Stocks Lower into Final Hour on Profit-taking, Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is below average. Investor anxiety is above average. Today’s overall market action is just mildly bearish given recent gains. The most technically extended financial, homebuilding and retail shares are under the most pressure today. The VIX is rising 7.0% today to a high 26.0. The ISE Sentiment Index hit a depressed 77.0 and the total put/call hit an above average 1.13 this morning. Finally, the NYSE Arms has been running high all day at 1.55, which is a positive, especially given below average volume. Overall, today’s action looks like a healthy low-volume consolidation of recent gains. Many growth stocks are higher on the day despite ongoing weakness in some of the leaders. I continue to believe pullbacks will remain relatively mild and short-term in nature and should be bought. Nikkei futures indicate a -75 open in Japan and DAX futures indicate a -5 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic pessimism and short-covering.

Today's Headlines

Bloomberg:
- CEOs, directors and other senior officials in corporate America are buying more of their companies’ shares than they’re selling for the first time since 1995, prompting growing confidence the stock market is poised to rally for the rest of the year. August Busch III, an AT&T(T) board member since 1980, bought $2.27 million shares in the biggest US phone company last month, his largest purchase on record. Monsanto Co.(MON) director William Parfet added to his holdings in the world’s No.1 seed producer for the first time in eight years.
- Perceived headwinds aren’t preventing the DJIA from beating all of the world’s biggest stock markets.
- President Bush is asking Congress to fund a $25 billion budget for the US Energy Dept., the largest requested increase for the dept. in five years. The president proposes to raise spending on programs to increase power production without boosting greenhouse gas emissions. The budget allocates more spending on “clean-coal” technology to capture emissions from coal-burning power plants as well as nuclear energy, which provides power without emitting carbon dioxide.
- Sugar-cane production in Brazil, the world’s biggest producer of sugar, may rise this year as growers plant more to benefit from soaring demand for biofuels, research company Datagro Ltd. said.
- The global sugar surplus may extend beyond 2009 as a price rally spurred by hedge fund buying dissuades farmers from reducing output, said Jonathan Kingsman, head of sugar and ethanol research company Societe Kingsman SA.
- Vestas Wind Systems A/S, the world’s biggest wind-turbine maker, rose 12% in Copenhagen trading after lifting its 2007 earnings forecast.
- Ignore the Obituaries, US Reign Will Endure.
- Crude oil is rising $1/bbl. after the Houston Ship Channel was closed to tankers because of fog and Turkish planes attacked Kurdish insurgent bases, boosting investment fund speculation in the commodity.
- Citadel Investment Group LLC, the asset-management firm run by Kenneth Griffin, separated its hedge fund business from an options market-making unit in what may be a prelude to a public offering.
- Microsoft(MSFT) May Borrow for First Time to Buy Yahoo(YHOO).

NY Times:
- Another Difficulty for a Microsoft-Yahoo Marriage: Recruiting.
- GM’s(GM) Global Strategy: A Brand for Every Place.

Forbes.com:
- Federal Reserve Governor Randall Kroszner called on the mortgage industry to help avoid a wave of defaults by “quickly” modifying payment terms.

PRNewswire:
- RBC Capital Markets today announced the launch of the RBC Emerging Manager Allocator platform, a proprietary pool of capital that is structured to invest in a diversified group of emerging manager hedge funds with a demonstrated ability in alternative investing.

Broadcasting & Cable:
- Cablevision(CVC) Starts New Video on Demand DVD Service.

Interfax:
- For the first time since 1991, Russian tanks, multiple rocket launchers and armored personnel carriers will roll across Red Square on May 9 as part of the annual Victory Day parade.

Bear Radar

Style Underperformer:

Mid-cap Value (-1.54%)

Sector Underperformers:

Retail (-4.34%), Airlines (-3.93%) and Homebuilders (-3.63%)

Stocks Falling on Unusual Volume:

DTG, ASF, VVI, MSTR, RYAAY, MASI, BPHX, ZOLT and NTG

Factory Orders Rise Again, Gauge of Future Business Spending Jumps

- Factory Orders for December rose 2.3% versus estimates of a 2.5% gain and an upwardly revised 1.7% gain in November.

BOTTOM LINE: Orders to US factories rose in December by the most since July, indicating business spending on new equipment is accelerating, Bloomberg reported. The 2.3% gain is the fourth consecutive increase and follows a revised 1.7% rise the prior month. The increase in factory orders was led by a 5% surge in demand for durable goods, such as airplanes and computers. Orders for non-defense capital goods excluding aircraft, a gauge for future business spending, jumped 4.5% versus a .1% decline the prior month. Computer orders rose 4.6% in December and machinery orders jumped 7.3%, the most since December 2006. Factories had enough goods on hand to last 1.24 months, up from the record 1.22 months set in November. I continue to believe manufacturing will help keep the overall US economy growing as companies rebuild depleted inventories from booming exports.

Bull Radar

Style Outperformer:

Mid-cap Growth (-.52%)

Sector Outperformers:

Utilities (+1.3%), Alternative Energy (+1.08%) and Oil Service (+.83%)

Stocks Rising on Unusual Volume:

GBX, R, KWK, OMRI, NVEC, YHOO, COIN, UDRL, SILC, INSP, ARAY, ARII, JRJC, SCSC, CTCM, LSTR, SNCR, HERO, JOYG, DRIV, NTLS, SNP, PDC, PTEN, BZP, PTR, EDE, WYE, SWC, CLWR, HSTX, OFG, SIRF and FRME

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