Thursday, May 12, 2005

Stocks Lower Mid-day on Steep Declines in Commodity Stocks

S&P 500 1,160.17 -.93%
DJIA 10,212.17 -.54%
NASDAQ 1,961.25 -.52%
Russell 2000 587.25 -1.39%
DJ Wilshire 5000 11,424.65 -.96%
S&P Barra Growth 561.68 -.80%
S&P Barra Value 594.34 -1.01%
Morgan Stanley Consumer 578.90 -.48%
Morgan Stanley Cyclical 692.79 -2.20%
Morgan Stanley Technology 448.17 +.01%
Transports 3,441.92 -2.60%
Utilities 363.16 -.96%
Put/Call .81 -19.0%
NYSE Arms 1.19 +50.19%
Volatility(VIX) 15.75 +9.0%
ISE Sentiment 115.0 -24.34%
US Dollar 85.50 +.72%
CRB 295.96 -1.65%

Futures Spot Prices
Crude Oil 48.70 -3.47%
Unleaded Gasoline 143.30 -3.24%
Natural Gas 6.50 -2.74%
Heating Oil 137.80 -1.79%
Gold 422.30 -1.31%
Base Metals 122.25 -.85%
Copper 138.20 -4.19%
10-year US Treasury Yield 4.18% -.52%

Leading Sectors
Semis +.49%
Internet +.49%
Airlines +.20%

Lagging Sectors
Oil Tankers -4.24%
Oil Service -4.31%
Steel -5.58%
BOTTOM LINE: The Portfolio is slightly higher mid-day on gains in my Energy-related and Base Metal shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are lower and volume is average. Measures of investor anxiety are mostly higher. Today’s overall market action is negative considering the declines in energy prices and strong retail report. The commodity declines I have been warning about since last year are finally here. Investors appear to be incorrectly assuming these declines mean US growth is slowing substantially. As well, the rising US dollar is prompting fears of earnings misses at multi-national companies and more hedge-fund blow-ups. My entire positive thesis for the second half of the year is built around declining commodity prices. I do not believe the dollar will rise enough to hurt earnings at most companies. Any hedge fund blow-ups will likely be minor dislocations. In my opinion, longer-term investors should use any further weakness to accumulate shares in favorite longs. I expect US stocks to trade higher into the close on short-covering, bargain hunting and lower energy prices.

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