Stocks Finish Higher, Boosted by Financial, Tech, Airline, Homebuilding, Retail and Gaming Shares

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Stocks Surging into Final Hour on Lower Energy Prices, Rising US Dollar, Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Computer longs, Gaming longs and Commodity shorts. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The overall tone of the market is bullish as the advance/decline line is higher, most sectors are rising and volume is above average. Investor anxiety is about average. Today’s overall market action is bullish. The VIX is falling 3.5%, but remains above average at 19.6. The ISE Sentiment Index is below average at 127.0 and the total put/call is about average at .89. Finally, the NYSE Arms has been running about average most of the day and is currently .89. The financials(XLF) are rising 4% today and continue to trade as if a significant low is already in place despite more negative headlines. Apple Computer(AAPL), one of my largest longs, is surging 4% today despite giving conservative forward guidance. I continue to believe there is a major sea change underway with respect to rising demand for the Mac and that this trend is still in its very early stages. Moreover, I believe the iPhone will make greater inroads into the enterprise than investors currently perceive. I still see substantial upside to Apple shares from current levels as the p/e multiple expands on better-than-expected earnings and rising demand for true "growth" stocks. Nikkei futures indicate an +240 open in Japan and DAX futures indicate an +84 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower energy prices, US dollar strength and less economic pessimism.

Today's Headlines

Bloomberg:
- Ford Motor(F) CEO Alan Mulally said confidence in the automaker is rising after its unexpected $100 million first quarter profit. The stock is soaring 13.3% on the news.
- European Central Bank President Jean-Claude Trichet said he’s concerned the euro’s gains will hurt Europe’s economy and signaled interest rates are high enough to curb inflation.
- The euro dropped against the dollar and yen as an industry report showed German business confidence fell to the lowest in more than two years in April.
- Crude oil fell more than $2 a barrel after the US dollar rose the most against the euro since June 2004, reducing the appeal of commodities to investors.
- Wheat is falling again, extending its slide to the lowest price in six months, as rainfall in parts of the southern Great Plains helped improve prospect for the US crop.

Wall Street Journal:
- The SEC filed fraud charges against a former trader for spreading false rumors about Blackstone’s(BX) takeover bid for Alliance Data Systems(ADS). The case comes as investigators probe whether a combination of false rumors and short-selling last month drove Bear Stearns(BSC) to collapse. The SEC is also investigating short selling in Lehman Brothers stock(LEH). “The Commission will vigorously investigate and prosecute those who manipulate markets with this witch’s brew of damaging rumors and short sales,” said SEC Chairman Christopher Cox. Mr. Berliner, a proprietary trader for Schottenfeld Group, spread false rumors on November 29 that Blackstone was considering lowering its price for ADS. The rumors sent the stock down 17% by midday. The SEC alleges Mr. Berliner used instant messages to spread the rumor across Wall Street to friends and traders at hedge funds and other brokerage firms. At the same time Mr. Berliner spread the rumor, he also sold ADS stock short, a bet it would fall in price.
- Wendy’s International(WEN) made a deal with investor Nelson Peltz, a move that follows its rejection last week of two offers from his Trian Fund Management LP hedge fund.
- US investment banks, brokerages and futures exchanges plan to create a clearing-house for firms on both sides of credit-default swaps.

NY Times:
- Biofuels Aren’t to Blame for Food Prices.

Washington Post:
- Attacks on Green Zone Drop Sharply, US Says. Joint Offensive With Iraqis Is Credited With Curbing Militancy in Cleric’s Stronghold.

FINalternatives:
- Missouri’s attorney general has asked the US Commodity Futures Trading Commission to step in to protect farmers from hedge funds and other commodities speculators.

Financial Times:
- UBS plans to exploit burgeoning interest in shipping futures and add to its list of alternative asset indices with the launch of a tradable investment index built on dry-bulk forward freight agreements.

Le Figaro:
- BAE Systems Plc wants to make at least 14 acquisitions in the US in the years to come and may consider purchases in Europe as well, citing CEO Mike Turner.

Saigon Times Weekly:
- Vietnam’s economic growth rate may fall to as low as 5.1% this year, citing an official with the country’s central bank. Vietnam’s economy is facing problems including a rising trade deficit and a property market bubble, he said.

Bear Radar

Style Underperformer:

Mid-cap Growth +.37%

Sector Underperformers:

Gold (-3.44%), Coal (-2.70%) and Steel (-2.10%)

Stocks Falling on Unusual Volume:

IPCC, FNF, UCBI, CLMT, IMO, PLXS, IFSIA, FSTR, SBUX, VDSI, EPIQ, NSIT, TITN, QDEL, SMA, TNC, CNH, PBT, IVC, HRH, WHR, BDC, CRA and IDC

Stocks With Unusual Put Option Activity:

1) SYNA 2) FLEX 3) XLNX 4) SBUX 5) PGNX

Durable Goods Orders Improve, Jobless Claims Plunge, New Home Sales Decline

- Durable Goods Orders for March fell .3% versus estimates of a .1% gain and an upwardly revised .9% decline in February.

- Durables Ex Transports for March rose 1.5% versus estimates of a .5% gain and an upwardly revised 2.1% decline in February.

- Initial Jobless Claims for this week fell to 342,000 versus estimates of 375,000 and 375,000 the prior week.

- Continuing Claims fell to 2934K versus estimates of 2990K and 2999K prior.

- New Home Sales for March fell to 526K versus estimates of 580K and a downwardly revised 575K in February.

BOTTOM LINE: Orders for US durable goods excluding transportation equipment rose more than forecast last month, Bloomberg reported. Total orders fell .3% due to a 20% decline in defense-related orders. A rebound in demand for machinery, combined with continued increases in computer bookings, paced the rise in the non-transport category. Bookings for non-defense capital goods excluding aircraft, a gauge of future business spending was unch. versus an upwardly revised 2% decline in February. Shipments of those goods, a number used to compute GDP, jumped 1.2%. Orders for computers and electronic products surged 1.9% and demand for machinery jumped 6.2%. This report is even more impressive considering the American Axle(AXL) strike that is approaching its third month and has left over 30 General Motors plants partially closed or completely idled. GM said yesterday that the strike had cost it sales of 7,000-10,000 vehicles to fleet buyers and had reduced inventories. Moreover, about 48,000 GM employees have been affected by the strike, representing half of the automaker’s manufacturing workforce in North America. I expect overall Durable Goods Orders to rise slightly this month and improve meaningfully later this year.

The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week to a two-month low, Bloomberg reported. The four-week moving average of jobless claims fell to 369,500 from 376,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at a historically low 2.2%. At 342,000, jobless claims are nowhere near levels normally associated with economic contraction. I suspect jobless claims have peaked for the year and will trend modestly lower through year-end.

Purchases of new homes in the US fell more than forecast in March, Bloomberg reported. The median sales price declined to $227,600 from $262,600 the prior year. The number of homes for sale fell to a seasonably adjusted 468,000, the lowest since July 2005. However, the supply of homes at the current sales pace rose to 11 months. I suspect March was the low for the year in New Home Sales and that they will bounce higher over the coming months on lower prices, lower interest rates, pent-up demand and less economic pessimism. The US Dollar is surging the most since 2004 against the euro on today’s reports. As well, according to Intrade.com, the odds of a US recession beginning this year have fallen to 56% from 79% a few weeks ago. I still believe the dollar has put in, at the very least, an intermediate-term bottom. A meaningful rally in the dollar could be the catalyst that finally pops the current commodity bubble, which would be a major positive for the broad US stock market. Despite all the fear mongering hysteria by commodity bulls over food prices, the S&P Goldman Sachs Ag Spot Index peaked February 27 and has since declined -16.3%. This index appears to me to have already made a major top. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 2 basis points today to 2.32%, which is down from 2.68% on March 13^th.

Bull Radar

Style Outperformer:

Large-cap Value (-.13%)

Sector Outperformers:

Banks (+2.48%), Airlines (+2.25%) and I-Banks (+2.0%)

Stocks Rising on Unusual Volume:

EWBC, COLB, GR, FLIR, TROW, EQIX, LNG, CPX, NIHD, TESO, MLNX, WIRE, POOL, EQIX, EXBD, GIFI, GSIC, FFIV, AEIS, STMP, SYNT, WOOF, PRXL, CSGP, SYNA, TRLG, AMFI, TROW, DFG, GDI, LTM and UNS

Stocks With Unusual Call Option Activity:

1) ABB 2) TASR 3) ZMH 4) RRC 5) WEN