Tuesday, May 31, 2005

Stocks Quietly Lower Mid-day on Growth Worries

Indices
S&P 500 1,193.99 -.40%
DJIA 10,494.60 -.45%
NASDAQ 2,069.58 -.30%
Russell 2000 617.42 +.08%
DJ Wilshire 5000 11,797.58 -.31%
S&P Barra Growth 577.48 -.42%
S&P Barra Value 612.08 -.37%
Morgan Stanley Consumer 585.85 -.47%
Morgan Stanley Cyclical 721.34 -.60%
Morgan Stanley Technology 478.98 -.50%
Transports 3,607.96 -.42%
Utilities 365.35 +.08%
Put/Call 1.08 +33.33%
NYSE Arms 1.74 +41.34%
Volatility(VIX) 13.11 +7.82%
ISE Sentiment 209.00 +22.22%
US Dollar 87.65 +.82%
CRB 300.38 -.17%

Futures Spot Prices
Crude Oil 51.65 -.39%
Unleaded Gasoline 146.20 -.90%
Natural Gas 6.33 -.55%
Heating Oil 144.60 +.01%
Gold 418.40 -1.02%
Base Metals 120.86 -.97%
Copper 145.50 +.80%
10-year US Treasury Yield 4.00% -1.60%

Leading Sectors
Airlines +1.86%
Hospitals +.82%
I-Banks +.38%

Lagging Sectors
Steel -.90%
Oil Service -.93%
Oil Tankers -1.44%
BOTTOM LINE: The Portfolio is higher mid-day on gains in my Internet longs and Base Metal and Energy-related shorts. I have not traded today and the Portfolio is still 50% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is very light. Measures of investor anxiety are mostly higher. Today’s overall market action is neutral, given last week’s gains, global growth concerns and mixed US economic data. I expect US stocks to trade mixed-to-higher into the close as slowing growth concerns are offset by lower-long term interest rates and better consumer sentiment. NYSE short interest as a percentage of total shares reached 2.4% as of today, an all-time high. I continue to see a "negativity bubble." Morgan Stanley's Stephen Roach, who has been predicting interest rates would soar for several years, is now changing his tune. He is now saying the 10-year T-note yield will hit 3.5% within the next 12 months. Roach seems to agree with my view of a continuing fall in commodity prices as a result of slowing global demand. As I stated a few months ago, I believe the new breed of "perma bears" will begin switching arguments from inflation to deflation over the coming months.

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