BETWEEN THE HEDGES

Tuesday, March 28, 2006

Wednesday Watch

Posted by Gary .....at 11:28 PM

Late-Night Headlines
Bloomberg:
- US Commerce Secretary Carlos Gutierrez called on China to crack down harder on copyright piracy and open its markets further to US products or risk a protectionist backlash that would hurt both economies.

Late Buy/Sell Recommendations
Citigroup:
- Downgraded (RDY) to Sell from Buy.

Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.12%.

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
- (ARRO)/.29
- (RECN)/.28
- (RI)/.46
- (SCS)/.11
- (UTIW)/.23

Upcoming Splits
- (BUCY) 3-for-2

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 950,000 barrels. Gasoline inventories are estimated to fall 1,450,000 barrels, and distillate supplies are expected to decrease by 1,250,000 barrels. Refinery utilization is expected to rise .50%.

BOTTOM LINE: Asian indices are higher, boosted by exporting shares in the region. I expect US equities to open mixed and to trade modestly lower into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Near Lows after Fed Rate Hike and Rise in Oil

Posted by Gary .....at 5:51 PM

Indices
S&P 500 1,293.23 -.64%
DJIA 11,154.54 -.85%
NASDAQ 2,304.46 -.48%
Russell 2000 751.27 -.37%
Wilshire 5000 13,060.13 -.54%
S&P Barra Growth 609.39 -.58%
S&P Barra Value 680.59 -.71%
Morgan Stanley Consumer 610.99 -.67%
Morgan Stanley Cyclical 810.59 -.47%
Morgan Stanley Technology 536.60 -.64%
Transports 4,532.17 -.57%
Utilities 393.92 -.57%
Put/Call 1.01 +20.24%
NYSE Arms 1.34 +46.16%
Volatility(VIX) 11.57 +.96%
ISE Sentiment 140.00 +2.19%
US Dollar 90.20 +.14%
CRB 331.66 +1.21%

Futures Spot Prices
Crude Oil 65.95 -.18%
Unleaded Gasoline 187.90 -.29%
Natural Gas 7.24 +.49%
Heating Oil 183.10 +.18%
Gold 567.00 unch.
Base Metals 178.17 -.30%
Copper 242.85 unch.
10-year US Treasury Yield 4.78% +1.63%

Leading Sectors
Oil Service +1.98%
REITs +1.08%
Gaming +.63%

Lagging Sectors
Semis -2.05%
Gold & Silver -2.24%
Airlines -2.70%

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:
- Former Defense Secretary Casper Weinberger, who oversaw the US military buildup under President Reagan that helped win the Cold War with the Soviet Union, died at the age of 88.
- Israel’s Acting Prime Minister Ehud Olmert and his Kadima Party won today’s election, tapping voters’ desire to abandon talks with the Palestinians and fix the country’s borders unilaterally, exit polls showed.
- General Motors(GM) said it will restate several years of financial statements for its home-mortgage unit.
- TD Ameritrade Holding(AMTD) said earnings for the fiscal second quarter will exceed its earlier estimate of as much as .28/share due to a surge in trading volume.
- The IRS audited 11,715 US millionaires in 2005, providing a rare glimpse of its efforts to ensure wealthy taxpayers comply with tax laws.
- Shares of companies based in developing countries are rising for a seventh quarter, extending the longest string of advances since the 1980s. The p/e ratio of so-called emerging market stocks is the highest since 1999, relative to developed countries.
- US Treasuries declined, driving the 10-year yield up the most in two months, after the Fed raised interest rates for the 15th straight time and signaled additional increases are likely.

CNBC:
- The Federal Reserve may boost its benchmark interest rate to 5% and stop there, former Dallas Federal Reserve Bank President Robert McTeer said.

BOTTOM LINE: The Portfolio finished lower today on losses in my Computer longs, Semi longs, Biotech longs and Energy-related shorts. I added (QQQQ) and (IWM) shorts in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bearish. The bond market's reaction to the Fed hike and commentary is disappointing considering investor expectations. As well, oil may bounce further in the short-run on the new ETF scheduled for this Monday. Given how good this quarter has been to many, I expect to see more profit-taking into quarter-end.

Stocks Lower into Final Hour as Bonds Weaken

Posted by Gary .....at 3:27 PM

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Biotech longs, Computer longs, Semi longs and Energy-related shorts. 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 lower, most sectors are falling and volume is below average.
The Johnson Redbook same-store sales index rose 2.4% year over year last week vs. a 2.5% rise the prior week. This week's gain is up from a 1.5% increase in late April 2005. The long-term average is a gain of around 2.5%. The Morgan Stanley Retail Index is 22.2% higher since late October, almost double the 11.6% gain for the S&P 500 (SPX) over the same time period. The Fed’s move and statements were about what most expected. The bond market appears to have overreacted. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain-hunting.

Today's Headlines

Posted by Gary .....at 2:50 PM

Bloomberg:
- Oil-tanker rates for shipments from the Middle East to Asia fell to the lowest level in almost seven months because of a surplus of vessels available for hire.
- President Bush said Iraqi leaders are returning to negotiations to try to form a government that can unite Shiite, Sunni and Kurdish factions.
- Israelis are voting in an election that has turned into a referendum on acting Prime Minister Ehud Olmert’s plan to abandon talks with the Palestinians and for the country to fix borders by itself.
- French students and labor unionists marched through Paris today, leading a fourth nationwide day of violent protests against a new youth labor law.
- Oil rose to a seven-week high on speculation that a government report will show US gas inventories fell for a fourth straight week.
- The Federal Reserve, beginning a new era under Chairman Bernanke, raised the main US interest rate to 4.75% and held out the prospect of further increases.
- US Treasuries declined, driving the two-year yield to almost a five-year high, after the Fed raised rates for the 15th straight time.

Wall Street Journal:
- Hewlett-Packard’s(HPQ) shares, which have been on a hot streak since the company named Mark Hurd as chief executive officer almost a year ago, may be cooling.
- The American Stock Exchange expects a fund that tracks crude-oil prices to start trading on Monday.
- Hartford Financial Services Group(HIG) said it will sell life insurance at its regular rates immediately after surgery to men with moderate levels of prostate cancer.
- France’s nuclear energy program is drawing international attention because of its success in reducing dependence on foreign energy supplies and cutting greenhouse gases.
- General Motors’(GM) Buick minivan is the car of choice among China’s business elite.
- Capitol Reader, an Internet-based readers’ service, provides booklovers with condensed versions of the political and public-affairs books they’re interested in but lack time to read.
- Southern Co.(SO), Wal-Mart Stores(WMT) and other US companies are drafting proposals to curb emissions of carbon dioxide and other so-called greenhouse gases.
- Cablevision Systems(CVC) will test a digital-video recorder that lets customers store programs on the company’s network rather than on a box in their homes.

NY Post:
- Jajah Inc., an Internet telephone startup, has the backing of Sequoia Capital Ltd., a venture capital firm that was an early supporter of Google(GOOG) and Yahoo!(YHOO).

NY Times:
- The number of US households with a net worth of $1 million or more, excluding main residences, rose to an all-time record 8.9 million last year, citing researcher TNS Financial Services.
- Google Inc.(GOOG) is boosting its lobbying and legislative operations as it seeks to catch up with competitors such as Yahoo!(YHOO) and Microsoft(MSFT) in Washington.
- US Helicopter Corp. began hourly shuttle service yesterday between Manhattan and John F. Kennedy International Airport for $139 each way, cutting the travel time to less than 10 minutes.
- The Arab League agreed on a plan to boost their diplomatic presence in Iraq.

Financial Times:
- The Bond Market Association will publish guidelines today to increase flexibility in the US market for borrowed bonds.

Gulf News:
- Lehman Brothers(LEH) plans to open offices in Dubai and Qatar to tap oil-driven wealth in the Middle East.
- Nasdaq Stock Market(NDAQ) is discussing listing opportunities with companies in the Persian Gulf.

Chronicle of Higher Education
- Public universities in Canada cost more to attend than those in the US, citing a study.

Consumer Confidence Highest Since April 2002

Posted by Gary .....at 10:50 AM

- Consumer Confidence for March rose to 107.2 versus estimates of 102.0 and a reading of 102.7 in February.

BOTTOM LINE: Consumer Confidence in the US economy jumped in March to the highest level in almost four years, driven by a strengthening labor market that’s lifting incomes and giving Americans means to spend, Bloomberg reported. The March reading beat even the highest estimate of 64 economists. The number of people saying that jobs are plentiful rose to the highest level since before the Sept. 11, 2001 terrorist attacks. Optimism about consumers’ present situation rose to 133.3, the highest since August 2001. The expectations component of the index rose to 89.9 from 84.2 the prior month. In my opinion, this component remains depressed due to the record number of leaders in the US, both political and financial, that perceive they benefit from spinning all news in a negative light. I continue to expect confidence to rise from current levels as irrational pessimism lifts further, energy prices fall, the labor market remains solid, stock prices rise further, housing stabilizes at more healthy levels and long-term rates remain relatively low.