Friday, September 30, 2005

Stocks Mixed Mid-day as Rising Long-term Rates Offset Lower Energy Prices

Indices
S&P 500 1,226.08 -.13%
DJIA 10,535.33 -.17%
NASDAQ 2,142.72 +.06%
Russell 2000 665.07 +.01%
DJ Wilshire 5000 12,253.87 -.01%
S&P Barra Growth 585.31 -.14%
S&P Barra Value 636.51 -.13%
Morgan Stanley Consumer 584.77 +.06%
Morgan Stanley Cyclical 728.39 +.38%
Morgan Stanley Technology 504.68 +.53%
Transports 3,731.65 +.36%
Utilities 431.25 -.40%
Put/Call .74 -5.13%
NYSE Arms .76 -2.35%
Volatility(VIX) 12.24 unch.
ISE Sentiment 206.00 +21.89%
US Dollar 89.41 +.01%
CRB 333.04 -.54%

Futures Spot Prices
Crude Oil 66.00 -1.03%
Unleaded Gasoline 208.00 -7.62%
Natural Gas 14.20 +.03%
Heating Oil 206.50 -2.81%
Gold 472.00 -.80%
Base Metals 129.51 -1.24%
Copper 172.90 -.60%
10-year US Treasury Yield 4.33% +.87%

Leading Sectors %
Airlines +2.36%
Semis +1.74%
Nanotechnology +1.62%

Lagging Sectors
Oil Service -.73%
Energy -.79%
Gold & Silver -1.10%
BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet longs, Semiconductor longs and Airline longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is slightly lower, most sectors are higher and volume is slightly below average. Measures of investor anxiety are lower. Today’s overall market action is neutral given the bounce in long-term rates, decline in energy prices and mixed economic data. I am seeing a number of leading indicators that point to a deceleration in unit labor costs, which comprise two-thirds of inflation. The Fed has stated numerous times that this is their chief focus with respect to inflation. I believe the net effects of the hurricanes will further dampen labor costs. I will be very surprised if the yield on the 10-year Treasury note breaches the high of 4.92% seen in June of last year any time soon. I expect US stocks to trade modestly higher from current levels into the close on short-covering and quarter-end window dressing.

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