BETWEEN THE HEDGES

Tuesday, June 06, 2006

Wednesday Watch

Posted by Gary .....at 10:56 PM

Late-Night Headlines
Bloomberg:
- Coffee fell the most since February in London and dropped to a five-month low in NY on speculation that the harvest in Indonesia, the world’s fourth-largest exporter, is the largest in eight years.
- Google(GOOG) plans to use Dell(DELL) servers as part of its $30,000 search appliance to lure more corporate customers.
- China had a coal mine accident that killed between three and nine people nearly everyday in May, a 30% higher accident rate than in the same month last year. China must take stronger
- The US House of Representatives approved a $32.1 billion spending measure to finance the Homeland Security Dept.’s efforts to tighten security at US ports and borders and fund local emergency programs.
- AU Optronics(AUO) cut its second quarter panel shipments forecast, citing recent market changes.
- Bird flu is a “high risk” for India, Pakistan and other South Asian countries because of the number of poultry kept in the region, where a spread of the vius among humans would cause a recession, the World Bank said.

Financial Times:
- Best Buy Co.(BBY) plans to expand further internationally after it entered China last month, citing an interview with CEO Brad Anderson.

Shanghai Morning Post:
- China may cut tax rebates for some exports, while boosting rebates for technical exports, to help reduce its trade surplus.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.75% to -.75% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.13%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (AMWD)/.51
- (ALOG)/.41
- (BMC)/.29
- (HRB)/1.79
- (IDT)/-.22
- (MTN)/1.73

Upcoming Splits
- (NSSC) 3-for-2
- (SCSS) 3-for-2

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 500,000 barrels. Gasoline supplies are expected to rise 1,500,000 barrels. Distillate inventories are estimated to rise 1,750,000 barrels. Finally, refinery utilization is expected to rise .25%.

3:00 pm EST
- Consumer Credit for April is estimated to rise to $3.5B versus $2.5B in March.

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

Stocks Finish Slightly Lower on Late-day Rebound

Posted by Gary .....at 5:44 PM

Indices
S&P 500 1,263.85 -.11%
DJIA 11,002.14 -.42%
NASDAQ 2,162.78 -.32%
Russell 2000 710.96 -.41%
Wilshire 5000 12,722.96 -.25%
S&P Barra Growth 584.53 -.01%
S&P Barra Value 677.63 -.22%
Morgan Stanley Consumer 601.24 +.04%
Morgan Stanley Cyclical 817.50 -1.12%
Morgan Stanley Technology 496.31 -.53%
Transports 4,608.38 -.24%
Utilities 410.86 -.22%
Put/Call .96 -20.66%
NYSE Arms 1.08 -61.36%
Volatility(VIX) 17.34 +4.14%
ISE Sentiment 108.00 -11.48%
US Dollar 84.77 +.75%
CRB 344.78 -1.15%

Futures Spot Prices
Crude Oil 72.45 -.07%
Unleaded Gasoline 218.25 +.17%
Natural Gas 6.38 -.03%
Heating Oil 204.24 -.01%
Gold 633.20 -.24%
Base Metals 219.31 -2.65%
Copper 347.00 -.56%
10-year US Treasury Yield 5.00% -.32%

Leading Sectors
Telecom +.93%
Restaurants +.21%
Networking +.13%

Lagging Sectors
Alternative Energy -1.95%
Homebuilders -2.78%
Gold & Silver -2.80%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
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Economic Calendar
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GuruFocus.com
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In Play

Afternoon Recommendations
Oppenheimer:
- Rated (TWI) Buy, target $26.

Banc of America:
- Rated (BA) Buy, target $93.
- Rated (GD) Buy, target $72.
- Rated (JOYG) Buy, target $62.
- Rated (CAT) Buy, target $80.

Afternoon/Evening Headlines
Bloomberg:
- Fidelity Investments had its debt outlook lowered to negative from stable by S&P, which said the world’s largest mutual fund manager has lost ground to competitors.
- The US dollar will strengthen against the euro by the first quarter of 2007 as the US economy slows and the trade deficit narrows, according to HBOS Group.
- Harvard University researchers have entered the race to do what Korean scientist Hwang Woo Suk falsely claimed to have accomplished last year: clone a human embryo in the lab to create stem cells genetically matched to a living person.
- Lawyers for 15 Canadian men accused of a terrorist plot to blow up Ontario landmarks said prosecutors are charging one of the defendants with planning to storm parliament and behead Prime Minister Stephen Harper.
- President Bush said Iran’s response to a US-backed initiative aimed at resolving a standoff over the Islamic Republic’s nuclear program is a “positive” first step toward negotiations.
- Money manager Mario Gabelli has settled a civil lawsuit alleging he defrauded the US government by using “sham” companies to win cellular phone licenses.

BBC:
- President Putin has commended the cooperation between Russia and the US over Iran.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Internet longs, Networking longs and Commodity shorts. I covered some of my (QQQQ) and (IWM) 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 lower, most sectors fell and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was mildly bearish, however there were a number of positives. I continue to believe the major averages are near a meaningful bottom. The Johnson Redbook same-store sales index rose 3.3% year over year last week vs. a 3.1% rise the prior week. The long-term average is a gain of around 2.5%. I expect to see retail sales decelerate back to average levels by next month.

Stocks Sharply Lower into Final Hour on Fed Comments and Housing Worries

Posted by Gary .....at 3:31 PM

BOTTOM LINE: The Portfolio is about unchanged into the final hour as losses in my Retail longs and Medical longs are offsetting gains in my Index ETF shorts, Energy-related shorts and Base Metal shorts. I took profits in my (QQQQ) and (IWM) shorts this morning and then added back to them, thus leaving the Portfolio 25% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is above average. I posted a few weeks ago that the outperformance by the Morgan Stanley Cyclical Index (CYC) over the Morgan Stanley Consumer Index (CMR) had never been greater. The spread between the two peaked eight days later. Since then, the CYC is down 8.3%, while the CMR is down 2.8%. I expect this trend to continue over the intermediate term. I expect US stocks to trade mixed into the close from current levels as short-covering and bargain hunting offset economic worries.

Today's Headlines

Posted by Gary .....at 2:33 PM

Bloomberg:
- Iran’s top nuclear negotiator said there are “positive steps” in US-backed incentives aimed at persuading the Islamic Republic to hold international talks about ending the production of nuclear fuel.
- China is stepping up efforts to keep the uncensored version of Google’s(GOOG) Internet search engine from users in the country, a journalism advocacy group said. Internet users in major Chinese cities had problems connecting to Google.com in the past week. The site was unavailable to the whole country on May 31.
- Copper led declines in metals on speculation that the US will raise interest rates to fend off inflation, boosting borrowing costs that may curb demand for raw materials.
- Emerging-market stocks fell to their lowest level in almost five months after Fed Chairman Bernanke signaled borrowing costs will rise again, reducing the attractiveness of riskier assets.
- Qwest Communications(Q) will offer Windows Live antivirus software to high-speed Internet access customers, switching from McAfee(MFE) as Microsoft introduces expanded online programs this year.
- The dollar gained the most in almost three weeks against the euro and yen as traders increased their bets that the Fed will raise interest rates.
- The Federal Reserve Bank of Philadelphia named economics professor Plosser as president, giving new Fed Chairman Bernanke a fellow career academic to help make interest-rate decisions.

Wall Street Journal:
- US providers of ETFs plan to move on from oil and precious metals and offer more diverse commodity-related products.
- Intel Corp.(INTC) may sell a major part of its communications businesses in an effort to strengthen the company against competition in its main markets.
- GE’s(GE) NBC television is considering partnerships with Bolt.com and other popular video Web sites in an effort to attract younger viewers.
- Time Warner’s(TWX) cable television unit plans to upgrade as many as four million set-top boxes with software from OpenTV Corp.(OPTV), to allow for more applications from third-party providers.

NY Times:
- Former US president Clinton is set to appear at more than two dozen fund-raisers for Democrats around the country, seeking to collect at least $20 million.

Dow Jones Newswires:
- Japan’s Finance Minister Tanigaki said deflation isn’t over and the central bank should use caution in setting monetary policy.

USA Today:
- Motorcycles sales are increasing as consumers look to save money on gas by switching to fuel-saving forms of transportation, citing Motorcycle Industry Council statistics.

Washington Post:
- Iraqis are confident that their newly formed government will help curb violence in the country.
- The Senate Select Committee on Intelligence wants the country’s imagery intelligence agency to provide US soldiers with laptop computers that display pictures and video of what may lie ahead.

NY Post:
- Fulcrum Global Partners LLC, which charged for its stock research while most Wall Street firms provided it free, has closed after five years.

Economic Releases

Posted by Gary .....at 10:32 AM

- None of note