Stocks Finish Well Off Session Lows on Fall in Commodity Prices, Short Covering and Bargain Hunting

Indices
S&P 500 1,258.57 +.16%
DJIA 11,117.32 +.17%
NASDAQ 2,169.17 +.48%
Russell 2000 711.27 unch.
Wilshire 5000 12,661.91 +.06%
S&P Barra Growth 584.60 +.37%
S&P Barra Value 671.94 -.05%
Morgan Stanley Consumer 603.17 +.34%
Morgan Stanley Cyclical 821.38 -.36%
Morgan Stanley Technology 501.78 +.81%
Transports 4,599.12 -.35%
Utilities 395.65 +.45%
Put/Call 1.36 +27.10%
NYSE Arms 1.09 +2.10%
Volatility(VIX) 17.36 -4.93%
ISE Sentiment 106.00 -45.92%
US Dollar 85.13 +.08%
CRB 342.51 -2.80%

Futures Spot Prices
Crude Oil 69.44 -.60%
Unleaded Gasoline 201.10 -.40%
Natural Gas 5.92 -.65%
Heating Oil 193.43 -.30%
Gold 642.80 +.83%
Base Metals 230.17 -5.45%
Copper 357.25 -1.83%
10-year US Treasury Yield 5.03% +.48%

Leading Sectors
Tobacco +1.48%
Software +1.07%
Semis +.75%

Lagging Sectors
Oil Service -1.54%
Oil Tankers -1.65%
Gold & Silver -4.0%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Raymond James:
- Added WHR to Total Return Focus List.

Afternoon/Evening Headlines
Bloomberg:
- The World Health Organization officials don’t have immediate plans to ask that experts recommend raising the alert level for a possible avian influenza pandemic.
- General Motors(GM) began hiring temporary workers for some US plants to replace union employees leaving because of buyouts and retirement incentives.
- Emerging-market stocks resumed their slump after a one-day rebound as investors fled from economies that have benefited from record high commodity prices.
- Crude oil fell below $70/bbl. after a government report showed that US gasoline stockpiles rose for a fourth straight week as imports surged before driving season.
- (GM) shares rose after the company began replacing union employees lost to buyouts and retirements with temporary workers and a Merrill Lynch analyst recommended the stock.
- Analog Devices(ADI) and online publisher Cnet(CNET) Networks became the latest companies under investigation for stock-option grants.
- Commodity prices that reached record highs this month may fall because rising interest rates in Japan and the US will slow economic growth and investor demand wanes, Prudential Equity analyst John Tumazos said.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Internet longs, Semi longs, Base Metal shorts and Energy-related shorts. I covered some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was modestly negative today as the advance/decline line finished slightly lower, sector performance was mixed and volume was heavy. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was mildly bullish. The very sloppy trading in many stocks today usually occurs near sustainable market bottoms. I continue to believe the major averages are close to making their lows for the year. A number of stocks, such as Google (GOOG), trade as though their lows are in place. Due to the elevated state of investor anxiety readings, the magnitude of the forthcoming rally will catch many off guard.

Stocks Mostly Lower into Final Hour on Economic Growth and Bird Flu Worries

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Networking longs and Retail longs. I added to my (IWM), (EEM) and (QQQQ) shorts today, thus leaving the Portfolio 25% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are lower and volume is heavy. Many of the same pundits and analysts that continuously make the case for ever higher commodity prices are the same ones inciting bird flu fears. I personally think the bird flu, which has only killed about 200 people globally (about the same amount that die nightly in Chinese coal mines), is just another symptom of the negativity bubble. However, if you do believe the bird flu is going to kill thousands or millions, I can't think of a more sure bet than to short commodities at current levels. Forget about the pie-in-the-sky small caps that may or may not benefit. A global pandemic would most surely be a demand-destroying event. I expect US stocks to trade modestly higher into the close from current levels on lower energy prices, short-covering and bargain hunting.

Durable Goods Orders Slow, New Home Sales Rise

- Durable Goods Orders for April fell 4.8% versus estimates of a .5% decline and an upwardly revised 6.6% gain in March.
- Durables Ex Transportation for April fell 1.1% versus estimates of a .5% gain and an upwardly revised 3.5% increase in March.
- New Home Sales for April fell to 1198K versus estimates of 1135K and a downwardly revised 1142K in March.

BOTTOM LINE: US orders for durable goods fell more than expected last month as demand for aircraft, computers and defense hardware slowed, raising concern companies plan to curb spending, Bloomberg said. Orders for commercial aircraft slumped 32% after a 68% surge the prior month. Auto bookings declined 1.6%. Bookings for non-defense capital goods excluding aircraft, which tracks future business investment, fell 1.7% versus a 3.6% rise the prior month. Durable goods orders will likely slow more from current levels as economic growth decelerates, however corporate spending should remain relatively healthy.

Sales of new homes in the US unexpectedly rose in April to the highest in four months, Bloomberg reported. A strong job market is boosting the demand for homes, notwithstanding higher borrowing costs. The number of unsold new homes fell to 5.8 month’s worth at the current sales pace from 6.0 the prior month. The median price of a new home rose .9% versus last year to $238,500. Sales rose 8.2% in the Northeast, 7.8% in the South and 2% in the West. Sales fell 1.1% in the Midwest. Today’s data is a positive and lends credence to a slower housing market, not a collapse. I continue to expect housing to slow to more healthy sustainable levels.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Vonage Holdings, a money-losing pioneer in the Internet phone-service business, raised $531.3 million in an IPO today as it seeks to keep ahead of competitors such as AT&T(T) and Comcast(CMCSA).
- The US dollar gained for a second day in Asia after a World Health Organization report said seven Indonesians may have contracted bird flu from other people, bolstering demand for safer assets.
- China raised fuel prices for the second time this year, which may slow demand growth further, according to analysts.

AP:
- Iran shut down a newspaper and detained its chief editor and cartoonist today for publishing a cartoon that has spawned riots by ethnic Azeris. The response, the first since President Ahmadinejad came to power, is a sign the Iranian government does not want a spotlight on the country’s internal divisions in the midst of a showdown with the US and Europe over nuclear issues.

Nihon Keizai:
- Japan and the US will issue a joint statement in June saying they will expand their defense alliance on a global scale.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.20%.
NASDAQ 100 indicated -.14%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (CWTR)/.11
- (DLTR)/.30
- (EV)/.32
- (DCI)/.41
- (JLG)/.34
- (NTAP)/.23
- (PETC)/.18
- (WSM)/.17

Upcoming Splits
- (JCOM) 2-for-1
- (UN) 3-for-1
- (NHY) 5-for-1
- (ITW) 2-for-1
- (SHOO) 3-for-2

Economic Releases
8:30 am EST
- Durable Goods Orders for April are estimated to fall .5% versus a 6.4% gain in March.
- Durables Ex Transportation for April are estimated to rise .5% versus a 3.3% rise in March.

10:00 am EST
- New Home Sales for April are estimated to fall to 1135K versus 1213K in March.

BOTTOM LINE: Asian indices are higher, weighed down by commodity stocks in the region. I expect US equities to open modestly higher and to fall modestly into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish Lower on Late Day Sell-Off

Indices
S&P 500 1,256.58 -.44%
DJIA 11,098.35 -.24%
NASDAQ 2,158.76 -.65%
Russell 2000 711.29 -.55%
Wilshire 5000 12,654.50 -.43%
S&P Barra Growth 582.46 -.44%
S&P Barra Value 672.28 -.43%
Morgan Stanley Consumer 601.13 -.25%
Morgan Stanley Cyclical 824.31 +.05%
Morgan Stanley Technology 497.76 -.73%
Transports 4,615.43 -.75%
Utilities 393.86 -1.42%
Put/Call 1.07 -11.57%
NYSE Arms 1.06 -33.49%
Volatility(VIX) 18.26 +3.05%
ISE Sentiment 188.00 -8.29%
US Dollar 84.40 +.07%
CRB 352.37 +2.37%

Futures Spot Prices
Crude Oil 71.46 -.42%
Unleaded Gasoline 208.80 -.95%
Natural Gas 6.28 +.37%
Heating Oil 199.25 -.32%
Gold 668.60 -.76%
Base Metals 243.44 +8.19%
Copper 382.25 -1.62%
10-year US Treasury Yield 5.03% -.16%

Leading Sectors
Gold & Silver +1.69%
Steel +1.37%
Oil Service +.71%

Lagging Sectors
Airlines -1.59%
Semis -1.62%
Computer Hardware -2.13%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
RBC Capital Markets:
- Rated (CSTR) Outperform, target $30.
- Rated (FLOW) Outperform, target $16.

Afternoon/Evening Headlines
Bloomberg:
- The Senate Intelligence Committee today approved General Michael Hayden’s nomination to head the US CIA.
- Gold demand fell 16% in the first quarter as prices at 25-year highs deterred purchases by jewelers, the biggest buyers, the producer-funded World Gold Council said.

Boston Globe:
- Massachusetts single-family home sales in April fell to their lowest point in more than 10 years while prices remained steady.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Internet longs, Retail longs and Networking longs. I added to my (EEM), (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bearish. Considering recent losses and elevated anxiety readings, today's reversal has to be very disappointing to the bulls. While commodities had a very good day today, the commodity stocks reversed most of their gains into the close. However, the real weakness remained in tech as semis continue to trade very poorly. Today's action makes it less likely that a durable bottom is in place in the major averages. I will closely monitor the market’s reaction to tomorrow’s housing data before further shifting market exposure.