Stocks Mixed into Final Hour as Profit-taking Offsets Falling Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Medical longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly negative today as the advance/decline line is lower, sector performance is mixed and volume is below average. Fed fund futures now imply a 48% chance for a 25-basis-point cut at the upcoming meeting, down from 72% before Friday's jobs report and down from 84% a week ago. Given better economic data, a stock market at record highs, significant improvement in the credit markets, recent gains in commodities and a weaker dollar, I think the odds now favor the Fed remaining on hold at the upcoming meeting. I would expect to hear Fed speakers this week take on a more hawkish tone if they in fact plan to keep rates steady. This should boost the U.S. dollar and pressure many commodities further, including oil. Recent stock gains and less economic pessimism should help propel Friday's University of Michigan Consumer Confidence reading above estimates. However, September retail sales reports will likely come in modestly below estimates due to the fact that temperatures across the country remain significantly above normal for this time of the year. Google (GOOG) is hitting the $600 I predicted at the beginning of the year, however, as I said last week, I now think $650-$675 is likely before year-end. Broadcom (BRCM) is breaking out of the trading range it has been in since May 2006 on above-average volume as investors cheer the company's recent 3G inroads at Samsung. Broadcom also recently announced meaningfully positive developments with Nokia (NOK). These announcements are significant. Caris recently rated the shares a buy, with a $44 target, which I view as very conservative. As well, Lehman Brothers made positive comments on the stock this morning, saying third-quarter results will be "solid." Finally, Deutsche Bank also reiterated its buy today, saying Broadcom is poised to become a "major handset player" over the next few years. Citigroup, Piper Jaffray, CSFB, Goldman Sachs and Morgan Stanley, however, are still either negative or neutral on the shares. I expect some more upgrades soon. I went long Broadcom during the peak of option backdating fears around $25 per share in September 2006 and have added to the position on pullbacks. I plan to do the same going forward as I continue to see substantial upside in the stock from current levels. Broadcom's breakout also bodes well for the Nasdaq and other semis. I still see many signs that bulls remain underinvested and bears remain too short, notwithstanding the recent surge in equities to record highs. As I said on Friday, short interest actually rose during the last two weeks of September, with the S&P 500 tacking on another 3% during that time. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices, investment manager performance anxiety and short-covering.