Stocks Finish Near Session Highs as Long-term Rates Decline

Indices
S&P 500 1,237.81 +.71%
DJIA 10,685.89 +.86%
NASDAQ 2,174.55 +.78%
Russell 2000 666.37 +.94%
DJ Wilshire 5000 12,238.96 +.72%
S&P Barra Growth 593.60 +.75%
S&P Barra Value 639.80 +.66%
Morgan Stanley Consumer 592.18 +.67%
Morgan Stanley Cyclical 758.96 +.64%
Morgan Stanley Technology 503.75 +.91%
Transports 3,762.84 +.52%
Utilities 397.22 +.94%
Put/Call .92 -8.0%
NYSE Arms .69 -40.52%
Volatility(VIX) 12.42 +.32%
ISE Sentiment 120.00 -36.17%
US Dollar 86.89 -.82%
CRB 322.59 +.83%

Futures Spot Prices
Crude Oil 65.87 +1.49%
Unleaded Gasoline 196.10 +3.41%
Natural Gas 9.38 +3.46%
Heating Oil 191.08 +3.92%
Gold 451.30 +.09%
Base Metals 127.54 +.13%
Copper 164.50 -.12%
10-year US Treasury Yield 4.32% -1.60%

Leading Sectors
Gold & Silver +4.11%
Restaurants +3.06%
Biotech +1.32%

Lagging Sectors
Papers -.09%
Gaming -.15%
Airlines -.87%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on YHOO.
- Reiterated Underperform on FLWS and DE.

Afternoon/Evening Headlines
Bloomberg:
- The Chicago Board of Trade said new limits on Treasury futures holding are a “prudent and proactive” response to traders’ concerns about a potential shortage of bonds used the settle the contracts.
- Delta and Continental boosted airfares by $10 each way to counter rising fuel prices.
- An Oklahoma man was arrested for allegedly having an explosive device in his carry-on bag as he went to board a flight to Philadelphia.
- After the close, Dell reported second-quarter sales that misses analysts’ estimates and indicated revenue will fall short again this quarter after the company slashed prices to win market share.
- Intel may raise its dividend or buy back more shares because it has too much cash, CFO Andy Bryant said.
- American International Group boosted its quarterly shareholder dividend 20%, the first increase since the company restated $3.9 billion of profit in May.

BOTTOM LINE: The Portfolio finished modestly higher today on gains in my Medical longs and Oil Tanker shorts. I added to my existing longs in the afternoon, thus leaving the Portfolio 50% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was slightly below average. Measures of investor anxiety remained mixed into the close. Overall, today’s market action was positive. With the U.S. economy poised for 4%+ growth over the next couple of quarters and inflation readings under control, investors are likely viewing higher oil prices as a positive that may help bring growth back down to more sustainable levels.

Stocks Modestly Higher Mid-day as Oil Hits Another Record and Long-term Rates Fall

Indices
S&P 500 1,228.48 -.05%
DJIA 10,598.55 +.04%
NASDAQ 2,158.37 +.03%
Russell 2000 660.61 +.07%
DJ Wilshire 5000 12,241.75 +.01%
S&P Barra Growth 589.25 +.01%
S&P Barra Value 635.56 -.01%
Morgan Stanley Consumer 588.50 +.05%
Morgan Stanley Cyclical 753.91 -.04%
Morgan Stanley Technology 499.99 +.15%
Transports 3,744.99 +.04%
Utilities 394.40 +.23%
Put/Call .91 -9.0%
NYSE Arms .96 -17.02%
Volatility(VIX) 12.71 +2.67%
ISE Sentiment 127.00 -32.45%
US Dollar 87.07 -.62%
CRB 321.97 +.63%

Futures Spot Prices
Crude Oil 65.55 +.92%
Unleaded Gasoline 193.70 +2.15%
Natural Gas 9.23 +1.75%
Heating Oil 188.70 +2.51%
Gold 450.60 +1.95%
Base Metals 127.54 +.13%
Copper 164.70 +.76%
10-year US Treasury Yield 4.33% -1.37%

Leading Sectors
Gold & Silver +3.84%
Restaurants +1.32%
Wireless +.94%

Lagging Sectors
Internet -.66%
Gaming -.83%
Airlines -1.16%

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Oil Tanker shorts. I added to a few existing longs and shorts this morning, thus leaving the Portfolio 25% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, most sectors are higher and volume is below average. Measures of investor anxiety are mixed. Today’s overall market action is neutral considering the rise in oil and fall in long-term rates. The AAII % Bulls fell to 39.74% this week from 47.83% the prior week; this reading is now at slightly below average levels. Likewise, the % Bears rose to 28.85% from 26.09% the prior week; this is back to average levels. These readings should help contain any near-term pullback related to oil or rates. I expect US stocks to trade modestly higher into the close on lower long-term rates.

Today's Headlines

Bloomberg:
- The Italian economy grew at the fastest pace in more than four years in the second quarter, pulling the country out of recession and back on course to grow this year.
- The UN nuclear watchdog will vote on a resolution criticizing Iran’s resumption of uranium processing activities today.
- Pfizer said it is revamping its consumer marketing, including educating doctors for at least six months about new medicines before beginning television and print ads.
- Qualcomm agreed to buy Flarion Technologies for as much as $805 million to increase sales of modems and chips for high-speed wireless networks.
- US Treasuries are rising after demand from international investors rose for the first time this week at an auction by the Treasury.
- Crude oil is rising to a record $66 a barrel in NY after the IEA reduced its estimate of output by Russia and other non-OPEC producers.
- The US dollar dropped to a 10-week low against the euro and fell the weakest since June versus the yen after a government report showed US retail sales in July grew less than forecast.

Wall Street Journal:
- US credit-card issuers such as JPMorgan Chase, Citigroup’s Citibank and Bank of America are raising their maximum late-payment penalty rates past 30%, as the cost of using the cards rises.
- The revised US bankruptcy law with tighter rules on debtors that takes effect Oct. 17 may prompt companies to file for bankruptcy earlier than they had considered.
- US economists, including those from universities and even the Federal Reserve, have started “blogging,” posting their thoughts on all manner of subjects on the Internet.
- Cell phone text messaging, popular in China and Europe, is beginning to find favor among US consumers.

NY Times:
- Michael Powell, former chief of the FCC, is joining private equity firm Providence Equity Partners.
- Goldman Sachs reversed an earlier decision and now plans to build a $2 billion office opposite NY’s former World Trade Center site.
- US food and drink manufacturers such as PepsiCo have ordered scientists to try to find food ingredients that have either less fat, white flour, sugar and salt, or healthier components such as whole grains, fiber and fish oil.

Detroit News:
- Ford Motor will produce new Lincoln models at a plant in Atlanta.

Star-Ledger:
- New Jersey said 851 public schools failed to meet performance test standards last year, up from 585 schools the year before.

Chicago Tribune:
- Sears Holdings has posted about 90 help-wanted notices for executive positions on job Web site Monster.com

Newsweek:
- Cingular Wireless LLC and Time Warner’s HBO network are in talks to provide HBO shows on Cingular phones.

Reuters:
- DirectTV Group will stop marketing TiVo’s digital video recorders this year and replace them with its own products.

Retail Remains Healthy, Jobless Claims Stay Low, Inventories at Record Low Levels

- Advance Retail Sales for July rose 1.8% versus estimates of a 2.1% increase and a 1.7% gain in June.
- Retail Sales Less Autos for July rose .3% versus estimates of a .6% increase and an upwardly revised .9% gain in June.
- Initial Jobless Claims for last week rose 308K versus estimates of 315K and 314K the prior week.
- Continuing Claims fell to 2573K versus estimates of 2573K and 2581K prior.
- Business Inventories for June were unchanged versus estimates of a .1% increase and a .1% gain in May.

BOTTOM LINE: Strong sales of autos took away from sales of other goods. Sales at auto dealers and parts stores rose 6.7% in July, the most since October 2001. Near record heat last month also adversely effected fall clothing sales. Economists now expect consumer spending to rise 3.7% this quarter, .5 percentage points higher than their forecast last month, Bloomberg reported. I expect retail sales to remain healthy through year-end as incomes improve, rates remain relatively low and stock prices rise.

The number of Americans filing first-time claims for jobless benefits unexpectedly fell last week as companies retained workers to meet rising demand, Bloomberg reported. The four-week moving-average fell to 309,250, the best level since February. The insured unemployment rate, which tracks the US unemployment rate, held at 2.0%.

US business inventories were unchanged in June and sales increased, suggesting companies will boost production in coming months to keep up with demand, Bloomberg reported. The surge in sales left companies with enough goods to last a record-low 1.29 months. Rising production will boost GDP growth during the next couple of quarters.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- The yen rose to the highest in three weeks against the US dollar in Asia after the finance ministry today said funds abroad accelerated purchases of Japanese stocks as growth in the world’s second-biggest economy recovers.
- Crude oil futures in NY are rising to another record above $65/bbl. after Iran’s government said it restarted its uranium enrichment program.

NY Times:
- The NY City health department urged restaurants to stop serving foods containing trans fats because they increase the risk of heart disease.

Financial Times:
- The UK’s Muslim communities are failing to help police in their search to identify radical Islam clerics and young people vulnerable to extremism, citing an interview with Metro Police Assistant Commissioner Tarique Ghaffur.

Asian Wall Street Journal:
- Yahoo! may make an announcement as early as today about an investment in Alibaba.com.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on MDT and HMA.

Night Trading
Asian Indices are +.25% to +1.0% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.03%.

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
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
ADI/.31
BGG/1.12
EAT/.70
CREE/.27
CYBX/-.81
DELL/.38
DWA/-.07
ELX/.24
JMDT/.19
KSS/.52
NVDA/.34
PSUN/.29
RRGB/.42
TGT/.59
URBN/.36

Upcoming Splits
None of note

Economic Releases
8:30 am EST
- Advance Retail Sales for July are estimated to rise 2.1% versus a 1.7% increase in June.
- Retail Sales Less Autos for July are estimated to rise .6% versus a .7% increase in June.
- Initial Jobless Claims for last week are estimated to rise to 315K from 312K the prior week.
- Continuing Claims are estimated to fall to 2573K versus 2581K prior.

10:00 am EST
- Business Inventories for June are estimated to rise .1% versus a .1% increase in May.

BOTTOM LINE: Asian indices are higher, spurred by economic optimism in the region. I expect US equities to open modestly higher and to decline later in the day on increasing worries over rising energy prices and interest rates. The Portfolio is 25% net long heading into the day.