Stocks Finish Near Session Lows on Lingering Housing-related Concerns, Profit-taking

Indices
S&P 500 1,511.04 -1.98%
DJIA 13,716.95 -1.62%
NASDAQ 2,639.86 -1.89%
Russell 2000 811.86 -2.84%
Wilshire 5000 15,198.09 -2.04%
Russell 1000 Growth 606.64 -1.75%
Russell 1000 Value 850.80 -2.26%
Morgan Stanley Consumer 726.66 -1.40%
Morgan Stanley Cyclical 1,088.48 -1.97%
Morgan Stanley Technology 642.41 -1.85%
Transports 5,265.10 -1.90%
Utilities 496.84 -3.45%
MSCI Emerging Markets 140.88 -1.76%

Sentiment/Internals
Total Put/Call 1.42 +79.75%
NYSE Arms 1.58 +118.28%
Volatility(VIX) 18.55 +10.35%
ISE Sentiment 112.0 -34.50%

Futures Spot Prices
Crude Oil 73.42 -1.96%
Reformulated Gasoline 204.0 -3.05%
Natural Gas 5.86 -2.95%
Heating Oil 202.90 -1.32%
Gold 682.30 +.12%
Base Metals 266.03 -1.0%
Copper 360.40 -1.44%

Economy
10-year US Treasury Yield 4.91% -3 basis points
US Dollar 80.11 -.31%
CRB Index 317.89 -.38%

Leading Sectors
Airlines +.31%
HMOs +.10%
Hospitals -.33%

Lagging Sectors
I-Banks -3.71%
Homebuilders -3.96%
Coal -5.6%

Evening Review
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In Play

Afternoon Recommendations
Citigroup:
- Upgraded (CHKP) to Buy, target $31.

Afternoon/Evening Headlines
Bloomberg:
- Emerging-market bonds tumbled, pushing yields over US Treasuries to the widest since December, as concern that losses in the US subprime mortgage market may spread prompted investors to sell riskier assets.
- Crude oil fell more than $1 a barrel, the biggest decline in almost a month, on speculation US refineries are increasing their fuel production and a signal that OPEC might be willing to pump more.
- Gasoline futures fell to the lowest in almost four months on speculation a government report tomorrow will show that US supplies are adequate to meet demand in the last weeks of the summer driving season.
- Amazon.com(AMZN), the world’s biggest online retailer, said profit more than tripled after it reduced technology spending and boosted sales of electronics. The company also increased its sales forecast, causing the shares to soar 17% in after-hours trading.
- Linear Technology(LLTC), whose chips are used by Cisco Systems(CSCO) and Apple Inc.(AAPL), said fourth-quarter profit fell 17% as sale jumped. The stock surged 5% in extended trading.

Wall Street Journal:
- Brian Hunter, whose bad energy bets led to hedge fund Amaranth Advisors’ fall, is trying to block a possible enforcement action from the Federal Energy Regulatory Commission.

BOTTOM LINE: The Portfolio finished lower today on losses in my Computer longs, I-Banking longs and Software longs. I added an (XLE) short, 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 very negative today as the advance/decline line finished substantially lower, almost every sector declined and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was very bearish. Commodity and housing-related equities were especially weak today. There is definitely an air of panic around those sectors. While we are likely not at the absolute bottom in those stocks, I sense we are nearing one. The 10-year yield finished at session lows, down 3 basis points, to 4.92%. While the major averages were very ugly, an unusual number of stocks I monitor were higher or just posted slight losses. "Growth" stocks are now substantially outperforming "value" stocks year-to-date. Here is a summary:

Large-cap growth +10.3%
Large-cap value +5.4%

Midcap growth +12.6%
Midcap value +7.2%

Small-cap growth +8.1%
Small-cap value -.4%

One of my predictions at the beginning of the year was that growth stocks would outperform value stocks and their outperformance would gain steam throughout the year. This appears to be happening now. One of my longs, American Superconductor (AMSC) had a very good day, and I still see substantial upside in the shares from current levels. It was also good to see my largest long, Google (GOOG) gain on the day, especially considering recent commentary on the shares. As well, Broadcom (BRCM) hung tough, and Gilead Sciences (GILD) finished with minor losses. All present longer-term investors great entry points, in my opinion. As I wrote a few weeks ago, I believe oil is in the process of making a major double-top and will begin a substantial decline this quarter that will have major positive implications for the U.S. broad market. I have begun adding to my energy-related shorts and plan to add meaningfully to them over the next month into any hurricane-related spike in the price of oil. The gasoline crack spread plunged another 8.2% today and has collapsed almost 70% in a little over two months. Natural gas is also dropping below $6 for the first time since December of last year and is down 63% from its highs. Finally, reformulated gasoline futures have declined 16% in less than three months.