Stocks Slightly Higher Mid-day, Led by Energy and Homebuilders

Indices
S&P 500 1,220.00 +.20%
DJIA 10,521.97 +.02%
NASDAQ 2,150.78 +.63%
Russell 2000 661.10 +.86%
DJ Wilshire 5000 12,178.31 +.33%
S&P Barra Growth 584.56 +.28%
S&P Barra Value 631.45 +.16%
Morgan Stanley Consumer 582.77 -.11%
Morgan Stanley Cyclical 735.65 -.08%
Morgan Stanley Technology 498.55 +.37%
Transports 3,700.93 +1.08%
Utilities 400.34 +.35%
Put/Call .85 -16.67%
NYSE Arms 1.00 -18.49%
Volatility(VIX) 13.16 -1.35%
ISE Sentiment 121.00 -37.63%
US Dollar 87.91 -.19%
CRB 318.32 +.24%

Futures Spot Prices
Crude Oil 66.60 +1.35%
Unleaded Gasoline 189.30 +1.88%
Natural Gas 9.84 +1.62%
Heating Oil 184.00 +1.13%
Gold 441.90 -.52%
Base Metals 129.98 -.75%
Copper 162.50 -1.10%
10-year US Treasury Yield 4.17% -.09%

Leading Sectors
Oil Tankers +5.54%
Oil Service +1.96%
Homebuilders +1.84%

Lagging Sectors
Airlines -.91%
Gold & Silver -1.15%
Steel -1.32%

BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Medical Information Systems, Internet and Semiconductor longs. I exited by IWM and QQQQ shorts this morning, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are gaining and volume is about average. Measures of investor anxiety are mostly lower. Today’s overall market action is positive given the rise in oil. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering.

Today's Headlines

Bloomberg:
- Iraq’s southern marshlands, which ousted dictator Saddam Hussein almost destroyed to punish Shiites for an uprising have recovered almost 37% of their former condition.
- Electronic Data Systems said it will get another $1.4 billion in revenue after the UK’s pension agency extended its contracts by two years.
- Crude oil is rising and natural gas reached $10 for the first time in 30 months and the third time ever on concern that a storm heading for Florida may threaten production platforms in the Gulf.

Wall Street Journal:
- United Auto Workers expects 2006 to be a bleak year for General Motors and the union is considering helping the carmaker cut costs, a senior official told a meeting of organized labor leaders.
- International demand for US mortgage-based securities has enabled US lenders to boost lending and sustain housing prices.
- Some US retailers are offering “employee discounts” to customers, hoping to copy the success of GM, DaimlerChrysler AG and Ford with the promotion.
- Lenovo Group of China took over IBM’s unprofitable pc business in May and posted a $33 million operating profit for May and June together.
- Starwood Hotels plans to spend $1.7 billion to put the first of its W brand hotels in Las Vegas.

NY Post:
- The SEC, the NASD and the NYSE have been auditing brokerages to eliminate “naked short selling.”

Detroit News:
- Ford Motor plans to announce its second major restructuring in four years within the next several months.

Austin American-Statesman:
- Texas state and local governments plan to offer Samsung Electronics as much as $225 million of incentives to build a chip plan in Austin.

Gulf News:
- At least 10,000 students from Saudi Arabia are applying to study at US universities this year as the government seeks to encourage the nation’s young people to shun Muslim extremism.

Finanz & Wirtschaft:
- Allergan, the maker of Botox, is looking to buy companies to help it triple in size over the next 10 years, CEO David Pyott said.

Xinhua News:
- China should adopt “forceful” measures to slow growth of industries that have over-expanded.

Durable Goods Orders Slow, New Home Sales Soar, Distillate Inventories Rise

- Durable Goods Orders for July fell 4.9% versus estimates of a 1.5% decrease and an upwardly revised 1.9% gain in June.
- Durables Ex Transportation for July fell 3.2% versus estimates of a .8% fall and an upwardly revised 3.6% gain in June.
- New Home Sales for July rose to 1410K versus estimates of 1328K and 1324K in June.
- The EIA reported crude inventories rose 1.85 million barrels vs. estimates of a 100,000 barrel increase. Gasoline inventories fell 3.25M barrels vs. estimates of a 1.5 million-barrel decline. Distillate inventories rose 1.43 million barrels vs. estimates of a 1.75 million-barrel increase.

BOTTOM LINE: US orders for durable goods declined more than forecast in July after a three-month surge, reflecting less demand for aircraft, computers and communications equipment, Bloomberg reported. Orders for non-defense capital goods excluding aircraft, a proxy for future corporate investment, declined 3.7% last month, the largest amount since October 2004.

US new home sales unexpectedly rose to a another all-time high last month as mortgage rates below 6% and steady employment gains sent American streaming into the housing market, Bloomberg said. The median price of a new home fell to $203,800, the lowest since December 2003. New Home Sales rose 36% in the West and 10.1% in the Northeast. However, they fell 13.5% in the Midwest and 3.5% in the South. Finally, the supply of new homes for sale at the current pace fell to 4 months from 4.1 months in June.

Oil is trading modestly higher on the inventory report. I continue to believe a meaningful decline in crude will begin over the next 6 weeks as terrorism/hurricane fears peak and demand for oil falls more than expected during the fourth quarter.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Stocks Finish Modestly Lower on Light Volume

Indices
S&P 500 1,217.59 -.34%
DJIA 10,519.58 -.48%
NASDAQ 2,137.25 -.19%
Russell 2000 655.47 -.30%
DJ Wilshire 5000 12,138.21 -.29%
S&P Barra Growth 582.87 -.29%
S&P Barra Value 630.43 -.38%
Morgan Stanley Consumer 583.42 -.25%
Morgan Stanley Cyclical 736.22 -.95%
Morgan Stanley Technology 496.71 -.02%
Transports 3,661.34 -1.72%
Utilities 398.94 +.57%
Put/Call 1.02 +13.33%
NYSE Arms 1.22 +6.24%
Volatility(VIX) 13.34 -.60%
ISE Sentiment 194.00 +22.01%
US Dollar 88.08 -.07%
CRB 317.56 +.14%

Futures Spot Prices
Crude Oil 66.24 +.91%
Unleaded Gasoline 186.90 +.40%
Natural Gas 9.98 +4.33%
Heating Oil 183.20 +1.13%
Gold 444.40 +.32%
Base Metals 130.96 -.44%
Copper 164.05 -.03%
10-year US Treasury Yield 4.17% -.69%

Leading Sectors
Disk Drives +.59%
Utilities +.54%
Networking +.54%

Lagging Sectors
Oil Tankers -1.47%
Papers -1.83%
Steel -2.83%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on BSX.
- Rated the Steel Service Sector In-line.

Afternoon/Evening Headlines
Bloomberg:
- Baidu.com, China’s most-used Internet search engine, said second-quarter profit jumped more than sevenfold as it sold more Web advertising.
- US Treasuries rose, pushing 10-year note yields to the lowest in a month.
- The number of Americans traveling for the Labor Day weekend may have the smallest increase for any holiday period in more than two years amid record gasoline prices.

BOTTOM LINE: The Portfolio finished higher today on gains in my Medical and Semiconductor longs and Oil Tanker shorts. I did not trade in the afternoon, thus leaving the Portfolio 50% net long. The tone of the market was modestly negative today as the advance/decline line finished lower, most sectors fell and volume was below average. Measures of investor anxiety were mixed into the close. Overall, today’s market action was slightly negative as stocks continue to consolidate recent gains.

Stocks Quietly Mixed Mid-day, Continuing Recent Consolidation

Indices
S&P 500 1,219.51 -.18%
DJIA 10,541.55 -.26%
NASDAQ 2,139.17 -.10%
Russell 2000 655.72 -.27%
DJ Wilshire 5000 12,151.91 -.18%
S&P Barra Growth 583.87 -.12%
S&P Barra Value 631.15 -.27%
Morgan Stanley Consumer 583.99 -.15%
Morgan Stanley Cyclical 737.86 -.72%
Morgan Stanley Technology 496.92 +.02%
Transports 3,674.41 -1.33%
Utilities 400.05 +.89%
Put/Call 1.09 +21.11%
NYSE Arms 1.20 +4.32%
Volatility(VIX) 13.55 +.97%
ISE Sentiment 219.00 +37.74%
US Dollar 88.06 -.10%
CRB 316.97 -.05%

Futures Spot Prices
Crude Oil 65.55 -.15%
Unleaded Gasoline 184.10 -1.11%
Natural Gas 9.63 +.69%
Heating Oil 181.90 +.41%
Gold 444.30 +.29%
Base Metals 130.96 -.44%
Copper 164.30 +.12%
10-year US Treasury Yield 4.17% -.78%

Leading Sectors
Networking +.66%
Utilities +.66%
Tobacco +.60%

Lagging Sectors
Homebuilders -1.27%
Oil Tankers -1.50%
Steel -2.60%

BOTTOM LINE: The Portfolio is higher mid-day on gains in my Medical and Semiconductor longs and Oil Tanker shorts. I added OS short this morning and added to existing longs, thus leaving the Portfolio 50% net long. I am using a $23 stop-loss on this position. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is light. Measures of investor anxiety are mostly higher. Today’s overall market action is slightly negative. The Johnson Redbook same-store sales index rose 3.90% year over year last week vs. a 3.8% rise the prior week. This week's gain is up from a 1.5% increase in late April and the 16th week in a row the index has exceeded 3%. I see very little evidence of any significant consumer weakness. Last month's "disappointing" retail reports were mostly a function of elevated expectations, near-record home sales, soaring auto sales and very hot weather. I am still looking to purchase shares of select retailers over the next few weeks for what I believe will be a strong year end. I expect US stocks to trade mixed-to-higher from current levels into the close on modestly lower interest rates and energy prices.