Stocks Jumping into Final Hour on Less Financial Sector Pessimism, Buyout Speculation, Rising QE2 Expectations, Tax Policy/Election Optimism

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 19.31 +1.47%
  
• ISE Sentiment Index 133.0 -22.22%
  
• Total Put/Call .79 +11.27%
  
• NYSE Arms .71 -40.15%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 98.99 bps +.55%
  
• European Financial Sector CDS Index 98.08.0 bps -1.73%
  
• Western Europe Sovereign Debt CDS Index 137.17 bps -1.20%
  
• Emerging Market CDS Index 204.25 bps +1.61%
  
• 2-Year Swap Spread 19.0 +1bp
  
• TED Spread 15.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .13% unch.
  
• Yield Curve 213.0 -7 bps
  
• China Import Iron Ore Spot $152.20/Metric Tonne -.33%
  
• Citi US Economic Surprise Index -5.80 -2.5 points
  
• 10-Year TIPS Spread 2.08% -6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +72 open in Japan
• DAX Futures: Indicating +22 open in Germany

Portfolio:

• Higher: On gains in my Medical, Tech and Biotech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades near session highs despite recent sharp equity gains, some weakness in Asia overnight and weaker US industrial production data. On the positive side, Education, REIT, Insurance, Hospital, Medical Equipment, Bank, I-Banking, Telecom, Computer Service, Energy, Oil Tanker and Utility shares are especially strong, rising 1.0%+. (XLF)/(IYR) have traded well throughout the day. Copper is rising +.69% and lumber is rising +.9% despite early euro weakness. The Portugal sovereign cds is falling another -3.91% to 344.47 bps, the Ireland sovereign cds is falling -2.34% to 394.57 bps, the UK sovereign cds is declining -2.38% to 54.17 bps and the US sovereign cds is plunging -8.17% to 36.47 bps. On the negative side, Contruction, Ag and Oil Service shares are under mild pressure, falling more than .5%. The 10-Year Yield is falling -7 basis points to 2.49%, despite today's equity strength and better housing data. The China sovereign cds is rising +11.4% to 62.78 bps. The broad market continues to trade very well as it continues to ignore most negatives and reward most positives. One of my longs, (AAPL), reports after the close today. I expect a very good report, once again. However, with the stock extended, combined with the company's typically conservative forward guidance, an initial kneejerk decline in the shares is possible. I would use any meaningful pullback in the stock from current levels as another buying opportunity. I still see significant upside over the intermediate/long-term on strong growth and multiple expansion. The stock still trades at a very reasonable 21.7x conservative forward estimates. In my opinion, AAPL deserves a forward multiple of 25-30 given its execution, product line-up and global prospects. I expect US stocks to trade modestly higher into the close from current levels on falling sovereign debt angst, diminishing financial sector pessimism, buyout speculation, rising QE2 expectations, short-covering, investment manager performance angst and tax policy/election optimism.