Stocks Finish Higher, Boosted by REIT, Construction, Disk Drive, Coal, Alt Energy and Oil Service Shares

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Stocks Higher into Final Hour on Diminishing Economic Fear, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs and Medical longs. I haven’t traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are positive and volume is about average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is rising 1.90% and is very high at 25.74. The ISE Sentiment Index is below average at 110.0 and the total put/call is around average at .81. Finally, the NYSE Arms has been running very high most of the day, hitting 1.83 at its intraday peak, and is currently 1.68. The Euro Financial Sector Credit Default Swap Index is falling 2.86% today to 82.83 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 falling 3.56% to 117.17 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling .99% to 18 basis points. The TED spread is now down 448 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is down 3.55% to 34.0 basis points. The Libor-OIS spread is falling 4.62% to 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 6 basis points to 1.83%, which is down 83 basis points since July 7th. The 3-month T-Bill is yielding .12%, which is unch. today. Cyclicals are outperforming again today, despite a very negative July consumer credit number, which is a big positive. Stocks had been weakening recently on positive news and now they are back to rising again, notwithstanding some negative news. REIT, Construction, Disk Drive, Steel, Oil Service, Coal and Alt Energy shares are especially strong, rising 3%+ for the day. It is also a big positive to see the N.A. IG CDS Index rolling over again. On the negative side, healthcare-related names are substantially underpforming on renewed healthcare reform worries. Besides healthcare, banking and road & rail shares are displaying relative weakness. Nikkei futures indicate an +22 open in Japan and DAX futures indicate an unch. open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering and investment manager performance anxiety.

Today's Headlines

Bloomberg:

- U.S. discount, grocery and restaurant chains are hiring a larger percentage of job applicants than seven months ago, signaling confidence the economy may be improving, software maker Kronos Inc. said. Kronos analyzed the 8.9 million job applications received by 68 retailers in the first seven months of the year. In July, 2.99 of every 100 applications resulted in a hire, compared with 2.75 in January, a three-year low, the Chelmsford, Massachusetts-based company said today in a statement.

- Goldman Sachs Group Inc. raised its forecasts for most industrial metals prices as a recovery in the world economy reduces spare capacity and boosts output costs. Copper for delivery in three months will climb to $7,650 a metric ton by end-2010, from a prior forecast of $5,800, analysts Jeffrey Currie, Janet Kong and Allison Nathan wrote in a report e-mailed today.

- Crude oil rose the most in more than a month after the dollar declined, spurring demand for commodities, and as OPEC ministers gathered in Vienna to decide on production levels.

- Russia is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse as Prime Minister Vladimir Putin exploits OPEC production cuts to gain market share. Exports of crude and refined products from Russia rose to about 7.4 million barrels a day in the second quarter, according to Energy Ministry data. Saudi shipments fell to about 7 million barrels a day, International Energy Agency estimates of output and domestic demand showed. Investors had expected Russian supplies to decline this year after Putin’s deputy, Igor Sechin, told the Organization of Petroleum Exporting Countries in December that his government was ready to limit production to support prices. Instead, the country is providing tax breaks for new fields in Siberia. OAO Rosneft, OAO Lukoil and BP Plc’s Russian venture TNK-BP pumped more as prices rose 54 percent to near $69 a barrel. “In no uncertain terms, Russia has been the biggest beneficiary of OPEC’s sacrifice,” said Chris Weafer, chief strategist at UralSib Financial Corp., in an interview in Moscow. “Higher prices have equaled a $20 billion tax windfall.”

- The U.S. may find its success in a trade dispute over European subsidies to Airbus SAS difficult to repeat after the Bush and Obama administrations gave billions of dollars to banks and automakers during the financial crisis.

- The U.S. was displaced by Switzerland as the world’s most-competitive economy after its financial markets were roiled by the worst crises since the Great Depression, the World Economic Forum said today. The U.S. fell to second position for the first time since the Geneva-based organization began its current index in 2004 as it lost marks for the sophistication of its markets and rising budget deficits.

- A money manager from Brooklyn, New York, was arrested and charged with operating a 30-year Ponzi scheme that claimed more than $45 million in assets. Philip Barry, 52, a resident of the Bay Ridge section of Brooklyn, began accepting money in the late 1970s from investors, guaranteeing fictional annual profits, according to a statement today by the U.S. Attorney in Brooklyn.

- European Central Bank council member Axel Weber said price pressures will remain subdued as the euro- region economy struggles to recover from recession. There is little risk that the ECB’s policy of flooding banks with cash will stoke inflation and it will take some time before the economy is growing fast enough to push up prices, Weber said in a speech in Frankfurt today. “All in all, inflation fears, understandable as they may be, are unfounded.”

- Treasuries rose after a record $38 billion offering of three-year notes drew the strongest demand in almost a year in the first of this week’s three debt auctions totaling $70 billion.

- President Barack Obama said he is willing to consider taxing soda and other sugary drinks as Congress debates overhauling the U.S. health-care system. “I actually think it’s an idea that we should be exploring,” Obama said in an interview with Men’s Health magazine that goes on sale next week. “There’s no doubt that our kids drink way too much soda.”

Wall Street Journal:

- Scottish Justice Secretary Kenny MacAskill, who recently released the Lockerbie bomber, has a brother who is an energy-industry executive and who has worked at firms that have pitched for oil business in Libya. The Scottish government, which has said that it made full disclosure of facts relevant to the decision, didn't disclose this relationship, and opposition politicians on Monday criticized this.

- The abrupt resignation of White House aide Van Jones, deep in the news hiatus of Labor Day weekend, will probably be forgotten in a few days. But it's a story that still deserves elaboration for what it says about the political coalition that helped to elect President Obama and whose demands are leading him into a cul-de-sac.

- While the deficits caused by the fiscal stimulus package will end in 2011 and will help to sustain a fragile recovery in 2010, the deficits projected for the longer term are a threat to our economic future. The starting point for controlling those future deficits is for Congress to abandon the administration's health-care plan—a plan that will cost more than $1 trillion. The deficits projected for the next decade and beyond are unprecedented. According to an assessment released in March by the Congressional Budget Office (CBO), the president's budget implies that deficits will average 5.2% of GDP over the next decade and will be 5.5% of GDP in 2019. Without the president's proposals, the budget office forecasts a 2019 deficit of only 2% of GDP.

- The next generation of nuclear reactors is on its way, and supporters say they will be safer, cheaper and more efficient than current plants. Here's a look at what's coming -- and when.

- There wasn’t a whole lot of legal news that broke over the weekend, but we do want to get you up to speed on an interesting and provocative ruling out of the Ninth Circuit. A three-judge panel last Friday ruled that a a Muslim man who was detained for weeks as a material witness in a terrorism case can sue former attorney general John Ashcroft. In so ruling, the panel rejected a bid for absolute legal immunity by Ashcroft.

- China's sovereign-wealth fund is looking to invest in U.S. real estate, including potentially snapping up distressed mortgage securities through a U.S.-government program, according to people familiar with the matter.

MarketWatch.com:
- Morgan Stanley changed its tech-sector view, upgrading systems and PC hardware to attractive from in-line but downgrading software to in-line from attractive.

- Employers' hiring plans for the upcoming fourth quarter dropped to their lowest level in the history of Manpower's Employment Outlook Survey, which started in 1962.

CNBC:

- Presient Barack Obama’s health-care reforms may push interest rates higher if the costs aren’t passed on to consumers or the industry, David Kelly, chief market strategist at JPMorgan Funds, told CNBC. “The problem is we’re trying in this debate, as in the energy debate and other debates, to pretend that nobody pays for this,” Kelly said. “And ultimately somebody will pay for it, or if they don’t, we’re going to pay for it through higher interest rates.”

- U.S. small business sentiment improved last month on hopes that the worst of the country's recession was over, an industry group said on Tuesday, but conditions remain very weak.

NY Times:

- When the Internal Revenue Service announced a deal last month that would force Switzerland to reveal the names of thousands of Americans suspected of offshore tax evasion, the agency called it a major step forward. But tax lawyers and former government officials have begun to question whether the deal might allow some large tax cheats to remain in hiding.

- Few people on or off Wall Street have capitalized on this crisis as deftly as Mr. Buffett. After counseling Washington to rescue the nation’s financial industry and publicly urging Americans to buy stocks as the markets reeled, in he swooped. Mr. Buffett positioned himself to profit from the market mayhem — as well as all those taxpayer-financed bailouts — and thus secure his legacy as one of the greatest investors of all time. When so many others were running scared last autumn, Mr. Buffett invested billions in Goldman Sachs — and got a far better deal than Washington. He then staked billions more on General Electric. While taxpayers never bailed out Mr. Buffett, they did bail out some of his stock picks. Goldman, American Express, Bank of America, Wells Fargo, U.S. Bancorp — all of them got public bailouts that ultimately benefited private shareholders like Mr. Buffett. Among the stocks Mr. Buffett has been selling lately is Moody’s, the granddaddy of the much-maligned credit ratings industry. Berkshire, Moody’s largest shareholder, said last week that it had reduced its stake by 2 percent.

- Merger mania may not be quite in full swing. But the pace of deal-making is showing signs of rousing back to life after nearly a year.

Washington Post:

- By Sept. 17, Obama must decide whether to slap a 55 percent tariff on tires imported from China, as recommended by a federal trade panel, or leave the matter alone, as a phalanx of lobbyists representing manufacturers in China and U.S. companies that import from them are urging.

- In an op-ed on Sunday ["The Elders' View of the Middle East"], former president Jimmy Carter, speaking on behalf of a self-appointed group of "Elders," described a rapacious Israel facing long-suffering, blameless Palestinians, who are contemplating a "nonviolent civil rights struggle" in which "their examples would be Mahatma Gandhi, Martin Luther King Jr. and Nelson Mandela." As with most of Carter's recent statements about Israel and the Palestinians, instead of facts we get vignettes from recent Carter travels. And while he finds "a growing sense of concern and despair" among "increasingly desperate" Palestinians, polls do not sustain this view.

- If projections bear out that the federal government will hire up to 120,000 people for jobs in the region over the next few years, the Washington area economy could be on its way to a rebound faster than most of the nation.

Boston Globe:

- Fifteen big banks that dominate worldwide trading of derivatives have committed to greater transparency in a $600 trillion market that regulators say needs stricter oversight to protect the global financial system.

Rassmussen:

- Fifty-three percent (53%) of U.S. voters say restricting jury awards in medical malpractice lawsuits would significantly reduce the cost of health care in the United States. A new Rasmussen Reports national telephone survey shows that only 21% disagree and 25% are not sure.

Politico:

- One of President Barack Obama’s former top campaign advisers is “losing patience” with the White House, he told POLITICO Tuesday morning, as frustrations among the president’s liberal allies crest over issues from health care legislation to gay rights. “I am one of the millions of frustrated Americans who want to see Washington do more than it's doing right now,” said Steve Hildebrand, the deputy campaign manager who oversaw the Obama campaign’s field organization and was an architect of his early, crucial victories over Sen. Hillary Clinton in Iowa and South Carolina.

Washington Times:

- When the "tea party" movement kicked off in April to protest record federal spending bills, trillion-dollar deficits and higher tax burdens, its members were fiercely independent and opposed any suggestion that they bond with a larger umbrella group, preferring to work within their local communities. But that go-it-alone approach is changing as a result of the war over health care, and the Tea Party Express tour is leading the way. The Tea Party Express - a caravan of buses, speakers and entertainers who have been holding protest rallies in cities and towns across the country - is heading to Washington, where on Saturday, up to 50,000 demonstrators are expected to march on the Capitol in a full-scale political offensive to persuade lawmakers to reject the health care overhaul bills that are pending in the House and Senate. "What we are seeing across the country is not only increasingly larger crowds but a greater determination to hold members of Congress to their opposition to the health care plan. They are angry and feel they've been ignored, and they don't like what Congress has done," Joe Wierzbicki, national coordinator of the Tea Party Express, said in a telephone interview as his 45-foot bus cruised through Texas last week on a 17-day, 34-rally tour that will end in Washington on Saturday.

USA Today:

- In a step that should help make the Internet safer for consumers, anti-virus giant Symantec(SYMC) on Wednesday will introduce a protection system designed to anticipate new malicious programs that try to sneak onto your computer. For decades, anti-virus protection has worked by reacting to new malicious programs. Researchers scramble to identify bad code, then create and distribute filters for it. But cybercriminals have gotten so fast at evading the latest filters that protection often comes too late. Symantec's new system, called Quorum, continuously predicts whether any new program that attempts to run on your PC is good or bad. It then takes steps to quarantine the bad code.

Reuters:
- India's physical gold prices were higher on Tuesday tracking international prices but sluggish domestic demand limited the upside, dealers said. "Demand will fall more," Suresh Hundia, president of the Bombay Bullion Association, said. "Only those who are short will buy at these prices." He estimated gold imports to fall to 350 tons in 2009 from 523 tons last year. "Besides higher prices gold buying will also be lower due to Shradh period," said a dealer with a private bank in Mumbai. Traders expect demand to remain sluggish during Shradh, a period to pay homage to ancestors, between Sept. 5 to Sept. 19, when purchasing gold is considered inauspicious.

Financial Times:
- The financial crisis has triggered a “huge surge” of investors looking to buy private equity positions from distressed owners, as three-quarters of them look for bargains in the so-called secondary market, according to research published on Tuesday.

BBC News:

- China's health minister says the nation is facing a grim situation as it tries to contain a rapid surge in swine flu.

Bear Radar

Style Underperformer:
Large-Cap Growth (+.38%)

Sector Underperformers:
HMOs (-1.40%), Medical Equipment (-.98%) and Education (-.57%)

Stocks Falling on Unusual Volume:
PENN, ATHR, CSTR, ASCA, STEC, BCRX, JOSB, KFT, TGP, TTC, MHP, WLP and IOC

Stocks With Unusual Put Option Activity:
1) KFT 2) MCO 3) GOLD 4) OSIR 5) BCRX

Bull Radar

Style Outperformer:
Mid-Cap Growth (+1.20%)

Sector Outperformers:
Oil Service (+3.24%), Steel (+2.48%) and Construction (+2.42%)

Stocks Rising on Unusual Volume:
GMXR, NIHD, ROSE, RTP, TKS, SU, BBL, GE, HES, ORH, OMTR, AVAV, PETS, DDS, FACT, JAZZ, TSPT, KONG, LIHR, SSRI, PAAS, ININ, GOLD, QLGC, VRUS, ERIC, ENER, EBIX, AMED, AIXG, SLAB, ATPG, APWR, SWSI, IHG, CUK, HMY, BVN, CDE, AU, AUY and DOM

Stocks With Unusual Call Option Activity:
1) WYE 2) SU 3) EGO 4) HL 5) RTN

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