Stocks Finish Higher, Boosted by Commodity, Financial, Retail, HMO and Technology Shares

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Stocks Higher into Final Hour on Less Extreme Economic Fear, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Biotech longs, Retail longs, Financial longs, Internet longs and Computer longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is heavy. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling -1.25% and is very high at 43.30. The ISE Sentiment Index is above average at 171.0 and the total put/call is below average at .77. Finally, the NYSE Arms has been running above average most of the day, hitting 3.34 at its intraday peak, and is currently .59. The Euro Financial Sector Credit Default Swap Index is falling 1.43% today to 114.0 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is rising 2.1% to 198.0 basis points. The TED spread is rising 2.42% to 97 basis points. The TED spread is now down 369 basis points in under four months. The 2-year swap spread is falling 2.23% to 65.75 basis points. The Libor-OIS spread is falling .67% to 97 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 5 basis points to 1.10%, which is down 160 basis points in under seven months. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .27%, which is down 2 basis points today. Considering today’s news the broad market reversal higher on very healthy volume is a big positive. “Growth” stocks are again substantially outperforming “value” shares. Market-leading stocks are also much stronger than the broad market. The US sovereign debt credit default swap is plunging 14.1% today to 70.30, which is also a big positive. One negative I see today is the weakness in the REIT sector. The AAII % Bulls fell to 24.63%, while the % Bears fell to 44.0% this week, which remains a positive. Nikkei futures indicate a +240 open in Japan and DAX futures indicate an +46 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and less extreme economic pessimism.

Today's Headlines

Bloomberg:

- Deutsche Bank AG(DB) Chief Executive Officer Josef Ackermann said revenue at Germany’s largest bank rose “significantly” in January from the previous year, giving him “confidence” for 2009.

- MasterCard Inc.(MA), the world’s second- largest credit-card network, rose the most in three months of New York trading after beating analysts’ profit estimates by raising the price of processing international purchases. Revenue rose 14 percent to $1.2 billion, MasterCard said, and price increases tied mostly to cross-border transactions made up more than half of the rise. The network climbed $19.19, or 14 percent, to $159.34 at 1:50 p.m. in New York Stock Exchange composite trading.

- Oil prices may fall to $25 a barrel in the second quarter of 2009 before rebounding slowing in the second half of the year, Morgan Stanley said. Slowing demand from China and Latin America and a “recent slew of dismal economic and trade data” were cited by analyst Hussein Allidina in a note to clients as the reasons behind the lower outlook.

- The U.S. options market is shrinking for the first time in at least seven years as investors curb the use of borrowed money, making it more expensive to insure stocks against losses. The number of outstanding calls and puts sank as much as 46 percent in January to 153 million, the lowest total in three years, according to data compiled by Options Clearing Corp.

- Zinc fell on the London Metal Exchange, ending a three-day winning streak, as inventories at almost a three-year high revived speculation about falling demand for the metal used to galvanize steel in cars. Aluminum also slid. The LME index of industrial metals had climbed 7.1 percent this week at yesterday’s close on speculation government spending on bridges and other infrastructure will spur demand. Zinc inventories in LME warehouses jumped 2,350 metric tons to 348,975 tons today, the most since Feb. 16, 2006.

- Orange-juice futures plunged the most in almost five months on speculation that frigid temperatures earlier today didn’t last long enough to hurt the crop in Florida, the world’s second-biggest orange producer. Temperatures fell below 30 degrees Fahrenheit (minus 1 Celsius) for about two hours before sunrise in Polk County, Florida’s biggest orange-producing area, according to the National Weather Service. Temperatures below 28 degrees for four to six hours can damage crops.

- European Central Bank President Jean- Claude Trichet signaled policy makers may cut their benchmark interest rate by half a percentage point to a record low of 1.5 percent next month as a recession in the euro region deepens. “I don’t exclude that we could reduce interest rates at our next decision,” Trichet said at a press conference in Frankfurt after leaving the key rate at 2 percent today. When asked whether the ECB will cut by a half or a quarter point, Trichet noted market expectations “would probably more be the first figure.”

- U.S. Supreme Court Justice Ruth Bader Ginsburg had surgery today for “apparently early stage” pancreatic cancer, the court said in a statement.

- Executives at Goldman Sachs Group Inc.(GS), JPMorgan Chase & Co.(JPM) and hundreds of financial institutions receiving federal aid aren’t likely to be affected by pay restrictions announced yesterday by President Barack Obama. The rules, created in response to growing public anger about the record bonuses the financial industry doled out last year, will apply only to top executives at companies that need “exceptional” assistance in the future. The limits aren’t retroactive, meaning firms that have already taken government money won’t be subject to the restrictions unless they have to come back for more.

- Fannie Mae, the mortgage-finance company under U.S. government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing. Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice yesterday to lenders posted on the Washington-based company’s Web site.

Wall Street Journal:

- Foster Wheeler Ltd. (FWLT) and two other international firms have won contracts to boost Iraq's export capacity from its southern oil terminals on the Persian Gulf, an Iraqi Oil Industry source in Basra said Thursday.

- President Barack Obama launched his version of the faith-based initiative Thursday, expanding the mission to include abortion reduction and outreach to the Muslim world. He also is trying to avoid the thorniest constitutional issues that beset the program for years under his predecessor. Mr. Obama's approach reflects his search for common ground on contentious social issues – while softening some of the positions he took on the campaign trail.

- President Barack Obama's new proposals on banker pay were a striking reminder of just how the balance of power is changing on Wall Street -- away from the big banks reliant on federal aid and to foreign-based or boutique firms that haven't required any bailout money.

CNBC.com:
- U.S. senators working to craft a massive U.S. economic stimulus package said on Thursday they had agreed it should be close to the $800 billion wanted by President Barack Obama, and Senate leader Harry Reid said he believed he had the votes to pass it.

- The Obama administration has decided on a new package of aid measures for the financial services industry, including a bad bank component, and is expected to announce them next Monday, according to a source familiar with the planning.

NY Times:

- Representative Charles B. Rangel’s financial disclosure forms had at least 28 omissions in the past 30 years and failed to account for what became of more than $239,000 in assets, according to a report issued Wednesday by a private government-ethics group. Despite Congressional rules that require members to list the purchase or sale of any assets, Mr. Rangel accumulated from $239,026 to $831,000 in assets that were not listed in subsequent reports, according to the report by the Sunlight Foundation, a nonpartisan group that advocates greater transparency by elected officials.

Forbes:

- General Electric Co.'s(GE) chief executive warned Thursday that capping the salaries of bank executives whose companies take taxpayer bailout money undermines the government rescue effort. Jeff Immelt, who has run the financial services, media and infrastructure conglomerate since 2001, also said "Buy America" provisions in the nearly $1 trillion federal stimulus bill jeopardizes U.S. exports.

CarryQuote:

- CarryQuote Launches Mobile Market Scanner For Fund Managers. For the first time ever, fund managers and traders can access cost-effective, real-time financial market data from around the globe and professional-level analytics from their desktop or any smartphone. Mobile Market Scanner™ delivers real-time financial market information from more than 50 global data sources that cover a broad range of asset classes, including equities, bonds, foreign exchange, commodities, real estate and alternative investments. It also provides actionable, professional-grade analytics that organize, filter and rank investment opportunities – significantly reducing the time needed to manipulate and synthesize data for analysis. Charts are presented in a jukebox style format, allowing users to quickly flip through and scan hundreds of markets to identify relevant information. Mobile Market Scanner™ is available via a web-based application as well as on all smartphones including Blackberry, Windows, Nokia (Symbian) Android (Google) and iPhone.

Politico:

- Rep. Hilda L. Solis’ nomination vote has been delayed by the Senate committee in charge of vetting her for the secretary of labor position in President Barack Obama’s Cabinet. The delay was announced moments after USA Today reported that Solis’ husband had recently paid off $6,400 in tax liens on an auto shop he owns in Los Angeles.

Portfolio.com:

- Department of Jargon, Hedge Fund Edition.

AppleInsider:

- Apple may be working on more effective wireless battery management systems for personal electronic devices, with a Mac serving as the hub, according to newly discovered company filings. A trio of patent requests published by the United States Patent and Trademark Office this week describe intelligent, universal, and rechargeable batteries that would be capable of powering a plethora of devices like cell phones, wireless keyboards and mice, speakers, mp3 players, PDAs, laptop computers, microphones, headphones, and headsets.

hedgeweek:

- New York-based asset manager Van Eck Global has launched the Market Vectors Pre-Refunded Municipal Index ETF on NYSE Arca, which it says is the US's first ETF to focus on the pre-refunded segment of the municipal bond market.

Reuters:
- The La Nina weather anomaly will persist into the spring of 2009 but should gradually weaken during that period, the U.S. Climate Prediction Center said on Thursday. Scientists believe La Nina spurs hurricane formation in the Atlantic basin by hindering wind shear that breaks up storms as they form. CPC said the potential impact of La Nina during February to April 2009 include above average precipitation in the Ohio and Tennessee valleys and below average rainfall in the southwestern and southeastern United States. It said the other impacts are below average temperatures in the Pacific Northwest and above average temperatures in much of the southern United States.

- It might be possible to modify mark-to-market accounting rules for U.S. banks facing steep writedowns of troubled assets without abandoning the underlying accounting standard, a senior Senate Democrat said. Sen. Christopher Dodd, the Democratic chairman of the Senate Banking Committee, told reporters on Wednesday evening after a panel hearing that at least one former bank regulator was discussing how to approach the difficult issue without "walking away from" mark-to-market standards. The issue of how to value distressed assets held by U.S. banks has been one of the most difficult challenges in constructing a bank rescue plan, according to industry lobbyists and lawmakers.

Estrategia:

- Chile’s copper production will increase 3% this year because of mine expansions, citing an industry chamber.

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arabianBusiness.com:
- 52% of UAE’s construction projects suspended. Nearly 53 percent of the UAE’s development portfolio, worth a combined $582bn, has been suspended as the construction industry grapples with the country’s dramatic real estate crash. Some 180 projects have been suspended while projected cash flow, the marker of the industry’s health, is set to drop 43 percent in the first quarter of 2009, the report noted.

Bear Radar

Style Underperformer:
Large-cap Value (+1.16%)

Sector Underperformers:
REITs (-.60%), Papers (-.21%) and Education (-.19%)

Stocks Falling on Unusual Volume:
IX, ESS, HME, EDU, UN, CNQR, AGNC, DLTR, EXBD, ABMD, PAAS, CVLT, VARI, FLIR, IT, IEX, RBC, HAR, NCR and LTM

Stocks With Unusual Put Option Activity:
1) CNQR 2) DO 3) DLTR 4) ERTS 5) AKAM

Bull Radar

Style Outperformer:
Mid-cap Growth (+1.23%)

Sector Outperformers:
HMOs (+4.13%), I-Banks (+3.46%) and Semis (+3.38%)

Stocks Rising on Unusual Volume:
COHR, ATHR, TGT, BHP, KSS, BBL, PTR, BG, FLO, SLH, TV, USB, TNDM, BBBB, AKAM, PENN, JNPR, ROST, TWGP, PHIIK, OSIS, UFPI, CRXL, COHR, CONN, LMNX, NETL, CTRN, ROLL, THRX, CNMD, RVBD, DLB, CRR, NAL, IFF, BMC, MA and CI

Stocks With Unusual Call Option Activity:
1) HL 2) CTX 3) DLTR 4) CI 5) AKAM

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