Stocks Finish Mixed as Gains in Tech and Medical Shares Offset Losses in Commodity and I-Banking Stocks

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In Play

Stocks Mixed into Final Hour as Short-Covering Offsets Rising Credit Angst

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Biotech longs, Gaming longs, Software longs, Computer longs and Commodity shorts. I added to my (QQQQ)/(IWM) hedges this morning and then covered them this afternoon, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly negative as the advance/decline line is lower, sector performance is mixed and volume is heavy. Investor anxiety is high again. Today’s overall market action is neutral. The VIX is falling .6% today, but remains high at 26.0. The ISE Sentiment Index hit a historically depressed 36.0 and the total put/call hit a high 1.34 today. Finally, the NYSE Arms has been running above average all day, hitting a very high 1.98 this morning. The 10-year swap spread is rising another 4 basis points today to 74.75 basis points over Treasuries. It is now near levels seen near prior peaks in credit market angst in August and November of last year. The odds for a 75 basis point rate cut at the upcoming Fed meeting have risen to 78.0%. I still think the odds that a cut occurs before the scheduled meeting have risen substantially of late. Cisco’s(CSCO) CEO said this afternoon that he is more confident in his long-term forecast than he was during the last conference call. He said any US downturn should be mild and short-lived. As well, rumors are swirling about an imminent bailout for troubled bond insurer Ambac(ABK). The two stocks are leading a market surge into the close. Moreover, the decline in commodities is a huge broad market positive as it gives the Fed more leeway to be more aggressive if necessary. Nikkei futures indicate a -120 open in Japan and DAX futures indicate an +40 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short covering, diminishing bond insurer angst, Fed rate cut speculation and bargain hunting.

Today's Headlines

Bloomberg:
- Commodities plunged the most in almost six weeks, as oil, gold and corn fell from record highs, on renewed concern that a slowing US economy will curb demand for raw materials.
- Federal Reserve Chairman Ben S. Bernanke urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting.
- California sold $1.75 billion of bonds, attracting record demand from individuals enticed by the highest tax-exempt yields in more than three years.
- Investor Martin Whitman is standing by his bet on MBIA Inc.(MBI), boosting his stake in the bond insurer to 10% as there is “much profit” to be made at current prices whether the existing business model succeeds or fails.
- Apple Rises as Cook Reiterated iPhone Sales Estimates.

Wall Street Journal:
- World Has Enough Oil for a Century. We are nowhere close to reaching a peak in global oil supplies.

NY Times:
- Cepheid(CPHD) Triples as Demand for ‘Superbug’ Test Grows.
- Spitzer Helps Donors Skirt $10,000 Limit He Set. Despite his high-profile pledge not to accept donations greater than $10,000 – less than one-fifth the $55,900 allowed under state law – Gov. Eliot Spitzer’s political organization has raised more than $1 million above the cap he imposed on himself, by directing his donors to the Democratic state party account, which he controls.

MarketWatch:
- Apple(AAPL), Fnac Discuss Selling iPhone in France.

Washington Post:
- Two-thirds of Democrats surveyed said Senator Hillary Clinton should continue her presidential bid if she wins in either Ohio or Texas today, citing a Washington Post-ABC News poll.

Reuters:
- BHP Billiton(BHP) talks to lenders on record $55 billion loan.
- Bill Gross, manager of the world’s biggest bond fund, said he bought $1.5 billion in municipal bonds on Feb. 29 at “very attractive prices.”

Financial Times:
- Another hedge fund collapse in focus.

Iranian Students News Agency:
- Iranian Oil Minister Gholamhossein Nozari said his country will support a decrease in oil output at a meeting of OPEC in Viena tomorrow.

Bear Radar

Style Underperformer:

Large-cap Value -1.79%

Sector Underperformers:

Coal (-4.68%), Gold (-3.87%) and I-Banks (-3.43%)

Stocks Falling on Unusual Volume:

AMWD, TIE, IBN, C, TONE, TSRA, OMPI, LCAPA, THRX, NUVA, CETV, CEDC, HMIN, CLWR, CMED, SUSQ, PAAS, JTX, NCS, BKS,

Bull Radar

Style Outperformer:

Large-cap Growth (-.87%)

Sector Outperformers:

Utilities (+1.21%), Hospitals (+.66%) and Steel (-.12%)

Stocks Rising on Unusual Volume:

HOT, EXC, PEG, MAR, TS, UVV, IPCS, KTC, BMA, CRMT, TECD, VISN, COIN, GTLS, MDTH, JRJC, DECK, AMAT, FPIC, PSYS, ASIA, BEAV, FARO, AVTR, CRDN, CPLA, BRKR, AIRM, TSL and BRL

Economic Releases

- None of note