Stocks Finish Higher, Boosted By Bank, HMO, Homebuilding, REIT, Retail, Restaurant and Gaming Shares

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Stocks Higher into Final Hour on Less Financial Sector Pessimism, Diminishing Credit Market Angst, Short-Covering

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Retail longs, Gaming longs and Commodity/Emerging Market shorts. I added (IWM)/(QQQQ) hedges this morning and then covered them, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is higher, sector performance is mixed and volume is heavy. Investor anxiety is high. Today’s overall market action is mildly positive. The VIX is rising 1.82% and is still above-average at 23.46. The ISE Sentiment Index is low at 93.0 and the total put/call is around average at .91. Finally, the NYSE Arms has been running extremely high most of the day, hitting a peak of 10.97, and is currently 1.17. The Euro Financial Sector Credit Default Swap Index is falling -10.1% today to 87.83 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 -7.4% to 137.0 basis points. The TED spread is rising 7.1% to 1.11 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 3 basis point to 1.99%, which is down 63 basis points in just over seven weeks and at the lowest level since September 2003. I think this morning’s gap higher in the heavily-shorted financials likely caused more forced selling in the hedge fund community, which is further pressuring a number of market-leading stocks, despite broad market gains. The fact that (CSCO), which has significant US dollar/overseas exposure, is 5.1% higher, yet several other leading tech stocks are substantially lower provides some evidence of this. Many of these leading stocks are now at very attractive entry points for both long and short-term investors, in my opinion. Also, the extreme spike in the NYSE Arms this morning is further evidence of forced selling. Nikkei futures indicate a -100 open in Japan and DAX futures indicate a +23 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on less financial sector pessimism, diminishing credit angst, short-covering and bargain-hunting.

Today's Headlines

Bloomberg:
- Bank and savings and loan insiders spent more money buying shares of their companies in May, June and July this year than in any previous three months in at least two decades, betting that financial institutions are bouncing back from the credit-market crunch. Insiders including bank directors and executives bought $296.2 million of their own stock in the period, according to data compiled by the Washington Service. That's the most since the research firm began tracking the data in November 1986.
- The US dollar rose to the highest level since October against the euro as the U.S. government's takeover of Fannie Mae and Freddie Mac boosted confidence in financial markets in the world's largest economy.
- OPEC has as much as 4 million barrels a day of spare production capacity and will boost output if it is needed, the group’s secretary-general said in a report. With investment of $160 billion in 120 new projects, this will rise to 5 million barrels a day by 2012, he said. Spending of $500 billion by 2020 will boost spare capacity to 9 million barrels a day.
- Spreads between interest-rate swaps and Treasury yields narrowed to the least in almost three months after the government takeover of Fannie Mae and Freddie Mac.
- Saudi Arabia has an “interest” in oil prices falling below $100 a barrel and won’t push for any cut in production levels at tomorrow’s OPEC meeting, said John Sfakianakis, chief economist at Saudi British Bank.
- Oppenheimer’s Gheit Says OPEC Won’t Cut Production. (video)
- Boeing Co.'s(BA) machinists, on the third day of a strike over job security and compensation, may be walking the picket lines for more than a month, if history and industry analysts prove any guide. The members of the Chicago-based planemaker's largest union, the International Association of Machinists and Aerospace Workers, have stopped work over three of the last six contracts.
- Currency traders are starting to take the British government at its word, putting the tumbling pound on course for the worst year since 1992. The pound is about 20 percent too strong against the dollar, even after falling more than 10 percent this year, according to New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund company.
- U.K. producer prices unexpectedly dropped by the most in at least 22 years in August after oil and raw material costs fell and economic growth stalled.
- Still Bullish on Stocks, Citigroup’s Levkovich Predicts 17% Gain.
- United Airlines parent UAL Corp. said it didn't file for bankruptcy, after a 2002 Chicago Tribune news report on the carrier's filing was mistakenly republished on a newspaper Web site. The shares fell as much as 76 percent before trading was halted for about 90 minutes, then recovered most of the decline. UAL trades between 10:55 a.m. and 11:08 a.m. New York time won't be canceled, the Nasdaq Stock Market said on its Web site.
- President Dmitry Medvedev agreed to pull back Russian troops from Georgian territory outside of Abkhazia and South Ossetia, while refusing to reconsider his decision to recognize the separatist regions' independence.

Wall Street Journal:
- Altria Agrees to Buy UST for $10.3 Billion.
- McAfee(MFE) Inc. is overhauling its security software to more rapidly identify malicious computer files, a technology shift that reflects a widening recognition that more needs to be done to stop cybercriminals.
- Critics Say Gates-Seinfeld Duo No Laughing Matter. Microsoft Ads Draw Attention, Not Praise; Missing the Creativity.

NY Times:
- Google Inc.(GOOG) applied for patent technology that allows it to provide Web users with data from computer servers and storage systems aboard barges at sea that are powered by ocean currents. The floating computer centers would let Google move data closer to people in regions where it’s too expensive or inefficient to build them on land, or to locations where existing networks have been damaged by natural disasters.
- MSNBC tried a bold experiment this year by putting two politically incendiary hosts, Keith Olbermann and Chris Matthews, in the anchor chair to lead the cable news channel’s coverage of the election. After months of accusations of political bias and simmering animosity between MSNBC and its parent network NBC, the channel decided over the weekend that the NBC News correspondent and MSNBC host David Gregory would anchor news coverage of the coming debates and election night. Executives at the channel’s parent company, NBC Universal, had high hopes for MSNBC’s coverage of the political conventions. Instead, the coverage frequently descended into on-air squabbles between the anchors, embarrassing some workers at NBC’s news division, and quite possibly alienating viewers. Although MSNBC nearly doubled its total audience compared with the 2004 conventions, its competitive position did not improve, as it remained in last place among the broadcast and cable news networks. In interviews, 10 current and former staff members said that long-simmering tensions between MSNBC and NBC reached a boiling point during the conventions. “MSNBC is behaving like a heroin addict,” one senior staff member observed. Tom Brokaw and Brian Williams, the past and present anchors of “NBC Nightly News,” have told friends and colleagues that they are finding it tougher and tougher to defend the cable arm of the news division. NBC Universal executives are also known to be concerned about the perception that MSNBC’s partisan tilt in prime time is bleeding into the rest of the programming day. On a recent Friday afternoon, a graphic labeled “Breaking News” asked: “How many houses does Palin add to the Republican ticket?” Mr. Griffin called the graphic “an embarrassment.”
- Senator Joe Biden, the Democratic vp nominee, said that he believes life begins at conception. Such a view contradicts the Democratic Party’s doctrine on abortion rights.

NY Post:
- NY Post Endorses John McCain for President.

InvestmentNews:
- The proliferation of mutual funds that rely on computers to select stocks is coming to an end.

Morningstar:
- A survey of the largest U.S. hedge-fund firms showed 35% of them have lost assets in the first half, putting the growth rate at 4.34%, the lowest in six years.

ReadWriteWeb:
- NBC Drop Microsoft’s Silverlight for Adobe.

Google Blog:
- Google(GOOG) Starts Newspaper Archive Digitization Effort.

Financial Times:
- Growth in the Chinese motor market has slowed more rapidly than expected in recent months - and August car sales may have fallen by as much as 10 per cent year-on-year, according to preliminary data. Baosteel, the Chinese steelmaker, recently cited weakness in the Chinese motor sector as one of the main factors behind a recent drop in steel demand.
- Allianz SE, Europe’s biggest insurer, is examining the US as a potential market for growth. “I don’t think you can reach satisfactory growth numbers if you are not a substantial player in the US, citing CEO Diekmann. “From a currency point of view, and from what I see of some of our competitors in the US, this is not a bad time to look at the US market.
- Parametric Technologies(PMTC), a maker of computer-aided design and operational software for businesses, has hired banking advisers and is approaching potential bidders in an attempt to sell itself for more than $2bn, according to people with knowledge of the process.

BBC:
- UK home prices to drop 25%, Nationwide Chief says.

La Repubblica:
- Investment, long-term oil supply contracts, and greater transparency in futures and options trading may lower crude prices and reduce market volatility, Eni SpA CEO Scaroni wrote. The use of oil futures has tripled since 2000, Scaroni said. More than 1 billion “paper barrels” change hands each day, compared with trades of 85 million physical barrels, Scaroni wrote.

Bear Radar

Style Underperformer:

Mid-cap Growth (-1.02%)

Sector Underperformers:

Coal irlind (-9.25%), Steel (-4.71%) and Gold (-3.12%)

Stocks Falling on Unusual Volume:

IPHS, ANW, MDR, TRA, UPL, TIE, HES, SU, TESO, CLF, CHCO, UAUA and RIMM

Stocks With Unusual Put Option Activity:

1) YRCW 2) RF 3) HOT 4) NETL 5) BIG

Economic Releases

- None of note

Bull Radar

Style Outperformer:

Large-cap Value (+2.83%)

Sector Outperformers:

Homebuilders (+5.32%), Banks (+3.54%) and Retail (+3.34%)

Stocks Rising on Unusual Volume:

CPF, RF, AXA, WB, BCS, GNW, TKC, PHH, RWT, RJET, GEHL, AGNC, AVID, GEOY, PVTB, ZION, AFAM, SBNY, PMTC, PACW, USPH, CRMT, CATY, NICE, AMSF, PNFP, BIDU, JOSB, DXPE, PHJ, CMO, IXG, AF, PHM, WF, KRE, TOL, RWT, NYC and PUW

Stocks With Unusual Call Option Activity:

1) COG 2) KEY 3) NLY 4) PRU 5) RF