Market Week in Review

S&P 500 1,557.59 +2.02%*

Click here for the Weekly Wrap by Briefing.com.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,557.59 +2.02%
DJIA 14,066.01 +1.23%
NASDAQ 2,780.32 +2.92%
Russell 2000 844.86 +4.89%
Wilshire 5000 15,670.97 +2.31%
Russell 1000 Growth 630.46 +1.93%
Russell 1000 Value 870.46 +2.29%
Morgan Stanley Consumer 754.68 +1.02%
Morgan Stanley Cyclical 1,085.32 +2.24%
Morgan Stanley Technology 679.13 +1.67%
Transports 4,997.17 +3.33%
Utilities 514.94 +2.67%
MSCI Emerging Markets 155.33 +3.9%

Sentiment/Internals
NYSE Cumulative A/D Line 71,323 +2.53%
Bloomberg New Highs-Lows Index +75 -70.0%
Bloomberg Crude Oil % Bulls 6.3 -60.6%
CFTC Oil Large Speculative Longs 239,250 -1.73%
Total Put/Call .74 -32.1%
NYSE Arms .55 -55.64%
Volatility(VIX) 16.91 -6.05%
ISE Sentiment 141.0 +28.18%
AAII % Bulls 51.81 +4.94%
AAII % Bears 25.30 -25.98%

Futures Spot Prices
Crude Oil 81.07 -.50%
Reformulated Gasoline 204.60 +.26%
Natural Gas 7.03 +2.88%
Heating Oil 221.82 +.07%
Gold 748.30 -.49%
Base Metals 251.66 +.37%
Copper 373.0 +2.29%

Economy
10-year US Treasury Yield 4.64% +6 basis points
4-Wk MA of Jobless Claims 312,800 +.2%
Average 30-year Mortgage Rate 6.37% -5 basis points
Weekly Mortgage Applications 636.7 -2.68%
Weekly Retail Sales +2.0%
Nationwide Gas $2.77/gallon -.03/gallon
US Cooling Demand Next 7 Days 98.0% above normal
ECRI Weekly Leading Economic Index 140.90 -.07%
US Dollar Index 78.31 +.76%
CRB Index 329.21 -1.34%

Best Performing Style
Small-cap Growth +5.2%

Worst Performing Style
Large-cap Growth +1.9%

Leading Sectors
Airlines +7.7%
Retail +6.5%
Homebuilders +6.3%
REITs +6.0%
I-Banks +5.6%

Lagging Sectors
Gold +.34%
Energy +.12%
Oil Tankers -.45%
HMOs -.69%
Foods -1.08%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

S&P 500 Blasts to Record High on Economic Optimism, Performance Anxiety, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Retail longs, Medical longs and Biotech longs. I added to my (UA) long, added a (NUAN) long and added a (USO) short 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 above average. Bear Stearns (BSC) raised Google's (GOOG) year-end 2008 price target to $700. I view that target as very conservative. The average 30-year mortgage rate fell 5 basis points this week, to 6.37%. This is down 37 basis points from June levels. The DailyPrincetonian.com has a very interesting article today that says on-campus Mac users have quadrupled over the last four years. I think this article encapsulates very well what is going on at many other campuses across the country and the opportunity that Apple (AAPL) has to make massive market share inroads against the PC over the coming years. Apple has been relatively popular on campuses for sometime, however, as these students graduated and took jobs, many switched to PCs because that is what their employer used. I expect that to change in a big way in the future with the explosion in popularity of the Apple brand and the introduction of the official version of Boot Camp. My prediction a couple of years ago that Apple would become the largest, most dominant consumer electronics company on the planet is looking better by the day. There is some talk today by the many bears that recent stock gains have been a function of shorts capitulating. While I am sure a portion of the gains may be attributed to short-covering, I seriously doubt many shorts are capitulating. In fact, the NYSE just reported last night that short interest over the last two weeks from Sept. 14 through Sept. 28 actually rose .3%. The S&P 500 rose almost 3% during that period. I think shorts have been reloading after taking some profits the prior two months. It is more likely that recent outsized gains are more a function of the many underinvested bulls putting cash to work. Remember too, that money market assets are at record levels. The current US negativity bubble has left massive bull firepower on the sidelines as the supply of stock remains low and the macro backdrop for investing continues to be very positive, which bodes very well for further outsized gains. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic pessimism, investment manager performance anxiety and short-covering.

Today's Headlines

Bloomberg:
- US stocks rallied, sending the S&P 500 to a record, after job growth exceeded forecasts and signaled the economy has weathered the August financial turmoil.
- Merrill Lynch(MER) will report its first quarterly loss in six years and faces “continued challenges” in credit markets the rest of this year. The stock is rising 3% on the news.
- Former Duke University lacrosse players accused of rape and then cleared sued disbarred ex-District Attorney Mike Nifong, the city of Durham, North Carolina, and its police department for malicious presecution.
- M&A, Stock Sales Climb as Global Credit Markets Calm.
- Copart(CPRT) rose to a record high on the Nasdaq after it increased its buyback program by 20 million shares, or almost a quarter of its stock outstanding.
- Iranian President Mahmoud Ahmadinejad reiterated his condemnation of Israel as crowds gathered in Tehran to chant “Death to America” and “Death to Israel” at a rally in support of Palestinians.
- Yahoo!(YHOO) executives should consider breaking up or selling the company, which runs the most-visited US Web site, to increase the value of the shares, according to Sanford C. Bernstein analysts.

Wall Street Journal:
- The United Kingdom is home to 17% of Europe’s high net-worth individuals, defined as anyone with more than $1 million in financial assets, such as private-equity holdings, stocks and bonds, according to a survey by Merrill Lynch and Capgemini.
- US Venture Capitalists Target Bigger Buyout Deals.

USAToday.com:
- The US military says it has captured at least six al-Qaeda media centers in Iraq and arrested 20 suspected propaganda leaders since June. The seizures of the centers underscore the importance al-Qaeda has placed on media.

DailyPrincetonian.com:
- Apple Users Quadruple at Princeton.

Job Market Still Healthy, Americans' Wages Growing Twice Inflation Rate

- The Change in Non-Farm Payrolls for September was 110K versus estimates of 100K and an upwardly revised 89K in August.

- The Unemployment Rate for September rose to 4.7% versus estimates of 4.7% and 4.6% in August.

- Average Hourly Earnings for September rose .4% versus estimates of a .3% gain and a .3% increase in August.

BOTTOM LINE: US employment accelerated in September and revised figures for August showed an unexpected gain, easing recession concerns and making the Fed less likely to cut interest rates again, Bloomberg reported. Revisions added 118,000 jobs to payroll numbers previously reported for July and August. Service industries, which include insurance companies, banks, restaurants and retailers, added 143,000 jobs last month. Moreover, average hourly earnings are growing at a very strong 4.1% year over year vs. the 20-year average of 3.2%. The 10-month moving average of average hourly earnings is 4.01%, and 1998 was the only year during the entire 1990s expansion that exceeded current levels. Furthermore, average hourly earnings are growing more than twice the CPI's most recent rate of 2.0% year over year. Finally, the unemployment rate's 10-month moving average is 4.5%. There have been only two other periods since the mid-1950s during which it has been lower. Job creation of around 75,000-125,000 is perfect for the stock market, in my opinion. The 10-year yield is rising 15 basis points on today's news as the imminent recession thesis loses further credibility. Fed funds futures now imply a 53.2% chance of a 25-basis-point cut at the upcoming meeting, down from 72% yesterday and 84% one week ago. A very healthy job market, record stock prices and a relatively small price decline in nationwide home prices, after historic gains, are the primary reasons that Americans' net worth hit another record high during the second quarter. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor costs increases.

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