Dow - 129.79    I  Nasdaq - 24.05    I  S&P 500 - 13.57    

Market Wrap
(Briefing):

A day after a worsening interest rate outlook sparked a wave of profit-taking activity, such concerns returned Wednesday, giving investors another excuse to keep reining in recent market gains.

At their lows of the day, the Dow, S&P 500 and Nasdaq were down 1.2% on average. Broad-based selling activity closed all 10 sectors sharply lower. Of the 147 S&P industry groups, 139 finished in negative territory.

One reason the focus was squarely on interest rates Wednesday is that the European Central Bank raised its benchmark rate 25 basis points to 4.00%. Even though the rate hike was widely anticipated, and 4.00% is still well below the 5.25% fed funds rate in the U.S., the upward trend in rates proved bothersome.

Separately, Morgan Stanley issued a "triple sell" rating on European equities for the first time since the dotcom bust due to rising rates among other things. The investment bank said it expects a 14% correction in European equities over the next six months.

That news sent Europe's three major bourses, which recently hit multi-year highs, plunging 1.8% on average and left investors in U.S. equities also questioning valuations.

As a reminder, the Dow and S&P 500 were in record territory just two days ago, yet rising interest rates have served as an effective profit taking catalyst for the overextended market.

Wednesday's only scheduled economic report also failed to give investors any incentive to use intraday market dips as buying opportunities.

As expected, Q1 productivity was revised lower, checking in at 1.0% (consensus 1.0%) from a previous read of 1.7%. With high levels of resource utilization still a Fed focal point as having the potential to sustain inflationary pressures, unit labor costs tripling from the 0.6% rate initially reported exacerbated wage-based inflation worries.

Adding insult to injury was some hawkish Fed speak. Even though he's no longer a voting Fed member, Richmond Fed President Lacker said he sees no significant moderating trend yet in U.S. inflation and that it's difficult to gauge whether the housing market correction has bottomed. While his prepared remarks merely echoed comments made in late May, his words struck a nerve with an increasingly cautious market that has been pricing in the likelihood of a rate cut every since the Fed stopped tightening last summer.

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Trade system guidelines (edited):
Only available to Newsletter Subscribers.

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Today's Picks - June 07, 2007

1.   BMC - BMC Software

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
06-07-07		Long	Above 15min high	Sell 1/2 once risk covered	Below LOD at time of setup
	* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 33.49

2.   MLM - Martin Marietta Materials

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
06-07-07		Short	Below 15 low	Cover 1/2 once risk covered	Above HOD at time of setup
	* Please Note: If the stock gaps up at the open do not enter the trade unless it trades below 155.60

3.   EWW - iShares MSCI Mexico Index Fund

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
06-07-07		Short	Below 15 low	Cover 1/2 once risk covered	Above HOD at time of setup
	* Please Note: If the stock gaps up at the open do not enter the trade unless it trades below 62.10

4.   SPW - SPX Corp

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
06-07-07		Short	Below 15 low	Cover 1/2 once risk covered	Above HOD at time of setup
	* Please Note: If the stock gaps up at the open do not enter the trade unless it trades below 85.90

Previous Trades

AG - AGCO

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
		Long	Above 15min high	Sell 1/2 once risk covered	Below LOD at time of setup
	* did not setup

FPL - FPL Group

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
		Long	Above 15min high	Sell 1/2 once risk covered	Below LOD at time of setup
	* did not setup

SID - Companhia Siderurgica Nacional

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
06-06-07		Short	51.86	Reached (51.60)	Above 51.86	up to + $1.27 per share (50.59)

OKE - Oneok Inc

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
06-06-07		Short	52.84	Reached (52.34)	Above 52.84	up to + 91 cents per share (51.93)

OXY - Occidental Petroleum

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
06-04-07	06-06-07	Long	56.92	Reached (57.30)	Closed Below 57.72	up to + $2.06 per share (58.98)