Monday, June 25, 2007

Stocks Finish Mildly Lower on Lingering Hedge Fund Worries

S&P 500 1,497.74 -.32%
DJIA 13,352.05 -.06%
NASDAQ 2,577.08 -.46%
Russell 2000 827.46 -.87%
Wilshire 5000 15,094.40 -.43%
Russell 1000 Growth 592.71 -.45%
Russell 1000 Value 855.11 -.33%
Morgan Stanley Consumer 725.87 -.03%
Morgan Stanley Cyclical 1,075.28 -.70%
Morgan Stanley Technology 619.42 -.65%
Transports 5,124.84 +.33%
Utilities 488.49 +.64%
MSCI Emerging Markets 130.45 -.91%

Total Put/Call 1.11 +7.77%
NYSE Arms 1.34 +53.25%
Volatility(VIX) 16.65 +5.71%
ISE Sentiment 132.0 +3.94%

Futures Spot Prices
Crude Oil 69.15 unch.
Reformulated Gasoline 229.89 +.54%
Natural Gas 6.93 -2.73%
Heating Oil 204.10 +.15%
Gold 653.80 -.49%
Base Metals 248.18 -1.29%
Copper 337.70 -.19%

10-year US Treasury Yield 5.08% -5 basis points
US Dollar 82.35 +.02%
CRB Index 313.24 -.48%

Leading Sectors
Restaurants +.77%
Utilities +.64%
Telecom +.15%

Lagging Sectors
Gold -1.91%
Coal -2.31%
Oil Service -2.36%

Evening Review
Market Performance Summary
Market Gauges
ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
PM Market Call
After-hours Movers
After-hours Stock Quote
In Play

Afternoon Recommendations

- Rated (GOOG) Buy, target $625.
- Rated (VCLK) Buy, target $36.
- Rated (YHOO) Buy, target $34.

Bank of America:
- Rated (JEF) Buy, target $34.

American Technology Research:
- Reiterated Buy on (ORCL).

Afternoon/Evening Headlines
- Bear Stearns(BSC) may put up only $1.6 billion to rescue one of its money-losing hedge funds, half as much as it offered last week. The size of the bailout dropped after the Bear Stearns High-Grade Structured Credit Fund found buyers for some assets and creditors sold others.
- The average US pump price for regular gasoline fell 2.7 cents to $2.98 a galloon in the week ended today, the government said.
- Natural gas in NY fell for a sixth consecutive session, closing at a three-month low, on forecasts for mild weather in key demand areas and near record supplies in storage.
- Roche Holding AG, the world’s biggest maker of diagnostic tests, offered to buy Ventana Medical Systems(VMSI) for about $3 billion as part of a push into wider use of screening to match patients with drugs. The stock soared 52% in after-hours trading.
- The SEC has made it easier for investors to find out whether companies do business in nations identified as supporting terrorism. The SEC said it’s added a search tool to its Web site that lets shareholders search annual reports for “business interests in countries the US Secretary of State has designated state sponsors of terrorism.”
- US Treasuries extended a week-long advance fueled by concern hedge fund losses on bets linked to subprime mortgages will become more widespread and falling commodity prices.

Business Week:
- The SEC opened a preliminary probe into why Bear Stearns(BSC) restated one of its failing hedge funds’ April losses.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my I-banking longs and Semi longs. I added to my (EEM) short and added (IWM)/(QQQQ) hedges in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, sector performance was mostly negative and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was mildly bearish. Uncertainty over the ramifications of the housing downturn continues to allow the many market bears to paint a worst-case scenario for U.S. equities and the economy. There remains little evidence that these real estate-related issues are having an overall negative impact on the broad economy, but in the U.S. negativity bubble, the worst is always assumed and promptly priced in. Another meaningful push higher in U.S. stocks will likely commence as the 10-year yield falls back below 5% and the Broker/Dealer Index stabilizes. I suspect this will begin to happen over the coming weeks. Natural gas fell another 2.7% and broke below $7 for the first time since the beginning of the year. As well, the Bloomberg Base Metals Spot Index fell another 1.3% today and is poised to test its 200-day moving average. Furthermore, corn fell another 2.7% today and is breaking below its 200-day moving average for the first time since first quarter 2006. The Goldman Sachs Agricultural Commodity Sub-Index is down about 6% in the last week. It is also noteworthy that today's worst-performing equity sector was oil service, notwithstanding the afternoon rise in the price of oil. In my opinion, the oil service sector is the most loved and most over-owned sector in the entire market and poses the greatest risk to investors through year-end.

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