Tuesday, June 19, 2007

Stocks Finish Slightly Higher as 10-year Yield Plunges 24 Basis Ponints in 5 Trading Days

S&P 500 1,533.70 +.17%
DJIA 13,635.42 +.16%
NASDAQ 2,626.76 +.01%
Russell 2000 848.34 +.24%
Wilshire 5000 15,451.28 +.18%
Russell 1000 Growth 605.19 +.11%
Russell 1000 Value 879.84 +.22%
Morgan Stanley Consumer 738.11 -.17%
Morgan Stanley Cyclical 1,089.29 -.07%
Morgan Stanley Technology 624.56 -.20%
Transports 5,132.50 -.06%
Utilities 503.10 +.06%
MSCI Emerging Markets 132.50 +.14%

Total Put/Call .87 -4.40%
NYSE Arms 1.09 -4.37%
Volatility(VIX) 12.85 -4.25%
ISE Sentiment 151.0 +6.3%

Futures Spot Prices
Crude Oil 69.09 unch.
Reformulated Gasoline 223.65 -1.23%
Natural Gas 7.53 -2.16%
Heating Oil 202.50 -.45%
Gold 664.50 +.70%
Base Metals 252.61 -2.83%
Copper 341.30 -.20%

10-year US Treasury Yield 5.08% -5 basis points
US Dollar 82.54 -.21%
CRB Index 317.82 -.96%

Leading Sectors
Airlines +2.08%
Disk Drives +1.89%
Networking +.62%

Lagging Sectors
Energy -.19%
Retail -.40%
Semis -.60%

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
Piper Jaffray:

- Rated (SPNC) Outperform, target $13.

- Rated (BABY) Buy, target $20.
- Rated (ASVI) Buy, target $26.

- Reiterated Outperform on (BBY).

Afternoon/Evening Headlines
- Nickel plunged 7.2% today, the most in nine months, on speculation that stainless steel makers will continue to cut use of the metal.
- US Senate lawmakers rejected proposals to increase the production of transportation fuel from coal. The fuel process, known as coal-to-liquids, aims to reduce US consumption of oil by creating diesel from coal. The US has the world’s largest known reserves of coal, according to the EIA, with enough supply for about 236 years at current usage levels.
- Merrill Lynch(MER) will proceed with a plan to sell about $800 million of bonds from a money-losing hedge fund run by Bear Stearns(BSC), a day after delaying a similar auction.
- NYC Mayor Bloomberg said today he would leave the Republican Party and switch his voter registration to independent.
- Most members in a group of US liberal arts colleges plan to stop participating in US News & World Report’s higher-education rankings, saying the magazine’s yearly survey misleads students.
- A US Senate panel approved almost $11 billion in new taxes on oil and natural gas drilling in the Gulf of Mexico.
- General Electric(GE) share surged the most since January 2004 amid expectations that profit from selling commercial jet engines will increase because of plane orders announced this week at the Paris Air Show.
- Home Depot(HD) agreed to sell its contractor-supplies unit to three buyout firms for $10.3 billion and may purchase a record $22.5 billion of its stock. The stock surged 5.4% in after-hours trading.

- Cerberus Capital Management’s planned purchase of DaimlerChrysler’s(DCX) Chrysler Group has been approved by US antitrust regulators.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my I-banking longs, Biotech longs and (TLT) long. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was mildly positive today as the advance/decline line finished slightly higher, sector performance was mostly positive and volume was about average. Measures of investor anxiety were slightly above average into the close. Today's overall market action was mildly bullish. As the many U.S. stock market "fearleaders" were talking about the probability of a 6% yield on the 10-year due to the runaway inflation they see all around them, the bond was putting in a meaningful bottom. Their scary inflation rhetoric came even as gold was falling, the U.S. dollar was rising, and Treasury Inflation Protected Securities(TIPS) were dropping. The 10-year yield has now plunged 24 basis points in five trading days. Investors should never forget that there has never been a time in U.S. history when this many market participants perceive that they personally benefit from a declining or stagnant U.S. economy and stock market. While bonds are getting overbought short-term, I still suspect we will see 4.75% on the 10-year yield during the third quarter. Natural gas dropped another 1.9% today and continues to trade poorly on little news even as oil has headed higher. As well, the Bloomberg Base Metals spot index is weakening noticeably and getting close to a technical breakdown. Agricultural commodities took a beating today with the Goldman Sachs Agricultural Index Spot falling 3.2%. Meteorlogix is forecasting above-average rain for the Midwest over the next 10 days, which should help newly planted crops. Corn closed down 4.7%, soybeans down 2.9% and wheat down 3.2%. There is also speculation that China will announce plans to restrict ethanol production. I suspect corn has put in place another meaningful top. This could further boost the 10-year as inflation expectations ratchet even lower.

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