Stocks Finish Higher, Boosted by Hospital, Retail, Software, Homebuilding, Insurance Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Slightly Higher into Final Hour on Short-Covering, Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Software longs, Medical longs and Commodity shorts. I covered some of my (IWM)/(QQQQ) hedges this morning and then added them back, thus leaving the Portfolio 50% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are rising and volume is about average. Investor anxiety is about average. Today’s overall market action is slightly bearish. The VIX is falling 1.3% and remains above average at 23.81. The ISE Sentiment Index is below average at 115.0 and the total put/call is slightly above average at .95. Finally, the NYSE Arms has been running below average most of the day and is currently .67. The reversal higher in oil, global growth concerns and higher long-term rates are pressuring stocks this afternoon. The Shanghai Composite is now down 52% from its high and down 44% just this year. On the positive side, the Euro Financial Sector Credit Default Swap Index is falling 4.7% today to 79.62 basis points. This is up from a low of 52.66 on May 5^th, but still down from 129.46 basis points on March 20^th. The TED spread is also falling 7.4% to .79 basis points. Despite the fact that the (LEH) equity remains under pressure, its credit default swap is 289.80, still down from the 450+ reached during mid-March. The AAII % Bulls fell 28.1% this week to 31.2%, while the AAII % Bears jumped 40.8% to 53.6%. If the reports about an impending (GOOG)/(YHOO) search deal are true, it would be a major positive for GOOG. Nikkei futures indicate an +162 open in Japan and DAX futures indicate a -46 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on rising commodity prices, global growth worries, rising long-term rates and more record shorting.

Today's Headlines

Bloomberg:
- The Baltic Dry Index, a measure of shipping costs for commodities, posted a record decline of 8.7% as port congestion eased and on speculation China may buy less iron ore.
- Copper fell to the lowest level in more than two months as the dollar strengthened, curing demand from investors who buy commodities as a hedge against inflation.
- Wheat fell on speculation that yields are better than normal as the US winter-crop harvest progresses in states from Texas to Kansas.
- McCain’s Young Backers Push Elders to Embrace Obama Web Tactics.
- Volatility in the oil markets has snarled attempts by refiners and other industry players to plan for the future.
- The US dollar strengthened against the euro as US retail sales advanced more than economists forecast.

Wall Street Journal:
- Billionaire hedge-fund manager Edward S. Lampert is placing new bets on a US housing recovery, buying stakes in beaten-up home builders, mortgage lenders and a home-improvement retailer.
- Citigroup to Close Hedge Fund; Blow to CEO.

NY Times:
- Senator Joe Lieberman said Wednesday that he would propose next week to ban large institutional investors, including index funds, from the nation’s booming commodities markets. “There is excessive speculation in the commodity markets that is driving up the cost of food and energy,” the senator said. Over the last five years, hundreds of billions of dollars have flowed into commodity futures markets. One steady source of money has been the growing number of new funds that mirror specific commodity indexes, like the S&P Goldman Sachs Commodity Index. More recently, exchange-traded funds, such as the United State Oil Fund(USO) and PowerShares DB Agriculture Fund(DBA), have followed index funds into the market.

TechCrunch:
- Yahoo(YHOO) and Google(GOOG) will make a joint announcement at 1:30 pm PST. What is the announcement? The very likely answer is, a search partnership between the two companies that outsources all or part of Yahoo search marketing, and possibly search itself, to Google.

Financial Times:
- Imarex, one of the world’s few platforms for trading freight derivatives, will on Friday launch its first shipping contract aimed at financial investors amid growth in demand for derivatives based on the shipping and freight industry.

- When you hear ‘new paradigm’ head for the hills.

Bear Radar

Style Underperformer:

Large-cap Growth +.50%

Sector Underperformers:

Goldirlind (-1.79%), Coal (-1.38%) and Oil Service (-1.24%)

Stocks Falling on Unusual Volume:

KEY, CTL, ANW, EAC, NCMI, CHDX, IVGN, EGLE, DRYS, GOLD, TBSI, TOO, ROC and CPO

Stocks With Unusual Put Option Activity:

1) BJS 2) APOL 3) TXN 4) JRCC 5) WYE

Import Prices Decelerate, Retail Sales Surge, Jobless Claims Rise, Inventories Gain

- The Import Price Index for May rose 2.3% versus estimates of a 2.5% increase and an upwardly revised 2.4% gain in April.

- Advance Retail Sales for May rose 1.0% versus estimates of a .5% gain and an upwardly revised .4% increase in April.

- Retail Sales Less Autos for May rose 1.2% versus estimates of a .7% gain and an upwardly revised 1.0% increase in April.

- Initial Jobless Claims for this week rose to 384K versus estimates of 370K and 359K the prior week.

- Continuing Claims rose to 3139K versus estimates of 3118K and 3081K prior.

- Business Inventories for April rose .5% versus estimates of a .3% gain and a .2% rise in March.

BOTTOM LINE: Prices of goods imported into the US rose less than forecast in May as smaller increases in the costs for autos and other consumer goods from abroad cushioned record energy expenses, Bloomberg said. Prices, excluding fuels, rose .5%, the smallest rise this year. The price of imported petroleum and petroleum products rose 7.8% versus a 5.9% gain the prior month. The cost of imported capital goods rose .3% from a month earlier. Prices of imported automobiles, parts and engines were unch. in May versus a .4% gain the prior month. Costs of imported consumer goods excluding autos rose .2% versus a .7% gain the prior month. I expect import prices to show a more meaningful deceleration beginning next quarter.

Retail sales in the US rose twice as much as forecast in May, and the most since November, as tax-rebate checks spurred Americans to shop at electronics and department stores, Bloomberg reported. Even excluding gasoline sales, retail purchases rose .8% last month. $56 billion, or just over half, of the tax rebates have been distributed thus far. Morgan Stanly economists raised their estimate for 2Q economic growth from a .2% contraction to a .5% gain. Purchases of electronics increased .7% and sales at department stores rose 1.2%, the most since March of last year. Sales at auto dealerships and parts stores increased .3% after dropping 2.1% in April. Excluding autos, gas and building materials, the retail group the govt. uses to calculate GDP, sales rose .8%, versus a 1% increase in April. The bulk of the tax rebates will probably be spent from July through September, giving 3Q growth a boost. I still expect retail sales to accelerate back to average rates in the second half of the year.

The number of Americans filing first-time claims for unemployment benefits last week rose more than forecast, Bloomberg reported. Weekly claims figures in the past two weeks have been more volatile than usual because of difficulties in making seasonal adjustments for the May 26 Memorial Day holiday, a Labor spokesman said. The four-week moving average for initial claims rose to 371,500 versus 369,000 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2.4% from 2.3% the prior week. I still expect jobless claims to trend modestly lower through year-end. The 10-year yield is rising 13 basis points and the US Dollar Index is surging 1.0% on today’s reports. The 10-year TIPS spread, a good gauge of inflation expectations, is stable at 2.51%, which is down from a 52-week high of 2.68% on March 13^th.

Bull Radar

Style Outperformer:

Small-cap Value (+1.53%)

Sector Outperformers:

Retail (+3.29%), Airlines (+3.11%) and I-Banks (+3.09%)

Stocks Rising on Unusual Volume:

IBN, FSLR, HDB, C, BAC, SI, CMED, CYBX, CASY, AUTH, BEAV, QCOM, NUAN, STST, TROW, RECN, CHKE, UBSI, KCAP, MCHP, CEDC, CCOI, ILMN, SQNM, QGEN, ABV, ABI, BUD, SEH, NT and FMX

Stocks With Unusual Call Option Activity:

1) NT 2) CMED 3) KEY 4) CMI 5) CC