Monday, October 01, 2007

Dow Rockets Through 14,000 to New Record, Led by Tech, Homebuilders and Financials

Indices
S&P 500 1,547.04 +1.33%
DJIA 14,087.55 +1.38%
NASDAQ 2,740.99 +1.46%
Russell 2000 824.74 +2.39%
Wilshire 5000 15,528.96 +1.38%
Russell 1000 Growth 626.15 +1.23%
Russell 1000 Value 863.03 +1.41%
Morgan Stanley Consumer 750.37 +.45%
Morgan Stanley Cyclical 1,077.44 +1.50%
Morgan Stanley Technology 677.06 +1.36%
Transports 4,909.20 +1.51%
Utilities 508.81 +1.45%
MSCI Emerging Markets 152.73 +2.16%

Sentiment/Internals
Total Put/Call .85 -22.02%
NYSE Arms .74 -40.49%
Volatility(VIX) 17.84 -.89%
ISE Sentiment 135.0 +22.73%

Futures Spot Prices
Crude Oil 80.21 -1.78%
Reformulated Gasoline 197.95 -3.02%
Natural Gas 7.07 +2.98%
Heating Oil 218.10 -2.0%
Gold 753.70 +.49%
Base Metals 248.99 -.70%
Copper 368.50 +1.24%

Economy
10-year US Treasury Yield 4.54% -4 basis points
US Dollar 77.94 +.28%
CRB Index 332.32 -.40%

Leading Sectors
Homebuilders +3.24%
I-Banks +2.67%
Semis +2.61%

Lagging Sectors
HMOs +.53%
Hospitals +.52%
Foods -.51%

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:

- Upgraded (AMB) and (PLD) to Buy.
- Downgraded (MPG) to Sell.

Afternoon/Evening Headlines
Bloomberg:
- US stocks rallied, sending the Dow Jones Industrial Average to a record, as investors speculated the worst may be over for banks and construction companies hurt by subprime mortgage losses.
- Crude oil fell $1.42/bbl. to $80.24/bbl. as speculators slashed long positions in anticipation of lower demand from refiners as margins drop to an 11-month low.
- UBS AG(UBS) and Citigroup Inc.(C), the biggest banks in Europe and the US, rose in stock market trading on investor optimism that their reports today on fixed-income losses may represent the low point for earnings.
- PDL BioPharma Inc.(PDLI), the developer of technology for cancer drugs, said it’s “actively” seeking offers to buy the company. The stock is rising 7.3% in after-hours trading.

Forbes:
- The former Federal Reserve chairman Alan Greenspan suggested here Monday suggested here Monday that the global credit crisis triggered in August might be coming to an end.

Dow Jones:
- Despite the housing slowdown, US household net worth Up 2.1% to record $57.86 trillion in second quarter, the Federal Reserve said.

BOTTOM LINE: The Portfolio finished higher today on gains in my Biotech longs, Computer longs, Retail longs, Internet longs, Semi longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was slightly above average. Measures of investor anxiety were around average into the close. Today's overall market action was very bullish. Every sector I follow gained, with the exception of foods. Airlines, gaming, restaurants, homebuilders, construction, investment banks, banks, semiconductors, papers, steel and alternative energy all posted 2%+ gains. Small-caps, both growth and value, were especially strong, with the Russell 2000 rising 2.4%. Over the last few months, I have heard numerous investors and pundits caution that there is still more bad news to come, insinuating or outright saying that you shouldn't be buying stocks even after a 10% correction. The problem with that is that, historically, the best time to buy stocks is always when the headlines are the worst and anxiety is high. Waiting until the headlines aren't scary or until the news actually gets better is a recipe for long-term underperformance, in my opinion. Back in August, investors were once again pricing in the worst case scenario rather than the most realistic outcome. Six weeks later, the imminent recession case is still alive, but, likely, it has a few less believers. With the supply of stock still low, it doesn't take much of an increase in demand for equities to push the averages sharply higher, which is what is going on right now. As I said last month, I still think stocks are in a win-win situation. If the economy doesn't fall into recession and the Fed doesn't cut rates further, earnings should hold up well and stocks should rise. If we begin to see recessionary data, the Fed, which is already ahead of the curve, has massive ammunition to stabilize growth and investors will likely begin to price in accelerating earnings next year. This is the main reason I think any bad news is mostly ignored and positive news is bought. The latest COT report shows large S&P 500 futures speculators are maintaining their net short positions near recent historic levels -- even as stocks soar. Another bullish indication is that commercial hedgers are now at a historically net long position. Finally, the COT all-index stochastic is still at levels normally associated with meaningful market bottoms. The S&P 500 is now up 10.7% year-to-date. I still expect it to rise about 17% total for this year.

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