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Producer prices fell in April

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Producer prices fell for the first time this year, as today's producer price report from the Labor Department showed prices declined by 0.2% in April. Economists were looking for a rise of 0.4%.

Food prices fell 3.2%, the biggest decline in 28 years, led by a record 46.5% decline in vegetable prices. Energy prices rose 2.5%, driven by increases in gasoline, heating oil and natural gas. Excluding food and energy prices, the core rate rose a modest 0.1%, which was in line with economist's forecasts.

Today's PPI report confirms that inflation remains under control. The PPI for finished goods has fallen 2% in the past 12 months, while the core rate is up just 0.4% in the past year.

Last week, the Federal Reserve held off on raising interest rates and today's low inflation most likely has the Fed at ease with that decision.

Stock futures show gains

While the PPI falls, stock futures are rising this morning as S&P futures show a gain of 10 points at 1,256. NASDAQ futures are also on the rise, adding 4.5 points at 1,078.50, while Dow futures trade up 42 points at 10,075.

Fair value for the S&P 500 today is $0.37. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.38 and set for selling at $-1.02. Fair value for the NASDAQ-100 today is $3.25.

DRAM prices drop 7.7% in Taiwan

Bear Stearns is saying a "ripple effect" from another drop in DRAM prices on Friday in Taiwan to $2.03 (-7.7%) that brings this week's decline to 25% is due to the lack of PC OEM buyers in the market and dumping of excess inventory has been weighing on prices.

This morning, Merrill Lynch says that channel check indicate that Micron Technology (NYSE:MU) $22.85 is tracking towards a slight sequential decline in bit shipments; also, near-term picture for DRAM pricing looks tough, with inventory rebuilding and MU and Samsung preparing t inflict additional pricing pain on Hynix. Merrill cuts MU May estimates to $0.21 from $0.32 and August FY02 estimates to $-0.13 from $0.21. Reiterates "near-term strong buy" rating.

Forbes article says, "short Inter-Tel."

Forbes reports that Stephen Worthington of the Barbary Coast hedge fund warns investors away from Inter-Tel (NASDAQ:INTL) $21.50, a provider of business telephone systems. According to the article, nearly all of the company's Q1 profit came from a nonrecurring $20 million arbitration settlement. Inter-Tel (INTL) is also said to have a troubling acquisition history and is now experiencing problems servicing customers. Mr. Worthington was quotes as saying, "Short the stock and cover at $12."

Jeff Bailey
Senior Market Technician
Option Investor

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