Stocks Sharply Higher into Final Hour on Buyouts and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Semi longs, Medical longs, Biotech longs and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is above average. Friday's healthy jobs and ISM Non-manufacturing reports were significant positives and make the imminent recession calls seem even more implausible. The Fed's Moskow said this morning that the U.S. economy will grow at a solid pace. The 10-year yield is stable after Friday's jump. Growth stocks are particularly strong today. I continue to believe that recent market action is indicative of a healthy consolidation after sharp gains and that the many bears remain stunningly complacent. Another substantial push higher in the major averages is likely over the coming weeks. The growth rate of the ECRI future inflation gauge is still falling. It declined 3.1% in the week ended Oct. 20. It had been rising at a 9% rate in October 2005. The 10-year yield is at session lows today at 4.7%. I continue to believe the Fed will not raise rates with the 10-year yield anywhere near current levels and that a cut is more likely in the first half of next year. I also still see a return to the secular trend of disinflation over the intermediate-term. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, performance anxiety, buyout speculation and diminishing economic growth concerns.