Stocks Finish Higher, Boosted by Rebounding Tech Shares

Indices
S&P 500 1,272.52 +.41%
DJIA 11,134.77 +.28%
NASDAQ 2,128.86 +.56%
Russell 2000 714.39 +.75%
Wilshire 5000 12,792.18 +.41%
S&P Barra Growth 586.59 +.34%
S&P Barra Value 684.50 +.47%
Morgan Stanley Consumer 616.50 +.34%
Morgan Stanley Cyclical 817.63 +.17%
Morgan Stanley Technology 478.90 +.68%
Transports 4,858.94 -.05%
Utilities 421.53 +.64%
Put/Call 1.08 +16.13%
NYSE Arms 1.31 +2.67%
Volatility(VIX) 13.14 -6.28%
ISE Sentiment 109.00 -31.88%
US Dollar 85.36 -.16%
CRB 350.28 +1.04%

Futures Spot Prices
Crude Oil 74.04 -.16%
Unleaded Gasoline 218.85 -.18%
Natural Gas 5.66 +.48%
Heating Oil 200.50 -.28%
Gold 642.70 -.06%
Base Metals 233.87 +2.21%
Copper 362.50 -.28%
10-year US Treasury Yield 5.10% -.48%

Leading Sectors
Semis +3.29%
Oil Service +3.0%
Defense +2.54%

Lagging Sectors
Oil Tankers -.71%
Homebuilders -1.21%
Airlines -1.50%

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Afternoon Recommendations
Raymond James:
- Added (AMMD) to Aggressive Growth category.

Afternoon/Evening Headlines
Bloomberg:
- Dan Rather, the former CBS Corp. news anchor, will produce and host a weekly news program for HDNet, a high-definition television channel co-founded by Mark Cuban.
- Nasdaq Stock Market(NDAQ) made its biggest inroads into trading shares of NYSE listed companies in more than a year.
- Genentech(DNA) said second-quarter net income rose 79% as doctors prescribed more of the company’s medicines for colon and breast cancers.
- KLA-Tencor(KLAC) and Applied Materials(AMAT) indicated demand may be stronger than analysts expected.
- Sears Holdings(SHLD) vice chairman Alan Lacy, the retailer’s former CEO, will leave the largest US dept. store chain as of July 29.
- The House of Representatives approved a measure to stifle online gambling in the US by restricting the flow of money to illegal Internet gaming sites.
- India’s Prime Minister Manmohan Singh pledged to tackle terrorism with “all possible measures” as governments across the world condemned the worst attack in Mumbai in 13 years.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Internet longs, Retail longs and Medical longs. I covered the remainder of my (IWM) and (QQQQ) shorts and added a small long position in (DNA) in the final hour, thus leaving the Portfolio 100% net long. I plan to add to my new (DNA) long on earnings related weakness. The tone of the market was positive today as the advance/decline line finished modestly higher, most sectors gained and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was quite bullish as the major averages and breadth improved dramatically from morning lows. Semis had been one of the worst performing sectors in the market based on the belief that earnings were going to be horrible this quarter. KLA-Tencor (KLAC) beat estimates and raised forward guidance. This will likely lead to further short-covering in the tech space tomorrow.

Stocks Higher into the Final Hour, Led by Reveral in Tech Shares

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Internet longs, Retail longs and Medical longs. I added to my (CYMI) long and covered some of my (IWM)/(QQQQ) shorts today, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is slightly higher, most sectors are higher and volume is about average. Bloomberg just interviewed former hedge fund manager Michael Steinhardt. He said there is a pall and sense of doom overhanging the U.S. stock market that isn't justified and that he thinks the market is OK. The economy will continue to expand and interest rates won't rise much further, according to Steinhardt. He said stocks are cheap and commodities are expensive. He called the belief that China produces vast amount of new consumerism each year a myth. Finally, he expects a continuing shakeout among hedge fund managers. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower long-term rates and bargain-hunting in tech.

Today's Headlines

Bloomberg:
- The sea off Greenland’s eastern coast may have as much as 110 billion barrels of oil, with further reserves to the west of the island, citing the US Geological Survey and Greenland’s Directorate of Commodities.
- Mumbai, India’s commercial hub, was rocked by seven explosions on trains and in commuter stations, killing as many as 142 people and injuring 450 in the nation’s worst terrorist attack in 13 years.
- China’s government said it’s “very concerned” about North Korea’s missile tests and has conveyed its concerns to the Pyongyang-based leadership, according to a Chinese foreign ministry spokeswoman.
- A bill to prohibit online gambling in the US and prevent financial transactions with offshore online gambling sites is scheduled for a July 12 vote in the US House of Representatives.
- A glut of ships that carry liquefied petroleum gas, used by most Asian households for cooking, may leave some vessels standing idle, said Simon Hill, managing director of Petredec Services.
- US 10-year Treasury notes rose, pushing yields to the lowest in three weeks, on signs economic growth is slowing in response to 17 interest-rate increases by the Fed.
- The Bush administration cut its estimate of this year’s budget deficit by 30% to $296 billion amid a surge in tax collections from corporations and wealthy individuals.
- Blackstone Group raised $15.6 billion for buyouts, topping rivals such as Kohlberg Kravis Roberts and Texas Pacific Group as manager of the world’s largest takeover fund.
- National City(NCC) agreed to buy Harbor Florida Bancshares for about $1.1 billion in its first acquisition of bank braches in Florida.

Wall Street Journal:
- Companies in the UK and US are becoming less inclined to outsource information technology services, citing a survey by DiamondCluster Intl., a management consulting firm.
- Time Warner(TWX) expects plans by its AOL unit to offer Internet services for free to some customers to cost almost $1 billion in operating profit through 2009.
- Sequoia Capital, a venture capital firm known for providing startup money for Google(GOOG) and Yahoo!(YHOO), will shift its focus in China to semiconductor firms from Internet-related companies.

NY Post:
- Former Time Warner(TWX) executive Steve Case plans to set up an internet site starting October to help people manage healthcare needs such as transferring medical records, finding a doctor and scheduling an appointment.

NY Times:
- Google(GOOG) is planning to build an office and research center in Michigan that will employ as many as 1,000 workers.
- Hewlett-Packard(HPQ), which secured a $3 billion contract from Procter & Gamble(PG) in 2003 to manage its information technology, is slowing the growth pace in its consulting unit.
- US law-enforcement officials say that some users of methamphetamine are turning to identity theft to finance their illicit drug habit.

USA Today:
- Southwest Air(LUV) passengers flying from San Diego to Phoenix didn’t like getting assigned seats on the first of more than 200 flights the carrier will use to determine whether it should drop its open-seating policy.

AP:
- NYC will place hundreds of extra police officers in the subways during rush hour and increase random bag searches there in response to today’s train bombings in Mumbai.

Economic Releases

- None of note

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- President Bush today approved an additional $80 million over the next two years to foster democracy in Cuba.
- China asked member governments of the UN Security Council to adopt a non-binding statement critical of North Korea’s ballistic missile program, a proposal the US and Japan rejected as too weak.
- Posco, the world’s fourth-largest steelmaker, may say profit declined for a third straight quarter as competition from China forced the company to lower prices and raw material costs rose.

Wall Street Journal:
- SEC Chairman Christopher Cox said Russia’s economic success depends on whether the government allows for the free flow of information. Russia’s restrictions on the media “deeply concern” capital markets, Cox wrote.

Financial Times:
- The European Commission will raise the ceiling for potential future fines on Microsoft(MSFT) to $3.8 million a day.

Age:
- US farmers are seeking hundreds of millions of dollars in compensation from AWB Ltd. as part of a class action filed in Washington against the Australian wheat exporter.

Chosun Ilbo:
- South Korea likely dropped its request to include goods made in the North Korean industrial park of Gaeseong from free-trade talks with the US.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated unch.

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Earnings of Note
Company/EPS Estimate
- (AMB)/.44
- (FLS)/.22
- (DNA)/.47
- (RI)/.51

Upcoming Splits
- None of note

Economic Releases
- None of note

BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity stocks in the region. I expect US equities to open modestly lower and to trim losses into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.