Weekly Scoreboard*

Indices
S&P 500 1,536.34 +1.91%
DJIA 13,668.11 +1.69%
NASDAQ 2,613.92 +3.0%
Russell 2000 853.41 +3.59%
Wilshire 5000 15,494.60 +2.23%
Russell 1000 Growth 606.97 +2.43%
Russell 1000 Value 884.12 +1.76%
Morgan Stanley Consumer 752.82 +1.70%
Morgan Stanley Cyclical 1,090.77 +3.67%
Morgan Stanley Technology 617.20 +2.32%
Transports 5,326.01 +3.70%
Utilities 519.29 +1.13%
MSCI Emerging Markets 128.75 +2.93%

Sentiment/Internals
NYSE Cumulative A/D Line 80,400 +7.53%
Bloomberg New Highs-Lows Index +869 +675.9%
Bloomberg Crude Oil % Bulls 30.0 -40.0%
CFTC Oil Large Speculative Longs 180,467 +2.60%
Total Put/Call .89 -20.54%
NYSE Arms .79 -23.30%
Volatility(VIX) 12.78 -9.23%
ISE Sentiment 119.0 -17.4%
AAII % Bulls 33.33 -10.8%
AAII % Bears 44.79 +16.19%

Futures Spot Prices
Crude Oil 65.08 +1.24%
Reformulated Gasoline 224.46 -1.01%
Natural Gas 7.87 +.04%
Heating Oil 192.28 -.32%
Gold 676.90 +2.56%
Base Metals 268.02 +2.60%
Copper 340.50 +6.91%

Economy
10-year US Treasury Yield 4.95% +9 basis points
4-Wk MA of Jobless Claims 304,500 +.3%
Average 30-year Mortgage Rate 6.42% +5 basis points
Weekly Mortgage Applications 636.40 -7.26%
Weekly Retail Sales +2.30%
Nationwide Gas $3.18/gallon -.04/gallon
US Cooling Demand Next 7 Days 6.0% above normal
ECRI Weekly Leading Economic Index 142.40 unch.
US Dollar Index 82.32 -.10%
CRB Index 314.12 +1.51%

Leading Sectors
REITs +6.85%
Networking +6.22%
I-Banks +5.27%
Internet +4.97%
Alternative Energy +4.05%

Lagging Sectors
HMOs +1.17%
Utilities +1.13%
Banks +.71%
Drugs -.13%
Homebuilders -.17%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

DJIA Hitting Another Record on More Economic Optimism, Short-Covering

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are gaining and volume is above average. Shanghai fell another 2.7% last night, but other emerging markets were mostly higher. Small caps are outperforming again today, and the Russell 2000 is now 9% higher year-to-date vs. a 9.1% gain for the S&P 500. The underlying tone of the market remains very healthy. The NYSE cumulative advance/decline line is making another new high today. My intraday gauge of investor angst is only around average levels, notwithstanding today’s advance. Google (GOOG) just announced that it has purchased Feedburner. This will allow Google to embed its ads in RSS feeds, which is a big positive. This acquisition has been speculated about for some time. This blog does a good job of summarizing its importance. This is a big deal, in my opinion, and another big win for Google. I expect US stocks to trade mixed-to-higher into the close from current levels on buyout speculation, more economic optimism, short-covering and investment manager performance anxiety.

Today's Headlines

Bloomberg:
- Coca-Cola(KO) is turning its attention back to the company’s bottlers around the world to boost sluggish sales.
- A buyout group including Blackstone Group LP and Kohlberg Kravis Roberts is seeking $4.35 billion of loans to fund their purchase of Biomet Inc.(BMET), a maker of artificial hips.
- Federal Reserve Governor Randall Kroszner said the US economy’s slowdown last quarter will “prove transitory” as growth picks up over the rest of the year.
- Cattle futures in Chicago fell to a four-month low as beef demand slowed after the US Memorial Day holiday.
- Crude oil is rising more than $1/bbl. on concern that US refiners aren’t increasing motor-fuel production fast enough after an unusual rash of nationwide refinery “outages.”
- Billionaire investor Warren Buffett will host a fundraiser for Democratic presidential candidate Hillary Clinton in NY this month, helping her attract donors who can write four-figure checks.
- About 98,000 candidates in 89 countries will take the CFA exam this weekend, capping an exam year that drew a record number of candidates amid rising stock prices.
- Wal-Mart Stores(WMT) will buy back as much as $15 billion in stock, sending the shares to their biggest gain in four years.
- Treasuries declined after reports showed the US created more jobs in May than economists forecast and manufacturing unexpectedly accelerated.
- General Motors(GM) posted a 9.6% increase in sales in May, while Japan’s Toyota Motor gained 14% to outsell No. 2 US automaker Ford Motor(F).
- Venezuelan President Chavez’s shutdown of the country’s most-watched television network has set off growing condemnation in Latin America and may derail his drive to become the region’s leader.

Wall Street Journal:
- ETFs are starting to suffer a financing drought as electronic trading spreads and the number of trading floor “specialists” dwindles.
- Boeing(BA) and Airbus SAS are working to increase the percentage of scrapped aircraft that can be reused.

NY Times:
- US private equity firms, hedge funds and investment banks are taking advantage of subprime mortgage industry woes to buy firms on the cheap. Cerberus Capital Management owns or plans to acquire Residential Capital, Option One and Aegis Mortgage. Together, the companies would make Cerberus the largest subprime lender in the US.
- A high-ranking US State Dept. official used a White House-approved speech to criticize Russia for its actions towards neighboring countries and suppressing individual rights and political opposition.

Washington Post:
- The Senate Select Committee on Intelligence demanded a legal review of the CIA’s detention and interrogation techniques as part of its 2008 authorization bill.

Chronicle of Higher Education:
- 50% of Americans say they believe post-secondary education is essential to a successful career, up from 31% who said so in a 2000 survey.

NY Post:
- Major League Baseball complained that Sling Media’s Slingbox television-watching device violates baseball’s contracts with networks, potentially costing the sport revenue.

Financial Times:
- Hedge funds have asked the International Swaps and Derivatives Assoc. to look into whether banks are manipulating markets by reworking US homeowners’ subprime mortgages, citing a copy of a letter the newspaper reviewed. A group of more than 25 hedge funds, led by Paulson & Co., sent the letter. They’ve bet against securities backed by home loans to borrowers with poor credit or high debt by using credit-default swaps. A fund run by NY-based Paulson betting against subprime bonds is up 90% this year.

La Repubblica:
- Luxottica Group SpA, the world’s biggest maker of eyeglasses, may buy US eyewear maker Oakley Inc.(OO).

Arab Oil & Gas:
- Arab states and Iran plan to increase their refining capacity 72% in the next eight years, by starting up new refineries and expanding existing plants at a cost of $173.4 billion.

Spending Rises More Than Estimates, Inflation Decelerates Further, Unemployment Still Low, Earnings Outpacing Inflation, Manufacturing Surging

- Personal Income for April fell .1% versus estimates of a .3% gain and an upwardly revised .8% increase in March.

- Personal Spending for April rose .5% versus estimates of a .4% gain and an upwardly revised .4% increase in March.

- The PCE Core for April rose .1% versus estimates of a .2% increase and unch. in March.

- The Change in Non-farm Payrolls for May was 157K versus estimates of 132K and 80K in April.

- The Unemployment Rate for May was 4.5% versus estimates of 4.5% and 4.5% in April.

- Average Hourly Earnings for May rose .3% versus estimates of a .3% gain and a .2% increase in April.

- Pending Home Sales for April fell -3.2% versus estimates of a .3% gain and a -4.5% decline in March.

- ISM Manufacturing for May rose to 55.0 versus estimates of 54.0 and a reading of 54.7 in April.

- ISM Prices Paid for May fell to 71.0 versus estimates of 73.0 and a reading of 73.0 in April.

- The Final Univ. of Mich. Consumer Confidence reading for May rose to 88.3 versus estimates of 88.0 and a prior estimate of 88.7.

BOTTOM LINE: Personal spending in the US rose in April and a measure of prices increased less than forecast, a sign American consumers will keep the economy growing this quarter without accelerating inflation, Bloomberg said. The Core PCE, the Fed’s favorite inflation gauge, rose 2.0% year-over-year versus the 20-year average of 2.5%. This was the smallest gain since February 2006. Adjusted for inflation, disposable incomes have risen 5.6% over the last year. Personal spending was revised up to an annual rate of 4.4%, the highest in a year. I continue to believe consumer spending will remain healthy over the intermediate-term as inflation slows more, gas prices fall, the job market remains healthy, stocks rise further, home sales stabilize at relatively high levels and interest rates remain historically low.

Employers in the US hired more workers than forecast last month, signaling the economy is rebounding, Bloomberg reported. The economy has created about 2 million jobs in the last year. As well, the Monster Employment Index hit another record high in May. The 50-week moving average of initial jobless claims has been lower during only two other periods since the 70s. The unemployment rate is a historically low 4.5%, down from 5.1% in September of 2005, notwithstanding fewer real estate-related jobs and significant auto production cutbacks, which are now subsiding. The unemployment rate's current 12-month average is 4.6%. It has been lower during only two other periods since the 50s. Most measures of Americans' income growth are still almost twice the rate of inflation. Average Hourly Earnings rose 3.8% year over year, substantially above the 3.2% 20-year average. The 10-month moving average of Americans' Average Hourly Earnings is currently 4.03%, and 1998 was the only year during the 1990s expansion that it exceeded current levels. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

An index of pending sales of existing homes in the US unexpectedly fell, Bloomberg reported. Pending home re-sales fell 10.4% in the Northeast and 10.2% in the West. They rose 2.3% in the Mid-west and .7% in the South. The recent rise in mortgage rates will likely slow the housing recovery, which should prevent the 10-year yield from rising meaningfully above 5%. However, I still believe housing sales are stabilizing at relatively high levels by historic standards.

Manufacturing growth in the US unexpectedly accelerated last month as orders picked up, Bloomberg reported. The Prices Paid component fell to 71 versus a reading of 73 the prior month. The New Orders component rose to 59.6 from 58.5 in April. I continue to believe the manufacturing sector will add to overall economic growth this quarter, after subtracting meaningfully from growth during 1Q on substantial inventory de-stocking.

Confidence among US consumers rose in May, helped by an improving job market and rising stock values, Bloomberg said. The Current Conditions component, a gauge of whether it’s a good time to buy big-ticket items like cars, rose to 105.1 from 104.6. I continue to believe both measures of consumer confidence will make new cycle highs over the intermediate-term.

Links of Interest

Market Snapshot
Detailed Market Summary
Quick Summary
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
Intraday Chart/Quote

Friday Watch

Late-Night Headlines
Bloomberg:
- Nelson Peltz, the billionaire investor known for pressing companies to take steps to increase their stock prices, is raising $2 billion for his hedge-fund group Trian Fund Management LP.
- CBS’s nightly newscast drew its smallest audience in 20 years last week, extending the drop in viewership for anchor Katie Couric that began almost from her first days on the job.
- James Chanos, president of Kynikos Assoc., is bearish on Moody’s Corp.(MCO), the bond rating company whose biggest shareholder is Warren Buffett. Kynikos sold Moody’s stock short, Chanos said.
- Dow Jones’(DJ) controlling Bancroft family, reversing decades of resistance to a sale of the company, said it will consider offers and plans to meet with Rupert Murdoch’s News Corp.(NWS/A) on his $5 billion bid.
- JPMorgan Chase(JPM) expects credit conditions to worsen and possibly make it cheaper to buy rivals.
- Shares of ethanol producers fell today, following separate analyst reports from Banc of America and UBS AG that said increased ethanol supplies will hurt prices and profits.
- Manufacturing activity in China expanded at a slower pace in May, according to a survey of purchasing managers released today. A plan for state companies to pay dividends may help to cool investment that threatens to leave the country with idle factories if the economy slows. Manufacturing overcapacity may lead to deflation and turn China’s investment growth into a “curse,” the Asian Development Bank said in March. State companies controlled by the central government will pay dividends under a trial program to start this year, the government said May 30. That will leave less money for investment.
- Trading in options to buy Staples(SPLS) surged to six times their daily average amid speculation the company might benefit from a takeover of rival OfficeMax(OMX).
- Chinese investors opened more than 420,000 new brokerage accounts on May 30, well above the daily average for the year, even as the government tripled the tax on securities transactions.
- The US dollar traded near the highest in more than three months against the yen before a US government report that will probably show jobs growth accelerated in May.
- Peter Kreisky, president of Kreisky Media Consultancy, expects the Bancrofts to sell Dow Jones(DJ) to News Corp.(NWS/A).

Wall Street Journal:
- CKX Inc.(CKXE), the operator of Elvis Presley’s Graceland estate, is near a deal to be taken private by Robert F.X. Sillerman.

China Daily:
- More than 70% of Chinese who studied overseas in the past two decades remained abroad, hindering the nation’s scientific progress, citing China’s social science academy.

Xinhua News Agency:
- China’s financial institutions have used up 6% of the $14.9 billion quota for overseas investment they’ve been granted so far.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CHS), target $32.

Piper Jaffray:
- Rated (CELL) Outperform.

Business Week:
- Earnings growth could push railroad stocks up an additional 35% through 2009, citing Morgan Stanley analyst William Greene.
- ConocoPhillips(COP) has become the third-largest US oil company as a result of investments such as a 20% stake it acquired in Russia’s Lukoil for $7.5 billion in 2005. Bernard Picchi of Wall Street Access said ConocoPhillips shares could reach $85 a year from now.
- Sepracor Inc.(SEPR) will be more profitable than analysts’ consensus, citing Robert Hazlett of BMO Capital Markets Corp.

Night Trading
Asian Indices are +.50% to +1.25% on average.
S&P 500 indicated +.16%.
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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Business & Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- None of note

Upcoming Splits
- (ANSS) 2-for-1
- (CI) 3-for-1
- (TSBK) 2-for-1

Economic Releases
8:30 am EST
- Personal Income for April is estimated to rise .3% versus a .7% gain in March.
- Personal Spending for April is estimated to rise .4% versus a .3% gain in March.
- The PCE Core for April is estimated to rise .2% versus unch. in March.
- The Change in Non-farm Payrolls for May is estimated at 132K versus 88K in April.
- The Unemployment Rate for May is estimated at 4.5% versus 4.5% in April.
- Average Hourly Earnings for May are estimated to rise .3% versus a .2% gain in April.

10:00 am EST
- Pending Home Sales for April are estimated to rise .3% versus a -4.9% decline in March.
- ISM Manufacturing for May is estimated to fall to 54.0 versus a reading of 54.7 in April.
- ISM Prices Paid for May is estimated at 73.0 versus a reading of 73.0 in April.
- The Final Univ. of Mich. Consumer Confidence reading for May is estimated at 88.0 versus 88.7 in April.

Afternoon
- Total Vehicle Sales for May are estimated to fall to 16.3M versus 16.4M in April.

Other Potential Market Movers
- The Fed’s Kroszner speaking, (WMT) Analyst Day, (WY) Analyst Meeting, (AIG) Financial Services Presentation, ASCO Annual Meeting, Bank of American Healthcare Conference, Sanford Bernstein Strategic Decisions Conference, Cowen Tech Conference and Lehman Wireless/Wireline Conference could also impact trading today.

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