Wednesday, May 25, 2005

Stocks Finish Modestly Lower on Light Volume Consolidation

S&P 500 1,190.01 -.34%
DJIA 10,457.80 -.44%
NASDAQ 2,050.12 -.56%
Russell 2000 606.40 -1.07%
DJ Wilshire 5000 11,729.34 -.43%
S&P Barra Growth 576.17 -.36%
S&P Barra Value 609.33 -.32%
Morgan Stanley Consumer 587.54 -.40%
Morgan Stanley Cyclical 719.07 -.74%
Morgan Stanley Technology 477.14 -.64%
Transports 3,599.49 -.91%
Utilities 362.48 -.28%
Put/Call 1.02 +37.84%
NYSE Arms .84 -16.05%
Volatility(VIX) 12.58 -.87%
ISE Sentiment 156.00 +2.63%
US Dollar 86.35 -.02%
CRB 299.24 +.85%

Futures Spot Prices
Crude Oil 50.96 +2.60%
Unleaded Gasoline 145.10 +1.70%
Natural Gas 6.30 -.69%
Heating Oil 142.50 +2.73%
Gold 419.50 +.14%
Base Metals 121.84 +.22%
Copper 141.95 unch.
10-year US Treasury Yield 4.08 +1.47%

Leading Sectors
Oil Tankers +1.83%
Oil Service +1.71%
Energy +1.18%

Lagging Sectors
Semis -1.10%
Airlines -1.23%
Steel -2.82%

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
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on ALK.
- Rated AEP, DUK and ED Underperform.
- Rated NRG, ETR Outperform.

Afternoon/Evening Headlines
- Ratings on Fox’s “American Idol” television show surged last night and a large audience for tonight’s finale probably will help the network win the closest May audience-ratings period ever among younger viewers.
- Northrop Grumman and General Dynamics would simultaneously build versions of the Navy’s DD(X) destroyer under a service proposal intended to reduce long-term costs, the Navy’s top acquisition officer said.

- Investors are becoming more confident that inflation in the US “won’t run away” as oil and commodity prices fall, PIMCO Managing Director William Gross said.

Gannett News:
- International Brotherhood of Teamsters President Hoffa broke with other labor union leaders Tuesday and commended President Bush’s efforts to discuss possible remedies to the looming Social Security crisis.

Chicago Tribune:
- McDonald’s seeks to lure younger, more tech-savvy customers by offering them the ability to surf the Internet, download music and burn CDs in a test restaurant in a Chicago suburb.

BOTTOM LINE: The Portfolio finished unchanged today as gains in my Internet/Networking longs and Steel shorts offset losses in my Wireless and Homebuilding longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was weak today as the advance/decline finished lower, sector performance was mixed and volume was light. Measures of investor anxiety were mostly lower into the close. Overall, today’s market action was slightly negative considering the bounce from early session lows. Today’s afternoon strength bodes well for further gains tomorrow. Long-term rates look like they have begun the counter-trend rally I expected as the 10-year T-note yield hit 4.0% this morning and finished at 4.08%. I still expect rates to breach the 4.0% level over the coming weeks. As well, the spread between the November crude contract and the spot price has narrowed from $4.15 a week ago to $1.55 currently. As this spread evaporates over the coming weeks, I expect the second leg down in oil prices to begin. I still believe crude will touch $35/bbl. during the second half of the year and average $30-$35/bbl. next year.

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