Wednesday, July 19, 2006

Stocks Finish Sharply Higher on Positive Earnings, Lower Energy Prices, Lower Rates and Bernanke Comments

Indices
S&P 500 1,259.81 +1.86%
DJIA 11,011.42 +1.96%
NASDAQ 2,080.71 +1.83%
Russell 2000 702.34 +3.04%
Wilshire 5000 12,642.82 +1.97%
S&P Barra Growth 580.52 +1.63%
S&P Barra Value 677.90 +2.07%
Morgan Stanley Consumer 611.55 +1.51%
Morgan Stanley Cyclical 788.02 +2.19%
Morgan Stanley Technology 467.81 +1.42%
Transports 4,695.09 +2.02%
Utilities 426.28 +1.43%
Put/Call .87 -20.18%
NYSE Arms .49 -54.59%
Volatility(VIX) 15.55 -12.34%
ISE Sentiment 119.00 +7.21%
US Dollar 86.45 -.64%
CRB 342.91 +.31%

Futures Spot Prices
Crude Oil 72.84 +.22%
Unleaded Gasoline 223.30 +.14%
Natural Gas 5.89 +.48%
Heating Oil 196.35 -.08%
Gold 643.10 +.05%
Base Metals 226.99 +.11%
Copper 360.10 +.21%
10-year US Treasury Yield 5.04% -1.59%

Leading Sectors
Airlines +5.41%
I-Banks +4.14%
Homebuilders +3.30%

Lagging Sectors
Energy +.85%
Foods +.64%
Internet -.94%

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
Oppenheimer:
- Rated (SUPX) Buy, target $50.

Afternoon/Evening Headlines
Bloomberg:
- Bill Gross, manager of the world’s biggest bond fund at PIMCO, told CNBC that the US Fed may begin lowering interest rates early next year.
- Apple Computer(AAPL) said third-quarter profit rose 48% after the company sold more Macs than analysts expected.
- Qualcomm(QCOM) said third-quarter profit rose 15% on demand for the latest handsets.
- EBay Inc.(EBAY) said second-quarter profit fell 14% as it expensed stock options. The company reiterated its full-year forecast and announced its first-ever stock buyback.
- Motorola(MOT) reported second-quarter profit that exceeded analyst estimates as demand surged for its new Razr and Q models.
- Intel(INTC) reported its biggest profit drop in more than four years and said it is unlikely to make its full-year forecast after losing sales to AMD.
- US 10-year note yields fell the most in six weeks after Fed Chairman Bernanke said “moderation” is under way in the economy, fueling speculation the bank will pause in lifting interest rates.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Semi longs, Retail longs and Medical 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, almost every sector rose and volume was above average. Measures of investor anxiety were lower into the close. Overall, today's market performance was very bullish. The overall picture that Bernanke painted in today's testimony was one of moderation. He expects U.S. growth to moderate only to around average levels and for inflation to decelerate going forward. I sense very few believe this is likely. While action in the bond market leads me to conclude that investors are beginning to believe the Fed has inflation under control, most believe the economy is slowing too much. I expect earnings over the next few weeks to reinforce Bernanke's Goldilocks(economy not too hot or cold) scenario.

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