Stocks Close at Session Highs on Heavy Volume on Plunging Energy Prices, Bargain-Hunting and Short-Covering

Indices
S&P 500 1,467.67 +2.42%
DJIA 13,468.78 +2.18%
NASDAQ 2,547.33 +1.44%
Russell 2000 766.39 +1.45%
Wilshire 5000 14,686.50 +2.07%
Russell 1000 Growth 589.71 +1.77%
Russell 1000 Value 821.64 +2.61%
Morgan Stanley Consumer 717.87 +2.41%
Morgan Stanley Cyclical 1,029.13 +1.25%
Morgan Stanley Technology 628.98 +1.81%
Transports 4,965.09 +1.87%
Utilities 493.32 +3.48%
MSCI Emerging Markets 130.43 -.43%

Sentiment/Internals
Total Put/Call 1.27 -11.19%
NYSE Arms .46 -87.04%
Volatility(VIX) 22.94 -8.82%
ISE Sentiment 92.0 -10.68%

Futures Spot Prices
Crude Oil 72.12 -4.45%
Reformulated Gasoline 193.40 -4.68%
Natural Gas 6.26 +2.96%
Heating Oil 194.96 -4.15%
Gold 683.10 -.16%
Base Metals 249.96 -2.17%
Copper 347.40 -.14%

Economy
10-year US Treasury Yield 4.74% +5 basis points
US Dollar 80.32 +.19%
CRB Index 312.29 -1.85%

Leading Sectors
Banks +5.36%
I-Banks +3.77%
Utilities +3.48%

Lagging Sectors
Steel -.08%
Airlines -1.65%
Gold -2.84%

Evening Review
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In Play

Afternoon Recommendations
Oppenheimer:
- Rated ARJ Buy, target $50.

BMO Capital:
- Rated (DELL), (HPQ) and (WDC) Outperform.

Afternoon/Evening Headlines
Bloomberg:
- Crude oil fell more than 4.5% in NY, the most in seven months, on worries over slowing demand with US supplies near a 10-year high.
- Sun Microsystems(SUNW) announced a new version of the Niagara processor used in its most-powerful server computers and said it will license the chip to other equipment makers as part of a plan to create a new line of business.
- Wynn Resorts(WYNN) reported second-quarter profit and revenue that exceeded analyst’ estimates after it opened a new casino in Macau, China, and drew more gamblers to Las Vegas. The shares jumped 10% in after-hours trading.
- The risk of borrowing debt of US financial companies including Bear Stearns(BSC) fell from the highest in more than five years today, as their stocks rallied and concerns eased about how much subprime mortgage securities will siphon off profits, according to credit-default swap traders.
- Ethanol in Chicago fell a fourth day amid concern of oversupply and as gasoline futures fell.
- China and other nations must meet US quality standards as imports of food, drugs and other products increases, healthy secretary Michael Leavitt said.
- SLM Corp.(SLM), or Sallie Mae, reaffirmed plans to be acquired by JC Flowers, Bank of America and JPMorgan Chase and said the deal would be completed in October.
- Microsoft(MSFT) won a reversal of a jury’s record $1.52 billion verdict in a landmark case over Alcatel-Lucent’s MP3 digital-music patents.
- Shares of Fannie Mae(FNM) and Freddie Mac(FRE), the two largest US home-loan companies, rose on speculation the companies’ regulator may lift a cap on the amount of home loan assets they can own, helping pour money into the mortgage market.

Wall Street Journal:
- Chevron Corp.(CVX) won the right to develop a natural-gas field in China.

Reuters:
- He’s made a fortune picking through the bones of failed steelmakers, textile mills and coal miners. Now billionaire investor Wilbur Ross is taking aim at another beleaguered industry: subprime mortgage lenders. He took his first step on Monday by providing $50 million in debtor-in-possession financing for American Home Mortgage, which filed for bankruptcy earlier in the day. It’s a tiny step, but Ross said there are many more to come.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Semi longs, Biotech longs, Medical longs and Commodity shorts. I added to my (PWR) long and to an existing short in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was neutral today as the advance/decline line finished slightly lower, most sectors rose and volume was heavy. Measures of investor anxiety were elevated again into the close. Today's overall market action was very bullish. S&P said this afternoon that the market is overreacting to its Bear Stearns (BSC) outlook. It also said that BSC's liquidity remains "solid" and that the liquidity at the Big 5 brokers is sound. These comments helped spur another surge higher in the financials into the close, which in turn boosted the broad market substantially. Only time will tell if the recent market bottom will hold. It is interesting to note that every bottom since the major bear market lows in 2002 has been accompanied by the bears saying that a new bear market had begun and the bulls waiting on a "whoosh" decline that never came. I want to stress, as well, as I said earlier today, that it isn't the news that matters as much as knowing what is already priced into stock prices. The credit fear news will likely remain scary over the coming weeks, but I think that is more than factored into the broad market at current levels. Despite today's huge rally in the major averages, the CBOE total put/call finished at a very high 1.27. As well, the ISE Sentiment Index finished at a depressed 92.0. This significant skepticism regarding today's gains shown by retail options traders is a positive. I expect overseas markets to get a rather large boost tonight, which could result in further gains here tomorrow morning.