Wednesday, October 24, 2007

Stocks Finish at Session Highs on Fed Rate Cut Speculation

S&P 500 1,515.88 -.24%
DJIA 13,675.25 -.01%
NASDAQ 2,774.76 -.88%
Russell 2000 810.85 -.94%
Wilshire 5000 15,266.57 -.29%
Russell 1000 Growth 623.84 -.18%
Russell 1000 Value 834.41 -.30%
Morgan Stanley Consumer 735.35 +.25%
Morgan Stanley Cyclical 1,046.32 +.07%
Morgan Stanley Technology 666.94 -2.54%

Transports 4,895.79 -.94%
Utilities 505.05 +.61%
MSCI Emerging Markets 155.68 -.43%

Total Put/Call .99 +2.06%
NYSE Arms .94 -1.75%
Volatility(VIX) 20.80 +1.91%
ISE Sentiment 125.0 -8.76%

Futures Spot Prices
Crude Oil $87.60 +2.73%
Reformulated Gasoline 215.51 +2.19%
Natural Gas 7.0 +3.61%
Heating Oil 234.90 +2.14%
Gold 767.80 +.62%
Base Metals 245.65 -1.95%
Copper 345.65 -1.62%

10-year US Treasury Yield 4.33% -7 basis points
US Dollar 77.50 -.10%
CRB Index 336.13 +.24%

Leading Sectors
Construction +1.07%
Defense +.97%
Oil Service +.86%

Lagging Sectors
Semis -2.41%
Networking -2.54%
HMOs -2.71%

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
PM Market Call
After-hours Commentary
After-hours Movers

After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
- VMware Inc.(VMW), reporting its first results since making the year’s biggest technology IPO, said third-quarter profit more than tripled on demand for software that makes computers more efficient. The stock is surging 8% in after-hours trading.
- Monster Worldwide Inc.(MNST), owner of the largest network of job-hunting Web sites, reported a $33.3 million third-quarter profit as international sales jumped 57%. The stocks rose 4% in after-hours trading.
- Symantec Corp.(SYMC) said profit fell 60% and gave forecasts for this quarter that missed analysts’ estimates as orders from large companies slowed, driving down the shares 10% in extended trading.
- Corn and soybeans fell as supplies from the US harvest inundated grain elevators and storage facilities.
- Merrill Lynch(MER) may sell Bloomberg stake.
- It looks like Apple’s(AAPL) iPhone may soon be headed to Canada.

BOTTOM LINE: The Portfolio finished lower today on losses in my Semi longs, Retail longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was heavy. Measures of investor anxiety were above average into the close. Today's overall market action was just mildly bearish given the sharp reversal from morning lows. Rumors of an imminent Fed discount rate cut seemed to have helped propel shares to session highs into the close. While I doubt the validity of these rumors, I think the heavy-volume reversal shows how easily stocks can lift and how much bull firepower is still on the sidelines. Energy, defense, software, construction and homebuilding shares actually finished in positive territory. Tech shares underperformed throughout the day, but cut losses in half from session lows. A number of leading growth tech stocks -- such as Apple (AAPL), Intuitive Surgical (ISRG) and Google (GOOG) -- only fell slightly, or actually rose, as well. My intraday gauge of investor angst finished at an above-average level. I want to see how stocks react tomorrow as imminent rate cut rumors subside and more negative housing data comes in. I still think the major averages will see another meaningful push higher into year-end. Thirty-day asset-backed commercial paper yields continue to plunge, falling another 9 basis points today. They are down 135 basis points since Sept. 7. As well, the average 30-year fixed rate jumbo mortgage rate is falling another 13 basis points today, to 6.78%, down from 7.34% on Sept. 5. Fed fund futures now imply an 86% chance for a 25-basis-point cut at the upcoming Fed meeting. The Fed's recent silence during rising expectations for another rate cut at the month-end meeting leads me to believe that one is coming. In addition to technology, financial shares were under pressure again. While I don't see these shares outperforming anytime soon, I wouldn't be shorting them at current levels either.

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