NEW YORK, NY After the initial pop at the open, all of the major stock indexes lost ground by early afternoon as market participants opted for a modest pause. The tech issues especially have been a drag on performance during the session. The financial issues have also come under pressure in afternoon trading. Additionally, U.S. treasuries are selling off, bringing the yield on the 10-year to approximately 3.88%. This compares to the 3.15% yield at the beginning of May prior to the most recent move down in prices.

Clearly, the topic du jour for today has to do with the impressive advance made in the price of crude oil. The commodity has doubled in the past few months to what are now seven-month highs. In early afternoon trading, light sweet crude oil for July delivery was trading at approximately $71.29 per barrel. While the current level is still way off the $149.00 per barrel attained last summer, the familiar arguments are being raised as to whether or not the move is sustainable.

The fact is that the move in the commodity last summer pretty much paralleled that of equity prices during the same period though with profoundly more volatility. From the highs attained last summer, crude oil prices fell 75.0% to a low of $33.00 per barrel before rebounding to its current level. Much of the price increase has to do with the fact that the outlook for the global economy is improving and with that an expected increase in demand for hydrocarbons. In addition, and perhaps even more crucial, is the fact that the U.S. dollar has been declining in value when compared to other international currencies. Today's move specifically has to do with an inventory report which indicated a draw of almost 4.4 million barrels. The consensus expectation was for a build of 100,000 barrels. This rather bullish outcome served as an impetus for traders to pile into the commodity.

The real strategy here is to figure out where crude oil is going at this point and try to position in front of it as opposed to trying to figure out where the commodity should be. Markets have a tendency to revert to the mean but invariably, it takes time and a matter of luck at betting exactly when that reversal will occur. This is a contango trade in crude oil as the path of least resistance appears to be up and investors are well advised to stay the current course.

Afternoon Notes from WSS Research Desk

Brian Sozzi

* Doesn't the advance in crude oil prices just feel plain old wrong? Better yet, doesn't the strong ascent seem to mirror last year's dollar weakness driven craziness? Goldman Sachs (GS) was out late last week in a note stating $85.00 per barrel oil was probable. Next the team may just be dusting off the $200.00 a barrel call.

* To my colleague David Silver's morning note that "Cash for Clunkers" is the next rage among the administration, I must ask: are owners of Dodge Vipers going to be forced to trade in their hot whips? It would be a darn shame if the administration appointed a special task force to go from town to town and forcefully remove gas guzzling vehicles from garages. If this hypothetical situation were to happen, look for strength in shares of Brinks (BCO).

* We continue to knock it out of the park with our institutional calls. Following yesterday's almost 30.0% advance in Movado Group (MOV) shares, in which we have had a buy on since February, Home Depot is continuing to trade with an upside bias upon the news released this morning. As a reference point, we recommended purchasing the stock in February. If you would like details on how to obtain access to this service, please contact your representative.

David Urani

* We all knew that when these bailouts and government spending plans started, that the country would pay for it in some way or another. We are starting to see the effects now in the forms of dollar devaluation and inflation. Russia has announced that it may remove some of its investments out of U.S. treasuries and into International Monetary Fund (IMF) debt that is spread across a basket of currencies. Russia has roughly $140.0 billion invested in U.S. treasuries. China has already expressed caution regarding its more than $700.0 billion of U.S. debt, and is actively pushing for a global currency to replace the dollar as the worldwide reserve currency. It is currently projected that the White House will have borrowed $3.25 trillion by the fiscal year ending September. The dollar has lost roughly 8.0% in the last month versus other currencies, with commodities also rising at a fast pace.

Carlos Guillen

* Overall tech shares are performing rather poorly in today's trading session. The chip sector, as measured by the Philadelphia Semiconductor Index, has decreased a bit less than 1.0% from Tuesday's closing price. This recent drop comes a day after Texas Instruments (TXN) significantly increased its revenue guidance range and now expects to see average sequential revenue growth of 15.0% in the second quarter. Tech stocks have given back some of yesterday's gains when the SOX increased by 4.45%. Some well known tech stocks giving up some of yesterday's gains include National (NSM), Texas Instruments, AMD (AMD), SanDisk (SNDK), and Marvell (MRVL).

* In other tech news, according to market research company iSuppli, the "number one" CPU maker in the world actually lost some of its market share to AMD. According to the data, Intel (INTC) lost 2.5 percentage points to a 79.1% market share, while AMD gained 2.3 percentage points to 12.8%. After previously losing market share during three out of four quarters in 2008, AMD managed to pull a rabbit out of a hat by taking market share from Intel in the first quarter of 2009. This was quite surprising given the macroeconomic backdrop and the weakness in PC and server markets. Apparently, AMD has shown increasing strength in most of its processor offerings, particularly in notebook processors. This news is supported by the fact that during the March quarter, AMD reported that revenue dropped by 20.9%, while Intel said its revenue declined by 26.1%.

David Silver

So much for doing fair business! Well, I guess you could argue that the UAW getting 55.0% of the new Chrysler is fair, but this move just solidifies that the weakness of Chrysler is here to stay. If anyone reading this commentary thinks that union members in three years are going to approve changes that takes unions jobs, please email me at David.Silver@wstreet.com and tell me why. I am very interested because with a 55.0% stake in the company, the union has the ability to alter just about every decision it makes. Another interesting development will be how CEO of Fiat (and now the Chrysler Group LLC) Sergio Marchionne deals with the union as well as how active it will be on the board of directors. The new board of directors will consist of three Fiat directors, four representing the US. government, one from the UAW, and one from the Canadian government. The company said that it expects to name the former Borden Chemical and Duracell chief executive as its chairman. It seems a bit fishy that the union only has one seat on the board yet has a 55.0% stake. The breakdown of ownership for the new Chrysler is as follows:

> 55.0% to the UAW
> 20.0% to Fiat (up to a 35.0% if certain goals are met)
> 8.0% to the U.S. government
> 2.0% to the Canadian government.

Note: Fiat will not be allowed to take a majority stake until the new Chrysler pays back the $15.5 billion lent to it from the Treasury Department.

So all in all where does that leave us? The auto plants that have been closed since May 1 will reopen (probably for the night shift) today and all those 53,000 Americans will go back to work. However, no one since Lee Iacocca has been able to make money with Chrysler. Fiat is getting two strong brand names in Jeep and Dodge, but the Chrysler name has not shown me anything in the past few sales releases that makes me believe it can be turned around. By the way, as an American tax payer, how can I get a deal like Fiat is getting? They are putting no money down for a 20.0% stake in a company with next to no liabilities with a promise to share technology and maybe bring a smaller, more fuel efficient vehicle into its fleet. Fiat cannot take more than its original 20.0% stake until the government has been paid back, but this company is still a long ways away from meeting the updated CAFÉ standards. I wonder what the fines will amount to for not meeting those new standards, and if the new Chrysler will be able to just start paying them now?