Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as tax hike worries, profit-taking, China bubble concerns and more shorting offset less economic fear, investment manager performance anxiety, and mostly positive earnings reports. My intermediate-term trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,1217.28 +2.11%*



The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,1217.28 +2.11%
  
• DJIA 11,204.28 +1.68%
  
• NASDAQ 2,530.15 +1.97%
  
• Russell 2000 714.92 +3.82%
  
• Wilshire 5000 12,607.66 +2.34%
  
• Russell 1000 Growth 540.02 +1.71%
  
• Russell 1000 Value 632.77 +2.73%
  
• Morgan Stanley Consumer 730.59 +1.93%
  
• Morgan Stanley Cyclical 967.01 +3.41%
• Morgan Stanley Technology 623.53 +.91%
  
• Transports 4,751.33 +2.27%
  
• Utilities 388.52 +2.39%
  
• MSCI Emerging Markets 42.81 -.06%
  
• Lyxor L/S Equity Long Bias Index 1,007.99 -.14%
  
• Lyxor L/S Equity Variable Bias Index 866.38 -.43%
  
• Lyxor L/S Equity Short Bias Index 852.03 +1.05%
  

Sentiment/Internals

• NYSE Cumulative A/D Line +93,851 +4.79%
  
• Bloomberg New Highs-Lows Index +1,216 +8
  
• Bloomberg Crude Oil % Bulls 35.0 -20.45%
  
• CFTC Oil Net Speculative Position +121,475 +7.15%
  
• CFTC Oil Total Open Interest 1,356,869 -2.55%
  
• Total Put/Call .70 -17.65%
  
• OEX Put/Call .45 -65.65%
  
• ISE Sentiment 144.0 +34.55%
  
• NYSE Arms 1.25 -58.47%
  
• Volatility(VIX) 16.62 -9.48%
  
• G7 Currency Volatility (VXY) 11.22 +2.09%
  
• Smart Money Flow Index 9,831.17 +.42%
  
• Money Mkt Mutual Fund Assets $2.878 Trillion -1.2%
  
• AAII % Bulls 38.12 -21.37%
  
• AAII % Bears 34.25 +15.32%
  

Futures Spot Prices

• CRB Index 279.05 +.99%
  
• Crude Oil 85.12 +.83%
  
• Reformulated Gasoline 235.31 +3.54%
  
• Natural Gas 4.12 +4.20%
  
• Heating Oil 225.05 +1.72%
  
• Gold 1,153.70 +1.40%
  
• Bloomberg Base Metals 224.50 -4.35%
  
• Copper 353.05 -.37%
  
• US No. 1 Heavy Melt Scrap Steel 373.33 USD/Ton +6.16
  
• China Hot Rolled Domestic Steel Sheet 4,680 Yuan/Ton +.06%
• S&P GSCI Agriculture 309.95 -.01%
  

Economy

• ECRI Weekly Leading Economic Index 133.0 +1.29%
  
• Citi US Economic Surprise Index +23.50 -4.5 points
  
• Fed Fund Futures imply 86.0% chance of no change, 14.0% chance of 25 basis point cut on 4/28
• US Dollar Index 81.35 +.65%
  
• Yield Curve 274.0 -7 basis points
  
• 10-Year US Treasury Yield 3.81% +5 basis points
  
• Federal Reserve's Balance Sheet $2.320 Trillion -.07%
  
• U.S. Sovereign Debt Credit Default Swap 38.0 +5.55%
  
• Western Europe Sovereign Debt Credit Default Swap Index 100.17 +9.67%
  
• 10-Year TIPS Spread 2.37% +3 basis points
  
• TED Spread 17.0 +2 basis points
  
• N. America Investment Grade Credit Default Swap Index 88.78 +5.11%
  
• Euro Financial Sector Credit Default Swap Index 96.53 +23.08%
  
• Emerging Markets Credit Default Swap Index 211.44 +.04%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 226.0 unch.
  
• M1 Money Supply $1.686 Trillion -1.21%
• Business Loans 618.50 +.72%
  
• 4-Week Moving Average of Jobless Claims 460,300 +.6%
  
• Continuing Claims Unemployment Rate 3.6% unch.
  
• Average 30-Year Mortgage Rate 5.07% unch.
  
• Weekly Mortgage Applications 550.60 +13.60%
  
• ABC Consumer Confidence -50 -3 points
  
• Weekly Retail Sales +3.0% -30 basis points
  
• Nationwide Gas $2.85/gallon -.01/gallon
  
• U.S. Cooling Demand Next 7 Days 15.0% below normal
• Baltic Dry Index 3,013 +.13%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 67.50 unch.
  
• Rail Freight Carloads 209,903 +3.12%
  
• Iraqi 2028 Government Bonds 83.0 +.12%
  

Best Performing Style

• Small-Cap Value +4.86%

Worst Performing Style

• Large-Cap Growth +1.71%

Leading Sectors

• Disk Drives +8.96%
• Homebuilders +8.59%
• Oil Service +8.13%
• REITs +6.84%
• Gaming +6.65%

Lagging Sectors

• Education -1.0%
• Drugs -1.18%
• Biotech -1.40%
• Airlines -1.86%
• Medical Equipment -2.16%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Higher into Final Hour on Less Economic Fear, Earnings Optimism, Short-Covering, Diminishing Financial Sector Pessimism

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Mostly Higher
  
• Volume: Above Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 16.24 -1.40%
  
• ISE Sentiment Index 149.0 +25.21%
  
• Total Put/Call .66 -12.0%
  
• NYSE Arms 1.28 -2.0%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.78 bps -1.06%
  
• European Financial Sector CDS Index 97.91 bps +9.87%
  
• Western Europe Sovereign Debt CDS Index 100.17 bps unch.
  
• Emerging Market CDS Index 211.21 bps -.51%
  
• 2-Year Swap Spread 18.0 unch.
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 274.0 -1 bp
  
• China Import Iron Ore Spot $184.80/Metric Tonne +.05%
  
• Citi US Economic Surprise Index +23.50 +1.9 points
  
• 10-Year TIPS Spread 2.37% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +120 open in Japan
• DAX Futures: Indicating +20 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Financial and Tech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as equities reverse morning losses and move to session highs on good volume. On the positive side, Airline, Gaming, Homebuilding, Disk Drive, Computer Hardware, Oil Service, Energy and Coal stocks are especially strong, rising 2.0%+. Cyclicals are relatively strong again. (IYR) has outperformed throughout most of the day. The US scrap steel benchmark price is rising another +4.2% today and has risen +6.2% over the last five days. On the negative side, Education and Wireless shares are under meaningful pressure, falling .75%+. The Greece sovereign cds is rising another +2.4% today to 626.0 bps and the Portugal sovereign cds is jumping +5.6% to 276.75 bps. As I said yesterday, it appears as though US assets are under accumulation by global financial institutions that are fleeing the instability in Europe. Moreover, the US economy is currently in a "Goldilocks" position compared to most of the rest of the world. Investors seem to perceive Asia/Latin America as running too hot, while most of Europe is viewed as running too cold. One of my longs, (DISCA), is hitting another new all-time high today. I would wait for a market-related pullback before accumulating more shares in this stock that I still view as having strong longer-term fundamentals. Here are the other recently mentioned positions that I am still long: (AAPL), (GOOG), (CREE), (RUE), (F), (SXCI), (ISRG), (HGSI) and (ASEI). I expect US stocks to trade modestly higher into the close from current levels on short-covering, less financial sector pessimism, diminishing economic fear and earnings optimism.

Today's Headlines

Bloomberg:

• New Home Sales Surge 27%, Goods Orders Climb. Sales of new homes surged 27 percent in March and orders for most durable goods climbed, indicating the U.S. economy sped up heading into the second quarter. The gain in new-home sales was the biggest in 47 years as buyers rushed to qualify for a government tax credit and the weather improved, a Commerce Department report showed. Bookings for goods meant to last at least three years, excluding cars and aircraft, climbed 2.8 percent. Sales increased in all four U.S. regions last month, led by a 44 percent jump in the South. The median price of a new home increased 4.3 percent in March from a year earlier to $214,000. The gain in orders for durable goods excluding transportation equipment last month was the biggest since the recession began in December 2007, another Commerce Department today showed. Business investment in equipment and software climbed at a 19 percent annual rate in the fourth quarter, the biggest gain in 11 years. Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, increased 4 percent. Shipments of those items, used in calculating gross domestic product, increased 2.2 percent.
• IMF's Lipsky Confident Greek Plan Will Be Adopted, Help Economy. The International Monetary Fund’s No. 2 official said he’s confident a plan to reduce Greece’s budget deficit will be adopted, enabling the institution and euro-area countries to send a financial lifeline. “A coherent, multi-year economic program of adjustment is being negotiated right now in Athens, will be agreed I believe, I’m confident will be put in place, will receive the requisite support that has been pledged,” John Lipsky said in an interview today with Tom Keene on Bloomberg Radio. “It’s going to take sustained effort over a period of time but I think we can do it.”
• Mountaintop Coal Rules May Send More U.S. Miners Underground. A U.S. crackdown on mountaintop mining in Appalachia may force coal producers to rely increasingly on underground sites such as the Massey Energy Co.(MEE) mine where 29 workers were killed this month in West Virginia. Four days before the April 5 accident, the U.S. Environmental Protection Agency issued water-pollution guidelines making it difficult for operators to secure permits for new above-ground mining in the region.
• UBS Exits Short-Dollar Recommendation, Citing Growth Surprise. UBS AG recommended that investors close short bets that the dollar will fall against the euro, pound, Australian dollar and yen. The eight-week moving average of the U.S. growth surprise index rose above the 1.5 standard deviation band, wrote Geoffrey Kendrick, a foreign-exchange strategist at UBS in London, in a research note today. “The dollar recommendation is closed,” Kendrick wrote. A short is a bet a currency will decrease.

Wall Street Journal:

• 2 More Signs china's Economy is Overheating. The Chinese central bank’s latest analysis of the economy (original Chinese-language PDF here) has two interesting pieces of data that could help shift the debate about just how hot the Chinese economy is running. So far, the government seems to be taking the view that China’s main problem is that property prices are too high, not that the total economy is overheating. Most of its policy measures in recent weeks have focused narrowly on reining in property speculation, while conspicuously avoiding broader measures – like interest rate hikes – that would affect everyone. Many outside observers, including the World Bank, think China still needs tighter overall monetary policy if it is to avoid inflation and overheating.

CNBC:

• Goldman(GS) Staffer's Book: 'How I Caused Credit Crunch'.

Business Insider:

• Microsoft's(MSFT) Bing/MSN Results Truly Horrifying - Loss Rate Balloons to $3 Billion/Year.

Forbes:

• Those Bullish Spreads. The global yield curve is steeper than it has been in half a century. That's a sign of strengthening economies.
  

Washington Times:

• 3 Million in Middle Class to Pay Health Law Penalty. Some 3 million middle-class Americans will be required to pay a penalty for not getting health insurance under the Obama administration's new health care law, raising questions about the president's willingness to break a campaign promise by increasing taxes on some families earning less than $250,000. A Congressional Budget Office analysis released Thursday said the average cost of the penalty will be slightly more than $1,000 apiece in 2016. Republicans chided the Obama administration for hurting middle-class Americans. "The president and his supporters in Congress are celebrating the benefits of health reform, but they also have an obligation to acknowledge the other side of the coin," said Sen. Charles E. Grassley of Iowa, the top Republican on the Senate Finance Committee. "There's a price for not participating, and people will pay it."

LA Times:

• Federal Investigation Boosts Concerns Over Debt-Relief Firms. A new report by undercover government investigators bolsters longstanding concerns that companies promising to help consumers overwhelmed by credit card and other debts often turn out to be financial predators that charge high fees but deliver little or nothing in return. When investigators for the Government Accountability Office posed as distressed consumers seeking help, so-called debt management companies gave them wildly exaggerated descriptions of the firms' success rates and sometimes promised savings of as much as 50 cents on the dollar, Gregory Kutz, the GAO official who ran the investigation, told Congress on Thursday. But after paying big up-front fees, often running to several thousand dollars, many consumers end up deeper in debt than they were before seeking help, Kutz said.

The Big Money:

• Starbucks(SBUX) Results Prove Recession's Over. If a national economic recovery is defined as two quarters of growth in a row, how should we define what's happening at Starbucks? Boom times. Profits: up eightfold in the second quarter. Revenues: up 9 percent. Same-store sales: up 7 percent. The company also boosted its profit forecast for the year from between $1.05 and $1.08 a share to between $1.19 and $1.22. "Given the substantial headwinds facing Starbucks during the past two years, the firm's rapid turnaround has been nothing short of remarkable," wrote Morningstar analyst R.J. Hottovy in a note today.

Institutional Investor:

• The Decline of Funds of Funds.

Chicago Sun-Times:

• Financial Reform Fails to Tackle Real Issues.

National Review:

• Goldman Sachs(GS) and the Left. An impressionistic study in cronyism.

Rasmussen Reports:

• 60% Say Capitalism Better Than Socialism. Sixty percent (60%) of U.S. adults nationwide say that capitalism is better than socialism. A new Rasmussen Reports telephone survey finds that 18% disagree.

Politico:

• Schumer: Obama's 'Counter-Productive' Israel Policy 'Has to Stop'. New York Senator Chuck Schumer harshly criticized the Obama Administration's attempts to exert pressure on Israel today, making him the highest-ranking Democrat to object to Obama's policies in such blunt terms. Schumer, along with a majority of members of the House and Senate, signed on to letters politely suggesting the U.S. keep its disagreements with Israel private, a tacit objection to the administration's very public rebuke of the Jewish State over construction in Jerusalem last month. But Schumer dramatically sharpened his tone on the politically conservative Jewish Nachum Segal Show today, calling the White House stance to date "counter-productive" and describing his own threat to "blast" the Administration had the State Department not backed down from its "terrible" tough talk toward Prime Minister Benjamin Netanyahu.

Reuters:

• US Economic Growth Gauge Shows Recovery on Track - ECRI.

Financial Times:

• Why Bets on Synthetic CDOs Must Be Banned.

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.09%)

Sector Underperformers:

• Education (-2.99%), Wireless (-1.0%) and Software (-.88%)

Stocks Falling on Unusual Volume:

• OPLK, PEGA, CYMI, INFA, CTL, AVID, AMSG, ASBC, EPAY, ALGN, BUCY, MSCC, AMZN, CAKE, QCOM, GVA, NCR, CTL, IR and BXS
  

Stocks With Unusual Put Option Activity:

• 1) SYNA 2) DTV 3) IP 4) WU 5) BAX