Dow Rockets Through 14,000 to New Record, Led by Tech, Homebuilders and Financials

Indices
S&P 500 1,547.04 +1.33%
DJIA 14,087.55 +1.38%
NASDAQ 2,740.99 +1.46%
Russell 2000 824.74 +2.39%
Wilshire 5000 15,528.96 +1.38%
Russell 1000 Growth 626.15 +1.23%
Russell 1000 Value 863.03 +1.41%
Morgan Stanley Consumer 750.37 +.45%
Morgan Stanley Cyclical 1,077.44 +1.50%
Morgan Stanley Technology 677.06 +1.36%
Transports 4,909.20 +1.51%
Utilities 508.81 +1.45%
MSCI Emerging Markets 152.73 +2.16%

Sentiment/Internals
Total Put/Call .85 -22.02%
NYSE Arms .74 -40.49%
Volatility(VIX) 17.84 -.89%
ISE Sentiment 135.0 +22.73%

Futures Spot Prices
Crude Oil 80.21 -1.78%
Reformulated Gasoline 197.95 -3.02%
Natural Gas 7.07 +2.98%
Heating Oil 218.10 -2.0%
Gold 753.70 +.49%
Base Metals 248.99 -.70%
Copper 368.50 +1.24%

Economy
10-year US Treasury Yield 4.54% -4 basis points
US Dollar 77.94 +.28%
CRB Index 332.32 -.40%

Leading Sectors
Homebuilders +3.24%
I-Banks +2.67%
Semis +2.61%

Lagging Sectors
HMOs +.53%
Hospitals +.52%
Foods -.51%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations
Bank of America:
- Upgraded (AMB) and (PLD) to Buy.
- Downgraded (MPG) to Sell.

Afternoon/Evening Headlines
Bloomberg:
- US stocks rallied, sending the Dow Jones Industrial Average to a record, as investors speculated the worst may be over for banks and construction companies hurt by subprime mortgage losses.
- Crude oil fell $1.42/bbl. to $80.24/bbl. as speculators slashed long positions in anticipation of lower demand from refiners as margins drop to an 11-month low.
- UBS AG(UBS) and Citigroup Inc.(C), the biggest banks in Europe and the US, rose in stock market trading on investor optimism that their reports today on fixed-income losses may represent the low point for earnings.
- PDL BioPharma Inc.(PDLI), the developer of technology for cancer drugs, said it’s “actively” seeking offers to buy the company. The stock is rising 7.3% in after-hours trading.

Forbes:
- The former Federal Reserve chairman Alan Greenspan suggested here Monday suggested here Monday that the global credit crisis triggered in August might be coming to an end.

Dow Jones:
- Despite the housing slowdown, US household net worth Up 2.1% to record $57.86 trillion in second quarter, the Federal Reserve said.

BOTTOM LINE: The Portfolio finished higher today on gains in my Biotech longs, Computer longs, Retail longs, Internet longs, Semi longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was slightly above average. Measures of investor anxiety were around average into the close. Today's overall market action was very bullish. Every sector I follow gained, with the exception of foods. Airlines, gaming, restaurants, homebuilders, construction, investment banks, banks, semiconductors, papers, steel and alternative energy all posted 2%+ gains. Small-caps, both growth and value, were especially strong, with the Russell 2000 rising 2.4%. Over the last few months, I have heard numerous investors and pundits caution that there is still more bad news to come, insinuating or outright saying that you shouldn't be buying stocks even after a 10% correction. The problem with that is that, historically, the best time to buy stocks is always when the headlines are the worst and anxiety is high. Waiting until the headlines aren't scary or until the news actually gets better is a recipe for long-term underperformance, in my opinion. Back in August, investors were once again pricing in the worst case scenario rather than the most realistic outcome. Six weeks later, the imminent recession case is still alive, but, likely, it has a few less believers. With the supply of stock still low, it doesn't take much of an increase in demand for equities to push the averages sharply higher, which is what is going on right now. As I said last month, I still think stocks are in a win-win situation. If the economy doesn't fall into recession and the Fed doesn't cut rates further, earnings should hold up well and stocks should rise. If we begin to see recessionary data, the Fed, which is already ahead of the curve, has massive ammunition to stabilize growth and investors will likely begin to price in accelerating earnings next year. This is the main reason I think any bad news is mostly ignored and positive news is bought. The latest COT report shows large S&P 500 futures speculators are maintaining their net short positions near recent historic levels -- even as stocks soar. Another bullish indication is that commercial hedgers are now at a historically net long position. Finally, the COT all-index stochastic is still at levels normally associated with meaningful market bottoms. The S&P 500 is now up 10.7% year-to-date. I still expect it to rise about 17% total for this year.

DJIA Blasting Through 14,000 to New Record High, Led by Technology, Homebuilders, Financials

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Networking longs, Retail longs, Biotech longs, Computer longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is very positive today as the advance/decline line is substantially higher, almost every sector is rising and volume is slightly above average. The 10-year yield is falling 4 basis points, and the 10-year TIPS spread is down to 2.29%, as investors continue to ratchet down their inflation expectations. The U.S. Dollar Index is rising 0.23%, which appears to be pressuring oil, which is falling $1.42/bbl. The dollar is surging against the yen, which is also a positive. Fed fund futures now imply a 78% chance of a 25-basis-point cut at this month's fed meeting. I think oil has seen its high for the year and has finally started a meaningful decline that will eventually be seen as a huge positive for the broad market. Last year, oil fell $28 per barrel in less than six months, which was one of the main catalysts behind a 16.5% jump in the S&P 500 over that timeframe, in my opinion. The fundamentals for oil are even worse this year as articulated very well by ISI Group's Mike Rothman a couple of weeks ago in Barron's. Moreover, with the consumer under more pressure this year, as a result of housing, it could be argued that a substantial decline in energy prices would even be more positive for the economy and stocks this year. Global chip sales rose 4.5% in August, led by a 48% surge in NAND flash sales, according to the Semiconductor Industry Association (SIA). The SIA said PC sales have been above their forecast this year. They also said cell phone sales have been above their forecast of 10% and now expect sales to come in at 15% for the year. The Philadelphia Stock Exchange Semiconductor Sector Index (SOX) is one of today's best performers, rising 2.9% on the news. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism, lower energy prices, lower long-term rates and investment manager performance anxiety.

Today's Headlines

Bloomberg:
- Global hedge-fund assets climbed 19% to about $2.5 trillion in the six months to July, before the subprime mortgage crisis in the US sparked turmoil in capital markets, a HedgeFund Intelligence survey showed.
- Crude oil is falling below $80/bbl. in NY as speculators slash long positions in anticipation of declining demand from refiners as margins tumble.
- Texas oil billionaire Oscar Wyatt pleaded guilty to conspiracy following three weeks of trial over kickbacks paid to Saddam Hussein in exchange for the right to buy oil under the UN Oil-for-Food program.
- The last time investors bet on a decline in Research In Motion(RIMM), maker of the BalckBerry e-mail phone, the stock tripled in a year. Now the shares are near a record and two-thirds of 37 analysts say it’s still a mistake.
- BP Plc(BP), Europe’s second-largest oil company, and Australia’s Babcock & Brown will officially open their largest US wind farm in Colorado tomorrow.
- Nokia Oyj(NOK), the world’s biggest mobile-phone company, agreed to buy Navteq Corp.(NVT) for $8.1 billion to gain digital maps of 69 countries and compete with TomTom NV in the market for navigation devices.
- Homebuilders, led by Lennar Corp.(LEN), rallied as a Citi Investment Research analyst recommended investors buy the shares after a 53% drop for the group this year.
- Uranium fell 12% last week, erasing most of this year’s gain, as supply outpace demand, according to TradeTech LLC, an industry consulting company that helps set prices.
- Sugar is falling 2.3% today, the most in six weeks, on speculation that Brazil, the world’s largest producer, may producer more sweetener than last year.

Wall Street Journal:
- Wall Street is re-evaluating how to measure growth at eBay Inc.(EBAY) and Amazon.com(AMZN) – and the change is helping to send the stocks of both companies higher.

NY Times:
- Starting tomorrow at certain Starbucks(SBUX) stores, a person with an iPhone or iTunes software loaded onto a laptop can download the songs they hear over the speakers directly onto those devices. The price will be 99 cents a song, a small price, Starbucks says, to satisfy an immediate urge.
- Fatal airplane crashes have plunged 65% over the last decade. There is now about one fatal accident in 4.5 million departures versus 1 in 2 million in 1997.

MSNBC.com:
- Is Hollywood’s ‘green’ carpet just show? Industry may be serving up organic fruit, but it’s also a major polluter.

Financial Times:
- Procter & Gamble(PG) has retained Blackstone to run two separate auctions – one for Duracell and one for its remaining food assets, Pringles and Folgers, according to sources familiar with the situation.

Valor Economico:
- Mexican billionaire Ricardo Salinas Pliego is seeking to use Brazilian technology to produce ethanol from sugar cane in Mexico.

O Estado de S. Paulo:
- One percent of all homicides in the world take place in Sao Paulo, Brazil’s largest city, citing a UN study.

ISM Manufacturing Still Showing Expansion, Prices Paid Falls

- ISM Manufacturing for September fell to 52.0 versus estimates of 52.6 and 52.9 in August.

- ISM Prices Paid for September fell to 59.0 versus estimates of 62.0 and a reading of 63.0 in August.

BOTTOM LINE: Manufacturing in the US grew in September, Bloomberg reported. Stronger growth overseas and a weaker dollar have propelled exports, providing a source of strength that is boosting manufacturing. The New Orders component of the index fell to 53.4 from 55.3 the prior month. The Prices Paid component fell to 59 from 63 the prior month. The Unfilled Orders component rose to 51 from 50.5 the prior month. The Inventory component fell to 41.6 from 45.4 the prior month. The Employment Component of the index rose to 51.7 from 51.3 the prior month. I continue to believe manufacturing will help boost overall US growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories.

Links of Interest

Market Snapshot Commentary
Market Performance Summary
Style Performance
Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes

Monday Watch

Weekend Headlines
Bloomberg:
- US stocks rose this week to complete the steepest September advance since 1998 as the Fed’s interest-rate cut helped energy and raw-material companies lead the market’s recovery from a summer rout.
- China Investment Corp., the nation’s $200 billion sovereign wealth fund, starts operations today as the government seeks to boost returns on the world’s biggest foreign-exchange reserves.
- US high-yield bonds posted the best returns in four years this month after the Fed’s interest rate cut enticed investors back to the riskiest debt.
- US Treasuries capped their biggest quarterly rally in five years as the inflation gauge preferred by Fed policy makers showed consumer prices rose at the slowest pace in more than three years during August.
- The euro’s record-setting rally may not extend through the end of October, according to analysts who rely on market patterns for their predictions.
- Garry Kasparov, the ex-world chess champion turned politician, will run in Russia’s March 2008 presidential election as the candidate for The Other Russia, a coalition opposed to President Vladimir Putin.
- Sentiment among Japan’s largest manufacturers unexpectedly held near a two-year high last quarter as exports expanded even as US economic growth cools.

NY Times:
- China Toys a Boon to Lead-Testing Companies.
- At first blush, the iPhone from Apple(AAPL), the new microprocessor family from Intel(INTC) and the ubiquitous Google(GOOG) search engine have nothing in common. Yet all of these products depend on obscure process innovations that, while highly complex and lacking glamour, are an essential part of establishing a winning edge in commercial electronics.

CNBC.com:
- Cramer is still confident that the Dow Jones will reach his year-end target of 14,548. Eight stocks in particular, he said, should get the index there.

MarketWatch.com:
- EMC: more than just the VMware parent. Diversification has been a boon to storage-technology giant.
- Boeing Co.(BA) took the lead over Airbus in commercial airplane orders in the third quarter, according to an early tally, as both aircraft makers kept drumming up business from fast-growing Asian markets and got some late-period purchase from venerable European carriers.

Barron’s:
- London’s $2.27 billion RAB Special Situations was the top-performing hedge fund during the past three years, with a 47.7% cumulative return.
- The Dow Jones has climbed in the fourth quarter for nine consecutive years, and in 24 of the past 27 years. The S&P 500 has produced fourth-quarter rallies in 13 of the past 15 years and racked up an average 6.3% haul, according to researchers at Bespoke Investment Group.

BusinessWeek.com:
- A group of Midwest utilities is building a plant that will store excess wind power underground.

TheStreet.com:
- Coming Week: Bond Binge.

CNNMoney.com:
- 5 Ways to Slash Your Energy Bill.
- 4 Must Have Gadgets.
- 5 Blinged-out Tech Toys.

Newsweek:
- The search for renewable-energy sources is making clean-tech jobs hot.

Crain’s Chicago Business:
- Exelon Corp.(EXE) CEO John Rowe said the utility operator is interested in mergers and acquisitions.
- McDonald’s Corp.(MCD) forecasts its expanded offering of drinks will boost sales by more than $1 billion annually.

Crain’s NY Business:
- Morgan Stanley(MS) Co-President Zoe Cruz and Avon Products(AVP) Chairman and CEO Andrea Jung are among the 25 most powerful women in NY businesses.

USA Today:
- Returns from large-capitalization growth funds far outpaced those of other diversified equity funds in the July-September period as investors sought the safety and growth potential of big companies following the return of volatility and the stock market’s pullback from its mid-July highs.
- Advertisers who wanted to know more about radio listeners are finally getting an electronic audience measurement system that’s not only delivering more accurate results but also shaking up the broadcasting business.

Washington Post:
- In their debate Wednesday night in Hanover, NH, none of the three top Democratic presidential candidates would promise to have the US military out of Iraq by January 2013 – more than five years from now.

AP:
- Former Republican House Speaker Newt Gringrich won’t run for president in 2008 because exploring a bid would clash with his role as the head of a tax-exempt group.
- Iraq is seeking to replace a UN Security Council mandate for the US-led force in their country with a long-term security agreement, citing Foreign Ministry officials. Iraq wants to establish a bilateral agreement similar to ones the US has with Saudi Arabia, Kuwait, the UAE, Bahrain, Qatar and Egypt.

Financial Times:
- FT.com, the internet arm of the Financial Times, will on Monday announce an innovative charging system and a major expansion of the site, fueling debate about newspapers’ online business models.
- The UAW union could become General Motors’ biggest shareholder under a deal to transfer the carmaker’s healthcare obligations to a huge union-managed trust.

Times:
- Goldman makes $370 million after saving its black box hedge fund.

Sunday Telegraph:
- The UK Treasury has given the go-ahead to JC Flowers & Co. and Cerberus Capital to proceed with their bids for Northern Rock Plc.

Commercial Times:
- Taiwan Semiconductor Manufacturing’s chip shipments in the fourth quarter will rise between 7% and 10% from the third quarter. Taiwan Semi received orders to make more chips fro clients such as Qualcomm Inc.(QCOM), Nvidia Corp.(NVDA), and Broadcom(BRCM).

Tehran Emrooz:
- Iran plans to build hotels for women only in each of the 30 provinces of the Islamic Republic, citing deputy head of Iran’s cultural heritage and tourism organization, Mohammad Sharif Malekzadeh. Women are now required to explain the reason for their hotel trips to a specialized unit of the of the local police station and get official permission prior to booking a room.

Weekend Recommendations
Barron's:
- Made positive comments on (BWA), (AMR) and (NDSN).

Citigroup:
- West Texas Intermediate crude rebounded from a mid-week breach below $80 to finish the week at $81.77. However, support from financial speculators and refining margins has declined, leaving our model delta about $6. Against a backdrop of deteriorating storm concerns, downside risk to oil prices looks like a reality. Open interest fell 1%, almost entirely on higher non-commercial short positions. This follows the 6% decline that accompanied the 9/20 contract expiration and contrasts with the post expiration rebound seen typically in recent months. Our technical team remains cautious, targeting support around $74/bbl.

Night Trading
Asian indices are +.25% to +.75% on average.
S&P 500 futures +.06%.
NASDAQ 100 futures -.07%

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Macro Calls
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (WAG)/.47
- (PALM)/.08

Upcoming Splits
- (BCSI) 2-for-1
- (JCI) 3-for-1
- (TAP) 2-for-1

Economic Releases
10:00 am EST
- ISM Manufacturing for September is estimated to fall to 52.5 versus 52.9 in August.
- ISM Prices Paid for September is estimated to fall to 62.3 versus 63.0 in August.

Other Potential Market Movers
- The Jeffries Technology Conference could also impact trading today.

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