Hat Trick For Shorts

Stocks got routed Friday, with the Dow posting its
third straight triple-digit loss.  The Dow has not been down
three days in a row since January 2003. It
was the worst week in the Dow since August 2004 and the biggest one-day
percentage drop in the Dow since March 2003.

For the week, the transports fell 5.9%, the Russell 2000 lost 4.9%, the
Nasdaq, -4.4%, the Dow, -3.5%, and the SPX, -3.1%. Semis lost 8.2% and oil
stocks fell 5.8%.

Disappointing results from IBM raised concerns about a slowing economy.
IBM reported 0.85 vs a 0.90 estimate, revenues were $22.9 billion. Net
income was $1.41 billion.

Weaker than expected economic news also contributed to the negative
sentiment. The Empire Manufacturing Index plummeted to  3.1; the
consensus was 19.0.  University of Michigan sentiment was 88.7,
lower than expected. It is the 4th month of downside activity in this index.
Export prices for March rose  0.7% import prices rose 1.8%.

Sectors are rotating. Out: Tech and deep cyclicals such as steel stocks.
Basic materials fell 7.5% this week. In: Drugs–up 4% this week. Merck is up
4.8% this week; PFE is up 4.2%, LLY, +8.4%.

Trader talk: What is the bond rally telling us? The economic data says
economy is slowing down.

General Electric
(
GE |
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and reported more than a billion dollars more than the expected revenue.
The company also guided the low end of estimates higher.

Citigroup
(
C |
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$15 billion in stock over the next 18 months.

Eli Lilly
(
LLY |
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judge ruled that the Zyprexa patent is valid.

Knight Ridder
(
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JB Hunt
(
JBHT |
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Sun Microsystems
(
SUNW |
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Genentech’s
(
DNA |
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treating breast cancer. The market potential is $4 billion.

Enforcement is back at the IRS. IRS audits are up over the 1 million mark for
the first time since 1999. The agency referred criminal 3000 cases to the
Justice Department in 2004 for prosecution and expects the number to be higher
this year.

The Nasdaq may be in talks to buy Instinet. Price: $2.5 billion.

Happy Birthday McDonald’s! The home of the Golden Arches turns
50 today. Ray Kroc opened the first restaurant in Des Plaines, IL; today, there
are more than 30,000. If you purchased 100 shares of MCD on the 1965 IPO at
$22.50, your investment would be worth $2.4 million today.

Looking forward: MMM, Coca-Cola, Altria, eBay, Intel, Yahoo and Google all
report next week.

Strong sectors are:  Biotech
(
$BTK.X |
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Pharmaceuticals
(
$DRG.X |
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(
$HMO.X |
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Weak sectors are:   Disk Drives
(
$DDX.X$ |
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-4.91%    Computer Hardware
(
$HWI.X |
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(
$SOX.X |
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Stocks in the News

Prudential upgraded General Motors
(
GM |
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at a 12-year low and the stock currently yields 7.5%, although that dividend may
be cut. Pru thinks 2005 will the be the worst year for GM and that things look
better for 2006.

Bank of America cut United Healthcare
(
UNH |
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Cree Research
(
CREE |
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Rambus
(
RMBS |
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RF Micro Devices
(
RFMD |
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Flir Systems
(
FLIR |
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MRO Software
(
MROI |
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Extreme Networks
(
EXTR |
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Affymetrix
(
AFFX |
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CTAS |
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favorably in Business Week’s ‘Inside Wall Street.’