Stocks Finish Mostly Higher, Boosted by Commodity, Biotech, Gaming and Construction Shares

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Stocks Mostly Higher into Final Hour on Diminishing Credit Market Angst, Less Financial Sector Pessimism

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Medical longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is neutral as the advance/decline line is slightly higher, sector performance is mostly negative and volume is about average. Investor anxiety is above-average. Today’s overall market action is neutral given recent gains. The VIX is falling .79% and is still above-average at 23.85. The ISE Sentiment Index is depressed at 87.0 and the total put/call is around average at .89. Finally, the NYSE Arms has been running high most of the day and is currently 1.42. The Euro Financial Sector Credit Default Swap Index is falling another 2.55% today to 82.78 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is -2.5% today at 133.88 basis points. The TED spread is rising 2.95% to 1.37. The 10-year TIPS spread, a good gauge of inflation expectations, has dropped 23 basis points in 10 days to 2.41%. Financials continue to trade pretty well given recent historic gains. The (XLF) is .48% higher on the day. Oil is $2.79 higher on the day, but given recent weakness and the hurricane approaching TX this rise is rather muted. Moreover, the S&P Goldman Ag Spot Price Index is falling another 2.1% today right to its 200-day moving-average. The last time this index broke down through this technical level in a convincing way was June 2004. Corporate insider stock activity remains at very bullish levels. If the crowded stock market bear camp is unable to gain any downside traction soon, I expect to see another short-covering induced surge higher fairly soon. Nikkei futures indicate a +337 open in Japan and DAX futures indicate an +17 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing credit market angst and less financial sector pessimism.

Today's Headlines

Bloomberg:
- The cost of protecting corporate bonds from default declined as Bank of America Corp.'s(BAC) second- quarter profit fell less than analysts estimated. Credit-default swaps on Bank of America, Citigroup Inc. and Wachovia Corp. fell for a fourth straight day. Benchmark gauges of credit risk in the U.S. and Europe also fell, signaling improved investor confidence, as strategists at Morgan Stanley and Bank of America said credit investors have priced in too dire an outlook for investment-grade corporate debt. Credit-default swaps on the Markit CDX North America Investment Grade Index, a benchmark gauge of credit risk tied to the bonds of 125 companies in the U.S. and Canada, fell 3 basis points to 133.75 basis points as of 1:14 p.m. in New York, according to Deutsche Bank AG.
- Roche Holding AG, Switzerland's largest drugmaker, offered to buy the rest of Genentech Inc.(DNA) for $43.7 billion to gain the largest U.S. maker of cancer medicines.
- Bank of America Corp.(BAC), whose stock climbed 60 percent in less than a week, reported earnings that beat analysts' estimates and said the newly acquired Countrywide Financial Corp. will add to profit this year.
- Wheat fell to a six-week low on speculation rising world production will outpace demand for flour and animal feed, after farmers planted more grain in response to record prices.
- Crude oil rose from a six-week low as a tropical storm entered the Gulf of Mexico, and Iran, the world's fourth-biggest producer, resisted demands to suspend nuclear research.
- Bill Gross, who manages the world's biggest bond fund, said mortgage-backed bonds issued by government-sponsored entities Fannie Mae and Freddie Mac are ``an excellent buy.''
- Apple Inc.'s(AAPL) iPhone 3G is sold out at almost all the company's U.S. retail outlets, 10 days after Chief Executive Officer Steve Jobs put the faster, cheaper upgrade of the mobile handset on the shelves.
- Yahoo! Inc.(YHOO) gave three director seats to billionaire activist Carl Icahn, dividing the board as the Internet company struggles to increase sales growth after spurning takeover offers.
- The five-year rally in emerging- market currencies is coming to an end as central banks from South Korea to Turkey struggle to contain inflation, say DWS Investments and Morgan Stanley.
- BankAtlantic Bancorp Inc. said it sued Ladenburg Thalmann & Co. bank analyst Richard Bove over a report called ``Who is Next?'' BankAtlantic accused Bove and the firm of defamation and negligence, according to a statement the Fort Lauderdale, Florida-based bank issued today on Business Wire.
- LG Electronics Inc. reported record quarterly profit as mobile-phone sales surged, challenging Motorola Inc. as the world's third-largest handset maker.

Wall Street Journal:
- Goldman Sachs Group Inc.'s(GS) most senior financial-institutions banker, Ken Wilson, is temporarily leaving the firm to advise Treasury Secretary Henry Paulson on how to resolve the country's banking crisis, according to people familiar with the matter.
- Biogen Idec Inc.(BIIB) will mark two years this week the relaunch of Tysabri, a potent drug for multiple sclerosis and Crohn's disease that is shaping up to be a blockbuster drug.
- The US Olympic Committee is distributing high-tech masks to more than 600 athletes because of concerns about pollution at next month’s Beijing Games.

NY Times:
- France Telecom Test Electronic Newspaper With Ads.

EE Times:
- The semiconductor assembly and test services market is set for major growth.

Financial Times:
- France’s President Nicolas Sarkozy is drawing up a three-point plan aimed at increasing the European Central Bank’s political accountability.
- Ethanol produced from municipal waste will be available within three years, according to Ineos Group Holdings Plc.

Daily Telegraph:
- Gulfsands Petroleum Plc is undertaking the biggest boost in Syrian oil production up to two decades, citing an interview with the company’s president, Mahdi Saijad.

Rzeczpospolita:
- The US dollar is close to stabilizing after falling against various currencies, Murilo Portugal, deputy managing director of the International Monetary Fund, said.

Emirates Business 24/7:
- As much as 40% of Middle East and North African hotel projects planned for 2015 may be delayed, citing a report by Jones Lang LaSalle Inc. The majority of the delayed projects will be in the six-nation Gulf Cooperation Council region, including the United Arab Emirates and Saudi Arabia.

Bear Radar

Style Underperformer:

Mid-cap Value +.13%

Sector Underperformers:

Airlines irlind (-1.91%), I-Banks (-1.90%) and Retail (-1.67%)

Stocks Falling on Unusual Volume:

ARTC, CHIC, ULTI, ASTE, VOCS, PNFP and CRRC

Stocks With Unusual Put Option Activity:

1) SGP 2) FHN 3) DNA 4) ARTC 5) SFI

Leading Indicators Fall Slightly

- Leading Indicators for June fell .1% versus estimates of a .1% decline and a downwardly revised .2% decline in May.

BOTTOM LINE: The index of leading US economic indicators fell in June for a second month, Bloomberg reported. The six-month annualized change for the index is -1.7% versus the -4 to -4.5% six month annualized decline normally scene during recessions, according to the Conference Board. A decline in the money supply spurred the slight decrease in the overall index. Economists now expect 2Q GDP growth, which is released on July 31, at 2.2%. I expect Leading Indicators to rise modestly for the month of July.

Bull Radar

Style Outperformer:

Large-cap Value (+1.24%)

Sector Outperformers:

Gaming (+3.26%), Banks (+2.93%) and Biotech (+2.59%)

Stocks Rising on Unusual Volume:

CBC, DNA, BAC, WB, CLMT, HES, GSK, CETV, NVS, ROCK, PETS, AFAM, PAAS, VIVO, BIIB, CBST, ECOL, RBCAA, ULTA, PACW, TEVA, ZION, IMCL, MHGC, BCSI, POOL, STBA, BARE, CLNE, PBE, TKR, TAC, MSB, BRL, AZN and BGH

Stocks With Unusual Call Option Activity:

1) PMI 2) LRCX 3) ZRAN 4) VLTR 5) ATHR