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From Briefing.com: 4:47PM Advanced Micro announces formation of Microprocessor Solutions Sector; consolidates existing microprocessor businesses (AMD) :-Update-

4:21PM UTStarcom files 2003 10-K/A with the SEC (UTSI) :UTSIE currently anticipates filing its 10-K for the year ended Dec 31, 2004 on or before April 15, 2005.

4:18PM Advanced Micro spinning off Flash unit (AMD) 17.06 -0.17:-Update- Spansion, the flash memory venture of AMD and Fujitsu, announces it has filed a registration statement with the SEC for a proposed initial public offering of its class A common stock. The number of shares to be offered and the estimated price range for the common stock have not been determined.

Close Dow -104.04 at 10403.93, S&P -13.97 at 1173.79, Nasdaq -31.03 at 1974.37: Widespread selling, sparked by higher bond yields, disappointing retail sales data and downside guidance, closed virtually every sector in negative territory, as all the major indices lost at least 1.0%... Volatility in Treasurys again played havoc with market sentiment, except today's arguably modest swings in bonds to the downside more than erased yesterday's late-day rally in equities, which was ignited primarily by just the opposite - a bond swing to the upside...
Today, bonds initially found modest buying interest, following weaker than expected March retail sales data, but meager indirect bidder participation (28.2%) in today's $15 bln 5-year note auction knocked the benchmark 10-year note (-8/32) to session lows and yields to their highs of the day (4.38%), further strengthening a negative tone first ignited by the poor retail sales figures... The 10-year note eventually closed down 5 ticks to yield 4.37%... March retail sales rose 0.3%, but checked in well below expectations of 0.8%, while the retail sales excluding autos grew just 0.1%, also below forecasts (+0.5%), following a revised 0.6% rise a month earlier...

While the weaker than expected March data may raise doubts about the trend in consumer spending, the numbers are not expected to greatly alter Q1 GDP estimates, which currently stand at about 3 1/2%... Also weighing on the markets was an earnings warning from Harley-Davidson (HDI 48.93 -9.84), which actually beat Q1 estimates by a penny, as well as downside guidance from the likes of Compuware (CPWR 6.00 -0.81) and Foundry Networks (FDRY 9.00 -0.45), which trumped upside Q1 guidance from Merck (MRK 34.52 +0.71) and McDonalds (MCD 31.22 +0.32)... Nine out of 10 economic sectors closed lower...

Pacing the way to the downside was the Materials sector (-2.7%), amid widespread weakness in Steel, Aluminum and Paper... Energy (-2.3%) was not far behind, as oil prices fell 3.2% to a 7-week low... Crude oil futures ($50.22/bbl -$1.64) extended yesterday's 3.4% sell off, amid better than expected builds of 3.6 mln barrels (consensus 400K) and 800K barrels (analysts expected levels to remain unchanged) in crude oil supplies and gasoline inventories, respectively... Falling oil prices, however, failed to lift overall sentiment due to the growing emphasis being placed on economic data, bond yields and upcoming corporate earnings growth...

Financial (-1.4%), Consumer Discretionary (-1.4%), Industrials (-1.5%) and Technology (-1.7%) were also an influential leaders losing ground... Pacing losses in technology was Semiconductor (-2.7%), which was weak after ASML Holding (ASML 15.28 -1.03) forecasted a decline in Q2 orders and following a report that showed global sales of chip equipment fell 2.5% in Feb. - the first such decline in 19 months...

Weakness in shares of Apple Computer (AAPL 41.04 -1.62), ahead of its Q1 earnings report after the close, dragged Hardware (-1.3%) down while every other sub-sector also showed losses in excess of 1.0%... Health Care (+0.5%), however, was the lone bright spot of the day, getting a boost from Merck's upside Q1 guidance and optimism that a U.S. District Court's long awaited decision may show that the patent on Eli Lilly's (LLY 57.12 +3.30) drug Zyprexa is valid and that challenges brought by generic drug makers are without merit...DJTA -2.7, DJUA -0.7, DOT -1.6, Nasdaq 100 -1.9, Russell 2000 -1.6, SOX -2.7, S&P Midcap 400 -1.4, XOI -2.2, NYSE Adv/Dec 969/2328, Nasdaq Adv/Dec 883/2198

3:52PM Biogen Idec announces positive 1-year data from SENTINEL trial evaluating addition of Tysabri to Avonex (BIIB) 36.40 -0.30:-Update- Co announces 1-year data from the Phase III SENTINEL trial, presented at the 57th annual American Academy of Neurology meeting, demonstrated that when Tysabri was added to Avonex in patients with relapsing forms of multiple sclerosis, the annualized clinical relapse rate was reduced by 54% over the effect of Avonex alone. In addition, these data, presented for the first time at a major medical meeting, demonstrated that the addition of Tysabri to Avonex resulted in significantly fewer new or newly enlarging T2-hyperintense lesions and gadolinium-enhancing lesions than Avonex alone, and that the proportion of Tysabri/Avonex patients who remained relapse-free was significantly higher than in the Avonex group.

9:28AM JupiterResearch Forecasts Portable MP3 Player Shipments to Achieve 'Critical Mass' Reaching 18 Mln in 2005 :JupiterResearch reports that U.S. shipments of MP3 players will grow 35% to 18.2 mln in 2005 and maintain a compound annual growth rate of over 10% through 2010, reaching an installed base of 56.1 million by then, up from 16.2 million in 2004. MP3 players will reach critical mass this year, fueling demand for digital music services and stores. "Apple shows no signs of losing momentum," said Michael Gartenberg, VP and Research Director at JupiterResearch. "The iPod is a consumer phenomenon. Apple dominates this sector and will dominate portable MP3 player growth over the medium term," added Gartenberg. Mostly due to the iPod's success, JupiterResearch has raised its near-term forecast, but projects that flash-based player shipments will surpass those of hard-drive models in 2007. "Historically, any new device or medium that reaches a U.S. household penetration of 15% to 20% creates a critical mass of customers for other products and services," said David Card, VP and Senior Analyst at JupiterResearch. "MP3 players will hit that mark this year. This is good news for both digital download stores and subscription music services. Subscription services and devices will fuel each other's growth," added Card.

9:09AM Gapping Down :HDI -11% (reports Q1; beats by a penny but lowers guidance; RBC downgrade), IMCL -8.8% (Erbitux delay; multiple downgrades), CPWR -11% (guides MarQ below consensus), WTSLA -8.4% (postpones 10-K), GRA -8.4% (CL King comments that asbestos bill may not be imminent), FDRY -8% (lowers guidance; downgrades from Merrill and BofA), ASML -6.1% (reports MarQ, but sees Q2 order intake down from Q1), PCLE -5.2% (guides lower; AVID -3% down in sympathy), IMDC -4.6% (FDA panel rejects IMDC's silicone breast implant; merger partner MRX -4.7% down in sympathy), SSCC -3.1% (guides lower), SGR -2.1% (prices secondary offering).

8:55AM Gapping Up :ELN +16.5% and BIIB +2% release positive data on Tysabri.... Other News: KOSP +7.5% (co and Barr announce settlement agreements), MCD +3.2% (guides above consensus), BWNG +18% (Thomas Weisel upgrade), DECK +2.5% (RBC upgrade), MWD +1.4% (reports of more top banker resignations).... Under $3: MCEL +18% (awarded contract from US Dept of Energy), BFLY +16% (reports March sales), TBUS +11% (co provides update).

8:32AM Marvell and Fuji Electric Hi-Tech to develop PDL products (MRVL) 35.08 :Marvell announces partnership with Fuji Electric Hi-Tech to develop and market point-of-load (POL) products for digital equipment like computers, networks and consumer electronics products.

8:15AM Novatel Wireless supplies Vodafone Portugal with Quad Band PC Card Modem (NVTL) 10.42 :Co announced it has supplied Vodafone Portugal with its Merlin U630 Wireless PC Card Modem. Using the Merlin U630, Vodafone Portugal's customers can have wireless high-speed broadband access worldwide. The Merlin U630 provides wireless broadband connectivity on UMTS 2100 MHz bands in Asia, Africa, Europe and the Middle East and GSM/GPRS 900/1800/1900 MHz bands across the globe. The Vodafone Mobile Connect Card enables remote workers to send and receive emails with large attachments, access the Internet and download files at speeds up to 384 kilobits per second.

4:01PM The Industrial Sector (OPENX) The Industrials sector of the S&P 500 has declined 6.3% year-to-date, after enjoying strong upside gains throughout 2004. We remain committed to our Overweight rating as stocks continue to look attractive due to their leverage to US economic growth, earnings momentum, increase in capital expenditures, increasing shareholder value, cash flow generation, stronger balance sheets, and dollar weakness.

General manufacturing activity in the first quarter expanded at a healthy clip supporting share prices. Positive ISM readings over the past few months indicate continued strength in the manufacturing sector. Nondefense capital good shipments and orders also remain positive. Our resident economist states that "..demand for manufactured goods does not look to be showing any significant slowing in early 2005 given the end of capital investment and tax incentives." Capital spending is expected to continue to pick up steam throughout the year, as companies utilize profit growth focusing on cash redeployment. Considering the economic environment and capital investment trends, the outlook for earnings remains quite positive. Moreover, a pickup in economic growth in Europe will further support gains.

In an environment of decelerating earnings growth, the industrials still offer considerable opportunities. Standard & Poor's estimates operating earnings growth of 18.1% vs. the broader market at 10.9% - only a slightly decline from last year's performance of 20.7%. This compares favorably to larger declines in operating earnings within the Discretionary, Energy, Technology, and Materials sectors. Yet growth comes at a price. The P/E multiple for the sector is 23.1x - a premium to the S&P 500 at 19.6x.

With regard to the specific sub-groups, the Airlines remain on the sell list for investors. With a strong economy and moderate capacity growth, carriers are seeing moderate pricing gains. Nevertheless, the high cost of energy will continue to weigh on the industry. These stocks are much more of a trading vehicle used by short-term market players to hedge fluctuations in oil prices. With regard to the Machinery group, all eyes will be earnings results from the likes of General Electric (GE), Eaton (ETN), and Caterpillar (00C) for indicators of a possible peak in the cycle. If this is the case, the market's focus will turn towards margin expansion, however, high steel costs could continue to put a drag on Q1 earnings. Near historical high valuations within the Airfreight and Logistic group may restrict near-term performance.

Strong demand for raw materials including metals, agricultural products, chemicals, forest products, and coal are driving rail shipment growth. Volume growth is expected to continue with auto shipments remaining weak. As such, we remain onboard with the Rail stocks as strong demand, improving utilization, and operating rates drive prices and profits. Aerospace and Defense remains a top performing group driven by end-market demand in both industries. Although high steel costs may impact shipbuilders in the near-term like General Dynamics (GD) and Northrop Grumman (NOC).

For now, the sector remains in a holding pattern, awaiting a catalyst that could come in the form of first quarter earnings results. As of mid-April, Industrials made up 11.8% of the S&P 500. ----Kimberly DuBord, Briefing.com
11:59AM The Goldman Sachs Group (GS) $111.20 -0.56 (-0.5%) If you are looking for a reason to be optimistic about the future of the market, focus on Goldman Sachs' announcement today that they have raised $8.5 billion in a new private equity fund, 30% of which is their own capital. There is only one reason to raise this much money in a private equity fund: to buy public companies because they are "cheap."

Usually, in the lifecycle of a company's valuation, the public market represents the top of the pyramid. It is in the extremely liquid auction marketplace that the highest value for a company can usually be found. The "traditional" way to create value is to build the fundamentals of a business to the point where a percentage of the company (ideally no more than one-third) can be offered to the public market. This "traditional" route views the IPO as the ultimate "exit plan."

A private equity fund uses a completely different approach. Such a fund targets public companies whose potential value has not been achieved in the public market. For whatever reason, poor management execution, excessive operational costs, problem subsidiaries, or just plain market indifference, the fund believes taking the entire company private is the best way to build value. In most cases, the fund's managers have a clear strategic vision for increasing the value of the company within a defined time period, often just two or three years. Once the plan for increasing value has been executed, the company is then brought back to the public market (or sold to an acquirer), where the fund expects the increased value to be both obvious and rewarded.

You could argue that any company purchased by a private equity fund ought to be undertaking the exact same strategic plan to increase value that the fund intends to take. Sometimes, however, the current management has no incentive to undertake such a risk, even if they see the same potential. In other cases, the fund's strategic plan may not be immediately obvious to outsiders. Each individual acquisition by a private equity fund is unique and the plan for creating value will be different for each target.

However, there is one "macro-level" principle that drives the creation of a private equity fund: the perception that the public market is not currently creating maximum value for shareholders. It is the purest application of the "buy low, sell high" mantra.

Why should this be encouraging for the rest of us? The market has gone nowhere this year, and last year's returns came only in the fourth quarter. For the past five quarters, four have been either flat or down. It would be extremely discouraging if the reason for this was eroding business fundamentals or declining GDP, because there is often nothing an investor can do about that. But the creation of Goldman's private equity fund, and particularly its size, implies that the reason for poor market performance lies with the market itself, not the underlying business potential of the future.

The creation of large private equity funds like Goldman's just means that Wall Street would rather buy public companies from you than sell a private company to you. Although it takes courage to keep looking for new investments while the overall market goes nowhere or heads down, the optimistic interpretation is that now is the time to start looking for undervalued stocks whose underlying business potential is still extremely good. That's what Goldman Sachs will be doing with their $8.5 billion. - Robert V. Green

10:56AM Harley-Davidson Inc. (HDI) 49.20 -9.57: It must be the thunderous cacophony emerging from a gleaming tail pipe that overpowers everything in its path that continues to attract riders to Harley's bikes. Well, actually, it's all that Harley-Davidson stands for quality, passion, and creating an unforgettable experience of motorcycling. This Milwaukee, Wisconsin-based company dating back to 1903 reported its Q1 guidance a penny ahead of expectations. Although, this was not a big surprise considering the company always beats expectations. The last time it only matched consensus was in the third quarter of 1998!

However, considering this success rate, shares are likely to suffer severe selling pressure after the company cut its FY05 guidance. Shares are already down over 7% in the pre-market. It now forecasts 5-8% growth, down from its previous guidance of mid-teens level growth due to weaker than expected domestic retail sales.

CEO Elect Jim Ziemer said due to weaker Q1 sales we feel it's prudent to limit short-term production growth, maintaining demand in excess of supply. As such, it now estimates shipments of 329,000 units, down from its previous target of 339,000. With 77,000 units shipped in the second quarter, 87,500 units in the third quarter, and 87,500 units in Q4. The revised shipment guidance represents 3.4% growth from 2004. Harley maintained its long-term unit growth projection of 7-9% per annum along with its earnings projection of mid-teens growth over the longer-term.

Even though the upside in earnings is likely to take a back seat to guidance, let's take a look at the quarter. The company reported earnings of $227.2 mln, or $0.77 per share up 13% from last year's period. On the top line, revenues rose 6.0% year/year to $1.24 bln, vs. the $1.23 bln consensus. Total shipments were 76.7k units - up 3.5% y/y.

Worldwide sales of motorcycles rose 2.8%. Growth was heavily weighted overseas with Europe and Japan up 20.6% and 10.6%, respectively. As a result, HDI benefited from currency gains for the quarter. US sales were down slightly. Sales in Parts & Accessories totaled $176.9 mln, up 4.6% y/y. Its Financing arm (HDFS) record $730 mln in loans, realizing a gain of $19.2 mln down from $25.2 mln last year. Credit losses grew slightly to 1.07% from 0.77% in 2004. Citing higher rates and a competitive environment, Harley expects HDFS income to be slightly lower y/y.

Gross margins for the motorcycle segment was 37.6% roughly flat with last year of 37.8%. The company noted cost pressures due to higher materials, primarily metal surcharges, On an operating level, margins rose 130 basis points to 24.2% due to lower costs.

Harley's success is built on the strength of its brand name worldwide. Historically, the second quarter is seasonally a strong period as warmer temperatures and spring fever lures consumers back into showrooms. Yet during its conference call, HDI said it expects earnings to be below last year of $0.82 vs. consensus of $0.92. According to industry analysts, dealers are confident in their sales projections for Q2 driven by new models including the 15th anniversary of Fat Boy and the new Street Rod and Sportster. So we will have to wait and see how sales trends shape up. Shares are trading near the bottom end of its historical range at 17.4x. For longer-term investors able to ride out near-term volatility, HDI represents a solid growth story at discounted valuations.----Kimberly DuBord, Briefing.com

9:20AM Page One - Whipsaw Risks : Treacherous - dangerously unstable and unpredictable. Whipsaw - to cause to move or alternate rapidly in contrasting directions. These two words define current market conditions. If you are looking to play short or intermediate-term moves in this market, you had better be ready to move quickly, and to watch the charts.

Since we went to a neutral stance on January 7 with the S&P 500 at 1190, the market has stayed in a fairly narrow trading range. Yesterday, it closed at 1188. That's fine, but the action within that trading range has been very volatile at times. Yesterday was one of those times.

The stock market was lower in the morning on fears that the minutes of the March 22 FOMC meeting would reveal heightened concerns on the part of members about rising inflation. It did. Yet, the stock market rallied sharply. It can be argued that there was good news in that the minutes implied that the Fed was not about to raise rates 50 basis points, but we're not buying it.

The minutes stated that the required amount of cumulative tightening may have increased, members noted that an accelerated pace of policy tightening did not appear necessary at this time. This implies that the Fed sees the fed funds rate settling at a higher neutral rate than they previously did, although they aren't prepared to raise rates more rapidly. That ultimately means higher interest rates. It is not good news, in our opinion.

The market rally reflected short covering, and perhaps some relief that the potential bad news is in the past. But it wasn't good news. This highlights what we have been saying for a couple of months - there is a significant risk of getting whipsawed under current conditions. There is no clear trend to play. The market is reacting to chart points and technical analysis as much as to fundamental news, if not more so. For all but active day traders, this is a very treacherous market. Most long-term investors should stay on the sidelines, hold their long-term positions, and wait for a better chance to ride a clear trend.

This morning stock futures indicate a slightly weaker open. After the close yesterday, Foundry Networks and Compuware warned. That's not too bad. This morning, Harley Davidson beat earnings estimates by a penny, and BB&T (a bank) reported in line. Oil is down another $0.40 this morning to about $51.50. It dropped sharply yesterday afternoon, but that was after the rally started, so it played only a supporting role.

March retail sales were reported to have risen 0.3%, and ex-autos the increase was just 0.1%. The data are slightly disappointing and, while not dramatic by any means, will raise some doubts about the trend in consumer spending. The 10-year note rallied yesterday, pushing the yield down to 4.36% this morning. There are a large number or earnings reports tomorrow, and many more next week. --Dick Green, Briefing.com