Stocks Finish at Session Highs, Boosted by Airline, Gaming, REIT, Hospital, I-Banking, Paper and Coal Shares

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Stocks Reversing Higher into Final Hour on Short-Covering, Technical Buying, Buyout Speculation, Less Economic Fear

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Financial longs, Biotech longs and Medical longs. I have not 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 rising and volume is about average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling .50% and is high at 24.03. The ISE Sentiment Index is around average at 140.0 and the total put/call is around average at .80. Finally, the NYSE Arms has been running high most of the day, hitting 1.51 at its intraday peak, and is currently 1.13. The Euro Financial Sector Credit Default Swap Index is rising .28% today to 75.0 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 2.23% to 110.43 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising .65% to 17 basis points. The TED spread is now down 446 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 7.26% to 33.25 basis points. The Libor-OIS spread is rising 6.44% to 12 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis points to 1.78%, which is down 89 basis points since July 7th. The 3-month T-Bill is yielding .13%, which is unch. today. Considering the declines overseas last night and this morning related mostly to US/China trade war worries, today’s broad market action is even more positive. The herd, which expects an imminent meaningful stock pullback, is likely getting a bit impatient. Cyclicals shares are outperforming again despite these concerns. Airline, Gaming, REIT, Insurance, Hospital, I-Banking, Paper and Utility shares are especially strong, rising 1.5%+. (IYR) has been grinding higher throughout the day, which is always a big positive, and is moving to session highs(+2.42%). Moreover, market leaders have been substantially outperforming throughout the day. I expect to see overseas markets recoup losses tonight, which could further boost US shares in the morning. Nikkei futures indicate an +160 open in Japan and DAX futures indicate an +14 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on diminishing economic fear, short-covering, technical buying, buyout speculation and investment manager performance anxiety.

Today's Headlines

Bloomberg:

- Sprint Nextel Corp.(S), the third- biggest U.S. mobile-phone operator, jumped as much as 14 percent in New York trading after the Sunday Telegraph reported Deutsche Telekom AG is considering buying the company. Deutsche Telekom has asked adviser Deutsche Bank AG to study a takeover of Sprint, the London-based Telegraph said yesterday, citing unidentified people. The company may make a bid in the next few weeks, the newspaper said.

- Wilbur Ross, the billionaire investor in distressed assets, projected the highest return among four firms vying for as much as $200 million from Connecticut state pensions to buy troubled mortgage securities.

- Intercontinental Exchange Inc.(ICEE), the owner of the largest credit-default swap clearinghouse, has cleared more than $2 trillion in North American contracts. The exchange guaranteed $41 billion of the contracts in the week ended Sept. 11, surpassing the $2 trillion mark, Atlanta- based Intercontinental said today in a statement. ICE Trust, backed by Wall Street’s largest banks, in March started clearing credit-default swap indexes based on investment-grade and high- yield, high-risk companies based in the U.S. and Canada.

- Goldman Sachs Group Inc.(GS) cut its 12-month forecast for U.S. wheat and corn prices, citing higher estimates for inventories of the grains. “Agricultural returns moved lower over the past month as U.S. crop conditions continued to improve,” the analysts said. In wheat, “driving this weakness has been rising production estimates from key producers,” Goldman Sachs said.

- Oil slipped as much as 1.8 percent as the MSCI World stock index dropped for the first time in eight days. U.S. supplies of distillate fuel, a category that includes heating oil and diesel, climbed to their highest level since 1983, according to an Energy Department report last week. The CME Group said in a notice to members on Sept. 11 that it would tighten enforcement of position limits on Nymex, CME, CBOT and COMEX beginning today. Violators will be subject to fines, according to the advisory on CME’s Web site. “The product markets are looking particularly weak,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Gasoline is in the rear-view mirror and we are now focused on distillate. There’s a ton of distillate out there and its hard to see how the surplus will be brought down.”

- Gold fell from an 18-month high on speculation that investors may begin selling out of long positions, which climbed to a record last week. Hedge-fund managers and other large speculators increased their net-long position in New York gold futures by 22 percent to 224,676 contracts in the week ended Sept. 8, U.S. Commodity Futures Trading Commission data show. “All the talk is that Comex gold net longs are extremely high and longs should start liquidating,” Miguel Perez- Santalla, a Heraeus Precious Metals Management sales vice president in New York, said by e-mail.

- Violent crime in the U.S. declined for the second year in a row in 2008, dropping 1.9 percent, according to the FBI. All four categories of violent crime surveyed by the Federal Bureau of Investigation -- forcible rape, murder, robbery and aggravated assault -- declined in 2008, according to data released today. Property crime declined by 0.8 percent compared with 2007. There were an estimated 1.38 million violent crimes in the U.S. last year, the FBI said. Murder and non-negligent manslaughter declined 3.9 percent.

- JPMorgan Chase & Co.(JPM) offered 122.9 million pounds ($203 million) for EcoSecurities Group Plc, topping a rival bid and signaling broader interest in trading pollution credits as the U.S. weighs a cap-and-trade program. EcoSecurities, manager of the most emission projects overseen by the UN, rose as much as 12 percent in London trading after Carbon Acquisition Co., a wholly owned unit of New York- based JP Morgan, offered 100 pence a share in cash. “It looks increasingly likely that we’ll see demand for Certified Emission Reduction credits from the U.S., and JPMorgan is taking a long-term position,” Parpia said in a telephone interview today. EcoSecurities creates and trades Certified Emission Reduction credits, or CERs, which are overseen by the UN. The so-called offset credits are part of the UN’s Clean Development Mechanism, the world’s second-largest carbon market, and can be used for compliance in the European Union’s carbon market, the largest greenhouse-gas trading program. There will be demand for offsets from the European Union as well as the U.S., said Jerome Malka, managing director of the Societe General joint venture Orbeo, in June. A proposal by U.S. representative Henry Waxman would allow as much as 2 billion metric tons of offsets a year starting 2012. The UN is seeking this year to set international climate- protection laws starting 2013 to determine the fate of the Clean Development Mechanism of the 1997 Kyoto Protocol. U.S. lawmakers are likely to reach a compromise on a new climate bill early next year, paving the way for implementation in 2012, analysts at Deutsche Bank said July 31. The climate-protection law, written by Democratic Representatives Henry Waxman of California and Edward Markey of Massachusetts, would also establish a U.S. emissions-trading program.

Wall Street Journal:

- The Chinese government's investment arm is in talks on taking a minority stake in Virginia-based power-plant developer AES Corp.(AES), according to people familiar with the matter. The possible purchase is part of a wide-ranging discussion aimed at building an alliance between AES and China Investment Corp., the country's sovereign wealth fund, with some $300 billion in assets. The discussions could result in CIC taking a significant stake in AES, which has a market capitalization of about $9.5 billion.

- After a brief, summer-long stretch of rising demand, steel prices are starting to decline, indicating that moves to increase production may have been too much too soon. Hot-rolled steel, a benchmark grade that typically is processed into cars, building structures or appliances, cost about $600 to $620 a metric ton in August. Now it can be had for about $550-$570 a ton, a drop of about 8%, according to World Steel Dynamics, a steel research firm. Steelmakers, with their exposure to a wide variety of end markets, from consumers to industrial users, are generally a leading indicator of economic strength. The fall in steel prices also has broader ramifications, affecting the prices of iron ore and shipping rates. When governments, especially China, rolled out stimulus packages, steelmakers saw an opportunity to bring production back online, after having made steep cutbacks earlier in the recession. Thomas Ludwig, chief executive of Germany-based steel distribution group Klockner & Co., which sells and processes steel throughout Europe and North America, said that real demand is still slow and that a lot of production has been used to fill depleted inventory pipelines. His group has purchased 1.7 million tons less of steel this year compared with a year earlier. The company's end markets include China and South Africa. He said steel demand could rise in the second half. But he warned that steelmakers need to show better discipline. "Overly aggressive steel-price increases amid still relatively weak real demand could choke off the recovery," he said. "Steelmakers overreacted" in swiftly closing steel mills last year and in early 2009, said Dave Phelps, president of the American Institute for International Steel, a trade group that represents foreign and domestic steel producers and buyers. "They took out too much production." But steelmakers in the U.S. have increased production in each of the past 11 weeks, according to the American Iron and Steel Institute, a trade group. Higher steel production led to higher demand -- and prices -- for raw materials needed to make steel, particularly iron ore. Spot prices for iron ore rose to $110 a metric ton in July from $60 a metric ton in March. Those prices have since fallen 18% to about $90 a metric ton. Seaborne shipping rates, which shippers charge to transport metals and minerals, are following the same pattern. For vessels that travel from Brazil to China, rates have fallen 28% to about $29 a metric ton from roughly $40 a ton in early July.

- Intuit Inc.(INTU) agreed to buy personal-finance site Mint.com for $170 million, adding to the tax and financial-management company's offerings in the burgeoning business of providing software as a service. Though Intuit's revenue growth slowed in the fiscal year ended July 31, the company continued to rack up gains in the part of its business that allows consumers to file taxes online while its older business of selling software in stores shrank.

MarketWatch.com:
- Chevron Corp.(CVX) said Monday it has received final approval from the Western Australian government for the massive Gorgon natural gas project, setting the stage for Australia's largest-ever resource venture. The project -- undertaken along with Exxon Mobil Corp.(XOM) and Royal Dutch Shell Plc.(RDS) -- is expected to cost $37 billion. Chevron said it should begin yielding gas in 2014.

CNBC:

- Warren Buffett Is Overrated? Futures Trader Thinks So.

NY Post:

- Rep. Charles Rangel(D-NY) reported no rental income for eight years on his rundown Harlem row house, even though public records show tenants were living there. The powerful chairman of the House Ways and Means Committee said he received nothing from 1993 to 2000 on the six-unit building, according to federal financial disclosure forms. But one current tenant told The Post she had lived at the building for 20 years -- and paid rent during that period. Another said her former boyfriend called 74 W. 132nd St. home for many years, paying about $500 a month in rent. The Democratic lawmaker, who is being probed by the House Ethics Committee for a laundry list of alleged financial misdeeds, has had a hard time keeping his story straight on the apartment building. While Rangel claims to have taken in not a dime in eight years, at least four tenants lived in the building during that time, The Post found.

NY Times:

- Like a balding hipster who imitates a young trendsetter’s style, Facebook is updating itself to look a lot more like Twitter.

Vanity Fair:
- This is my list of who I perceive to be the 10 most powerful people in the world today.

- 100 to Blame: William Donaldson, Dubai, and More.

InvestmentNews:

- With Swiss banking giant Credit Suisse Group AG on the lookout for private banks and possibly other wealth management firms in the United States, the short list for potential acquisition targets is led by big names such as U.S. Trust Corp. and First Republic Bank, both owned by Bank of America Corp. Other likely candidates are smaller private banks such as Lydian Private Bank and Trust and Boston Private Financial Holdings Inc., as well as a large multifamily office such as GenSpring Family Offices LLC, according to industry insiders.

Pew Research:

- The public’s assessment of the accuracy of news stories is now at its lowest level in more than two decades of Pew Research surveys, and Americans’ views of media bias and independence now match previous lows. Just 29% of Americans say that news organizations generally get the facts straight, while 63% say that news stories are often inaccurate. In the initial survey in this series about the news media’s performance in 1985, 55% said news stories were accurate while 34% said they were inaccurate. That percentage had fallen sharply by the late 1990s and has remained low over the last decade. Similarly, only about a quarter (26%) now say that news organizations are careful that their reporting is not politically biased, compared with 60% who say news organizations are politically biased. And the percentages saying that news organizations are independent of powerful people and organizations (20%) or are willing to admit their mistakes (21%) now also match all-time lows. Republicans continue to be highly critical of the news media in nearly all respects. However, much of the growth in negative attitudes toward the news media over the last two years is driven by increasingly unfavorable evaluations by Democrats. Within the GOP, the balance of favorable to unfavorable assessments of The Wall Street Journal is second only to that for Fox News. Democratic and independent assessments of The Wall Street Journal are also, on balance, positive. And the balance of opinion regarding National Public Radio is favorable across the board; however, Democratic opinions of NPR are somewhat more positive than those of Republicans (50% favorable vs. 39%).

Morningstar:

- Leveraged Loan Market Shows Tentative Signs of Life.

Ars Technica:

- Some AT&T iPhone owners have begun reporting that multimedia messaging (MMS) has been enabled on their accounts, more than a week earlier than AT&T promised. The feature is not yet available for everyone on an iPhone—it appears as if AT&T is doing a gradual rollout to ensure that its network can handle the load—but if everything goes according to plan, all users should be able to send MMSes by September 25.

Forbes:

- The Top 15 Highest Paid Celebrities.

LA Times:

- You'd hardly know that Wall Street giant Morgan Stanley(MS) is struggling through the chaotic aftermath of the global financial crisis sparked a year ago by the collapse of investment banking rival Lehman Bros. Holdings Inc. At least not from the way Morgan executives are paying themselves. Despite a large second-quarter operating loss, Morgan earmarked $3.9 billion for bonuses and other compensation. That was almost three-quarters of its quarterly revenue, far more than firms typically shell out. A year after Lehman's record-setting bankruptcy sent shivers through the global financial system and sparked predictions of a wholesale reordering in the way Wall Street operates, one old saw remains: The more things change on Wall Street, the more they stay the same.

Politico:

- President Barack Obama is on the warpath over myths and distortions about health care reform, but he’s spreading one of his own: that there’s any chance of genuinely bipartisan health care legislation reaching his desk this fall. In truth, Democratic offers to reach across the aisle — and Republican demands that they do so — are largely a charade, performed for the benefit of a huge bloc of practical-minded voters who hunger for the two parties to work together and are mystified that it never seems to happen. The answer is hardly a mystery to Obama or his adversaries. They know that the political incentives driving them toward conflict are vastly stronger than any impulses they may personally harbor for conciliation and compromise.

Business Insider:

- Apple’s(AAPL) September quarter Mac sales are ahead of consensus after July and August, Piper Jaffray analyst Gene Munster says in a note today, based on analysis of NPD Group stats. Meanwhile, iPod sales are trending below estimates, but international growth and new iPod models will help. Munster says NPD data from July and August show Mac sales up 7% year-over-year through August, while the Street is expecting 5% year-over-year growth for the quarter.

AP:

- Al-Qaida leader Osama bin Laden described President Barack Obama as "powerless" to stop the war in Afghanistan and threatened to step up guerrilla warfare there in a new audiotape released to mark the anniversary of the Sept. 11 attacks in the United States. In the 11-minute tape, addressed to the American people, bin Laden said Obama is only following the warlike policies of his predecessor George W. Bush and Vice President Dick Cheney and he urged Americans to "liberate" themselves from the influence of "neo-conservatives and the Israeli lobby." The tape was posted on Islamic militant Web sites two days after the eighth anniversary of the 2001 suicide plane hijackings. Bin Laden said Americans had failed to understand that al-Qaida carried out the attacks in retaliation for U.S. support for Israel. If America reconsiders its alliance with the Jewish state, al-Qaida will respond on "sound and just bases." "If you end the war (in Afghanistan), so let it be," bin Laden said. "But if it is otherwise, all we will do is continue the war of attrition against you on all possible axes." "You are waging a hopeless and losing war for the benefit of others, a war the end of which is not visible on the horizon," he said, according to a translation of the tape Monday by SITE Intelligence Group, a terrorist-monitoring firm, and by The Associated Press. Bin Laden devoted much of his address to discussing U.S. connections with Israel and castigated Americans for failing to understand that the issue was behind al-Qaida's animosity. As he often does in his addresses, he cited books by American scholars and others that he said support his claim. Such citations also serve to show he keeps close watch on current events and media despite being a fugitive in a war zone.

Reuters:
- Shares of Dendreon Corp (DNDN) rose nearly 12 percent on Monday amid renewed speculation that the company, which is developing a vaccine treatment for prostate cancer, is a takeover target, analysts said. The biotechnology company, based in Seattle, is expected to resubmit its application for regulatory approval of the drug, called Provenge, in the fourth quarter of this year. "There is a rumor today on message boards of a $40 bid from a European company," said Joe Pantginis, an analyst at Merriman Curhan Ford.

- Delta Air Lines(DAL), the world's biggest airline, boosted its operating margin forecast for the third quarter, citing lower fuel costs, and said other financial measures were trending in line with or better than year-earlier and second-quarter levels.

- Labor leader Denis Hughes will stay on as chairman of the New York Federal Reserve Bank's board of directors in 2010, the Fed said in a statement on Monday. The Washington-based Federal Reserve Board of Governors also named the chairs and deputy chairs of the 11 other regional Fed boards for next year.

- United States Natural Gas Fund LP (UNG), an exchange traded fund in the natural gas market, said late Friday it would resume issuing new shares late this month.

- Oak Hill Advisors on Monday said it has closed a $1.125 billion corporate credit distressed fund targeting investments in loans, bonds and other securities. Investor interest in the fund exceeded the firm's initial target of $750 million by more than 50 percent, Oak Hill Advisors said in a statement. Investors include corporate and public pension plans, endowments and insurance companies, Oak Hill said.

- Auxilium Pharmaceuticals Inc's (AUXL) data shows its experimental drug for patients with a potentially crippling hand disorder appears to provide some relief with mostly minor side effects, U.S. Food and Drug Administration staff said in documents released on Monday.

Financial Times:
- A full-blown trade row erupted between the US and China after Beijing accused Washington of “rampant protectionism” for imposing heavy duties on imported Chinese tires and threatened action against imports of US poultry and vehicles. Trade relations between two of the world’s biggest economies deteriorated after Barack Obama, US president, signed an order late on Friday to impose a new duty of 35 per cent on Chinese tire imports on top of an existing 4 per cent tariff.

Digitimes:

- With major NAND flash chip producers allocating more supplies for Apple, Taiwan-based memory module houses have seen a serious shortage of the memory chips, according to industry sources. Samsung Electronics has informed Taiwan module makers that it will halve its NAND flash supply to them in September, and Micron Technology has also told some of its downstream customers that no NAND flash chips are available, claimed the sources. Toshiba and Hynix Semiconductor are also giving priority to Apple, and are offering limited supply to the spot market, the sources added. Apple is expected to officially launch the iPhone in China in the fourth quarter of 2009. The vendor is also now selling its new iPod Touch media player featuring capacity up to 64GB. The average spot price of 16Gb multi-level cell (MLC) chips rose 0.85% to close at US$5.17 on September 11, and the 32Gb part was up 0.5% to US$7.13, according to DRAMeXchange. In the contract market, average pricing for 16Gb chips climbed 7.2% to US$4.48 in the first half of September, and 32Gb went up 4.3% to US$6.80.

Bear Radar

Style Underperformer:
Large-Cap Growth (+.01%)

Sector Underperformers:
Gold (-1.48%), Construction (-1.04%) and Banks (-.92%)

Stocks Falling on Unusual Volume:
O, CDE, FSLR, RGLD, CSIQ, TNDM, SBAC, SFSF, REGN and WGO

Stocks With Unusual Put Option Activity:
1) AUXL 2) S 3) MOT 4) YRCW 5) ACI

Bull Radar

Style Outperformer:
Small-Cap Growth (+.19%)

Sector Outperformers:
Hospitals (+3.27%), Airlines (+1.50%) and Gaming (+1.01%)

Stocks Rising on Unusual Volume:
SLXP, AUXL, AES, AIG, SI, ZRAN, BRP, PCAR, OSIS, ERIC, DNDN, ITMN, ATPG, COCO, HITK, MAPP, FLIR, AVAV, LPNT, PENN, CRZO, BMTI, OSTK, PEGA, PPDI, BIDU, CLNE, DWA, WNS, CTB, BCA, KCP, FFH, CYH, GT, NLC and SPN

Stocks With Unusual Call Option Activity:
1) HOLX 2) AUXL 3) YRCW 4) GME 5) KSS

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