Stocks Finish Mostly Higher on Falling Energy Prices, More Economic Optimism

Indices
S&P 500 1,524.12 -.06%
DJIA 13,539.95 -.02%
NASDAQ 2,588.02 +.36%
Russell 2000 839.92 +.75%
Wilshire 5000 15,347.78 +.07%
Russell 1000 Growth 599.45 +.09%
Russell 1000 Value 879.65 -.08%
Morgan Stanley Consumer 744.64 +.06%
Morgan Stanley Cyclical 1,060.23 -.32%
Morgan Stanley Technology 616.32 +.42%
Transports 5,197.19 -.11%
Utilities 533.70 -.38%
MSCI Emerging Markets 127.05 +.28%

Sentiment/Internals
Total Put/Call 1.14 +22.58%
NYSE Arms 1.06 +17.96%
Volatility(VIX) 13.06 -1.80%
ISE Sentiment 148.0 -1.33%

Futures Spot Prices
Crude Oil 64.97 -1.96%
Reformulated Gasoline 230.77 -3.90%
Natural Gas 7.81 -1.28%
Heating Oil 190.98 -2.11%
Gold 659.20 -.69%
Base Metals 273.52 +1.29%
Copper 330.55 -2.79%

Economy
10-year US Treasury Yield 4.82% +4 basis points
US Dollar 82.41 +.06%
CRB Index 311.42 -1.60%

Leading Sectors
Gaming +4.83%
Airlines +2.59%
Homebuilders +2.04%

Lagging Sectors
Oil Service -1.51%
Steel -1.61%
Gold -1.72%

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Afternoon Recommendations
Needham:
- Upgraded (TECD) to Buy.

Afternoon/Evening Headlines
Bloomberg:
- Harbinger Capital Partners, owner of 13% of Openwave Systems(OPWV), offered $335 million in cash to gain control of the maker of mobile-phone software and replace its management and board.
- Copper futures fell 3% to the lowest in seven weeks in NY on speculation that demand may slow in China.
- Alcan Inc.(AL) rejected a $27.4 billion bid from Alcoa Inc.(AA) as “inadequate,” signaling a higher price may be needed to win acceptance for a takeover that would create the world’s largest aluminum company.
- Crude oil fell more than $1 barrel on signs that a government report tomorrow will show US gas supplies jumped.
- Corn in Chicago fell 3% after a government report showed that planting of the US crop had accelerated after a slow start and that plants were in better shape than last year.
- Valero Energy(VLO), the largest US gasoline refiner, projected a 57% increase this year in profit margins on oil processing at Gulf Coast plants.
- Gold fell $5/oz. on the decline in oil and rise in the US dollar.
- Wall Street’s largest bonus increases will probably go to bankers who specialize in the booming business of leveraged buyouts, where incentive pay may jump 20%, a survey by consultant Johnson Associates found.
- Medtronic(MDT) said fourth quarter profit rose 9.7% on higher sales of implantable defibrillators. The stock rose .80 to $51.61 in after-hours trading.
- Payless ShoeSource(PSS), the largest US shoe retailer by store count, agreed to buy Stride Rite(SRR) for $800 million in cash and will rename the combined company Collective Brands. SRR soared 31% on the news in after-hours trading.
- Analog Devices(ADI) said second-quarter earnings fell 14% on expenses to shut down a plant and a shift in orders to less-profitable products. The shares fell 4.9% in after-hours trading.
- Merrill Lynch’s Ben Watson, chief of its hedge-fund development and management group, resigned after two years at the firm.

AP:
- The manager of a Chinese toothpaste maker being probed in the deaths of at least 51 people in Panama said the product is safe.

Reuters:
- Barrick Gold Corp.(ABX) is in no rush to make new acquisitions, citing CEO Wilkins.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Biotech longs and Internet longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, sector performance was mostly positive and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was bullish. The index everyone loves to hate, the Russell 2000, made another all-time high today and is up about 7% for the year. Many stocks I monitor posted 2%-4% gains. Today's action was more impressive considering the -1.5% losses in most commodity stocks. A gasoline build near or above tomorrow's 1.2 million barrel build estimate will likely result in further energy complex weakness. I have seen many negative articles written of late about the tech sector and how bad it is and how much it is underperforming. I'm not sure where this is coming from. The MS Tech Index is already 9% higher year-to-date vs. an 8.5% gain for the S&P 500. I expect tech shares' outperformance to accelerate in the second half of the year. The time to buy these shares is now, in my opinion, while perceptions are still negative. Three of my favorites are still Google (GOOG), Apple (AAPL) and Broadcom (BRCM). I remain long all three. As I said yesterday, I sense the Google train is leaving the station again right now. I still expect the stock to exceed $600 before year-end.