Dow Jones Industrial Average Finishes 61 Points from All-time High

Indices
S&P 500 1,336.59 +.02%
DJIA 11,689.24 +.17%
NASDAQ 2,263.39 +.09%
Russell 2000 732.54 +.40%
Wilshire 5000 13,339.18 +.10%
S&P Barra Growth 620.89 +.13%
S&P Barra Value 713.55 -.09%
Morgan Stanley Consumer 655.21 +.27%
Morgan Stanley Cyclical 821.31 -.16%
Morgan Stanley Technology 530.80 -.18%
Transports 4,480.38 +.62%
Utilities 434.82 +1.17%
Put/Call .84 -6.67%
NYSE Arms 1.11 +57.47%
Volatility(VIX) 11.58 +.43%
ISE Sentiment 115.0 -1.71%
US Dollar 85.67 +.05%
CRB 304.32 +1.20%

Futures Spot Prices
Crude Oil 62.99 +3.25%
Unleaded Gasoline 153.55 +2.93%
Natural Gas 5.66 -2.50%
Heating Oil 171.50 +3.45%
Gold 607.80 +.75%
Base Metals 233.22 +1.40%
Copper 347.85 -.24%
10-year US Treasury Yield 4.59% +.25%

Leading Sectors
Oil Service +1.90%
Disk Drives +1.63%
Biotech +1.47%

Lagging Sectors
Homebuilders -1.23%
Airlines -1.76%
Telecom -2.25%

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
CSFB:
- Rated (GILD) Outperform.
- Rated (AMGN) Underperform.

Afternoon/Evening Headlines
Bloomberg:
- Pennsylvania approved the first slot-machine licensees in the state, allowing five horse-racing facilities to add the devices.
- Texas Pacific Group, the leveraged buyout firm run by David Bonderman and James Coulter, raised about $15 billion, the second-biggest fund ever for takeovers.
- Hewlett-Packard(HPQ) Chairman and CEO Mark Hurd has the unanimous support of the board as he attempts to contain the scandal over a probe into the source of board leaks, director Robert Ryan said.
- A gunman, possibly armed with a bomb, took hostages at a high school outside Denver today and shots were reported fired, authorities said.
- President Bush will be confronting a growing rift between two crucial allies in the war against terrorism when he brings the presidents of Afghanistan and Pakistan to the White House for a dinner meeting tonight.
- Verizon Communications(VZ) said it plans to spend $22.9 billion expanding its fiber-optic Internet and television network through 2010, placing a price tag on the project for the first time.
- The US needs to add 40% more doctors who practice general medicine by 2020 to help care for an aging population, a medical group says.
- Crude oil rose 3.2% as speculators covered bets that the commodity would fall.
- Chesapeake Energy(CHK), the second-biggest independent natural-gas producer in the US, said it will idle about 6% of its output because of excess supply and a plunge in prices for the commodity.
- Natural-gas futures in NY plunged to their lowest in almost four years as mild weather cut demand and brimming inventories pared the need for fresh purchases.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Medical longs, Biotech longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished higher, sector performance was mixed and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was modestly bullish. U.S. gasoline supplies are now at the highest level since 1991 for this time of the year. Implied gasoline demand rose 0.6% for the week vs. a 20-year average of 1.7% demand growth. Moreover, distillate stocks are 18% above the five-year average for this time of the year as we head into the winter. Oil traded up on short-covering today. This bounce could last a few days as oil was getting very oversold technically. The 10-year was only slightly lower today despite the better housing data and recent gains. While the DJIA failed to close at a new high, I like the set-up for new highs by next week. A number of growth stock leaders are finally exhibiting significant upside momentum.

Stocks Mixed into Final Hour on Bounce Higher in Oil

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Retail longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is slightly higher, sector performance is mixed and volume is above average. Bloomberg just reported that commodity hedge funds fell for the fourth straight month in August and are now down 13.8% year-to-date, according to the Center of International Securities and Derivatives Markets. These declines came despite worries over war, inflation, U.S. dollar weakness and booming global growth. I suspect a large portion of the mountain of cash that has been deployed into these funds recently is very hot money. I expect another down-leg in most commodities will commence during the fourth quarter as funds raise cash to meet year-end redemptions. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering.

Today's Headlines

Bloomberg:
- The Dow Jones Industrial Average is 25 points from an all-time record high as an unexpected increase in new-home sales bolstered confidence that consumer spending will support economic growth.
- Natural Gas futures in New York are plunging about 9% to their lowest in almost four years as mild weather cut demand and record inventories pared the need for fresh purchases.
- US gasoline supplies are now at the highest level for this time of the year in 15 years.
- Federated Department Stores(FD) said billionaire investor Carl Icahn plans to buy $113.4 million to $500 million of additional stock, sending the retailer’s shares to a record.
- The NY Merc told Amaranth Advisors LLC that the hedge fund’s natural gas bets were too big a month before the trades led to a $6 billion loss.
- NY’s 18,000 restaurants would have to stop cooking with artificial trans fats, blamed for increasing the risk of heart disease, under regulations proposed by the city’s Health Department.
- McDonald’s(MCD) raised its annual dividend 50%, the biggest gain in three years, as sales climbed.

Wall Street Journal:
- General Motors(GM), Ford Motor(F) and DaimlerChrysler AG(DCX) are reducing some sticker prices for the 2007 model year, in an attempt to lure consumers with “value pricing.”
- General Motors(GM) will ask for a multi-billion dollar payment to form an alliance with Nissan Motor and Renault SA.
- Florida’s younger families are being pushed out of the state by rising housing prices and insurance, an influx of retirees and concern over another big hurricane.
- The US oil industry and Silicon Valley venture capital firms are involved in an increasingly vicious fight over a proposed tax to fund conservation and alternative-energy measures.
- Pirate Capital LLC, a hedge fund that pressures companies for changes that might boost their stock price, is experiencing problems this year with below-industry performance and a SEC investigation into possible securities-law violations.
- Citigroup(C), Merrill Lynch(MER), and Goldman Sachs(GS) are among six Wall Street firms planning a new electronic trading service for big stock trades, a venture that will compete with NYSE Group’s(NYX) NYSE and Nasdaq Stock Market(NDAQ).

NY Times:
- US clinics and medical centers are developing a consistent set of forensic methods to detect elder abuse.
- Qwest Communications(Q), the fourth-largest US phone company, has enough cash to buy a rival, perhaps a wireless carrier or a corporate provider of telecommunications services.

USA Today:
- At least seven men have died from electrocution in the US since July after a surge in thefts of copper wiring used for electricity, citing police and utility officials in five states.

Washington Post:
- More state and local law enforcement are beginning to check the immigration status of people they come into contract with as part of a nationwide effort to better police those living in the US illegally.

Reuters:
- The NYSE expects to refer 140 cases of potential insider trading to the SEC, 26% more than last year, citing Robert Marchman, the executive vice president of NYSE Regulation, a unit of the bourse.

Washington Square News:
- NYU, the largest private university in the US, raised a record $397.5 million in fiscal 2006, including $68 million for financial aid.

AP:
- 7-Eleven, Inc., the largest US operator of convenience stores, is dropping Citgo Petroleum as its gasoline supplier throughout the country. Citgo, a subsidiary of Venezuela’s state-owned oil company, became a “public-relations issue” for 7-Eleven because of recent comments by Venezuelan President Hugo Chavez that President Bush was an alcoholic devil. “Regardless of politics, we sympathize with many Americans’ concern over derogatory comments about our country and its leadership.” 7-Eleven will instead purchase fuel from several US distributors, including Sinclair Oil and Frontier Oil.

Financial Times:
- The US hedge-fund industry may regret that a SEC rule requiring registration and “modest” disclosure was thrown out by a court this year, because more rigorous rules may replace it.

Durable Goods Orders Fall, New Home Sales Rise Pushing Down Housing Inventories

- Durable Goods Orders for August fell .5% versus estimates of a .5% gain and a 2.7% decline in July.
- Durables Ex Transports for August fell 2.0% versus estimates of a .5% gain and unch. in July.
- New Home Sales for August came in at 1040K versus estimates of 1050K and 1009K in July.

BOTTOM LINE: Orders placed with US factories for durable goods unexpectedly dropped in August, Bloomberg reported. Orders for non-defense capital goods excluding aircraft, a gauge of future business spending, fell .3% versus a .9% gain in July. Auto bookings rose 4.4% in August versus a 6.9% decline in July. Manufacturing is temporarily weakening, mainly due to auto production cutbacks, but should rebound over the intermediate-term.

New home sales in the US unexpectedly rose in August, signaling a possible stabilizing of the housing market. Plunging mortgage rates and bargain-hunting in many areas are helping. The median price of a new home is $237,000. New home sales are considered a leading indicator of the housing market. The number of unsold new homes fell to a 6.6-month supply at the current sales pace versus a 7-month supply in July. Sales rose 21.7% in the Northeast, 12.2% in the Midwest and 11.1% in the South. Purchases fell 17.7% in the West. Net home equity extraction fell to an annualized $141 billion in the second quarter versus $196 billion a year earlier, yet consumer spending remained healthy. I continue to believe housing will stabilize at relatively robust levels over the next few months after modest price declines.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
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:
- US stocks extended this week’s rally, lifting the Dow Jones Industrial Average to its second-highest close in history, after a rebound in consumer confidence suggested household spending will keep the economy healthy.
- ABC won the first week of the new television season as a decision to switch “Grey’s Anatomy” to Thursday night from Sunday paid off.
- Brazil’s steel industry will double by 2011 as Mittal Steel(MT) and its rivals build new mills near iron-ore mines to lower their costs.

Detroit News:
- Carlos Ghosn, CEO of Renault SA and Nissan Motor, will tell GM than an alliance between their companies could save $10 billion a year.

Financial Times:
- Amaranth Advisors LLC, the hedge-fund company that lost $6 billion betting on rising natural gas prices, has told investors that it will either liquidate its remaining assets or sell itself to a larger institution.

Apple Daily:
- Acer Inc. expects its fourth-quarter sales to grow between 10%-20% from the third quarter as new orders for its personal computers flooded in, citing Acer Chairman J.T. Wang.

Late Buy/Sell Recommendations
Morgan Stanley:
- Reiterated Overweight on (JBL), target $38.
- Reiterated Overweight on (BAC), target $55.

Jeffries:
- Cisco Systems(CSCO) shares may rise to $30 as the company beats competitors for orders to upgrade telephone networks, said analyst Bill Choi, who started coverage of the stock with a “buy” rating.

Night Trading
Asian Indices are +.75% to +1.50% on average.
S&P 500 indicated -.08%.
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
- (ATU)/.78
- (MKC)/.36
- (RECN)/.24

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Durable Goods Orders for August are estimated to rise .5% versus a 2.4% decline in July.
- Durables Ex Transportation for August are estimated to rise .5% versus a .5% gain in July.

10:00 am EST
- New Home Sales for August are estimated to fall to 1040K versus 1072K in July.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 1,700,000 barrels. Gasoline supplies are estimated to rise by 700,000 barrels. Distillate inventories are expected to rise by 2,600,000 barrels. Finally, Refinery Utilization is estimated to fall .73%.

BOTTOM LINE: Asian indices are higher, boosted by automaker, commodity and technology shares in the region. I expect US equities to open modestly higher and to fade into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.