Stocks Finish Near Session Lows on Profit-taking and Higher Energy Prices

Indices
S&P 500 1,501.19 -.13%
DJIA 13,383.84 +.28%
NASDAQ 2,525.29 -.83%
Russell 2000 814.18 -.99%
Wilshire 5000 15,085.00 -.25%
Russell 1000 Growth 589.39 -.38%
Russell 1000 Value 866.30 -.02%
Morgan Stanley Consumer 737.72 +.07%
Morgan Stanley Cyclical 1,056.21 +.38%
Morgan Stanley Technology 601.26 -.96%
Transports 5,126.27 +.16%
Utilities 529.90 +.30%
MSCI Emerging Markets 124.98 +.06%

Sentiment/Internals
Total Put/Call .92 +6.98%
NYSE Arms .84 +2.08%
Volatility(VIX) 14.01 +.36%
ISE Sentiment 127.0 -20.13%

Futures Spot Prices
Crude Oil 63.04 +.93%
Reformulated Gasoline 230.20 +.03%
Natural Gas 7.85 -1.22%
Heating Oil 188.93 +1.21%
Gold 673.20 +.46%
Base Metals 276.02 -.59%
Copper 353.0 +.94%

Economy
10-year US Treasury Yield 4.70% +1 basis point
US Dollar 81.77 -.35%
CRB Index 310.48 +.46%

Leading Sectors
Road&Rail +1.28%
Telecom +.83%
Steel +.77%

Lagging Sectors
REITs -1.56%
Computer Hardware -1.67%
Airlines -2.05%

Evening Review
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In Play

Afternoon Recommendations
Merrill Lynch:
- Reiterated Buy on (TXI).

Afternoon/Evening Headlines
Bloomberg:
- US Senator Charles Grassley proposed legislation that would subject hedge funds to stricter oversight and routine inspections, reinstating rules struck down by a federal court last year. The measure would require hedge-fund managers with at least 15 investors and more than $50 million in assets to register with the SEC. Grassley, citing the collapse of Amaranth Advisers LLC in September, said he’s concerned that increasing investments in hedge funds by pension funds could jeopardize American’s retirement savings.
- Sugar plunged to a 23-month low after C. Czarnikow Sugar Ltd., the world’s biggest broker of the sweetner, said a 2007 global surplus will be larger than estimated. The commodity has plunged 26% just this year.
- Federal Reserve officials raised concerns about deflation as early as November 2001, about a year-and-a-half before they disclosed to the public that interest-rate policy was responding to “an unwelcome” fall in inflation. “I think we are moving gradually from a disinflationary process toward a situation where we could experience outright deflation,” then-Chairman Greenspan told the FOMC meeting that month, according to transcripts released today in Washington.
- XM Satellite Radio Holdings(XMSR) suspended the hosts of the “Opie & Anthony” morning show for 30 days because they aired crude remarks about raping First Lady Laura Bush and Secretary of State Condoleezza Rice.
- Limited Brands(LTD) agreed to sell a majority of its Express unit and put its Limited Stores up for sale after first-quarter profit fell to half the company’s previous forecast.
- Applied Materials(AMAT) said fiscal second-quarter profit was little changed because of costs to close a business and acquire another. The shares fell 4% in after-hours trading.

Reuters:
- AT&T(T) may extend its satellite TV partnership with EchoStar Communications(DISH) into its territory in the southeastern US, citing an AT&T executive.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Computer longs and Retail longs. I added to my (EEM) short and to my (IWM)/(QQQQ) hedges in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was above average. Measures of investor anxiety were about average into the close. Today's overall market action was bearish as the major averages and breadth finished near session lows. Too many market leading stocks gathered downside traction as the day progressed. Technology and small-cap shares were especially weak. Talk of this turning into a Nifty 50 type narrow market advance is way too premature, in my opinion. Cumulative breadth just made a record high a few days ago and the ValueLine Geometric Index, the best gauge of the broad market, is still performing in line with the S&P 500 year to date. The DJIA is up 7.4% year to date vs. a 6.6% gain in the S&P 500. My intraday gauge of investor angst finished only around average levels, notwithstanding today’s declines. I suspect we will see some more mixed-to-weaker trading in the near-term.