Stocks Finish at Session Highs, Boosted by Technology, Telecom, Energy Shares

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Stocks Surging into Final Hour on Less Economic Pessimism, Bargain-Hunting, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Software longs, Computer longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling 5% today, but remains high at 25.0. The ISE Sentiment Index hit a very depressed 48.0 and the total put/call hit an above-average 1.06 today. Growth stocks are substantially outperforming value stocks, with many posting huge gains relative to the broad market. Today’s overall market action is even more impressive considering there really isn’t any meaningfully positive news to account for the strong move in the major averages and financials began the day under duress. I suspect the large short/sell every rally crowd is beginning to get a bit worried by this action. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 8 basis points today to 2.26%, which is down from 2.48% in late November. Inflation expectations remain muted and stable, despite the recent rebound in commodity prices. Fed fund futures now imply a 68.0% chance, down from 80.0% yesterday, for a 50 basis point rate cut at the upcoming meeting and a 32% chance for a 75 basis point cut, which is up from 20% yesterday. The US dollar is breaking out of its recent trading range versus the yen, which is also a positive. One of my longs I recently added to, (AMSC), is surging 8% today on strength in other alternative energy stocks and conference call comments. The company said its expects revenues to exceed $150M in FY08 and that it sees a huge growth opportunity in China’s power grid and it expects a lot more business in China in the future. This stock is volatile and high risk, but should be a huge winner long-term. Nikkei futures indicate an +270 open in Japan and DAX futures indicate a +70 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, less economic pessimsim and short-covering.

Today's Headlines

Bloomberg:
- First Solar(FSLR), the largest US maker of solar power-modules, said fourth-quarter profit rose almost eightfold on surging demand for its thin-film technology. First Solar shares are soaring 27% on the report.
- Students in the US are Becoming Better Prepared for College. Almost 30% more US public high school seniors passed at least one advanced placement exam in 2007, showing they’re better prepared for college than five years ago, the College Board said. About 15.2% of seniors scored 3 or better on a 5-point scale in at least one advanced placement exam, up from 11.7% in 2002, according to a report released today. The improved scores reflect growing efforts to prepare high school students for college and reduce the need for remedial courses. More than 3,600 of the world’s colleges and universities accept AP credit. The 3 score makes them “qualified” to receive college credit, though some colleges require a 4 to offer credit.
- Bethune of Global Insight Says US Economy Will Improve in Second Half. (video)
- The portion of newsletter writers who were bullish on stocks slid to 36.7% in the five days ended February 8 from 41.6%, the largest decline in almost five years, the NY-based Investors Intelligence said today.
- NY Attorney General Andrew Cuomo will sue UnitedHealth Group(UNH) and subpoena 16 other insurers to investigate reimbursement practices.
- Iraq Lawmakers, Sidelining Disputes, Pass Budget, Other Bills.
- Yen Falls as Gain in US Retail Sales Signals Continued Growth.
- OPEC may add 840,000 barrels a day to its oil production capacity this year, boosting the group’s available spare volumes, the International Energy Agency said.

Wall Street Journal:
- Norfolk, CSX Boost Spending to Improve Rail Lines.
- Iran Avoids Sanctions, Strengthens Ties With Neighbors.
- Hershey(HSY), Mars Offer Caffeinated Candy to Boost Sales.
- Big Clinton Fund-Raisers May Run Their Own Ads. Rich Backers Huddle With Lawyers to Help Cash-Strapped Effort.

CNBC:
- Turnaround specialist Wilbur Ross said Wednesday he does not expect Warren Buffett’s offer to reinsure $800 billion of municipal bond debt to succeed. “If it went through, it would be the best deal since the Dutch bought Manhattan Island from the Indians,” Ross said.

BusinessWeek:
- Rupert Murdoch’s New Startup Incubator. The SlingShot Labs venture is designed to spawn Internet startups for News Corp. and also likely to help MySpace compete with Facebook.

TechCrunch:
- Yahoo(YHOO) And News Corp.(NWS/A) Continue Marathon Discussions; Possible Bid To Counter Microsoft(MSFT).

Washington Post:
- Lawmakers and the American public should support US-Iraqi talks on establishing a “status of forces” agreement, Secretary of State Condoleezza Rice and Defense Secretary Robert Gates wrote. The agreement would include helping Iraqis fight al-Qaeda, developing security forces and stopping the flow of weapons from Iran, Rice and Gates wrote. The accord wouldn’t authorize permanent US bases there.

Financial Times:
- Google(GOOG) homes in on revenue from phones. Google on Wednesday said it had seen 50 times more searches on Apple’s(AAPL) iPhone than any other mobile handset, adding weight to the group’s confidence at being able to generate significant revenues from the mobile internet.

Actualidad Economica:
- Banco Santander SA, Spain’s biggest bank, would like a “significant position” in the US, CEO Alfredo Saenz said.

Asharq al-Awsat:
- Arab states approved a law giving them the power to cancel permits for Arab news channels that are deemed to broadcast offensive material. The law, which was adopted by all Arab states except Qatar, calls on Arab satellite channels to respect Arab tradition, leaders, religion and culture and has the power to ban channels, suspend their licenses and reject renewing their licenses.

Bear Radar

Style Underperformer:

Mid-cap Value +1.13%

Sector Underperformers:

HMOs (-1.51%), Utilities (+.15%) and REITs (+.22%)

Stocks Falling on Unusual Volume:

NILE, HCSG, DAKT, ATAC, WERN, WYNN, RECN and UNH

Retail Sales Exceed Estimates, Business Inventories Rise

- Advance Retail Sales for January rose .3% versus estimates of a .3% decline and a .4% decline in December.

- Retail Sales Less Autos for January rose .3% versus estimates of a .2% gain and an upwardly revised .3% decline in December.

- Business Inventories for December rose .6% versus estimates of a .5% increase and a .4% gain in November.

BOTTOM LINE: Retail sales in the US unexpectedly rose in January, easing concern that the US economy is slipping into recession, Bloomberg reported. The gain was led by spending on autos, clothes and gasoline. Sales at automobile dealerships and parts stores jumped .6% versus a 1.1% decline in December. Sales at clothing retailers surged 1.4% and purchases at non-store retailers, which include online and catalog sales, gained .5%. Sales at building materials stores fell 1.7%. I expect retail sales to continue to improve back to more average rates over the intermediate-term on historically low interest rates, decelerating inflation, improving consumer confidence, fiscal stimulus, pent-up demand, rising stock prices, a more healthy job market and subsiding housing fears.

Inventories at US businesses in December rose more than expected and sales fell at the end of last year, Bloomberg reported. Sales fell .5% after a 1.4% gain in November. The amount of goods on hand at the current sales pace rose to 1.26 months’ worth. Inventories at retailers actually fell .1% and auto dealers saw a 1.6% decline in supplies. Inventories at building materials retailers rose .3%. Falling inventories were the main reason 4Q GDP rose a less-than-estimated .6%, subtracting 1.3 percentage points from growth. Inventory rebuilding this quarter should help add to growth.

Bull Radar

Style Outperformer:

Small-cap Growth (+.93%)

Sector Outperformers:

Alternative Energy (+3.71%), Computer Hardware (+2.20%) and Semis (+2.18%)

Stocks Rising on Unusual Volume:

ARP, BGC, GNA, ABD, ORB, JNY, GWR, ACOR, WSPI, MDCO, BWLD, SPSS, VOLC, VRTX, CEPH, FSLR, OCNF, PNRA, GXDX, AMAT, ECOL, KNSY, PFCB, BOBE, VLCCF, HOFT, MICC, CSIQ, ALY, UDRL, INT, CLMS, CLWR, ITU, OFG and ARGN