Stocks Finish at Session Highs on Short-Covering, Buyout Speculation and Diminished Sub-prime Fears

Indices
S&P 500 1,518.76 +.57%
DJIA 13,577.87 +.56%
NASDAQ 2,651.79 +.48%
Russell 2000 839.97 +.30%
Wilshire 5000 15,331.39 +.52%
Russell 1000 Growth 606.61 +.54%
Russell 1000 Value 863.51 +.59%
Morgan Stanley Consumer 729.85 +.65%
Morgan Stanley Cyclical 1,096.22 +1.0%
Morgan Stanley Technology 636.87 +.54%
Transports 5,287.51 +1.72%
Utilities 503.01 +.50%
MSCI Emerging Markets 138.13 +.25%

Sentiment/Internals
Total Put/Call .92 -7.07%
NYSE Arms .64 -65.52%
Volatility(VIX) 16.64 -5.29%
ISE Sentiment 136.0 -13.38%

Futures Spot Prices
Crude Oil 72.47 -.47%
Reformulated Gasoline 229.60 -3.10%
Natural Gas 6.59 -1.63%
Heating Oil 209.65 -1.29%
Gold 662.10 -.36%
Base Metals 258.84 +.80%
Copper 360.70 -.08%

Economy
10-year US Treasury Yield 5.08% +6 basis points
US Dollar 80.79 -.09%
CRB Index 322.87 -.05%

Leading Sectors
Wireless +1.15%
Steel +1.15%
Internet +.95%

Lagging Sectors
Gold -.35%
REITs -.41%
Oil Service -.82%

Evening Review
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In Play

Afternoon Recommendations
Deutsche Bank:
- Rated (DLB) Buy, target $42.

Afternoon/Evening Headlines
Bloomberg:
- Fremont General(FMT) will halt foreclosures in Massachusetts for 90 days, state Attorney General Martha Coakley announced.
- Gasoline futures fell the most in more than a month, declining 3.0%, after a US Energy Dept. supply report today showed inventories rose more than expected despite lower-than-expected refinery utilization with oil inventories near decade highs.
- Motorola Inc.(MOT) said sales missed its forecasts for the third time this year after losing customers to rivals such as Nokia(NOK) and Apple Inc.(AAPL). The stock fell .20 in after-hours trading.
- Genentech Inc.(DNA) said second-quarter profit rose 41%, driven by the cancer drugs Avastin and Rituxin. The stock was flat in after-hours trading.
- Yum! Brands(YUM) said second-quarter profit rose 12% on higher sales in China, its fastest-growing market. The stock was flat in after-hours trading.
- The US budget deficit will narrow to $205 billion this year, the lowest in five years.
- Congressional proposals to raise taxes on the profits of managers of hedge funds and buyout firms may stifle US entrepreneurship and hurt the economy, the Treasury Dept. said, as Senate and House panels held hearings on the taxation and regulation of the industy.
- SLM Corp.(SLM), known as Sallie Mae, was told by the group planning to acquire the company that pending legislation in the US House may scuttle the deal. The shares fell 10% on the news.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Semi longs and Software longs. I trimmed back my (EEM) short and (IWM)/(QQQQ) hedges in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was slightly positive today as the advance/decline line finished mildly higher, most sectors rose and volume was above average. Measures of investor anxiety were about average into the close. Today's overall market action was mildly bullish. Despite sub-prime worries lingering in the background, as usual, the underlying tone remains constructive in the broad market. Technology stocks remain a source of strength. I suspect monthly chain store sales, which are released tomorrow, will come in below estimates. However, this is widely expected. The DJIA is only 0.5% off its all-time high, which is amazing considering all the sub-prime collapse talk. The many U.S. stock market bears remain stunningly complacent, in my opinion, notwithstanding the huge rally in stocks that has transpired over the last five years. I see few signs of capitulation by the bears, and their ranks appear to be growing ever more crowded.