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Market Update 070206
http://biz.yahoo.com/mu/update.html

4:20 pm : For a second straight day, stocks looked lethargic as the lack of catalysts this week continues to leave investors indecisive about the sustainability of last week's impressive rally.

While the absence of potentially troubling economic data cleared way for the bulls to build on recent market gains right out of the gate, renewed concerns about Tech's growth prospects, oil prices making another run at $60/bbl intraday, and some apprehension ahead of several speeches from Fed officials underpinned a sense of caution throughout the session.

Even with Fed Chairman Bernanke's testimony out of the way around 1:30 ET, which made no mention of interest rates or the economy, investors struggled to find much incentive to get back into a market ripe for a pullback on the heels of the S&P 500's best weekly performance since August.

Of the five sectors closing higher, Utilities turned in the best performance as falling bond yields made dividend-paying stocks more attractive. The Dow Jones Utilities Index was up for the seventh straight day and closed at an all-time high.

The yield on the 10-year note fell four basis points to 4.76% after this week's first refunding auction garnered surprisingly strong demand from foreign central banks. The $16 bln 3-year note auction drew a solid 2.97 bid-to-cover with indirect bidder participation checking in at 32.3%, the biggest share since May 2005.

The rate-sensitive and much more influential Financials sector, though, provided the bulk of market support that merely helped the S&P 500 claw back after falling for the first time in five days. REITs were among the day's best performers after Blackstone raised its all-cash offer for Equity Office Properties (EOP 55.95 +0.49) to $39 bln. Investors also applauded MGIC Investment's (MTG 70.00 +7.07) decision to acquire Radian Group (RDN 66.54 +5.70) for $4.9 bln in stock while an analyst upgrade on State Street (STT 68.21 +1.13) gave Asset Managers a boost.

Providing additional sector support was Principal Financial Group (PFG 63.03 +0.79), which closed at an all-time higher after posting a 15% rise in Q4 profits. However, another strong profit report within the sector also served as a reminder that, without an estimated 8% contribution in aggregate earnings growth from Financials, Q4 profit growth for the S&P 500 stands at an unimpressive 3%.

Among the five sectors losing ground, Technology was the day's most influential laggard. A Q3 revenue warning from National Semiconductor (NSM 22.71 -0.61) Monday night gave investors another reason to rotate out of semiconductor stocks. A change of heart regarding tonight's Q2 report from Cisco Systems (CSCO 27.28 -0.23), which was up 1.0% earlier in anticipation of a solid report from the tech bellwether, also took away what little momentum stocks were exhibiting early on.

Energy was another disappointment as the sector failed to benefit from a late-day rebound in crude. Even with oil prices near their highest levels of the year, Anadarko Petroleum's (APC 42.40 -0.55) Q4 shortfall offset a 3.5% surge in Grant-Prideco (GRP 40.88 +1.37). The latter is a suggested holding in Briefing.com's Active Portfolio and it handily topped Wall Street forecasts and issued upside FY07 EPS guidance. BTK -0.2% DJ30 +4.57 DJUA +0.8% NASDAQ +0.89 NQ100 -0.1% R2K +0.4% SOX -0.5% SP400 0.5% SP500 +1.01 XOI -0.5% NASDAQ Dec/Adv/Vol 1323/1673/2.14 bln NYSE Dec/Adv/Vol 1197/2087/1.42 bln

11:00 am : A renewed wave of selling interest now leaves all three major averages trading in negative territory. Further deterioration in Technology (-0.5%), which now paces the way lower among the seven sectors losing ground, remains the biggest constraint for the bulls. Oil prices now trading near session lows, in sympathy with a reversal in natural gas futures, are now placing added emphasis on growth concerns for Energy (-0.4%), especially following Anadarko Petroleum's (APC 42.49 -0.46) Q4 shortfall.

It appears further analysis of Treasury Secretary Paulson saying earlier that the economy is in transition from above trend growth to a sustainable rate of about 3% is curbing some of the recent enthusiasm tied to further evidence that the economy is getting back on track. DJ30 -9.88 NASDAQ -9.79 SOX -1.3% SP500 -0.92 XOI -0.7% NASDAQ Dec/Adv/Vol 1283/1442/520 mln NYSE Dec/Adv/Vol 1109/1875/350 mln

10:30 am : After briefly slipping into negative territory, amid a reversal in Technology, the Nasdaq is now trading relatively flat. Cisco Systems (CSCO 27.49 -0.02) was up as much as 1% earlier, but some renewed uncertainty about its Q2 report tonight now leaves the bellwether in the red. Chip stocks are also under pressure after National Semiconductor (NSM 22.64 -0.68) warned last night that Q3 revenues will miss forecasts. DJ30 +7.05 NASDAQ +0.67 SOX -0.6% SP500 +1.89 NASDAQ Dec/Adv/Vol 1228/1432/360 mln NYSE Dec/Adv/Vol 1095/1806/236 mln

10:00 am : The indices are holding onto modest gains as the bulk of industry leadership remains positive. Of the eight sectors trading higher, Materials (+0.6%) paces the way as greenback weakness makes dollar-denominated commodities stocks more attractive. Providing a more influential floor of support for stocks, though, is Financials (+0.4%). An analyst upgrade on State Street (STT 68.19 +1.11) is giving Asset Managers a boost while investors are applauding MGIC Investment (MTG 69.30 +6.37) and Radian Group (RDN 67.00 +6.16) merging in a $4.9 bln stock swap. DJ30 +10.94 NASDAQ +4.50 SP500 +2.05 NASDAQ Dec/Adv/Vol 921/1567/170 mln NYSE Dec/Adv/Vol 853/1901/92 mln

09:40 am : As expected, the indices open modestly higher. With virtually every sector expected to show slower growth in coming quarters, and earnings forecasts in the Tech sector coming down noticeably of late, investors are placing some early bets that bellwether Cisco Systems (CSCO 27.76 +0.25) will be an exception. The stock is up nearly 1%.

Oil prices are up 1.3% near $59.50/bbl; but the market's resilience of late to higher energy prices and subsequent leadership in the Energy sector are providing some notable support as stocks try to regain some momentum on the heels of yesterday's breather. DJ30 +10.37 NASDAQ +5.40 SP500 +2.17 NASDAQ Vol 98 mln NYSE Vol 54 mln

09:15 am : S&P futures vs fair value: +2.6. Nasdaq futures vs fair value: +3.5.