DJIA Hits Another Record High After Fed Comments

Indices
S&P 500 1,512.58 +.32%
DJIA 13,362.87 +.40%
NASDAQ 2,576.34 +.18%
Russell 2000 834.77 +.47%
Wilshire 5000 15,230.32 +.38%
Russell 1000 Growth 596.84 +.35%
Russell 1000 Value 870.40 +.37%
Morgan Stanley Consumer 743.58 +.28%
Morgan Stanley Cyclical 1,055.12 +.56%
Morgan Stanley Technology 610.69 +.37%
Transports 5,215.49 -.05%
Utilities 529.52 +.26%
MSCI Emerging Markets 125.76 +1.08%

Sentiment/Internals
Total Put/Call .73 -26.26%
NYSE Arms .83 -20.06%
Volatility(VIX) 12.88 -2.50%
ISE Sentiment 164.0 +32.26%

Futures Spot Prices
Crude Oil 61.57 -1.11%
Reformulated Gasoline 224.52 +1.85%
Natural Gas 7.73 +1.26%
Heating Oil 182.07 -.50%
Gold 682.80 -.67%
Base Metals 283.77 +.52%
Copper 366.25 -1.61%

Economy
10-year US Treasury Yield 4.66% +3 basis points
US Dollar 82.0 +.08%
CRB Index 308.68 -.07%

Leading Sectors
Steel +1.87%
Semis +1.8%
Retail +1.34%

Lagging Sectors
Oil Tankers -.16%
Drugs -.18%
Internet -1.34%

Evening Review
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Afternoon Recommendations
Deutsche Bank:
- Rated (SLAB), (XLNX), (MRVL), (TSRA) and (NETL) Buy.

Afternoon/Evening Headlines
Bloomberg:
- Edison Intl.(EIX) said it plans to more than triple its wind-power production capacity within two years, an investment that may to $2 billion.
- Crude oil in NY fell to the lowest in seven weeks in NY after an EIA report showed inventories surged near eight-year highs and gasoline supplies rose more than expected even as refinery utilization rose less than expected.
- Sugarcane production in Brazil, the world’s largest grower, will soar 54% in the next five years as global demand increases for crop-based fuels, said the head of Brazil’s largest sugar and ethanol group.
- Alltel Corp.(AT) is in talks with three competing buyout groups including one that pairs the Carlyle Group with Kohlberg Kravis Roberts.
- Whole Foods Market(WFMI) reported second-quarter profit that fell more than expected on costs to open new stores and competition from traditional grocers. The shares fell 9% in after-hours trading.
- Vice-President Dick Cheney said he was “impressed” by the commitment of Iraqi leaders to move forward on measures to speed political reconciliation in their nation after conferring with them in Baghdad today.
- WebSideStory(WSSI), a provider of Web site analytics, increased its full-year forecast. The stock soared 21% in after-hours trading.

Dow Jones:
- Atticus Capital LLC, one the largest shareholders of Deutsche Boerse AG, said the German exchange’s plan to purchase International Securities Exchange(ISE) will hurt investors.

CNBC:
- Bill Gross, manager of the world’s biggest fixed-income fund, told CNBC that he prefers short-maturity notes because the Fed will lower interest rates to support economic growth.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Networking longs, Semi longs, Retail longs and I-Banking longs. I didn’t trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished modestly higher, most sectors rose and volume was above-average. Measures of investor anxiety were slightly below-average into the close. Today's overall market action was bullish as the major averages and breadth finished near session highs. The broad market outperformed the S&P 500. Retail, REITs, Engineering/Construction, Semis, Homebuilders, Wireless, Steel and Coal all saw very good gains today. The U.S. Dollar Index finished at session highs and the 10-year yield rose 3 basis points as the FOMC statement implied faster U.S. economic growth going forward. I suspect many anticipated a Fed news sell-off before the upcoming retail sales data, which likely left more traders leaning the wrong way. Back in February, I pointed out that heavily shorted Mohawk Industries (MHK) was exploding higher despite lowering forward guidance meaningfully. This should have been a huge red flag to the shorts, yet short interest has only grown since then, from around 10% of the float to 13%. The stock surged 3.5% today on heavy volume to an all-time high on private equity chatter. I want to reiterate how amazing this is considering what has transpired in housing and how disturbing it should be to the many "U.S. housing collapse will lead to a market collapse" bears. This is just more evidence of the severe complacency in the bear camp, in my opinion.

Stocks Surging into Final Hour Again After Constructive Fed Comments

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Retail longs, I-Banking longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is mildly higher, most sectors are rising and volume is heavy. Weekly mortgage applications rose 3.6%, the third consecutive weekly gain. As well, purchase applications rose again; they were up 2.6%, and up 17% from October lows. The upcoming April retail same-store-sales and advance retail sales data will likely come in below even lowered estimates. The coldest April in a decade and the Easter calendar shift played a huge part in the likely weak data. However, I wonder if this is already priced into stocks given how much short interest has risen in the retail sector and how many analysts have made cautious comments of late regarding the prospects for April sales. Yesterday, Morgan Stanley described a "perfect storm" for softline retail during April. However, their note also said their proprietary retail sales leading indicator is predicting an acceleration to 6%, excluding autos and gas, in July from 4.2% in February. I agree with these expectations. So far this year, despite numerous perceived headwinds, the Morgan Stanley Retail Index (MVRX) is 8.1% higher vs. a 7.3% gain for the S&P 500. I expect US stocks to trade mixed-to-higher into the close from current levels on buyout speculation, short-covering, lower oil prices and investment manager performance anxiety after another failed sell-off attempt.

Today's Headlines

Today’s Headlines
Bloomberg:
- Oil is falling -$.71/bbl. after inventories surged to the highest since June of last year and approached 8-year highs. Moreover, gasoline supplies rose more than estimate despite lower-than-expected refinery utilization.
- The Fed kept the benchmark US interest rate at 5.25% and said inflation remains the “predominant” risk for the economy. The FOMC also said it expects economic growth to rise at a moderate rate and inflation to decelerate.
- News Corp.’s $5 billion bid for Dow Jones(DJ) has a 40% chance of success and its failure would send the shares plunging to below their pre-offer price, according to UBS.
- IBM(IBM) shares climbed to the highest level in five years after Goldman, Sachs(GS) suggested buying the stock because of rising earnings at the world’s largest computer-services provider.
- Amaranth Advisors LLC, the hedge fund that collapsed in September under $6.6 billion of energy-trading losses, will pay $717,000 to settle an unrelated case by the SEC. The firm improperly used shares acquired during public offerings in 2004 and 2005 to cover short positions, or bets that the shares would drop, the SEC said today.
- Eric Rosenfeld, co-founder of Long-term Capital Management, and two of his former colleagues are starting a hedge fund that uses computers to pick investments.

Wall Street Journal:
- Alltel Corp.(AT), a wireless telephone company, is holding talks with three groups of leveraged-buyout firms who are considering a possible acquisition.
- Chinese investors may soon start investing in real estate abroad, if restrictions on private investment in overseas real estate are lifted later this year.
- EBay Inc.(EBAY) is in talks to acquire StumbleUpon, an Internet company that helps people find Web sites that interest them.
- Delta Air(DAL) plans to overhaul and develop its facilities in NY and LA.
- United Steelworkers, the union representing workers in the US steel industry, is blocking takeovers, demanding board seats, and taking sides in bidding wars to enhance its negotiating power.
- Plans by Citigroup Inc.(C), to spend $50 billion in alternative energy sources are getting a lukewarm response from environmentalist advocates that say the company could also do other things.
- Hewlett-Packard(HPQ) and Eastman Kokak(EK) are among the printer-makers that recently introduced lower-priced ink cartridges to compete with the rapid market expansion of cartridge-refilling firms.
- Tetra Technologies(TTI) and other companies are working around the clock to bolster oil gas rigs in the Gulf of Mexico against the next storm.
- A US official accused Venezuela of allowing its airports and ports to be used by drug traffickers shipping cocaine to Europe.

NY Times:
- Mowaffak al-Rubaie, the national security adviser to Iraq’s prime minister Nuri Kamil al-Maliki, made his case to American legislators that pulling out troops from his country would be a disaster. He met several Democrats on Tuesday who have been calling for imminent US military withdrawals from Iraq, including Representative John P. Murtha and Senator Carl Levin. The meetings didn’t seem to shift the lawmakers’ positions.

Financial Times:
- Marathon Oil(MRO), the fourth largest US oil and gas company, has been warned by federal regulators that its refining unit could face legal action alleging manipulation of futures trading contracts. The action claims that a unit of the Houston-based Marathon tried to manipulate the price of West Texas Intermediate crude oil.
- Thomson Corp.’s offer to buy Reuters Group Plc for $17.5 billion may not be concluded quickly and the Canadian company’s share price may suffer during the process.

Haaretz:
- Israel has a good chance of being accepted into the OECD next week.

Handelsblatt:
- The German government plans to force hedge funds to disclose more information.

Economic Releases

- None of note

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- McDonald’s Corp.(MCD), which sold its first hamburger 52 years ago, says it now sells more chicken than Kentucky Fried Chicken.
- The queue of ships waiting to load coal at Newcastle, Australia, the world’s largest coal-export harbor, may fall 50% by June, according to the Hunter Valley Coal Chain Logistics Team.

Reuters:
- International Business Machines(IBM) agreed to sell and support Red Hat’s(RHAT) Linux software on large corporate computers.

Economic Times:
- ONGC Videsh Ltd. and a group of other Indian state-run companies have discovered oil and gas in Iran. The Farsi field may have as much as 10 trillion cubic feet of natural gas and 1 billion barrels of oil.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (URBN), target $30.
- Reiterated Buy on (CVS), target $43.
- Reiterated Buy on (HPQ), target $55.

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.14%.

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Earnings of Note
Company/EPS Estimate
- (AZPN)/.15
- (B)/.40
- (BRL)/.61
- (CGX)/1.03
- (CXR)/.13
- (DTV)/.30
- (EIX)/.65
- (FLS)/.56
- (FWLT)/.73
- (FTO)/.77
- (GMKT)/.12
- (HGSI)/-.42
- (IO)/.03
- (LM)/1.17
- (MGAM)/-.05
- (NWS/A)/.28
- (ONXX)/-.44
- (PEIX)/.02
- (PCP)/1.27
- (SINA)/.18
- (STN)/.59
- (TK)/1.07
- (TXU)/1.13

Upcoming Splits
- (ATR) 2-for-1
- (VOLV) 5-for-1
- (TCK) 2-for-1

Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 875,000 barrels versus a 1,169,000 barrel increase the prior week. Gasoline supplies are estimated to rise by 150,000 barrels versus a -1,115,000 barrel drawdown the prior week. Distillate inventories are expected to rise by 450,000 barrels versus a -198,000 barrel decline the prior week. Finally, refinery utilization is expected to rise by 1.0% versus a .46% increase the prior week.

2:15 pm EST
- The FOMC is expected to keep the benchmark fed funds rate at 5.25%.

Other Potential Market Movers
- The weekly MBA Mortgage Applications report, (TXN) financial analyst meeting, (NT) investor technology day, Robert Baird Growth Stock Conference, Bear Stearns Global Transportation Conference, UBS Global Generic/Specialty Pharma Conference, Goldman Consumer Products Symposium, BIO Intl. Convention, Piper Jaffray Semi/Communications Conference, AG Edwards Lodging/Leisure Symposium and Bank of America Basic/Industrials Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.