Tuesday, March 13, 2007

Stocks Finish Sharply Lower on Continuing Subprime Concerns

Indices
S&P 500 1,377.95 -2.04%
DJIA 12,075.96 -1.97%
NASDAQ 2,350.57 -2.15%
Russell 2000 769.12 -2.52%
Wilshire 5000 13,907.89 -2.04%
Russell 1000 Growth 544.79 -1.94%
Russell 1000 Value 793.64 -2.11%
Morgan Stanley Consumer 682.93 -1.75%
Morgan Stanley Cyclical 925.56 -1.92%
Morgan Stanley Technology 547.46 -2.20%
Transports 4,726.56 -2.65%
Utilities 473.87 -1.49%
MSCI Emerging Markets 110.76 -1.71%

Sentiment/Internals
Total Put/Call 1.40 +34.62%
NYSE Arms 2.80 +118.18%
Volatility(VIX) 18.13 +29.6%
ISE Sentiment 95.0 -9.52%

Futures Spot Prices
Crude Oil 58.07 -1.43%
Reformulated Gasoline 193.65 +1.36%
Natural Gas 6.92 +.20%
Heating Oil 169.90 +.99%
Gold 644.40 -.91%
Base Metals 242.55 +1.49%
Copper 279.70 -1.83%

Economy
10-year US Treasury Yield 4.49% - 6 basis points
US Dollar 83.72 -.19%
CRB Index 304.52 -.60%

Leading Sectors
Telecom -.50%
Hospitals -.64%
Wireless -.77%

Lagging Sectors
Homebuilders -3.42%
Gold & Silver -3.91%
I-Banks -4.42%

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
Citigroup:
- Reiterated Buy on (MCO).

Afternoon/Evening Headlines
Bloomberg:
- US stocks fell today, erasing three days of gains on continuing subprime mortgage worries.
- Treasury Secretary Henry Paulson, seeking a consensus among financial luminaries, pledged swift action to ensure the US remains the world’s dominant capital market.
- House Financial Services Committee Chairman Barney Frank asked whether pension-fund investment in hedge funds poses risks to the financial system and individual investors, and if so, what Congress should do about it.
- OPEC may increase production if demand for crude increases, the group’s president said.
- Crude oil fell over $2/bbl. from session highs below $58/bbl. on comments from OPEC and worries over slowing global demand.
- Gold fell in NY for the third session in a row on worries over slowing global demand for the inflation hedge.
- Countrywide Financial Corp.(CFC) CEO Angelo Mozilo said concern that subprime mortgage defaults will continue to surge are keeping qualified borrowers from buying homes, and amount to an “overreaction.” “There’s been a rush to judgment, an overreaction, a baby being thrown out with the bathwater,” he said.

Business Week:
- American Online founder Stephen M. Case’s latest venture is a new payment system for credit cards that seeks to use the Internet to reduce transaction costs for retailers.

BOTTOM LINE: The Portfolio finished lower today on losses in my Retail longs, Internet longs, Biotech longs and Telecom longs. I added back (IWM)/(QQQQ) hedges in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was very negative today as the advance/decline line finished substantially lower, every sector fell and volume was above average. Measures of investor anxiety were elevated into the close. Today's overall market action was very bearish. I think the fact that oil is breaking down again gives the Fed a bit more leeway to cut rates if necessary. However, I still do not expect a cut and expect economic data to begin improving very soon. Nikkei futures are indicating a 400-point drop on the open in Japan. The fact that the major averages were unable to bounce into the close likely indicates more weakness tomorrow morning. I still believe, based on the action today, that sellers are beginning to use up their firepower. Today’s losses were likely exaggerated by this week’s option expiration.

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