Wednesday, June 08, 2005

Stocks Modestly Lower Mid-day on Rising Apprehension Ahead of Greenspan's Testimony

Indices
S&P 500 1,195.93 -.14%
DJIA 10,480.10 -.02%
NASDAQ 2,059.83 -.34%
Russell 2000 621.53 -.36%
DJ Wilshire 5000 11,832.98 -.16%
S&P Barra Growth 576.88 -.27%
S&P Barra Value 614.30 -.01%
Morgan Stanley Consumer 582.34 -.28%
Morgan Stanley Cyclical 721.19 -.08%
Morgan Stanley Technology 478.95 -.52%
Transports 3,540.87 -2.0%
Utilities 370.39 +.07%
Put/Call .84 unch.
NYSE Arms .78 -32.12%
Volatility(VIX) 12.75 +2.91%
ISE Sentiment 176.00 +12.82%
US Dollar 87.86 +.42%
CRB 304.02 -.72%

Futures Spot Prices
Crude Oil 53.27 -.91%
Unleaded Gasoline 150.20 -.90%
Natural Gas 7.08 -.66%
Heating Oil 156.90 -1.99%
Gold 426.60 -.02%
Base Metals 123.16 -1.31%
Copper 154.60 +.19%
10-year US Treasury Yield 3.92% +.73%

Leading Sectors
I-Banks +.62%
Disk Drives +.54%
Semis +.39%

Lagging Sectors
Homebuilder -1.24%
Airlines -1.87%
Oil Tankers -2.01%
BOTTOM LINE: The Portfolio is lower mid-day on losses in my Internet and Homebuilding longs and Energy-related shorts. I exited my QQQQ long position, thus leaving the Portfolio 50% net long. The tone of the market is modestly negative as the advance/decline line is lower, most sectors are lower and volume is below average. Measures of investor anxiety are mixed. Today’s overall market action is slightly negative considering the decline in energy prices from morning highs and apprehension ahead of Greenspan’s comments tomorrow. I expect Greenspan to hint that the Fed will remove the word "measured" from the June policy statement. However, I expect him to make convoluted statements otherwise, giving something to the doves and hawks. I do not expect him to explicitly state that the Fed is nearly done hiking rates. The markets should respond in a modestly positive way to this. However, if I am incorrect and Greenspan implies that the Fed will continue hiking rates at the current pace for the foreseeable future, the markets will likely have a substantial negative reaction. As well, an unexpected acknowledgement that Fisher was spot on in his assessment of the situation would likely lead to a substantial positive reaction by investors. I expect US stocks to trade mixed into the close as lower energy prices offset worries over Greenspan’s testimony tomorrow.

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