Tuesday, June 26, 2007

Stocks Finish Slightly Lower on Weakness in Commodity Stocks and Lingering Housing Worries

S&P 500 1,492.89 -.32%
DJIA 13,337.66 -.11%
NASDAQ 2,574.16 -.11%
Russell 2000 826.13 -.16%
Wilshire 5000 15,043.04 -.34%
Russell 1000 Growth 590.79 -.32%
Russell 1000 Value 851.68 -.40%
Morgan Stanley Consumer 726.53 +.09%
Morgan Stanley Cyclical 1,063.97 -1.05%
Morgan Stanley Technology 617.93 -.24%
Transports 5,076.57 -.94%
Utilities 487.84 -.13%
MSCI Emerging Markets 129.99 -.35%

Total Put/Call 1.08 -2.70%
NYSE Arms 1.24 -7.51%
Volatility(VIX) 18.89 +13.45%
ISE Sentiment 143.0 +8.33%

Futures Spot Prices
Crude Oil 67.94 -1.79%
Reformulated Gasoline 224.89 -2.33%
Natural Gas 6.85 -1.27%
Heating Oil 199.71 -2.22%
Gold 644.30 -1.59%
Base Metals 252.70 +1.82%
Copper 332.85 -2.05%

10-year US Treasury Yield 5.08% unch.
US Dollar 82.32 unch.
CRB Index 310.73 -.80%

Leading Sectors
Internet +1.53%
Drugs +.86%
Restaurants +.64%

Lagging Sectors
Oil Service -1.85%
Steel -1.93%
Gold -2.64%

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
Deutsche Bank:

- Rated (RYL) Buy, target $52.

- Reiterated Buy on (MO).

Afternoon/Evening Headlines
- Bear Stearns(BSC) probably won’t bail out the second of its money-losing hedge funds, Merrill Lynch(MER) analyst Guy Moszkowski said, a day after sounding the alarm that investors couldn’t “rule out” such a rescue.
- Bear Stearns(BSC) said it will put up $1.6 billion to rescue one of its money-losing hedge funds, half as much as it offered last week, after raising additional money through asset sales.
- NY harbor conventional gasoline’s discount to futures widened for a second day and reformulated gasoline’s premium declined as traders may be anticipating lower prices next month.
- The Intl. Monetary Fund said it will consider whether to sell gold and invest the proceeds in interest-bearing accounts during a board meeting next month.
- The SEC has undertaken about a dozen probes involving collateralized loans, Chairman Christopher Cox said.
- US steel stocks fell after Arcelor Mittal, the world’s biggest steelmaker, was downgraded by Merrill Lynch(MER) to neutral on concern that steel prices may decline.
- US steel imports reached the highest this year in May as countries including China and South Korea exported more of the metal, an industry group said. Chinese imports were 85% higher than a month earlier, the group said. “The surge in steel imports from China to over 500,000 net tons in May, which equates to an annualized rate in excess of 6 million tons, is of particular concern to domestic steel producers,” Andrew Sharkey, CEO of the institute said.
- Oracle Corp.(ORCL) said fourth-quarter profit rose 23%, beating analysts’ estimates, buoyed by database sales and recent acquisitions. The stocks is rising .23 to $19.39 in after-hours trading.
- Nike Inc.(NKE) said fourth quarter profit climbed 32% on a weaker dollar and increased US clothing and equipment sales. The stock is surging 5.2% in after-hours trading.
- Apple’s(AAPL) iPhone already has people lining up at two Apple stores in New York, four days before the device is scheduled to be released.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Internet longs, Medical longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished mildly lower, sector performance was mostly negative and volume was above average. Measures of investor anxiety were high into the close. Today's overall market action was mildly bearish. Cyclicals undperformed meaningfully today as commodity-related stocks (-1.75% to -3.25%) remained under significant pressure for the second day in a row. The two main sources of inflation over the last few years have been commodities and housing. While a significant hurricane could temporarily send energy prices higher, I suspect almost every commodity has already seen its highs for the year. This should help spur another substantial deceleration in inflation readings during the third quarter. I still believe that the 10-year yield has peaked for the year, as well. Google (GOOG) continues to trade very well. The stock looks like it is coiling before another surge higher. It remains my largest equity long position. According to sentimenTrader.com, the All-Index, All-Product Dollar-Weighted Stochastic is now at an extreme level that is normally associated with meaningful market bottoms. At 90.9, this chart shows that it is at the extremes it hit during the trough of the February/March pullback. Readings at 80 or above are historically followed by a 13.6% gain in the S&P 500 89% of the time on average over the next 12 months.

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