Stocks Mixed Mid-day as Energy Prices Fall and Long-term Rates Rise

Indices
S&P 500 1,197.46 +.11%
DJIA 10,398.21 +.20%
NASDAQ 2,107.83 -.08%
Russell 2000 641.32 -.22%
DJ Wilshire 5000 11,948.69 +.02%
S&P Barra Growth 574.57 -.02%
S&P Barra Value 619.10 +.26%
Morgan Stanley Consumer 585.33 +.35%
Morgan Stanley Cyclical 708.62 +1.05%
Morgan Stanley Technology 497.54 -.67%
Transports 3,751.08 +.38%
Utilities 396.01 -.35%
Put/Call .91 +3.41%
NYSE Arms .77 -21.83%
Volatility(VIX) 14.24 -2.0%
ISE Sentiment 146.00 -22.34%
US Dollar 89.52 +.31%
CRB 325.47 -1.10%

Futures Spot Prices
Crude Oil 61.65 -1.35%
Unleaded Gasoline 161.25 -2.65%
Natural Gas 14.14 -1.35%
Heating Oil 188.00 -.52%
Gold 473.00 -.36%
Base Metals 133.08 -.46%
Copper 181.80 -.36%
10-year US Treasury Yield 4.57% +1.03%

Leading Sectors %
I-Banks +1.29%
Oil Tankers +1.12%
Papers +.98%

Lagging Sectors
Networking -1.78%
HMOs -2.28%
Gaming -2.69%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Medical longs and Computer longs. I added PLAY long this morning and took profits in an existing long, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is slightly above average. Measures of investor anxiety are mixed. Today’s overall market action is neutral considering the rise in long-term rates and fall in energy prices. Trim Tabs is now estimating international funds will take in $87.5 billion this year, the most since they began keeping track in 1985. I continue to believe the mania for international stocks will end badly in the coming months. It will likely coincide with the accelerated downward move in commodity prices that I envision. I expect US stocks to trade modestly higher from current levels into the close on falling energy prices.

Today's Headlines

Bloomberg:
- US demand for international stocks this year may be the highest in more than 20 years, based on mutual-fund flows. The growth has led to concern that gains in markets worldwide have peaked.
- Shares of Doral Financial, Puerto Rico’s largest mortgage lender, plunged after the company disclosed late yesterday that the SEC is conducting a formal probe into an earnings restatement.
- CBS News President Andrew Heyward will step down after almost 10 years and will be replaced by CBS Sports chief Sean McManus.

Wall Street Journal:
- Lockheed Martin is part of a group of companies that may make a takeover offer for Computer Sciences.
- EarthLink and SK Telecom, South Korea’s leading wireless provider, plan to start a cell-phone and data service in the US.
- Ford Motor is trying to improve its internal knowledge of gasoline-electric engine technology so it can ensure its ability to produce hybrid engines to compete against Toyota Motor, maker of Prius hybrid cars.
- The Gulf Coast hurricane season, which has left hundreds of thousands of US citizens homeless, means a bonanza for makers of motorized mobile homes.

NY Times:
- There has been a “significant” increase in the number of first-time buyers of commercial real estate in the US as people seek higher return on investment.
- Billionaire investor Wilbur Ross plans to take advantage of cheaper prices to acquire ailing auto-parts businesses and combine them into a stronger company.

Washington Post:
- The US State Department issued final rules for putting electronic identification chips into all US passports.

Boston Globe:
- The median price of a single-family home in Massachusetts fell 4% to $360,000 in September, the first monthly decline since February.

AP:
- Democratic Senator Jon Corzine’s New Jersey gubernatorial campaign ad that features a paralyzed man criticizing Republican Doug Forrester for his views on stem-cell research has drawn negative comments.

Al-Ahram:
- Egypt has started pumping oil from one of three offshore fields in the Gulf of Suez that have reserves of up to 70 million barrels, citing Petroleum Minister Sameh Fahmy.

INA:
- Iranian President Mahmoud Ahmadinejad called Israel’s withdrawal from Gaza a “trick” and said the Islamic world would “wipe Israel away.”

Economic Releases

- The EIA just reported that crude oil inventories rose 4.41 million barrels vs. estimates of a 2.0 million barrel rise. Gasoline inventories rose 159,000 barrels vs. estimates of a 1.5 million barrel rise. Distillate supplies fell 1.62 million barrels vs. estimates of a 1.3 million barrel fall.

BOTTOM LINE: The EIA data was moderately bearish for oil, however the commodity is rising slightly on continued speculation that demand is accelerating from Sept. The overall trend in demand is lower and will remain so over the intermediate-term.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
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IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
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NASDAQ 100 Heatmap
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Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Australia’s consumer prices increased less than economists expected in the third quarter as the price of TVs, DVDs, stereos and medicines declined.
- Japan’s exports rose 8.8% to a record in September on higher demand from the US and China.
- Crude oil is falling for a sixth day in seven before a report today that may show US stockpiles increased for a third week on higher imports and weaker demand.

Financial Times:
- Sealed indictments in the CIA leak probe are expected to be filed tomorrow and released later this week.

AFP:
- Laser printers made by Xerox Corp. and other companies produce a secret code that can help the US Secret Service track down currency counterfeiters.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on GNW and CVS.
- Reiterated Underperform on EW and CR.

Night Trading
Asian Indices are -.50% to +.75% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.19%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
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Macro Calls
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Earnings of Note
Company/EPS Estimate
ADP/.35
AHC/3.30
APCC/.28
BUD/.80
BIDU/.06
BOL/.90
BIIB/.42
BA/.80
CAH/.72
COP/2.56
GLW/.21
CSX/.72
DO/.40
DBD/.27
EL/.32
ESRX/.61
KMG/2.64
LLL/1.09
MGM/.41
MNST/.24
NEM/.25
OMX/.29
PFCB/.31
PHM/1.39
RCL/1.47
S/.38
ZMH/.67

Upcoming Splits
- None of note

Economic Releases
10:30 am EST
- Platt's estimates weekly crude inventories rose 2.7 million barrels, gasoline inventories rose 2.3 million barrels, distillate inventories declined 1.1 million barrels and refinery utilization increased 4.0%.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology companies in the region. I expect US equities to open mixed and to rise modestly later in the day. The Portfolio is 100% net long heading into the day.