Stocks Finish Near Session Lows on Another Bout of Subprime Fears

Indices
S&P 500 1,510.12 -1.42%
DJIA 13,501.70 -1.09%
NASDAQ 2,639.16 -1.16%
Russell 2000 837.48 -1.85%
Wilshire 5000 15,251.64 -1.42%
Russell 1000 Growth 602.35 -1.18%
Russell 1000 Value 858.48 -1.63%
Morgan Stanley Consumer 725.12 -1.29%
Morgan Stanley Cyclical 1,085.34 -1.73%
Morgan Stanley Technology 633.48 -.86%
Transports 5,198.15 -1.54%
Utilities 500.49 -1.18%
MSCI Emerging Markets 137.70 -1.08%

Sentiment/Internals
Total Put/Call .99 +22.22%
NYSE Arms 1.87 +64.50%
Volatility(VIX) 17.57 +15.90%
ISE Sentiment 157.0 -8.0%

Futures Spot Prices
Crude Oil 72.65 +.64%
Reformulated Gasoline 236.05 +.68%
Natural Gas 6.68 +4.26%
Heating Oil 211.84 +1.22%
Gold 664.50 +.30%
Base Metals 256.77 -1.38%
Copper 359.80 -.87%

Economy
10-year US Treasury Yield 5.02% -12 basis points
US Dollar 80.82 -.75%
CRB Index 323.04 +.56%

Leading Sectors
Computer Hardware -.63%
Alternative Energy -.79%
Drugs -.87%

Lagging Sectors
Homebuilders -2.65%
Retail -2.66%
I-Banks -2.88%

Evening Review
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In Play

Afternoon Recommendations
Bank of America:
- Rated (RPM) Buy, target $27.
- Rated (USG) Sell, target $42.

Afternoon/Evening Headlines
Bloomberg:
- Palestinian Authority President Mahmoud Abbas accused Hamas of allowing al-Qaeda into the Gaza Strip.
- Emerging-market bonds fell after Moody’s Investors Service lowered the credit ratings on $5.2 billion of bonds backed by subprime mortgages and S&P said it may cut ratings on $12 billion of the securities.
- Nasdaq Stock Market(NDAQ) gained approval for a new rule that will allow companies that it lures from rival exchanges to keep their three-letter trading symbols.
- Continental Resources(CLR) announced that it entered into fixed-price swap contracts covering 10,000 barrels of oil per day for the period from August 2007 through April 2008. During each month of the contract, Continental will get $72.90/bbl. and will pay counterparties the average of the NYMEX crude oil futures contract settlement prices for such month.

Financial Times:
- BHP Billiton(BHP) probably won’t team up with a private equity firm and bid for Alcoa Inc.(AA) and is in no rush to bid for Alcan(AL).

Die Welt:
- Adidas AG expects to have a “record year” in 2008 as the European soccer championship boosts sales, citing CEO Herbert Hainer.

BOTTOM LINE: The Portfolio finished higher today on gains in my (TLT) long, Biotech longs, Computer longs, Software longs, Semi longs and Commodity shorts. I added back 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 substantially lower, every sector declined and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was bearish. It appeared to me that Bernanke’s speech was more dovish than expected, thus leading traders to conclude that the Fed may be more worried about housing than before. This helped push the 10-year yield down 12 basis points to session lows. I suspect it will take more earnings reports from the brokers to really help lift some uncertainty, which should help push the I-banking sector higher from current levels. I will look to add to my Goldman Sachs (GS) long on any further significant weakness. On the positive side, many true “growth” stocks rose today, despite losses in the major averages. This is the best environment I have seen in years for truly good stockpickers to substantially outperform the broad market.