Replies to post #6138 on Sector Investing

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From Briefing.com: 4:14 pm Weekly Wrap

The previous Weekly Wrap concluded with "it may (be) a struggle to post further significant gains through the first half of the year." That certainly was the case this past week. The factors mentioned last week - lowered profit expectations for 2006 and inflation risks - were prominent again this week.

The major event was the Fed meeting on Tuesday. The Fed raised the fed funds target 1/4% to 4 1/2%. That was fully expected. They also changed the language in the policy statement to read "further policy tightening may be needed." Previous statements said that "further measured policy firming is likely to be needed."

That wasn't much, especially as some change was expected to at least give new Fed Chairman Bernanke some latitude to chart a new course. The statement also blew off all signs of economic weakness in housing and fourth quarter real GDP with the statement that "the expansion in economic activity appears solid."

The market quickly came to the conclusion that another rate hike was likely at the March 28 meeting. Hopes that the Fed might have reached the end of the tightening cycle dissipated.

Concerns that the Fed would raise rates even past the March 28 meeting accelerated as the week progressed. A 0.6% decline in fourth quarter productivity announced on Thursday was seen as a problem in that productivity gains help curtail the inflationary impact of rising wages. That became even more of an issue on Friday. The January employment data showed a 0.4% increase in hourly earnings for the second month in a row. This reflects a modest uptrend. The unemployment rate also fell to 4.7% from 4.9% in December.

The employment data suggest that any slack in the labor market is fading. That could lead to higher wage increases and cost-push inflationary pressures. By the end of the week, the fed funds futures were assuming not just a 1/4% rate hike in March, but a 70% chance of another 1/4% rate hike after that.

The earnings reports this past week continued to be uninspiring. The list of disappointments included Eastman Kodak, Schering-Plough, Altria, and Sara-Lee. The biggest losers, however, were high flyers Google and Amazon.com. These companies had decent fourth quarter reports, but the outlook for 2006 troubled investors.

There were also plenty of good earnings reports. Energy companies had fantastic reports. But overall, the reports were consistent with the view that 2006 earnings estimates may have to come down even further.

The economic data this past week was good. The stock market wasn't thrilled, because strong data is seen now as potentially inflationary. January payrolls were up 193,000 and the two prior months were revised significantly upward. The labor market is strong. January same store sales for retailers were very strong. Auto sales for January were up significantly. Clearly, first quarter real GDP growth is going to rebound sharply. As noted above, however, that may not be great news for stocks.

Oil prices were a surprise bullish factor this week. Despite the continuing concern over Iran's nuclear ambitions, oil ended the week a little over $64 a barrel, down from $67 last week.

The market obsession right now is inflation. Any signs of inflation will raise concerns that the Fed will keep raising rates. That will keep the stock market in check. The 10-year note yield has already gone from 4.39% at the start of the year to 4.55% on Friday. That reflects concerns over inflation and the likelihood of further Fed tightening.

There are still positives for the market. Acquisition levels remain high. Dividend increases and stock buyback programs are providing support. Until the market becomes convinced that inflation is not picking up and that the end of the Fed rate hikes can be seen, however, the upside for stocks is limited.

 
 Index      Started Week Ended Week Change  %Change  YTD  
 DJIA         10907.21    10793.62 -113.59   -1.0 %  0.7 %  
 Nasdaq        2304.23     2262.58  -41.65   -1.8 %  2.6 %  
 S&P 500       1283.72     1264.03  -19.69   -1.5 %  1.3 %  
 Russell 2000   732.22      724.22   -8.00   -1.1 %  7.6 %

4:20 pm : Friday's stock market spent the session in the red. The January employment report fanned inflation fears and rate hike worries, and a disappointing fourth quarter earnings report from Amazon.com (AMZN 38.29 -4.45) contributed to the market's struggle. In addition, a spike in the price of crude weighed upon sentiment.

The hourly earnings component of the jobs data received the most attention. Hourly earnings rose a slightly more than expected 0.4% in January, and the December figure was revised to 0.4% from the originally reported 0.3%. The data suggest a firming wage trend, and a lower than expected unemployment rate of 4.7% underpinned concerns over a tight labor market. The hourly earnings trend heightened inflation fears, and fed the argument that the Fed may continue raising interest rates. For its part, Briefing.com expects a 25 basis point hike at the FOMC's March meeting. On the heels of the Fed's ambiguous policy directive, today's data spurred further uncertainty that gave investors reason to anticipate even further monetary tightening. The other closely-watched element, non-farm payrolls, rose a less than expected but very solid 193K. When also taking into account the upward revision to the December data, the payroll change was consistent with expectations for approximately 3.5% real GDP growth during the first quarter.

Selling pressure was broad-based and left all but one economic sector with a loss. Rate-sensitive areas were especially affected by the jobs data, but a recovery in the Treasury market helped them move off of their lows. A rally in 30-year bonds, ahead of next week's auction and anticipation of decent foreign demand helped that market gain ground after its early sell-off. Bonds were also aided by the ISM index, which reflected lower than expected growth.

The Technology and Energy sectors were the worst faring. Crude futures closed 1.1% higher, at $65.37 per barrel, as concerns over Iran's nuclear ambitions continue to affect the energy market. The Energy sector did not catch a bid from the crude action, and levied a weighty 1.1% loss. Amazon.com dragged the Technology sector 1.1% lower. Failing to meet the street's high expectations, the company joined the likes of Yahoo (YHOO 33.48 -0.77), eBay (EBAY 40.41 -1.17), and Google (GOOG 383.00 -13.04) last night. Internet related issues were particularly weak, but selling was wide-spread and left a majority of the S&P 500's tech stocks trending lower. The semiconductor and computer hardware industries were also areas of significant weakness.

Telecom was today's lone bright spot, but its 0.4% advance did little to counter the declines across the broader market.DJ30 -58.36 NASDAQ -18.99 SP500 -6.81 NASDAQ Dec/Adv/Vol 1686/1316/2.22 bln NYSE Dec/Adv/Vol 1956/1311/1.75 bln

09:45 am Nice Systems: Banc of America Sec initiates Buy. Target $60. The firm says that shares of top quality cos can have their own independent worth that can not be derived just from its parts. It is their opinion that FO is evolving into such a firm. Its valuation discount to the mkt has narrowed from 27% in 2002 to approximately 5% last year. In time, they believe that FO will move to a mkt multiple and perhaps even gain a premium valuation.

09:45 am Microtune: Needham & Co reiterates Buy. Target $6 to $6. Target raised following Q4 results, as firm believes TUNE appears to have a very strong position in two major digital TV growth drivers for 2006 and beyond: Digital over-the-air TV and cell phone broadcast TV. They believe Microtune is winning very prestigious design wins in these areas, likely to significantly increase 2007 revenue growth. This is all on top of a slightly profitable base business founded in the cable TV (modem + set top box) and automotive areas.

09:43 am Stratex Networks: Ferris Baker Watts upgrades Neutral to Buy. Upgrade is following Q3 results. They believe the Alcatel licensing deal could bring a new stream of high-margin revenue, and the technology that brought the deal promises higher margins for Stratex products.

09:43 am Superior Ind: Prudential upgrades Underweight to Neutral. Target $15 to $15. Firm believes the potential takeout price target of $24 based on scenarios from their merger model. They say a key attraction is Nara's relatively strong presence in the New York City market, with over $400mm in deposits.

09:42 am JC Penney: Piper Jaffray reiterates Outperform. Target $69 to $69. Firm believes recent industry consolidation has enabled JCP to transform itself into a next generation department store, providing customers with everything from apparel and home furnishings to fine jewelry and hair salons. As a result, they think JCP stores have become "one-stop shops" at a time when convenience and service have never been more important to the customer.

09:41 am Cerner: Piper Jaffray reiterates Outperform. Target $50 to $50. Firm is citing the quality of Q4 earnings. They believe the stock traded down in the aftermarket because of lack of earnings upside. They view any weakness as a buying opportunity - the business is tracking ahead of their model before accounting adjustments, and the accounting adjustments only serve to improve the quality of results.

09:40 am Cohu: Needham & Co downgrades Buy to Hold. Downgrade is based upon near term uncertainty and a very lumpy, less predictable business. They feel it is safer to wait on the sidelines to determine if the order downdraft is a one quarter phenomenon or a longer term trend.

09:39 am Intuitive Surgical: Piper Jaffray reiterates Market Perform. Target $85 to $85. Firm is saying the co posted another good quarter of above consensus estimates. They think the introduction of the new da Vinci S system will create near-term revenue uncertainty as the accounts in the sales pipeline evaluate whether to upgrade to the new system. Their field checks indicate the new system is much easier to set up, has significantly greater utility, and will likely be preferred by most of the U.S. accounts that would have purchased systems with fourth arms. They are forecasting that the new system mix will improve to 70% by year end, but delays in upgrading and fulfilling new orders will cause the year to be back-end loaded.

09:38 am Wet Seal: Sanders Morris Harris upgrades Hold to Buy. Target $10. Firm expects the co's buying, planning, and allocation road map to be more proactive than reactive in 06. Furthermore, with a more stable and vastly improved balance sheet, they believe the co will continue to get better pricing terms, and it should also be able to build its import program.

09:35 am Amazon.com: Deutsche Securities reiterates Hold. Target $44 to $44. Target cut following Q4 results below their expectations, with $2.977 bln in revenues, (vs. their $3.025 bln estimate) and true cash EPS at $0.39, (assumes cash taxes paid at a 7% tax rate), below their estimate of $0.43. They note that as a similar theme to the previous quarters, AMZN continues to reinvest back into R&D (with incremental investments increasing), and no sustainable operating leverage (or return on investment) evident in the near term. As for the stock, they remain on the sidelines for now and believe the stock will likely trade in the mid-to-high $30 levels.

09:33 am bebe stores: Sanders Morris Harris reiterates Buy. Target $20 to $20. Firm ups target following Jan comps, as they believe certain elements of the current fashion trends, such as shorts/crops, dresses, sexy jackets (a signature item), and pencil skirts, are working in bebe's favor.

12:14 pm Ryder System (R)

42.00 -1.75: For 19 consecutive quarters, Ryder System (R) topped analysts' expectations. Unfortunately for the global leader in truck leasing, that winning streak came to an end this morning after fourth quarter earnings checked in a penny shy of the Reuters Estimates consensus. On a positive note, Q4 earnings of $0.93 per share, which excluded charges for accounting changes and a benefit from a reduction in insurance reserves, still represented a second straight quarter of higher earnings and organic operating revenue growth in every segment -- a feat not experienced simultaneously in several years.

Total revenue rose 13.3% year/year to $1.54 bln, matching forecasts. Ryder's Fleet Management Solutions (FMS) business segment revenue grew 7% to $1.0 bln, driven by higher fuel services revenue, while revenue in its Supply Chain Solutions (SCS) segment grew 31% to $483 mln, driven by increased volumes and expanded business in all industry groups. According to management, such consistent performance provides momentum for achieving its business objectives for 2006.

For Q1, the company established an EPS forecast of $0.65 to $0.70 (consensus $0.67). For fiscal 2006, earnings are expected to grow 10-14% year/year to between $3.77 and $3.92 per share (consensus $3.77), which excludes a benefit of $0.08 and $0.10 in stock compensation expensing. Full-year guidance is based on a lower number of diluted shares outstanding, principally driven by Ryder's recently announced $175 mln share repurchase plan.

While we maintain an Overweight rating on the Industrials sector, with an emphasis on transportation stocks, we believe the rails offer the most attractive risk/reward characteristics. To wit, Burlington Northern Santa Fe (BNI) is a suggested holding in our portfolio for active investors.

-- Brian Duhn, Briefing.com

12:04 pm THQ, Inc. (THQI)

26.61 +0.41: THQ Inc., the world's No.3 video game publisher, on Friday said third quarter earnings fell from a year earlier on lower sales, but exceeded Wall Street's estimates. The Agoura Hills, California-based company also issued downside guidance for the fourth quarter and offered a mixed outlook for the full year, as it continues to grapple with a transition to next-generation gaming hardware. Similarly, rival Electronic Arts on Thursday reported lower quarterly earnings, and provided a bleak forecast for the current quarter, due to slower sales and continued investment in the transition.

For the third quarter, THQI earned $47.6 million, or $0.72 per share, on sales of $357.8 million. That compares with earnings of $62.9 million, or $1.05 per share, on sales of $400.3 million in the year ago period. Still, the results, which represented a 32% and 11% decline on the bottom-line and top-line, respectively, topped the Reuters Estimates consensus for earnings of $0.65 per share and revenue of $319.8 million.

In terms of guidance, THQI sees earnings of $0.02 per share in the current quarter on sales of $135 million. Analysts, on average, are expecting earnings of $0.10 per share on $149.27 million. For the fiscal year, a period viewed as a transition year for the industry, the company forecasted EPS of $0.67 (consensus $0.68) and revenue of $790 million (consensus $769.4 million). The company also established initial guidance for fiscal 2007 of EPS growth of 34% to 50% and sales growth in the range of 14% to 20%.

While transition-related issues continue to weigh on THQI, and the industry, longer-term growth prospects remain encouraging. Given the company's proven ability to develop successful game titles and strong market leadership position, it is well positioned for further growth as the industry continues to evolve and adapt to next generation gaming systems.

--Richard Jahnke, Briefing.com

11:56 am California Pizza Kitchen (CPKI)

32.06 -0.61: After Thursday's close, California Pizza Kitchen reported Q4 earnings of $0.29 per share and total revenues of $125 mln, matching the Reuters Estimates consensus on both the bottom and top lines. However, fourth quarter results didn't surprise anyone since the company announced preliminary figures in early January when management blamed a smaller year/year increase in comparable sales growth due to remodeling initiatives and hurricane-related store-closure days.

The aforementioned warning contributed to a 4.0% decline in the stock that day, offering a blow to the Consumer Discretionary sector, and raised concerns about management's handle on CPKI's operations, since only 11 of its 188 restaurants were located in Florida, where Wilma struck in late-October.

The bad taste left in shareholders' mouths, though, didn't last long. Two weeks later CPKI hit an all-time high of $34.50. In conjunction with the fourth quarter report, management said they remain focused on revenue growth, margin expansion at the operating line, and quality development across all of CPKI's concepts, and subsequently, issued upside guidance.

For Q1, the company already added two new restaurants and it expects comparable restaurant sales growth of 5.0% to 6.0% to result in earnings of $0.27-0.28 (consensus $0.26). For fiscal 2006, management sees EPS of $1.35-1.39, excluding the effects of stock-based compensation expense and the impact of a lease accounting pronouncement; the Reuters Estimates consensus is $1.33.

-- Brian Duhn, Briefing.com

10:31 am Electronic Arts (ERTS)

54.50 +0.92: In the midst of a transition to next-generation gaming consoles, Electronic Arts on Thursday reported lower third quarter earnings that missed already diminished expectations, and offered a somber outlook for the current quarter as it continues to invest ahead of revenues.

The world's largest video game publisher, along with other publishers, has been hurt in recent months by lower sales and increased investment in new gaming platforms, such as Sony's PlayStation 3, Nintendo Co.'s Revolution, and the recently released Microsoft Xbox 360. While the investment phase in the transition is not over, the steady transition to new hardware, combined with the company's strong game franchises and market leading position, continues to support a positive long-term outlook on Electronic Arts, as compared to its smaller rivals.

Net income, excluding one-time items, was $268 million, or $0.86 per share, in the third quarter. That compares with earnings of $391 million, or $1.23 per share, in the year ago period and the Reuters Estimates consensus of $0.90 per share. Revenue fell 11% year/year to $1.27 billion from $1.43 billion. Although the third quarter is typically the industry's biggest selling season, consumers largely delayed video game purchases ahead of the release of new gaming hardware. Accordingly, game sales for the current PlayStation 2, Xbox, and Game Boy Advance, declined 25%, 35%, and 37%, respectively, in the most recent quarter.

As the company, and consumers, continue to focus on next generation software, near-term results are likely to remain sluggish. To that end, the company issued downside guidance for the current fourth quarter. Specifically, it forecasted earnings to be in the range of $0.06 to $0.14 per share and revenue of $550 to $600 million. That falls below the current analyst estimate for earnings of $0.15 per share on revenue of $630.24 million.

--Richard Jahnke, Briefing.com

10:23 am Maytag (MYG)

17.85 -0.17: As anticipated, Maytag reported its second consecutive quarterly loss. However, surprising to loyal shareholders was that the nation's third largest appliance maker failed to follow in its soon-to-be parent Whirlpool's (WHR) footsteps with better than expected results. Maytag reported a Q4 (Dec) loss of $0.31 per share which, even after backing out multiple non-recurring items, still checked in 18 cents worse than the Reuters Estimates consensus of ($0.13). Consolidated sales rose 6.6% year/year to $1.24 bln (consensus $1.25 bln).

While Maytag posted solid top-line sales growth during the quarter with increases in all of its major appliance product categories, especially refrigeration, Chairman and CEO Ralph Hake wasted no time in saying, "I am extremely disappointed that our positive sales gains in major appliances were more than offset by our overall high cost structure." In particular, operating results were hurt by lower utilization of manufacturing capacity, a disappointing performance in floor care due to continued volume decline and price erosion, as well as higher distribution costs.

Management said it will address profitability over the next several quarters by continuing to pursue business improvement initiatives and expects to evaluate alternative strategies for the company's floor care product line (e.g. an underperforming Hoover vacuum unit) and commercial businesses (e.g. Dixie-Narco vending machines), including their possible sale. It will be interesting to see if Maytag's sale to Whirlpool will proceed with the "open optimism" Hake cited in late December upon the merger's endorsement at a special shareholders meeting, which was accompanied by Hake adding, "we have to have an ending to have a new beginning."

Whirlpool is expected to close its $21 a share cash and stock ($1.68 bln) bid for Maytag as early as this quarter and is awaiting regulatory approval from the Justice Dept.

--Brian Duhn, Briefing.com

09:18 am Amazon.com (AMZN)

42.74: Amazon.com on Thursday reported fourth quarter profit fell 43% from a year earlier on accelerated shipping discounts, sending shares plunging in pre-market action. Excluding non-recurring items, the results topped analysts' estimate, but revenue fell short of expectations. As the company continues to invest in new technology and promotions to drive sales growth and cash flow - a repeated theme for the past six quarters - expectations are that profit margins will continue to contract. As such, we would remain on the sidelines until greater clarity can be had into the company's return on investments.

For the fourth quarter, Seattle-based Amazon.com said it earned $199 million, or $0.47 per share, down from $347 million, or $0.82 per share, a year earlier. The results included a one-time tax benefit of approximately $38 million, compared with a $239 million one-time tax gain last year. Excluding these charges, the company would have earned $0.26 per share - five cents better than the Reuters Estimates consensus of $0.21.

Despite the sharp decline in earnings, Amazon.com reported fourth quarter revenue jumped 17.2% year/year to $2.98 billion on strong holiday demand. However, the results fell short of analysts' estimate of $3.08 billion. North American segment sales were up 21% to $1.68 billion in the period, while International segment sales grew 13% to $1.29 billion. Excluding the unfavorable impact of foreign exchange rates, net sales for the segment were up 23%. Overall, top-line growth was offset by increased shipping promotions through Amazon Prime, the company's membership program which allows members to get unlimited express shipping for an annual fee of $79, as well as investment in developing new innovative programs to attract new customers.

Looking to the first quarter, the company expects nets sales of $2.14 to $2.29 billion versus the consensus estimate of $2.28 billion. That represents year/year growth between 13% and 20%. For fiscal 2006, the company forecasted revenue in the range of $9.85 to $10.45 billion. According to Reuters Estimates, analysts are expecting revenue of $10.15 billion.

--Richard Jahnke, Briefing.com

09:12 am Weatherford (WFT)

43.28: Anyone wondering where all those windfall profits (well not all) are going, just take a look at the oil services industry. Weatherford, the fourth largest services company, generated the highest annual revenues in the company's history. Soaring activity levels around the globe, with particular strength in North America and the Eastern Hemisphere, outperformed rising rig counts.

With demand outpacing supply, service companies have been able to institute multiple price book increases. Weatherford's operating margins widened 120 basis points since the third quarter and 290 points over last year's period. Revenues in the fourth quarter grew 14% sequentially and 26% yearly (ex-acquisition) to $1.2 bln. The two cent beat in EPS doesn't fully demonstrate the accelerated top line growth, earnings momentum, and operating leverage these companies are experiencing. The greatest risk is soaring cost pressures from equipment to labor. Expenses for WFT grew to 21.8% of sales from 18.7% last year.

We remain bullish on the entire group with holdings in our Active Portfolio - BJ Services (BJS), Grant Prideco (GRP), and Transocean (RIG) - ranging from oil services, to equipment, to deep-sea drillers.

--Kimberly DuBord, Briefing.com

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COHR - Short term buy alert set at 27.50





http://finance.yahoo.com/q/ks?s=COHR

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To Pause, or Not To Pause
April 28, 2006
By John Mauldin

URL: http://www.frontlinethoughts.com/printarticle.asp?id=mwo042806

To Pause, or Not To Pause
Rising Volatility, Falling Markets
G7 to Asia: Stop the Currency Manipulation
A Brief Historical Reminder
Japan Dumps Money into the System - QE
The Dollar at Home - and Abroad
Mac Ross, Rest In Peace
Orlando, Montreal and La Jolla

Be careful what you wish for. You just might get it. This week we look at a more transparent Fed, Japanese monetary policy, the powerhouse rise of gold, and a rather important op-ed piece in the Wall Street Journal, with a theme of seeing how they all impact the dollar. There is more than a little intrigue in the markets, and we try and make sense of it. We are going to quote a number of friends who each give us a piece of the puzzle, and see what it all means. But I'll give you a preview: it means more volatility and a weaker dollar.

I'll Be Watching You

But first, let's have some fun. The following is a link to a very funny satirical music video by the students at the Columbia Business School (first sent to me by Gary North among a host of friends). This takes a little set-up to understand some of the inside jokes. It is set to the tune of the old Police hit, "Every Breath You Take." It makes fun of the fact that the Dean of the Business School, Glenn Hubbard, former chairman of the Council of Economic Advisers to the President, wanted to be Fed chairman. CBS refers to Columbia Business School and not the TV network. Major kudos to the kids who did this! And for those of you who aren't familiar with Hubbard's face (after all, he is an economist), the student who "plays" Hubbard is an uncanny look-alike of a young Hubbard. At least now, Glenn, you can make claims to being an erstwhile rock star.

Sample lyrics, as "Hubbard" sings about Bernanke:

"First you move your lips, and hike a few more bips, when demand then dips and the yield curve flips, I'll be watching you!" Crank up the volume and enjoy!

http://www0.gsb.columbia.edu/students/organizations/follies/media/EveryBreath.wmv

To Pause, or Not To Pause

And that sets up our first item of the day. Fed chairman Ben Bernanke rather shocked the markets yesterday. Let's go straight to the quote that sent waves through the foreign currency markets:

"... if in the Committee's judgment the risks to its objectives are not entirely balanced, at some point in the future the Committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook.... Of course, a decision to take no action at a particular meeting does not preclude actions at subsequent meetings."

Bernanke is on the record as calling for a more transparent Fed. He is clearly signaling a subtle but important change in Fed policy. Heretofore, the Fed meets, raises rates 25 basis points, and goes home. They are highly likely to do so at the Fed meeting in early May.

Bernanke as much as guaranteed that the statement from that meeting will change as well. Instead of promising an interest rate hike at the next meeting, it is likely to leave open the possibility that the Fed will pause or stop or raise at the next meeting in June. Anything could happen.

The Fed is nearing the end of its interest rate hike cycle. But I think it is clear from reading the speeches of the various Fed governors that they do not now know when that will be. We are in new territory. Thus, they are going to become data-driven from meeting to meeting. Interest rate policy is going to be set by the data that comes out between meetings.

They will be looking at inflation, the housing market, consumer spending, overall growth, and a lot more. I have said for a long time that until the housing market slows down, the Fed is likely to continue to raise rates. There are some data-driven as well as anecdotal signs that may (finally!) be happening. If housing is slowing down by the June meeting, they may indeed decide to pause and see what the summer brings.

Today we learned that the economy grew 4.8% in the first quarter of this year. That is really quite strong. Inflation is at the upper end of the Fed's comfort level. If we see another two months of that type of environment, it is likely they will raise rates yet again, at least in August.

But there is reason to think they may raise again in June. If the inflation data continues to be high, the Fed committee may agree with former Atlanta Fed president William Ford, who commented on Bernanke's testimony about the interest rate outlook and inflation:

"It surprised me that he was as soft as he was in the way he couched the outlook for future change. No matter what inflation rate you look at, including the one they look at, inflation is at the upper end of a tolerable band in their measures, and certainly for those of us that eat and use energy, which is the real CPI, is up by over 3 percent year-over-year... So I expected him to be a little bit tougher than he was, and the market also expected that and reacted appropriately to his suggestion that they might take a rest when we get to the June 28-29 meeting after the May 10 meeting." (Courtesy Bill King)

Frankly, I think pausing in June would be a good thing. I think the economy is likely to slow in the latter part of the year and that inflation will take care of itself, without the Fed "piling on" with yet one more rate hike. If I am wrong, then they can always catch up during the remainder of the year.

But hold a gun to my head and ask me today? I still think the odds are for more rate hikes, as the economy is doing well. Is it going to roll over in 50 days? It sure does not seem that way now.

Rising Volatility, Falling Markets

But this means that the markets are likely to become more volatile, as each piece of "data" will become more important the closer we get to a Fed meeting, potentially moving the markets with a sudden swiftness. And rising volatility in the current market climate is not necessarily a good thing. In next week's Outside the Box, I am going to be sending you a very important study done by good friend Ed Easterling at Crestmont Research. He discusses how volatility, in terms of historical trends, is actually at the low end of the scale, which means that it can only go up from here. Rising volatility in the secular cycles we are in today is not good for the stock market. This will be out Monday night. I strongly suggest you set aside some time to read it. Let me give you a preview:

"It seems that never before have the bulls and the bears had such strong arguments--the tectonic plates of the markets are intensely balanced in an edgy state of latent eruption. Most investors are actively searching for clues about what might next occur in the stock market: new highs or a correction.

"Regardless of the direction of the market's next leg, the move is likely to happen with increased volatility. The historical cycle of stock market volatility has been erratic, yet consistent, for more than five decades. And although the trend in volatility may not be a completely reliable indicator, it does offer key insights about the likely direction of the market. Most if all, portfolios that are best positioned for declining volatility often do not perform well in rising volatility. Therefore all investors can directly benefit from insights about the upcoming conditions.

"... The current state of volatility is an indicator of a potentially sharp stock market decline based upon (i) the currently low level of volatility, (ii) the tendency for upward spikes to follow extreme low volatility, (iii) the relationship of market direction to volatility trends, and (iv) the propensity for downside volatility during secular bear markets. Volatility could decline further and could remain low for some time longer; however, based upon history, it has not stayed low without subsequently spiking and, as it goes lower, the likelihood of a spike increases significantly.

"When volatility does start to rise and the stock market likely declines, the bulls will call it a "pullback" or a "correction" in advance of the next major upward move in the market. Because we are currently in a secular bear market (at the least, a bear-in-hibernation), the market can be expected to act as it has during the past secular bear markets. Keep in mind: over the course of secular cycles, the market is driven by recognized principles of economics and finance. The current market conditions are not positioned to provide another secular bull market at this time--it is not a sleeping bull. The current conditions reflect a secular bear or a bear-in-hibernation because the price/earnings ratio ("P/E") is above its historical average. Without a rising P/E, future returns will be below average and investors are likely to experience an extended, choppy, and often volatile period."

G7 to Asia: Stop the Currency Manipulation

And there are other reasons to think volatility may be rising. First, let's look at the rather surprising communique that came from last weekend's G7 meeting. Normally, these are the most bland of any government release. But this one had some bite to it. The best way to look at it is from trading maven Dennis Gartman's viewpoint:

"One gets the sense that the market and her participants are taking stock of the situation; are re-reading and re-considering what it was that the G7 was trying to tell the markets in broad terms this past weekend, and are considering what messages the IMF and other international banking organizations are trying to send. The more we consider these things the more convinced we are that the G7's communique this past weekend is preparing us for something along the lines, eventually, of another Plaza Accord-like notice at some point in the future. It was a shot across the bow of the economic policies of China. It was a warning shot to Japan ... and these 'shots' were fully intended, carefully planned and completely understood.

"We turn then to what our good friend, Mr. Robert Savage of Goldman Sach's foreign-exchange dealing operation, said in his always insightful evening commentary yesterday regarding what is going on in the forex market. He said:

" 'The G7 opened the box of conspiracy theories [this past weekend]. Today's FT article on the IMF role in FX is a case study in how international cooperation can be less than clear and can lead to even less clarity. The story highlights how the G7 communique means different things to different nations--to the ECB's Trichet it's all about the 'scary' US current account deficit; to Japan it's all about the need to revalue the CNY; to the US it's all about stoking domestic demand in Europe and Japan. But in the end--the language agreed upon opens a door to traders to sell the USD.

" 'Everyone realizes that the acceptance of big intervention to hold the USD bid or of pegged currencies to enhance trade has been cut and a line has been drawn. Further--talk about the IMF role draws out the need for reserve management--and how much of the EUR or gold to hold instead of the USD comes into play. Further--as the US gets news that shows a Fed policy of "pause" in the face of stronger consumer demand fed by a strong jobs environment--then inflation returns as a concern.'

"Mr. Savage is absolutely right in what he's said. The fear of intervention to stem dollar weakness has been all but withdrawn. The Ministry of Finance in Japan intervention efforts shall only be realized should the Yen/dollar rate become unstable or far too abnormally volatile. We suspect that that means only should the Yen/dollar rate move 3 Yen or more in a session will the Ministry make its anger felt via intervention. Too, the communique made it clear that the G7 expects China to move more rapidly toward strengthening its currency, to the detriment of the Yen's present advantage, which means a stronger Yen vs. the US dollar as the Renminbi/Yen rate will be expected at least to hold steady even as the Yen strengthens vis a vis 'the buck.'"

I have been bearish on the dollar and bullish on gold for four years. I have often noted that the drop in the dollar would hopefully take a long time and be done on a gradual basis. It appears we are getting ready to see another leg down in the dollar, and this time maybe against the Asian currencies as well. Let us hope that this next leg down is long and slow.

Good friend Chuck Butler must be happy. He runs the foreign currency desk at Everbank. You can get an FDIC-insured CD denominated in almost any currency you want. If you are interested you can reach him at 800-926-4922, and tell him I said to call.

A Brief Historical Reminder

Ok, let's now look at another piece of the puzzle, courtesy of my friends at GaveKal. As I wrote a few weeks ago, the change in monetary policy in Japan has the potential to be a very big deal indeed. They have been the source of much of the massive build-up of liquidity in the world's collective money supply. Let's let GaveKal take us down memory lane to see exactly how much:

"A few years ago, as Japan remained stuck in its deflationary bust, most cognoscenti were happy to pronounce that Japan had become "irrelevant"; and sure enough, most investors stopped paying attention to what Japanese policy makers were really up to.

"Meanwhile, faced with a collapse in the domestic velocity of money, Japan's policy makers were about to adopt a set of policy which would influence asset prices all over the world and whose repercussions are still felt today. The reason behind the collapse in the velocity of money was easy enough to diagnose: Japan's commercial banks were, by and large, bankrupt. This left Japan's policy makers with two options:

A) Nationalize and recapitalize the bankrupt commercial banks (a course of action which most policy makers felt was too politically contentious) or

B) Flood the system with high powered money, so that the collapse in V would be compensated by the rise in M so that P*Q (i.e.: nominal GDP) could stabilize (as per Irving Fisher's MV=PQ).

"And the policy of quantitative easing (QE) was born. This policy of QE came on top of other policies already implemented, namely the zero interest rate policy (ZIRP) and a policy of control of the exchange rate in a band of Y105-Y120 against the US$. And together, these policies would have a massive impact on global financial markets.

Japan Dumps Money into the System - QE

"One of the trademarks of perma-bears is to blame all the world's ills on an hyper-active Fed whose policy shifts endanger the state of our economies and the value of financial assets. But is this a fair indictment? Judging Fed policy by the growth rate of the US monetary base (see chart next page), we find that the US monetary base has been growing fairly steadily and in line with US GDP growth. In fact, if one wants to blame a central bank for volatility in global monetary aggregates, one should instead turn to Japan.

"The chart below shows the US monetary base, the Japanese monetary base - in dollars - and the sum of the two (also in dollars). What emerges from this graph is very simple: all the volatility in the US + Japanese base aggregate has come from the Japanese part of the component. The volatility in global M has in the past thirty years come from Japan.



"Looking at the past thirty-five years, we find that the Japanese monetary base has been allowed to double over short periods (i.e.: less than three years) three times. Each time, it led to massive bull markets (real estate, share prices, commodities, gold, etc...), followed, some time after the expansion of Japan's money supply was over, by a serious market downturn. Will this time prove any different? So far, it has!

"Another interesting fact drawn from the above chart is that, following the large 2001-2004 expansion in the Japanese monetary base, the Japanese monetary base is now larger than the US'. That is quite impressive for an economy less than half the size."

"So far, it has!" That sounds to me like the old joke of the man who jumped off the top of the Empire State Building, and commented as he flew past the 52nd floor, "So far, so good."

Japan has made it clear they expect the policy of quantitative easing to stop and, at some point in the future, we will actually see Japanese rates rise. This is going to have a large effect on world interest rates and liquidity, maybe as much or more than the Fed raising rates.

Couple this with the Chinese move to raise rates, which I think is just the first in a series of things the People's Bank of China will do to slow down certain sectors of the Chinese economy. They will also continue to slowly allow the Renminbi to rise, and maybe even at a faster rate if the rest of Asia will go along as the G7 suggests.

The Dollar at Home - and Abroad

Just how serious is all this? In 1992, I remember reading a watershed op-ed piece in the Wall Street Journal by Walter Wriston, former chairman of Citibank and the ultimate insider. Basically, he waved the white flag and said in essence, "Central banks and governments can no longer control currency valuations. It is now in the hands of traders and hedge funds." From time to time, you see such op-eds in the Wall Street Journal and think, "This might be important."

This Friday gave us another important essay. This one is by Martin Feldstein, Harvard professor, chief economic advisor to Ronald Reagan, and a host of other titles and honors. He was on the very short list of two or three names to be appointed Fed chairman after Greenspan. When he speaks, American policy makers pay attention. If you can get last Friday's Journal, I suggest you read the entire article (page A-14). Here are some brief excerpts [emphasis mine]:

"For more than a decade, under Democrats and Republicans, Washington has emphasized that 'a strong dollar is good for America.' It's time to change the message. We need a strong dollar at home and a competitive dollar abroad: i.e., an exchange rate that will make American goods more attractive to foreign buyers and that will cause American consumers and firms to choose American-made goods and services.

"... These two goals - strong at home, competitive internationally - are compatible in practice. With an appropriate monetary policy, we can shift to a competitive level of the dollar without raising the future rate of inflation. Consider what happened in the '80s, the last time that the dollar fell sharply. In April 1985 the dollar began a decline, falling 23% in 12 months and a total of 37% by the beginning of 1988. Although the price of imports rose sharply, the overall inflation rate did not increase. CPI inflation, 3.9% in 1984 (and almost exactly the same in the previous two years), actually declined to 3.8% in 1985 and to 1.1% in 1986. Between 1985 and the start of 1988, while the dollar fell 37%, the inflation rate averaged only 3.1%. Although a decline in oil prices contributed to this lower rate of inflation, the core rate of inflation that excludes energy prices also fell. That's not a guarantee that a dollar decline now wouldn't raise inflation, but it shows that it is possible to have a sharp dollar decline with no adverse effect on inflation.

"... But the primary reason for wanting the dollar to become more competitive in the near future is that we may need an improved trade balance over the next few years to sustain the economy's expansion. Although forecasters generally believe that the likely outlook for the economy in 2006 and 2007 is a continuation of solid economic growth, there is a serious risk that the combination of falling house values and an end to the low-interest incentive to refinance mortgages will cause consumer spending to decline relative to incomes. A sharp slowdown in consumer spending could cause an economic downturn.

"... Even if the dollar does decline during the coming months, the delays in the response of exports and imports to the more competitive dollar will mean that the increase in aggregate demand from this source may not happen for a year or more. That's why the U.S. needs to shift to a more competitive dollar as soon as possible."

Feldstein is only acknowledging what everyone knows. The dollar must fall over time as part of the process to balance the trade deficit. The imbalance can go on for a lot longer than most dollar bears think, but not indefinitely. Better to start the process now and have it go slow and, if not actually smoothly, then not precipitously. Feldstein is giving intellectual cover for a policy everyone knows will be implemented, whether actively with worldwide cooperation or forced more violently by the markets.

What the G7 communique, the announcements by Japan, statements by European central bankers, and the Feldstein piece all add up to is a call for a weaker dollar to deal with the perceived problem of the US trade deficit over time. I expect there will be some serious back-room discussions trying to get cooperation from the various Asian nations to allow their collective currencies to rise.

The last decade has seen a period of competitive currency valuations among the Asian countries, as each tried to maintain whatever competitive advantage it could muster through currency manipulation. Thus, we see the massive buildups of their balance sheets, which are mostly invested in US dollar-denominated debt of some form.

That currency regime may be in the process of changing. Someone send a note to Senators Schumer and Graham, brothers in bipartisan idiocy, that you should be careful what you wish for, as you may get it. We may indeed get a lower dollar, but it will come with a price. I rather suspect that the transition will not be as smooth as one would like. It will be a period of slower growth and Muddle Through. Enjoy the recent good times while they last. Not that they won't come again, but the period in between will be slower and bumpier.

Mac Ross, Rest In Peace

It is with heavy heart that I note the passing of my dear friend Mac Ross, who succumbed last night after a long, valiant, and dreadfully difficult battle with pancreatic cancer. Mac was always a source of wisdom and candid comments. In addition to being a close and true friend, he was the smartest marketing mind I have ever met. We first met when he worked for Phillips Publishing in the early '80s, and he has consulted with a number of people in the investment publishing world. I called upon his remarkable talents frequently. Truth is, he came up with the name for Bull's Eye Investing, as whatever I was going to call it before didn't pass muster with him. And a lot of "my" best ideas were hatched in conversations with Mac, often with a glass of wine (he was a true connoisseur) and long, rambling, but very insightful discussions.

Mac had great character and integrity. We would do six-figure business deals on a handshake, and I would never worry that he woud keep up his end of the bargain.I always enjoyed staying with Mac and his wife Marji (brilliant in her own right) on my trips to DC, as it meant a night of great conversation, great wines, and good friends. A voracious reader, he had well-thought-out opinions on just about everything, and freely shared his sources, ideas, and opinions with one and all. He was a gentle, happy, passionate man and I will miss him terribly, as will all his friends, but especially his wife Marji and their three daughters, 16, 14, and 9. (Many of you will either know or know of Marji, as she is the president and publisher of Regnery Books.) All of us wish her and the children the very best and offer our deepest sympathies and any help we can. Rest in Peace, Mac. (Marji requests that donations be sent to the Lombardi Cancer Center at Georgetown Hospital. There will be a memorial service on Tuesday.)

Orlando, Montreal, and La Jolla

I will be here next week for a quick day and speech, then in Montreal the following week. Then on to La Jolla for my Strategic Investment Conference. It will make for a busy month, but it should be (mostly) fun.

It is time to hit the send button. It will be a reflective weekend for many of us. Life is so easily and too quickly shed, it seems this evening, and we need to spend more time with family and friends, as they are the true wealth in our lives. Have a great week.

Your thinking life is too short analyst,


John Mauldin
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FINANCIAL MARKETS FORECAST AND ANALYSIS - The Elliott Wave Pattern in the Dow Industrials and S&P 500

We are seeing the final thrust up in the Dow Industrials to complete the multi-month Rising Bearish Wedge, a.k.a. Ending Diagonal Triangle. That final thrust higher is labeled below as wave e up.

http://futures.fxstreet.com/Futures/content/100480/content.asp?menu=review

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From Briefing.com: 4:20 pm : The major averages closed sharply lower Thursday as soaring commodity prices and higher interest rates -- the main reasons behind our Neutral market view -- exacerbated concerns about inflation and Fed policy as aggressive selling efforts weighed on stocks across the board.

On the commodity front, gold prices closed at a new 26-yr high and copper was up 9% at one point early on and finished at another historic high. Further underscoring our Overweight rating on the Materials sector was silver, which closed at its best levels since January 1981. Also, crude oil prices continued to regain some upward momentum, closing up 1.6% at $73.25 a barrel amid ongoing geopolitical concerns tied to Iran and Nigeria as well as refinery outages adding to supply concerns. Neither oil's surge nor gold's gain, however, were enough to provide sector support for Energy and Materials. As this year's top two performers, investors still viewed today's overall bearish sentiment as an incentive to lock in recent gains.

Technology, though, was the biggest drag on the market from a sector standpoint. As if Microsoft (MSFT 23.22 -0.55) missing Q3 (Mar) forecasts by a penny two weeks ago and then warning for the current quarter wasn't enough, nervousness this week was renewed following Dell's (DELL 24.51 -0.38) disappointing guidance Monday night, which continues to weigh on PC stocks. Less than 24 hours later, continued weakness independent of inflation fears was exacerbated after a disappointing sales forecast from Cisco Systems (CSCO 20.05 -0.70) fueled concerns of slowing growth in tech. Further consolidation in the semiconductor group, which continues to exhibit a negative bias going into the seasonally slower months, also contributed to Technology's 2.4% drubbing that turned the sector negative for the year.

With the broad-based nature of upside surprises acting as a recent source of buying support for the market in the face of rising interest rates, a Q1 disappointment from Dow component American International Group (AIG 63.15 -3.39) garnered extra scrutiny that weighed heavily on Financials. The rate-sensitive sector also lost ground as more attractive yields in Treasuries prompted consolidation in large-cap bank stocks.

The yield on the 10-yr note hit a 4-year high of 5.17% before closing at 5.15%. One of the top five biggest days of corporate issuance, only mediocre foreign interest in a widely watched 10-yr note auction and still no clear indication from the Fed about further rate hikes weighed on Treasuries throughout the session. With the Fed now focused on "incoming data" to determine Fed policy, a lower than expected rise in April retail sales data briefly improved sentiment in both bonds and stocks before the bell. However, since steady growth in consumer spending keeps economic growth on a strong growth path, uncertainty as to whether or not a pause is in the cards at the next FOMC meeting kept buyers on the sidelines.

The Dow, which came within 80 points of hitting its all-time high just yesterday, is now more than 220 points away as 28 of 30 components post losses. The only component to post a gain was Johnson & Johnson (JNJ 58.84 +0.52), which was upgraded to Buy from Neutral at Banc of America. Alcoa (AA 36.02 -0.20) was the only other Dow stock catching a bid throughout most of the session, as aluminum prices hitting their highest levels since June 1988 lifted AA shares to a new 52-week high; but late-day consolidation efforts closed the stock lower. Meanwhile, the S&P and Nasdaq recorded their biggest losses since January 20th, with even more conviction behind the tech-heavy index's poor performance coming from heavy volume to the downside.

Among only a handful of bright spots on a day where decliners outpaced advancers on both the NYSE and Nasdaq by a 3-to-1 margin was News Corp. (NWS.A 18.58 +0.58). A suggested holding in our Active Portfolio, the stock hit a new 52-week high after more than doubling Q3 (Mar) profits and doubling its share buyback program to $6 bln. Nonetheless, with earnings season coming to a close, as more than 450 companies in the S&P 500 have already reported, and the market's focus shifting to "incoming data" after the Fed provided no clear indication yesterday of a pause in its tightening efforts, an overwhelming sense of nervousness kept sellers in control of trading from the open to the close. BTK -1.3% DJ30 -141.92 DJTA -1.0% DJUA -1.1% DOT -1.6% NASDAQ -48.04 NQ100 -2.2% R2K -2.4% SOX -2.3% SP400 -1.3% SP500 -16.93 XOI -1.0% NASDAQ Dec/Adv/Vol 2454/630/2.48 bln NYSE Dec/Adv/Vol 2577/690/1.81 bln

4:01PM Vishay withdraws Class C common stock and size of Board Proposals From Consideration (VSH) 16.83 -0.25 : Co announces that its Board of Directors determined to withdraw from consideration at the co's 2006 annual meeting of stockholders held today proposed charter amendments authorizing shares of new Class C common stock and placing sole authority for determining the number of directors in the hands of the Board of Directors.

3:56PM FEI Company: Japan Electronics manufacturer selects FEIC system for in-fab root cause analysis (FEIC) 24.20 -0.65 : Co announced that a global Japanese electronics manufacturer has selected FEI's DA 300 in-fab defect analyzer for its factory. The advanced automated system will enable critical root cause analysis in a fraction of the time required by other techniques and will be used for the first time ever to rapidly analyze process defects in C.C.D. semiconductor devices.

2:17PM Lexar Media announces ITC commences investigation of Toshiba based on Lexar complaint (LEXR) 9.35 -0.13 : Co announced that the U.S. International Trade Commission (ITC) has voted to commence an investigation into whether Toshiba Corp, Toshiba America, and Toshiba America Electronic Components, are infringing three Lexar patents. Lexar, in a complaint filed with the ITC on April 11, 2006, is seeking all possible relief, including a permanent exclusion order to bar the importation into the U.S. of Toshiba's infringing NAND flash chips and cards, as well as products that incorporate Toshiba's infringing chips. Additionally, Lexar's complaint requests a cease-and-desist order to bar further sales and distribution of infringing products that have already been imported into the United States by Toshiba.

11:34AM NASDAQ 100 Trust aggressive break under May low stalls near its 200 day ema at 40.71-- session low 40.70 (QQQQ) 40.87 -0.80 : Its 200 day sma is at 40.62.

10:46 am EchoStar Communications (DISH)

30.80 -1.45: EchoStar Communications said Thursday that its first quarter earnings tumbled more than 50%, due in part to a $74 million settlement with TiVo (TIVO), and fell short of analysts' expectations. For the quarter, the no.2 U.S. satellite TV provider, behind DirecTV (DTV), posted net income of $147 million, or $0.33 per share, compared with $318 million, or $0.70, a year ago. The results included a $74 million charge related to the TiVo settlement, as well as $23 million related to the early redemption of debt securities. According to Reuters Estimate, analysts on average were expecting the company to earn $0.41 per share.

First quarter revenue increased 13.1% to $2.29 bln, matching the consensus estimate, as subscriber related revenue rose 15% to $2.18 bln. EchoStar added approximately 225,000 net new subscribers during the period, down from 325,000 a year ago. The company ended the quarter with 12.27 million total subscribers, a 9.2% increase from 11.23 million subscribers last year. Average revenue per subscriber was $59.93, compared with $57 a year earlier.

At the same time, however, EchoStar said subscriber acquisition cost increased 6.7% to $665, up from $623 last year. It also noted that its monthly churn, or customer losses, increased to 1.57% in the quarter, compared with 1.44% in the year ago period.

Based on the mixed first quarter results, which were depressed by certain charges and higher marketing costs amid increased competition, shares of the company traded lower during the regular trading session, falling more than 4%.

--Richard Jahnke, Briefing.com

10:41 am JC Penney Co. Inc. (JCP)

65.62 -1.21: Shares of J.C. Penney Co were near flat after the company said it saw first-quarter earnings of $0.90 per share excluding a charge related its sale of the Eckerd drugstore chain. That was $0.02 better than a Reuters Estimates consensus of $0.88.

The company, which operates 1,021 department stores nationwide, said it sees earnings per share of $0.60 versus $0.58 consensus for the second quarter. It said it sees earnings per share of $4.24 to $4.34 for 2007, up from previous guidance of $4.22 to $4.32 and consensus of $4.35 per share.

The company reported its 12th straight quarter of increasing same-store sales. First quarter total department store sales increased 2.2% and comparable department store sales increased 1.3%, in line with the company's expectations. Sales were strongest in fine jewelry, family footwear, children's clothing, and men's clothing, and grew the most in the Southeast and West.

During the quarter, J.C. Penney, which has a market cap of about $15.66 billion, announced a joint venture to open Sephora cosmetics sections in its stores and to add about 175 new stores over the next four years.

Early this year, J.C. Penney authorized a new $750 million stock repurchase program and also announced a 44% increase in its annual dividend to $0.72 per share. These initiatives, management said, demonstrate the board's confidence in the company's longer-term prospects. The company expects that the repurchase program will be completed in 2006.

Myron Ullman, III, chairman and chief executive officer of the company, said a cycle time reduction program will increase the speed of new product introductions and added that the company will make further improvements in a multi-channel initiative with jcp.com, providing access at all stores.

--Christine Marie Nielsen, Briefing.com

09:36 am Urban Outfitters Inc. (URBN)

21.16: Urban Outfitters on Thursday reported first quarter results that fell short of Wall Street's expectations, hurt by increased markdowns and weak same store sales. Specifically, the company, which operates under the Anthropologie, Free people, and Urban Outfitters brands, said net income declined to $20.3 million, or $0.12 per share, from $27.4 million, or $0.16 per share, a year earlier. That was three-cents below the Reuters Estimates consensus.

Revenue for the period grew 16.7% to $270 million, versus the consensus estimate of $274.14 million. The company attributed the increase to a 22% increase in the number of stores in operation, a 65% jump in Free People wholesale sales, and a 17% gain in direct-to-consumer sales. That, however, was partially offset by a 3% decline in total company same store sales during the quarter. By brand, same store sales decreased by 2% at Anthropologie and 4% at Urban Outfitters, and increased by 14% at Free People.

"The recent seismic shift in women's fashion presents both challenges and opportunities for our company," stated chairman and president Richard Hayne. "In order to better capitalize on future opportunities, we appropriately applied heavy markdowns during the first quarter to turn slower moving merchandise and rationalize our weeks of supply."

For the latest quarter, Urban Outfitters said gross margin decreased by 636 basis points year/year, due to aggressive markdowns to clear seasonal merchandise and an increase in store occupancy rates, as a percentage of net sales, as a result of the reduction in same store sales.

Based on the disappointing first quarter results, shares of the company traded sharply lower in pre-market activity. Amid declining sales trends, the stock has fallen more than 36% since reaching a 52-week high in November, and is down approximately 15% already this year.

--Richard Jahnke, Briefing.com

09:23 am Movie Gallery, Inc. (MOVI)

3.16: Movie Gallery Inc. seemed somewhat larger than life when it said Thursday that it saw first-quarter earnings of $0.90 per share, $0.02 better than the Reuters Estimates consensus of $0.88, thanks largely to its acquisition of rival Hollywood Entertainment Corp. Revenues for the latest period rose 2.5% year over year to $4.22 bln versus the $4.24 bln consensus.

Movie Gallery's shares have fallen 90% over the last year as a result of online competition of the likes of Netflix, Inc. (NFLX).The company, the number two video store operator in the U.S. with approximately 4,800 stores, reported same-stores declined 6.5%, reflecting continued softness in the video rental industry.

Joe Malugen, Chairman, President and Chief Executive Officer of Movie Gallery, said in a press release that the video rental industry also continues to be challenged by a soft home video release schedule, but that recent box office successes are encouraging. He said Movie Gallery is pursuing a comprehensive set of initiatives to drive revenues, maximize margin opportunities, and further improve its operating efficiencies.

The market, however, remains unconvinced as shares continue to languish at multi-year lows. Not helping matters, currently the short interest is 60% of the float. Yet, today shares are moving back a bit from dismal depths in the pre-market after sales beat estimates.

In the first quarter of 2006, the company closed 46 stores, some of which where overlap trade areas served by competing Movie Gallery and Hollywood stores. In total, this effort is expected to be beneficial to net income during 2006.

--Christine Marie Nielsen, Briefing.com

09:19 am News Corp.

18.00: The good news just keeps on coming from the media and broadcasting industry. For all those not tuned in, Disney (DIS) and Time Warner (TWX) kicked off the season with big hits, following last night by mega-media giant, News Corp. Viacom (VIA), the cable and film company run by Sumner Redstone, also broadcast an upside report due to higher film revenues.

The positive momentum continues for News Corp, a suggested holding in our Active Portfolio, as profits exceed forecasts and the street's expectations. In the third quarter, earnings of $0.26 per share topped consensus by six cents. Net income grew 14% to $1 bln driven by double-digit percentage increase in its TV, cable, and magazines segments, along with a $90 mln improvement at SKY Italia. The satellite broadcast network added 112k subs in the quarter bringing its total to 3.710 mln, up 14.6% y/y. Total revenues rose 2.6% year/year to $6.2 bln. Demonstrating its financial flexibility, the company doubled its share buyback program to $6 billion initiated last June.

MySpace, the ultra-hip online community, expanded to over 70 million registered users, solidifying its preeminence as one of the fastest growing sites on the Internet, according to the company. News Corp launched Mobizzo this quarter, a comprehensive new destination for mobile content. Like Disney, News Corp is aggressively developing new ways of distributing and monetizing its content across a multitude of new media platforms.

Considering the current business trends and strong advertising markets, News Corp could surpass its forecasts of EBIT growth of 12% this year. Given its strong operating momentum and long-term growth potential, News Corp remains a standout amongst its peers. Notwithstanding the 22% gain since we added to the Active Portfolio, we think the stock remains attractively valued.

--Kimberly DuBord, Briefing.com

09:43 am Rare Hospitality: Susquehanna Financial initiates Positive. Firm believes the combination of the steady LongHorn operations, coupled with the high growth long-term potential of the Capital Grille concept, gives investors the opportunity to play two different segments of the restaurant industry.

09:43 am Mortons Restaurant Group: Susquehanna Financial initiates Positive. Firm believes that upscale casual and fine dining are the most attractive restaurant segments, given their relative insulation from consumer pressures, less competition, and strong operational performance.

09:41 am JDA Software: Brean Murray initiates Strong Buy. Target $20. Firm believes that annual revenues remain stable, despite lumpy execution, driven by a predictable maintenance stream and the co's announced acquisition of Manugistics, which should be significantly accretive to '06 and '07 EPS.

09:40 am Immersion Corp: Thomas Weisel downgrades Outperform to Peer Perform. Firm downgrades rating on stock based on the belief that the core business remains soft, especially gaming, future royalty payments by Sony and Nintendo look unlikely based on recent announcements and upside to current $90.7 mln Sony judgment now seems less likely, in their view, following Sony PS3 controller announcement this week.

09:39 am Ensco: Clear Asset Mngmt initiates Buy. Target $60. Firm is saying that with oil prices over $70 per barrel, more difficult properties have become more economically feasible to drill and ESV has been there to capitalize on this opportunity.

09:39 am Federated: Oppenheimer upgrades Neutral to Buy. Firm saying that as the consolidator, and the strongest operator in the department store sector, the co is positioned to produce substantial earnings growth and returns to shareholders.

09:37 am Option Care: Jefferies & Co downgrades Buy to Hold. Target $16 to $13.5. Firm downgrades rating on stock after the co reported results below consensus; firm says margin erosion in OPTN's specialty pharmacy segment makes them question the co's ability to meet its 2006 guidance without making acquisitions, and valuation seems pricey.

09:32 am Teva Pharm: Banc of America Sec reiterates Neutral. Target $45 to $35. Firm cuts target following earnings miss. The firm says the co did not adequately address the key issue. The of has the generic industry changed so much that the only real profit is going to come from the 6-mo. exclusivity periods? The firm says Teva's US generic business reported 0% growth, and the co defended that "as expected" it was a period when there were no major new launches. The firm says when asked about major launches in the quarter results not in the year-ago period, such as Oxycontin ER, Zithromax, Allegra, and others -- the co indicated that without new launches in the quarter, there would be no offset to natural price erosion. The firm is also somewhat concerned that the undisclosed buyout price for Copaxone could be an eventual burden in 2008.

09:31 am Freeport-McMoRan: RBC Capital Mkts reiterates Sector Perform. Target $65 to $73. Firm ups target to reflect their new gold price forecast. The firm says they believe Freeport would be an attractive target to senior metals and gold producers. The firm says the quality and uniqueness of Grasberg would likely lead to competing bids if an offer were made.

09:29 am TOM Online: Brean Murray downgrades Strong Buy to Accumulate. Target $30 to $28. Firm is saying that TOMO remains one of their favorite long-term picks in the China Internet sector. The firm notes the co delivered solid 1Q06 results, continues to widen its lead on #2 Sina (SINA) and is well positioned to monetize emerging services such as wireless micro payments (UMPay) and VoIP (Skype). However, the firm says they are reducing their ests to reflect a soft 2Q06 outlook due to softer S.M.S and W.A.P revs. The firm says they had also projected higher rev contributions in 2Q06 from the World Cup in their previous model.

[ReturntoSender]

From Briefing.com: 5:14PM Market Wrap : Stocks tumbled for a second straight day as realization that interest rates are still going higher, perhaps much higher than what has been priced into the market so far, prompted broad-based consolidation which closed all three major averages down at least 1.0%. The absence of any notable leadership, as all ten economic sectors finished in negative territory, and above average volume to the downside lending even more conviction behind another dismal performance, kept buyers sidelined heading into the weekend.

4:32 pm Weekly Wrap

The stock market had a very rough week. Reality finally hit home on the interest rate front.

The S&P 500 index was dead flat on Monday and Tuesday. The reason was simple. The market was awaiting the Fed's policy announcement on Wednesday. Another 1/4% hike in the fed funds rate to 5% was fully expected, and it happened. There were also high hopes that the Fed would give an indication that it would either pause at the next meeting and not raise rates then, or that it would indicate that the rate hikes were over. That didn't happen.

Instead, the Fed policy statement said "some further policy tightening may yet be needed" and that the "extent and timing" was uncertain. The statement also said, to no one's surprise, that the upcoming data would be critical in determining policy. After all, if the economy weakens significantly, the Fed probably won't raise rates again. If inflation picks up, the Fed will keep raising rates.

The problem was that the market was hoping to look past the top of the interest rate cycle while economic growth remained strong. Now, there are by no means any assurances that the Fed won't raise rates again. In fact, if economic growth continues to put pressures on resource utilization, more rates hikes are likely. The market is not likely to get the best of both worlds - strong economic and earnings growth and no more rate hikes.

The S&P vacillated on Wednesday after the announcement and closed down just 2 points.

Then the selling started. The S&P plunged 17 points on Thursday. This was at times ascribed to a continued sharp rise in commodity prices or to a weaker than expected April retail sales reports. But the commodity story is by no means new, and the retail data could have been spun as a reason why the Fed would be cautious. The real reason for the selling was the realization that interest rates are still going higher, perhaps much higher than was priced into the stock market.

The selling continued on Friday, and for the same reason. There was no news, and oil prices were actually down a bit. Yet the S&P dropped sharply again.

This week, it was all about the Fed.

Earnings season essentially closed out. Over 90% of the S&P 500 have now reported first quarter earnings and the reports tail off sharply in the weeks ahead. Oil is holding well above $70 a barrel. The 10-year note yield has backed up to 5.18% from 5.11% at the end of last week as it continues its steady march higher.

The focus in the weeks ahead will be on the incoming data. The market is caught in a bit of a vise. Strong economic data represents a risk in that it may lead to the Fed raising rates. Weak economic data undermines the market optimism about earnings growth. Furthermore, any uptick in inflation data could send tremors through the market. The stock market is not yet priced for further rates hikes which may well be coming. This reality set in last week, and some further consolidation may yet be needed.

 
 Index      Started Week Ended Week Change % Change  YTD  
 DJIA         11577.74    11380.99  -196.75  -1.7 %  6.2 %  
 Nasdaq        2342.57     2243.78   -98.79  -4.2 %  1.7 %  
 S&P 500       1325.76     1291.24   -34.52  -2.6 %  3.4 %  
 Russell 2000   781.83      742.40   -39.43  -5.0 % 10.3 %

4:20 pm : Stocks tumbled for a second straight day as realization that interest rates are still going higher, perhaps much higher than what has been priced into the market so far, prompted broad-based consolidation which closed all three major averages down at least 1.0%. The absence of any notable leadership, as all ten economic sectors finished in negative territory, and above average volume to the downside lending even more conviction behind another dismal performance, kept buyers sidelined heading into the weekend.

Before the bell, investors found some comfort after the U.S. Trade Deficit unexpectedly narrowed for a second straight month in March to $62 bln. However, realizing that such a decline will leave an upward revision to Q1 GDP growth -- a red flag for inflation hawks -- and additional data that showed the largest jump in import prices since September, which will weigh heavily on the April Trade Deficit, continued to underpin a sense of nervousness throughout the Treasury market. As a result, stocks again took a bearish cue from rising interest rates and traded in sympathy with further deterioration in bonds which lifted the yield on the 10-yr note to another 4-year high (5.18%).

With no notable earnings reports on the docket and over 90% of the S&P 500 having already reported Q1 results, investors also turned their attention to further weakness in the dollar -- a concern that we're not buying into as a presumed bearish factor for the market. After all, a modestly weak dollar is actually good for U.S. equities since it increases demand for U.S. products and increases the value in dollars of overseas profits for U.S. companies. Nevertheless, the recent damage done on the commodity price front due in part to a weaker greenback making dollar-denominated assets like gold and oil more attractive, continued to act as an overhang even though crude prices fell 1.7% and gold lost 1.2%. In fact, modest consolidation throughout commodities merely prompted investors to lock in profits from this year's two best performing sectors. Energy and Materials plunged 2.9% and 2.1%, respectively. To wit, Alcoa (AA 34.79 -1.23) was the worst performing Dow component Friday with ExxonMobil (XOM 62.20 -1.26), ranking third on the price-weighted index with a 2.0% pullback, also contributed to the Dow snapping a five-week winning streak.

Speaking of Industrials, the sector has been the third best performer in 2006 and, as one might deduce from all of this year's leaders getting hit the hardest Friday, turned in the day's third worst performance. Caterpillar (CAT 77.81 -1.81), United Technologies (UTX 64.87 -0.95), and Honeywell (HON 42.91 -0.63) -- all recently at 52-week highs -- were also influential Dow components that weighed on blue chips throughout the session.

On a positive note, chip maker Analog Devices (ADI 36.03 +1.35) beat estimates by three cents and issued upside guidance, which plays into our Overweight rating on Technology; however, follow-through consolidation throughout the influential sector also took a toll on investors asking themselves if they should in fact "sell in May and go away." BTK -1.1% DJ30 -119.74 DJTA -2.1% DJUA -1.0% DOT -1.0% NASDAQ -28.92 NQ100 -1.3% R2K -2.0% SOX -0.8% SP400 -1.8% SP500 -14.68 XOI -2.2% NASDAQ Dec/Adv/Vol 2295/740/2.32 bln NYSE Dec/Adv/Vol 2583/663/1.85 bln

4:15PM Afternoon Wrap: Heavy selling, Nasdaq 100 under water for the year : The week started out on a solid note with all the averages (except Nasdaq 100/Comp) establishing minor new 52-wk highs. Over the last three days, however, the market has been hammered with the breakdown coming amid strong volume suggesting institutional selling (Nasdaq 2.332 bln, NYSE 1.848 bln). Friday's losses leave the Nasdaq 100 under water for the year (2005 close 1645.20), below its 200 day averages (1650) and back near the bottom of its year long trading range (1633). Commodity/energy, which provided leadership of late, helped pace the way lower Thur/Fri. The weakest sectors Friday included: Coal -5.1%, Steel -4.5%, Mining -4.3%, Oil Service -4%, Gold -4%, Natural Gas -3.1%, Commodities Index -2.9%, Railroad -2.8%, Paper -2.3%, Broker/Dealer -2.2%, Oil 2.2%. Little was in the plus column other than Healthcare +0.4% and Health Provider +0.13%.

1:42PM NASDAQ 100 Trust hovering just above support (QQQQ) 40.29 -0.45 : Highlighted the 6 month range floor in early trade at 40.19/40.16 (see 09:34, 09:55 updates) with the index hovering near this area for the last several hours (recent session low 40.19). While is has edged slightly off the low, will need to see gains back above 40.40 and the 40.56/40.63 area to begin to improve. The next areas of interest on the downside is in the 40.08/40.00 and 39.90.

10:35 am Mittal Steel (MT)

40.00 +0.75: The world's largest steel producer, Rotterdam-based Mittal Steel Co. Friday shook up European markets, not to mention the commodities world, when it announced it had obtained U.S. antitrust clearance for a bid to acquire its rival and second-largest steelmaker Arcelor SA. European authorities are due to report on the matter June 7.

Mittal has been bidding for Luxembourg-based Arcelor since early 2006, with its latest figure upwards of $27 billion. Should the purchase occur, it would be the largest such deal seen in the steel industry.

Arcelor has said it will ask its shareholders May 19 to back the repurchase of up to 150 million of its shares as part of a strategy against Mittal's hostile offer. However, Mittal executives have said Arcelor's proposed buyback program could be in violation of regulations in some jurisdictions. It wasn't clear which jurisdictions or regulations the company may have been referencing, however.

Arcelor's other defense maneuvers have included a transfer of Dofasco Inc., which the company purchased in March, to a trust based in the Netherlands in an effort to keep Mittal from selling it to German steelmaker ThyssenKrupp (TKAG) should a takeover occur.

Both companies said Friday that they had seen declines in first-quarter profits. Mittal said it saw profits of $743 mln, or $1.06 a share, down from the year-ago total of $1.15 bln, or $1.78 a share. Arcelor reported a profit of $968 mln for the January through March quarter, down nearly 20% from $934 mln a year earlier as steel prices fell and oil costs rose. Financial results for the period have been converted from euros.

--Christine Marie Nielsen, Briefing.com

10:15 am Taser International Inc. (TASR)

9.38 -0.76: Shares of Taser International Inc. plunged on Friday, falling nearly 10% in early trading, after the stun gun maker said it would delay filing its first quarter report with the Securities and Exchange Commission due to concerns about its methodology for calculating certain expenses. The stock, which foundered last year amid a host of legal issues and bad publicity over injuries from the use of its products, is up about 34% year to date.

In an SEC filing, Taser said its method for calculating indirect manufacturing expense applied to inventory was incorrect and also identified a clerical error in the calculation. As a result of the errors, the Scottsdale, Arizona-based company said adjustments were required to correct the cumulative impact both in the fiscal first quarter and relevant prior periods. The changes will have no impact on revenues for the periods, it noted.

Taser did not say when it expects to file its quarterly report.

Although market sentiment towards the beleaguered company has improved dramatically in recent months, with investors returning to the stock, we believe it is prudent for investors to lock in gains at this juncture as the company continues to recover from a challenging year, as well as recent accounting concerns.

--Richard Jahnke, Briefing.com

09:26 am Expedia Inc. (EXPE)

19.66: Expedia Inc. said Thursday that its first quarter profits slipped 51% as higher expenses offset modest revenue growth, sending shares sharply lower in pre-market activity. The travel services company, which was spun off from IAC/InteractiveCorp. (IAC) last year, earned $23.3 million, or $0.06 per share, down from $48 million, or $0.14 per share, in the year ago period. On an adjusted basis, earnings were $57 million, or $0.15 per share - six-cents below the Reuters Estimates consensus.

Revenue inched up 1.8% to $493.9 mln from $485 mln last year, the company said, while gross bookings increased 14% for the quarter. Analysts on average were looking for revenue of $544.37 mln, according to Reuters Estimates. The increase in total revenue was driven by higher merchant hotel and advertising revenues, partially offset by a decline in worldwide agency air revenue. Expedia's domestic revenue fell 4% year/year, but international revenue grew 24%. Meanwhile, domestic gross bookings increased 10% and international gross bookings increased 26%, or 34% excluding the impact of foreign currency translation.

Gross profit for the period was $375 mln, up 1% from a year earlier. However, gross margin was down 63 basis points to 75.8%, largely due to the inclusion of lower gross margin revenue from a recently acquired travel services destination company. Operating income, meanwhile, decreased by 35% to $89 million, driven by higher operating expenses, particularly higher selling and marketing and general and administrative expenses.

In a statement, Chairman and Senior Executive Barry Diller said, "While we anticipated negative growth in the first half of 2006, our performance this quarter was far below those expectations." "We increased costs in many sectors - necessarily we believe for our long term growth - but didn't generate the revenues to offset the increased expenses," he added.

Amid concerns of heightening competition, shares of Expedia have fallen approximately 18% since the beginning of the year. With increasing costs and continued industry pressures weighing on the company, as evidenced in the latest quarter, we would remain on the sidelines with respect to the current investment proposition.

--Richard Jahnke, Briefing.com

09:19 am Kohl's Corp (KSS)

56.85: Kohl's Corp. is allowing shareholders to end their week on a high note after announcing first-quarter earnings of $167.2 million, or $0.48 per share, $0.02 better than a Reuters Estimates consensus of $0.46. The store said the positive financials were due largely to a surge in same-store sales in April.

Total sales at the the Menomonee Falls, Wisconsin-based company jumped 16.1%, climbing to $3.18 bln from $2.74 bln a year ago. Sales at stores open longer than a year climbed 6.9% in the quarter, helped in large part by a 13.4% surge last month. Revenues were said to have risen 16.1% year over year to $3.18 bln, versus the consensus of $3.17 bln.

While Kohl's issued in-line guidance for the second quarter, with earnings per share of $0.61 to $0.64 versus $0.62 consensus, it raised its guidance for the fiscal year of 2007. The company said it saw earnings per share of $2.91 to $3.02, up from $2.74 to $2.87. That compared to consensus of $2.91.

The company, which has a market cap of about $19.64 bln, continues its impressive growth pattern. Kohl's opened 17 new stores in the quarter and Kohl's officials said they expect to open another 85 locations in the third and fourth quarters of the year. The company said it expects to open a total of 200 new outlets in 2006 and 2007 and as many as 500 stores over the next five years.

In March, Kohl's announced it entered into a strategic credit card alliance with JPMorgan Chase (JPM). Under the terms of the deal, the investment bank purchases Kohl's private label credit card accounts and the outstanding balances associated with the accounts for approximately $1.5 billion. Kohl's handles all customer service functions and received payments related to the profitability of the program.

Kohl's can convert its receivables connected to the deal into cash, and that enables Kohl's to repurchase stock, fund its store expansion, and use the funds for general corporate purposes. In conjunction with the deal, Kohl's board authorized a $2 billion share repurchase program that the company said Thursday is expected to be completed in approximately two to three years.

--Christine Marie Nielsen, Briefing.com

08:41 am Nvidia Corp (NVDA)

28.30: Shares in the world's number three computer-graphics chip maker, rose in extended trading following a solid quarterly result despite seasonal weakness. Net income grew 41% to $90.7 mln, or 23 cents per share on rising demand for chipsets. Excluding costs from stock-based compensation, per share profits of 29 cents bested expectations by a penny.

Revenues rose 16.8% over the prior year and 8% sequentially to $681.8 mln - a slight upside over estimates. The Santa Clara, California-based company reported seeing broad-based growth in graphic processor units (GPUs), handhelds, and consumer electronics. It looks to the adoption of Microsoft's (MSFT) Vista, high-definition video, and Sony's (SNE) Playstation 3 released in November, as key growth drivers. Gross margins widened by 220 basis points q/q to $42.4% due to an improved product mix. Of concern, operating expenses grew 15% sequentially and inventories rose 36%, which the company indicated was due to product ramps.

Nvidia forecasts sales will be unchanged for the second quarter, along with flat gross margins and higher operating expenses. EPS guidance of $0.29, excluding option expenses, is a penny ahead of consensus. At 23.6x forward earnings, the stock appears priced to perfection. Given its seasonality, we would be sitting on the sidelines throughout the summer looking for a better entry point ahead of the third quarter ramp into the holiday season.

--Kimberly DuBord, Briefing.com

09:40 am General Motors: KeyBanc Capital Mkts / McDonald upgrades Hold to Buy. Target $35. Firm ups rating and target based primarily on their belief that 1) the UAW-GM-DPH negotiations will be successfully completed with no material labor disruptions; 2) GM's earnings will improve materially in 2006 and 2007 driven primarily by the introduction of the co's new full-size SUVs and pickup trucks; and 3) cost savings initiatives. Additionally, the firm says they are more bullish on the longer-term outlook for GM as they believe 1) the 2007 contract negotiations with the UAW will likely result in a material reduction in structural costs; and 2) the changes underway to streamline the co's global product development process will yield material benefits in terms of lowering product costs, reducing product development times and improving product quality.

09:39 am ViaSat: CE Unterberg Towbin downgrades Buy to Market Perform. Firm downgrades based on the co's growth, which the firm thinks will remain robust. While firms believes upside is possible from commerical endeavors, they do not think it is sufficient to change estimates enough to change their recommendation. Firm says there are business units that could provide upside to the revenue estimates, but firm has already built in substantial growth for commercial broadband, information security and MIDS, the areas most likely to deliver upside.

09:38 am Newfield Expl: UBS reiterates Buy. Target $55 to $65. Firm is saying their takeaways from the analyst meeting were 1) mgmt's high conviction in success of play came through in the presentation. 2) recent wells being drilled in play are exceeding baseline assumptions & would rank in top 40% in Barnett shale; 3) potential upside to their N.A.V assumptions exists in several areas (e.g costs, infill, acreage prospectivity, multi zone completion).

09:35 am Acorda Therapeutics: Cowen & Co initiates Outperform. Firm is saying that they are optimistic that Fampridine's Phase III trial will be successful. As walking disability is a major unmet need in multiple sclerosis, firm's consultants expect Fampridine would enjoy meaningful use, and firm believes that it could have $175 - $200 mln peak potential. Firms says that while there is clinical development risk associated with Fampridine, Acorda is trading at a deep discount to its peer Phase III cos suggesting that Wall Street is giving it little credit for Fampridine's potential. Firm expect Acorda to outperform the market over the next 12-24 months as Fampridine successfully completes its Phase III program.

09:34 am Threshold Pharma: Lazard Captial downgrades Buy to Hold. Firm is noting that TH-070 Phase III trial placed on clinical hold due to apparent drug-related significant liver enzyme abnormalities. The firm says given that TH-070 is used by oncologists at significantly higher doses than the current BPH trials with no signs of liver toxicity, this adverse event was unexpected.They are removing TH-070 worldwide sales ests from their model. They expect safety concerns to outweigh possible positive efficacy results from the upcoming Phase II and Phase III trial results, reducing the likelihood of approval and market potential if approved.

09:33 am Basic Energy Services: RBC Capital Mkts reiterates Underperform . Target $36 to $45. Firm is saying BAS has not seen any change in customer behavior despite the pullback in natural gas prices. The firm says the market conditions remain "very" strong across all operating segments.