Stocks Finish Sharply Higher, Boosted by Financial, Technology, Healthcare, Homebuilding, REIT, Construction and Medical Shares

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Stocks Soaring into Final Hour on Less Financial Sector Pessimism, Less Extreme Economic Fear, Short-Covering, Buyout Speculation

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Education longs, Medical longs, Biotech longs and Retail longs. I added to my (ILMN) and (GILD) longs and took profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Investor anxiety is about average. Today’s overall market action is very bullish. The VIX is falling 6.37% and is very high at 40.83. The ISE Sentiment Index is below average at 129.0 and the total put/call is below average at .74. Finally, the NYSE Arms has been running around average most of the day, hitting 1.35 at its intraday peak, and is currently .73. The Euro Financial Sector Credit Default Swap Index is rising 1.05% today to 192.66 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 2.24% to 244.55 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is rising .84% to 112 basis points. The TED spread is now down 351 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is plunging 9.69% to 65.25 basis points. The Libor-OIS spread is falling .84% to 106.0 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 10 basis points to 1.0%, which is down 164 basis points since July 7th. 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 .20%, which is down 2 basis points today. The methodical grind higher today is much healthier than a gap and then flat-line. Breadth is very good. The action in financials remains a huge positive. Much of this rally is predicated on the assumption that mark-to-market will at the very least be relaxed and possibly even temporarily suspended. As well, talk of bringing back the uptick rule is a large psychological positive for investors. The AAII % Bulls rose to 27.64% this week, while the % Bears fell to 54.47%. Overall, investors remain overwhelmingly bearish. However, I would still like to see a few other technical indicators, such as the total put/call, display more investor angst. The 10-year T-note is trading as if it is about to break out again. Large specs are the most net short the 10-year since August of last year and much talk of a bond bubble still persists. We have had a large rally in stocks and some better economic data, yet the 10-year is firm. Asian equities should see sharp gains tonight. Nikkei futures indicate an +300 open in Japan and DAX futures indicate an +32 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, declining credit market angst, bargain-hunting, buyout optimism, better investor psychology, less extreme economic fear and diminishing financial sector pessimism.

Today's Headlines

Bloomberg:

- Sales at U.S. retailers in February fell less than forecast and a gain in January exceeded the previous estimate, indicating the biggest part of the economy may be starting to stabilize. The Commerce Department’s figures mean the decline in gross domestic product this quarter will probably be less than anticipated. Retail purchases decreased by 0.1 percent following a 1.8 percent jump in January, the Commerce Department said today in Washington. Excluding cars, sales climbed 0.7 percent. Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales increased 0.5 percent, after rising 1.7 percent. In addition to service stations, clothing, furniture, electronics and department stores showed gains in sales.

- President Barack Obama’s proposal for spending $634 billion on revamping U.S. health care threatens to expand a “bloated” system, the chairman of the Senate Budget Committee said. “This is an area that gives many of us great pause, because we are already spending one in every six dollars in this economy on health care,” said the chairman, Democrat Kent Conrad of North Dakota, at a hearing today of his committee. About 30 percent of the $2.5 trillion the U.S. is projected to spend on health care this year may be “wasted” because of unneeded treatments, White House budget director Peter Orszag told the Senate Finance Committee on March 10.

- Bank of America Corp.(BAC), bolstered by $50 billion in profit before taxes and provisions this year, isn’t likely to need more aid when the U.S. completes its “stress test,” Chief Executive Officer Kenneth Lewis said.

- Billionaire Warren Buffett said Berkshire Hathaway Inc. plans to sell more derivative contracts, a tactic some investors have said may cause the insurer to suffer billions of dollars in losses. “Oh, we’ll continue,” he said in a Bloomberg Television interview, portions of which will be broadcast today and tomorrow. “We do anything that I think I understand and where I think that the odds strongly favor making money, which doesn’t mean you make money every time.”

- K+S AG, Europe’s largest producer of potash used in fertilizers, forecast “significantly” lower earnings this year as farmers delay purchases, betting prices may decline later in the year. Profit from thawing salt will improve, yet not enough to counter the deterioration in potash and nitrogen volumes, the Kassel, Germany-based company said today. K+S, which previously flagged 2009 as an “opportunity” for growth, fell 11 percent. OAO Uralkali, Russia’s second-largest producer of potash, cut prices of the mineral last week for the first time since 2006. “There’s a clear buyers strike in the market,” Christian Faitz, a Frankfurt-based analyst at Sal. Oppenheim Jr & Cie said by telephone today. “Farmers are saying ‘we don’t want to pay those prices.’ We don’t know when, or if, they will ever start paying those prices again.” Faitz rates K+S “neutral.”

- General Electric Co.(GE) and its finance arm lost the top-level AAA rating from Standard & Poor’s that they’ve held since 1956 as a global recession sapped earnings and exposed potential risks. The one-level downgrade to AA+ with a “stable” outlook affects long-term debt, S&P analysts said in a statement today. Under debt guarantees and covenants, GE would have had to post additional collateral if the ratings fell below AA-.

- Gilead Sciences Inc.(GILD) agreed to buy CV Therapeutics Inc.(CVTX) for about $1.4 billion to gain chest-pain and heart drugs, topping a hostile offer from Japan’s Astellas Pharma Inc. Gilead, based in Foster City, California, will pay $20 a share for CV Therapeutics, of Palo Alto, California, the companies said today in a statement. The offer beats a $16-a- share bid from Astellas, which began a tender offer on Feb. 27 after rejections by the CV Therapeutics board.

- Wall Street employees’ base salaries may double as bonuses, which can account for the bulk of pay for bankers and traders, shrink, said Alan Johnson, who runs a compensation consulting firm. Base salaries have ranged from about $80,000 to $300,000, with bonuses often climbing into the millions of dollars, Johnson said. Now, he says employees who received $250,000 in base salary may get an increase to $500,000 or $600,000.

- Bernard Madoff was jailed after admitting he masterminded the largest Ponzi scheme in history, an epic swindle that may have reached $65 billion and made him the symbol of investor distrust in a global recession. Madoff, 70, entered his guilty plea in Manhattan federal court three months after confessing to relatives that his firm, Bernard L. Madoff Investment Securities LLC, was “one big lie.” U.S. District Judge Denny Chin ordered that Madoff, who has been free on $10 million bond, should be jailed while awaiting sentencing, scheduled for June 16. He faces as much as 150 years in prison.

- Russia’s ruble plunged the most in almost three weeks against the dollar as Russia’s largest privately owned bank forecast a 20 percent depreciation and the price of oil continued to decline. The currency slid as much as 1.2 percent to 35.3956 per dollar today, its biggest drop since Feb. 20. The ruble may decline as much as 20 percent this year against the target basket used to manage its fluctuations, as banks convert funds provided by the government into foreign currency, Moscow’s Alfa Bank said.

- Treasury Secretary Timothy Geithner pushed Group of Seven officials to soften criticism of China last month, according to a person briefed on the matter, after his accusation that the nation was “manipulating” the yuan strained ties with the U.S.’s second-biggest trading partner.

- General Motors Corp.(GM), citing gains from stepped-up cost cutting, said it told President Barack Obama’s autos task force that the carmaker won’t need $2 billion of U.S. aid requested by month’s end to survive. “This development reflects the acceleration of GM’s companywide cost-reduction efforts as well as proactive deferrals of spending previously anticipated in January and February,” GM Chief Financial Officer Ray Young said in a statement, without providing new timing on its borrowing needs.

- Bernard Madoff has “killed the hedge fund” because investors will demand greater transparency on where their money goes, the head of the $60 billion Qatar Investment Authority said. “For the next three years it will be very difficult and literally the game will change,” the fund’s Executive Director Hussain Ali Al-Abdullah told the Wharton Business School Global Alumni Forum in Dubai today. The Abu Dhabi Investment Authority, the world’s biggest sovereign fund, had $400 million invested with Madoff at one point, the New York Times said in December.

- OAO Novolipetsk Steel Chairman Vladimir Lisin said demand in China may dip after a “small revival.” There are “positive dynamics” on export markets, while the Russian steel market is stagnant, Lisin told reporters in Moscow today.

- Palm oil futures may tumble as much as 23 percent this year because of lower energy prices and increasing vegetable oil supplies, according to analyst forecasts at an industry conference in Kuala Lumpur.

- Crude oil rose for the first time in three days before OPEC meets this weekend to consider a fourth production cut. Algerian Energy Minister Chakib Khelil said yesterday that OPEC is likely to reduce output again at its meeting.

Wall Street Journal:

- The Commodity Futures Trading Commission is planning to re-evaluate how it grants so-called hedge exemptions to futures traders seeking to exceed speculative position limits. The decision to open the issue for discussion comes after months of criticism leveled against the agency by lawmakers and some policy experts who said the CFTC's lack of action to rein in excessive speculation propelled the record-high oil and ...

- Investors who hold billions of dollars of residential mortgage-backed securities are pressing the Obama administration to make changes in its housing rescue plan. Participation by these investors will help determine the success of President Barack Obama's $75 billion plan to reduce foreclosures and help stabilize the housing market. But many investors are critical of features of the program and have been meeting with Treasury officials in an effort to influence parts of the plan, such as how it treats second mortgages.
- And the 20 Richest Men in Finance Are…

MarketWatch:
- Legislators and regulators need to take action immediately to change controversial mark-to-market accounting rules, which require daily revaluing of assets such as mortgage-backed securities and credit default swaps, a bipartisan group of lawmakers said Thursday. "We must correct the rules to prevent gross distortions," said Rep. Paul Kanjorski, D-Penn., chairman of the House Securities Subcommittee, at a hearing to discuss the regulations.

Boston Globe:

- Six months after the first CVS(CVS) MinuteClinics opened in the state, thousands of Massachusetts residents have visited the in-store clinics for treatment of sore throats, bronchitis, and the flu. With MinuteClinics opening at a rate of more than two a month in the state, company executives said they have taken off here faster than in the 24 other states where the company owns clinics. Nurse practitioners at the 16 Massachusetts clinics open so far have treated more than 10,000 patients with acute problems and given about 10,000 flu shots, the executives said.

Washington Post:

- With President Obama's plan to tax the rich to pay for health care facing deep skepticism on Capitol Hill, key lawmakers are pressing a different way to raise money: taxing the health benefits workers receive from their employers. So far, administration officials have been careful not to endorse the idea, which Obama blasted as a major tax increase last year after Sen. John McCain (R-Ariz.) made it the centerpiece of his presidential campaign's health plan. But the president hasn't slammed the door on it, either.

ESPN.com:

- During his campaign for Delaware Governor last fall Jack Markell often hinted that, if elected, he'd support sports betting in his state. Now that he's got the job, Markell is done hinting. ESPN The Magazine has learned that sometime next week, according to a statehouse source, Markell will introduce a proposal which, for the first time in more than 30 years, makes gambling on sports legal east of the Mississippi River.

AppleInsider:

- Apple(AAPL) is exploring the possibility of including a wireless "remote wand" with future versions of its Apple TV media system that would provide users with precise control over a cursor on the Apple TV screen in very much the same way a conventional mouse controls a cursor on a PC. It would also unlock three-dimensional controls similar to those offered by Nintendo's Wii controller.

Google Blog:

- Here comes Google(GOOG) voice. We've just started to release a preview of Google Voice, an application that helps you better manage your voice communications. Google Voice will be available initially to existing users of GrandCentral, a service we acquired in July of 2007.

Politico:

- President Barack Obama announced new steps Wednesday to rein in pork barrel spending by Congress, but his failure to specify real cuts could come back to haunt him in the larger fight over his ambitious budget plans this spring. “Nobody’s going to believe it’s real until they see an example,” Rep. Jim Cooper (D-Tenn.) said, urging Obama to follow up soon with specific rescissions singling out wasteful projects to be terminated. And the risk for the president is that he appears hemmed in by the old power structure in Congress just when he is trying to speak to a larger audience in the country about the challenges ahead.

CBSNews.com:

- President Obama said he would consider deploying National Guard troops to control violence along the US-Mexico border during an interview Wednesday. "I don't have a particular tipping point in mind," he continued. "I think it's unacceptable if you've got drug gangs crossing our borders and killing U.S. citizens." The potential deployment comes amid reports that approximately 1,000 people have been killed along the contentious border in the first three months of 2009. Increased violence in northern Mexican towns has been attributed to battles that have broken out following Mexican President Felipe Calderon order of a crackdown on drug cartels.

Reuters:
- Bank of America Corp's (BAC) chief executive said on Thursday it would be a "nightmare" for U.S. banks to be nationalized, wiping out shareholders and perhaps bondholders, and further damaging an economy that might begin to recover as soon as this year. Speaking to the Chief Executive Officers Club of Boston, CEO Kenneth Lewis also said he is confident that Bank of America, the largest U.S. bank, will pass the government's pending "stress test," and would not need more government capital. Bank of America took $45 billion from the U.S. Treasury Department's Troubled Asset Relief Program (TARP), including some funds in a January bailout to help absorb debt-ravaged Merrill Lynch & Co.

- The U.S. Treasury sold $11 billion worth of 30-year long bonds on Thursday in an extraordinarily well received auction that calmed some worries over the government's massive borrowing spree. "It was great," Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco, said about the auction.

- Apple(AAPL) will hold an event next Tuesday to preview new software for the iPhone, the company said. Apple said in an email invitation on Thursday that it will provide a "sneak peek" at the iPhone 3.0 software, along with information about the new software kit that third-party vendors use to create applications for the device. The company will host the event at its corporate campus in Cupertino, California, on March 17.

Webstock.com:

- China’s copper output rose 11% to 606,000 metric tons in the first two months of 2009 from a year earlier, citing data from the National Bureau of Statistics. Production was 320,000 tons in February.

Bear Radar

Style Underperformer:
Large-cap Growth (+1.70%)

Sector Underperformers:
Steel (-2.52%), Coal (-.78%) and Software (-.68%)

Stocks Falling on Unusual Volume:
SCHN, X, KALU, CLF, COP, NAFC, SINA, FSYS, PLL, JAS and KYE

Stocks With Unusual Put Option Activity:
1) STLD 2) TYC 3) SOHU 4) SINA 5) HMY

Bull Radar

Style Outperformer:
Large-cap Value (+2.56%)

Sector Outperformers:
HMOs (+5.26%), Disk Drives (+4.27%) and Biotech (+4.04%)

Stocks Rising on Unusual Volume:
CVTX, CELG, TI, PFE, CHU, ABT, TYC, SNP, SI, CTSH, APA, AXYS, ICFI, SMTS, JOSB, GENZ, DRIV, AIRM, ESRX, CRXL, POWI, TLP, DNA, MW, GLP, KSP, BGH, BKE, ABC, MCK, IBB, BRP, PVH and XSD

Stocks With Unusual Call Option Activity:
1) FMCN 2) TYC 3) DAL 4) S 5) WRC

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