Stocks Finish Lower, Despite Late Surge, on Healthy Profit-taking and Lingering Sub-prime Concerns

Indices
S&P 500 1,546.17 -.21%
DJIA 13,918.22 -.38%
NASDAQ 2,699.49 -.47%
Russell 2000 845.91 -.47%
Wilshire 5000 15,575.12 -.22%
Russell 1000 Growth 616.86 -.17%
Russell 1000 Value 877.03 -.24%
Morgan Stanley Consumer 737.20 -.27%
Morgan Stanley Cyclical 1,124.38 -.19%
Morgan Stanley Technology 649.08 -.66%
Transports 5,429.83 +.59%
Utilities 511.44 +.87%
MSCI Emerging Markets 140.09 -.84%

Sentiment/Internals
Total Put/Call 1.12 +20.43%
NYSE Arms .94 -9.21%
Volatility(VIX) 16.0 +2.37%
ISE Sentiment 156.0 -5.45%

Futures Spot Prices
Crude Oil 75.18 +1.57%
Reformulated Gasoline 219.50 +4.49%
Natural Gas 6.52 +3.46%
Heating Oil 209.90 +3.24%
Gold 673.80 +1.19%
Base Metals 256.98 +.62%
Copper 356.30 +.30%

Economy
10-year US Treasury Yield 5.02% -2 basis points
US Dollar 80.43 -.14%
CRB Index 323.60 +1.57%

Leading Sectors
Gold +3.74%
Road & Rail +2.06%
Energy +2.0%

Lagging Sectors
Banks -1.32%
I-Banks -1.68%
Semis -1.78%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
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Timely Economic Charts
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PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Bank of America:
- Rated (BHI), (HAL), (SLB), (SII) and (WFT) Buy.

Afternoon/Evening Headlines
Bloomberg:
- Federal Reserve Chairman Ben Bernanke said hedge funds and private-equity firms offer “important benefits” for the US economy, including a way to share risk and increase liquidity in the markets.
- Washington Mutual(WM), the biggest US savings and loan, said second-quarter profit rose 8.2%, beating analysts’ estimates as the retail banking and credit card units grew and losses on mortgage lending narrowed. The stock rose 4% in extended trading.
- International Business Machines(IBM), the world’s biggest computer-services company, reported a 12% gain in second-quarter profit after bolstering sales through software acquisitions. The stock is surging $3/share in after-hours trading to $114.10.
- EBay Inc.(EBAY) said earnings rose for the fourth straight quarter after higher fees increased auction revenue and its PayPal unit added more corporate customers. The stock was mostly unch. in extended trading.
- Juniper Networks(JNPR) reported second-quarter net income of $86.2 million as new products boosted sales. The stock rose $.50/share to $27.25 in after-hours trading.
- Labor Ready(LRW) reported revenue for the second quarter of $351.1 million, an increase of 3.3% from $339.8 million for the second quarter of 2006. The stock is soaring 11.1% in extended trading.

AP:
- Iran confirmed that a second round of talks with the US about Iraq will be held in the “near future,” citing Iranian officials.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Semi longs and I-Banking longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was negative today as the advance/decline line finished lower, sector performance was mixed and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was mildly bearish as the major averages and breadth finished lower, but trimmed losses substantially into the close. Many stocks I monitor finished with gains. I suspect today's morning losses had more to do with option expiration than "real" selling. I also suspect many large investors that have been expecting a pullback or correction built short exposure further into morning weakness and are now left trapped again as stocks surged meaningfully into the close, leaving little time to exit morning positions. The brokers rebounded, but not as sharply as I would have expected. However, I suspect stocks will build on today's closing surge tomorrow.