Wednesday, August 01, 2007

Stocks Soar into Close on Short-covering, More Economic Optimism, Bargain-hunting

Indices
S&P 500 1,465.81 +.72%
DJIA 13,362.37 +1.14%
NASDAQ 2,553.87 +.30%
Russell 2000 777.91 +.23%
Wilshire 5000 14,713.02 +.54%
Russell 1000 Growth 589.16 +.60%
Russell 1000 Value 822.70 +.61%
Morgan Stanley Consumer 708.80 +1.14%
Morgan Stanley Cyclical 1,041.67 -.19%
Morgan Stanley Technology 630.27 +.78%
Transports 5,045.97 +.32%
Utilities 489.46 +2.11%
MSCI Emerging Markets 132.42 -2.11%

Sentiment/Internals
Total Put/Call 1.36 +14.29%
NYSE Arms .66 -73.26%
Volatility(VIX) 23.67 +.64%
ISE Sentiment 101.0 -3.81%

Futures Spot Prices
Crude Oil 76.65 -1.99%
Reformulated Gasoline 203.30 -3.46%
Natural Gas 6.40 +3.38%
Heating Oil 207.10 -2.46%
Gold 677.50 -.26%
Base Metals 254.80 -2.05%
Copper 358.40 -1.77%

Economy
10-year US Treasury Yield 4.78% +4 basis points
US Dollar 80.83 +.08%
CRB Index 319.87 -1.31%

Leading Sectors
Disk Drives +2.37%
Utilities +2.11%
Telecom +1.77%

Lagging Sectors
Oil Service -1.35%
I-Banks -1.59%
Gold -1.96%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers

After-hours Stock Quote
In Play


Afternoon Recommendations
Bank of America:

- Rated (DELL) Buy, target $35.
- Rated (SUNW) Buy, target $6.25.
- Rated (HPQ) Buy, target $56.

Afternoon/Evening Headlines
Bloomberg:
- Starbucks Corp.(SBUX), the world’s largest coffee shops, said third-quarter profit rose 8.8% on sales from new stores and demand for chilled drinks. The stock surged 4.1% in after-hours trading.
- Dolby Labs(DLB) reported total revenue of $119.6 million, compared to $93.7 million for the third quarter of fiscal 2006, an increase of 28%. The stock is rising 9% in extended trading.
- Invitrogen(IVGN) reported revenues for the second quarter were $322 million, an increase of 13% over the $285 million for 2006. The stock rose 7.6% in after-hours trading.
- The Gordon and Betty Moore Foundation, established by the co-founder of Intel Corp.(INTC) and his wife, pledged $100 million to the Univ. of Cal., Davis for a professional nursing school.
- The International Monetary Fund said the US economy is likely to have a “soft landing” as growth continues in the face of the subprime mortgage concerns.
- Gasoline futures in NY fell 3.3%, the lowest in almost four months, after an energy dept. report today showed a second week of inventory gains as oil inventories remain near decade highs.
- Ethanol prices fell 5.1% in Chicago after a government report showed production increased 38% over the year before and gasoline futures fell.

BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Computer longs, Networking longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was mildly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was heavy. Measures of investor anxiety were elevated into the close. Today's overall market action was bullish. The explosive move higher on the close likely left many traders heavily leaning the wrong way. As well, with Asian stocks taking 3%+ hits overnight, I suspect those traders will be quite shocked to come in to their offices and see the DJIA up 150, given the news today. I think the main tell for the close today -- and possibly an indication that we may have seen a meaningful bottom -- came when Beazer Homes (BZH) dropped 42%, yet the broad market held relatively firm. I suspect Asian stocks will see a nice bounce tonight, which should lead to further upside in US and European shares tomorrow morning. Growth stocks are still the cheapest in at least 30 years relative to value stocks on a price-to-cash flow basis. Leading growth stocks have crushed the performance of the major averages this year, have held up better during this pullback and should continue outperforming substantially going forward. Six of the stocks on which I have disclosed that I am long for the last two years -- Google (GOOG, +11.2%), Apple (AAPL, +57%), Intuitive Surgical (ISRG, +120%), Under Armour (UA, +27%), Quanta Services (PWR, +40%) and Gilead Sciences (GILD, +14%) -- are prime examples of this massive outperformance year-to-date, and these are just a few examples. There are many others. Moreover, the Russell 1000 Growth Index is still 7.1% higher year-to-date vs. a 1.9% gain for the Russell 1000 Value Index. Midcap growth is 8.6% higher for the year vs. a 3.1% gain for midcap value. Finally, the Russell 2000 Growth Index is 4.0% higher year-to-date vs. a 4.8% loss for the Russell 2000 Value Index. A significant change is under way toward multiyear growth stock outperformance, in my opinion, and this continues to be ignored by most investors.

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