Tuesday, June 07, 2005

Stocks Modestly Higher Mid-day on Fed "Pause" Speculation

Indices
S&P 500 1,201.25 +.31%
DJIA 10,517.21 +.48%
NASDAQ 2,074.75 -.05%
Russell 2000 626.07 +.51%
DJ Wilshire 5000 11,892.79 +.32%
S&P Barra Growth 580.48 +.39%
S&P Barra Value 616.55 +.28%
Morgan Stanley Consumer 585.71 +.29%
Morgan Stanley Cyclical 723.40 +.10%
Morgan Stanley Technology 483.35 -.01%
Transports 3,639.51 +.13%
Utilities 372.62 +1.0%
Put/Call .83 -4.60%
NYSE Arms .75 -42.76%
Volatility(VIX) 11.84 -3.58%
ISE Sentiment 196.00 +11.36%
US Dollar 87.56 -.05%
CRB 306.65 -.20%

Futures Spot Prices
Crude Oil 53.85 -1.17%
Unleaded Gasoline 151.50 -.95%
Natural Gas 7.12 +.04%
Heating Oil 160.70 -.59%
Gold 426.60 -.42%
Base Metals 124.80 -1.13%
Copper 154.30 -1.34%
10-year US Treasury Yield 3.92% -.63%

Leading Sectors
Hospitals +1.89%
Airlines +1.55%
Papers +1.20%

Lagging Sectors
Computer Hardware -.26%
Oil Tankers -.60%
Gold & Silver -1.31%
BOTTOM LINE: The Portfolio is higher mid-day on gains in my Internet, Networking and Retail longs. I added a few tech longs this morning, thus leaving the Portfolio 100% net long. One of my new longs is XXIA and I am using an $18 stop-loss on this position. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is average. Measures of investor anxiety are lower. Today’s overall market action is modestly positive considering Greenspan’s dovish comments last night. As I have stated numerous times over the last year, I do not believe there is a “conundrum” with respect to low long-term rates. I continue to believe the U.S. economy is temporarily slowing to below-average rates of growth. As well, global growth appears on the verge of slowing substantially.
A firmer U.S. dollar, slowing global growth, decelerating measures of inflation and a flight of capital back to the U.S. should keep rates low. The U.S. has likely experienced a cyclical bout of modest inflation within a secular disinflationary environment. This will become more apparent over the coming quarters. I expect US stocks to trade mixed-to-higher into the close on short-covering and more Fed “pause” speculation.

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