S&P 500 Closes at New All-Time High, Joining the DJIA and Russell 2000 in Record Territory

Indices
S&P 500 1,530.23 +.80%
DJIA 13,633.08 +.83%
NASDAQ 2,592.59 +.80%
Russell 2000 843.35 +.69%
Wilshire 5000 15,411.91 +.82%
Russell 1000 Growth 602.89 +.85%
Russell 1000 Value 881.83 +.79%
Morgan Stanley Consumer 747.20 +.33%
Morgan Stanley Cyclical 1,073.82 +1.05%
Morgan Stanley Technology 613.61 +.45%
Transports 5,233.78 +.52%
Utilities 520.04 +.81%
MSCI Emerging Markets 125.18 -.17%

Sentiment/Internals
Total Put/Call .90 -3.23%
NYSE Arms .59 -50.83%
Volatility(VIX) 12.83 -5.17%
ISE Sentiment 139.0 +8.59%

Futures Spot Prices
Crude Oil 63.40 +.40%
Reformulated Gasoline 227.0 -1.21%
Natural Gas 7.96 +2.99%
Heating Oil 186.84 -.03%
Gold 659.10 -.65%
Base Metals 262.54 -.48%
Copper 330.50 -.45%

Economy
10-year US Treasury Yield 4.87% -1 basis point
US Dollar 82.43 +.15%
CRB Index 309.25 +.58%

Leading Sectors
REITs +2.59%
Oil Service +2.32%
Engineering & Construction +2.03%

Lagging Sectors
HMOs -.14%
Restaurants -.27%
Semis -.36%

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Afternoon Recommendations
Bank of America:
- Rated (HTZ) Buy.

Afternoon/Evening Headlines
Bloomberg:
- US stocks surged for a third day, sweeping the S&P 500 past its 2000 closing record, despite a 6.5% plunge in Chinese stocks overnight.
- Yahoo! Inc.(YHOO) said Chief Technology Officer Farzad Nazem resigned, leaving two of the top executive posts at the company unfilled.
- Intel Corp.(INTC) said it will join with Microsoft Corp.(MSFT) and Dell Inc.(DELL) to develop technology that helps flash memory speed up personal computers.
- WR Hambrecht Chairman Bill Hambrecht plans to form a professional football league in North American cities where there are no NFL teams.
- President Bush asked Congress today to approve $30 billion over the next five years to mount a more aggressive campaign against the spread of AIDS worldwide.
- Apple Inc.(AAPL) agreed to carry clips from Google’s(GOOG) YouTube starting in June, using the world’s most popular online video service to attract customers for its two-month-old digital-television box.
- Apple Inc.(AAPL) will replace MedImmune in the S&P 100.
- US steel imports fell 26% in April as domestic prices dropped and service centers held off on new orders, an industry group said.
- Gasoline futures fell to a three-week low on estimates a US Energy Department report tomorrow will show a fourth consecutive week of rising inventories, as some refineries increase production.
- Jim Rogers, CEO of Beeland Interests Inc., sees more China measures to pop their stock “bubble.”
- The Group of Eight leading industrial nations said they are ready to back tougher sanctions against Iran if the country fails to suspend uranium enrichment.

Financial Times:
- Dow Jones’(DJ) largest outside shareholder said News Corp.’s(NWS/A) $5 billion offer for the publisher is “fairly attractive” and may even been raised.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, I-Banking longs, Retail longs and Computer longs. I added an (AKAM) trading long and added to a few energy-related shorts in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished mildly higher, sector performance was mostly positive and volume was above average. Measures of investor anxiety were about average into the close. Today's overall market action was very bullish. Once again, many stocks trounced the major averages today. True "growth stocks" were especially strong, with quite a few exhibiting explosive action. I still expect Google (GOOG) to exceed $600 and Apple (AAPL) to exceed $150 this year. These two stocks remain my two largest long positions. Despite the recent housing data, the August home price futures ticked up today to $214,800 from $214,400. I suspect today's whipsaw market action resulted in more investors leaning the wrong way. Performance anxiety is likely back in play in a big way. The Nikkei futures are indicating a 100-point gain in Japan on the open. Gold is falling another $4.30 per ounce on worries over emerging market demand and a report last night from London-based Virtual Metals that gold supply will exceed demand by 250 metric tons this year. The precious metal continues to trade very poorly given the numerous potential upside catalysts over the last year. I still expect a complete technical breakdown in gold before year-end.

DJIA Surging Near Another Record into Final Hour, Despite 6.5% Plunge in Chinese Shares, on FOMC Minutes

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, I-Banking longs, Retail longs and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is about even, most sectors are higher and volume is above average. Why is the myth that there is no oil demand destruction continuously perpetuated? Over the last three years global oil demand has only risen a total of 2.4% to 83.9 million barrels per day (OPCBRTOT Index on Bloomberg), while global economic growth has been the highest in over three decades, averaging near 5% annually. Global supplies (OPCBTSUP Index on Bloomberg) have risen 5.0% during that period to 85.6 million barrels per day. Just last year, global oil demand rose a paltry 0.9% while global growth boomed 5.3%. Moreover, oil consumption in the 30 OECD (Organization for Economic Co-operation and Development)countries actually fell 0.6% in the last year for the first time in over 20 years! These facts aren't possible without significant and pervasive global demand destruction. I believe the reason why the "no demand destruction" myth goes unchallenged in the media is that there has never been a time in U.S. history that more investors, analysts and pundits perceived that they benefit from high oil prices and they are positioned accordingly. Commercial hedgers, historically the smart money, remain net short crude despite record crack spreads and the onset of driving season. I continue to believe we have already seen the highs for the year in oil and gasoline prices. I expect US stocks to trade mixed into the close from current levels as buyout speculation, short-covering and investment manager performance anxiety offsets China bubble worries.

Today's Headlines

Bloomberg:
- Clashes between Venezuelan police and marchers protesting the government’s shutdown of Radio Caracas Television left dozens detained or injured across the country.
- Goldman Sachs Group’s(GS) Global Alpha hedge fund fell -3.4% in the first four months of this year, according to a report sent to investors last week. Global Alpha has declined -12% since 2005. The $10 billion fund struggled in a 16-month stretch when the S&P 500 rose 22%.
- Gold is falling another $4.70/oz. on speculation the US economy does not need a Fed rate cut, thus boosting the dollar and reducing demand for the precious metal.
- Federal Reserve officials acknowledged they underestimated to length of the US housing slowdown, while continuing to view inflation as the biggest threat to the economy, the release of the FOMC minutes showed.
- CBS Corp.(CBS) bought the music-focused social-networking site Last.fm for $280 million in cash.
- News Corp.(NWS/A) agreed to buy Web site owners Photobucket Inc. and Flektor Inc. to add digital picture services that let users store, edit and share images.
- Palm Inc.(PALM) will start selling a portable computer in a bid to increase sales as its Treo mobile phone and e-mail device loses ground to the BlackBerry.
- China’s stocks plunged 6.8% last night, the most in three months, after the government tripled the tax on securities transactions to cool a rally that’s drawing more than 300,000 new investors a day.

Wall Street Journal:
- The SEC intends to review so-called 12b-1 fees, charged by mutual funds to compensate intermediaries such as brokers.
- Pizza chains in the US are losing market share as consumers seek more innovative products.
- Navistar International(NAVZ), the delisted parent of International Truck & Engine Co., may be a buyout target and its stock has risen as a result.

Politico:
- Former Tennessee Senator Fred Thompson is expected to announce his candidacy for the 2008 Republican presidential nomination in Nashville over the Fourth of July holiday, citing unidentified Thompson advisers.

CNBC:
- The NYSE will close one of four trading rooms later this year because of a drop in activity.

Economic Releases

- None of note

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Asian stocks fell for the first time in three days after China tripled the tax on securities transactions. The Chinese benchmark CSI 300 Index fell 6.4% on the news.
- Gold supply will exceed demand by 250 metric tons this year, a bigger surplus than forecast in October, as increased prices deter jewelry buyers, London-based research company Virtual Metals said. Jewelry consumption will decline 2.5% to 2,218 tons, a second annual drop, Virtual Metals said.
- NBC Universal named producer Ben Silverman as co-chairman of television and entertainment with Marc Graboff in a reshuffle aimed at lifting the network out of last place.
- US Secretary of State Condoleezza Rice insisted Iran must suspend uranium enrichment, rebuffing a suggestion by the International Atomic Energy Agency’s chief that the US and its allies relax the demand.
- CDW Corp.(CDWC) agreed to be bought by Madison Dearborn Partners LLC for about $7.3 billion amid a surge of private-equity investments in technology.
- Japan’s industrial production unexpectedly fell for a second month as manufacturers reduced output.
- Australia’s retail sales in April gained less than economists forecast as rising gasoline prices crimped spending at department stores.
- Nippon Steel Corp., Asia’s largest steelmaker, doesn’t plan to buy rival producers, Nippon President Mimura said.
- Steel Dynamics(STLD) said second-quarter profit may fall to the low end of the per-share range of 95 cents to $1 forecast by the company in mid-April because of lower than expected shipments and pricing for flat-rolled steel.
- Gilead Sciences(GILD) said its experimental drug for cystic fibrosis, a fatal lung disease, met the main goal of a study.
- Japan’s birthrate rose in 2006 for the first time in six years, citing a Health Ministry report that will be released in the latter half of next week.
- Thailand’s Prime Minister Surayud Chulanont said he will order emergency rule in Bangkok if court rulings that may ban Thailand’s two main political parties spark violent protests.

Wall Street Journal:
- Cantor Fitzgerald LP, the firm that lost hundreds of employees during the Sept. 11, 2001, attacks, will combine two units in a $1.3 billion deal. The new company, to be known as BGC Partners, will comprise eSpeed Inc., a publicly-held electronic-trading company controlled by Cantor, and BGC Partners, Cantor’s closely-held bond-trading unit.

Financial Times:
- Microsoft Corp.(MSFT) will release information today about a coffee table-shaped “surface computer” that the company says will open up a multibillion dollar area of computing, citing a demonstration by Microsoft(MSFT).

Economic Times:
- India may increase the amount of money local mutual funds can invest in equity and debt abroad.

Securities Times:
- Some Chinese banks started internal probes to prevent customers from using loans to buy stocks as the benchmark index reaches new highs daily. Banks told branches to look more closely at loans for working capital and small business operations so they aren’t diverted into the stock market.

Late Buy/Sell Recommendations
Citigroup:
- Retailing-softlines short interest rose 8.5% in May to a record 257,000,000 shares short on the heels of a prior peak in April on lingering worries over consumer spending. Retailers with the most significant increases in short interest include ANN +38%, CHRS +35%, CTR +29%, MW&URGI +26%, ANF/CMRG/LTD +25%, CBK +24%, GPS +23%, TJX +22%, DBRN +20%, CHIC +21%, TUES&ARO +15%, HOTT +12% and BEBE/PLCE/ROST +11%.

Morgan Stanley:
- Reiterated Overweight on (GILD).

Night Trading
Asian Indices are -.75% to -1.0% on average.
S&P 500 indicated -.28%.
NASDAQ 100 indicated -.28%.

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Earnings of Note
Company/EPS Estimate
- (CHS)/.26
- (DAKT)/.08
- (DLTR)/.37
- (DBRN)/.31
- (JAS)/-.07
- (JOYG)/.72
- (NOVL)/.01
- (PSS)/.59
- (RL)/.62
- (SMTC)/.10
- (THO)/.41
- (WSM)/.13

Upcoming Splits
- (NRG) 2-for-1
- (SRCL) 2-for-1
- (GEO) 2-for-1

Economic Releases
2:00 pm EST
- The Minutes of May 9 FOMC Meeting

Other Potential Market Movers
- The weekly MBA Mortgage Applications report, weekly retail sales reports, ADP Employment Change, (SPAR) analyst meeting, (IRBT) analyst meeting, (GNW) strategic update, FBR Growth Conference, Merrill Lynch Small-cap Tech Healthcare Conference, Bank of American Healthcare Conference, Deutsche Bank Energy/Utilities Conference, Sanford Bernstein Strategic Decisions Conference, Cowen Tech Conference and Lehman Wireless/Wireline Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and automaker stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.