Wednesday Close

Indices
S&P 500 1,172.53 +.07%
DJIA 10,456.02 -.14%
NASDAQ 1,990.22 +.04%
Russell 2000 612.06 -1.05%
DJ Wilshire 5000 11,557.77 -.11%
S&P Barra Growth 566.66 +.18%
S&P Barra Value 601.49 -.04%
Morgan Stanley Consumer 574.86 +.74%
Morgan Stanley Cyclical 750.67 -1.07%
Morgan Stanley Technology 452.44 +.39%
Transports 3,732.28 -.58%
Utilities 348.70 -.91%
Put/Call .83 -15.31%
NYSE Arms .54 -48.29%
Volatility(VIX) 14.06 -1.47%
ISE Sentiment 119.00 -28.31%
US Dollar 83.95 +.01%
CRB 306.51 -2.08%

Futures Spot Prices
Crude Oil 54.04 +.43%
Unleaded Gasoline 159.25 +1.12%
Natural Gas 7.15 +.24%
Heating Oil 154.25 +.58%
Gold 425.40 unch.
Base Metals 128.81 -1.19%
Copper 144.25 -.14%
10-year US Treasury Yield 4.59% -1.05%

Leading Sectors
Airlines +2.03%
Drugs +1.27%
Semis +1.16%

Lagging Sectors
Iron/Steel -1.89%
Energy -1.90%
Oil Service -3.16%

After-hours Movers
DITC +4.70% after announcing it will replace DuPont Photomask(DPMI) in the S&P SmallCap 600.
DRI +4.86% after beating 3Q estimates and raising 05 guidance.
OATS +10.03% after Burkle’s Yucaipa announced it held a 9.2% stake.
XRTX +10.7% after beating 1Q estimates and boosting 2Q guidance substantially.
LEXR +36.23% after a jury said Toshiba Corp. and a unit must pay $381.4 million to it in a case over flash memory technology.

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

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on WAG, SLB, CL, HEP and RCL.

Merrill Lynch:
- Named GIS to Focus 1 stock list.

Afternoon/Evening Headlines
Bloomberg:
- Applied Materials will start paying dividends and boosted its stock buyback program to $4 billion to return cash to shareholders.
- Delta Air Lines must further reduce costs and generate additional cash to counter the rising price of fuel.
- Crude oil rose from its daily lows and gasoline futures surged to a record after an explosion at BP Plc’s Texas City crude-oil refinery, the third-largest in the US, raised supply concerns before the peak summer driving season.
- The US dollar traded near a 5-week high against the euro in Asia on forecasts durable goods orders probably rose in February, signaling consumer spending may prompt the Fed to speed up rate increases.
- Tiffany & Co. is revamping its strategy in Japan, adding more expensive items and refurbishing stores, to try to reverses three consecutive years of sales declines in the country.
- MCI Inc. said it will keep discussing an $8.45 billion takeover bid from Qwest Communications Intl.

Wall Street Journal:
- Texas Pacific Group, General Atlantic Partners LLC and Newbridge Capital Inc. may buy shares of Lenovo Group Ltd. for $350 million.

London-based Times:
- GlaxoSmithKline Plc will produce data which will show its Seretide asthma drug is more effective than its biggest competitor.

Real Estate Alert:
- Bids for New York’s MetLife Building came in at about $1.7 billion, short of the expected $2 billion, as a rise in long-term interest rates drove down offers.

BOTTOM LINE: US stocks finished mostly lower today as fears over slowing global economic growth more than offset falling commodity prices. The Portfolio finished slightly lower as losses in my Gaming longs more than offset gains in my Homebuilding shorts. I did not trade in the afternoon, thus leaving the Portfolio market neutral. The tone of the market deteriorated into the close as the advance/decline line dropped to its daily lows, most sectors declined and volume increased. Tech and defensive Consumer-oriented sectors outperformed throughout the day while Small-caps, Cyclicals and Commodity-related stocks underperformed. Most measures of investor anxiety were lower, which is also a negative. Overall, today’s market action was negative, considering recent losses, stabilizing interest rates, a firming US dollar and declining energy prices. While an oversold rally could occur at any time, I continue to expect measures of investor anxiety to rise further before a more durable bottom is in place.

Mid-day Scoreboard

Indices
S&P 500 1,173.42 +.15%
DJIA 10,465.92 -.05%
NASDAQ 1,993.68 +.22%
Russell 2000 614.63 -.64%
DJ Wilshire 5000 11,570.15 -.01%
S&P Barra Growth 566.85 +.21%
S&P Barra Value 602.18 +.08%
Morgan Stanley Consumer 574.70 +.72%
Morgan Stanley Cyclical 752.46 -.83%
Morgan Stanley Technology 452.61 +.42%
Transports 3,738.65 -.42%
Utilities 349.29 -.74%
Put/Call 1.09 +11.22%
NYSE Arms .56 -46.30%
Volatility(VIX) 14.09 -1.26%
ISE Sentiment 94.00 -43.37%
US Dollar 83.93 +.68%
CRB 306.15 -2.19%

Futures Spot Prices
Crude Oil 53.80 -3.98%
Unleaded Gasoline 155.20 -1.45%
Natural Gas 7.14 -1.49%
Heating Oil 151.50 -2.04%
Gold 425.80 -1.32%
Base Metals 128.81 -1.19%
Copper 144.70 -3.37%
10-year US Treasury Yield 4.61 -.61%

Leading Sectors
Airlines +2.31%
Semis +1.45%
Telecom +1.29%

Lagging Sectors
Gaming -1.46%
Energy -2.01%
Oil Service -2.95%

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

BOTTOM LINE: US stocks are mixed mid-day as worries over future US economic growth are offsetting lower energy prices and interest rates. The Portfolio is slightly lower on losses in my Chinese ADR shorts and Gaming longs. I exited a few longs from various sectors this morning as they hit stop-losses, thus leaving the Portfolio’s market exposure Market Neutral. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is light. Commodities, Cyclicals and Small-caps are underperforming, while Tech is outperforming. Measures of investor anxiety are mixed, which is a negative. Today’s overall market action is disappointing considering recent losses, the fall in energy prices and stabilization of interest rates. On the positive side, the ISE Sentiment Index hit its lowest level this morning since before the election in Sept. 04 and the CRB Index appears to have topped. I believe inflation fears will peak over the next few weeks. Declining inflation worries, a stabilizing US dollar, lower long-term interest rates and falling commodity prices should propel equities in the second half of the year. I expect US stocks to trade modestly lower into the close as volatility and volume increase.

Today's Headlines

Bloomberg:
- Emerging market currencies, bonds and stocks fell after the US Fed signaled inflation may accelerate, reducing the yield advantage of developing nation and other high-risk assets.
- Hedge fund managers worldwide earned $44.8 billion in fees last year, down 21% from a record 2003, as investment returns worsened, according to estimates by UBS AG.
- The Chicago Mercantile Exchange, the biggest US futures market, has put its acquisition plans on hold because of a “frenzy” of interest by competitors to go public.
- US sales of previously owned homes fell less than forecast in February to a 6.79 million annual rate, supported by cheap mortgage rates and growing employment.
- Crude oil is falling more than $2 a barrel in NY as the Energy Dept. reported that US inventories rose to the highest since July 2002.
- The US dollar is rising to a five-week high against the euro after US inflation accelerated at the fastest pace since 2002.

The Wall Street Journal:
- Microsoft is facing scrutiny from the European Commission because it may not be complying with the commission’s antitrust order on Windows software.
- US building costs rose 10.5% last year, as strong demand and higher prices spurred the biggest increase since the early 1980s.
- General Motors is in talks to sell a stake in its GMAC Commercial Mortgage unit to raise as much as $1 billion.
- Burlington Resources, BP PLC and Peoples Energy Corp. are meeting opposition to oil and gas drilling in the US West from an unlikely coalition of ranchers and environmentalists.
- Toyota Motor’s plan to become the world’s No.1 seller of cars worries investors who wonder if the Japanese carmaker might be giving up profit in search of market share.
- American International Group is being investigated over whether offshore companies it claimed were unaffiliated actually belonged to AIG.
- The FDA wants drugmakers to submit genetic testing data from the development stage to encourage the use of technology to evaluate how patients will respond to new medicines.

The New York Times:
- China’s economic growth is being driven predominately by an investment binge, sparking concern that the country’s financial system eventually might be stressed by unneeded factories and underused highways.
- Boston Scientific plans to use its right to buy closely held Cryovascular Systems, which has a technology to temporarily freeze the walls of blood vessels while blockages are being repaired.
- Gannett Co., Knight-Ridder Inc. and Tribune Co. are buying 75% of Topix.net, a Web site with links to news articles and government information.

Economic Releases

- The Consumer Price Index for February rose .4% versus estimates of a .3% increase and a .1% rise in January.
- The CPI Ex Food & Energy rose .3% versus estimates of a .2% increase and a .2% gain in January.
- Existing Home Sales for February fell to 6.79M versus estimates of 6.7M and 6.82M in January.

Morning Buy/Sell Recommendations

Goldman Sachs:
- Reiterated Outperform on WFC and RIG.
- Reiterated Underperform on HBAN.
- Upgraded CK to Outperform.
- Reiterated Attractive view of Oil Service sector, saying significant upside is still likely.

Smith Barney:
- Upgraded MYK to Buy, target $18.50.
- Upgraded GPN to Buy, target $74.
- Reiterated Buy on AV, target $20.
- Reiterated Buy on CNI, target 62.50
- Reiterated Buy on FON, target $27.
- Reiterated Sell on MU, target $11.50.
- Reiterated Buy on RIMM, target $96.

Banc of America:
- Upgraded CPWR to Buy, target $10.
- Rated OMM Buy, target $27.
- Rated SFL Buy, target $24.

Legg Mason:
- Rated DTV Buy, target $18.

Deutsche Bank:
- Raised MCHP to Buy, target $30.

UBS:
- Rated HUN Buy, target $31.

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Paul Wolfowitz, President Bush's nominee to lead the World Bank, gained support from European Union nations including the Netherlands and Italy.
- The US 10-year T-note is rising in Asia for the first day in four on optimism a US government report on consumer prices tomorrow will ease concern inflation in quickening.
- Japanese exports rose at the slowest pace in more than a year in February as shipments of electronic equipment slumped, signaling the nation may not be able to rely on overseas demand to drive a recovery from recession.
- Crude oil is falling for a second day in NY on concern the Fed will accelerated the pace of US interest rate increases, slowing global economic growth and demand for fuel.
- The Fed's two-edged message -- that while inflation risks are rising, it needn't yet step up the pace of interest rate increases -- may reflect disagreements among policy makers that will be clarified in coming weeks, economists and former Fed officials said.

The NY Times:
- Borders Group, Piney Bowes and other companies are offering special discounts and employee programs as a way to attract older workers.

Financial Times:
- Hedge fund managers worldwide earned as much as $45 billion more than US mutual funds.

London-based Times:
- Millennium & Copthorne Hotels Plc, a British hotelier, plans to sell the Biltmore Hotel in Los Angeles for as much as $500 million.

Beijing Morning Post:
- China's film industry will grow 140% and be worth $12 billion by 2007, up from $5 billion in 2004.

China Business News:
- GE Energy plans to spend about $100 million to acquire Shanghai-based Xinhua Control Engineering Co. to gain access to the Chinese company's technology.

Korea Economic Daily:
- BHP Billiton is asking Japanese steelmakers to pay double for its iron ore this year, more than Brazil's Cia. Vale do Rio Doce's 71.5% increase.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on AMGN.
- Reiterated Attractive view of Hospital sector.

Banc of America:
- Reiterated Sell on BDY, target $8.

Night Trading
Asian Indices are -1.25% to unch. on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.27%.

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

Earnings of Note
Company/EPS Estimate
DRI/.51
FINL/.56
GME/.69
MLS/.49

Splits
ATVI 4-for-3
BZH 3-for-1
IIVI 2-for-1

Economic Releases
8:30 EST:
- The Consumer Price Index for February is estimated to rise .3% versus a .1% gain in January.
- The CPI Ex Food & Energy for February is estimated to rise .2% versus a .2% increase in January.

10:00 EST:
- Existing Home Sales for February are estimated to fall to 6.7M versus 6.8M in January.

BOTTOM LINE: Asian indices are mostly lower as commodity and exporter shares in the region decline on worries over slowing global demand. I expect US equities to open modestly lower in the morning on a slightly higher-than-expected CPI report. A significantly higher-than-expected report would lead to a larger morning decline. Again, I will key on the bond market for the direction of equities. I plan to increase market exposure into any morning losses using tight stops. The Portfolio is 25% net long heading into tomorrow.