Record High Oil…But The Dow Doesn’t Seem To Care!

Stocks shrugged off record high oil on this
quadruple witching Friday.
Stocks closed higher for the seventh
straight day. First-hour volume was an all
time record at over 700,000 shares. The
major indices are just off multi-year highs. S&P 500 is 1% off, and the Dow is
3% under its multi-year highs. The S&P turned positive for the year–the first
time since early March. So far this quarter, guidance has been strong and many
companies have announced stock buyback programs.

The current account deficit widened 3.6% to $195.1 billion, hotter
than expected and a new record. The deficit amounts to a record 6.4% of gross
domestic product. The University of Michigan Consumer Sentiment Index
rebounded to 94.8 in June vs. 86.9 in May.

Crude rose above $58, to double top territory and new record highs.
The U.S., British and German embassies in Nigeria were closed, adding to
geopolitical concerns. Nigerian light sweet crude is highly prized by refiners
because it can easily be turned into gasoline. Nigerian is an OPEC member, the
largest producer in Africa and the 11th largest in the world. To top it all off,
the Shell Deer Park refinery is closing for two weeks for unexpected
maintenance.

Demand for gasoline is 3% higher than this time last year. Distillate demand
is up  6.5%. Refiners are operating near capacity and with inventories 9%
over last year, traders are worried not about supply, but about output. 
Technical analyst John Murphy said crude could rise above $70/bbl.
“I don’t think there’s any doubt we’re headed higher,”
Murphy said in an interview today.

Adobe
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beat by a penny, ex-items and beat on revenues, but
guidance was a disappointment.

Circuit City
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reported a loss of 0.07 for Q1, wider than
expected. CC has been losing market share to Best Buy and Wal-Mart recently.
Earlier this week, Best Buy
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reported blowout numbers.

KB Homes
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beat by 0.28 and raised 2005 guidance; revenues were
in-line. Sales jumped nearly 80%.  Many homebuilders are making historic
highs.

Genentech
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is buying a plant in San Francisco from Biogen
Idec

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. Price tag: $408 million. The plant was originally built to
manufacture the recalled drug Tysabri.

Guidant
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is recalling 38,000 defibrillators after two deaths
were reported. GDT fell 1.6%. Johnson & Johnson
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is acquiring
Guidant..

Smith Barney upgraded the hombuilders–after downgrading the sector in
February.

Former Tyco chairman Dennis Kozlowzski was convicted on 23 of
23 counts today, including grand larceny and conspiracy. He was accused of
looting Tyco of more than $500 million.

An FDA advisory committee recommended NitroMed’s
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heart
drug for African Americans be approved. 

What is quadruple witching? It’s when stock index futures, stock index
options, stock options and single stock futures all expire. It happens four
times a year, on the third Friday of March, June, September and December.
Sometimes you will see wild gyrations, inconsistency and false price moves as
contracts are covered and rolled over. Some traders either trade lightly or not
at all on options expiration days.

Strong sectors were:  Biotech  
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+2.03%       Homebuilders
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+2.08%     Oil
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+1.95%

      

Weak sectors were:  Airlines
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-2.41%    Disk Drives
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-1.14%      Software

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-0.36%   

Dow +46.26 10,624.91
Nasdaq +1.75 2090.90
S&P 500 +6.10 1217.06

The dollar was -1.00 at
87.74

Crude Oil was +1.77 at
59.20

Gold was +1.00 at 437.10

ce=”Arial” size=”2″ face=”Arial”>Volume was 1.63 billion on the NYSE and
2.03 billion on the Nasdaq.

Market breadth was positive.

NYSE Issues
Advancing 2069 Up Vol 1335
Declining 1173 Down Vol 632
1.76 2.11
Nasdaq
Advancing 1472 Up Vol 1134
Declining 1549 Down Vol 631
1.05 1.79

Stocks in the News

FedEx
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was mentioned positively in Business Week.

Wachovia downgraded Goldman Sachs
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to market perform from
outperform.

Bank of America
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is acquiring a 9% stake in China
Construction Bank
for $2.5 billion. IT is the largest single investment to
date in the Chinese banking sector. The company plans to sell shares to the
public later this year.

Host Marriot
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increased its dividend by 25%.

Valero
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upped Q2 and 2005 guidance, saying the $7.51 estimate
is too low.

Canada gave 7-years licenses to XM Satellite Radio
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and
Sirius Satellite

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. The Canadian market is only 1/10 the size of
the U.S. market.

Brice Wightman