Stocks Higher into Final Hour on Fed Commentary

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Retail longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is higher, almost every sector is rising and volume is about average. Weekly same-store-sales rose 2.0% this week, the same as last week, but up from 1.4% in early July. Moreover, weather derivatives show nationwide temperatures moving down to slightly below average for this time of the year for the next seven days, which could help boost cold weather clothing sales. As well, the Rasmussen consumer index rose to 111.7 today, up from 105.6 a week ago and also up from the August average of 106.8 during the peak of the global market turmoil. The investment grade credit default swap index has declined another 8.4% over the last week, and the speculative grade credit default swap index has decreased 3.3% over the same period, both of which are positives. The JPMorgan Emerging Market Debt Index hit a new all-time high yesterday and is up 0.55% over the last week. The Bear Stearns High-Yield Index is 0.47% higher during that period. Overall, I view comments by the Fed’s Poole today as more dovish than I expected. However, fed fund futures now imply a 38% chance for a 25-basis-point cut at the upcoming meeting, down from 48% yesterday and 74% one week ago. The 10-year yield is moving back to unchanged, and stocks are moving higher on these comments and the release of the FOMC minutes. I expect US stocks to trade mixed into the close from current levels as investment manager performance anxiety and short-covering offsets falling odds for a fed rate cut at the October meeting and higher energy prices.