Tuesday, March 22, 2005

Tuesday Close

S&P 500 1,171.71 -1.02%
DJIA 10,470.51 -.90%
NASDAQ 1,989.34 -.91%
Russell 2000 618.58 -.48%
DJ Wilshire 5000 11,570.94 -.92%
S&P Barra Growth 565.65 -.74%
S&P Barra Value 601.72 -1.29%
Morgan Stanley Consumer 570.62 -.50%
Morgan Stanley Cyclical 758.78 -.68%
Morgan Stanley Technology 450.70 -1.54%
Transports 3,754.23 +.13%
Utilities 351.89 -1.96%
Put/Call .98 +27.27%
NYSE Arms 1.04 +16.28%
Volatility(VIX) 14.27 +4.85%
ISE Sentiment 166.00 +25.76%
US Dollar 83.44 +.57%
CRB 313.02 -.15%

Futures Spot Prices
Crude Oil 55.68 -.62%
Unleaded Gasoline 156.63 -.55%
Natural Gas 7.21 -.51%
Heating Oil 153.95 -.46%
Gold 427.00 -1.07%
Base Metals 130.36 +.06%
Copper 148.25 -1.0%
10-year US Treasury Yield 4.64% +2.61%

Leading Sectors
Airlines +1.03%
Computer Service +.56%
Oil Service +.56%

Lagging Sectors
Utilities -1.96%
Insurance -2.10%
Software -2.44%

After-hours Movers
ATPL +36.0% after announcing a special, one-time cash dividend of $12.50 per common share.

Evening Review
Detailed Market Summary
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
Futures Recap
S&P 500 Gallery View
Timely Economic Charts
PM Market Call
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on PAYX.
- Said BenQ’s newly developed ink cartridges will pressure printer margins of established printer vendors.

Legg Mason:
- Raised MKC to Buy, target $41.

Morgan Stanley:
- Raised SDS to Overweight.

Afternoon/Evening Headlines
- US Treasuries are still overvalued even after the recent rise in yields, said Bill Gross, chief investment officer at PIMCO.
- American International Group may have a “serious problem” if executives refuse to answer questions in an accounting investigation, NY Attorney General Eliot Spitzer said.
- The US dollar rose to the highest in a month against the euro and yen after the Fed raised its target interest rate a quarter point to 2.75% and suggested the pace of rate hikes may accelerate.
- US Treasury notes tumbled the most since November after the Fed raised its benchmark interest rate.
- AOL Latin America said it may file for bankruptcy protection because it doesn’t have enough cash to fund its business beyond September and pay its debt.
- Oracle Corp. said third-quarter profit fell 15% on costs to buy PeopleSoft and revenue lagged behind analysts’ expectations.

Financial Times:
- Hyundai Motor aims to increase sales in the US by one-sixth this year, mostly at the expense of Japanese rivals.

Sydney Morning Herald:
- Rio Tinto Group and Xstrata Plc may be studying a joint bid for WMC Resources Ltd. to top BHP Billiton’s A$7.85 a share offer.

China Daily:
- China’s central bank may raise interest rates again in the second quarter.

SportsBusiness Daily:
- General Motors will become the exclusive automobile partner of Major League Baseball as part of a $50 million agreement.

BOTTOM LINE: US stocks fell today on worries over rising interest rates and inflation. The Portfolio finished higher on gains in my Chinese ADR shorts, Homebuilding shorts and Gaming longs. I took profits in a number of Tech longs in the afternoon and added a few new Homebuilding shorts, thus leaving the Portfolio 25% net long. One of my new shorts is HOV and I am using a $54 stop-loss on this position. The tone of the market deteriorated meaningfully into the afternoon as the advance/decline line dropped substantially, almost every sector fell and volume increased. Tech and interest-rate sensitive sectors underperformed, while small-caps outperformed and measures of investor anxiety were mostly higher. Overall, today’s market action was negative, considering recent losses, a firming US dollar and declining energy prices. The Bloomberg Crude Oil % Bulls is now at 64%, the highest reading since oil peaked in Oct. of last year. The bond market’s reaction to the Fed’s policy statements leads me to believe the 10-year T-note yield will test its highs set in June of last year. While today’s action was disheartening for the Bulls, a further spike in measures of investor anxiety from current levels will likely result in a much more durable and tradable bottom in the near future.

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