Stocks Finish Sharply Higher, at Session Highs, on Strength in Financial, Technology, Retail Sectors

Indices
S&P 500 1,481.05 +2.91%
DJIA 13,307.09 +2.46%
NASDAQ 2,673.65 +3.46%
Russell 2000 789.15 +2.88%
Wilshire 5000 14,890.37 +2.79%
Russell 1000 Growth 609.90 +2.82%
Russell 1000 Value 811.88 +2.84%
Morgan Stanley Consumer 740.67 +1.78%
Morgan Stanley Cyclical 998.45 +2.18%
Morgan Stanley Technology 625.89 +3.68%
Transports 4,705.78 +2.44%
Utilities 518.31 +.44%
MSCI Emerging Markets 153.22 +3.05%

Sentiment/Internals
Total Put/Call 1.21 +32.97%
NYSE Arms .31 -66.95%
Volatility(VIX) 24.10 -22.48%
ISE Sentiment 118.0 +.85%

Futures Spot Prices
Crude Oil $91.41 -3.39%
Reformulated Gasoline 232.15 -3.95%
Natural Gas 7.93 -.33%
Heating Oil 250.45 -3.01%
Gold 801.90 -.72%
Base Metals 237.96 +1.19%
Copper 311.40 +.16%

Economy
10-year US Treasury Yield 4.26% +5 basis points
US Dollar 75.85 -.07%
CRB Index 345.53 -1.14%

Leading Sectors
I-Banks +5.8%
Computer Hardware +5.58%
Airlines +5.2%

Lagging Sectors
Utilities +.45%
HMOs +.45%
Restaurants +.26%

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
CSFB:
- Rated (PEP) Outperform, target $87.
- Rated (KO) Outperform, target 68.

Afternoon/Evening Headlines
Bloomberg:
- US stocks rallied the most in two months after Wal-Mart Stores’ profit beat analysts’ estimates and Goldman Sachs(GS) said it doesn’t plan any significant writedowns on mortgage-related assets.
- The risk of US companies defaulting on their debt fell after Goldman Sachs(GS) said it doesn’t plan to take significant writedowns on mortgage-related assets and Bank of America said it may need to write down $3 billion of debt.
- Goldman Sachs(GS) and Lehman Brothers(LEH) led gains among brokerage stocks on optimism that Wall Street’s biggest firms have contained losses stemming from asset-backed securities.
- Crude oil fell more than $3 a barrel, the biggest decline in three months, after the IEA cut its forecast for global demand through 2008 and record prices curb fuel use.
- MBIA Inc.(MBI), the world’s biggest bond insurer, rose the most since October 1987 after the Wall Street Journal reported that Warren Buffett’s Berkshire Hathaway(BRK/A) may provide capital to the bond insurance industry.

Reuters:
- The Federal Reserve will reduce its target rate “at least another 100 basis points” over the next six to 12 months, said Paul McCulley, a fund manager at PIMCO.

Financial Times:
- Weyerhaeuser Co.(WY) signed confidentiality agreements with as many as seven companies interested in its containerboard and building-materials divisions.

Nikkei English News:
- Sun Microsystems(SUNW) and 10 other information technology firms will build Japan’s first underground data center, which will use half the power of other facilities.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Internet longs, Medical longs, Retail longs and Software longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, every sector gained and volume was heavy. Measures of investor anxiety were above about average into the close, despite today’s sharp gains. Today's overall market action was very bullish. Market-leading growth stocks were especially strong, with many soaring 5% to 10%. Computer hardware, wireless, bank, investment bank, homebuilder, retail and airline stocks all posted 4%+ gains. Despite the recent pullback, the MS Tech Index is still 11% higher year-to-date. I still expect tech to outperform through year-end, especially growth tech. I still think market-leading growth stocks have likely seen their lows for the year. If we do get another bout of meaningful weakness over the coming weeks, it will likely be the result of global economic slowdown fears. Secular growth stories should display relative strength under such a scenario. Recent declines in many of these stocks have left them cheap again relative to the broad market given their fundamentals. Nasdaq short interest rose another 1.6% the last two weeks of October, to 8.02 billion shares, the Nasdaq reported yesterday.

Here are the 25 stocks with the largest percent increase in short interest relative to their float over the last two weeks of October:

1. CALM +17.2%
2. MNKD +16.4%
3. TGIC +14.9%
4. CTCT +12.8%
5. CLWT +9.8%
6. CCRT +9.5%
7. BKUNA +8.3%
8. BHIP +7.4%
9. FOLD +7.3%
10. WBMD +7.0%
11. MBRK +7.0%
12. USNA +6.8%
13. TMTA +6.6%
14. HCSG +6.5%
15. HAIN +6.2%
16. CORS +6.0%
17. OVTI +5.9%
18. NTII +5.4%
19. TASR +5.3%
20. SNCR +5.2%
21. PALM +5.2%
22. BONT +5.1%
23. SEED +5.0%
24. ACLI +4.9%
25. FBTX +4.6%

The S&P 500 also reported short interest data yesterday. Despite its very oversold state, the financial sector saw a 10.5% jump in short interest over the last two weeks of October, which was by far the largest increase of any S&P 500 sector. Broken down by industry, banks saw short interest spike 16.7%, diversified financial short interest rose 9.6%, and real estate short interest surged 9.5%. This also corresponds with the fact that the Financial Select Sector SPDR (XLF) is the second most heavily shorted security on the Amex. The XLF is now 4.1% higher on the day to session highs.

Here are the 25 S&P 500 companies with the largest increase in short interest relative to their float over the last two weeks of October:

1. JNY+8.9%
2. HAR +8.5%
3. ABI +7.7%
4. ABK +5.2%
5. MTG +5.0%
6. CFC +4.7%
7. AIV +3.4%
8. LXK +2.9%
9. LEN +2.9%
10. DDS +2.8%
11. VRSN +2.7%
12. TIE +2.6%
13. LSI +2.4%
14. EK +1.9%
15. NYX +1.9%
16. FHN +1.6%
17. IFF +1.4%
18. BC +1.4%
19. BDK +1.3%
20. CIT +1.0%
21. ETFC +1.0%
22. CVG +1.0%
23. HAL +1.0%
24. NCC +1.0%
25. CBG +1.0%