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Tuesday Watch

Late-Night Headlines
Bloomberg:
- Intrepid Potash Inc., the largest US producer of the potassium compound used in fertilizer, priced an IPO of 30 million shares at $32 apiece.
- Texas Instruments(TXN) forecast second-quarter profit that missed analysts’ estimates as demand for mobile-phone chips slows, sending the shares .60/share lower to $30 in after-hours trading.
- Google Inc. ranked as the world’s most powerful brand for the second straight year, as the company capitalized on its name to sell advertising globally, according to a study by a consulting firm.
- President Bush and the leaders of Canada and Mexico tried to make the case for further trade and immigration at a meeting today amid a political backlash in the US against both.
- China’s stocks dropped, driving the Shanghai Composite Index to 50% below its October record.

Wall Street Journal:
- India Prepares for Slowdown In Economic Growth.
- Believe it or not, some savvy Wall Street deal makers see the beleaguered US banking industry as a glass half-full. Cleveland-based National City’s(NCC) announcement Monday that it is getting $7 billion in capital to shore up its balance sheet is the latest sign that private-equity firms think there is big money to be made by investing in banks pummeled by bad loans and the economy.

MarketWatch.com:
- A production slowdown at the nation’s refineries, now operating at levels last seen in the aftermath of Hurricane Katrina in 2005, couldn’t come at a more troublesome time for consumers watching pump prices flirt with $4 a gallon. “If this operating level persists, the industry will likely see another round of intense legislative scrutiny,” said John Kilduff, an analyst at futures brokerage MF Global. US refineries operated at 81.4% of their operable capacity in the week ending April 11. Spring is typically when refiners idle parts of their plants to undertake maintenance. But they don’t always cut back so drastically.
- Home prices aren’t tanking everywhere. In some housing markets, homes aren’t only retaining value – they’re gaining.
- Wall of skepticism. Market-timers’ caution a bullish sign to contrarians.

NY Times:
- Western banks have stocked up on assets in fast-growing Asian economies, but the current credit crisis has some analysts suggesting they should now be selling them.
- Many of the wealthiest hedge funds managers are lining up behind the Obama campgain.

BusinessWeek.com:
- Strong Signals for American Tower(AMT). S&P believes the leading wireless tower company offers an attractive combination of earnings predictability and growth opportunities.

CNNMoney.com:
- 2008: Fortune 500 List: Wal-mart’s #1.

USA Today.com:
- General Motors(GM) says the eight-week strike at American Axle and Manufacturing Holdings has forced it to cut production at two more factories. The strike at American Axle has affected production at 30 GM factories in the USA, Canada and Mexico. Several GM plants in Ohio have been among those affected.
- Drivers cut back as gas prices hit all-time high. Gasoline sales have fallen 2% to 11% a month since December in a study by 13 owners of stations scattered across the USA that are not direct competitors. Average prices for full-size SUVs in March tumbled 15.4% from a year earlier at wholesale auctions where dealers buy and sell vehicles, and large pickups were down 12.6%, after adjustments for miles and other factors, according to Thomas Webb, chief economist for Manheim Consulting, a unit of the company that operates many big auctions.

Wired:
- Google-Backed Solar Startup Picks Up Steam, $130 Million. The money, from Google’s(GOOG) philanthropic arm, Google.org, and venture capital firms Idealab and Oak Investment Partners, will go towards the construction of eSolar’s first functioning solar power plant. “ESolar’s long term is to become a viable replacement for all fossil fuel,” said Robert Rogan, a Cal Tech Ph.d. and eSolar’s executive vp for corporate development.

Reuters:
- The board of Calpers, the biggest US pension fund, approved plans on Monday to put more emphasis on how diverse corporations’ boards are and what environmental risks companies pose when it assesses corporate management and governance. Additionally, the board of Calpers endorsed a bill before California lawmakers that would specifically create, for publicly held companies that do business with the state, a standard on disclosing information about climate change-related activities. Environmental policies the board approved would allow Calpers to influence how financial analyst, portfolio managers and companies evaluate climate risks and to encourage consistency in how companies disclose those risks.

Financial Times:
- Mattel(MAT), the biggest US toymaker, is hoping 11m online Barbie fans can help it offset a decline in the sales of real dolls. The group will be the first leading toy company to charge for access to a site that promotes its own toys, introducing subscription-based elements to its rapidly growing BarbieGirls.com “virtual world” website.
- Warburg Pincus, the US-based private equity group, will on Tuesday announce it has raised $15bn for its new global fun, shrugging off the credit squeeze that has made life harder for many of its buy-out rivals.
- Europe’s economy is resilient but not immune to global economic threats, the IMF warned on Monday as it defended its gloomy view on the continent’s outlook.

TimesOnline:
- Russia could soon follow the Middle Eastern sovereign wealth funds and invest billions of dollars in direct overseas investments if, as expected, its national welfare fund is given more freedom to invest.

China Securities Journal:
- China’s mutual funds lost $92.6 billion in the first quarter of this year, citing Beijing-based TX Investment Consulting.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (ALB), target $49.

Piper Jaffray:
- Rated (CRM) Buy, target $81.
- Rated (INFA) Buy, target $19.
- Rated (RHT) Buy, target $26.

Night Trading
Asian Indices are -1.50% to -.25% on average.
S&P 500 futures -.46%.
NASDAQ 100 futures -.55%.

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Earnings of Note
Company/EPS Estimate
- (PNR)/.48
- (EAT)/.32
- (LXK)/.89
- (UNH)/.80
- (BJS)/.55
- (JBLU)/-.07
- (CSL)/.55
- (OMC)/.62
- (KMB)/1.07
- (UAUA)/-3.41
- (JEC)/.78
- (CME)/4.81
- (STI)/1.03
- (BTU)/1.6
- (SII)/.87
- (CPO)/.71
- (WAT)/.64
- (MCD)/.70
- (SHW)/.60
- (BHI)/1.20
- (PH)/1.34
- (LMT)/1.63
- (COH)/.45
- (DD)/1.28
- (WYE)/.89
- (WU)/.28
- (T)/.74
- (AKS)/.83
- (AVY)/.81
- (RHI)/.46
- (IVGN)/1.13
- (YUM)/.40
- (CERN)/.44
- (XL)/2.24
- (NSC)/.77
- (CREE)/.14
- (YHOO)/.09
- (VMW)/.22
- (RJF)/.41
- (ILMN)/.24
- (CEC)/1.12
- (BRCM)/.28
- (VFC)/1.28
- (AAI)/-.31

Upcoming Splits
- (RBA) 3-for-1

Economic Releases
10:00 am EST
- Existing Home Sales for March are estimated to fall to 4.92M versus 5.03M in February.

Other Potential Market Movers
- The House Price Index, Richmond Fed Manufacturing Index, weekly retail sales reports, (URS) analyst day, JPMorgan China Conference, Dow Jones Newswires Wireless Innovations Conference and UBS Retail Softlines/Hardlines Conference could also impact trading today.

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

Stocks Finish Slightly Lower, Weighed Down by Financial, Airline and Gaming Shares

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In Play

Stocks Mostly Lower into Final Hour on Low Volume Consolidation of Recent Gains

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Computer longs, Biotech longs and Software longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is slightly bearish as the advance/decline line is lower, most sectors are declining and volume is below average. Investor anxiety is about average. Today’s overall market action is neutral. The VIX is rising 3.3% and remains above average at 20.8. The ISE Sentiment Index is about average at 152.0 and the total put/call is above average at 1.01. Finally, the NYSE Arms has been running slightly above average most of the day and is currently 1.04. Considering recent gains, financial sector news/weakness and another rise in energy prices, today’s broad market performance is even more impressive. True growth stocks are especially strong with many leaders posting substantial gains. (ISRG), one of my long-held long positions, is trading at session highs, rising .5%, after another sharp decline this morning. I suspect the lows are in for the stock, however I still plan to add to the position on any further unexpected meaningful weakness going forward. I still believe (ISRG) has much more upside from current levels over the long-term. Apple Inc.(AAPL), another one of my long-held longs, is surging 3.5% ahead of earnings later this week. While the stock is getting extended short-term, I still expect it to finish substantially above current levels by year-end. The 10-year swap spread is falling another 2.25 basis points today to 64.75 basis points over Treasuries. This is down from a high of 92.75 in early March and down 11.45 basis points in three days. There has been much made over the recent rise in the US-dollar based LIBOR rate to 2.92%. However, this rate is still down 281 basis points from a high of 5.73% in September of last year. According to Intrade.com, the odds traders place on the US economy falling into recession this year have dropped to 59.5% from 79.0% a few weeks ago. Nikkei futures indicate a -36 open in Japan and DAX futures indicate an +61 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering and less economic pessimism.

Today's Headlines

Bloomberg:
- Lehman Brothers(LEH) recommends investors sell the pound against the US dollar as the worst UK housing slump in 30 years will force the Bank of England to cut interest rates.
- Dennis Gartman, editor of the daily Gartman Letter, is “abandoning ship” on his positive gold outlook after three years, on expectations that efforts to contain food prices will curb demand for the metal as a hedge against inflation.
- Corn fell the most in six months and soybeans dropped on expectations that warmer, drier weather will firm soggy fields in the US Midwest, helping farmers accelerate planting of the nation’s two biggest crops.
- Carlyle Group, the world’s second largest private-equity firm, is raising a $500 million collateralized loan obligation to buy high-risk, high-yield debt being sold by banks at discounted prices.
- Google Inc.(GOOG) trailing Baidu.com(BIDU) in China’s online search market, expects to process more local Web queries through mobile phones than computers by 2011, aided by an alliance with the nation’s largest wireless carrier.
- Hedge funds attracted $16.5 billion of new cash in the first quarter, the smallest inflows since the end of 2005.
- Democratic presidential candidate Hillary Clinton leads rival Barack Obama 7 percentage points among likely voters in tomorrow’s Pennsylvania primary, a new Quinnipiac Univ. poll found.

Wall Street Journal:
- ECB-Political Split Could Damp the Euro. The euro could slip from its record highs against the dollar amid a schism between the European Central Bank and the Continent’s political leaders. As central bankers appear inclined to stand firm on rates, many politicians are looking for looser monetary policy and a weaker euro. “I still think that we are in pretty much the final stages of the dollar selloff,” said Adam Cole, global head of foreign-exchange strategy at RBC Capital Markets in London.
- Macy’s(M) Aims to Tailor US Stores to Local Tastes.

NY Times:
- Marketers Try to Spread Ads Across Several Web Sites.

Washington Times:
- The Islamic Society of North America, a coalition of Muslim groups, is asking John McCain to stop using the term “Islamic” when identifying terrorists and extremists. “The hateful ideology which underpins bin Ladenism is properly described as radical Islamic extremism,” said Steve Schmidt, a McCain spokesman.

LA Times:
- Sony Corp.(SNE) is preparing to launch an online video service through its game console PlayStation 3 as early as this summer.

NY Post:
- Scores of hedge funds, already suffering through one of the poorest performance stretches in recent memory, got blasted last Thursday after one giant fund sold investments on the belief that the Fed was done cutting rates.

National Geographic:
- US Leads World in Wind-Power Growth.

AppleInsider:
- Apple(AAPL) said to have signed landmark 3G iPhone deal for Italy. Apple Inc.’s next generation iPhone will arrive in Italy in a matter of weeks under a landmark deal that will see handset sold through Telecom Italia Mobile without a contract and carrier lock.

Gallop.org:
- Americans Aren’t More Worried About Global Warming.

AP:
- Hybrid vehicle registrations in the US increased 38% last year after gas prices rose and showrooms offered more options, citing marketing-research provider RL Polk & Co. Overall, hybrid sales jumped even as total vehicle sales fell 3%. Toyota’s Prius remained the top-seller, capturing 51% of the market last year compared with 43% in 2006. Other hybrid models included Nissan Motor’s Altima, GM’s Saturn Aura and Toyota’s Lexus LS600h sedans and some sport utility vehicles. California had the most hybrid sales, followed by Florida, NY, Texas and Washington.

CBCnews:
- The backlash over billionaire hedge fund managers. Consider the way this money was made. Paulson and the rest of the hedge funds that made huge scores did so at the expense of homeowners and lenders, in what’s turning out to be a US housing crisis. Banks are in trouble, there are waves of layoffs playing out, and you’ve got a select few fund mangers out strutting their stuff. The politicians and tax collectors are reading about these billionaire money managers. Bragging about making a bundle, when so many in finance are struggling, that’s not so bright.

Frankfurter Allgemeine Zeitung:
- Bundesbank Vice President Franz-Christoph Zeitler expects the German economy to slow this year as the global credit squeeze cools demand. The German economy will grow about 1.5% this year, down from 2.5% last year, he said.

Handelsblatt:
- 40% of top German managers now see negative effects on their own businesses form the strength of the euro against the dollar, as well as the financial and real estate crisis in the US.

Indian Express:
- India should extend a ban on futures trading in wheat, rice and lentils to prevent local prices from climbing, citing a recommendation from a government panel.

China Securities Journal:
- China may impose a new resource tax this year pegged to commodities prices, citing Shi Yaobin, the tax policy head at the finance ministry. The new plan, which will consider both volume and prices, “is mature,” the report said.

Bear Radar

Style Underperformer:

Mid-cap Value -.97%

Sector Underperformers:

Airlines (-3.13%), Banks (-2.44%) and Gold (-2.02%)

Stocks Falling on Unusual Volume:

WCBO, BPOP, UFCS, ALDN, MDTH, GFIG, AMLN, TTO and NTL

Stocks With Unusual Put Option Activity:

1) LLY 2) AMLN 3) PEP 4) NCC 5) PGNX