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.