Thursday, January 26, 2006

Stocks Finish Sharply Higher on Strong Economic Data, Falling Natural Gas Prices and Less Irrational Earnings Pessimism

Indices
S&P 500 1,273.83 +.72%
DJIA 10,809.47 +.93%
NASDAQ 2,283.00 +.99%
Russell 2000 728.48 +1.68%
S&P Barra Growth 605.99 +.49%
S&P Barra Value 663.88 +.96%
Morgan Stanley Consumer 596.35 -.03%
Morgan Stanley Cyclical 790.90 +.65%
Morgan Stanley Technology 536.70 +.62%
Transports 4,306.53 +1.55%
Utilities 414.77 -.92%
Put/Call .69 -17.86%
NYSE Arms .82 -19.13%
Volatility(VIX) 12.42 -3.50%
ISE Sentiment 194.00 +1.57%
US Dollar 88.63 +.34%
CRB 343.46 +.27%

Futures Spot Prices
Crude Oil 66.45 +.29%
Unleaded Gasoline 169.00 +.31%
Natural Gas 8.25 +.32%
Heating Oil 178.40 +.34%
Gold 560.70 +.14%
Base Metals 167.35 -.98%
Copper 220.05 -.05%
10-year US Treasury Yield 4.50% +.67%

Leading Sectors
Semis +2.88%
Defense +2.28%
I-Banks +2.45%

Lagging Sectors
Computer Hardware -.82%
Utilities -.92%
Networking -1.26%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on (ALK), (EL) and (HD).
- Reiterated Underperform on (UIS) and (MKL).

Afternoon/Evening Headlines
Bloomberg:
- Hamas, the radical Islamic movement that has attacked Israelis thousands of times with suicide bombers, wrested control of the Palestinian legislature from Fatah, winning 76 seats in yesterday’s voting, election officials said.
- Broadcom Corp.(BRCM) said fourth-quarter profit almost tripled as sales grew for consumer gadgets such as wireless headsets and Apple Computer’s video iPod.
- Microsoft(MSFT) said second-quarter profit rose 5.5%, buoyed by new server software. Revenue missed forecasts after shortages of its Xbox 360 console.

Wall Street Journal:
- Goldman Sachs(GS) will pay $2.58 billion for a stake in Industrial & Commercial Bank of China.
BOTTOM LINE: The Portfolio finished higher today on gains in my Medical longs, Semi long, Semi-equip. longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, most sectors gained and volume was heavy. Measures of investor anxiety were mostly lower into the close. Overall, today's performance was very bullish as the major averages and breadth finished near session highs on heavy volume, notwithstanding higher long-term rates, rising oil prices, a big political win for Hamas, jitters over tomorrow's GDP report and earnings worries. I have the feeling that tomorrow's GDP report will be viewed positively by the market. We have heard for weeks how "bad" it is going to be. I expect it to exceed estimates of a 2.8% increase, which should calm fears that the economy is slowing too much. However, if I am wrong and GDP comes in below estimates, the recent rise in long-term rates should cease and traders will factor in an even greater chance that the Fed will "pause." Either way, I suspect stocks will build on today's gains tomorrow.

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