Stocks Finish Near Session Highs on Less Economic Pessimism

Indices
S&P 500 1,550.96 +.75%
DJIA 13,727.03 +.74%
NASDAQ 2,718.95 +.47%
Russell 2000 791.20 +.72%
Wilshire 5000 15,243.96 +.75%
Russell 1000 Growth 629.68 +.62%
Russell 1000 Value 826.24 +.92%
Morgan Stanley Consumer 762.82 +.38%
Morgan Stanley Cyclical 1,029.80 +.93%
Morgan Stanley Technology 638.05 +.82%
Transports 4,901.11 +.51%
Utilities 552.74 +.38%
MSCI Emerging Markets 159.26 -.22%

Sentiment/Internals
Total Put/Call .96 unch.
NYSE Arms .67 -27.70%
Volatility(VIX) 20.74 -.53%
ISE Sentiment 120.0 +8.11%

Futures Spot Prices
Crude Oil $87.95 -.36%
Reformulated Gasoline 224.90 -.88%
Natural Gas 7.05 -1.40%
Heating Oil 247.63 -1.13%
Gold 814.80 +1.82%
Base Metals 214.71 -1.58%
Copper 309.25 -1.07%

Economy
10-year US Treasury Yield 4.15% +5 basis points
US Dollar 76.04 -.33%
CRB Index 343.45 +.15%

Leading Sectors
Banks +2.77%
I-Banks +2.54%
REITs +2.14%

Lagging Sectors
Telecom -.64%
Oil Tankers -.73%
Papers -.74%

Evening Review
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In Play

Afternoon Recommendations
Oppenheimer:
- Reiterated Buy on (RATE), Top Small-cap Pick.

Citigroup:
- Added (EBAY) to CIR Recommended List, Maintain Buy.
- Reiterated Buy on (CELG).
- FCF yields in semis are >6%, a level that has only been seen two other times over the last 14 years(7/96 and 3/03). Historically, when this level has been achieved, semi stock returns are significant(+145% and +79% in the previous two instances). The FCF yield Buy signal augments Citi’s thesis of a new positive FCF cycle due to a combination of accelerating revenue growth, expanding gross margins and declining capex.

Afternoon/Evening Headlines
Bloomberg:
- Sharper Image(SHRP) holder Clinton Group boosted its stake to 7.2% from 1.04%.
- Texas Instruments(TXN), the biggest maker of mobile-phone chips, said fourth quarter sales will climb to at least $3.5 billion, raising the low end of its forecast. The shares advanced 5% in extended trading.
- Washington Mutual(WM) will write down the value of its home lending unit by $1.6 billion in the fourth quarter and cut 3,150 jobs as losses in the mortgage market increase. The stock is down 7% in after-hours trading.
- The Boeing(BA) board of directors today approved a 14% increase in the company’s dividend, the fifth increase in the past five years.

BOTTOM LINE: The Portfolio finished higher today on gains in my Biotech longs, Software longs, Retail longs and Semi longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished mildly higher, almost every sector rose and volume was about average. Measures of investor anxiety were about average into the close. Today's overall market action was bullish, considering recent gains. I would expect to see some near-term profit-taking on a 25 basis point cut in the fed funds rate tomorrow. A 50 basis point fed funds rate cut would likely lead to further near-term upside, depending on the accompanying policy statement. Any near-term market turbulence is likely to be mild and short-lived as short interest is back near record levels, hedge fund sentiment is still exceptionally bearish, retail options traders continue to display bearishness, large S&P 500 futures traders are still positioned near historically net short levels, and many large long only investors are still likely under invested. I suspect investment manager performance anxiety could also come back into play very soon as the S&P 500 is now 9% higher for the year, with the DJIA and Nasdaq each up 13%. Large-cap and mid-cap growth remains this year’s best performing styles, both rising 15% for the year.