Stocks Building on Record Gains into Final Hour on More Economic Optimism, Short-Covering, Buyout Speculation

BOTTOM LINE: The Portfolio is higher into the final hour on gains in Retail longs, Computer longs, Internet longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mixed today as the advance/decline line is slightly lower, most sectors are gaining and volume is about average. Asian equities followed U.S. shares sharply higher overnight. Korea's KOSPI is now up 37% year-to-date, surpassing Vietnam and closing in rapidly on Shanghai’s y-t-d performance. The potential denuclearization of the Korean peninsula has barely been mentioned in the press here, however. The VIX is still hovering around 15, meaningfully higher than during other recent market record surges. USA Today has a survey out today that bodes quite well for continued strong sales of Apple’s(AAPL) iPhone and future versions. The chief strategy officer of the firm conducting the survey said the findings are "pretty much off the charts."

The survey was of 1,000 cell phone users from July 6-10. Here is a summary:

• 90% of 200 owners said they were "extremely" or "very" satisfied with their phone.
• 85% said they are "extremely" or "very" likely to recommend the device to others.
• The high cost of the iPhone was the No. 1 reason consumers interested in the iPhone did not buy one.
• Owners did say Apple (AAPL) could improve some things. Longer battery life, faster Internet speed and more internal memory were common requests. The lack of a physical keyboard was way down the list of wishes.
• 30% of iPhone buyers were first-time AAPL customers.
• 40% of iPhone buyers said it was their first iPod.
• 50% of iPhone buyers switched from another carrier to AT&T (T).
• Of those 50%, 35% paid an average of $167 to break a contract with another carrier.
• 25% of new iPhone buyers that switched from another carrier came from Verizon (VZ).
• iPhone owners expect to pay about $35 more in monthly service fees compared with their previous cell phones.

First of all, 90% of iPhone owners are "extremely" or "very" satisfied with their phones, which is huge. The cost of the current phone will come down as new versions come out, which will bring in more new AAPL customers. The fact that 30% of iPhone buyers were first-time AAPL customers is very positive and bodes well for a significant widening of the "halo effect." Longer battery life, faster Internet speed and more internal memory, which were at the top of the iPhone owners' wish lists, are easily addressed. The fact that 50% of iPhone buyers switched from another carrier and were willing to pay all the associated high costs illustrates how badly many wanted this phone, in my opinion. For emphasis, this is AAPL's first stab at a major new product in a massive new market. The stock still has substantial upside from current levels as earnings exceed even the most optimistic estimates and the multiple expands further. Apple remains my second-largest long position, just behind Google Inc.(GOOG). I expect US stocks to trade mixed-to-higher into the close from current levels on stable long-term rates, more economic optimism, buyout speculation and short-covering.