Wednesday Watch

Late-Night Headlines
Bloomberg:
- The Australian dollar dropped the most in two weeks against the yen as a drop in US stocks prompted investor to pare investments funded by loans in the Japanese currency.
- Democratic senators moved today to cut off funding for VP Dick Cheney’s office next fiscal year as part of a dispute over rules for handling sensitive documents.
- Pakistan must unite to defeat extremism, Prime Minister Shaukat Aziz said after an army raid on the capital’s Red Mosque left more than 50 militants dead.
- Bear Stearns(BSC) said one of the firm’s two hedge funds that flirted with collapse last month has since cut its debt in half to $600 million after finding buyers for more assets.
- Gerdau Ameristeel Corp., the US unit of Brazilian steelmaker Gerdau SA, will buy Chaparral Steel(CHAP) for $4.22 billion in cash to expand in North America. Chaparral shareholders will receive $86 a share. The stock closed trading yesterday at $75.69.

Wall Street Journal:
- The potential sale of the Wall Street Journal to News Corp.(NWS/A) has drawn together a pair of investors who had made separate proposals to keep the newspaper independent.
- Wal-Mart Stores(WMT) will be able to build supercenters in San Diego after city officials voted to override an ordinance designed to block the stores.
- Many Chinese corporations are putting piles of cash into local stocks, fueling the bull market and their own profits. But the enthusiasm in corporate boardrooms for stock investing creates the potential for a nasty fallout if the market turns sour.

Chosun Ilbo:
- South Korea may sign a formal peace agreement with North Korea and agreed to an inter-Korean summit because President Roh Moo Hyun sees progress is being made on denuclearization by the government in Pyongyang.

Shanghai Securities News:
- China’s central bank may raise interest rates twice more this year, with the first coming as soon as this month, according to a Bank of China research report.

Late Buy/Sell Recommendations
Citigroup:
- CY2Q global telecom equipment capital spending should be up more than 10% sequentially with roughly 25% increases in North America and Europe offsetting a seasonally normal 11% decline in Asia-Pacific. This overall capex increase should support generally solid results for the sector. Out Top Picks are Ciena(CIEN) and Finisar(FNSR).

Night Trading
Asian Indices are -1.0% to -.50% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.13%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (AIR)/.41
- (CHAP)/1.37
- (DNA)/.72
- (RECN)/.31
- (RT)/.47
- (WWW)/.28
- (YUM)/.36

Upcoming Splits
- (TPL) 5-for-1

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -50,000 barrels versus a 3,151,000 barrel build the prior week. Gasoline supplies are expected to rise by 825,000 barrels versus a 1,851,000 barrel build the prior week. Distillate inventories are estimated to rise by 900,000 barrels versus a 1,162,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to rise by .4% versus a .6% increase the prior week.

Other Potential Market Movers
- The Fed’s Plosser speaking, Fed’s Warsh speaking, weekly MBA Mortgage Applications report, (MSFT) financial analyst briefing at E3, (LIZ) analyst meeting, CE Unterberg Towbin Emerging Growth Conference and CIBC Consumer Growth Conference could also impact trading today.

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