DJIA Soars to Another Record, Surpassing 13,000 on Positive Earnings and Economic Data

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DJIA Surging Past 13,000, Hitting Another Record High, on Strong Earnings and Economic Reports

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Telecom longs, Computer longs and Medical longs. I added to my Google(GOOG) long and to an existing short today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, sector performance is mostly positive and volume is heavy. I continue to believe that Google is egregiously undervalued at current levels relative to the broad market and its Internet peers. I am shocked that I am able to buy the shares again at current levels after GOOG's recent report. I still expect GOOG to exceed $600 this year on multiple expansion and better-than-expected earnings. The stock remains my largest long position. Yesterday after the close, Bloomberg reported that Nasdaq short interest surged 1.7% to 8,010,000,000 shares, from mid-March through mid-April, hitting another all-time high. Moreover, like the NYSE, the last two months has seen Nasdaq short interest soar 13.8%, the largest two-month percentage increase since at least 1991. Here are the 20 Nasdaq stocks with the largest percentage increase in their short interest relative to their float from mid-March through mid-April:

1) USNA +32.9%
2) HCBK +25.5%
3) HINT +23.4%
4) HLYS +19.1%
5) HERO +18.7%
6) ASTI +18.0%
7) DVSA +15.9%
8) DHOM +14.2%
9) CLWT +13.7%
10) CONN +9.4%
11) BLDR +9.0%
12) NRMX +8.4%
14) PONR +8.0%
15) CBRL +7.5%
16) DAKT +6.8%
17) PRAA +6.5%
18) LHCG +6.5%
19) NUVO +6.4%
20) TECUA +6.2%

Here are the 20 S&P 500 stocks with the largest percentage increase in their short interest relative to their float from mid-March through mid-April:

1) WEN +13.0%
2) KBH +6.9%
3) HAL +5.4%
4) MOT +4.3%
5) BEN +4.0%
6) CTX +3.5%
7) JNY +3.1%
8) DHI +2.8%
9) CIEN +2.8%
10) X +2.7%
11) ED +2.5%
12) RSH +2.5%
13) MCO +2.4%
14) CHK +2.4%
15) STZ +2.4%
16) CC +2.2%
17) HRB +2.1%
18) AVB +2.0%
19) MTG +1.7%
20) MAS +1.7%

I expect US stocks to trade mixed-to-higher into the close from current levels on positive earnings reports, short-covering, positive economic data and stable long-term rates.

Today's Headlines

Bloomberg:
- US stocks are surging, sending the DJIA to another all-time high and above 13,000 for the first time, after earnings from Amazon.com(AMZN) bolstered speculation that profit forecasts are too low.
- Israel held back today from retaliating for a barrage of rockets fired by Hamas members in the Gaza Strip, while warning that any further attacks will draw a powerful response.
- Shares of Amazon.com(AMZN), the world’s biggest Web retailer, sky-rocketed 27% after the company boosted its 2007 profit and sales forecasts. As of today, the short-interest ratio on the shares was at an all-time high, surpassing the peak in March 2003.
- Crude oil rose .60/bbl. after a government report showed that US gasoline supplies fell again as refinery utilization dropped substantially on ongoing nationwide “outages.” US oil supplies jumped and are near eight year highs.

Wall Street Journal:
- Fuel-efficient car drivers are having a negative impact on the US federal highway trust fund as less gasoline tax is paid.
- Martha Stewart Living(MSO) will start selling craft products, citing an interview with CEO Lyne.

NY Times:
- Jarden Corp.(JAH), a maker of consumer goods including Coleman camping equipment and Bicycle playing cards, will buy K2 Inc.(KTO) for $1.2 billion in cash and stock.

- Energy News Today:
- Exxon Mobil Corp.(XOM) halted production on a catalytic cracker at its Beaumont, Texas, refinery in the past 24 hours to repair a “minor problem.”

China Information:
- China needs to control the expansion of short-term assets as people put less money in bank deposits and the stock market booms, a state Statistics Bureau affiliated newspaper said. Financial risks have also risen as short-term currency arbitrage increases, and the economic and financial bubble grows, the paper said. International “hot money” has directly or indirectly flowed into the stock market, while assets from domestic banks, private equity, and assets managed by financial companies are participating in the equity market boom. To stop the stock market overheating, the government should remind people of the risks associated with buying shares now. Regulators should tighten supervision of mutual funds and control equity growth, and should accelerate changes to the currency.

Durable Goods Orders Jump, New Home Sales Rise, New Home Inventories Fall, New Home Prices Rise

- Durable Goods Orders for March rose 3.4% versus estimates of a 2.5% gain and an upwardly revised 2.4% gain in February.
- Durables Ex Transports for March rose 1.5% versus estimates of a 1.1% gain and an upwardly revised -.4% decline in February.

- New Home Sales for March rose to 858K versus estimates of 890K and 836K in February.

BOTTOM LINE: Orders for US durable goods rose more than forecast in March, signaling business spending started to recover as the first quarter ended, Bloomberg said. Demand at Boeing(BA) surged, while orders for communications equipment metals and machinery bounced back. Orders for non-defense capital goods excluding aircraft, a gauge of future business investment, jumped 4.7%, the largest gain since September 2004. 100 CEOs turned optimistic over the pace of future US economic growth for the first time in a year, according to a recent Conference Board survey. I continue to believe manufacturing bottomed last quarter and will begin adding to US economic growth this quarter as companies gain confidence in the sustainability of the current expansion.

Purchases of new homes in the US rose in March as better weather and sales incentives brought out more buyers, Bloomberg reported. The median price of a new home rose 6.4% in March to $254,000 from $238,800 a year earlier. The supply of new homes at the current sales pace fell to 7.8 months’ worth from 8.1 months in February. Sales soared 50% in the Northeast and jumped 9.8% in the Midwest. Sales fell 2.7% in the South and .9% in the West. Moreover, mortgage applications rose the most in seven weeks this week, led by a 3.7% surge in purchase applications. I continue to believe home sales have stabilized at relatively high levels and will trend around current levels over the intermediate-term.

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Wednesday Watch

Late-Night Headlines
Bloomberg:
- South Korea’s economy, Asia’s third largest, expanded .9% in the first quarter, the same pace as the fourth quarter, as increased exports and consumer spending made up for slowing construction.
- Google Inc.(GOOG), owner of the world’s most-used Internet search engine, signed an agreement with China Telecom Corp. to sell online advertising on 400 Web sites operated by the nation’s biggest Internet service provider.
- Posco, the world’s fourth-largest steelmaker, said it will increase output of nickel-free stainless steel 500% by next year.
- New Zealand’s dollar is “massively overvalued” and will fall 7% against the yen in six months, said Stephen Koukoulas, chief Asia-Pacific strategist at TD Securities Ltd.

21^st Business Century Herald:
- China’s commerce ministry has sent officials to probe local government export incentives and may eliminate some “unreasonable” policies, citing ministry officials.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (T), target raised to $44.

Think Equity:
- Rated (UA) and (CROX) Accumulate.

Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.04%.

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Earnings of Note
Company/EPS Estimate
- (AGR)/.18
- (AAI)/.02
- (AKAM)/.28
- (ACL)/1.16
- (ATI)/1.83
- (ABC)/.67
- (BUD)/.69
- (AAPL)/.64
- (AVB)/.63
- (AV)/.13
- (BHI)/1.10
- (BDX)/.91
- (BDK)/1.49
- (BA)/1.02
- (BWLD)/.52
- (BOB)/.38
- (CDN)/.24
- (CEN)/.29
- (CTXS)/.34
- (CL)/.77
- (COP)/1.90
- (CEG)/.94
- (GLW)/.26
- (DBD)/.19
- (EXC)/1.02
- (FFIV)/.62
- (FCX)/2.20
- (GD)/1.06
- (GENZ)/.74
- (HCA)/.87
- (HES)/1.17
- (KOMG)/.98
- (LEA)/.22
- (LVLT)/-.22
- (MANH)/.22
- (MSO)/-.17
- (MXIM)/.31
- (MCO)/.58
- (NSC)/.70
- (NTRI)/.91
- (OI)/.17
- (PEP)/.61
- (PFCB)/.40
- (PHM)/-.14
- (QCOM)/.47
- (RTN)/.64
- (ROL)/.18
- (R)/.82
- (RYL)/.48
- (SEE)/.37
- (SII)/.73
- (SWK)/.80
- (TIN)/.47
- (TSCO)/.11
- (UPS)/.96
- (VAR)/.47
- (WEN)/.13
- (XLNX)/.25
- (XTO)/1.07
- (ZMH)/.93

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Durable Goods Orders for March are estimated to rise 2.5% versus a 1.7% gain in February.
- Durables Ex Transports for March are estimated to rise 1.1% versus a -1.0% decline in February.

10:00 am EST
- New Home Sales for March are estimated to rise to 890K versus 848K in February.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -1,500,000 barrels versus a -994,000 barrel decline the prior week. Gasoline supplies are expected to fall by -500,000 barrels versus a -2,718,000 barrel decline the prior week. Distillate supplies are expected to rise by 500,000 barrels versus a -795,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by .5% versus a 2.0% gain the prior week.

2:00 pm EST
- Fed’s Beige Book

BOTTOM LINE: Asian indices are mildly lower, weighed down by technology and automaker stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.