Wednesday, June 01, 2005

Stocks Higher Mid-day on Diminishing Fed Fears and Lower Inflation

Indices

S&P 500 1,204.26 +1.07%

DJIA 10,569.01 +.97%

NASDAQ 2,092.24 +1.14%

Russell 2000 624.09 +1.20%

DJ Wilshire 5000 11,901.87 +1.05%

S&P Barra Growth 581.83 +1.06%

S&P Barra Value 617.62 +1.03%

Morgan Stanley Consumer 587.71 +.55%

Morgan Stanley Cyclical 728.74 +1.17%

Morgan Stanley Technology 486.86 +1.67%

Transports 3,637.89 +1.08%

Utilities 369.52 +1.20%

Put/Call .56 -42.27%

NYSE Arms .62 -59.67%

Volatility(VIX) 12.29 -7.52%

ISE Sentiment 129.00 -32.81%

US Dollar 88.06 +.34%

CRB 303.04 +.74%

Futures Spot Prices

Crude Oil 53.75 +3.43%

Unleaded Gasoline 151.80 +3.61%

Natural Gas 6.62 +3.78%

Heating Oil 152.50 +5.28%

Gold 417.70 -.29%

Base Metals 121.70 +.70%

Copper 148.70 +2.09%

10-year US Treasury Yield 3.90% -1.81%

Leading Sectors

Energy +2.21%

Gold & Silver +2.14%

Gaming +1.78%

Lagging Sectors

Telecom -.15%

Defense -.29%

Oil Tankers -.83%

BOTTOM LINE: The Portfolio is higher mid-day on gains in my Internet, Homebuilding, Retail and Wireless longs. I added a number of new longs this morning, thus leaving the Portfolio 100% net long. One of my new longs is GME and I am using a $28 stop-loss on this position. The tone of the market is positive as the advance/decline line is higher, almost every sector is higher and volume is above average. Measures of investor anxiety are mostly lower. Today’s overall market action is positive, given the rise in energy prices and disappointing ISM report. The Fed's Fisher said on CNBC today that "there's room to tighten a little bit further" and that "we're in the eighth inning of rate cycle.” I am more confident than ever that the Fed is almost ready to "pause." However, I would not be surprised to see conflicting comments over the next couple of weeks from Fed speakers. Fisher's comments today were not a mistake or the result of inexperience, in my opinion. They were the first attempt at changing perceptions in an orderly manner before the June 30 meeting. I expect US stocks to trade mixed into the close as rising energy prices and growth worries are offset by lower long-term interest rates, subsiding Fed worries and decelerating inflation.

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