Stocks Mixed Mid-day as Oil Rises and Rates Fall

Indices
S&P 500 1,209.03 +.20%
DJIA 10,572.05 +.05%
NASDAQ 2,083.93 +.43%
Russell 2000 641.09 +.62%
DJ Wilshire 5000 11,997.42 +.30%
S&P Barra Growth 580.39 +.13%
S&P Barra Value 624.32 +.25%
Morgan Stanley Consumer 583.44 +.02%
Morgan Stanley Cyclical 740.22 +1.10%
Morgan Stanley Technology 480.85 +.38%
Transports 3,552.36 +.71%
Utilities 371.42 -.68%
Put/Call .92 +10.84%
NYSE Arms .76 -13.38%
Volatility(VIX) 11.24 -1.92%
ISE Sentiment 190.00 -10.80%
US Dollar 88.80 +.20%
CRB 308.59 +.51%

Futures Spot Prices
Crude Oil 56.40 +1.67%
Unleaded Gasoline 158.80 +1.63%
Natural Gas 7.61 +2.27%
Heating Oil 162.20 -.01%
Gold 437.90 +1.62%
Base Metals 125.06 +.77%
Copper 156.95 +1.32%
10-year US Treasury Yield 4.08% -.42%

Leading Sectors
Gold & Silver +3.52%
Biotech +2.28%
Computer Hardware +1.84%

Lagging Sectors
Drugs -.44%
Telecom -.47%
Oil Tankers -1.38%

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Homebuilding/Gaming longs and Oil Tanker Shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is above average. Measures of investor anxiety are mixed. Today’s overall market action is neutral, considering another move higher in energy and the disappointing Philly Fed report. The Prices Paid component of the Philly Fed has now declined 64.44% just since February 1. This index joins the Chicago PMI, ISM Manufacturing, ISM Non-Manufacturing and Empire Manufacturing in showing plunging prices paid indices. I expect US stocks to trade mixed into the close as high energy prices offset lower long-term rates.

Today's Headlines

Bloomberg:
- Fugitive terrorist leader Abu Musab al-Zarqawi’s “most trusted operations agent” in Iraq was captured without incident two days ago in the northern city of Mosul.
- US Treasuries rallied after a report from the Fed’s Philly branch showed the region’s manufacturing was weaker this month than most economists forecast.
- Eurex AG, the world’s largest futures exchange by transactions, plans a currency futures market in the US to rival the Chicago Mercantile Exchange, where $38 billion of the securities change hands each day.

Wall Street Journal:
- The European Union needs to tackle the biggest concern of voters who turned down the proposed European constitution -- the weak European economy – said Giorgio La Malfa, Italy’s minister of European affairs.
- US clothing companies are poised to accelerate acquisitions in order to strengthen their position in pricing negotiations with consolidating retailers.

NY Times:
- The UAW won’t agree to allow GM to pare back health-care benefits for hourly workers.
- The US Corporation for Public Broadcasting is being investigated for more than $29,000 in payments last year to lobbyists and consultants that weren’t disclosed to the corporation’s board.
- New York state lawyers are increasingly stealing from their clients, with a growing number of abuses from Long Island attorneys, citing statistics from the Lawyer’s Fund for Client Protection.

Lloyd’s List:
- The cost of leasing a container ship fell in the past week, the first decline since December 2003.

Financial Times:
- Former Iranian President Akbar Hashemi Rafsanjani, running again for president, is a pragmatist who could be a force for change in the Middle East.

Housing Starts Near Record Levels, Jobless Claims Hold Steady

- Housing Starts for May rose to 2009K versus estimates of 2050K and 2005K in April.
- Building Permits for May fell to 2050K versus estimates of 2109K and 2148K in April.
- Initial Jobless Claims for last week rose to 333K versus estimates of 330K and 332K the prior week.
- Continuing Claims rose to 2641K versus estimates of 2587K and 2583K prior.

BOTTOM LINE: US housing starts rose .2% in May to the best pace since February as low interest rates and job growth continued to fuel demand. These numbers reinforce the view that this will be the best year for homebuilding since 1978 and the best year ever for home sales. Starts increased in all regions but the South, where they fell 12%. US home sales will top 8 million this year, the fifth consecutive record.

The four-week moving-average of jobless claims rose to 335,000 from 332,250. Jobless claims fell to an average of about 328,000 this year from 343,000 for all of last year. The four-week moving-average of continuing claims rose to 2.597 million from 2.585 million. The insured unemployment rate rose to 2.1% in the week from 2% the week before. Employers have added jobs at a monthly rate of about 180,000 this year, compared with a monthly average of 183,000 for all of last year. The economy generated 2.2 million new jobs last year, the most in five years.

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Thursday Watch

Late-Night Headlines
Bloomberg:
- Integrated Device Technology agreed to buy Integrated Circuit Systems for $1.7 billion in cash and stock.
- Pfizer will acquire all outstanding shares of Vicuron Pharmaceuticals at a price of $29.10 per share in cash, for an aggregate equity purchase price of approximately $1.9 billion.

Wall Street Journal:
- GM's European auto business is showing the first signs of recovery, according to GM Europe Chairman Frederick Henderson.
- SAP AG hired several executives from Oracles and other rivals as competition grows.

MarketWatch:
- Marin Capital Partners, a hedge fund that previously managed about $2 billion, will close this week because of a "lack of suitable investment opportunities in the current market."

Financial Times:
- Growth in the level of service jobs outsourced from wealthy nations may be restrained due to the lack of skills held by workers in low-wage countries, citing a study by McKinsey Global Institute.
- Elan Corp. Plc, Ireland's biggest drugmaker, has developed a vaccine for Parkinson's disease which early-stage trials show works well in mice, citing test data from the Univ. of Cal., San Diego.

BBC:
- Iran did not tell the UN inspectors investigating its nuclear program about all its nuclear work, citing Iranian presidential candidate Ali Akbar Hashemi Rafsanjani.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on AMLN.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated +.06%.

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Earnings of Note
Company/EPS Estimate
ADBE/.27
CHTT/.56
GS/1.87
KBH/1.78
WGO/.49

Upcoming Splits
None of note

Economic Releases
8:30 EST:
- Housing Starts for May are estimated to rise to 2050K versus 2038K in April.
- Building Permits for May are estimated to fall to 2107K versus 2148K in April.
- Initial Jobless Claims for last week are estimated to remain at 330K versus 330K the prior week.
- Continuing Claims are estimated to fall to 2587K versus 2588K prior.

12:00 EST:
- The Philly Fed. for June is estimated to rise to 10.0 versus a reading of 7.3 in May.

BOTTOM LINE: Asian indices are mostly higher, led by commodity-related stocks in the region. I expect US equities to open modestly higher on positive economic reports and merger activity. Several Fed speakers are scheduled for later in the day, which could also impact trading. The Portfolio is 75% net long heading into the day.