Stocks Post Largest 2-day Gain Since Near Major Bear Market Low in 2002

Indices
S&P 500 1,469.02 +2.86%
DJIA 13,289.45 +2.55%
NASDAQ 2,662.91 +3.18%
Russell 2000 770.04 +3.60%
Wilshire 5000 14,753.22 +2.86%
Russell 1000 Growth 612.01 +2.80%
Russell 1000 Value 795.60 +2.91%
Morgan Stanley Consumer 751.65 +1.80%
Morgan Stanley Cyclical 983.23 +3.76%
Morgan Stanley Technology 622.85 +3.45%
Transports 4,625.43 +3.55%
Utilities 529.67 +1.21%
MSCI Emerging Markets 150.87 +2.98%

Sentiment/Internals
Total Put/Call .89 +9.88%
NYSE Arms .29 -56.7%
Volatility(VIX) 24.11 -8.26%
ISE Sentiment 96.0 -27.27%

Futures Spot Prices
Crude Oil $91.47 -3.13%
Reformulated Gasoline 229.33 -3.36%
Natural Gas 7.20 -4.68%
Heating Oil 260.0 -2.01%
Gold 812.0 -1.12%
Base Metals 218.24 -1.0%
Copper 303.70 +1.49%

Economy
10-year US Treasury Yield 4.02% +8 basis points
US Dollar 75.18 +.12%
CRB Index 343.78 -1.15%

Leading Sectors
I-Banks +5.95%
Homebuilders +5.78%
Computer Hardware +4.57%

Lagging Sectors
Energy +1.66%
Utilities +1.21%
HMOs +.74%

Evening Review
Market Performance Summary
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In Play

Afternoon Recommendations
Oppenheimer:
- Rated (ARG) Sector Outperformer.

Citigroup:
- Rated (CBEY) Buy, target $33.
- Rated (GLBC) Buy, target $25.
- Rated (TWTC) Buy.

Afternoon/Evening Headlines
Bloomberg:
- US stocks staged the biggest two-day rally in five years, led by financial shares, after Federal Reserve Vice Chairman Donald Kohn buttressed expectations for another interest rate cut.
- Natural gas in NY plunged 4.2% today on an outlook that above-average supplies are ample for winter.
- Crude oil fell another $3.03/bbl, reaching its largest 2-day drop since January, as a US government report showed that supplies declined less than expected and the US dollar rose further.
- SunPower Corp.(SPWR), the largest US supplier of solar panels, surged after it said Morgan Stanley(MS) will provide up to $190 million in financing for future projects.
- Treasury two-year notes had their biggest two-day decline since 2004 as a stock rally pared demand for the relative safety of government debt.
- Sigma Designs said net revenues for the third quarter rose 56% from the prior quarter and 164% from the same quarter last year. The stock is jumping 12% in after-hours trading.

CNNMoney.com:
- This bonus season, investment banks are doling out golden handcuffs.

BOTTOM LINE: The Portfolio finished higher today on gains in my Medical longs, Biotech longs, Semi longs, Computer longs, Internet longs, Software longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was exceptionally positive today as the advance/decline line finished substantially higher, every sector rose and volume was heavy. Measures of investor anxiety were above average into the close, despite today’s sharp gains. Today's overall market action was very bullish. As is usually the case in the current “US negativity bubble”, pundits spent most of their time today trying to scare investors and consumers with much talk of recession and bear markets, while stocks were in the midst of their best 2-day advance since near the major bear market bottom in 2002. Market leading growth stocks gained significant traction into the afternoon with many rising 6-9% on the day. Despite the recent pullback, the Nasdaq is still 11% higher year-to-date and large-cap growth stocks are 12% higher so far this year. The 10-year swap spread fell another 1.7 basis points today to 67.0 basis points over Treasuries. This is down from 87.5 basis points over Treasuries just six days ago, which is a big positive. The yen remained weak throughout the day again, which is also a positive. As well, the G-7 currency volatility index fell another 2% today. Nikkei futures are indicating a +400 open in Japan. Today's rally was of much higher quality than other recent advances that have failed. While some healthy consolidation days are likely in the near-term, I suspect a significant year-end rally is now underway.