Stocks Finish Lower on Economic Data, Profit-Taking

Indices
S&P 500 1,472.29 -1.15%
DJIA 13,305.47 -1.07%
NASDAQ 2,605.95 -.92%
Russell 2000 790.46 -1.28%
Wilshire 5000 14,804.23 -1.09%
Russell 1000 Growth 595.33 -.91%
Russell 1000 Value 822.43 -1.30%
Morgan Stanley Consumer 709.66 -1.10%
Morgan Stanley Cyclical 1,020.41 -1.47%
Morgan Stanley Technology 642.45 -.75%
Transports 4831.05 -1.80%
Utilities 488.14 -1.16%
MSCI Emerging Markets 133.84 -1.06%

Sentiment/Internals
Total Put/Call 1.15 +11.65%
NYSE Arms 1.60 +153.37%
Volatility(VIX) 24.58 +7.90%
ISE Sentiment 104.0 -26.76%

Futures Spot Prices
Crude Oil 75.85 +1.03%
Reformulated Gasoline 199.99 +.45%
Natural Gas 5.83 +3.59%
Heating Oil 210.50 +1.23%
Gold 691.50 unch.
Base Metals 232.96 +.72%
Copper 326.15 -1.35%

Economy
10-year US Treasury Yield 4.47% -8 basis points
US Dollar 80.61 -.33%
CRB Index 310.92 -.09%

Leading Sectors
Energy -.12%
Networking -.16%
Internet -.17%

Lagging Sectors
I-Banks -2.32%
Retail -2.35%
Homebuilders -2.94%

Evening Review
Market Performance Summary
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Sector Performance
ETF Performance
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Timely Economic Charts
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PM Market Call
After-hours Commentary
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In Play

Afternoon Recommendations
Deutsche Bank:
- Rated (MSFT) Buy, target $33.

Oppenheimer:
- Rated (BFF) Buy.

Afternoon/Evening Headlines
Bloomberg:
- Citigroup Inc.(C) will close its $2.4 billion Tribeca hedge fund and return money to clients five months after it agreed to buy investment manager Old Lane LP, which uses a similar strategy.
- Orange juice rebounded as investors scooped up cheap supplies and closed bets that prices will fall further after futures touched a 22-month low.
- Nickel fell the most in almost three weeks on the London Metal Exchange as stainless-steel makers, the biggest consumers of the metal, cut prices because of weaker demand. Copper and aluminum also fell.
- Sugar fell to a two-week low on expectations that a global glut will widen and speculation demand is slowing for ethanol, a fuel made from cane and corn, as the US summer driving season wanes.
- Salix Pharmaceuticals(SLXP) had its biggest gain in 3 ½ years in Nasdaq trading after reporting successes in two drug trials.
- ADC Telecom(ADCT), the maker of telecom equipment, said third-quarter profit more than tripled. The stock rose 5.3% in after hours trading.
- JCPenney August same-store-sales fell 4% and the company reaffirmed its sales forecast for Sept./Oct. The stock rose 2.3% in extended trading.
- The J.Crew Group(JCG), the retailer whose shares have doubled since it sold stock to the public last June, fell as much as 11% in extended trading after it posted second-quarter sales below analysts’ estimates. The stock fell 8.7% in after-hours trading.

BOTTOM LINE: The Portfolio finished lower today on losses in my Retail longs, Computer longs and Semi 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, every sector fell and volume was below average. Measures of investor anxiety were elevated into the close. Today's overall market action was bearish. However, growth stocks, while lower, substantially outperformed value stocks again across all market caps. Apple (AAPL) did experience a sell-the-news reaction to today's announcements, which wasn't surprising after the recent run-up and general market weakness. I think the iPhone price cut is a net positive for the stock and sets the stage for a 3G version, which is likely by year-end, according to Oppenheimer. I will continue to use any meaningful weakness in the stock to add to my long position. Google (GOOG) finished up $2.65, near session highs. I didn't hear any new news this afternoon to account for its relative strength. Johnson Redbook weekly retail sales rose 2.4% this week vs. a 2.3% gain the prior week. This is also up from a 1.4% gain in early July. Over the last month, weekly retail sales have averaged a 2.3% gain, as well. While this is modestly below the long-term average of 2.8%, it does not suggest meaningfully broad-based retail weakness. The fact that sales have improved slightly into the recent credit turmoil is also noteworthy. Here is a summary of the Fed’s Beige Book report that was released this afternoon:

1. The U.S. economy has continued to expand.

2. Most banks say that housing weakness deepened after the market rout.

3. Outside housing, the market impact on the economy is limited.

4. Five Fed banks reported moderate or modest growth.

5. Four Fed banks reported that the pace of activity has slowed.

6. The New York Fed reported continued expansion.

7. Boston and Atlanta Fed banks say that activity is mixed.

8. Most banks cite tighter lending standards for mortgages.

9. Some Fed banks say that credit is available for most consumers, firms.

10. Several Fed banks say tighter credit clouds the housing outlook.

11. Retail sales were generally positive.

Overall, I would classify this report as mixed. However, the tone was slightly more positive than I had expected. I still expect a 25-basis-point fed funds rate cut at the upcoming meeting. I expect the Fed to begin to make more dovish commentary over the near-term before the meeting later this month.