Tuesday, April 03, 2007

Stocks Finish Sharply Higher on Decline in Energy Prices and Greater Economic Optimism

Indices
S&P 500 1,437.77 +.93%
DJIA 12,510.30 +1.03%
NASDAQ 2,450.33 +1.16%
Russell 2000 811.76 +1.06%
Wilshire 5000 14,525.03 +.91%
Russell 1000 Growth 566.19 +1.02%
Russell 1000 Value 831.43 +.83%
Morgan Stanley Consumer 710.01 +.76%
Morgan Stanley Cyclical 966.71 +1.03%
Morgan Stanley Technology 567.54 +1.05%
Transports 4,901.78 +1.76%
Utilities 510.10 -.02%
MSCI Emerging Markets 118.44 +1.15%

Sentiment/Internals
Total Put/Call 1.07 +28.92%
NYSE Arms .77 -17.87%
Volatility(VIX) 13.51 -7.02%
ISE Sentiment 106.0 -19.08%

Futures Spot Prices
Crude Oil 64.60 -2.03%
Reformulated Gasoline 201.55 -1.34%
Natural Gas 7.45 -2.88%
Heating Oil 183.82 -1.30%
Gold 670.10 -.21%
Base Metals 258.79 +3.67%
Copper 330.80 +4.06%

Economy
10-year US Treasury Yield 4.66% +2 basis points
US Dollar 83.18 +.39%
CRB Index 313.78 -.41%

Leading Sectors
Airlines +3.39%
Internet +1.95%
Homebuilders +1.74%

Lagging Sectors
Oil Service +.20%
Utilities -.02%
Coal -.42%

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
Merrill Lynch:
- Reiterated Buy on Google(GOOG).

Afternoon/Evening Headlines
Bloomberg:
- Falling oil prices and an unexpected rise in pending home sales ignited a stock-market rally that carried the DJIA to a five-week high.
- Crude oil(-$1.30/bbl.) fell the most in more than three weeks after Prime Minister Tony Blair said the UK will try to negotiate with Iran over the release of 15 hostage British naval personnel.
- Boeing Co.(BA) won an order for five of its 787 Dreamliner jets from Japan Airlines Corp., bringing the total to 514 and extending its lead over Airbus SAS.
- The shutdown of a Valero Energy Corp.(VLO) refinery in Texas has caused some Colorado filling stations to run out of gasoline over the past two weeks, a spokesman for AAA Colorado said.
- US buyers may have imported as much as 2.8 billion cubic feet a day of liquefied natural gas, a record, as sellers sought to capitalize on high prices.
- Goldman Sachs Group’s(GS) Global Alpha hedge fund lost 5.7% in February, hurt by wrong-way bets on stocks, global bonds and currencies including the Japanese yen. The decline left the $10 billion fund down 2% for the year.

BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Computer longs, Internet 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, almost every sector rose and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was very bullish. The I-Banking, Internet, Paper, Airline, Homebuilder and HMO sectors all substantially outperformed the major averages. Corn fell another 2.4% today and is down 21% from its highs as some are now saying it has entered a bear market, which would have positive implications for future inflation readings. So far, the addition of more Google (GOOG) shares last month is paying off as the stock has busted through its 50-day moving-average on volume today. Google remains my largest long position. I sense many traders are in disbelief of recent stock strength. I suspect we will build on today's gains before week's end. Johnson Redbook weekly retail sales surged 4.1% last week vs. a 3.9% gain the prior week and a 1.7% gain during this week last year. This is well above the long-term average and the highest weekly increase since early May of last year. Weekly retail sales have gained 3.4%, 3.7%, 3.9% and 4.1% over the last four weeks vs. weekly gains of around 2.75% the prior 3 months. Retail sales are clearly trending higher even as the record number of U.S. stock market bears say sales should be falling off a cliff right now. I continue to believe retail sales are bouncing back sharply into the spring, notwithstanding the drag from housing and higher gas prices. This is likely the result of the facts that wage growth is almost double the recent CPI reading, interest rates are still very low, unemployment is historically low and Americans' net worth is at record high levels. These large positives continue to be ignored.

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