Wednesday, October 25, 2006

Dow Jones Industrial Average Makes Another All-time High as Long-term Rates Decline on FOMC Policy Statement

Indices
S&P 500 1,382.22 +.35%
DJIA 12,134.68 +.06%
NASDAQ 2,356.59 +.50%
Russell 2000 767.15 +.62%
Wilshire 5000 13,820.65 +.40%
S&P Barra Growth 641.20 +.41%
S&P Barra Value 738.92 +.29%
Morgan Stanley Consumer 670.09 +.34%
Morgan Stanley Cyclical 861.44 +.04%
Morgan Stanley Technology 551.19 +1.27%
Transports 4,782.25 +1.07%
Utilities 452.30 +.81%
Put/Call .84 -22.22%
NYSE Arms 1.06 +22.98%
Volatility(VIX) 10.66 -1.11%
ISE Sentiment 151.0 -1.94%
US Dollar 86.38 -.37%
CRB 312.77 +1.70%

Futures Spot Prices
Crude Oil 61.60 +3.79%
Unleaded Gasoline 159.35 +3.61%
Natural Gas 7.77 +9.58%
Heating Oil 174.10 +2.70%
Gold 594.20 +.58%
Base Metals 243.79 +.56%
Copper 339.80 -.19%
10-year US Treasury Yield 4.76% -1.08%

Leading Sectors
Gold & Silver +2.91%
Disk Drives +2.89%
Semis +2.60%

Lagging Sectors
Airlines -1.15%
Defense -1.24%
HMOs -2.23%

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
Bank of America:
- Rated (GOOG) Buy, target $597.
- Rated (YHOO) Buy, target $34.
- Rated (AMZN) Buy, target $45.

Afternoon/Evening Headlines
Bloomberg:
- The Dow Jones Industrial Average hit another all-time high and bonds rallied after the Federal Reserve left interest rates unchanged for a third straight meeting and suggested that moderate economic growth will keep inflation from accelerating.
- Clear Channel Communications(CCU) said it is considering a possible sale of the company and hired Goldman Sachs(GS) as adviser.
- Goldman Sachs(GS) invited 115 employees to become partners, a designation that rewards them with a bigger share of bonuses at the securities industry’s most profitable firm.
- The Fed kept its benchmark interest rate at 5.25% for a third month and played down concerns that the housing slump will jeopardize the five-year economic expansion.
- Democratic Party allies, including labor unions and activists, are outspending their Republican counterparts by more than 2-to-1 in the final weeks of the congressional campaign, Federal Election Commission figures show.
- Bain Capital LLC may bid for Tribune(TRB), jumping into a crowded takeover contest.
- Hedge fund Moore Capital Management said it will open an office in Canada with a new team of traders hired from Amaranth Advisers, the Greenwich, Conn. Firm that lost $6.6 billion last month on natural gas trades.
- NASD fined the CEO of the James River Capital hedge fund a record $2.25 million over accusations he used deception to engage in timed trading.

CNBC:
- The Federal Reserve will cut its benchmark interest rate to 5% from 5.25% early next year, Bill Gross, CIO of PIMCO said.

Detroit Free Press:
- President Bush has set a date to meet with the CEOs of Detroit’s autmakers.

Financial Times Deutschland:
- Advanced Micro Devices(AMD), Intel’s(INTC) largest rival in PC processors, forecast a reduction in the price competition between it and Intel in the coming year, citing CEO Ruiz.

AP:
- The Ohio Supreme Court today upheld the constitutionality of privately operated, publicly funded charter schools, saying the creation of differently financed schools was within the state legislature’s authority.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Internet longs and Computer longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished higher, most sectors rose and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was bullish. Despite the substantial bounce in energy prices, the 10-year yield finished at session lows, falling 5 basis points to 4.76%. This bodes well for even lower rates over the coming weeks. We had two more potential negative catalysts today with oil and the Fed, and the bears were unable to capitalize. I suspect another round of short-covering is under way.

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