Existing Home Sales Slightly Exceed Estimates, Weekly Retail Sales Confirm Last Week's Improvement

- Existing Home Sales for March came in at 4.93M versus estimates of 4.92M and 5.03M in February.

BOTTOM LINE: Sales of previously owned homes in the US fell in March less than economists had anticipated, Bloomberg reported. The median sales price fell to $200,700 from $217,400 a year earlier. The number of homes for sale at the current pace rose to 9.9 months’ worth versus 9.6 months’ worth in February. Purchases rose 2.2% in the Northeast and the West. They fell 6.5% in the Midwest and 3.5% in the South. Sales of condos and co-ops rose 3.6%. Residential construction has subtracted from economic growth since the first three months of 2006. Home sales have stabilized over the last month around current levels, which is a large positive. According to BankRate.com, the average 30-year fixed rate mortgage is falling 7 basis points today to 5.83%, which is down from 6.38% in June of last year. Weekly retail sales rose 1.9% this week versus a 2.0% gain the prior week. This week’s gain confirms the improvement seen last week. After averaging .6% increases during the month of February, weekly retail sales have seen a meaningful improvement, averaging 1.95% the last two weeks. This is especially noteworthy considering how pessimistic the consumer supposedly is and the stimuli that is on the horizon. I still expect home sales to bounce higher over the coming months on lower mortgage rates, lower prices, pent-up demand and less economic angst.

Bull Radar

Style Outperformer:

Large-cap Value (-.42%)

Sector Outperformers:

Gaming (+2.73%), Telecom (+.50%) and Banks (+.24%)

Stocks Rising on Unusual Volume:

LVS, WYNN, ARB, CHK, FCX, GOOG, WTI, STO, HES, ZRAN, VLTR, CNC, SFG, FEED, MPEL, WGOV, TWIN, LOGI, DCOM, FTEK, ARTC, MICC, RMBS, GNTX, FSYS, ASTI, KELYA, GFIG, FITB and PNR

Stocks With Unusual Call Option Activity:

1) ICO 2) AMT 3) CBI 4) LXK 5) MCO

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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.