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Friday Watch

Late-Night Headlines
Bloomberg:
- Oracle Corp.(ORCL) said fourth-quarter profit and revenue exceeded forecasts on soaring sales of database licenses.
- Bill Gates will step down from his day-to-day role at Microsoft(MSFT) in July 2008.
- More than 33,000 union workers at GM(GM) and Delphi have signed up for a buyout program designed to help the companies with plant closings, the head of the UAW said.
- Leaders of Hamas, blocked by international sanctions from wiring funds, are filling the Palestinian Authority’s empty treasury by carrying millions of dollars in cash into the Gaza Strip, stashed in suitcases and hidden money belts.
- A long-range missile test by North Korea would violate an agreement Japanese Prime Minister Koizumi reached with the country’s leader, Kim Jong Il, in 2002, Japan’s chief cabinet secretary said.

Wall Street Journal:
- Metals prices may fall further if raw material consumers increase their use of alternatives such as plastics and less-expensive metals, citing analysts. Industries that use copper have started substituting, citing London-based research company CRU.

Financial Times:
- Russian President Putin said Iran is “ready to negotiate” over its nuclear program.
- The Sarbanes-Oxley Act has benefited accountancy firms as companies pay them more fees to ensure they meet corporate governance regulations, citing research by law firm Foley & Lardner.

London-based Times:
- BP Plc, Europe’s biggest oil company, plans to invest around $37 billion on US projects to explore and produce more oil and natural gas. The company will spend $16 billion in the next decade on exploration and production in the Gulf of Mexico, and plans to invest $17 billion at its onshore facilities.

Maeil Business Newspaper:
- The US will likely call a session of the UN Security Council if North Korea test fires a long-range missile this weekend.

Late Buy/Sell Recommendations
Lehman Brothers:
- Recommended selling the Canadian, Australian and New Zealand dollars and to buy the US dollar.

Business Week:
- Mirant Corp.(MIR), a US power company, could become a takeover target with utility holding company FPL Group(FPL) named as a possible buyer, citing unidentified analysts.
- RAE Systems(RAE), which makes instruments that detect gas and radiation levels, may rise on demand in homeland security products from the US and China governments, citing NY Global Securities’ Julie Chen.
- The shares of Black & Decker(BDK), which makes power tools, may fall because of declining sales, citing Christopher Laudani of Equity Research Online.

Night Trading
Asian Indices are +1.75% to +2.75% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated +.11%.

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
- (CCL)/.44
- (WGO)/.38

Upcoming Splits
- (IIIN) 2-for-1
- (OII) 2-for-1
- (PARL) 2-for-1
- (IFO) 2-for-1

Economic Releases
8:30 pm EST
- 1Q Current Account Deficit is estimated to shrink to -$222.0B versus -$224.9B in 4Q.

9:45 am EST
- Preliminary Univ. of Mich. Consumer Confidence for June is estimated to fall to 79.0 versus a reading of 79.1 in May.

1:00 am EST
- The NAHB Housing Market Index for June is estimated at 45 versus a reading of 45 in May.

BOTTOM LINE: Asian indices are sharply higher, boosted by technology and exporting stocks in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Finish Sharply Higher on Positive Economic Data, Short-covering and Bargain Hunting

Indices
S&P 500 1,256.13 +2.12%
DJIA 11,014.47 +1.83%
NASDAQ 2,144.15 +2.79%
Russell 2000 701.06 +3.54%
Wilshire 5000 12,616.78 +2.35%
S&P Barra Growth 582.83 +1.87%
S&P Barra Value 671.40 +2.38%
Morgan Stanley Consumer 603.55 +1.05%
Morgan Stanley Cyclical 806.14 +2.90%
Morgan Stanley Technology 491.22 +3.21%
Transports 4,638.92 +3.76%
Utilities 410.61 +1.65%
Put/Call .86 -23.21%
NYSE Arms .19 -67.15%
Volatility(VIX) 15.92 -25.86%
ISE Sentiment 117.00 +23.16%
US Dollar 86.02 -.14%
CRB 337.56 +1.67%

Futures Spot Prices
Crude Oil 69.76 +.37%
Unleaded Gasoline 203.96 +.18%
Natural Gas 7.26 +.75%
Heating Oil 194.41 +.37%
Gold 581.50 +1.96%
Base Metals 208.54 +4.27%
Copper 315.00 +.59%
10-year US Treasury Yield 5.09% +.68%

Leading Sectors
Steel +6.72%
Airlines +5.88%
I-Banks +5.79%

Lagging Sectors
Foods +1.03%
HMOs +.94%
Broadcasting +.50%

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
Deutsche Bank:
- Upgraded (IGT) to Buy.

Afternoon/Evening Headlines
Bloomberg:
- Mark Oberle, CFO of ethanol maker Corn Plus LLP, is sitting out his industry’s biggest building boom in a quarter century, and Microsoft(MSFT) Chairman Bill Gates may wish he’d done the same. Within two years, planned expansion by ethanol producers will push US supplies pas demand, resulting in a glut, according to Standard and Poor’s.
- The US Senate Judiciary Committee approved a constitutional amendment that would empower Congress to outlaw flag burning, setting the stage for an election-year debate about “desecration” of the national symbol.
- Fed Chairman Bernanke said soaring energy prices may slow economic growth and spur inflation in the short-run, while being manageable over a longer period of time.
- Shares of Cnooc Ltd., China’s largest offshore oil producer, had their biggest gain in more than 10 months after a foreign partner found a field big enough to meet the nation’s natural-gas needs for four years.

CNBC:
- Millennium Pharmaceuticals(MLNM), a drugmaker focused on cancer and inflammatory disease treatments, has hired Morgan Stanley to entertain offers from prospective buyers.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Biotech longs, Networking longs, Internet longs and Semi longs. I added to my Intuitive Surgical(ISRG) long and took profits in a few trading longs in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, every sector rose and volume was heavy. Measures of investor anxiety were lower into the close. Overall, today's market performance was very bullish. I expect to see some follow-through or consolidation tomorrow. I would be very surprised to see a substantial giveback of today's gains. The 10-year was stable today, rising only 3 basis points. Considering the huge rally in stocks the last two days, recent inflation hysteria and stronger economic data that basically puts to rest the notion of a plunging economy, the 10-year acts very well.

Stocks Sharply Higher into Final Hour on Bargain Hunting, Short-Covering and Positive Economic Data

BOTTOM LINE: The Portfolio is substantially higher into the final hour on gains in my Computer longs, Internet longs, Biotech longs and Semi longs. I took profits in some more of my (EEM) short, added to my Apple Computer(AAPL) long and exited the remainder of my (QQQQ) and (IWM) shorts this morning, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is higher and volume is heavy. The AAII percentage of Bulls remained unchanged at 26.41% this week from 26.23% the prior week. This reading is still at depressed levels. The AAII percentage of Bears soared to 54.98% this week from 45.08% the prior week. This reading is now at very elevated levels. The percentage bears is the highest since February 2003. The S&P 500 has rallied 57% since bearish sentiment hit this level. I expect bullish sentiment to rise next week. I continue to believe overall investor sentiment toward U.S. stocks is at levels associated with meaningful market bottoms. I expect US stocks to trade mixed-to-higher into the close from current levels on more short-covering and bargain hunting.

Jobless Claims Healthy, Manufacturing Mixed, Foreign Security Purchases Fall, Capacity Utilization Declines, Prices Paid Falls

- Initial Jobless Claims for last week fell to 295K versus estimates of 320K and 303K the prior week.
- Continuing Claims rose to 2425K versus estimates of 2425K and 2410K prior.
- Empire Manufacturing for June rose to 29.0 versus estimates of 11.0 and a reading of 12.9 in May.
- Net Foreign Security Purchases for April fell to $46.7B versus estimates of $60.0B and $70.4B in March.
- Industrial Production for May fell .1% versus estimates of a .2% rise and a .8% gain in April.
- Capacity Utilization for May fell too 81.7% versus estimates of 81.9% and 81.9% in April.
- The Philly Fed Index for June fell to 13.1 versus estimates of 11.0 and a reading of 14.4 in May.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week to a four-month low, evidence the labor market is holding up as the economy slows, Bloomberg said. The four-week moving average fell to 315,750 from 328,000 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, remained at 1.9%. This report adds to mounting evidence that the economy is not slowing too much. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Manufacturing growth in NY state unexpectedly accelerated this month, Bloomberg reported. The outlook component of the index increased to 33.7 versus 30.2 the prior month. The new orders component surged to 25.8 versus 16.2 in May. The prices paid component rose to 52.9 from 43.1 the prior month. The employment component declined to 5.1 from 9.7 in May. I continue to believe manufacturing is in the process of slowing to more average levels.

International investors slowed purchases of US securities in April, Bloomberg reported. Foreign purchases of US stocks slowed to $6.5 billion from $19 billion the prior month. I expect foreign demand for US assets to surge in May on a flight to quality, relative strength in US stocks and a rising dollar.

Industrial Production in the US unexpectedly fell last month for the first time since January as the economy began to slow, Bloomberg reported. Production of consumer durable goods, which include automobiles, furniture and electronics, fell .8% versus a .4% fall the prior month. Capacity Utilization is now slightly above the long-term average of 80.7%. I expect factory production and capacity utilization to continue to head lower, back to average levels, over the intermediate-term.

Manufacturers in the Philly area expanded at a slower pace in response to higher energy prices and cooling demand, Bloomberg said. The new orders component of the index rose to 17.7 this month from 2.7 the prior month. The prices paid component fell to 48.7 from 55.3 the prior month and 66.7 in October of 2005. The employment component of the index rose to 6.8 versus 1.1 in May. I continue to believe manufacturing is in the process of slowing to more average rates. Prices paid have most likely peaked for this cycle.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote