MAJOR PAPERS:

• According to people familiar with the discussions, the Wall Street Journal reported that Microsoft Corporation (NASDAQ: MSFT) has held discussions with Time Warner Inc (NYSE: TWX) and News Corporation (NYSE: NWS), among others, about joining it in a deal that could lead to the breakup of Yahoo! Inc (NASDAQ: YHOO). Some of the sources said the preliminary talks are unlikely to result in a deal with Yahoo!
• Johnson & Johnson (NYSE: JNJ) is reportedly in exclusive talks to sell its wound-care business Ethicon to the private-equity arm of JP Morgan Chase & Co (NYSE: JPM), according to the Wall Street Journal. Terms of the potential deal were not disclosed.

• Sources familiar with the inquiry said that the Justice Department has opened a formal antitrust investigation into a deal that would allow Google Inc (NASDAQ: GOOG) to provide some search advertising for Yahoo!. The Washington Post reported that investigators will demand documents from Google and Yahoo!, as well as other large companies in the media and Internet industries.

• Reuters reported that regulators in the European Union are looking at the long-term effects of BHP Billiton Limited's (NYSE: BHP) $170B bid for Rio Tinto Group (NYSE: RTP). Sources familiar with the EU questionnaire said regulators have asked competitors and customers about effects of the deal on their businesses through 2015.

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Since 1975, Lakshmi Mittal has turned ArcelorMittal (NYSE: MT) into a global steel powerhouse. As a result, he's worth in excess of $45 billion. Actually, as an indication of his power, Mittal is now a board member of Goldman Sachs Group, Inc. (NYSE: GS).

And, no doubt, his dealmaking is likely to continue. In fact, there are reports that ArcelorMittal will make a play for Rio Tinto Group, which is the #2 ore producer in the world. The company is currently ensnared in a hostile takeover from BHP Billiton Ltd. (NYSE: BHP). Basically, ArcelorMittal may make an equity investment, which could exceed $10 billion.

Why? ArcelorMittal needs to find ways to stabilize its raw material supplies. After all, with pricing pressures, it's important to contain things.

Then again, this may ultimately be mostly noise -- to get traders excited. But, in light of ArcelorMittal's global power, investors will definitely listen.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Rio Tinto (NYSE:RTP) is 4% higher, apparently because of rising commodities prices.

BHP Billiton (NYSE:BHP) is up 3%, also due to rising prices for metals.

Ford (NYSE:F) is off 2% on predictions of weak June sales.

Fear of falling car sales is also driving GM (NYSE:GM) down by almost 2%.

Stocks may trade different in the pre-market than they do in the regular session.

Douglas A. McIntyre is an editor at 247wallst.com.

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MAJOR PAPERS:

• Future crude oil supplies may be a lot tighter than thought. That is what the International Energy Agency in Paris is expected to find when it releases its assessment of the world's 400 major oil fields in November, according to the Wall Street Journal, a reversal from previous reports and is based on a lack of investment and aging oil fields.
• The Institute for Safe Medication Practices, a nonprofit safety organization, found serious side effects linked to Pfizer Inc's (NYSE: PFE) Chantix, a smoking cessation drug. Chantix, which has been banned by the FAA for use by pilots and air-traffic controllers, is already tied to psychiatric issues, including depression and suicide, according to the Wall Street Journal, and the report also points to heart trouble, seizures and diabetes.

• The New York Times reported that the Jacksonville Police and Fire Pension Fund has accused American International Group Inc (NYSE: AIG), along with several of its executives, of inflating its stock price artificially by understating the company's exposure to the subprime mortgage crisis. According to the lawsuit, AIG's Q1 loss of $7.8B shocked investors because the insurance giant assured them that any losses on credit insurance "would be limited".
• Following speculation a Chinese entity would look to take a stake in Australian miner BHP Billiton Limited (NYSE: BHP), Huang Tianwen, the president of Sinosteel Corp, said the company has not formed a bid for the firm. The Australian reported that Chinese steel mills may look to buy into iron ore miner Fortescue Metals Group.

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BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP) are both up about 5% as mining stocks rebound in London trading.

BCE (NYSE:BCE) is off over 16% after a Canadian court blocked the company's LBO.

NetApp (NASDAQ:NTAP) is off almost 12% on weak earnings.

NetEase (NASDAQ:NTES) is down about 3% after reporting numbers worse than Wall St. expectations.

Stocks may trade differently in the premarket than they do during the regular session.

Douglas A. McIntyre is an editor at 247wallst.com.

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• China Watch: Game Plan for Earthquakes, Inflation
• Shanghai Stock Market Falls After Quake

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Before the bell: Futures lower ahead of CPI

Macy's (NYSE: M), which was forecast to report a loss of a penny a share in the first quarter, said the difficult retail environment hurt sales and it incurred costs from a restructuring. The loss came to $59 million, or 14 cents a share, compared with a profit of $36 million, or 8 cents a share, a year earlier. (As the numbers are quite fresh, it's possible they include one-time item not yet sorted out and not comparable to analyst expectations.)

John Deere (NYSE: DE) said its second-quarter profit rose 22%. Deere experienced increased demand for its farm equipment, as crop prices kept rising, posting an 18% increase in sales. Profit for the quarter jumped to $763.5 million, or $1.74 per share, a penny below analyst estimates. From premarket early action, it seems shares of DE might start much lower.

Freddie Mac (NYSE: FRE) also reported this morning, saying its first quarter loss widened to $151 million as the U.S. housing market worsened. Somehow, though, the results were not as poor as expected and FRE's loss of 66 cents a share beat estimates of a 92 cents a share loss. FRE's shares are up over 6% in premarket trading.

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MAJOR PAPERS:

• The Wall Street Journal reported that Ford Motor Company (NYSE: F) CEO Alan Mulally isn't done cost-cutting. According to people close to the situation, Mulally is considering more job cuts, selling its Volvo brand and closing the troubled Mercury brand.
• BHP Billiton Limited (NYSE: BHP) CEO Marius Kloppers strongly criticized Rio Tinto Plc (NYSE: RTP) and its CEO yesterday, the Financial Times reported. BHP Billiton has outperformed Rio Tinto in several areas, including share price appreciation and EPS growth, said Kloppers, adding, "On every metric I can envisage they [Rio] have been beaten."

• According to the Economic Times, AT&T Inc (NYSE: T) is reportedly in preliminary talks with Malaysia's Maxis Communications about buying its 74% stake in Indian cellular phone company Aircel, sources said.
• The United Auto Workers union has rejected several "generous" benefit and wage proposals, according to American Axle & Manufacturing Holdings Inc (NYSE: AXL). In a statement yesterday, the Detroit News reported that American Axle said while tentative agreements had been reached on several issues, the UAW "repeatedly rejected" other proposals that were "considerably higher than the market rate."

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"A once in a lifetime super bull market in commodities is underway," note resource experts Mary Anne and Pamela Aden. Here, the advisors look at some favorite commodity stocks in their The Aden Forecast.

"Commodities are in a mega super rise is because of the dramatic changes in the global economy. The rise that started in commodities in 2001 has continued to expand over the years and we believe the upmove is just warming up and it has years to run.

"There are several reasons for this. The weakening dollar and low interest rates have certainly helped push up the whole sector while investment demand grew as an inflation hedge. But the key reason why the commodities are in a mega super rise is because of the dramatic changes in the global economy.

"China's need for natural resources has set off this global boom and it's been a big factor fueling the boom in emerging countries as well. It's also an important reason why the commodity moves are volatile. Supplies have become limited. So even a small disruption in supply shakes up the markets.

"We could see a contra move in the upcoming months but the major trends are very much intact, which is up for gold and silver, and down for the dollar.

"We strongly believe that staying invested during the major rise is the best way to make money, in spite of the ups and downs. The resource sector is poised to rise. Use the downs to add to your positions and plan on being a long-term investor.

"Among our portfolio holdings in the sector are DB Powershares Commodity Index Tracking ETF (ASE: DBC) and iShares GS Natural Resources (NYSE: IGE). Among individual resources companies, we recommend BHP Billiton (NYSE: BHP) and Freeport McMoran (NYSE: FCX)."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

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MOST NOTEWORTHY:

• Friedman Billings initiated Jefferies Group (NYSE: JEF) with a Market Perform citing the difficult underwriting environment and challenging credit market.
  
• JMP Securities initiated Quality Systems (NASDAQ: QSII) with an Outperform rating and $35 target. The firm expects the company's practice management and electronic medical record solutions to benefit from growth opportunities within the ambulatory market.
  
• Techwell (NASDAQ: TWLL) was assumed with an Overweight rating and $14 target at Thomas Weisel, as they expect TWLL to have continued stable revenue growth given its market leadership and increased global security demand.

OTHER INITIATIONS:

• Bernstein initiated NetSuite (NYSE: N) with a Market Perform rating and $23 target.
  
• Keefe Bruyette started Comerica (NYSE: CMA) with a Market Perform rating and $37 target.
  
• BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RTP) were assumed at ING with Buy ratings.

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MOST NOTEWORTHY:

• Bernstein upgraded shares of BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RTP) to Outperform from Market Perform as they believe urbanization in China will increase demand for metals.
  
• Prudential Financial (NYSE: PRU) was raised to Overweight from Underweight at Lehman as they believe the company's exposure to commercial mortgage-backed securities is limited.

• SL Green Realty (NYSE: SLG) and Brookfield Properties (NYSE: BPO) were upgraded at Credit Suisse to Neutral from Underperform.
  
• Yamana Gold (NYSE: AUY) was raised at UBS to Buy from Neutral.

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• Sirius Satellite Radio (NASDAQ: SIRI) was downgraded at Credit Suisse from Outperform to Neutral and the target price lowered from $3.75 to $3.
• BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RTP) were both upgraded by Bernstein from Market Perform to Outperform.
• Yamana Gold (NYSE: AUY) was also upgraded by UBS from Neutral to Buy.
• But The Gap (NYSE: GPS) was downgraded from Outperform to Neutral at Credit Suisse and the target price lowered from $25 to $20.

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MAJOR PAPERS:

• To help stabilize the housing market, the Wall Street Journal reported that the Bush Administration is planning to help create fresh funding for mortgages. The plan, which still requires final approval, is said to ease an excess-capital requirement for government sponsored organizations Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac, and the Federal Housing Administration.
• The Wall Street Journal also reported that a merger between Northwest Airlines Corporation (NYSE: NWA) and Delta Air Lines Inc (NYSE: DAL) may be derailed after Delta pilots notified executives they remain unable to reach an agreement with Northwest pilots on how to integrate pilot ranks should the two combine.
• The Financial Times reported that BAE Systems Plc (OTC: BAESY) won a $715M order to supply nearly 1,500 mine-resistant vehicles from the U.S. government.

• The Chinese government has locked out Australian mining giants BHP Billiton Limited (NYSE: BHP) and Rio Tinto Plc (NYSE: RTP) from selling iron ore into its daily spot market, the Sydney Morning Herald reported. Mining sources said that the decision may have already cost Australia up to $300M in export profits.

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MAJOR PAPERS:

• According to sources, the Wall Street Journal reported that Countrywide Financial Corporation (NYSE: CFC) is under investigation for possible securities fraud. People close to the situation say the inquiry is in its early stages but it involves an inquiry into alleged misrepresentations of the company's financial position and the quality of its mortgage loans.
• The Financial Times reported that Credit Suisse Group (NYSE: CS) has teamed up with three leading academics to create products that will deal with the potentially lucrative hedge fund replication industry. The upcoming suite of products will attempt to mechanically replicate the returns of the major hedge fund strategies.

• Rio Tinto Plc (NYSE: RTP) is expected to announce this week that its aluminum business is worth up to $20B more than current estimates, after a rise in aluminum prices; the UK Times reported that the statement could raise pressure on BHP Billiton Limited (NYSE: BHP) to increase its takeover bid for Rio.
• Asset manager Ameriprise Financial Inc (NYSE: AMP) is pairing up with MasterCard Incorporated (NYSE: MA), the Associated Press reported, to become a credit card lender for the first time, the two companies reportedly plan to announce today.

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BHP Billiton (NYSE: BHP) closed of $73.64 Thursday.

BHP announced on Feb. 6 the offer of 3.4 BHP shares per Rio Tinto (NYSE: RTP) to create the world's largest mining company.

BHP overall option implied volatility of 45 is near its 26-week average according to Track Data, suggesting non-directional risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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It is alarming to me that the same people who screw up the economy (or stand by watching) are the ones that are now promoting the remedies. They have proven without a shadow of a doubt that this is not their strong suit. The proposed economic stimulus package has bi-partisan support and calls for an estimated $156 billion of tax rebates ranging from $500 to $1,000 (+ $300 for each child) that might show up in May.

If we are going to add on to our already humungous joke of national debt, than I want to invest this capital in something that will bring a higher return on invested capital (ROIC) than the paltry one time mad money. That expenditure should be for national infrastructure projects like roadways, bridges, tunnels, and waterways.

We have all heard about the poor condition of our national infrastructure and the hundreds of billions of dollars of repair work and replacement that is desperately needed.

This alternative would bring visible results that every single person in the country would benefit from and improved linkages always stimulate economic growth. Road improvements even reduce fuel consumption by shortening routes and reducing friction both strategically and physically.

Furthermore, this form of stimulus goes directly to support middle and lower income workers, the ones hurt by the severe downturn in the construction industry. The government, like private enterprise, benefits when it can borrow cheaply and invest at higher returns. This has been historically true of infrastructure projects.

Giving people a one time hand out is like giving your kids some cash for the week end. They will enjoy it while it lasts and it won't last long. However, building something usable will have a benefit for several generations.

If you are interested in a few stocks that would benefit from this type of investment you might add the following to your watch list:

• Alcoa Inc (NYSE: AA) -- aluminum
• BHP Billiton Ltd ADR (NYSE: BHP) -- raw materials
• The Black & Decker Corporation (NYSE: BDK) -- hand tools
• Caterpillar Inc. (NYSE: CAT) -- heavy equipment
• Cemex SAB de CV (ADR) (NYSE: CX) -- concrete
• Deere & Company (NYSE: DE) -- heavy equipment
• Freeport McMoRan Copper (NYSE: FCX) -- raw materials
• General Electric Company (NYSE: GE) -- building systems
• The Home Depot, Inc. (NYSE: HD) -- construction supply
• Honeywell International, Inc. (NYSE: HON) -- building systems
• Jacobs Engineering Group, Inc. (NYSE: JEC) -- engineering
• Johnson Controls, Inc. (NYSE: JCI) -- building systems
• Lowe's Companies, Inc. (NYSE: LOW) -- construction supply
• Nucor Corporation (NYSE: NUE) -- steel
• Reliance Steel & Aluminum (NYSE: RS) -- specialty metals
• Rio Tinto plc (ADR) (NYSE: RTP) -- raw materials
• United States Steel Corporation (NYSE: X) -- steel
• United Technologies Corporation (NYSE: UTX) -- building systems
• URS Corporation (NYSE: URS) -- engineering

All of these do not present the same value and some of them, being conglomerates will be effected less than more focused companies. For example, I would expect CX or NUE to receive more benefit than GE or UTX.

• On a related note: Suburban slums -- city centers being revitalized

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of any of these stocks except for CX. RS is one of my 2008 picks.

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MAJOR PAPERS:

• Mining companies BHP Billiton Limited (NYSE: BHP) and Rio Tinto Plc (NYSE: RTP) are not only competing over iron-ore customers, but they are not competing for investors as well, according to the Wall Street Journal's "Heard on the Street." BHP says 60% of their investors also own Rio shares; Rio puts the figure at 50%.
• Prices for the top 50 branded drugs increased an average of 6.73% in 2006 and 7.82% last year at wholesale, according to market research firm Delta Marketing Dynamics. Often targeted by politicians, pharmaceutical companies are undeterred, the Wall Street Journal reported.

• According to iSuppli sources, Apple Inc (NASDAQ: AAPL) has cut its 2008 NAND order forecast and informed suppliers that its demand growth will slow in 2008 vs. 2007.
• The Boeing Company (NYSE: BA) is considering suspending work on the short-range version of its 787 jet, the -3 shorthaul, in an attempt to get production of the long-range version, the long-range -8, back on track, Flight Blogger said.

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