Market Week in Review

S&P 500 1,503.35 +.05%

Click here for The Weekly Wrap by Briefing.com.

Weekly Scoreboard*

Indices
S&P 500 1,503.35 +.05%
DJIA 13,408.62 +.36%
NASDAQ 2,603.23 +.55%
Russell 2000 833.70 -.13%
Wilshire 5000 15,163.08 +.03%
Russell 1000 Growth 595.22 -.03%
Russell 1000 Value 858.51 +.07%
Morgan Stanley Consumer 728.96 +.39%
Morgan Stanley Cyclical 1,076.43 -.59%
Morgan Stanley Technology 622.61 -.14%
Transports 5,098.88 -.18%
Utilities 498.17 +2.64%
MSCI Emerging Markets 131.11 -.45%

Sentiment/Internals
NYSE Cumulative A/D Line 74,318 -2.49%
Bloomberg New Highs-Lows Index +144 +136.1%
Bloomberg Crude Oil % Bulls 48.0 +28.0%
CFTC Oil Large Speculative Longs 197,493 -1.63%
Total Put/Call 1.01 -1.94%
NYSE Arms 1.41 +57.47%
Volatility(VIX) 16.23 +3.05%
ISE Sentiment 166.0 +30.71%
AAII % Bulls 39.02 -9.59%
AAII % Bears 35.77 +6.2%

Futures Spot Prices
Crude Oil 70.47 +2.22%
Reformulated Gasoline 223.75 -.16%
Natural Gas 6.78 -5.23%
Heating Oil 203.79 -.19%
Gold 651.50 -.91%
Base Metals 251.09 -.14%
Copper 343.0 +1.84%

Economy
10-year US Treasury Yield 5.03% -10 basis points
4-Wk MA of Jobless Claims 316,000 +.3%
Average 30-year Mortgage Rate 6.67% -2 basis points
Weekly Mortgage Applications 618.60 -3.90%
Weekly Retail Sales +1.70%
Nationwide Gas $2.97/gallon -.02/gallon
US Cooling Demand Next 7 Days 5.0% below normal
ECRI Weekly Leading Economic Index 142.80 unch.
US Dollar Index 81.93 -.50%
CRB Index 315.74 +.32%

Leading Sectors
Disk Drives +2.96%
Utilities +2.64%
Telecom +2.60%
Wireless +2.2%
Internet +2.2%

Lagging Sectors
I-Banks -1.55%
Gold -1.87%
Coal -1.97%
Homebuilders -2.94%
Oil Service -3.55%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks at Session Lows into Final Hour on Terrorism Fears, Subprime Worries and End-of-Quarter Profit-taking

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my I-Banking longs, Software longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is mildly lower, most sectors are lower and volume is about average. The PCE Core year over year rose 1.9% in May, the smallest increase since March 2004. This is also well below the 20-year average of 2.5% and within the Fed's comfort zone. The myth of problematic inflation lives on; however, if oil begins collapsing in the third quarter as it did last year, this argument will become extremely difficult to make. The fundamentals for oil are even worse this year, in my opinion. The 10-year yield is at session lows, falling 8 basis points. It has dropped 30 basis points in less than two weeks. The NYSE Arms is an above-average 1.23, the VIX is rising 8.2% and the CBOE total put/call is an above-average 1.0. Sloppy action over the last few days appears to me to be a function of buyers stepping away after a great quarter and aggressive funds selling/shorting winners. I expect large buyers to re-emerge next week. I also think better-than-expected earnings, a break below 5% in the 10-year yield, diminishing subprime fears and a large acquisition could provide upside catalysts for the broad market over the coming weeks. I expect US stocks to trade modestly higher into the close from current levels on lower long-term rates and subsiding end-of-quarter profit-taking.

Today's Headlines

Bloomberg:
- The DJIA is poised to post its best quarterly performance since the fourth quarter of 2003.
- UK police dismantled a car bomb found outside a nightclub packed with hundreds of people near London’s Piccadilly Circus, raising concern about terrorism.
- US treasuries are rising after a government report showed the Fed’s most closely watched measure of inflation slowed in May. The 10-year yield has plunged 27 basis points in less than 2 weeks.
- The Canadian dollar fell after the nation’s economy unexpectedly registered zero growth in April.
- Washington Mutual(WM), the biggest US savings and loan, will refinance up to $2 billion in subprime loans. The loans will be refinance or modified at discounted rates to help borrowers’ stabilize their finances and avoid foreclosure.
- BP Plc(BP), Europe’s second-largest oil company, and UK biofuels developer D1 Oils Plc said they plan to start a joint venture to plant jatropha for use as biodiesel.
- General Motors(GM) will invest $945 million over the next five years in Europe to introduce more fuel-efficient vehicles that cause less pollution.
- The price of US steel sheet fell for a third straight month in June because of reduced demand from manufacturers and a drawdown of inventories by distributors, Purchasing magazine said.
- Corn plunged to a 12-week low in Chicago after a government report said US farmers planted more acres than forecast in March.
- Crude oil rose to a 10-month high in NY on speculation by investment funds that low supplies of gas will continue to boost prices into the summer.
- Talbots Inc.(TLB) appointed apparel-industry veteran Trudy Sullivan as its new CEO in an effort to stem five years of declining profit at the women’s clothing retailer.
- Chicago Board of Trade’s(BOT) largest shareholder, Sydney-based hedge fund Caledonia Investments, has voted against the proposed sale to the Chicago Mercantile Exchange because the price is too low.
- Bear Stearns(BSC) hired Jeffrey Lane from Lehman Brothers Holdings(LEH) to run its asset-management division after the near-collapse of two hedge funds forced the firm to put up $1.6 billion for a bailout.

Wall Street Journal:
- Discover Financial Services, set to be spun off by Morgan Stanley(MS), is far smaller than rivals Visa USA Inc. and MasterCard Inc., yet its shares may be attractive because credit-card demand is growing.
- Delta Air Lines may be the leading contender to gain the first new non-stop flights between the US and China, to be awarded under agreements signed in May.
- Iowa Senator Charles Grassley, the top Republican on the Senate Finance Committee, may determine the outlook for legislative proposals to raise taxes on the hedge-fund and private-equity industries.
- Lawmakers moved to salvage parts of a grand compromise on immigration reform following the collapse of the broad package.

Boston Herald:
- Massachusetts is considering creating a loan pool backed by as much as $200 million in state bonds to enable homeowners to refinance unaffordable mortgages.

Washington Post:

- Russian authorities have shut down a US-funded non-profit training organization for journalists and filed criminal charges that critics say are politically motivated.

LA Times:
- Doug Frantz, managing editor of the LA Times, will become the Middle East bureau chief for the Wall Street Journal next month.

AP:
- The California State Assembly approved another 17,000 slot machines at casinos run by four Southern California tribes that will bring the state hundreds of millions of dollars in new revenue.

CNBC:
- The SEC is increasing its scrutiny of Bear Stearns’(BSC) hedge fund business.

Financial Times:
- Goldman Sachs Group(GS) was the top investment banking adviser in the world in the first half of 2007, citing Dealogic data.

China Knowledge:
- BP Plc(BP), Europe’s second-largest oil company, aims to double the import and sale of liquefied petroleum gas in China by 2010.

Incomes/Spending Rise Less Than Estimates, Inflation Decelerates Further, Chicago Manufacturing Strong, Construction Jumps, Confidence Revised Higher

- Personal Income for May rose .4% versus estimates of a .6% gain and a -.2% decline in April.

- Personal Spending for May rose .5% versus estimates of a .7% increase and a .5% gain in April.

- The PCE Core (MoM) for May rose .1% versus estimates of a .1% gain and a .1% increase in April.

- The Chicago Purchasing Manager Index for June came in at 60.2 versus estimates of 58.0 and a reading of 61.7 in May.

- Construction Spending for May rose .9% versus estimates of a .1% gain and a .2% increase in April.

- The Final Univ. of Mich. Consumer Confidence reading for June rose to 85.3 versus estimates of 84.0 and 83.7 in May.

BOTTOM LINE: Americans spent less than forecast in May and the Fed’s preferred inflation gauge cooled, Bloomberg reported. The Core PCE, the Fed’s favorite inflation gauge, rose 1.9% from a year earlier, the smallest gain since March 2004. This is also well below the 20-year average of 2.5% and within the Fed’s comfort zone. Consumer spending will come in below average rates this quarter, however spending should substantially exceed estimates of 2.5% in the second half of the year as interest rates come back down, energy prices fall substantially, sentiment improves, inflation decelerates further, stocks rise further, incomes continue to outpace inflation and housing sales stabilize at relatively high levels.

A measure of US business activity unexpectedly held near a two-year high this month, suggesting business spending will support continued growth, Bloomberg reported. The Prices Paid component fell to 68.1 from 70.2 in May. The Employment component of the index fell to 52.7 from 57.3 the prior month. The New Orders component fell to 65.7 from 71.1 the prior month. I continue to believe manufacturing will help boost US growth back to 3%+ this quarter.

Spending on US construction projects rose more than forecast last month as work on non-residential and government projects helped overcome cutbacks in homebuilding, Bloomberg said. The .9% increase was the biggest gain since February 2006. Every category besides residential construction showed an increase, spurred by the building of factories and utilities. I still expect construction spending to trend below average rates as homebuilders further pare down inventories and commercial construction slows modestly.

Confidence among US consumers came in above the level economists had expected for June, Bloomberg reported. While the average price of gas has fallen to $2.97/gallon from the record $3.23/gallon on May 23, it is still 28% higher this year. Consumers believe inflation will rise 2.9% over the next five years, down from 3.1% the prior month. I continue to believe both main gauges of consumer sentiment will rebound back near cycle highs before year-end.

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Friday Watch

Late-Night Headlines
Bloomberg:
- Research In Motion Ltd.(RIMM), maker of the BlackBerry e-mail phone, said first quarter profit rose 73% on demand for new devices with cameras and music players. The company also announced a 3-for-1 stock spit. Shares soared 17% in after-hours trading.
- Some seafood imported to the US from China will be detained by regulators because of possible contamination with unsafe drugs, the latest health warning about products from that country.
- FedEx Corp.(FDX) truck drivers would be able to join unions more easily under US legislation approved by a House panel today, in a victory for organized labor.
- The yen headed for the biggest quarterly loss against the US dollar since 2001 before reports that are forecast to show falling prices and slowing consumption in Japan.
- North Korea’s pledge to close its Yongbyon reactor and dismantle its nuclear program may help establish a security agreement for northeast Asia, South Korean Foreign Minister Song Min Soon said.
- Japan’s consumer prices fell .1% in May, a pace of decline that’s unlikely to deter the central bank from raising its benchmark interest rate, the lowest among major economies.
- The US House of Representatives moved toward giving small companies an additional year to adhere to the Sarbanes-Oxley Act’s accounting rules, which are being revised by the SEC.
- Consideration of an energy package in the House of Representatives that had been scheduled for July may be delayed until September partly because of pending work on other legislation, Speak Nancy Pelosi said.
- The highest-rated collateralized debt obligations holding subprime mortgages may be worth buying if an abundance of selling causes prices to drop, according to Morgan Stanley.
- Members of the International Swaps and Derivatives Assoc. said they will not change trading contract language to address concerns raised by a group of hedge funds that banks who invest in derivatives tied to subprime mortgage bonds may try to suppress defaults by buying bad loans out of the deals.
- Apollo Group(APOL), the for-profit education company, reported profit excluding some items of 81 cents a share in the third quarter and said it plans to buy back as much as $500 million of its own stock. The stock rose 6.7% in after-hours trading.
- Komag(KOMG), the maker of computer disk-drive components, agreed to be bought by Western Digital(WDC) for $32.25 a share, or $1 billion, in cash. Komag rose 7.7% in after-hours trading.
- South Korea has accepted new labor and environment provisions for its free-trade agreement with the US, allowing it to be signed tomorrow, Kim Jong Hoon, the Asian country’s chief negotiator said.

Wall Street Journal:
- Apple Inc.(AAPL) may not be able to meet demand for its iPhone, Chief Executive Officer Steve Jobs said. The iPhone hasn’t had an effect on iPod sales, Jobs said.
- Ford Motor(F) plans to resume paying a dividend sometime in the future, citing a video of CEO Mulally talking to dealers.

LA Times:
- Doug Frantz, managing editor of the LA Times, will leave the paper, citing Editor James O’Shea.

Daily Mail:
- Russia wants to add oil reserves twice the size of Saudi Arabia’s by laying claim to untapped oil and natural gas fields beneath the North Pole.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MON), target raised to $77.
- Rated (CMG) Buy, target $100.
- Reiterated Buy on (SNDK), target $52.

Needham & Co.:
- Rated (SNDK) Buy, target $55.

Business Week:
- Shares of USG Corp., the No. 1 maker of gypsum wallboard in the US, may rebound next year if the housing market turns around. The stock may rise 44% to $70 a share in the next year, citing Michael Metz, chief investment strategist at Oppenheimer Holdings.
- Shares of Kaydon Corp.(KDN) may rise as increased interest in wind energy will strengthen demand for the anti-friction bearings the company makes for turbines.
- United Retail Group(URGI), whose clothing caters to women wearing size 14 or larger, will benefit from summer sales.

Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (NDN)/.01
- (AZZ)/.42

Upcoming Splits
- (CXW) 2-for-1

Economic Releases
8:30 am EST
- Personal Income for May is estimated to rise .6% versus a -.1% decline in April.
- Personal Spending for May is estimated to rise .7% versus a .5% gain in April.
- PCE Core (MoM) for May is estimated to rise .1% versus a .1% gain in April.

9:45 am EST
- The Chicago Purchasing Manager Index for June is expected to fall to 58.0 versus a reading of 61.7 in May.

10:00 am EST
- Construction Spending for May is estimated to rise .1% versus a .1% gain in April.
- Final University of Michigan Consumer Confidence for June is estimated to rise to 84.0 versus a prior estimate of 83.7.

Other Potential Market Movers
- The JPMorgan Global Tobacco Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Mixed on Quarter-end Profit-taking

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Stocks Higher into Final Hour as Fed Says Core Inflation is Moderating, Leaves Benchmark Rate at 5.25%

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Software longs and Networking longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is mildly higher, almost every sector is rising and volume is above average. The Fed left the benchmark rate unchanged at 5.25%. They made both hawkish and dovish comments in the ensuing policy statement. They said core inflation has improved modestly, but that it may not be sustained. The other statements were about the same as prior ones. They did not stress a focus on headline inflation rather than core, as some investors had feared. Natural gas has broken down again technically, which seems to be weighing on oil service stocks despite today’s rise in oil. As well, corn has plunged 19% in nine days, even as oil has risen and talk of alternative energy has grown louder. Nasdaq reported that short interest on the exchange surged another 9.2% to 9,170,000,000 shares, from mid May through mid June, hitting another all-time high. Moreover, as on the NYSE, the last four months have seen Nasdaq short interest soar an astounding 30.2%, the largest four-month percentage increase since at least 1991, according to Bloomberg data.

Here are the 25 Nasdaq stocks with the largest percentage increase in their short interest relative to their float from mid May through mid June:

1) USNA +20.6%
2) SMTC +18.0%
3) BBND +13.7%
4) PODD +11.6%
5) GMTN +10.9%
6) OATS +9.4%
7) TRMP +8.6%
8) KLIC +8.4%
9) TRGL +7.6%
10) MCHX +7.5%
11) LPHI +7.2%
12) GMET +7.0%
13) SNTA +7.0%
14) AGEN +6.9%
15) GLBC +6.6%
16) MNKD +6.6%
17) PALM +6.4%
18) ENTG +6.3%
19) SIRO +6.2%
20) MALL +6.1%
21) UHAL +6.1%
22) CHIP +5.9%
23) COMV +5.7%
24) SHFL +5.6%
25) TSCM +5.6%

The S&P 500 also reported short interest data. Here are the five industries in the S&P 500 with the largest percentage increase in their short interest from mid May through mid June:

1) Utilities +16.3%
2) Information Technology +12.8%
3) Health Care +8.3%
4) Financials +7.9%
5) Telecom Services +3.5%

Here are the 20 S&P 500 stocks with the largest percentage increase in their short interest relative to their float from mid-May through mid-June:

1) NSM +13.8%
2) PNW +5.6%
3) KLAC +5.2%
4) RSH +4.8%
5) HAS +4.7%
6) CIEN +4.0%
7) MBI +3.3%
8) TRB +3.0%
9) WFMI +3.0%
10) EQR +2.8%
11) NVDA +2.6%
12) GNW +2.4%
13) IBM +2.1%
14) LIZ +2.1%
15) SSP +1.9%
16) MU +1.9%
17) HBAN +1.9%
18) DTE +1.9%
19) MYL +1.8%
20) DCT +1.8%

I expect US stocks to trade modestly higher into the close from current levels on short-covering, diminishing sub-prime angst and bargain-hunting.

Today's Headlines

Bloomberg:
- Venezuelan President Hugo Chavez attacked US dominance as he visiting Russia looking to secure a deal for eight Russian submarines and greater energy cooperation.
- A US District Court froze the assets of Lake Shore Asset Management, a hedge funds run by a former chairman of the Chicago Mercantile Exchange, after misrepresentations in the fund’s financial statements were uncovered by the Commodity Futures Exchange Commission. Chicago-based Lake Shore purported to manage $1 billion for investors and traded in US commodities futures contracts with a 13-year profitability record. A review later showed the fund had about $466 million. Lake Shore barred regulators from inspecting its accounts on June 14, a violation of the Commodity Exchange Act.
- Jeremy Siegel, a professor at the University of Pennsylvania’s Wharton School of Business doesn’t see “excessive leverage” in the economy.
- Corn in Chicago fell for a third session this week as rains revive crops in the US Midwest threatened by unusually hot, dry weather earlier this month. Corn has plunged 19% in 9 trading days.
- Natural gas is plunging 5% to a five-month low after a weekly government report showed inventories are 18% above the five-year average for this time of the year as industrial demand falters.
- The Fed kept the benchmark US interest rate at 5.25% and said that core inflation has moderated, but that the moderation may not be sustainable.
- Petro-Canada, the third-largest oil company in Canada, and its partners will spend $24.6 billion on an oil-sands project in northern Alberta that’s one of the world’s most costly energy developments.
- A bald eagle swept above a crowd at the Jefferson Memorial in Washington as the Interior Department declared that the national bird is no longer threatened with extinction after four decades as an endangered species.
- GM(GM) agreed to sell its Allison Transmission unit to buyout firms Carlyle Group and Onex for $5.6 billion.
- Robert Steel, the US Treasury’s top finance official, said concerns that the near failure of two money-losing hedge funds run by Bear Stearns(BSC) might spark a financial crisis or hurt the economy are unfounded.
- Shares of Build-A-Bear Workshop(BBW) rose the most in almost three years after the maker of stuffed animals hired Lehman Brothers(LEH) to explore a sale, following a forecast of declining profit.
- The US Senate again blocked passage of comprehensive immigration legislation, almost certainly ending chances Congress will act this year on it.
- Ford Motor(F) said it’s offering three-year, no-interest loans on all 2007 Ford, Lincoln and Mercury vehicles to start making room at dealerships for next year’s models.
- Intel Corp.(INTC) was upgraded to “overweight” from “equal weight” at Lehman Brothers, which said a new series of semiconductors designed for laptop computers may boost revenue and earnings growth.

Wall Street Journal:
- Visa International Inc. will pay $170 million to sponsor soccer’s World Cup for eight years, citing FIFA President Sepp Blatter.
- Enterprise Rent-A-Car is opening a branch in Washington DC where customers will be offered vehicles that run on E85, a fuel comprising 85% ethanol and 15% gasoline.
- Chipotle Mexican Grill(CMG), the Chicago Tribune(TRB) and Visa will sponsor the first Windy City Cornhole Classic on July 28 at Soldier Field in Chicago. The bag-tossing game known as cornhole, Bags, and Baggo has become the latest fad in the US Midwest at bars, parties and church picnics.
- Some US House Republicans have aligned with Wall Street in an attempt to halt a congressional proposal that would raises taxes substantially on financial firms.

AP:
- The Democrat-controlled House of Representatives endorsed a $4,000 pay raise that would increase their salaries to almost $170,000.

Expansion:
- Acciona SA has acquired the rights to develop wind parks in the US from EcoEnergy LLC. EcoEnergy has the rights to develop 1,300 megawatts of wind power. Acciona plans to invest $1.75 billion before 2009 in wind energy in the US.

Final GDP and GDP Price Index Revised Slightly Higher, Job Market Still Healthy

- Final 1Q GDP rose .7% versus estimates of a .8% gain and a prior estimate of a .6% gain.

- Final 1Q Personal Consumption rose 4.2% versus estimates of a 4.4% gain and a prior estimate of a 4.4% increase.

- Final 1Q GDP Price Index rose 4.2% versus estimates of a 4.2% gain and a prior estimate of a 4.0% increase.

- Final 1Q Core PCE QoQ rose 2.4% versus estimates of a 2.2% gain and a prior estimate of a 2.2% increase.

- Initial Jobless Claims for last week fell to 313K versus estimates of 315K and 326K the prior week.

- Continuing Claims fell to 2490K versus estimates of 2500K and 2517K prior.

BOTTOM LINE: The US economy expanded at an annual pace of .7 percent in the first quarter, Bloomberg reported. According to economists, this quarter was the low point for the year as the trade deficit narrows and corporate spending accelerates. Spending on residential construction fell at a 15.8% annual pace last quarter versus a 19.8% pace in the fourth quarter. The decline subtracted .9 percentage point from growth. I continue to believe US growth will come in at 3%+ this quarter before decelerating modestly below trend in 3Q.

Fewer Americans filed first-time claims for unemployment benefits last week, signaling the labor market remains healthy, Bloomberg said. The four-week moving average of jobless claims rose to 316,000 from 315,000 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at 1.9% for the ninth consecutive week. The unemployment rate is currently a historically low 4.5%. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor costs increases.

Links of Interest

Market Snapshot Commentary
Market Performance Summary

Style Performance
WSJ Data Center
Top 20 Biz Stories
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Thursday Watch

Late-Night Headlines
Bloomberg:
- Apple Inc.'s campaign to build excitement about its iPhone may be the most successful marketing effort ever, surpassing the drive to promote Ford Motor Co.'s 1964 Mustang and Microsoft Corp.'s Windows 95.
- CryoCor Inc.(CRYO) won the backing of US advisers for its experimental device to treat a type of irregular heartbeat, moving the product a step closer to approval more than a year after regulators rejected it.
- UBS AG, Europe’s largest bank by assets, was accused by Massachusetts regulators of “dishonest and unethical” practices in dealings with hedge-fund advisers.
- The yen fell from a two-week high against the US dollar and euro on speculation investors resumed sales of the currency in search of higher returns elsewhere.
- Japan’s industrial production unexpectedly dropped for third month in May, the longest losing streak in almost two years, raising concern that the world’s second-largest economy is slowing.
- The fate of US immigration legislation was cast into doubt when at least six senators who helped revive the proposed overhaul said they either oppose or are leaning against a move to permit a vote on final passage.

Financial Times:
- Motorola(MOT) is worried about the effect of Apple’s(AAPL) iPhone but believes the device has weaknesses, citing an interview with Padmasree Warrior, Motorola’s chief technology officer.
- Signs emerged on Wednesday that efforts by federal officials to tackle the competitiveness of the US capital markets are speeding up.
- Ten international banks, including HSBC and Standard Charter, have been punished by China’s foreign exchange regulator for breaching strict capital controls by helping to funnel huge amounts of foreign exchange into the country’s soaring stock and property markets.
- Iran’s parliament on Wednesday night agreed to press ahead with plans to introduce fuel rationing in the face of panic and rioting across the country over the proposals.

Late Buy/Sell Recommendations
Citigroup:
- We strongly recommend investors take advantage of current weakness to add to their (ABK, target $103) and (MBI, target $74) positions. Valuations are neat the trough, yet market conditions for new business are the most attractive they have been since 2003 as spreads are finally widening.
- Reiterated Buy on (JCI), target raised to $131.

Night Trading
Asian Indices are +.25% to +1.0% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (COMS)/.02
- (ACN)/.55
- (APOL)/.71
- (ARRO)/.37
- (BMET)/.48
- (BBOX)/.61
- (CBK)/.30
- (STZ)/.15
- (FDO)/.41
- (FINL)/-.10
- (GIS)/.63
- (KBH)/.26
- (MU)/-.24
- (MON)/1.00
- (TONS)/.98
- (PALM)/.14
- (RAD)/.00
- (RBN)/.59
- (SLR)/.05
- (TIBX)/.02
- (WOR)/.36

Upcoming Splits
- (FLO) 3-for-2

Economic Releases
8:30 am EST
- Final 1Q GDP is estimated to rise .8% versus prior estimates of .6% increase.
- Final 1Q Personal Consumption is estimated to rise 4.4% versus prior estimates of a 4.4% increase.
- Final 1Q GDP Price Index is estimated to rise 4.0% versus prior estimates of a 4.0% gain.
- Final 1Q Core PCE QoQ is estimated to rise 2.2% versus prior estimates of a 2.2% gain.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 324K the prior week.
- Continuing Claims are estimated to fall to 2500K versus 2523K prior.

2:15 pm EST
- The FOMC is expected to leave the benchmark Fed Funds rate at 5.25%.

Other Potential Market Movers
- The Wachovia CEO Summit, RBC Energy Infrastructure/Trust Conference and Jeffries Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by automaker and energy stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Sharply Higher on Diminishing Sub-Prime Worries and Short-Covering

Indices
S&P 500 1,506.34 +.90%
DJIA 13,427.73 +.68%
NASDAQ 2,605.35 +1.21%
Russell 2000 838.46 +1.49%
Wilshire 5000 15,187.08 +.96%
Russell 1000 Growth 596.72 +1.0%
Russell 1000 Value 858.88 +.85%
Morgan Stanley Consumer 730.23 +.51%
Morgan Stanley Cyclical 1,072.66 +.82%
Morgan Stanley Technology 625.94 +1.30%
Transports 5,129.77 +1.05%
Utilities 496.11 +1.70%
MSCI Emerging Markets 130.21 +.16%

Sentiment/Internals
Total Put/Call 1.05 -2.78%
NYSE Arms .72 -41.42%
Volatility(VIX) 15.53 -17.79%
ISE Sentiment 116.0 -15.94%

Futures Spot Prices
Crude Oil 69.01 +1.83%
Reformulated Gasoline 225.46 +.34%
Natural Gas 6.93 +.76%
Heating Oil 202.51 +1.60%
Gold 645.80 +.08%
Base Metals 246.31 -2.53%
Copper 335.25 +1.09%

Economy
10-year US Treasury Yield 5.08% unch.
US Dollar 82.32 +.03%
CRB Index 312.30 +.51%

Leading Sectors
Biotech +2.20%
REITs +2.08%
Alternative Energy +2.12%

Lagging Sectors
Insurance +.20%
Gaming +.08%
Hospitals +.05%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Bank of America:
- Rated (SPR) Buy, target $42.

Oppenheimer:
- Rated (CRWN) Buy, target $9.25.

Afternoon/Evening Headlines
Bloomberg:
- Treasury Secretary Henry Paulson said Congress shouldn’t punish Blackstone Group LP with higher taxes because it became a publicly traded partnership, and he warned against “unintended consequences” of broader efforts to tax hedge funds and buyout firms.
- Merrill Lynch(MER) CEO O’Neal and Goldman Sachs Group(GS) CEO Lloyd Blankfein offered reassurance to investors today, saying they see few risks of widespread turmoil in the credit markets.
- James Glassman, senior US economist at JPMorgan(JPM), sees the Fed “on the sidelines” and the price of oil dropping.
- Corn fell to a six-week low in Chicago on speculation that rains will revive Midwest crops threatened by hot, dry weather earlier this month.
- Sugar fell in NY on renewed speculation that rising Brazilian and Indian production will widen a global glut.
- A Senate panel probing the National Security Agency’s domestic terrorism surveillance program issued subpoenas to the White House, VP Dick Cheney and the Justice Dept. for documents showing the Bush administration’s legal justification for the program.
- Shares of Nike Inc.(NKE), the world’s largest sneaker maker, posted their biggest gain in 4 ½ years after the company said orders for clothing and shoes rose 12%, the most since 1997.
- Shares of ComScore Inc.(SCOR), Data Domain(DDUP) and Spreadtrum Communications(SPRD) soared in their first day of trading as demand for speedier wireless connections and Web content renewed investor appetite for technology stocks.
- Bed Bath & Beyond(BBBY) said first quarter profit rose 4.2% after customers bought less bedding and curtains as US home sales slowed. The stock fell 4.3% in after-hours trading.

WABC television:
- NYC is experiencing scattered power outages, affecting parts of the South Bronx, East Harlem and the Upper East Side.

BOTTOM LINE: The Portfolio finished higher today on gains in my I-Banking longs, Medical longs, Semi longs, Biotech longs and Base Metal shorts. 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, 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. Growth stocks were especially strong, however, every sector I follow finished higher. Technology stocks outperformed again today, and the MS Tech Index is now 10.6% higher year-to-date vs. a 7.2% gain for the S&P 500. Corn fell another 3.6% and has completely broken down technically. I continue to believe a major top in the commodity is already in place. This spurred another 1% decline in the Goldman Ag Commodity Sub-Index. Retail options traders exhibited bearish sentiment throughout the day. The Nikkei futures are indicating an up 100 open in Japan. I suspect U.S. stocks will build on today's gains tomorrow.

Here is a five-year chart of NYSE short-interest:

As you can see, short interest was basically flat from mid-2002 through first quarter 2005, which is what I would expect considering the massive number of new hedge funds created during that period and a large stock rally off the bottom in October 2002. However, the recent parabolic rise in short interest, the largest four-month percentage increase on record (+30%), is stunning considering recent stock gains and is symptomatic of the current U.S. negativity bubble, in my opinion. Moreover, the only ETF that is ranked in the top 30 NYSE short positions is the iShares Russell 2000 Index (IWM). The rest are equities. I think this is a direct result of the massive capital that is allocated to low correlation U.S. stock strategies and the undying belief by the herd that the U.S. will continue to underperform all other global markets indefinitely. I suspect, given their horrific risk-adjusted underperformance over the last few years, that some low-correlation U.S. stock strategies will see significant redemptions at year-end and that a large percentage of this capital will move into more positively correlated U.S. stock strategies. As well, I think a chain reaction of events has already begun that will lead to a dramatic positive change in perception by global portfolio managers regarding the prospects for US stocks vs. most other global markets. The recent parabolic rise in short interest is unsustainable and only brings the "mother of all short-covering rallies" closer, in my opinion.

Stocks Reverse Sharply Higher into Final Hour on Diminishing Subprime Angst, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my I-banking longs, Medical longs, Semi longs, Biotech longs and Base Metal shorts. I covered some of my (EEM) short and all of my (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is above average. AppleInsider is reporting today that, according to two recent reports, Mac sales are accelerating faster than anticipated across the board. Numerous pundits and analysts attempted to paint a negative picture of Apple (AAPL) back when the stock was around $90 per share on news of the iPhone. These bearish comments, which were hailed as hard-hitting and thorough analysis at the time, rarely mentioned the traction of the Mac or the inferior competition that the iPhone would face. I suspect similar bearish attacks will occur next week in an attempt to paint the iPhone’s release as a flop. I plan to use any material weakness in the shares to add to my long position, which is my second largest, behind Google (GOOG). I continue to believe that even the most optimistic investors are underestimating the company's financial prospects going forward and that the stock still has substantial upside. I expect US stocks to trade modestly higher into the close from current levels on short-covering, diminishing sub-prime angst and bargain-hunting.

Today's Headlines

Bloomberg:
- Goldman Meets Match in Googleplex When Recruiting Graduates.
- Merrill Lynch(MER) CEO O’Neal says subprime mortgage losses are contained.
- White House spokesman Tony Snow said the Bush administration is critical of Democratic legislation that would more than double taxes paid by managers of hedge funds, buyout firms, real estate partnerships and venture capital firms.
- The wealth of the world’s millionaires swelled at the fastest pace in seven years in 2006, led by growth in emerging markets such as China, according to an annual survey by Capgemini SA and Merrill Lynch.
- Lloyd Blankfein, CEO of Goldman Sachs(GS), said “the private equity boom isn’t over” and that “market conditions are quite benign.”
- Corn is falling another 4.1% in Chicago on speculation that rains will revive Midwest crops.
- Oil is rising over $1/bbl. on a fall in gasoline supplies as refinery utilization remains very low for this time of year due to ongoing maintenance “problems” and the cancellation of plans by refiners to increase production capacity by 500,000 barrels per day earlier in the year.
- Apple Inc.(AAPL) is offering easy activation of its new iPhone by using iTunes, which will be critical to a successful introduction of the mobile device, according to American Technology Research analysts.
- Iranians rioted in the streets of Tehran after the government imposed rationing of gasoline, which the country spends $5 billion a year to import.
- Fidelity National Information Services(FIS) agreed to buy rival EFunds(EFD) for about $1.8 billion in cash to bolster its debit-card business.
- CommScope Inc.(CTV), a maker of cable for high-speed services, agreed to buy mobile-phone equipment maker Andrew Corp.(ANDW) for about $2.6 billion.
- China, the world’s biggest producer and consumer of cotton, may reduce imports by 32% this year, pressuring international prices, as a record domestic crop boosts supplies.

Wall Street Journal:
- US Treasury Secretary Henry Paulson will announce today a review of financial-market regulation. Recommendations might include consolidating some overlapping regulatory jurisdictions. Also today, Paulson will probably call for hedge-fund managers to develop voluntary standards for behavior to minimize market risks.
- Wal-Mart Stores(WMT), Home Depot(HD), Best Buy(BBY) and other big-box retailers are putting up clearer signs, adding brighter lights and speeding up checkouts to make shopping less tedious.
- Apple Inc., Nokia Corp., Samsung and other makers of cell phones are increasingly offering wireless Internet access.
- About 17% of the fund managers questioned said US stocks are overrated, the highest percentage in the survey’s three-year history, despite the fact that valuations have fallen substantially over that timeframe, citing a quarterly Russell Investment Group survey.
- United Auto Group(UAG) will change its name to Penske Automotive Group next week to tap the name recognition of its CEO and controlling shareholder.
- Amazon.com(AMZN) is increasing services to business Internet usurers, selling digital storage and computing power that could lift sales in 2008 and 2009, citing Deutsche Bank analyst Jeetil Patel.

NY Times:
- Kurdistan’s relative stability compared with the rest of Iraq has brought it billions of dollars of investment in the past four years.

Dow Jones:
- Carlyle Group may go public after rival buyout firm Blackstone Group’s successful IPO, citing a managing director.

Philadelphia Inquirer:
- Donald Trump’s plan to sell Trump Entertainment Resorts(TRMP), the casino company he controls, to a private-equity partnership has hit snags over the price.

Market News Intl.:
- The European Central Bank hasn’t decided whether to raise interest rates again in September, citing “well-placed monetary sources.”

AppleInsider:
- Mac sales are accelerating faster than anticipated across the board thanks to the iPhone and Leopard, and could even crack the elusive business market that has remained a Windows sanctuary, according to a pair of new reports.

CNBC:
- The Chinese government has shut down 180 food manufacturers after a probe found industrial chemicals and additives in their products.

Frankfurter Allgemeine Zeitung:
- Germany’s government wants to increase energy efficiency and lower the use of electricity, oil and gas by increasing subsidies to meet a goal to cut emissions in 2020 by 40% from 1990’s level.

People’s Daily:
- Cuba will help Nigeria develop technology to produce ethanol from sugar cane, citing Elio Olivia, the Cuban ambassador to Nigeria.

Durable Goods Orders Fall in May after Large April Upward Revision

- Durable Goods Orders for May fell 2.8% versus estimates of a 1% decline and an upwardly revised 1.1% gain in April.

- Durables Ex Transports for May fell 1% versus estimates of a .2% gain and an upwardly revised 2.5% increase in April.

BOTTOM LINE: Orders for US durable goods fell more than forecast in May, Bloomberg reported. The decline was spurred by fewer orders for aircraft, metals and machinery. May’s decline wasn’t a big surprise considering the prior two months’ gains were the best since August/September 2005. Total orders have never been up for four consecutive months since record-keeping began in 1992. Non-defense capital goods orders ex aircraft, a gauge of future business spending, fell 3% after a 2.3% surge the prior month. Unfilled orders for those goods rose .6%. Manufacturers had a 1.46 months’ supply of durable goods on hand at the current sales pace in May, unchanged from April. I continue to believe manufacturing will help boost US economic growth back to 3+% this quarter on inventory rebuilding and a subsiding of auto production cutbacks.

Links of Interest

Market Snapshot Commentary
Market Performance Summary

Style Performance
WSJ Data Center
Top 20 Biz Stories
Movers & Shakers
Upgrades/Downgrades
In Play
Today in IBD
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Wednesday Watch

Late-Night Headlines
Bloomberg:
- General Motors’(GM) Cadillac luxury-vehicle division is considering hybrid versions of all its models.
- A unit of General Electric(GE), the world’s biggest maker of power generators, will invest in three windparks in New York State, its first wind energy investment there.
- Shares of Cameco Corp.(CCJ), the world’s largest uranium producer, fell the most in eight months on concern that the price of uranium has peaked.
- Countrywide Financial Corp.(CFC) called “unfounded” market speculation that the company was the subject of raids by federal authorities.
- North Korea is “committed” to scrapping its nuclear program and is “positive” about its relations with the US and the international community, a group of European Union lawmakers told reporters in Seoul today.
- Japan’s retail sales unexpectedly rose for the first time in eight months, signaling spending by consumers may drive second-quarter economic growth.

Wall Street Journal:
- Apple’s iPhone is a breakthrough smart phone with some flaws, according to a review by Walter S. Mossberg. The “simply beautiful” handheld computer, set to go on sale June 29, offers the “best Web browser,” the biggest and highest-resolution screen and better battery life than key competitors, according to the review, also written by Katherine Boehret.

Late Buy/Sell Recommendations
Citigroup:
- (TSO) and (VLO) are downgraded to Sell and (SUN) is lowered to Hold. We are lowering ratings across the board for the US refiners. Valuations have moved within striking distance of levels we believe take full account of structural changes that have underpinned our positive view since early 2007. But from here the balance of risk has moved to the downside. Share price appreciation has benefited from a number of transitory factors that have inflated earnings expectations beyond levels we believe can reasonably be viewed as repeatable.
- Reiterated Buy on (NKE), target $65.

Morgan Stanley:
- Reiterated Outperform on (ORCL), target $24.

Night Trading
Asian Indices are -1.0% to -.25% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.10%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (ATML)/.03
- (BBBY)/.37
- (CKR)/.27
- (CAG)/.31
- (GY)/-.04
- (MLHR)/.49
- (MKC)/.33
- (PKE)/.41
- (PAYX)/.36
- (RHT)/.15
- (SMOD)/.22
- (SMSC)/.25
- (TBL)/.15
- (XRTX)/.14

Upcoming Splits
- (SPAR) 3-for-2
- (VSEC) 2-for-1
- (FLO) 3-for-2

Economic Releases
8:30 am EST
- Durable Goods Orders for May are estimated to fall -1.0% versus a .8% gain in April.
- Durables Ex Transports for May are estimated to rise .2% versus a 1.9% increase in April.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,500,000 barrels versus a 6,902,000 barrel build the prior week. Gasoline supplies are estimated to rise by 1,000,000 barrels versus a 1,791,000 barrel increase the prior week. Distillate inventories are expected to rise by 500,000 barrels versus a 157,000 barrel build the prior week. Finally, Refinery Utilization is expected to rise by .83% versus a -1.63% decline the prior week.

Other Potential Market Movers
- The weekly MBA Mortgage Applications report, (LUV) analyst meeting, Wachovia CEO Summit and Jeffries Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by automaker and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Slightly Lower on Weakness in Commodity Stocks and Lingering Housing Worries

Indices
S&P 500 1,492.89 -.32%
DJIA 13,337.66 -.11%
NASDAQ 2,574.16 -.11%
Russell 2000 826.13 -.16%
Wilshire 5000 15,043.04 -.34%
Russell 1000 Growth 590.79 -.32%
Russell 1000 Value 851.68 -.40%
Morgan Stanley Consumer 726.53 +.09%
Morgan Stanley Cyclical 1,063.97 -1.05%
Morgan Stanley Technology 617.93 -.24%
Transports 5,076.57 -.94%
Utilities 487.84 -.13%
MSCI Emerging Markets 129.99 -.35%

Sentiment/Internals
Total Put/Call 1.08 -2.70%
NYSE Arms 1.24 -7.51%
Volatility(VIX) 18.89 +13.45%
ISE Sentiment 143.0 +8.33%

Futures Spot Prices
Crude Oil 67.94 -1.79%
Reformulated Gasoline 224.89 -2.33%
Natural Gas 6.85 -1.27%
Heating Oil 199.71 -2.22%
Gold 644.30 -1.59%
Base Metals 252.70 +1.82%
Copper 332.85 -2.05%

Economy
10-year US Treasury Yield 5.08% unch.
US Dollar 82.32 unch.
CRB Index 310.73 -.80%

Leading Sectors
Internet +1.53%
Drugs +.86%
Restaurants +.64%

Lagging Sectors
Oil Service -1.85%
Steel -1.93%
Gold -2.64%

Evening Review
Market Performance Summary
Market Gauges
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
After-hours Stock Quote
In Play

Afternoon Recommendations
Deutsche Bank:
- Rated (RYL) Buy, target $52.

Citigroup:
- Reiterated Buy on (MO).

Afternoon/Evening Headlines
Bloomberg:
- Bear Stearns(BSC) probably won’t bail out the second of its money-losing hedge funds, Merrill Lynch(MER) analyst Guy Moszkowski said, a day after sounding the alarm that investors couldn’t “rule out” such a rescue.
- Bear Stearns(BSC) said it will put up $1.6 billion to rescue one of its money-losing hedge funds, half as much as it offered last week, after raising additional money through asset sales.
- NY harbor conventional gasoline’s discount to futures widened for a second day and reformulated gasoline’s premium declined as traders may be anticipating lower prices next month.
- The Intl. Monetary Fund said it will consider whether to sell gold and invest the proceeds in interest-bearing accounts during a board meeting next month.
- The SEC has undertaken about a dozen probes involving collateralized loans, Chairman Christopher Cox said.
- US steel stocks fell after Arcelor Mittal, the world’s biggest steelmaker, was downgraded by Merrill Lynch(MER) to neutral on concern that steel prices may decline.
- US steel imports reached the highest this year in May as countries including China and South Korea exported more of the metal, an industry group said. Chinese imports were 85% higher than a month earlier, the group said. “The surge in steel imports from China to over 500,000 net tons in May, which equates to an annualized rate in excess of 6 million tons, is of particular concern to domestic steel producers,” Andrew Sharkey, CEO of the institute said.
- Oracle Corp.(ORCL) said fourth-quarter profit rose 23%, beating analysts’ estimates, buoyed by database sales and recent acquisitions. The stocks is rising .23 to $19.39 in after-hours trading.
- Nike Inc.(NKE) said fourth quarter profit climbed 32% on a weaker dollar and increased US clothing and equipment sales. The stock is surging 5.2% in after-hours trading.
- Apple’s(AAPL) iPhone already has people lining up at two Apple stores in New York, four days before the device is scheduled to be released.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Internet longs, Medical longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished mildly lower, sector performance was mostly negative and volume was above average. Measures of investor anxiety were high into the close. Today's overall market action was mildly bearish. Cyclicals undperformed meaningfully today as commodity-related stocks (-1.75% to -3.25%) remained under significant pressure for the second day in a row. The two main sources of inflation over the last few years have been commodities and housing. While a significant hurricane could temporarily send energy prices higher, I suspect almost every commodity has already seen its highs for the year. This should help spur another substantial deceleration in inflation readings during the third quarter. I still believe that the 10-year yield has peaked for the year, as well. Google (GOOG) continues to trade very well. The stock looks like it is coiling before another surge higher. It remains my largest equity long position. According to sentimenTrader.com, the All-Index, All-Product Dollar-Weighted Stochastic is now at an extreme level that is normally associated with meaningful market bottoms. At 90.9, this chart shows that it is at the extremes it hit during the trough of the February/March pullback. Readings at 80 or above are historically followed by a 13.6% gain in the S&P 500 89% of the time on average over the next 12 months.