Stocks Finish at Session Highs on Heavy Volume

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Stocking Soaring into Final Hour on Strength in Financials, Retail, Homebuilding and Airlines

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Computer longs, Internet longs and Biotech longs. I added (IWM)/(QQQQ) hedges on the bounce earlier today and then covered them, thus leaving the Portfolio 100% net long. The overall tone of the market is slightly positive as the advance/decline line is mildly higher, sector performance is mixed and volume is heavy. Investor anxiety is high again. Today’s overall market action is very bullish after the key reversals seen yesterday in many stocks. “Value” stocks are substantially outperforming today. The beaten-up and heavily shorted financials, retailers, airlines and homebuilders are rising significantly. The total put/call hit a very high 1.57 and the VIX hit a very high 34.42 today. The average 30-year mortgage rate plunged to 5.31% this week from 5.69% last week. About 70% of conventional mortgages are now able to be refinanced, according to CNBC. Mortgage rates are now at levels that will greatly alleviate the mortgage reset situation that has been weighing so heavily on the market. As I said yesterday, we are going to see a significant amount of stimuli in a short period of time, which will move the Fed closer to being “ahead of the curve,” rather than behind it. Moreover, there are still many other potential positive catalysts that could materialize at any time. With today’s market rebound and recent losses overseas, the S&P 500 is significantly outperforming most other global markets year-to-date. Moreover, the US market is trading again as if a meaningful bottom is now in place. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, less economic pessimism and bargain hunting.

Bull Radar

Style Outperformer:

Small-cap Value (+1.89%)

Sector Outperformers:

Banks (+4.52%), Homebuilders (+3.53%) and Retail (+2.69%)

Stocks Rising on Unusual Volume:

XSD, EMV, SGK, SMTS, CREE, CPKI, FSNM, LIHR, AVTR, CVBF, PTEC, PSMT, FULT, LSTR, CVCO, FAST, RRGB, IBKC, WTFC, HMIN, EXLS, COLB, WERN, BBT, EWBC, WFC, WB, CUZ, PPS, NSC, GWR, KSS, SHLD, GEOY, SNP and PFE

Economic Releases

- None of note

Links of Interest

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- Timken Co. Chairman Ward Timken said he expects large takeover deals in the US steel industry this year after smaller companies were bought last year.
- Lawyers Embrace US Climate Practice at $700 an Hour.
- Dartmouth College, following moves by Harvard and Yale universities to make their schools more affordable, said students from families earning $75,000 or less won’t have to pay tuition, starting in the next academic year.
- Texas Instruments(TXN), the biggest market of mobile-phone chips, said profit climbed 13% and projected results this quarter that topped some analysts’ estimates as demand holds up better than anticipated. The shares rose 3.2% in extended trading.
- Hong Kong’s stocks jumped, lifting the benchmark index to its biggest advance in nine years, after the city followed an interest-rate cut by the US Fed.

MarketWatch.com:
- Fortune’s 100 Best Places to Work.
- Apple Inc.(AAPL) on Tuesday reported a first-quarter profit that rose 58% from a year ago, but the company’s shares tumbled in after-hours trading as the consumer electronics maker gave an earnings outlook that fell short of Wall Street analysts’ forecasts.

CNBC:
- Apple(AAPL): The LIVE Blog From Tuesday’s Earnings Call.

Briefing.com:
- Apple(AAPL) Conference Call Summary:

• iMac sales continue to be robust and Leopard launch has been very successful.
• iPod market share in US remained steady with previous year results; saw market share gains in European and Asian countries
• Total company gross margin was 34.7%; stronger than expected due to a more favorable commodity environment, stronger software sales, higher overall revenue and a weaker US dollar.
• Apple said they have reasonable confidence in achieving their guidance and that guidance at 29% is actually up from a year ago MarQ when they grew 21%.
• Ended quarter below Mac channel inventory target and said generally the Macintosh business has “been on fire.”
• Said traffic growth in US stores has been amazing.
• Company now has $18 billion in cash and no debt.
• Apple is thrilled with results they have seen from Best Buy(BBY).
• Orders are very strong for the new MacBook Air.
• Saw strong demand for new software.
• Half of Macs sold at retail to first-time buyers.
• Confident in selling 10 million iPhones in 2008.
• Plans to sell iPhone in Asia and added European cities in 2008.
  

USA Today.com:
- Rate cut should help borrowers, ease credit tightness.
- Gas prices fall to one month low.

Reuters:
- Short interest jumped 8.7% on the NYSE in mid-January, rising to another all-time high, the exchange said on Tuesday. Short interest soared 41% in shares of Washington Mutual(WM), 96% in shares of Sallie Mae(SLM), 40% in shares of Target(TGT) and 23% in shares of Wachovia(WB).
- Biggest changes in NYSE short interest.

Independent:
- BHP Billiton(BHP) is preparing a hostile $127 billion bid for rival Rio Tinto Plc(RTP).

Late Buy/Sell Recommendations
Citigroup:
- Upgraded (EXC) to Buy, target $85.
- Upgraded (EIX) to Buy, target $59.
- Upgraded (FE) to Buy, target $81.
- Upgraded (DTE) to Buy, target $48.
- Raised (PNM) to Buy, target $23.50.
- Raised (FPL) to Buy, target $74.
- Raised (AEP) to Buy, target $50.
- Maintain Buy on (DOX), target $46.

Bank of America:
- Upgraded (WYNN) to Buy.

Night Trading
Asian Indices are unch. to +4.5% on average.
S&P 500 futures -1.2%.
NASDAQ 100 futures -2.0%.

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Earnings of Note
Company/EPS Estimate
- (ABT)/.92
- (WLP)/1.50
- (COH)/.68
- (EAT)/.31
- (ROL)/.11
- (PX)/.96
- (PFE)/.47
- (SLM)/.55
- (GD)/1.40
- (KMB)/1.11
- (FCX)/1.73
- (UTX)/1.06
- (PJC)/.56
- (LUV)/.10
- (DAL)/-.18
- (STI)/.31
- (CHKP)/.44
- (EEXC)/1.02
- (ETH)/.69
- (PMTC)/.23
- (ATI)/1.41
- (ROK)/1.00
- (MOT)/.13
- (STJ)/.49
- (COP)/2.40
- (QCOM)/.52
- (SYK)/.66
- (GILD)/.43
- (COF)/.60
- (NFLX)/.14
- (QLGC)/.26
- (EBAY)/.41
- (CTXS)/.43
- (AB)/1.08
- (VAR)/.40
- (SYMC)/.29
- (FFIV)/.21
- (WDC)/1.04
- (NE)/1.30
- (RYL)/-.47
- (RDN)/-1.76

Upcoming Splits
- (FWLT) 2-for-1

Economic Releases
- None of note

Other Potential Market Movers
- The JPMorgan High Yield Conference, Sidoti Emerging Growth Forum, (HS) investor day, (SPW) investor meeting, weekly MBA mortgage applications report and weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by automaker and financial 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.