It hasn't been too long ago when almost every day I'd start this post by saying something like, stocks are poised for yet another day of gains, their fourth in a row. Alas, this week, I'm saying the opposite. Stock futures this morning indicate another down open on Wall Street in what could be the fourth straight day of sharp declines.

The bond market continued to show losses as bond yields continued to rise. The ten-year Treasury note shot up overnight to 5.25% from 5.13% on Thursday. This five-year high matches the current Federal Reserve benchmark rate and causes jitters among investors. Already there was the problem with the deteriorating sub-prime lending market, and now mortgage-backed securities are affected. Not to mention the effect higher yields can have on other lending and borrowing, namely business borrowing for different purposes, from deal making to needed operating cash flow.

While bond yields usually trade at or above the benchmark rate, the fact that they were below indicated some sort of expectation the Fed would cut rate. This adjustment of yields means that a rate cut is no longer seen within the next six months as the U.S. economy has been unexpectedaly resilient causing inflation expectations. To add to yield pressure is the fact the recently other central banks around the world raised rates due to strong global growth and fears of inflation, most notably was the recent ECB rate hike on Wednesday.

The Dow Jones industrial average is off over 400 points in the last three days and may continue the decline today if overseas markets are any indication. Asian markets tumbled Friday in response to Wall Street's sell-off. Japan's Nikkei fell 1.5%, Hong Kong's Hang Seng dropped 1.4%. Stocks were also lower in Europe.

Today at 8:30 a.m., the Commerce Department is due to release its report on the April trade deficit. Economists expect that the trade gap narrowed to $63.5 billion in April, from $63.9 billion in March.

Corporate news:

Imports of some newer model phones with Qualcomm Inc. (NASDAQ: QCOM) chips were barred due to patent infringement of Broadcom Inc. (NASDAQ: BRCM) chips. The decision could potentially slow the introduction of new models and may affect Motorola (NYSE: MOT) and also affect wireless providers that rely on Qualcomm's chips including Verizon (NYSE: VZ), AT&T (NYSE: T) and Sprint (NYSE: S). However, shares of QCOM are up 1.2% in premarket trading (7:36 a.m.) as some analysts said they do not expect the company's near-term business to suffer. Qualcomm plans to petition the decision.

National Semiconductor (NYSE: NSM) shares are up 9.3% in pre-market trading (7:49 a.m.) after the company reported better-than expected earnings yesterday. NSM was upgraded to Buy from Hold at UBS.

Biomet Inc. (NASDAQ: BMET) yesterday accepted a sweetened takeover bid of $11.4 billion from a group of private equity firms which includes Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and TPG.

YRC Worldwide (NASDAQ: YRCW) -- implied volatility and call spike on LBO speculation.
YRCW, a transportation holding company with brands including Yellow Transportation, Roadway, Reimer Express, Meridian IQ, New Penn, USF Holland and USF Reddaway, is recently up $0.49 to $40.03 on LBO speculation. YRCW will be speaking at Merrill Lynch's Transportation Conference next week. YRCW has a market cap of $2.2 billion with $1 billion in debt. YRCW reported quarterly March 2007 revenue of $2.3 billion. YRCW call option volume of 6,382 contracts compares to put volume of 207 contracts. YRCW June option implied volatility is at 44, July is at 36 above its 26-week average of 32 according to Track Data, suggesting larger price risks.

Biomet (NASDAQ: BMET) -- implied volatility-risk increases into June 8th shareholder vote.
BMET a designer, manufacturer and marketer of joint replacement products announced on 12/18/06 a consortium including the Blackstone Group, Goldman Sachs and Kohlberg Kravis Roberts will purchase BMET for $44 a share in cash. Institutional Shareholder Services recommended BMET holders vote down the $10.9 billion private equity deal. BMET shareholders are to vote on 6/8/07. Indiana state law requires a 75% vote for the acquisition to be approved. BMET over all option implied volatility of 17 is above its 5-month average of 12 according to Track Data, suggesting larger risk.

Option volume leaders today are: Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) and Wal-Mart (NYSE: WMT).

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

MAJOR PAPERS:

• The Wall Street Journal reported that President Bush picked former advisor Robert Zoellick to take over the World Bank from Paul Wolfowitz; Mr. Zoellick, now a vice chairman at Goldman Sachs Group Inc (NYSE: GS), was a trade representative and deputy secretary of state.
• The Institutional Shareholder Service has advised shareholders of medical device maker Biomet Inc (NASDAQ: BMET) to turn down a $10.9B private equity deal for the company, according to the Wall Street Journal.
• The Financial Times reported that the IntercontinentalExchange Inc (NYSE: ICE) has signed an exclusive deal with the CBOT Holdings Inc (NYSE: BOT), a move that could advance ICE's unsolicited bid for the Chicago Board of Trade.
• Rather than focus on potential take-out targets, Barron's Online's "Weekday Trader" said that the smart bet for investors is to focus on companies with rising profits, cash flows and dividends, such as Loews Corp-Carolina Group (NYSE: CG) and Imperial Tobacco Group plc (NYSE: ITY), which boast free cash and dividends.

OTHER PAPERS:

• Best Buy Co Inc (NYSE: BBY) is in talks with Vivek for a "foray" into India, the Economic Times reported.
  
• The Washington Post reported that Nigeria filed criminal charges against Pfizer Inc (NYSE: PFE) over child deaths.

Smith & Nephew plc (NYSE:SNN) announced the acquisition this morning of Swiss company Plus Orthopedics for $889 million in cash. This will solidify Smith & Nephew's position as the number 4 global player. The other three major firms are Stryker Corp. (NYSE:SYK), Zimmer Holdings (NYSE:ZMH), and soon to be acquired Biomet Inc. (NASDAQ:BMET). Biomet is undergoing due diligence by a group of private equity firms led by the Blackstone Group. The transaction is expected to close by October of this year.

The orthopedic sector has the wind at its back. The approval process for an orthopedic device is rigorous, but not as lengthy as the cardiac device sector. The marketplace is global in nature and the demographics are about to enter the sweet spot.

With 78 million U.S. baby boomers alone, and another 80 million-plus baby boomers in the European markets, the aging of this group is ripe for the sector. New hips, knees, elbows and shoulders will see record recipients as each year unfolds. Besides the basic joint-replacement products, the spinal sector is also expected to see massive growth. Minimally invasive surgical procedures are expanding the addressable market as the risk profile for such surgeries is significantly less. The dread of osteoporosis affects nearly 700,000 women in the United States alone.

A brave research analyst at Deutsche Securities raised his price target this morning for Zimmer Holdings, Inc. (NYSE:ZMH) from $90 to $94. I am not really sure what a stretch this is, but let's take the price target raising here as good news. More importantly, let's take it as a good sign. A sign of accelerating momentum and growth in the business.

I wrote earlier this week that Zimmer Holdings is one of the four mega-players in the orthopedic device space. With the aging of Baby Boomers, new knees, hips, shoulders, etc. will be in increasing demand. But what sets Zimmer apart from its chief competitors, Stryker Corp. (NYSE:SYK), Biomet Inc. (NASDAQ:BMET), and Smith and Nephew plc (ADR) (NYSE:SNN) is its patented minimally invasive surgical (MIS) techniques and technology. It is cleaning up with the surgeons, who make the decisions of which products to buy.

The other area that distinguishes Zimmer Holdings is its strength in the ever-growing field of spinal-surgery. Zimmer has a whole host of products and devices for MIS spinal surgery. Spinal compression fractures caused by trauma and the ever-evil osteoporosis can now be more successfully treated with MIS than what used to be a large incision surgery.

Zimmer is the better long-term play in the orthopedic device space and as Baby Boomers continue to age, the growth rate for Zimmer will be strong. It also has and should maintain for the years to come a significant competitive advantage.

Georges Yared is the author of "Baby Boomer Investing...Where do we go from here?" and " Stop Losing Money Today." For more info go to http://www.georgesyared.com

The orthopedic device/replacement market is as competitive as any in the medical world. Biomet, Inc. (NASDAQ:BMET) is going private; Stryker Corp. (NYSE:SYK) and Smith and Nephew plc (ADR) (NYSE:SNN) both have impressive margins. As we baby Boomers age, but want to remain active, we'll need new hips, elbows, knees, etc. So the demographic shift is playing to all of these companies' sweet spot.

The long-term winner however is Zimmer Holdings, Inc. (NYSE:ZMH). This Warsaw, Indiana-based company figured early on that the key decision maker in whose knee or hip goes into a patient belongs with the surgeon. ZMH perfected a minimally invasive surgical (MIS) technology and has trained thousands of surgeons with the technique. Of course, with the technique comes Zimmer products and devices.

The orthopedic game is different from the cardiac device game in that the doctor chooses the device of preference. In the cardiac game, usually the hospital administrator chooses the devices. ZMH aggressively marketed and trained the surgeons, by-passing the hospital buying staff. The MIS techniques benefit first and foremost the patient, then of course comes the insurance companies absorbing less costly procedures and hospital stays. ZMH should be looking for top-line and bottom-line growth in the 15% per year range for the foreseeable future.

Georges Yared is the author of "Baby Boomer Investing...Where do we go from here?" and "Stop Losing Money Today." For more info visit his website here.