Thursday Watch

Late-Night Headlines
Bloomberg:
- Daniel Zwirn, the NY-based manager who is shutting down a $4 billion hedge fund because of investor withdrawals, plans to start a new fund.
- Investors are so scared of stocks and bonds that they have stashed record $3.51 trillion in US money-market mutual funds. Investors have pulled about $40 billion from US equity funds through March 28.
- French President Nicolas Sarkozy offered a battalion of troops to fight the Taliban insurgency in east Afghanistan, a “substantial” increase of military power after NATO allies demanded more forces, the alliance said.
- Al-Qaeda’s deputy leader Ayman al-Zawahiri defended insurgent attacks in Iraq, Algeria and Morocco that killed Muslim civilians, according to a US-based intelligence group.
- The euro fell from a five-week high against the yen on speculation a government report will show consumers are curbing spending, after the IMF said the region’s economic growth is slowing “sharply.” The currency snapped a three-day winning run against the yen and weakened against the dollar as traders increased bets the European Central Bank will cut interest rates.
- Treasury Secretary Henry Paulson said the US and China must work together to reduce their dependency on oil and increase energy security.
- Research In Motion(RIMM) forecast profit and sales that beat analysts’ estimates after consumers snapped up devices with music players and Web browsers last quarter. The stock rose 4.1% in extended trading.
- LDK Solar(LDK) rose 9.3% in after-hours trading after the Chinese maker of silicon wafers in solar cells said it won a contract to supply 640 megawatts to a unit of Moser Baer India Ltd. over 10 years.

Wall Street Journal:
- The European Union’s greenhouse gas emissions from key industries rose 1.1% last year despite its anti-pollution policies, demonstrating the difficulty in meeting international commitments to fight climate change.

MarketWatch.com:
- Speculation grows about 3G iPhone release.
- GM(GM) calls for more hydrogen at the pump. Establishing an infrastructure to fuel hydrogen-powered vehicles is “economically viable and doable,” GM said.
- Nissan Motor(NSANY) plans to begin selling specially-designed electric vehicles for the US market in 2010.

CNBC.com:
- Congressional ‘Pork’ Spending Skyrockets. Federal Reserve Chairman Ben Bernanke has been getting plenty of heat from Congress for stepping in to rescue Bear Stearns(BSC). But a new report shows that lawmakers themselves don’t show much restraint when it comes to spending taxpayer money on pet projects. The amount of so-called pork barrel spending jumped 30% - to $17.2 billion – during the current fiscal year. Lawmakers awarded money to 11,610 pet projects, a 337% increase from 2007 but that was just one-third of the 36,0000 requests that Congress actually pitched itself.

CNNMoney.com:
- iPhone’s winners and losers.

Financial Times:
- Why the euro is unlikely to eclipse the US dollar.
- The $1.4 billion flagship hedge fund of London’s Plexus Partners has lost more than a third of its value this year after arbitrage trades in the credit markets went spectacularly wrong.
- Wall Street banks are working on plans to separate troubled assets from the rest of their businesses in an effort to ring-fence problems and restore investors’ confidence in the financial sector. A number of US firms are looking to follow the example set by UBS.

TimesOnline:
- Jerome Kerviel, the trader accused of losing Societe Generale $7.84 billion, plans to sue the bank for unfair dismissal.

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (MON), raised estimates, target $145.
- Reiterated Buy on (SNDK), lowered estimates, target $35.

Night Trading
Asian Indices are -.50% to +1.0% on average.
S&P 500 futures -.09%.
NASDAQ 100 futures -.03%.

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Earnings of Note
Company/EPS Estimate
- (RPM)/.06
- (STZ)/.25
- (SCHN)/.96
- (IART)/.50
- (AYI)/.68

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Initial Jobless Claims for this week are estimated at 366K versus 366K the prior week.
- Continuing Claims are estimated to rise to 2860K versus 2845K prior.

10:00 am EST
- ISM Non-manufacturing for March is estimated to fall to 48.5 versus 49.3 in February.

Other Potential Market Movers
- The Fed’s Bernanke speaking, Treasury’s Paulson speaking, Fed’s Yellen speaking, Fed’s Mishkin speaking, weekly EIA natural gas inventory report, (DELL) analyst meeting, (AER) analyst day, (SRP) investor meetings, (FRG) analyst conference call, Morgan Stanley Banking Conference, Lehman Brothers Global Chemical Conference, Morgan Stanley Global Electricity Conference, Leerink Swann Bugs & Drugs Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and real estate stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Slightly Lower, Weighed Down by Airline, HMO and Telecom Shares

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In Play

Stocks Lower into Final Hour on Profit-taking, Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Computer longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly bearish as the advance/decline line is slightly lower, sector performance is mixed and volume is about average. Investor anxiety is above average. Today’s overall market action is neutral. The VIX is rising 3.3% and remains above average at 23.5. The ISE Sentiment Index is a low 98.0 and the total put/call is above average at 1.04. Finally, the NYSE Arms has been below average most of the day and is currently around average at 1.06. Overall, I would classify today's action as a healthy consolidation of recent gains. Many market leading stocks are higher on the day. Research In Motion(RIMM) reports after the close. I don’t have a position in this stock, however it could see some mild weakness even on an anticipated positive report given other technical factors, which could lead to some broad market weakness early tomorrow. As well, Bernake and Paulson’s testimony tomorrow and jitters ahead of Friday’s jobs report could pressure stocks mildly on the open. Nikkei futures indicate an +65 open in Japan and DAX futures indicate an +53 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking and higher energy prices.

Today's Headlines

Bloomberg:
- The cost of protecting against a default by Lehman Brothers(LEH), Citigroup(C), UBS AG(UBS) and other banks and securities firms dropped to the lowest in five weeks on diminished concern that the market will see a repeat of the crisis that toppled Bear Stearns(BSC). Credit default swaps tied to Lehman narrowed 15 basis points to 220 basis points and have declined 85 basis points since it raised $4 billion from a sale of convertible preferred shares to bolster capital. Bank and broker credit-default swaps have been cut by almost half since the Fed backed an emergency sale of Bear Stearns.
- AT&T(T), the biggest US wireless carrier, is now “very interested” in using mobile-phone software developed by Google Inc.(GOOG) and its partners, overcoming its initial skepticism about the project.
- Crude oil rose more than $3 barrel in NY on investment fund speculation, despite a 7,317,000 barrel build in supplies this week which was more than three times estimates.
- Obama Says He Would Give Gore Key Role Shaping Climate Policy. Democratic presidential candidate Barack Obama said that if elected he would consider asking former Vice President Al Gore to take a cabinet-level position focused on tackling global warming.
- Best Buy(BBY), the largest US electronics retailer, said fourth-quarter profit fell less than analysts estimated on higher sales of more-expensive laptops and video-game consoles.

Wall Street Journal:
- Amid resurgent money-market strains, the European Central Bank pumped an extra $55.3 billion into the European banking system as part of its regular market operations.
- National City(NCC) is considering a plan to sell itself to hometown rival KeyCorp.(KEY).
- Man Behind Burger King Turnaround.

Forbes:
- Iceland threatens ‘bear trap’ intervention against hedge funds. Iceland is prepared to order direct intervention in the currency and stock markets in an attempt to punish international hedge funds that it claims are attacking its financial system, said Prime Minister Geir Haarde.

Washington Post:
- Senator John McCain told a radio talk show host that he is “getting together a list” of names to be his vice presidential running mate.

NY Post:
- NY led all other states and Washington, DC, in public school spending for the second straight year, according to the latest Census Bureau numbers. “The academic results that we’ve received in return don’t match the level of spending we have,” said Jason Brooks, research director at the Foundation for Education Reform and Accountability in Albany.

Kauppalehti:
- Nokia Oyj(NOK) is still losing market share in the US, researcher Strategy Analytics said. The world’s largest mobile-phone maker needs to work more closely with US operators on customized units rather than trying to sell standardized global handsets, analyst Bonny Joy said. Research In Motion(RIMM) and Apple(AAPL) are ahead of Nokia with specialized products for fast US networks, she said. Nokia has less than 10% of the US market, down from about 33% in 2001.

Caribbean Net News:
- Cubans crowded shops on Tuesday to buy DVD players and electric bikes that went on sale for the first time as new President Raul Castro moved to lift many restrictions in the one-party socialist state. Stores were authorized to sell dozens of electric goods that were previously banned, including microwave ovens, flat-screen televisions and even computers.

Der Spiegel:
- Hedge Funds See Opportunities in Ashes of Subprime Crisis.

Bear Radar

Style Underperformer:

Large-cap Growth -.12%

Sector Underperformers:

Airlines (-1.85%), Computer Services (-1.14%) and HMOs (-1.1%)

Stocks Falling on Unusual Volume:

BK, ALSK, SIRT, PSYS, RVBD, CROX, PAY and FCN

Stocks With Unusual Put Option Activity:

1) CCL 2) MAS 3) TMA 4) MHP 5) TLM

Factory Orders Below Estimates, Employment Data Better

- Factory Orders for February fell 1.3% versus estimates of a .8% decline and a 2.3% fall in January.

BOTTOM LINE: Orders to US factories fell more than forecast in February, Bloomberg reported. Excluding orders for transportation equipment, demand fell 1.8%. Bookings for non-defense capital goods excluding aircraft, a gauge of future business spending, fell 2.4%. Shipments of those goods, used to compute GDP, fell 1.9% versus a .4% decline in January. Bookings for military equipment fell 2.2%. Bookings for transportation equipment rose 1.8%, boosted by a 5.1% surge in aircraft demand. The strike at auto-parts supplier American Axle has closed or idled 30 plants at GM, which is affecting almost half of the automaker’s employees.

Today’s ADP Employment Change showed a gain of 8,000K US jobs in March versus estimates of a 45,000 job loss. Within the report, the service sector added 85,000 workers, while the financial sector was unch and construction employment fell by 22,000. Small companies added 55,000 jobs. I expect Friday’s employment report to be slightly better than economists’ estimates. Factory Orders should bounce back over the next few months as fiscal/monetary stimuli takes hold, companies rebuild depleted inventories and the American Axle strike ends.