Stocks Sharply Higher Mid-day on Less Pessimism

Indices
S&P 500 1,213.55 +.90%
DJIA 10,477.13 +.67%
NASDAQ 2,142.17 +1.31%
Russell 2000 654.62 +1.80%
DJ Wilshire 5000 12,127.95 +1.0%
S&P Barra Growth 579.03 +.83%
S&P Barra Value 630.22 +.94%
Morgan Stanley Consumer 584.40 +.12%
Morgan Stanley Cyclical 729.71 +1.49%
Morgan Stanley Technology 504.51 +1.13%
Transports 3,923.06 +2.16%
Utilities 389.85 -.17%
Put/Call .68 -29.17%
NYSE Arms .66 -46.47%
Volatility(VIX) 13.65 -8.08%
ISE Sentiment 172.00 +4.24%
US Dollar 89.74 -.38%
CRB 315.40 -.15%

Futures Spot Prices
Crude Oil 59.10 -1.25%
Unleaded Gasoline 156.20 -2.59%
Natural Gas 11.52 -2.95%
Heating Oil 176.75 -2.08%
Gold 464.60 unch.
Base Metals 134.72 +.70%
Copper 182.85 -.11%
10-year US Treasury Yield 4.60% +.98%

Leading Sectors %
Homebuilders +3.59%
Airlines +3.0%
Semis +2.75%

Lagging Sectors
Utilities -.24%
HMOs -1.06%
Software -1.94%

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Medical longs, Semi longs, Computer longs and Retail longs. I added TOL long this morning and added to my Steel shorts, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is higher and volume is heavy. Measures of investor anxiety are lower. Today’s overall market action is positive considering the shift in psychology. For the last two months, beginning around the time of Hurricane Katrina, almost every bit of news has been interpreted in a negative light by investors. In my opinion, the fundamentals dictate much higher stock prices. However, during the last couple of months, the many with negative agendas, both political and financial, have been winning the battle for investor psychology. I sense this may be changing right now. I expect US stocks to trade modestly higher from current levels into the close on more optimism.

Today's Headlines

Bloomberg:
- Bank of America and other foreign institutions that have invested a combined $13 billion in China’s banks will be required to hold their shares for at least three years and won’t be allowed to buy stakes in more than two lenders.
- Gangs of youths clashed with French police for a sixth night as violence spread in Paris suburbs, prompting President Chiraq to call for calm.
- Johnson & Johnson won clearance from US antitrust regulators for its planned $25.4 billion purchase of Guidant after agreeing to divest stent technology and blood vessel-harvesting products.
- Johnson & Johnson said it may not complete its $25.4 billion purchase of Guidant because the companies haven’t agreed on a restructuring of the transaction requested by J&J.
- Mercury Interactive said three of its top executives resigned after a company investigation found that they manipulated the value of stock options for six years.
- GE expects as much as $1.2 billion in savings next year after it consolidated operations into six business units, four times earlier estimates.
- Heating oil, crude oil and gasoline fell after an EIA report showed that US inventories of distillate fuel dropped less than expected.

Wall Street Journal:
- MBIA is close to settling federal and state investigations of its accounting, agreeing to pay less than $100 million in fines and damages and accepting a review of past practices.
- A SEC investigation into GE’s use of hedge accounting has been upgraded to a formal investigation.
- Black & Decker plans to start selling next year tools with rechargeable batteries that provide double the power of 18-volt tools commonly used by contractors.
- US regulators will ask drugmakers to submit digital versions of the labels they use to describe a treatment’s use and risks, to be included in an online archive available to the public.
- Sweeping changes to the US tax code are necessary to remove a bias against saving and investment, R. Glenn Hubbard wrote.

NY Times:
- Aetna Inc., a health insurer, plans to say today that it will pay for some depression treatment as employers cite the ailment as a frequent cause of absenteeism and low productivity.

Financial Times:
- IVillage Inc., which operates Web sites for women, may sell its operations for more than $700 million.

Oil Supplies Rise Above Estimates

- The EIA just reported that crude inventories rose 2.73M barrels versus estimates of a 2.5M barrel rise. Gasoline inventories rose 1.03M barrels versus estimates of a 700K barrel rise. Distillate supplies fell 159K barrels versus estimates of a 1M barrel fall. Refinery Utilization rose 1.76% versus estimates of a 2.28% gain.

BOTTOM LINE: This data is once again bearish for the energy complex, however oil is up slightly on the report.

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

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Steel companies may lose their luster amid increasing production from China.
- Australian Prime Minister John Howard said the government has received information on a credible terrorism threat and will recall legislators to give police extra powers to deal with the threat.
- Toyota Motor and Honda Motor helped Asian auto brands win a record share of the US market in October as sales plunged for GM and Ford.

Financial Times:
- Delphi Corp. may ask GM to finance a one-off payment to workers facing wage and benefit cuts in return for lower parts prices.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on NFP and MSFT.
- Reiterated Underperform on SMP, SGP, SIRI and HCC.

Night Trading
Asian Indices are -.25% to +1.0% on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated -.13%.

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
ATVI/-.06
ATK/1.01
BZH/3.11
BMC/.23
CECO/.51
DF/.50
DVN/1.80
DUK/.48
PCLN/.37
QCOM/.33
SPW/.68
TK/.40
TWX/.17
UVN/.22

Upcoming Splits
- None of note

Economic Releases
10:30 am EST
- Platt's estimates that weekly crude inventories rose 2.75 million barrels, gasoline inventories rose 1.4 million barrels and distillate supplies fell 1 million barrels. Refinery utilization is expected to rise 2.5%.

BOTTOM LINE: Asian indices are mostly higher on earnings optimism in the region. I expect US equities to open modestly lower and to rise later in the day. The Portfolio is 100% net long heading into the day.

Stocks Finish Modestly Lower after Fed Rate Hike

Indices
S&P 500 1,202.76 -.35%
DJIA 10,406.77 -.32%
NASDAQ 2,114.05 -.29%
Russell 2000 643.02 -.56%
DJ Wilshire 5000 12,007.42 -.30%
S&P Barra Growth 574.29 -.54%
S&P Barra Value 624.34 -.17%
Morgan Stanley Consumer 583.70 -.59%
Morgan Stanley Cyclical 719.01 +.15%
Morgan Stanley Technology 498.92 -.09%
Transports 3,840.04 +.64%
Utilities 390.54 -2.64%
Put/Call .96 +9.09%
NYSE Arms 1.23 +33.05%
Volatility(VIX) 14.85 -3.07%
ISE Sentiment 165.00 -14.95%
US Dollar 90.08 +.01%
CRB 315.83 -.15%

Futures Spot Prices
Crude Oil 59.84 unch.
Unleaded Gasoline 160.36 unch.
Natural Gas 11.94 +.99%
Heating Oil 180.52 +.01%
Gold 460.80 +.04%
Base Metals 133.78 -.93%
Copper 181.50 -.06%
10-year US Treasury Yield 4.56% +.40%

Leading Sectors
Steel +1.73%
Oil Service +1.56%
Computer Services +1.31%

Lagging Sectors
REITs -2.14%
Computer Hardware -2.18%
Utilities -2.64%

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 SYMC, MSFT, CL, TXU and TAP.
- Reiterated Underperform on SGP, CSE and MMC.

Afternoon/Evening Headlines
Bloomberg:
- Codelco, the world’s largest copper producer, said prices for the metal will drop by about a third in the next three years as mining companies expand output to meet growing demand from China.
- Microsoft plans to develop “live” programs that create real-time links to data over the Internet.
- Federal Reserve policy makers raised the benchmark US interest rate a 12th straight time to head off faster inflation and signaled they aren’t finished yet.
- Former US House Majority Leader DeLay won his bid to remove from his campaign-finance trial a Texas judge who has contributed money to Democratic candidates.
- Moderate US Senate Democrats said they want to know more about Supreme Court nominee Samuel Alito’s judicial philosophy and signaled reluctance to support a filibuster to block his confirmation.

Financial Times:
- Anheuser-Busch Cos. and Heineken NV are in talks to buy a controlling stake in Fujian Sedrin Brewery in a deal that may value the Chinese brewer at $800 million.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Internet longs, Medical Information System longs and Airline longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was slightly negative today as the advance/decline line finished lower, sector performance was mixed and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was neutral and likely frustrating for the bulls and bears. The major averages finished modestly lower; however, a number of sectors gained. It is a big positive that the MS Tech Index fell only 0.09% lower on the day of a Dell (DELL) earnings warning. I still expect stocks to build on recent gains over the next few days.