Stocks Finish Slightly Higher Boosted by Financial, Technology and Airline Shares

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Stocks Rising into Final Hour on Falling Credit Market Angst, Less Financial Sector Pessimism, Lower Energy Prices, Bargain-Hunting, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Education longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, sector performance is mixed and volume is about average. Investor anxiety is about average. Today’s overall market action is bullish. The VIX is falling 3.11% and is very high at 42.99. The ISE Sentiment Index is above average at 179.0 and the total put/call is below average at .75. Finally, the NYSE Arms has been running around average most of the day, hitting 1.21 at its intraday peak, and is currently .74. The Euro Financial Sector Credit Default Swap Index is falling 1.89% today to 190.67 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling 3.29% to 239.20 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is rising .63% to 110 basis points. The TED spread is now down 353 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 7.24% to 70.50 basis points. The Libor-OIS spread is falling 1.47% to 106.0 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis points to .90%, which is down 174 basis points since July 7th. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .22%, which is down 1 basis point today. Market leading stocks are substantially outperforming the broad market today. As I said near the beginning of the year, I continue to believe the tech sector will outperform over the intermediate-term. The MS Tech Index is jumping another 3.1% today. One of my longs, (AAPL) is 6% higher today on new product news and speculation. I still believe the shares will be substantially higher than current levels at year-end. The (XLF) continues to trade very well, which is always a huge positive. Today’s action bodes well for further broad market gains over the short-term. Nikkei futures indicate an +40 open in Japan and DAX futures indicate an +1 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower energy prices, declining credit market angst, bargain-hunting, tech sector optimism and less financial sector pessimism.

Today's Headlines

Bloomberg:

- Dennis Blair, the director of U.S. National Intelligence, said it will be “difficult” to persuade the Iranian government to give up developing nuclear weapons if it decides to build an atomic bomb. Many within the Iranian leadership see nuclear weapons as important to national security and foreign policy objectives, Blair said in a report submitted to the Senate Armed Services Committee yesterday in Washington.

- China’s textile exports slumped 20.6% to $7.29 billion in the first two months of the year from a year earlier and clothing exports dropped 11% to $14.6 billion, the Customs Bureau said. Shipments of mechanical and electrical products dropped 21.8% to $90 billion and exports of “high-tech” goods, which overlap with electrical exports, declined 24.6% to $43.8 billion.

- Greenwich, Connecticut, home sales dropped 77 percent in February, the most on record, as Wall Street firms cut jobs and buyers retreated from multimillion- dollar purchases, Prudential Connecticut Realty said.

- Mortgage applications in the U.S. increased last week, led by a rebound in refinancing as borrowing costs dropped. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 11 percent to 723.4 in the week ended March 6, from 649.7 the prior week. The group’s refinancing gauge jumped 13 percent and its purchase index gained 7.1 percent. The average rate on a 30-year fixed-rate loan slid to 4.96 percent from 5.14 percent the prior week, the report showed. It reached a record-low 4.89 percent in early January.

- The cost to protect against a default by banks including Citigroup Inc. and Bank of America Corp. fell for a second day as the stock-market rally prompted traders to pare bets that had pushed the contracts to records. Credit-default swaps on New York-based Citigroup fell 35 basis points to 535 basis points, according to broker Phoenix Partners Group. Contracts on Charlotte, North Carolina-based Bank of America fell 45 to 295. Contracts tied to Wells Fargo & Co. of San Francisco declined 41 to 230, Phoenix and CMA DataVision prices show. Contracts on the Markit CDX North America Investment-Grade index of 125 companies in the U.S. and Canada declined 5 basis points to 236.5 basis points as of 11:04 a.m. in New York, Phoenix prices show. In London, the Markit iTraxx Financial index of 25 European financial companies fell eight basis points to 193 basis points, according to JPMorgan Chase & Co. The index is still trading wider than the broader iTraxx Europe index of 125 companies with investment-grade ratings. The iTraxx Europe declined 10 basis points to 192.5 basis points, JPMorgan prices show.

- Corn fell for the first time in four sessions and soybeans erased an earlier gain after the U.S. Department of Agriculture cut its forecast for global demand and said inventories will be bigger than expected a month ago. World corn reserves before this year’s harvest in the Northern Hemisphere will be 144.62 million metric tons, up 5.8 percent from 136.66 million estimated in February and higher than the 129.96 million held a year earlier, the USDA said in a report. Global soybean inventories on Sept. 30 will be 49.95 million tons, up from 49.87 million forecast in February, as global consumption drops 1.7 percent this year, the USDA said.

- German manufacturing orders collapsed in January as the global recession smothered exports. Orders plunged 38 percent from a year earlier, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry in Berlin said today. From December they fell 8 percent, four times as much as economists expected and extending their worst decline on record.

Wall Street Journal:

- Sports sponsorships by investment banks are the latest victim of the financial downturn, even in Asia, as banks are beginning to find the brand benefits associated with such events costly.

- Toyota Motor Corp. said hybrid sales under its namesake and Lexus brands have topped one million in the U.S., hitting the mark in less than nine years as consumers gravitated to the more fuel-efficient vehicles.

MarketWatch:
- An unexpected rise in petroleum supplies weighed on drilling and oil company shares on Wednesday as the sector fell back into the red after big gains in the previous session. Crude inventories rose by 700,000 million barrels, while analysts had expected a decline of 1 million barrels.

NY Times:

- Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens. The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say, but others say the conditions go beyond protecting taxpayers and border on social engineering.

CNNMoney.com:

- Worldwide smartphone sales grew 3.7% on the year to 38.1 million units in the fourth quarter 2008, research firm Gartner said Wednesday. Research In Motion (RIMM), the maker of Blackberry smartphones, increased its market share to 19.5% from 10.9%, as its sales grew 85% to 7.4 million units. Apple's (AAPL) market share increased to 10.7% from 5.2%, as its sales more than doubled, to 4.1 million units from 1.9 million.

Detroit Free Press:

- Greektown Casino increased its share of Detroit's gaming market in February -- as the three casinos reported that revenues were up more than 9% from January. "We are attracting folks that play at other properties ... it says that players are interested in what we have here, and folks are playing more with us than they had been," said Amanda Totaro, an executive with the Fine Point Group, a Las Vegas consultant working with Greektown.

PCMagazine:

- Is your second-generation iPod shuffle getting a bit too bulky? Not chatty enough?Not to worry. Apple(AAPL) on Wednesday unveiled a super-slim, 4GB iPod shuffle that holds up to 1,000 songs and includes a speech function that will read your song choices aloud. The revamped shuffle comes in at 1.8 inches tall and 0.3 inches thick, nearly half the size of the previous model, Apple said. All the controls are housed in the earphone cord. Can't remember the name of a song? Press a button and the VoiceOver feature will speak the names of song titles, artists, and playlist names. The option currently supports 14 languages, including French, Mandarin Chinese, and Swedish.

Reuters:
- Apple will take third-quarter delivery of newly developed 10-inch touchscreens from Taiwan, a source said on Wednesday, amid talk the U.S. firm is developing a touchscreen PC. Taiwan touchscreen specialist Wintek already makes small screens for Apple iPhones, and has received orders for the larger ones that are roughly the same size as those used in mini PCs, said the source close to the Taiwan firm.

- U.S. lawmakers unveiled a proposal on Wednesday to allow government approval of cheaper generic copies of biotechnology medicines that often cost tens of thousands of dollars per year. Democratic Rep. Henry Waxman and co-authors of the legislation said biotech drugs were the fastest-growing and most expensive components of the nation's prescription drug bill, and generic copies would save money for patients, employers, insurers and the federal government. Waxman's measure would give brand-name companies five years of market exclusivity for original products, and three years for modifications of existing products in some cases. The period could be extended by up to one year for pediatric studies or new uses, according to a summary of the bill.

- JPMorgan Chase & Co (JPM) Chief Executive Jamie Dimon said he sees "modest signs" of an economic recovery and endorsed a plan to create a U.S. systemic risk regulator. Dimon, speaking at a U.S. Chamber of Commerce economic conference, also said mark-to-market accounting may have been applied "to a ridiculous point."

- Bank of America Corp (BAC) has put a private bank it inherited from Merrill Lynch & Co on the block, and the largest U.S. bank may try to sell other assets as well. But unlike rival Citigroup Inc (C), which is planning a radical overhaul, Bank of America may not need capital so badly that it has to swallow hard and sell key assets it would rather keep, industry experts said.

- Top officials from Intel (INTC), Advanced Micro Devices (AMD) and other chipmakers met with lawmakers on Wednesday to argue against taxing corporations on profits made overseas and to lobby for more visas for skilled workers. President Barack Obama has proposed changing laws that allow U.S. firms to defer taxes on income earned overseas until the money is actually repatriated. The deferral was allowed since most countries do not tax overseas profits. "If you want to decrease our competitiveness, ... then raising our tax rate is absolutely the right thing to do," Intel Chairman Craig Barrett told reporters after visiting Capitol Hill.

- U.S. money market fund assets rose by $10.7 billion to $3.835 trillion in the latest week, the Money Fund report said on Wednesday.

- Some U.S. firms are not exercising enough judgment when applying mark-to-market accounting standards, a board member of the Financial Accounting Standards Board said on Wednesday. Lawrence Smith also said the accounting standards setter will "in the real short term" issue guidance on mark-to-market, or fair value, accounting that will address whether a market is active or inactive and whether a transaction is distressed.

International Herald Tribune:

- The hard-hit hedge fund industry is expected to shrink back to 2005 levels of about $1 trillion this year as cash-needy investors, rocked by the Bernard Madoff scandal and further performance losses, get a chance to exit. There is little relief in sight for funds as U.S. institutional investors pull out cash to meet commitments to private equity, while portfolios that locked up investor money last year will shortly see disillusioned investors leave. "I think we'll have two quarters of significant redemptions," said Chris Manser, the global head of funds of hedge funds at AXA Investment Managers. "Because of Madoff and very difficult performance, a lot of funds will be receiving high levels of redemptions."

Handelsblatt:

- RWE AG, Daimler AG and an alliance of more than twenty European carmakers and utilities want to fix a common standard in order to begin building a service network for electric cars. The companies want to reach an agreement on plug sockets, filling stations and other fixtures next month so that electric cars can be charged up anywhere.

Globe and Mail:

- Buried deep in the Water Quality Investment Act of 2009 - a proposed piece of U.S. legislation that would grant billions to state and local governments - Buy American is alive and well. The bill, which would finance more than $15-billion (U.S.) worth of water and sewage projects over the next five years, bars the use of all foreign-made iron, steel and other manufactured goods on such projects. "Overnight, it's going to cause huge damage to a lot of Canadian companies, including our own," said John Hayward, president of Hayward Gordon Ltd., a small Halton Hills, Ont.-based pump maker. "It's creating a lot of panic."

Al-Seyassah:

- OPEC is likely to cut output at its March 15 meeting to boost oil prices, citing Emad al-Ateeqi, a member of Kuwait’s Supreme Petroleum Council.

Bear Radar

Style Underperformer:
Large-cap Value (-.31%)

Sector Underperformers:
Oil Tankers (-3.40%), Insurance (-3.0%) and HMOs (-2.59%)

Stocks Falling on Unusual Volume:
EBS, CAH, MBT, ABT, HES, CHTT, PCLN, SPWRA, ATHN, UTHR, GENZ, ESRX, NTES, SAM and MCK

Stocks With Unusual Put Option Activity:
1) EXC 2) BDK 3) SPWRA 4) XTO 5) BWA

Bull Radar

Style Outperformer:
Small-cap Growth (+1.61%)

Sector Outperformers:
Banks (+4.59%), I-Banks (+4.10%) and Computer Hardware (+3.29%)

Stocks Rising on Unusual Volume:
CS, PNC, CMA, RTP, SLF, FCX, REP, EAT, SLH, PFCB, HPT, HMY, APA, WAG, DXPE, LHCG, APEI, CMTL, ZEUS, AAON, MCHP, LOPE, GTIV, JDAS, ANEN, ASCA, BWLD, PENN, SIVB, FSYS, RATE, XSD, WPC, TGP, AKO/A, KSP, TOO, BKE, JCG, BGH and MTN

Stocks With Unusual Call Option Activity:
1) CMCSK 2) MU 3) YRCW 4) NSM 5) PRU

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