Monday, June 26, 2006

Stocks Finish at Session Highs on Light Volume ahead of Fed Hike

Indices
S&P 500 1,250.56 +.49%
DJIA 11,045.28 +.51%
NASDAQ 2,133.67 +.58%
Russell 2000 698.64 +1.23%
Wilshire 5000 12,580.73 +.54%
S&P Barra Growth 578.82 +.35%
S&P Barra Value 670.0 +.62%
Morgan Stanley Consumer 603.61 +.42%
Morgan Stanley Cyclical 809.61 +.37%
Morgan Stanley Technology 487.04 +.14%
Transports 4,772.36 -.01%
Utilities 407.99 +.45%
Put/Call .74 -25.25%
NYSE Arms .75 +.79%
Volatility(VIX) 15.61 -1.76%
ISE Sentiment 208.00 +55.22%
US Dollar 86.52 -.41%
CRB 337.37 +.70%

Futures Spot Prices
Crude Oil 71.64 -.22%
Unleaded Gasoline 217.88 +2.41%
Natural Gas 5.98 +.34%
Heating Oil 197.50 -.20%
Gold 587.90 +.03%
Base Metals 207.99 +3.55%
Copper 322.15 -.36%
10-year US Treasury Yield 5.23% +.28%

Leading Sectors
Homebuilders +1.80%
Gold & Silver +1.12%
Energy +1.11%

Lagging Sectors
Airlines -.52%
Gaming -.60%
Disk Drives -.64%

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
Banc of America:
- Rated (COST) Buy, target $63.

Piper Jaffray:
- Rated (OPTN) Outperform, target $14.

Lehman Brothers:
- Upgraded IT Consulting & Computer Services Sector to Positive.

Afternoon/Evening Headlines
Bloomberg:
- US Treasury 10-year notes fell a ninth consecutive day as the prospect of a 17th straight interest-rate hike by the Fed this week prompted investors to demand higher returns.
- US stocks rose as companies’ plans for $88 billion in takeovers outweighed concern that the Fed will hike rates further.
- Natural gas fell to the lowest closing price in a month in NY as moderate temperatures limited demand for the power-plant fuel.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Retail longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was positive today as the advance/decline line finished higher, most sectors rose and volume was very light. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was mildly bullish. A substantial amount of market uncertainty revolves around housing and inflation. We had one very positive data point on housing today and we get another one tomorrow. Personal incomes and spending are released Friday, which are related to the housing slowdown. At this point, most expect the Fed to raise 25 basis points and make hawkish statements in their ensuing policy statement. While I am very certain that a 25 basis-point hike is in the offing, I am not as certain of the tone of the policy statement. I wouldn't be surprised to see more dovish statements than most expect. Finally, the PCE Core, the Fed's favorite inflation gauge, is released on Friday. Bottom line, the market hates uncertainty and some very key releases are on tap this week. The lifting of this uncertainty, combined with depressed investor sentiment and substantial losses in many stocks this quarter will likely lead to short profit-taking and long bargain-hunting on Thursday and Friday. Thus, I expect stocks to finish the week on a positive note.

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