Stocks Finish Near Highs as Long-Term Interest Rates Fall and Earnings Exceed Estimates

Indices
S&P 500 1,243.72 +.56%
DJIA 10,705.55 +.64%
NASDAQ 2,198.44 +.56%
Russell 2000 683.04 +1.21%
DJ Wilshire 5000 12,415.86 +.66%
S&P Barra Growth 597.02 +.57%
S&P Barra Value 642.24 +.55%
Morgan Stanley Consumer 592.82 +.92%
Morgan Stanley Cyclical 767.51 +.92%
Morgan Stanley Technology 504.61 +.15%
Transports 3,817.06 +1.47%
Utilities 397.26 +.84%
Put/Call .78 -1.27%
NYSE Arms 1.01 +14.91%
Volatility(VIX) 10.52 +1.54%
ISE Sentiment 148.00 -16.85%
US Dollar 89.34 -.43%
CRB 310.53 +1.12%

Futures Spot Prices
Crude Oil 60.09 +1.66%
Unleaded Gasoline 173.28 +.99%
Natural Gas 7.73 +1.82%
Heating Oil 164.50 +1.72%
Gold 433.60 +.07%
Base Metals 126.02 +.42%
Copper 164.65 -.15%
10-year US Treasury Yield 4.18% -1.53%

Leading Sectors
HMOs +3.45%
Gaming +2.58%
Homebuilders +2.36%

Lagging Sectors
Software +.08%
Hospitals +.01%
Computer Hardware -.36%

Evening Review
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on PCO, SYMC, MERQ, MSFT and STN.
- Reiterated Underperform on UST, CNA and UALAQ.

Banc of America:
- Downgraded MOT to Neutral.

Afternoon/Evening Headlines
Bloomberg:
-

Financial Times:
- Cnooc’s executives and directors met yesterday to consider whether to raise the company’s offer for Unocal to about $20 billion.
- US Treasuries rose on speculation yields near three-month highs are excessive given the outlook for tame inflation.

CNet News.com:
- Microsoft won contracts to supply the UK government’s HM Revenue & Customs agency and Department for Works and Pensions with Windows XP Software.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Medical, Medical Information Systems and Retail longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was slightly above average. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was positive. The AAII % Bulls rose to 57.52% this week from 41.18% the prior week; this is back near the above-average levels seen two weeks ago. Likewise, the % Bears fell to 17.65% from 27.45% the prior week; this is back to below-average levels. I believe sentiment will remain mostly elevated through year-end.