Stocks Higher into Final Hour on Short-Covering, Lower Energy Prices, Bernanke Comments

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Gaming longs, Software longs, Semi longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 4.8% today, but remains high at 26.3. The ISE Sentiment Index is a very low 80.0 and the total put/call is an above-average 1.06. The JPMorgan G-7 Currency Vix is falling 4% today and appears to be rolling over, which is also positive. Fed Chairman Bernanke said earlier today that inflation won’t prevent any needed cuts and that he is “ready to move if he needs to move.” He was also “very upbeat” about the prospects for avoiding recession. He said he sees very slow growth this quarter and just slow growth next quarter, before growth picks up in the second-half of the year. Fed fund futures now imply an 82% chance for a 50 basis point rate cut at the upcoming meeting and an 18% chance for a 75 basis point cut. It may just be profit-taking, but today’s oil/gold weakness is noteworthy considering emerging market stock gains and US dollar weakness. Many investors are worried about how much Shanghai re-opens lower tonight after its holiday break. This could be one of the reasons for today’s commodity weakness and above-average investor angst readings, despite nice stock gains. I still sense very few investors believe the lows for the major averages are in, which is a large positive. One of my longs, Nuance Communications(NUAN) is jumping 13% today on large volume after reporting solid 1Q results and boosting 2Q revenue guidance. I plan to add to this long position on any meaningful pullback from current levels and still see significant upside in the shares over the intermediate-term. The only real negative I see in today’s action is the relative weakness in some large-cap leaders. However, many of these stocks have posted pretty good gains over the last few days so I am not reading too much into it at this point. Nikkei futures indicate an +230 open in Japan and DAX futures indicate a +13 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, lower energy prices, constructive Fed comments and short-covering.

Today's Headlines

Bloomberg:
- Billionaire investor Warren Buffett said he offered to shore up $800 billion of municipal bonds guaranteed by troubled MBIA Inc.(MBI), Ambac Financial(ABK) and FGIC Corp. in a bid to gain 33% of the debt insurance market.
- Bank of America(BAC), Citigroup(C) and four other US lenders agreed with Treasury Secretary Henry Paulson to take new steps to help borrowers in danger of foreclosure stay in their homes.
- Bill Miller Says Microsoft(MSFT) Will Need to ‘Enhance’ Yahoo(YHOO) Offer.
- Boeing Co.(BA), the world’s second-biggest maker of commercial aircraft, said its planes may be flying on a mix of biofuel and jet kerosene within five years. A Virgin Atlantic Airways Ltd. Boeing 747 is scheduled to make the first biofuel-powered test flight for a commercial plane later this month. Boeing is focusing on so-called second-generation biofuels such as algae, oil from Babassu nuts and the hardy Jatropha bush.
- Genworth Financial(GNW), the insurer divested by GE, expects its US mortgage insurance business to rebound next year.
- AIG(AIG) Credit-Default Swap Losses Won’t Be ‘Material’.
- Monsanto Co.(MON), the world’s biggest seed producer, raised its 2008 profit forecast because of demand for week killer and genetically modified corn and soybeans.
- Julius Baer Group rose the most in 10 days in Zurich trading on speculation that Goldman Sachs(GS) may be interested in taking over Switzerland’s biggest independent money manager.
- Legg Mason Capital Management raised its stake in Countrywide Financial(CFC), the biggest US mortgage lender, to 15% and said it hasn’t decided whether to vote for Bank of America’s(BAC) $4 billion takeover.
- Nuance Communications(NUAN), the biggest maker of speech-recognition software, surged the most in a year after forecasting second-quarter sales that beat estimates on rising demand for its mobile-phone products.
- Nokia(NOK) will offer Google’s(GOOG) search engine on some handsets and will work with Orange SA to promote its Internet services and boost sales of devices with Web access.
- Danish police arrested three suspects in an alleged plot to murder one of 12 cartoonists whose caricatures of the Prophet Muhammad in 2005 sparked riots in Muslim communities around the world.
- Citigroup(C) has never been held in such low esteem by debt investors, and that’s why Prince Alwaleed bin Talal isn’t the only one in love with the bank whose looks are deceiving.

Wall Street Journal:
- H&R Block(HRB) Seen by Some as Well on Road to Recovery.

NY Times:
- US Immigration Rules Eased to Cope With Backlog.
- More Hedge Funds Likely to Fail as Losses Mount.

ZDNet:
- Google ‘Android’ Phones Debut at Barcelona Show.

news-journalonline.com:
- Officials tout alternative fuel to aid state farmers.

NY Sun:
- Applications for admission skyrocket at NYU.
- Quinn to Propose Incentive Pay for Some Teachers.

Washington Post:
- The European Union may fingerprint foreign travelers arriving and leaving the area and transfer the information to databases that could be shared with friendly nations.

Reuters:
- America Movil SAB, the biggest mobile-phone carrier in Latin America, will make videos from Google’s(GOOG) YouTube Web site available on its phones.
- Alternative investments firm First Avenue Partners said on Monday it planned to raise up to $750 million for a portfolio that will invest with start-up hedge funds, as well as funds that have seen heavy outflows.

Financial Times:
- Hedge funds investing in emerging markets pick London as their domicile more often than any other location, citing Hedge Fund Research. According to Hedge Fund Research, there are more than 950 hedge funds specializing in emerging markets, with a total of $110 billion under management.

YLE TV:
- Nokia(NOK) phones are being rejected by Germans following the announcement that the company would close its factory in the German town of Bochum. Nokia has also lost favor with consumers interviewed in market surveys, citing research firm Psychonomics AG.

El Universal:
- Supporters of Venezuelan President Hugo Chavez asked federal investigators to examine programming at privately-owned news channel Globovision, which they say has “slandered” the president.

Xinhua:
- China’s natural gas output rose 23% to 69.3 billion cubic meters in 2007, citing the China Petroleum and Chemical Industry Association. Production in 2008 may reach 76 billion cubic meters.

Bear Radar

Style Underperformer:

Mid-cap Growth +.57%

Sector Underperformers:

Coal (-3.08%), Gold (-1.81%) and Airlines (+.03%)

Stocks Falling on Unusual Volume:

DY, MAS, ZOLT, CYNO, HWAY, VRTX, BRKS, EXPD, WINN and ANR

Bull Radar

Style Outperformer:

Large-cap Value (+1.91%)

Sector Outperformers:

Steel (+3.16%), Insurance (+2.87%) and Banks (+2.94%)

Stocks Rising on Unusual Volume:

VRX, WWE, CMP, TNS, SDA, HGR, AIG, CW, CNA, SBP, FWRD, ASEI, VECO, ELOS, NUAN, TWTC, IPGP, BMRN, CBEY, MELI, MDTH, OZRK, WOOF, CRZO, JRCC, LCAPA, CRVL, BRLI, CHNR, TKC, ITU, RTP, HBC, GL, HOFT and UTIW

Economic Releases

- None of note

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