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Thursday Watch

Late-Night Headlines
Bloomberg:
- SAP AG said first-quarter profit rose 11% as the company gained market share and increased sales in the US and Asia.

AP:
- Two investigators working on the UN/Iraq oil-for-food scandal quit in protest, saying they felt the conclusions played down criticisms of Secretary General Kofi Annan.

Financial Times:
- Liberty Media International may use $6 billion of its cash and liquid assets for investments in cable-television businesses in Japan and Europe.

Electronic Times:
- MasterCard International will team up with South Korean mobile phone operator SK Telecom to offer payment services via mobile phones.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on UTX, MSFT, EBAY, MDT, COF, YUM, TMK, AWA, ALL, FORM, CVD, ACN, DOX, EBAY and CAL.
- Reiterated Underperform on BE, AZR and TER.

Night Trading
Asian Indices are -.1.0% to +.25% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.25%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Asian Indices
European Indices
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In Play
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Daily Stock Events
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Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
ADP/.57
ATI/.46
AT/.82
ABC/.79
AMGN/.67
T/.59
BAX/.34
BEBE/.18
BLS/.38
BRCM/.22
CZR/.22
CMI/1.57
DAL/4.76
GOOG/.92
GDT/.62
HCA/.88
IR/1.18
IGT/.31
KRB/.46
MCD/.43
MRK/.59
NUE/2.05
ODP/.41
SNDK/.32
SGP/.01
SIRI/-.14
UPS/.73
VLO/1.97
WY/1.14
WHR/1.11
XLNX/.20
YELL/.91

Splits
None of note

Economic Releases
8:30 EST
- Initial Jobless Claims for last week are estimated to remain at 330K.
- Continuing Claims are estimated to fall to 2655K versus 2664K prior.

10:00 EST
- Leading Indicators for March are estimated to fall .3% versus a .1% increase in February.

12:00 EST
- Philadelphia Fed. for April is estimated to fall to 10.7 versus a reading of 11.4 in March.

BOTTOM LINE: Asian indices are mostly lower on concerns over hawkish comments by the US Fed. I expect US equities to open modestly lower on a continuation of today's sell-off and worries over slowing growth. The Portfolio is 25% net long heading into tomorrow.

Wednesday Close

Indices
S&P 500 1,137.50 -1.33%
DJIA 10,012.36 -1.14%
NASDAQ 1,913.76 -.96%
Russell 2000 584.96 -1.68%
DJ Wilshire 5000 11,215.84 -1.34%
S&P Barra Growth 549.78 -1.27%
S&P Barra Value 583.47 -1.38%
Morgan Stanley Consumer 568.13 -1.38%
Morgan Stanley Cyclical 695.92 -1.35%
Morgan Stanley Technology 429.14 -.79%
Transports 3,395.26 -1.55%
Utilities 360.36 -.92%
Put/Call .81 -14.74%
NYSE Arms 1.88 +70.84%
Volatility(VIX) 16.92 +13.10%
ISE Sentiment 134.00 -14.10%
US Dollar 83.47 -.35%
CRB 306.99 +.97%

Futures Spot Prices
Crude Oil 53.50 -.98%
Unleaded Gasoline 156.85 -.81%
Natural Gas 6.98 -1.09%
Heating Oil 149.80 -.71%
Gold 436.30 -.09%
Base Metals 128.48 +1.73%
Copper 150.50 -.30%
10-year US Treasury Yield 4.18% -.61%

Leading Sectors
Internet +.34%
Networking +.08%
Wireless -.36%

Lagging Sectors
Homebuilders -2.43%
I-Banks -2.74%
Gaming -2.80%

Evening Review
Detailed Market Summary
Daily ETF Performance
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Market Wrap CNBC Video(bottom right)
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on GD, MO, MERQ and DOX.

Piper Jaffray:
- Rated GOOG Outperform, target $250.

Afternoon/Evening Headlines
Bloomberg:
- President Bush urged Congress to send him comprehensive energy legislation by early August to help counter rising oil and gas prices, which he said are becoming a “tax on jobs.”
- Hertz may be sold by parent Ford Motor to raise money as the automaker tries to halt a decline in US automotive market share.
- The NYSE agreed to merge with Archipelago Holdings and make the 212-year-old institution a public, for-profit company.
- Delta Air, Northwest and other US carriers could defer pension payments and avoid bankruptcy filings to resolve pension shortfalls under a bill introduced in the US Senate today.
- BearingPoint said it found errors in financial statements spanning the past two years and the SEC began an investigation into its accounting.
- Brazil’s central bank unexpectedly raised its benchmark lending rate for an eighth straight month in a bid to stem inflation in South America’s largest economy.
- US factories, retailers and service companies were able to pass on to consumers some of the higher costs of energy and other raw materials, the Federal Reserve said in its Beige Book report.

Interfax:
- Russian ministries proposed a plan to stockpile supplies of oil products to meet swings in demand.

BOTTOM LINE: US stocks finished lower today after the Fed’s Beige Book report spooked investors. The Portfolio finished slightly lower on losses in my Homebuilding, Gaming and Computer longs. I added a few new shorts and exited a number of longs from various sectors in the afternoon as they hit stop-losses, thus leaving the Portfolio 25% net long. One of my new shorts is X and I am using a $47 stop-loss on this position. The tone of the market deteriorated into the afternoon as the advance/decline finished at its daily lows, almost every sector fell and volume was above average. Measures of investor anxiety were mostly higher. Overall, today’s market action was negative, considering recent positive earnings reports, stabilizing energy prices and lower long-term interest rates. The Fed’s Beige Book report rekindled fears that the Fed is misinterpreting recent data. The economy is slowing and inflation is not a problem. The bond and stocks markets are looking through the temporary rise in measures of inflation and signaling a return to a deflationary environment. I continue to believe the Fed will realize this and slow their rate of hikes over the next couple of months. While stocks may head marginally lower through earnings season, I continue to believe the major averages are close to a meaningful bottom and that the second-half of the year will be much better for US equities.

Mid-day Scoreboard

Indices
S&P 500 1,143.26 -.83%
DJIA 10,074.05 -.53%
NASDAQ 1,924.07 -.43%
Russell 2000 587.58 -1.24%
DJ Wilshire 5000 11,268.55 -.89%
S&P Barra Growth 552.90 -.71%
S&P Barra Value 586.11 -.95%
Morgan Stanley Consumer 570.33 -1.0%
Morgan Stanley Cyclical 698.13 -1.03%
Morgan Stanley Technology 431.28 -.29%
Transports 3,418.79 -.87%
Utilities 362.06 -.45%
Put/Call .81 -14.74%
NYSE Arms 1.14 +1.61%
Volatility(VIX) 16.01 +7.02%
ISE Sentiment 141.00 -9.62%
US Dollar 83.48 -.33%
CRB 306.46 +.81%

Futures Spot Prices
Crude Oil 52.40 +.21%
Unleaded Gasoline 157.70 +.38%
Natural Gas 7.11 +.99%
Heating Oil 150.30 +.74%
Gold 436.50 +.48%
Base Metals 128.48 +1.73%
Copper 150.95 +2.58%
10-year US Treasury Yield 4.23% +.47%

Leading Sectors
Networking +.85%
Internet +.83%
Software -.37%

Lagging Sectors
Steel -2.12%
Gaming -2.38%
I-Banks -2.54%

BOTTOM LINE: US stocks are modestly lower mid-day on inflation worries. The Portfolio is slightly higher on gains in my Internet and Networking longs. I exited a few Gaming longs this morning, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is weak, almost every sector is lower and volume is above average. Measures of investor anxiety are mostly higher. Today’s overall market action is also negative, considering recent strong earnings reports and the bond market’s muted reaction to the CPI report. Base Metal stocks are falling, notwithstanding today’s rise in the underlying commodities. I am looking to short these stocks after their recent bounces. I expect US stocks to trade mixed-to-higher into the close on short-covering.

Today's Headlines

Bloomberg:
- The global economy may be “damped further” by rising oil prices and Europe may be threatened by weaker growth, Swiss National Bank directorate member Philipp Hildebrand said.
- GM said “there is no issue” over the world’s largest automaker’s ability to repay $300 billion in debt.
- US 10-year T-notes fell for the second day in three after the March consumer price index climbed more than forecast.

Wall Street Journal:
- Google may report net income for 2005 even higher than last year’s $399 million, in part because of deft accounting.
- Growing anti-Japanese sentiment in China reflects increasing rivalry for control of the world’s most economically dynamic region as much as historical resentment of Japan’s wartime occupation.
- European politicians are pulling back from support for free market policies in the face of rising unemployment and concern over international competition.
- US shopping mall vacancy in the first quarter remained at 5.3%, its lowest point in 3 ½ years, as rents fell, citing a 62-market survey.
- France’s Pernod Ricard SA and Fortune Brands have agreed to buy Allied Domecq Plc for about $14 billion.

NY Times:
- The Risk and Insurance Management Society called for an end to incentive compensation paid to insurance brokers as a way to avoid a conflict of interest.

Dow Jones:
- AOL has begun blocking Web sites identified as being used for stealing personal information from consumers.

NY Post:
- Morgan Stanley is offering bonuses of as much as $7 million to a dozen top executives to encourage them to stay after five senior officials left the firm recently.

O Estado de S. Paulo:
- The Brazilian unit of Wal-Mart more than tripled sales in 2004, gaining on rivals through lower prices and acquisitions.

Financial Times Deutschland:
- The German economy, Europe’s largest, faces the danger of deflation, the Economist Intelligence Unit said.

Economic Releases

- The Consumer Price Index for March rose .6% versus estimates of a .5% increase and a .4% gain in February.
- The CPI Ex Food & Energy for March rose .4% versus estimates of a .2% gain and a .3% increase in February.
- Summary of Weekly Petroleum Data for the Week Ending April 15, 2005.