense sites in eastern Europe.

Nikkei:
- Hitachi Ltd. and Oracle Corp.(ORCL) will begin to sell wireless IC tags in China to detect fake goods.

Economic Times:
- China’s government will soon announce new measures to cool its property market, including an increase in the supply of land, citing sources from Beijing. The government will also seek to build more low-cost housing and clamp down on illegal real estate transactions and corruption. China has steeped up measures to curb lending that’s fueling a surge in real estate prices, seeking to maintain social stability.

Economic Daily News:
- CPC Corp., Taiwan’s state oil refiner, plans to order $1 billion in equipment and controlling systems from Honeywell Intl.(HON) this year and in 2008.

China Securities Journal:
- China’s investors should be rational in considering the stock market’s recent declines instead of blaming the government’s stamp duty. The average valuation of Chinese stocks is around 50 times 2007 earnings, much higher than the average in the world’s main stock markets. The speed that stock prices have soared by is “extremely unusual,” which underscores the “structural bubbles” in the stock market. The huge price fluctuations within each trading day reflected the “weak sentiment” among investors and the fact that the trading is “unsustainable.”

The Standard:
- China’s coming collapse is not a fait accompli but there is always someone making the point.

21^st Century Business Herald:
- Investors should heed the increasing risk in China’s stock market and not depend on the government to keep prices up for political reasons, citing a central bank adviser. Many investors have continued to buy shares, betting the government won’t let the market fall ahead of a national meeting of the ruling party later this year and next year’s Beijing Olympics, Fan Gang, a monetary policy committee member of China’s central bank, was cited as saying. The government should take actions to curb price increases because risk is escalating, he said. Possible tools included interest rate increases, currency exchange rates, bank reserve requirements and central bank bill auctions, Fan said.

Weekend Recommendations
Barron's:
- Made positive comments on (GE) and (BLC).
- Made negative comments on (ABT).

Citigroup:
- Reiterated Buy on (PLCE), target $78.
- We believe retail sales in May showed modest improvement over April as warmer, drier weather helped consumers return to Spring buying patterns. While comparisons remain more challenging in May than April, we believe their will be a higher incidence of sales upside to expectations versus what we saw in April.
- We favor Advance Auto Parts(AAP), Office Depot(ODP) and Tractor Supply(TSCO) as our best new money ideas in retail.
- Reiterated Buy on (ORCL), target $23.
- Reiterated Buy on (NKE), raised target to $65 from $58.

Morgan Stanley:
- We expect retail sales in May to benefit from pent-up demand for seasonal apparel following a soft April and the arrival of warmer weather. We continue to favor retailers with strong fundamentals and the ability to drive margins and returns ahead of consensus expectations. Top picks include (JCP) and (COH).

Night Trading
Asian indices are unch. to +.75% on average.
S&P 500 indicated -.12%.
NASDAQ 100 indicated -.13%.

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

Earnings of Note
Company/Estimate
- (CMOS)/.00
- (FRE)/1.09
- (FCEL)/-.37
- (KKD)/.06
- (QSII)/.33

Upcoming Splits
- (TSBK) 2-for-1
- (EPIQ) 3-for-2
- (PFMG) 2-for-1
- (NGA) 3-for-2

Economic Releases
- Factory Orders for April are estimated to rise .7% versus a 3.5% increase in March.

Other Potential Market Movers
- Goldman Sachs Lodging/Gaming/Restaurant/Leisure Conference, ASCO Annual Meeting, Deutsche Bank Media/Telecom Conference, (PMTC) Global Media/Analyst Event, (PFE) Analyst Meeting could also impact trading on Monday.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon finishing modestly higher. The Portfolio is 100% net long heading into the week.