Stocks Finish Higher, Boosted by Oil Service, Steel, Wireless, Construction, Rail and Airline Shares

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In Play

Stocks Higher into Final Hour on Short-Covering, Diminishing Credit Market Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Medical longs, Biotech longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is bullish as the advance/decline line is higher, almost every sector is rising and volume is about average. Investor anxiety is above average again. Today’s overall market action is very bullish considering recent gains, today’s economic data and the rise in oil. The VIX is falling 1.2%, but remains high at 25.4. The ISE Sentiment Index is a below average 137.0 and the total put/call is an above-average 1.03. Finally, the NYSE Arms has been above average most of the day and is currently 1.08. The iTraxx European Financial Sector Credit Default Swap Index is falling another 25 basis points to 92 basis points. It has plunged 68 basis points in less than one week. The TED spread is falling another 16 basis points to 138 basis points and has plunged 66 basis points in two days, which is one of the largest 2-day drops on record. The 3-month T-bill yield is rising another 21 basis points today to 1.27%, which is 71 basis points higher in two days. It is also a positive that the 10-year TIPS spread, a good gauge of inflation expectations, is falling another 6 basis points to 2.25%. This spread has declined 43 basis points in about a week. My favorite biotech long, Gilead Sciences(GILD), is making a new all-time high today. The stock is up 11% this year in a poor market environment. I still see substantial upside to the shares from current levels. Nikkei futures indicate an +100 open in Japan and DAX futures indicate an +100 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and diminishing credit market angst.

Today's Headlines

Bloomberg:
- Petroleo Brasileiro SA(PBR) rose the most in almost two months in Sao Paulo trading on speculation the state-controlled oil company found oil off the coast of Maranhao state in Brazil’s northeast. Traders are speculating Petrobras discovered a field in Maranhao that is bigger than its Tupi field offshore Rio de Janeiro.
- Republican presidential candidate John McCain said a government bailout of banks should be based “solely on preventing systemic risk” and not on helping financial and property speculators.
- CME Group(CME), the world’s largest futures market, said it will buy Credit Market Analysis to give its customers pricing information on derivatives such as credit-default swaps.
- Emerging-Market Bond Spreads Widen on Credit Loss Concerns.
- Countrywide Financial(CFC) and UK lender Lloyds TSB Group Plc led a decline in the cost of protecting bonds from default to the lowest in a month. Credit-default swaps on Countrywide tumbled 82 basis points to 374 and Lloyds TSB dropped a record 49 basis points to 76, according to CMA Datavision.
- The risk of corporate debt defaults in Asia has increased because of the global credit turmoil, weakening US dollar and slowdown of the US economy, S&P said. Companies from Southeast Asian countries such as Indonesia, Thailand and Vietnam that have borrowed heavily in the past are likely to struggle as their economies rely on exports to the US, S&P said.
- James B. Bullard, the deputy director of research and monetary analysis at the Federal Reserve Bank of St. Louis, was named president of the bank, the St. Louis Fed said. Bullard, 47, will take over April 1 for William Poole, who is retiring.
- Democratic presidential candidate Barack Obama and his wife Michelle gave $10,772 of the $1.2 million they earned from 2000 through 2004 to charities, or less than one percent, according to tax returns for those years released today by his campaign. The couple earned more than $2.6 million in 2005 and 2006 after the Illinois senator published a bestselling book in 2005. They donated $137,622 over those two years and made their church, Trinity United Church of Christ, one of the biggest beneficiaries of their philanthropy, donating $27,500. Obama is under scrutiny for his ties to the church because of comments made by its senior pastor.
- Google(GOOG) said rival Yahoo!(YHOO) will support its OpenSocial software, allowing developers to put their programs on a broader range of social-networking sites.

Wall Street Journal:
- Starwood(HOT) Plans $4 Billion Renovation to Boost Brand.
- Vornado Realty(VNO) May Offer Bargain for REIT Investors.
- Securitization Market Will Recover, Penner Says.

NY Times:
- Clinton’s Mortgage Solution: Bring in Greenspan? Post-Fed Mr. Greenspan has secured multiple advisory positions, including one at Paulson & Company, the hedge fund that has been one of the greatest beneficiaries of the destruction in the housing market.

Albany Journal:
- AMD(AMD) to Unveil $3.2 Billion NY Chip Plant.

Frankfurter Allgemeine Zeitung:
- Sony BMG, the music joint venture of Sony Corp.(SNE) and Bertelsmann AG, may charge a fixed monthly fee to let users download unlimited music from the Web and is discussing distribution accords with Apple Inc.(AAPL) and Nokia Oyj(NOK).

Daily Telegraph:
- Hedge funds are the likely culprits behind the rumors that hit HBOS, Britain’s largest mortgage lender, says Ian Cowie.

Kauppalehti:
- Microsoft Corp.(MSFT) said most of Europe’s biggest companies will be using its Vista operating system by the end of this year. About 80% of “large” corporations in Europe plan to install Vista by the end of 2008, citing an interview with Pierre Liautaud, head of Microsoft’s western European unit. Sales of Vista to corporate clients have been stalled by concerns about compatibility with existing systems. Liautaud said credit-market turmoil in the US has not so far affected information technology sales in Europe.

Bear Radar

Style Underperformer: Large-cap Value -.09% Sector Underperformers: Retail (-.68%), HMOs (-.35%) and Telecom (-.12%) Stocks Falling on Unusual Volume: BTI, IDCC, VTIV, COMV, MTG, LXP and SMA

Consumer Confidence Very Depressed

- Consumer Confidence for March fell to 64.5 versus estimates of 73.5 and a reading of 76.4 in February.

BOTTOM LINE: US consumer confidence fell more than forecast in March, Bloomberg reported. The Expectations component of the index fell to 47.9, the lowest since December 1973 during Watergate and the Arab oil embargo. The proportion of people who expect their incomes to rise over the next six months fell to 14.9%, the lowest since record keeping began in 1967. Confidence in the Northeast Central region, which continues to weigh heavily on the overall gauge, plunged to a record low of 35.8. At the depths of the 2000-03 bear market(in which the Nasdaq plummeted almost 80%), confidence in this region never fell below 55.0. Most hedge funds and major media outlets are located in the Northeast Central region. Confidence in the Mountain(96.5) and Southwest Central(95.6) regions remains relatively healthy. The Present Situation component, which gauges consumers’ perceptions of their current financial situation and whether or not it’s a good time to purchase a large-ticket item, fell to 89.2 from 104 the prior month. However, the percentage of consumers planning to purchase a home rose to a seven-month high of 3.3% from 2.9% the prior month.

Johnson Redbook weekly retail sales rose 1.2% this week, the third straight week showing acceleration. This week’s gain is up from a .5% gain three weeks ago. The Richmond Fed Manufacturing Index for March rose to 6 versus estimates of -5 and a reading of -5 in February. This index is now at the highest level in six months. Fed fund futures now imply a 64.0% chance for a 25 basis point cut at the April 30^th meeting, down from 72.0% yesterday. The odds for a 50 basis point cut are up to 36.0% from 28.0% yesterday. I suspect consumer confidence readings have now put in place major lows.

Bull Radar

Style Outperformer:

Mid-cap Growth (+.45%)

Sector Outperformers:

Oil Service (+2.29%), Steel (+2.14%) and Road&Rail (+1.47%)

Stocks Rising on Unusual Volume:

GDP, ANW, MON, LFC, PDC, PBR, CCC, TKS, OLN, PENN, PLLL, WSCI, TITN, PMTC, MBLX, WPPGY, CALM, RICK, AXYS, CSIQ, SLAB, CVCO, ICON, AVAV, TYPE, CLHB, FMCN, ULTA, THQI, RZG, GGP and MIM