S&P 500 1,101.72 +1.43%
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Last week was definitely a win for the Bulls. Crude oil reached a 21-year high and reports confirmed a slowing of economic growth in the second quarter, yet U.S. stocks advanced. Telecom and software, having recently experienced significant declines, saw some of the best performances for the week. It was also a positive that the CRB Index continued to drop, which bodes well for future readings of inflation. Finally, the AAII % Bulls fell again, which is a contrary indicator and a good development. On the negative side, the Put/Call, Arms and VIX all fell, showing there is still too much investor complacency to sustain a meaningful advance. I currently do not believe high oil prices are a major problem for the U.S. economy, however above $50/bbl. economic weakness will accelerate. I continue to anticipate a decline in prices before they reach this level. Inflation is still set to rise below its 41-year average of 3.0% for all of 2004.
Saturday, July 31, 2004
Economic Week in Review
ECRI Weekly Leading Index 131.10 -.08%
Existing Home Sales for June rose to 6.95M versus estimates of 6.65M and an upwardly revised 6.81M in May. The median selling price rose 9.6% year-over-year to a record $191,800. "When you combine the fact that more people are working and we have low mortgage rates, you get a healthy housing market," said Tom Kunz, CEO of Century 21. The U.S. economy so far this year has had the strongest six months of job growth since the stock market bubble burst and the economy began to plunge into recession in 2000, Bloomberg reported. Moreover, the average rate on a 30-year fixed mortgage is still only about a percentage point above an all-time low. The supply of homes available for sale, another gauge of housing demand, dropped to 4.1 months' worth in June, the lowest since December 2001, Bloomberg said. Finally, mortgage purchase applications suggest sales will remain robust. June purchase applications were 12% higher on average than in 2003, the Mortgage Bankers Association said.
The Conference Board's Consumer Confidence for July was 106.1, a two-year high, versus estimates of 102.0 and an upwardly revised reading of 102.8 in June. Confidence was boosted by an improving job market that also helped keep home sales at record levels, Bloomberg said. FactCheck.org, an arm of the Annenberg Public Policy Center of the Univ. of Pennsylvania, recently said employment "has increased by 1.3 million jobs this year in categories that on average paid above the median earnings of $541 a week," Bloomberg reported. "U.S. households are continuing to display tremendous confidence in future economic conditions by their willingness to enter into the housing market," said John Ryding, chief U.S. economist at Bear Stearns. The Conference Board also said the percentage of Americans who consider jobs hard to find is now the lowest since 2000.
New Home Sales for June were 1326K versus estimates of 1272K and a downwardly revised 1337K in May. The median selling price increased 11.7% to $209,900 from June of last year. More jobs and higher wages are giving buyers the wherewithal to purchase as interest rates rise, Bloomberg said. The upward turn in interest rates is also dragging "fence-sitters" into the housing market. A total of 1.17 million new homes will probably be sold this year, besting the all-time record sold last year by 7.4%, according to a forecast from the National Association of Home Builders. "One thing that is very difficult to accomplish is to sell a home to an unemployed individual," said Donald Tomnitz, CEO of D.R. Horton. The economy is doing much better, creating jobs, which is the best thing that can happen to our industry he said.
Durable Goods Orders for June rose .7% versus estimates of a 1.5% rise and an upwardly revised decrease of .9% in May. "We went through somewhat of a rough patch in the second quarter and maybe business investment is starting to pick up again," said Bill Natcher, an economist at National City Corp. "Things are still looking good for the second half." Business spending on new equipment and software is likely to grow at an average 16% annual pace in the second half of the year after expanding at an average 10% rate from January to June, according to a forecast by economists at Barclays Capital. Tax cuts approved last year included a greater allowance for depreciating investments in equipment, giving companies incentive to accelerate spending this year before they expire.
Initial Jobless Claims for last week were 345K versus estimates of 340K and 341K the prior week. Continuing Claims were 2960K versus estimates of 2875K and 2786K prior. Claims tend to fall when hiring increases, and weekly claims of about 340,000 corresponds with the monthly creation of roughly 200,000 jobs, according to many economists. The rise in claims is "all due to the temporary auto plant shutdowns," said Joseph LaVorgna, an economist at Deutsche Bank Securities. "The labor market continues to be robust."
The advance Gross Domestic Product reading for 2Q was 3.0% versus estimates of 3.7% and an upwardly revised 4.5% in 1Q. Personal Consumption rose 1.0% versus estimates of a 2.0% rise and an upwardly revised 4.1% increase in 1Q. The GDP Price Deflator for 2Q rose 3.2% versus estimates of a 3.0% gain and a downwardly revised increase of 2.7% in 1Q. The core personal consumption expenditure index, Greenspan's favorite inflation gauge, rose 1.8% at an annual rate in the second quarter after a 2.1% pace in the prior quarter, Bloomberg reported. Nominal GDP rose 6.3% in the second quarter after rising 7.4% in the first quarter, Bloomberg said. "Nominal demand growth remains very robust and this report should in no way discourage the Fed from raising rates a quarter of a point on Aug. 10," said John Ryding of Bear Stearns. Today's report also contained the government's annual revisions for GDP since 1Q of 2001. The revisions show that the monetary and fiscal stimuli implemented during the recession led to the fastest recovery on record, Bloomberg reported. The recession officially ended in November 2001, Bloomberg said.
The Chicago Purchasing Manager Index for July rose to 64.7 versus estimates of 60.0 and a reading of 56.4 in June. After falling in June, the Index surged back near its 16-year high reached in May. Factories are boosting production to reduce building backlogs. The rebound bolsters expectations growth is reaccelerating after slowing in the second quarter, Bloomberg reported. Moreover, the group's index of prices paid for raw materials fell, suggesting inflation is decelerating, Bloomberg said.
Bottom Line: Overall, last week's data were mixed, with signs of improvement. Home sales continue to defy the bears and pundits. There is not a glut of homes as demand continues to outstrip supply. Furthermore, interest rates remain low by historic standards. Home sales should remain strong as job growth continues. As well, American's net worth continues to reach all-time high levels as their homes appreciate in value. Better job opportunities and increasing wealth are leading most Americans to feel more confident about the economy as some consumer confidence readings reach levels not seen since before the stock market crashed and the economy headed towards recession in 2000. Moreover, the big picture in Iraq continues to improve and the media's obsession with negatively has led it to focus on other subjects. Corporate spending should accelerate in the second-half of the year as companies take advantage of tax relief that was passed to alleviate the massive overcapacity of technology equipment produced during the bubble. This relief is scheduled to expire at the end of the year. 2Q GDP came in .7 percentage points below expectations, however 1Q growth was revised higher by .6 percentage points. Recent data continue to suggest that the slowdown seen in the second quarter was temporary. Third quarter growth should exceed 4.0% once again.
Existing Home Sales for June rose to 6.95M versus estimates of 6.65M and an upwardly revised 6.81M in May. The median selling price rose 9.6% year-over-year to a record $191,800. "When you combine the fact that more people are working and we have low mortgage rates, you get a healthy housing market," said Tom Kunz, CEO of Century 21. The U.S. economy so far this year has had the strongest six months of job growth since the stock market bubble burst and the economy began to plunge into recession in 2000, Bloomberg reported. Moreover, the average rate on a 30-year fixed mortgage is still only about a percentage point above an all-time low. The supply of homes available for sale, another gauge of housing demand, dropped to 4.1 months' worth in June, the lowest since December 2001, Bloomberg said. Finally, mortgage purchase applications suggest sales will remain robust. June purchase applications were 12% higher on average than in 2003, the Mortgage Bankers Association said.
The Conference Board's Consumer Confidence for July was 106.1, a two-year high, versus estimates of 102.0 and an upwardly revised reading of 102.8 in June. Confidence was boosted by an improving job market that also helped keep home sales at record levels, Bloomberg said. FactCheck.org, an arm of the Annenberg Public Policy Center of the Univ. of Pennsylvania, recently said employment "has increased by 1.3 million jobs this year in categories that on average paid above the median earnings of $541 a week," Bloomberg reported. "U.S. households are continuing to display tremendous confidence in future economic conditions by their willingness to enter into the housing market," said John Ryding, chief U.S. economist at Bear Stearns. The Conference Board also said the percentage of Americans who consider jobs hard to find is now the lowest since 2000.
New Home Sales for June were 1326K versus estimates of 1272K and a downwardly revised 1337K in May. The median selling price increased 11.7% to $209,900 from June of last year. More jobs and higher wages are giving buyers the wherewithal to purchase as interest rates rise, Bloomberg said. The upward turn in interest rates is also dragging "fence-sitters" into the housing market. A total of 1.17 million new homes will probably be sold this year, besting the all-time record sold last year by 7.4%, according to a forecast from the National Association of Home Builders. "One thing that is very difficult to accomplish is to sell a home to an unemployed individual," said Donald Tomnitz, CEO of D.R. Horton. The economy is doing much better, creating jobs, which is the best thing that can happen to our industry he said.
Durable Goods Orders for June rose .7% versus estimates of a 1.5% rise and an upwardly revised decrease of .9% in May. "We went through somewhat of a rough patch in the second quarter and maybe business investment is starting to pick up again," said Bill Natcher, an economist at National City Corp. "Things are still looking good for the second half." Business spending on new equipment and software is likely to grow at an average 16% annual pace in the second half of the year after expanding at an average 10% rate from January to June, according to a forecast by economists at Barclays Capital. Tax cuts approved last year included a greater allowance for depreciating investments in equipment, giving companies incentive to accelerate spending this year before they expire.
Initial Jobless Claims for last week were 345K versus estimates of 340K and 341K the prior week. Continuing Claims were 2960K versus estimates of 2875K and 2786K prior. Claims tend to fall when hiring increases, and weekly claims of about 340,000 corresponds with the monthly creation of roughly 200,000 jobs, according to many economists. The rise in claims is "all due to the temporary auto plant shutdowns," said Joseph LaVorgna, an economist at Deutsche Bank Securities. "The labor market continues to be robust."
The advance Gross Domestic Product reading for 2Q was 3.0% versus estimates of 3.7% and an upwardly revised 4.5% in 1Q. Personal Consumption rose 1.0% versus estimates of a 2.0% rise and an upwardly revised 4.1% increase in 1Q. The GDP Price Deflator for 2Q rose 3.2% versus estimates of a 3.0% gain and a downwardly revised increase of 2.7% in 1Q. The core personal consumption expenditure index, Greenspan's favorite inflation gauge, rose 1.8% at an annual rate in the second quarter after a 2.1% pace in the prior quarter, Bloomberg reported. Nominal GDP rose 6.3% in the second quarter after rising 7.4% in the first quarter, Bloomberg said. "Nominal demand growth remains very robust and this report should in no way discourage the Fed from raising rates a quarter of a point on Aug. 10," said John Ryding of Bear Stearns. Today's report also contained the government's annual revisions for GDP since 1Q of 2001. The revisions show that the monetary and fiscal stimuli implemented during the recession led to the fastest recovery on record, Bloomberg reported. The recession officially ended in November 2001, Bloomberg said.
The Chicago Purchasing Manager Index for July rose to 64.7 versus estimates of 60.0 and a reading of 56.4 in June. After falling in June, the Index surged back near its 16-year high reached in May. Factories are boosting production to reduce building backlogs. The rebound bolsters expectations growth is reaccelerating after slowing in the second quarter, Bloomberg reported. Moreover, the group's index of prices paid for raw materials fell, suggesting inflation is decelerating, Bloomberg said.
Bottom Line: Overall, last week's data were mixed, with signs of improvement. Home sales continue to defy the bears and pundits. There is not a glut of homes as demand continues to outstrip supply. Furthermore, interest rates remain low by historic standards. Home sales should remain strong as job growth continues. As well, American's net worth continues to reach all-time high levels as their homes appreciate in value. Better job opportunities and increasing wealth are leading most Americans to feel more confident about the economy as some consumer confidence readings reach levels not seen since before the stock market crashed and the economy headed towards recession in 2000. Moreover, the big picture in Iraq continues to improve and the media's obsession with negatively has led it to focus on other subjects. Corporate spending should accelerate in the second-half of the year as companies take advantage of tax relief that was passed to alleviate the massive overcapacity of technology equipment produced during the bubble. This relief is scheduled to expire at the end of the year. 2Q GDP came in .7 percentage points below expectations, however 1Q growth was revised higher by .6 percentage points. Recent data continue to suggest that the slowdown seen in the second quarter was temporary. Third quarter growth should exceed 4.0% once again.
Friday, July 30, 2004
Weekly Scoreboard*
Indices
S&P 500 1,101.72 +1.43%
Dow 10,139.71 +1.78%
NASDAQ 1,887.36 +2.07%
Russell 2000 551.29 +2.24%
S&P Equity Long/Short Index 956.51 -.97%
Put/Call .64 -17.95%
NYSE Arms 1.31 -24.71%
Volatility(VIX) 15.32 -7.15%
AAII % Bulls 34.0 -4.79%
US Dollar 89.96 +.77%
CRB 267.78 -.90%
Futures Spot Prices
Gold 393.70 +.13%
Crude Oil 43.80 +5.11%
Unleaded Gasoline 130.49 +2.75%
Natural Gas 6.11 -1.34%
Base Metals 112.13 +3.65%
10-year US Treasury Yield 4.47% +1.13%
Average 30-year Mortgage Rate 6.08% +1.67%
Leading Sectors
Iron/Steel +6.78%
Telecom +4.77%
Software +3.69%
Lagging Sectors
Foods -.64%
HMO's -1.97%
Hospitals -4.33%
*% Gain or loss for the week
S&P 500 1,101.72 +1.43%
Dow 10,139.71 +1.78%
NASDAQ 1,887.36 +2.07%
Russell 2000 551.29 +2.24%
S&P Equity Long/Short Index 956.51 -.97%
Put/Call .64 -17.95%
NYSE Arms 1.31 -24.71%
Volatility(VIX) 15.32 -7.15%
AAII % Bulls 34.0 -4.79%
US Dollar 89.96 +.77%
CRB 267.78 -.90%
Futures Spot Prices
Gold 393.70 +.13%
Crude Oil 43.80 +5.11%
Unleaded Gasoline 130.49 +2.75%
Natural Gas 6.11 -1.34%
Base Metals 112.13 +3.65%
10-year US Treasury Yield 4.47% +1.13%
Average 30-year Mortgage Rate 6.08% +1.67%
Leading Sectors
Iron/Steel +6.78%
Telecom +4.77%
Software +3.69%
Lagging Sectors
Foods -.64%
HMO's -1.97%
Hospitals -4.33%
*% Gain or loss for the week
Mid-day Update
S&P 500 1,100.92 +.04%
NASDAQ 1,892.74 +.62%
Leading Sectors
Broadcasting +2.21%
Semis +1.80%
Disk Drives +1.59%
Lagging Sectors
Airlines -.93%
Telecom -.99%
HMO's -1.85%
Other
Crude Oil 43.50 +1.71%
Natural Gas 6.15 .49%
Gold 393.30 +.90%
Base Metals 112.13 +1.15%
U.S. Dollar 89.92 -.02%
10-Yr. T-note Yield 4.48% -2.07%
VIX 15.49 -1.21%
Put/Call .60 -6.25%
NYSE Arms 1.51 +64.13%
Market Movers
APCC -13.1% after missing 2Q forecast and giving weaker outlook.
MGAM -25.0% after missing 3Q estimates and lowering 04 forecast.
KLAC +7.5% after meeting 4Q estimates, raising 1Q outlook and WR Hambrecht upgrade to Buy.
GILD +10.5% after beating 2Q estimates substantially.
VSEA +8.8%after meeting 3Q estimates, raising 4Q outlook and Bank of America upgrade to Neutral.
SWIR +8.1% as Piper Jaffray reiterated Outperform after meeting with management.
CYTC +8.5% after beating 2Q estimates and making positive comments.
IRF +7.3% after CEO made positive comments on CNBC.
ACAP +14.2% after substantially beating 2Q estimates and multiple upgrades.
VAS -17.3% on weaker-than-expected 2Q, multiple downgrades and executive resignations.
SYNA -13.6% after meeting 4Q estimates, but lowering 1Q forcast.
PHS -9.3% after beating 2Q estimates, but poor earnings quality.
TGI -9.2% after missing 2Q earnings estimates.
Economic Data
Advance 2Q Gross Domestic Product rose 3.0% versus expectations of a 3.7% rise and an upwardly revised 4.5% increase in 1Q.
Advance 2Q Personal Consumption rose 1.0% versus expectations of a 2.0% increase and an upwardly revised 4.1% increase in 1Q.
Advance 2Q GDP Price Deflator rose 3.2% versus estimates of a 3.0% rise and a downwardly revised 2.7% increase in 1Q.
Final Univ. of Mich. Consumer Confidence for July was 96.7 versus estimates of 96.2 and a reading of 96.0 prior.
Chicago Purchasing Manager report for July was 64.7 versus estimates of 60.0 and 56.4 in June.
Recommendations
Goldman Sachs reiterated Outperform on SYMC, DOW, BSX, CMX, AMIS, LIZ and MSFT. Goldman reiterated Underperform on KZL. Citi SmithBarney reiterated Buy on MWD, target $72. Citi reiterated Buy on BHI, target $50. Citi reiterated Buy on ACGL, target $48. Citi reiterated Buy on SPF, target $90. Citi reiterated Buy on BC, target $49. Citi reiterated Buy on BZH, target $174. Citi reiterated Sell on XOM, target $40.50. Citi reiterated Buy on BG, target $50. Citi reiterated Buy on UNH, target $86. DNR cut to Sector Underperform by CIBC. VAS cut to Sector Underperform by CIBC. KSS raised to Overweight at Prudential, target $53. JWN cut to Underweight at Prudential, target $45. GNTX raised to Overweight at Prudential, target $40. ITMN cut to Sell at Legg Mason. XMSR rated Buy at Bank of America, target $32. CVD raised to Outpeform at Bear Stearns, target $51. NILE raised to Buy at Merrill, target $36. HE cut to Sell at Merrill.
Mid-day News
U.S. stocks are mostly higher today on stronger earnings reports, falling interest rates and short covering. Spirit Air, the biggest privately owned U.S. airline, is lowering its prices in a bid to prevent JetBlue Air from grabbing customers when it starts flights from New York's LaGuardia airport to Florida in September, Bloomberg reported. The Sarbanes-Oxley Law, passed two years ago today, has made investors more confident about the accuracy of the financial information they receive from companies, Nasdaq Chief Executive Bob Greifeld wrote in the Wall Street Journal. The U.S. FBI warned police throughout the western U.S. that al-Qaeda terrorists may be planning to strike in California or New Mexico, the LA Times reported. Procter & Gamble may report its biggest quarterly earning gain in two years, on Monday, bolstered by acquisitions and surging sales in developing countries such as China, Bloomberg said. The U.S. economy grew at a 3% annual rate from April through June, less than forecast, Bloomberg reported. The Chicago Purchasing Manager report rebounded sharply in June to 64.7, near May's 16-year high reading of 68.0, Bloomberg reported. Bristol-Myers Squibb, the biggest maker of AIDS drugs, agreed to pay $300 million to settle a class-action lawsuit related to its wholesaler inventory practices, accounting and partnership with ImClone Systems, Bloomberg reported. Crude oil in New York rose to a record for the second time this week on concern that supply from the world's top exporters will be disrupted as fuel consumption surges, Bloomberg said.
BOTTOM LINE: The Portfolio is substantially higher today on strength in my internet, semi-equipment and alternative energy longs. I have not traded today and the Portfolio is still 125% net long. Anti-business political rhetoric and rising energy prices are restraining today's market. While GDP was weaker-than expected, I continue to believe that the slowdown is just a pause that refreshes and economic growth will accelerate in the near future. Signs of this are already appearing as evidenced by today's very strong Chicago Purchasing Manager's report. I expect U.S. stocks to remain mixed into the close as the spiking Arms Index and falling interest rates offset the negatives.
NASDAQ 1,892.74 +.62%
Leading Sectors
Broadcasting +2.21%
Semis +1.80%
Disk Drives +1.59%
Lagging Sectors
Airlines -.93%
Telecom -.99%
HMO's -1.85%
Other
Crude Oil 43.50 +1.71%
Natural Gas 6.15 .49%
Gold 393.30 +.90%
Base Metals 112.13 +1.15%
U.S. Dollar 89.92 -.02%
10-Yr. T-note Yield 4.48% -2.07%
VIX 15.49 -1.21%
Put/Call .60 -6.25%
NYSE Arms 1.51 +64.13%
Market Movers
APCC -13.1% after missing 2Q forecast and giving weaker outlook.
MGAM -25.0% after missing 3Q estimates and lowering 04 forecast.
KLAC +7.5% after meeting 4Q estimates, raising 1Q outlook and WR Hambrecht upgrade to Buy.
GILD +10.5% after beating 2Q estimates substantially.
VSEA +8.8%after meeting 3Q estimates, raising 4Q outlook and Bank of America upgrade to Neutral.
SWIR +8.1% as Piper Jaffray reiterated Outperform after meeting with management.
CYTC +8.5% after beating 2Q estimates and making positive comments.
IRF +7.3% after CEO made positive comments on CNBC.
ACAP +14.2% after substantially beating 2Q estimates and multiple upgrades.
VAS -17.3% on weaker-than-expected 2Q, multiple downgrades and executive resignations.
SYNA -13.6% after meeting 4Q estimates, but lowering 1Q forcast.
PHS -9.3% after beating 2Q estimates, but poor earnings quality.
TGI -9.2% after missing 2Q earnings estimates.
Economic Data
Advance 2Q Gross Domestic Product rose 3.0% versus expectations of a 3.7% rise and an upwardly revised 4.5% increase in 1Q.
Advance 2Q Personal Consumption rose 1.0% versus expectations of a 2.0% increase and an upwardly revised 4.1% increase in 1Q.
Advance 2Q GDP Price Deflator rose 3.2% versus estimates of a 3.0% rise and a downwardly revised 2.7% increase in 1Q.
Final Univ. of Mich. Consumer Confidence for July was 96.7 versus estimates of 96.2 and a reading of 96.0 prior.
Chicago Purchasing Manager report for July was 64.7 versus estimates of 60.0 and 56.4 in June.
Recommendations
Goldman Sachs reiterated Outperform on SYMC, DOW, BSX, CMX, AMIS, LIZ and MSFT. Goldman reiterated Underperform on KZL. Citi SmithBarney reiterated Buy on MWD, target $72. Citi reiterated Buy on BHI, target $50. Citi reiterated Buy on ACGL, target $48. Citi reiterated Buy on SPF, target $90. Citi reiterated Buy on BC, target $49. Citi reiterated Buy on BZH, target $174. Citi reiterated Sell on XOM, target $40.50. Citi reiterated Buy on BG, target $50. Citi reiterated Buy on UNH, target $86. DNR cut to Sector Underperform by CIBC. VAS cut to Sector Underperform by CIBC. KSS raised to Overweight at Prudential, target $53. JWN cut to Underweight at Prudential, target $45. GNTX raised to Overweight at Prudential, target $40. ITMN cut to Sell at Legg Mason. XMSR rated Buy at Bank of America, target $32. CVD raised to Outpeform at Bear Stearns, target $51. NILE raised to Buy at Merrill, target $36. HE cut to Sell at Merrill.
Mid-day News
U.S. stocks are mostly higher today on stronger earnings reports, falling interest rates and short covering. Spirit Air, the biggest privately owned U.S. airline, is lowering its prices in a bid to prevent JetBlue Air from grabbing customers when it starts flights from New York's LaGuardia airport to Florida in September, Bloomberg reported. The Sarbanes-Oxley Law, passed two years ago today, has made investors more confident about the accuracy of the financial information they receive from companies, Nasdaq Chief Executive Bob Greifeld wrote in the Wall Street Journal. The U.S. FBI warned police throughout the western U.S. that al-Qaeda terrorists may be planning to strike in California or New Mexico, the LA Times reported. Procter & Gamble may report its biggest quarterly earning gain in two years, on Monday, bolstered by acquisitions and surging sales in developing countries such as China, Bloomberg said. The U.S. economy grew at a 3% annual rate from April through June, less than forecast, Bloomberg reported. The Chicago Purchasing Manager report rebounded sharply in June to 64.7, near May's 16-year high reading of 68.0, Bloomberg reported. Bristol-Myers Squibb, the biggest maker of AIDS drugs, agreed to pay $300 million to settle a class-action lawsuit related to its wholesaler inventory practices, accounting and partnership with ImClone Systems, Bloomberg reported. Crude oil in New York rose to a record for the second time this week on concern that supply from the world's top exporters will be disrupted as fuel consumption surges, Bloomberg said.
BOTTOM LINE: The Portfolio is substantially higher today on strength in my internet, semi-equipment and alternative energy longs. I have not traded today and the Portfolio is still 125% net long. Anti-business political rhetoric and rising energy prices are restraining today's market. While GDP was weaker-than expected, I continue to believe that the slowdown is just a pause that refreshes and economic growth will accelerate in the near future. Signs of this are already appearing as evidenced by today's very strong Chicago Purchasing Manager's report. I expect U.S. stocks to remain mixed into the close as the spiking Arms Index and falling interest rates offset the negatives.
Friday Watch
Earnings of Note
Company/Estimate
BOBJ/.17
CVX/2.72
NTE/.28
Splits
None of note.
Economic Data
Advance 2Q Gross Domestic Product estimated +3.7% versus +3.9% in 1Q.
Advance 2Q Personal Consumption estimated +2.0% versus +3.8% in 1Q.
Advance 2Q Price Deflator estimated +3.0% versus +2.9% in 1Q.
Final Univ. of Mich. Consumer Confidence reading for July estimated at 96.2 versus 96.0 in June.
Chicago Purchasing Manager for July estimated at 60.0 versus 56.4 in June.
Recommendations
Goldman Sachs reiterated Outperform rating on AHC, MUR, BC, KLAC, NOC, BHI, ISG, NFX, PXD, VLO and DVN. Goldman reiterated Underperform on PCO and MGM.
Late-Night News
Asian indices are higher on strong earnings reports from technology and industrial companies in the region. Microsoft may start its online music store by the end of August, allowing consumers to buy and download digital audio tracks to their computers, the Financial Times said on its Web site. China said it may use military force against Taiwan if island President Chen Shui-bian doesn't scrap plans to amend Taiwan's constitution and fails to endorse the "one-China" policy, China Daily reported. Less than half of the 5.3 million tickets for the Olympics in Athens have been sold, the Guardian said. Target agreed to sell its Mervyn's department store chain to an investment group for approximately $1.65 billion in cash, Bloomberg said.
Late-Night Trading
Asian Indices are +1.0% to +1.5% on average.
S&P 500 indicated +.12%.
NASDAQ 100 indicated +.14%
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on the end of the Democratic Convention with no terror attacks, better economic reports and short covering. However, rising oil prices and anti-business political rhetoric will likely hold any rally in check. The Portfolio is 125% net long heading into tomorrow.
Company/Estimate
BOBJ/.17
CVX/2.72
NTE/.28
Splits
None of note.
Economic Data
Advance 2Q Gross Domestic Product estimated +3.7% versus +3.9% in 1Q.
Advance 2Q Personal Consumption estimated +2.0% versus +3.8% in 1Q.
Advance 2Q Price Deflator estimated +3.0% versus +2.9% in 1Q.
Final Univ. of Mich. Consumer Confidence reading for July estimated at 96.2 versus 96.0 in June.
Chicago Purchasing Manager for July estimated at 60.0 versus 56.4 in June.
Recommendations
Goldman Sachs reiterated Outperform rating on AHC, MUR, BC, KLAC, NOC, BHI, ISG, NFX, PXD, VLO and DVN. Goldman reiterated Underperform on PCO and MGM.
Late-Night News
Asian indices are higher on strong earnings reports from technology and industrial companies in the region. Microsoft may start its online music store by the end of August, allowing consumers to buy and download digital audio tracks to their computers, the Financial Times said on its Web site. China said it may use military force against Taiwan if island President Chen Shui-bian doesn't scrap plans to amend Taiwan's constitution and fails to endorse the "one-China" policy, China Daily reported. Less than half of the 5.3 million tickets for the Olympics in Athens have been sold, the Guardian said. Target agreed to sell its Mervyn's department store chain to an investment group for approximately $1.65 billion in cash, Bloomberg said.
Late-Night Trading
Asian Indices are +1.0% to +1.5% on average.
S&P 500 indicated +.12%.
NASDAQ 100 indicated +.14%
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on the end of the Democratic Convention with no terror attacks, better economic reports and short covering. However, rising oil prices and anti-business political rhetoric will likely hold any rally in check. The Portfolio is 125% net long heading into tomorrow.
Thursday, July 29, 2004
Thursday Close
S&P 500 1,100.43 +.46%
NASDAQ 1,881.06 +1.23%
Leading Sectors
HMO's +4.0%
Airlines +2.93%
Semis +2.93%
Lagging Sectors
Restaurants -.29%
Consumer -.35%
Iron/Steel -2.71%
Other
Crude Oil 42.90 +.35%
Natural Gas 6.18 unch.
Gold 390.50 +.18%
Base Metals 110.86 +.70%
U.S. Dollar 89.95 +.22%
10-Yr. T-note Yield 4.57% -.22%
VIX 15.68 -2.91%
Put/Call .64 -4.48%
NYSE Arms .92 -17.86%
After-hours Movers
AIRT +9.20% on continued rise after reporting strong 1Q results.
GILD +6.81% after beating 2Q estimates substantially.
ISIL +4.68% after slightly missing 2Q estimates, but maintaining 3Q forecast.
MGAM -26.2% after missing 3Q estimates and lowering 04 forecast.
APCC -12.9% after missing 2Q forecast and giving weaker outlook.
SYNA -11.6% after meeting 4Q estimates, but lowering 1Q forcast.
THQI -10.5% after missing 1Q estimates and lowering 2Q outlook.
FLML -6.58% after disappointing 2Q report.
Recommendations
Goldman Sachs reiterated Underperform on MKL, CNA and DUK. Goldman reiterated Outperform on AIG, AHC, XOM and AFL. MGI Pharma's(MOGN) drugs that are taken by caner patients to alleviate the side effects of treatment will help further boost the company's sales, Business Week reported. Albertson's(ABS) share price may more than double to $51 in the next 12 to 18 months, Business Week said. Audible(ADBL), a provider of audio books, magazines and newspapers on the Internet, will benefit as more readers flock to its service, Business Week reported.
After-hours News
U.S. stocks finished higher today on stabilizing oil prices, stronger earnings reports and short covering. After the close, the U.S. Supreme Court is expected to rule that Visa and MasterCard cannot ban banks from issuing other credit cards, allowing American Express to distribute bank-issued cards, Business Week reported. Boston Scientific's Taxus stent, which was recalled after being linking to three deaths and 43 serious injuries, will be used again at Brigham & Women's Hospital, on of several large hospitals to suspend use of the device, the Wall Street Journal reported. Senator Kerry's supporters in the U.S. presidential election are challenging Ralph Nader's candidacy in some states and hired Vermont Governor Howard Dean to help persuade voters not to support him, Business Week said. Some hedge fund managers have been informed they have been barred from bidding for shares through the retail portion of Google's IPO, Dow Jones reported. Janus Capital said a client plans to withdraw $5 billion in funds, Bloomberg reported. Intel delayed the release of a faster version of its Pentium desktop processor until next year, Bloomberg said.
BOTTOM LINE: The Portfolio finished substantially higher today as several of my technology longs increased significantly. I did not trade in the afternoon and the Portfolio is still 125% net long. The tone of the market was pretty good today as several sectors saw good gains and the advance/decline line was strong in the face of stubbornly high oil prices. U.S. stocks should see more gains in the near-term. A pull-back in energy could turn the recent rally into something more substantial. However, weakness will likely resurface in the coming weeks on the same worries that have recently plagued shares.
NASDAQ 1,881.06 +1.23%
Leading Sectors
HMO's +4.0%
Airlines +2.93%
Semis +2.93%
Lagging Sectors
Restaurants -.29%
Consumer -.35%
Iron/Steel -2.71%
Other
Crude Oil 42.90 +.35%
Natural Gas 6.18 unch.
Gold 390.50 +.18%
Base Metals 110.86 +.70%
U.S. Dollar 89.95 +.22%
10-Yr. T-note Yield 4.57% -.22%
VIX 15.68 -2.91%
Put/Call .64 -4.48%
NYSE Arms .92 -17.86%
After-hours Movers
AIRT +9.20% on continued rise after reporting strong 1Q results.
GILD +6.81% after beating 2Q estimates substantially.
ISIL +4.68% after slightly missing 2Q estimates, but maintaining 3Q forecast.
MGAM -26.2% after missing 3Q estimates and lowering 04 forecast.
APCC -12.9% after missing 2Q forecast and giving weaker outlook.
SYNA -11.6% after meeting 4Q estimates, but lowering 1Q forcast.
THQI -10.5% after missing 1Q estimates and lowering 2Q outlook.
FLML -6.58% after disappointing 2Q report.
Recommendations
Goldman Sachs reiterated Underperform on MKL, CNA and DUK. Goldman reiterated Outperform on AIG, AHC, XOM and AFL. MGI Pharma's(MOGN) drugs that are taken by caner patients to alleviate the side effects of treatment will help further boost the company's sales, Business Week reported. Albertson's(ABS) share price may more than double to $51 in the next 12 to 18 months, Business Week said. Audible(ADBL), a provider of audio books, magazines and newspapers on the Internet, will benefit as more readers flock to its service, Business Week reported.
After-hours News
U.S. stocks finished higher today on stabilizing oil prices, stronger earnings reports and short covering. After the close, the U.S. Supreme Court is expected to rule that Visa and MasterCard cannot ban banks from issuing other credit cards, allowing American Express to distribute bank-issued cards, Business Week reported. Boston Scientific's Taxus stent, which was recalled after being linking to three deaths and 43 serious injuries, will be used again at Brigham & Women's Hospital, on of several large hospitals to suspend use of the device, the Wall Street Journal reported. Senator Kerry's supporters in the U.S. presidential election are challenging Ralph Nader's candidacy in some states and hired Vermont Governor Howard Dean to help persuade voters not to support him, Business Week said. Some hedge fund managers have been informed they have been barred from bidding for shares through the retail portion of Google's IPO, Dow Jones reported. Janus Capital said a client plans to withdraw $5 billion in funds, Bloomberg reported. Intel delayed the release of a faster version of its Pentium desktop processor until next year, Bloomberg said.
BOTTOM LINE: The Portfolio finished substantially higher today as several of my technology longs increased significantly. I did not trade in the afternoon and the Portfolio is still 125% net long. The tone of the market was pretty good today as several sectors saw good gains and the advance/decline line was strong in the face of stubbornly high oil prices. U.S. stocks should see more gains in the near-term. A pull-back in energy could turn the recent rally into something more substantial. However, weakness will likely resurface in the coming weeks on the same worries that have recently plagued shares.
Mid-day Update
S&P 500 1,100.47 +.46%
NASDAQ 1,879.44 +1.14%
Leading Sectors
HMO's +3.66%
Airlines +3.41%
Semis +3.22%
Lagging Sectors
Consumer -.31%
Foods -.32%
Iron/Steel -3.74%
Other
Crude Oil 42.72 -.42%
Natural Gas 6.19 +.78%
Gold 390.30 -.38%
Base Metals 110.86 +.70%
U.S. Dollar 89.90 +.17%
10-Yr. T-note Yield 4.57% -.35%
VIX 15.71 -2.72%
Put/Call .63 -5.97%
NYSE Arms .94 -15.18%
Market Movers
ESRX -11.9% after the company said 19 states are investigating its business practices.
CCE -15.5% after missing 2Q estimates and giving weak guidance.
MVL -14.3% after beating 2Q estimates and giving weaker guidance.
TARO -22.6% after disappointing 2Q results.
INSP +28.5% after substantially beating 2Q estimates, raising 3Q/04 guidance and multiple upgrades.
SFNT +21.7% after beating 2Q estimates and raising 3Q/04 outlook.
ALDA +21.3% after better-than-expected 2Q.
OCLR +19.3% after announcing it is being acquired by COO for about $1.2B.
LAVA +21.8% after beating 1Q estimates, raising 2Q guidance and authorizing 1M share buyback.
PRX +17.7% on better-than-expected 2Q.
EQIX +13.2% after beating 2Q estimates and raising 3Q guidance.
BC +10.5% after beating 2Q estimates and raising 3Q forecast.
KKD -10.8% after saying the SEC is investigating how the company accounted for the repurchase of franchises and earnings forecasts.
FCN -10.6% after meeting 2Q estimates, but lowering 3Q/04 outlook.
ULBI -18.4% on profit-taking after beating 2Q estimates and maintaining 04 outlook.
Economic Data
2Q Employment Cost Index rose .9% versus expectations of a .9% rise and a 1.1% rise in 1Q.
Initial Jobless Claims last week rose to 345K versus estimates of 340K and an upwardly revised 341K prior week.
Continuing Claims were 2960K versus estimates of 2875K and a downwardly revised 2786K prior.
Help Wanted Index for June was 38 versus estimates of 40 and a reading of 39 in May.
Recommendations
Goldman Sachs reiterated Underperform on KMG, CAN, BMY, MKL, LVLT, TCO, EDS and GSIC. Goldman reiterated Outperform on NEM, ISG, BC, BHI, CMX, MDT, GDT, SPG and BIIB. Goldman's IT survey leads them to believe a trading bottom is near in tech. Goldman downgraded GM to Underperform. Citi SmithBarney said to Buy RJR now, target $77. Citi reiterated Buy on TYC, target $38. Citi reiterated Buy on IGT, target $50. Citi reiterated Buy on RCL, target $52. Citi reiterated Buy on EEFT, target $23. Citi reiterated Buy on CAM, target $63. Citi reiterated Buy on APD, target $57. Citi reiterated Buy on RSG, target $35. Citi reiterated Buy on SRCL, target $56. Citi reiterated Buy on QSFT, target $16. Citi reiterated Buy on WFR, target $14. Citi reiterated Buy on ACLS, target $15. Citi reiterated Buy on NEM, target $50. Citi reiterated Buy on SSI, target $54. CENX raised to Overweight at JP Morgan. BLDP raised to Buy at UBS, target $9. YHOO rated Sector Outperform at CIBC, target $36. IBM rated Outperform at CSFB, target $100. GPS rated Outperform at CSFB, target $27. GTK cut to Underperform at Morgan Stanley. NILE raised to Outperform at Bear Stearns, target $37.
Mid-day News
U.S. stocks are rising mid-day on strength in technology shares, stronger earnings reports and a slight decline in oil prices. Apria Healthcare(AHC), which provides respiratory therapy and home medical equipment, is considering a sale of the company, the NY Post reported. China imported 2.08 million tons of flat steel products in June, or 35% less than a year ago, the Tex Report said. Canada stepped up security at the U.S. border, searching travelers leaving the country over concern about the possibility of a terrorist attack on the Democratic Convention, the National Post reported. Two computer glitches at CIBC led to account errors for more than 66,000 clients at Canada's third-largest bank, the Toronto Star reported. California Pizza Kitchen founders Rosenfield and Flax, who regained control of the pizza chain a year ago, plan to open new outlets and will redesign stores to attract bigger dinner crowds, the LA Times reported. The Saudi Arabian government agreed to give $1 billion in aid to Iraq, Sky News said. LA County property assessments rose 7.6% in 2003 to a record high of $781 billion as of Jan. 1, the LA Times reported. Fortune Brands's Jim Beam unit and Starbucks will introduce next week a liqueur combining the companies' bourbon and coffee, the Rocky Mountain News reported. California's Fremont Police Dept. is acquiring stun guns made by Taser, and expects the weapons to be in use by Sept., the San Jose Mercury News reported. Crude oil prices are falling after Russia's Justice Ministry said OAO Yukos Oil can keep producing and selling oil, Bloomberg reported.
BOTTOM LINE: The Portfolio is substantially higher today on strength in my technology longs. I added a few new longs this morning, bringing the Portfolio's market exposure to 125% net long. One of my new longs is ANDW and I am keeping a $10.25 stop-loss on this position. I expect U.S. stocks to remain near current levels into the afternoon. However, tomorrow should see another positive day with the end of the Democratic Convention without terror attacks, better-than-expected economic reports and short-covering.
NASDAQ 1,879.44 +1.14%
Leading Sectors
HMO's +3.66%
Airlines +3.41%
Semis +3.22%
Lagging Sectors
Consumer -.31%
Foods -.32%
Iron/Steel -3.74%
Other
Crude Oil 42.72 -.42%
Natural Gas 6.19 +.78%
Gold 390.30 -.38%
Base Metals 110.86 +.70%
U.S. Dollar 89.90 +.17%
10-Yr. T-note Yield 4.57% -.35%
VIX 15.71 -2.72%
Put/Call .63 -5.97%
NYSE Arms .94 -15.18%
Market Movers
ESRX -11.9% after the company said 19 states are investigating its business practices.
CCE -15.5% after missing 2Q estimates and giving weak guidance.
MVL -14.3% after beating 2Q estimates and giving weaker guidance.
TARO -22.6% after disappointing 2Q results.
INSP +28.5% after substantially beating 2Q estimates, raising 3Q/04 guidance and multiple upgrades.
SFNT +21.7% after beating 2Q estimates and raising 3Q/04 outlook.
ALDA +21.3% after better-than-expected 2Q.
OCLR +19.3% after announcing it is being acquired by COO for about $1.2B.
LAVA +21.8% after beating 1Q estimates, raising 2Q guidance and authorizing 1M share buyback.
PRX +17.7% on better-than-expected 2Q.
EQIX +13.2% after beating 2Q estimates and raising 3Q guidance.
BC +10.5% after beating 2Q estimates and raising 3Q forecast.
KKD -10.8% after saying the SEC is investigating how the company accounted for the repurchase of franchises and earnings forecasts.
FCN -10.6% after meeting 2Q estimates, but lowering 3Q/04 outlook.
ULBI -18.4% on profit-taking after beating 2Q estimates and maintaining 04 outlook.
Economic Data
2Q Employment Cost Index rose .9% versus expectations of a .9% rise and a 1.1% rise in 1Q.
Initial Jobless Claims last week rose to 345K versus estimates of 340K and an upwardly revised 341K prior week.
Continuing Claims were 2960K versus estimates of 2875K and a downwardly revised 2786K prior.
Help Wanted Index for June was 38 versus estimates of 40 and a reading of 39 in May.
Recommendations
Goldman Sachs reiterated Underperform on KMG, CAN, BMY, MKL, LVLT, TCO, EDS and GSIC. Goldman reiterated Outperform on NEM, ISG, BC, BHI, CMX, MDT, GDT, SPG and BIIB. Goldman's IT survey leads them to believe a trading bottom is near in tech. Goldman downgraded GM to Underperform. Citi SmithBarney said to Buy RJR now, target $77. Citi reiterated Buy on TYC, target $38. Citi reiterated Buy on IGT, target $50. Citi reiterated Buy on RCL, target $52. Citi reiterated Buy on EEFT, target $23. Citi reiterated Buy on CAM, target $63. Citi reiterated Buy on APD, target $57. Citi reiterated Buy on RSG, target $35. Citi reiterated Buy on SRCL, target $56. Citi reiterated Buy on QSFT, target $16. Citi reiterated Buy on WFR, target $14. Citi reiterated Buy on ACLS, target $15. Citi reiterated Buy on NEM, target $50. Citi reiterated Buy on SSI, target $54. CENX raised to Overweight at JP Morgan. BLDP raised to Buy at UBS, target $9. YHOO rated Sector Outperform at CIBC, target $36. IBM rated Outperform at CSFB, target $100. GPS rated Outperform at CSFB, target $27. GTK cut to Underperform at Morgan Stanley. NILE raised to Outperform at Bear Stearns, target $37.
Mid-day News
U.S. stocks are rising mid-day on strength in technology shares, stronger earnings reports and a slight decline in oil prices. Apria Healthcare(AHC), which provides respiratory therapy and home medical equipment, is considering a sale of the company, the NY Post reported. China imported 2.08 million tons of flat steel products in June, or 35% less than a year ago, the Tex Report said. Canada stepped up security at the U.S. border, searching travelers leaving the country over concern about the possibility of a terrorist attack on the Democratic Convention, the National Post reported. Two computer glitches at CIBC led to account errors for more than 66,000 clients at Canada's third-largest bank, the Toronto Star reported. California Pizza Kitchen founders Rosenfield and Flax, who regained control of the pizza chain a year ago, plan to open new outlets and will redesign stores to attract bigger dinner crowds, the LA Times reported. The Saudi Arabian government agreed to give $1 billion in aid to Iraq, Sky News said. LA County property assessments rose 7.6% in 2003 to a record high of $781 billion as of Jan. 1, the LA Times reported. Fortune Brands's Jim Beam unit and Starbucks will introduce next week a liqueur combining the companies' bourbon and coffee, the Rocky Mountain News reported. California's Fremont Police Dept. is acquiring stun guns made by Taser, and expects the weapons to be in use by Sept., the San Jose Mercury News reported. Crude oil prices are falling after Russia's Justice Ministry said OAO Yukos Oil can keep producing and selling oil, Bloomberg reported.
BOTTOM LINE: The Portfolio is substantially higher today on strength in my technology longs. I added a few new longs this morning, bringing the Portfolio's market exposure to 125% net long. One of my new longs is ANDW and I am keeping a $10.25 stop-loss on this position. I expect U.S. stocks to remain near current levels into the afternoon. However, tomorrow should see another positive day with the end of the Democratic Convention without terror attacks, better-than-expected economic reports and short-covering.
Thursday Watch
Earnings of Note
Company/Estimate
ADPT/.04
AET/1.66
APCC/.19
BZH/4.06
BHI/.31
BMY/.39
CMX/.30
CNXT/.02
COX/.11
XOM/.88
GP/.92
G/.41
IM/.15
IRF/.51
KLAC/.45
LIZ/.43
MGAM/.33
NOC/.75
PTEN/.14
THQI/.11
Splits
None of note.
Economic Data
2Q Employment Cost Index estimated +.9% versus +1.1% in 1Q.
Initial Jobless Claims for last week estimated at 340K versus 339K prior week.
Continuing Claims estimated at 2875K versus 2797K prior.
Help Wanted Index for June estimated at 40 versus 39 in May.
Recommendations
Goldman Sachs reiterated Outperform on PFGC, ROH, AFL, MUR, PPL, SBC and NFX. Goldman Sachs reiterated Underperform on ACAI and JDSU.
Late-Night News
Asian indices are mostly lower on weakness in technology shares. Goldman Sachs won approval from the Chinese government to start a local investment banking venture, becoming the first overseas firm allowed to arrange bond and stock sales through a business it controls, the Financial Times reported. Siemens AG, Germany's biggest engineering company, set internal targets to increase U.S. sales by up to $2.5 billion in a 30 months strategy, the Financial Times said. ATI Technologies will increase computer-chip orders at Taiwan Semiconductor Manufacturing and United Microelectronics on expectations of sales growth in the second half of this year, the Commercial Times reported. China is willing to risk damage to its economic growth and the failure of the 2008 Beijing Olympics if it needs to take action to prevent Taiwan from declaring its independence, China Daily reported. Time Warner's International Cinemas teamed up with a third partner in China to tap the growing market for movie entertainment, Oriental Morning Post reported. Cooper Companies, which makes surgical instruments, agreed to purchase Ocular Sciences for about $1.2 billion to become the world's third-largest maker of contact lenses, Bloomberg said.
Late-Night Trading
Asian Indices are -1.25% to unch. on average.
S&P 500 indicated -.15%.
NASDAQ 100 indicated -.07%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on weakness in Asia and anti-business political rhetoric. I continue to believe the major indices are in the midst of an oversold tradable rally. The Portfolio is 100% net long heading into tomorrow.
Company/Estimate
ADPT/.04
AET/1.66
APCC/.19
BZH/4.06
BHI/.31
BMY/.39
CMX/.30
CNXT/.02
COX/.11
XOM/.88
GP/.92
G/.41
IM/.15
IRF/.51
KLAC/.45
LIZ/.43
MGAM/.33
NOC/.75
PTEN/.14
THQI/.11
Splits
None of note.
Economic Data
2Q Employment Cost Index estimated +.9% versus +1.1% in 1Q.
Initial Jobless Claims for last week estimated at 340K versus 339K prior week.
Continuing Claims estimated at 2875K versus 2797K prior.
Help Wanted Index for June estimated at 40 versus 39 in May.
Recommendations
Goldman Sachs reiterated Outperform on PFGC, ROH, AFL, MUR, PPL, SBC and NFX. Goldman Sachs reiterated Underperform on ACAI and JDSU.
Late-Night News
Asian indices are mostly lower on weakness in technology shares. Goldman Sachs won approval from the Chinese government to start a local investment banking venture, becoming the first overseas firm allowed to arrange bond and stock sales through a business it controls, the Financial Times reported. Siemens AG, Germany's biggest engineering company, set internal targets to increase U.S. sales by up to $2.5 billion in a 30 months strategy, the Financial Times said. ATI Technologies will increase computer-chip orders at Taiwan Semiconductor Manufacturing and United Microelectronics on expectations of sales growth in the second half of this year, the Commercial Times reported. China is willing to risk damage to its economic growth and the failure of the 2008 Beijing Olympics if it needs to take action to prevent Taiwan from declaring its independence, China Daily reported. Time Warner's International Cinemas teamed up with a third partner in China to tap the growing market for movie entertainment, Oriental Morning Post reported. Cooper Companies, which makes surgical instruments, agreed to purchase Ocular Sciences for about $1.2 billion to become the world's third-largest maker of contact lenses, Bloomberg said.
Late-Night Trading
Asian Indices are -1.25% to unch. on average.
S&P 500 indicated -.15%.
NASDAQ 100 indicated -.07%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on weakness in Asia and anti-business political rhetoric. I continue to believe the major indices are in the midst of an oversold tradable rally. The Portfolio is 100% net long heading into tomorrow.
Wednesday, July 28, 2004
Wednesday Close
S&P 500 1,095.42 +.05%
NASDAQ 1,858.26 -.58%
Leading Sectors
Iron/Steel +8.25%
Cyclicals +1.38%
Transports +1.22%
Lagging Sectors
Airlines -1.27%
Hospitals -1.68%
Disk Drives -2.35%
Other
Crude Oil 42.66 -.56%
Natural Gas 6.12 -.28%
Gold 391.60 -.05%
Base Metals 110.09 +1.62%
U.S. Dollar 89.79 unch.
10-Yr. T-note Yield 4.58% -.60%
VIX 16.15 -2.42%
Put/Call .67 -6.94%
NYSE Arms 1.12 +43.59%
After-hours Movers
CNCT +6.37% after beating 2Q estimates and raising 3Q/04 guidance.
JDSU +6.67% after beating 4Q estimates and maintaining 1Q outlook.
SFNT +13.84% after beating 2Q estimates and raising 3Q guidance.
ALDA +17.3% after reporting better-than-expected 2Q.
INSP +27.23% after substantially beating 2Q estimates and raising 3Q/04 guidance.
WFMI -5.05% after missing 3Q estimates, but raising 04 outlook.
ESRX -13.1% after missing 2Q estimates, lowering 04 outlook and announcing it is being investigated by 19 states.
Recommendations
Goldman Sachs reiterated Underperform on HMT, AVP, AG and Outperform on SAP, VZ. OMC rated Focus 1 stock of the week at Merrill Lynch.
After-hours News
U.S. stocks finished mixed today as a short-covering rally boosted shares this afternoon. After the close, Saudi Arabia proposed deployment to Iraq of a military force drawn from Islamic nations to supplement and perhaps eventually replace the U.S.-led coalition, Saudi Foreign Minister Saud al-Faisal said. The U.S. plans to spend $53 million over five years on a multinational program to capture methane from coal mines and landfills in developing countries to provide energy and reduce the gas' affect on global warming, Bloomberg reported. JDS Uniphase, the world's largest maker of parts for fiber-optic networks, said its fourth-quarter net loss narrowed to $24.3 million after sales rose for the first time in 12 quarters, Bloomberg said.
BOTTOM LINE: The Portfolio finished unchanged today on the addition of a few new longs in the afternoon, leaving market exposure at 100% net long. One of my new longs is CYMI and I am using a stop-loss of $25.50 on this position. While not a great day by any means, it could have been much worse and should be viewed as a positive. Barring any domestic terror attacks, U.S. stocks should rally through week's end.
NASDAQ 1,858.26 -.58%
Leading Sectors
Iron/Steel +8.25%
Cyclicals +1.38%
Transports +1.22%
Lagging Sectors
Airlines -1.27%
Hospitals -1.68%
Disk Drives -2.35%
Other
Crude Oil 42.66 -.56%
Natural Gas 6.12 -.28%
Gold 391.60 -.05%
Base Metals 110.09 +1.62%
U.S. Dollar 89.79 unch.
10-Yr. T-note Yield 4.58% -.60%
VIX 16.15 -2.42%
Put/Call .67 -6.94%
NYSE Arms 1.12 +43.59%
After-hours Movers
CNCT +6.37% after beating 2Q estimates and raising 3Q/04 guidance.
JDSU +6.67% after beating 4Q estimates and maintaining 1Q outlook.
SFNT +13.84% after beating 2Q estimates and raising 3Q guidance.
ALDA +17.3% after reporting better-than-expected 2Q.
INSP +27.23% after substantially beating 2Q estimates and raising 3Q/04 guidance.
WFMI -5.05% after missing 3Q estimates, but raising 04 outlook.
ESRX -13.1% after missing 2Q estimates, lowering 04 outlook and announcing it is being investigated by 19 states.
Recommendations
Goldman Sachs reiterated Underperform on HMT, AVP, AG and Outperform on SAP, VZ. OMC rated Focus 1 stock of the week at Merrill Lynch.
After-hours News
U.S. stocks finished mixed today as a short-covering rally boosted shares this afternoon. After the close, Saudi Arabia proposed deployment to Iraq of a military force drawn from Islamic nations to supplement and perhaps eventually replace the U.S.-led coalition, Saudi Foreign Minister Saud al-Faisal said. The U.S. plans to spend $53 million over five years on a multinational program to capture methane from coal mines and landfills in developing countries to provide energy and reduce the gas' affect on global warming, Bloomberg reported. JDS Uniphase, the world's largest maker of parts for fiber-optic networks, said its fourth-quarter net loss narrowed to $24.3 million after sales rose for the first time in 12 quarters, Bloomberg said.
BOTTOM LINE: The Portfolio finished unchanged today on the addition of a few new longs in the afternoon, leaving market exposure at 100% net long. One of my new longs is CYMI and I am using a stop-loss of $25.50 on this position. While not a great day by any means, it could have been much worse and should be viewed as a positive. Barring any domestic terror attacks, U.S. stocks should rally through week's end.
Mid-day Update
S&P 500 1,085.32 -.88%
NASDAQ 1,837.04 -1.72%
Leading Sectors
Iron/Steel +2.13%
Oil Service +1.71%
Commodity +.75%
Lagging Sectors
Semis -2.69%
Airlines -3.26%
Disk Drives -3.42%
Other
Crude Oil 42.85 +2.41%
Natural Gas 6.05 +1.02%
Gold 392.00 +.56%
Base Metals 110.09 +1.62%
U.S. Dollar 89.73 -.07%
10-Yr. T-note Yield 4.60% -.26%
VIX 17.15 +3.63%
Put/Call .71 -1.39%
NYSE Arms 1.15 +47.44%
Market Movers
CECO -23.4% after beating 2Q estimates, lowering 3Q sales forecast and multiple downgrades.
UTSI -28.8% after missing 2Q forecast, lowering 3Q/04 outlook and multiple downgrades.
TEVA -6.5% after a U.S. court blocked final approval for Alpharma's gabapentin capsule.
ZRAN +15.6% after beating 2Q estimates and raising 3Q/04 outlook.
CELL +15.2% after reporting strong 2Q results.
WBSN +14.2% after beating 2Q estimates, raising 3Q guidance and multiple upgrades.
KRON +11.77% after beating 3Q estimates and raising 4Q guidance.
AV +11.4% after beating 3Q estimates and giving positive outlook.
GRMN +11.0% after beating 2Q estimates and raising 3Q guidance.
X +5.2% after beating 2Q estimates, giving positive outlook and Prudential upgrade to Overweight.
ALD +7.4% after beating 2Q forecast.
CREE +8.4% after beating 4Q estimates and raising 1Q guidance.
WIRE -27.2% after weaker-than-expected 2Q.
ASCA -19.3% after missing 2Q estimates and lowering 3Q forecast.
NILE -18.3% after beating 2Q estimates and lowering 3Q/04 guidance.
EEFT -21.3% after beating 2Q estimates and lowering 3Q outlook.
WMGI -17.6% after meeting 2Q estimates, lowering 3Q/04 outlook and multiple downgrades.
LSCP -17.8% after beating 2Q estimates, but giving disappointing guidance.
Economic Data
Durable Goods Orders for June rose .7% versus estimates of a 1.5% rise and an upwardly revised decline of .9% in May.
Durable Goods Orders Less Transportation for June fell .6% versus estimates of a 1.1% rise and an upwardly revised .6% decline in May.
Recommendations
PENN raised to Buy at Deutsche Bank, target $45. MDCA rated Sector Outperform at CIBC, target $16. BBBB rated Outperform at Thomas Weisel. X raised to Overweight at Prudential, target $45. ABX cut to Underweight at Prudential, target $15. CB raised to Overweight at Prudential, target $80. MTSN raised to Overweight at JP Morgan. VRTS raised to Sector Outperform at CIBC, target $25. WBSN raised to Outperform at Raymond James, target $41. Goldman Sachs reiterated Outperform on AMGN, BIIB, DNA, AVP, AGN, IR, ETN, MERQ and LIZ. Goldman reiterated Underperform on LSI, AG and EW. Citi SmithBarney said to Buy Auto Suppliers for a trade, favorites are AXL, MGA and LEA. Citi reiterated Buy on VZ, target $43. Citi reiterated Buy on ATH, target $113. Citi reiterated Buy on WLP, target $140. Citi rated BRCD Buy, target $6.30. Citi reiterated Buy on SBUX, target $54. Citi reiterated Buy on BCII, target $30. Citi reiterated Buy on VRTS, target $24. Citi reiterated Buy on LLY, target $82.
Mid-day News
U.S. stocks are falling mid-day on rising oil prices, weaker-than-expected economic data and a few disappointing earnings reports. US Air will change its flight system later this year, including taking apart its Pittsburgh hub, to stay solvent and compete against low-fare carriers in its major East Coast markets, the New York Times reported. Paul Volcker, the head of a UN panel investigating corruption in its Iraq oil-for-food program, won't share information with U.S. congressional committees that also are conducting inquiries, the NY Times reported. California's proposed budget agreement would restore millions of dollars to the Univ. of California and allow it to offer admission to 5,800 freshmen whose entry would have been deferred for two years, the San Francisco Chronicle reported. Vice President Cheney drew the loudest cheers on his first bus tour of the 2004 election when he told audiences that trial lawyers wreck good companies, wipe out jobs and saddle doctors with costs they pass to patients, Bloomberg reported. A homicide car bomber today drove into a crowd of Iraqi civilians waiting in line for jobs in the central Iraqi city of Baqubah, killing 68 and wounding 56, the AP reported. OAO Yukos Oil, Russia's biggest oil exporter, said the government ordered a halt to production from its main Siberian unit as court bailiffs seek to recover $3.4 billion in back taxes and fines. This sent crude oil futures to a record, Bloomberg said.
BOTTOM LINE: The Portfolio is lower today on weakness in my technology longs. I sold several tech positions this morning as they hit stop-losses, bringing the Portfolio's market exposure to 50% net long. Another disappointing day for the Bulls as the averages are unable to hold even one day's gains. However, any slight pullback in oil prices should result in a tradable rally. I still believe the markets will form a short-term bottom this week as the Democratic Convention concludes with no domestic terror attacks. I expect U.S. stocks to rise modestly into the close on short-covering.
NASDAQ 1,837.04 -1.72%
Leading Sectors
Iron/Steel +2.13%
Oil Service +1.71%
Commodity +.75%
Lagging Sectors
Semis -2.69%
Airlines -3.26%
Disk Drives -3.42%
Other
Crude Oil 42.85 +2.41%
Natural Gas 6.05 +1.02%
Gold 392.00 +.56%
Base Metals 110.09 +1.62%
U.S. Dollar 89.73 -.07%
10-Yr. T-note Yield 4.60% -.26%
VIX 17.15 +3.63%
Put/Call .71 -1.39%
NYSE Arms 1.15 +47.44%
Market Movers
CECO -23.4% after beating 2Q estimates, lowering 3Q sales forecast and multiple downgrades.
UTSI -28.8% after missing 2Q forecast, lowering 3Q/04 outlook and multiple downgrades.
TEVA -6.5% after a U.S. court blocked final approval for Alpharma's gabapentin capsule.
ZRAN +15.6% after beating 2Q estimates and raising 3Q/04 outlook.
CELL +15.2% after reporting strong 2Q results.
WBSN +14.2% after beating 2Q estimates, raising 3Q guidance and multiple upgrades.
KRON +11.77% after beating 3Q estimates and raising 4Q guidance.
AV +11.4% after beating 3Q estimates and giving positive outlook.
GRMN +11.0% after beating 2Q estimates and raising 3Q guidance.
X +5.2% after beating 2Q estimates, giving positive outlook and Prudential upgrade to Overweight.
ALD +7.4% after beating 2Q forecast.
CREE +8.4% after beating 4Q estimates and raising 1Q guidance.
WIRE -27.2% after weaker-than-expected 2Q.
ASCA -19.3% after missing 2Q estimates and lowering 3Q forecast.
NILE -18.3% after beating 2Q estimates and lowering 3Q/04 guidance.
EEFT -21.3% after beating 2Q estimates and lowering 3Q outlook.
WMGI -17.6% after meeting 2Q estimates, lowering 3Q/04 outlook and multiple downgrades.
LSCP -17.8% after beating 2Q estimates, but giving disappointing guidance.
Economic Data
Durable Goods Orders for June rose .7% versus estimates of a 1.5% rise and an upwardly revised decline of .9% in May.
Durable Goods Orders Less Transportation for June fell .6% versus estimates of a 1.1% rise and an upwardly revised .6% decline in May.
Recommendations
PENN raised to Buy at Deutsche Bank, target $45. MDCA rated Sector Outperform at CIBC, target $16. BBBB rated Outperform at Thomas Weisel. X raised to Overweight at Prudential, target $45. ABX cut to Underweight at Prudential, target $15. CB raised to Overweight at Prudential, target $80. MTSN raised to Overweight at JP Morgan. VRTS raised to Sector Outperform at CIBC, target $25. WBSN raised to Outperform at Raymond James, target $41. Goldman Sachs reiterated Outperform on AMGN, BIIB, DNA, AVP, AGN, IR, ETN, MERQ and LIZ. Goldman reiterated Underperform on LSI, AG and EW. Citi SmithBarney said to Buy Auto Suppliers for a trade, favorites are AXL, MGA and LEA. Citi reiterated Buy on VZ, target $43. Citi reiterated Buy on ATH, target $113. Citi reiterated Buy on WLP, target $140. Citi rated BRCD Buy, target $6.30. Citi reiterated Buy on SBUX, target $54. Citi reiterated Buy on BCII, target $30. Citi reiterated Buy on VRTS, target $24. Citi reiterated Buy on LLY, target $82.
Mid-day News
U.S. stocks are falling mid-day on rising oil prices, weaker-than-expected economic data and a few disappointing earnings reports. US Air will change its flight system later this year, including taking apart its Pittsburgh hub, to stay solvent and compete against low-fare carriers in its major East Coast markets, the New York Times reported. Paul Volcker, the head of a UN panel investigating corruption in its Iraq oil-for-food program, won't share information with U.S. congressional committees that also are conducting inquiries, the NY Times reported. California's proposed budget agreement would restore millions of dollars to the Univ. of California and allow it to offer admission to 5,800 freshmen whose entry would have been deferred for two years, the San Francisco Chronicle reported. Vice President Cheney drew the loudest cheers on his first bus tour of the 2004 election when he told audiences that trial lawyers wreck good companies, wipe out jobs and saddle doctors with costs they pass to patients, Bloomberg reported. A homicide car bomber today drove into a crowd of Iraqi civilians waiting in line for jobs in the central Iraqi city of Baqubah, killing 68 and wounding 56, the AP reported. OAO Yukos Oil, Russia's biggest oil exporter, said the government ordered a halt to production from its main Siberian unit as court bailiffs seek to recover $3.4 billion in back taxes and fines. This sent crude oil futures to a record, Bloomberg said.
BOTTOM LINE: The Portfolio is lower today on weakness in my technology longs. I sold several tech positions this morning as they hit stop-losses, bringing the Portfolio's market exposure to 50% net long. Another disappointing day for the Bulls as the averages are unable to hold even one day's gains. However, any slight pullback in oil prices should result in a tradable rally. I still believe the markets will form a short-term bottom this week as the Democratic Convention concludes with no domestic terror attacks. I expect U.S. stocks to rise modestly into the close on short-covering.
Wednesday Watch
Earnings of Note
Company/Estimate
ATN/.42
BUD/.83
APPB/.33
ASKJ/.22
AVP/.46
BIIB/.32
BA/.47
CAH/.93
CMCSA/.09
EDS/-.03
ESRX/.94
HLT/.18
INSP/.14
JDSU/.00
NXTP/.05
SOHU/.24
SBL/.09
TWX/.15
ZBRA/.59
ZMH/.55
Splits
None of note.
Economic Data
Durable Goods Orders for June estimated +1.5% versus -1.8% in May.
Durable Goods Orders Less Transportation for June estimated +1.1% versus -1.4% in May.
Fed's Beige Book
Recommendations
Goldman Sachs reiterated Attractive view of non-life insurance industry, favorites are AIG, ALL, ENH, RE and STA. Goldman reiterated Outperform on AUO, DD, NFX and BC. Goldman reiterated Underperform on EDS and FSS.
Late-Night News
Asian indices are mostly higher, led by Japan, on optimism over exports after a report showed U.S. consumer confidence hit a 2-year high. Members of the al-Qaeda terrorist network are traveling through Europe on illegally obtained South African passports, the AP reported. Exxon Mobil is considering selling it 19% stake in China Petroleum & Chemical, raising about $1.2 billion, almost double what it paid four years ago, the Financial Times reported. Afghanistan will have 23 candidates for its presidential election in October, including the incumbent President Hamid Karzai, Agence France-Presse reported. A blood test may help prevent premature births by detecting infections in amniotic fluids, according to a study in the Journal of the AMA. The dollar traded near its highest in about six weeks against the euro and the yen in Asia after the strong U.S. consumer confidence report, Bloomberg reported. Charter Communications, the U.S. cable-tv operator controlled by billionaire Paul Allen, settled a SEC investigation into how it counted subscribers, Bloomberg said.
Late-Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated +.06%.
NASDAQ 100 indicated +.11%
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on stronger earnings reports, falling energy prices and stabilizing interest rates. The Portfolio is 100% net long heading into tomorrow.
Company/Estimate
ATN/.42
BUD/.83
APPB/.33
ASKJ/.22
AVP/.46
BIIB/.32
BA/.47
CAH/.93
CMCSA/.09
EDS/-.03
ESRX/.94
HLT/.18
INSP/.14
JDSU/.00
NXTP/.05
SOHU/.24
SBL/.09
TWX/.15
ZBRA/.59
ZMH/.55
Splits
None of note.
Economic Data
Durable Goods Orders for June estimated +1.5% versus -1.8% in May.
Durable Goods Orders Less Transportation for June estimated +1.1% versus -1.4% in May.
Fed's Beige Book
Recommendations
Goldman Sachs reiterated Attractive view of non-life insurance industry, favorites are AIG, ALL, ENH, RE and STA. Goldman reiterated Outperform on AUO, DD, NFX and BC. Goldman reiterated Underperform on EDS and FSS.
Late-Night News
Asian indices are mostly higher, led by Japan, on optimism over exports after a report showed U.S. consumer confidence hit a 2-year high. Members of the al-Qaeda terrorist network are traveling through Europe on illegally obtained South African passports, the AP reported. Exxon Mobil is considering selling it 19% stake in China Petroleum & Chemical, raising about $1.2 billion, almost double what it paid four years ago, the Financial Times reported. Afghanistan will have 23 candidates for its presidential election in October, including the incumbent President Hamid Karzai, Agence France-Presse reported. A blood test may help prevent premature births by detecting infections in amniotic fluids, according to a study in the Journal of the AMA. The dollar traded near its highest in about six weeks against the euro and the yen in Asia after the strong U.S. consumer confidence report, Bloomberg reported. Charter Communications, the U.S. cable-tv operator controlled by billionaire Paul Allen, settled a SEC investigation into how it counted subscribers, Bloomberg said.
Late-Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated +.06%.
NASDAQ 100 indicated +.11%
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on stronger earnings reports, falling energy prices and stabilizing interest rates. The Portfolio is 100% net long heading into tomorrow.
Tuesday, July 27, 2004
Tuesday Close
S&P 500 1,094.83 +.99%
NASDAQ 1,869.10 +1.64%
Leading Sectors
Retail +2.91%
Biotech +2.64%
Telecom +2.41%
Lagging Sectors
Hospitals -.51%
Airlines -.78%
HMO's -4.2%
Other
Crude Oil 41.82 -.05%
Natural Gas 5.98 -.10%
Gold 388.00 +.26%
Base Metals 108.33 -.74%
U.S. Dollar 89.73 +.79%
10-Yr. T-note Yield 4.60% +2.68%
VIX 16.55 -4.34%
Put/Call .72 -12.2%
NYSE Arms .78 -32.76%
After-hours Movers
CREE +6.76% after beating 4Q estimates and raising 1Q guidance.
VRTS +4.10% after beating 2Q estimates and raising 3Q forecast.
ZRAN +10.04% after beating 2Q estimates and raising 3Q/04 outlook.
MFE +7.84% after beating 2Q estimates and raising 3Q guidance.
UTSI -13.4% after missing 2Q forecast and lowering 3Q/04 outlook.
MNST +6.1% after beating 2Q estimates and lowering 3Q outlook.
Recommendations
Goldman Sachs reiterated Attractive view of Paper sector, favorite is IP. Goldman reiterated Outperform on AMGN, ADP, MSFT and GDT.
After-hours News
U.S. stocks finished higher today on better-than-expected economic reports and strong telecom earnings. After the close, Electronic Data Systems, the world's second-biggest computer-services provider, reduced its quarterly dividend to 5 cents a share, Bloomberg reported. Chubb, the second-biggest liability insurer for U.S. corporate boards, said second-quarter profit climbed 41% as premiums and investment income rose, Bloomberg said. New Jersey faces higher borrowing costs after S&P and Fitch cut credit ratings on more than $18 billion in debt, Bloomberg said.
BOTTOM LINE: The Portfolio finished slightly higher today as strength in my biotech, security and technology longs offset my rising retail shorts. I added a few more longs in the afternoon, bringing the Portfolio's market exposure to 100% net long. One of my new longs is ERES and I am using a $22.00 stop-loss on this position. The strength of today's rally was impressive given the extent to which rates rose and oil climbed. The advance/decline line and volume were much improved today as well. Finally, the CRB Index continued its recent slide, breaking down through its 200-day moving-average today, which bodes well for future inflation readings. While the major U.S. averages should continue to rally for awhile longer, recent lows will likely be tested in the coming weeks as investor complacency is still too high for a meaningful bottom.
NASDAQ 1,869.10 +1.64%
Leading Sectors
Retail +2.91%
Biotech +2.64%
Telecom +2.41%
Lagging Sectors
Hospitals -.51%
Airlines -.78%
HMO's -4.2%
Other
Crude Oil 41.82 -.05%
Natural Gas 5.98 -.10%
Gold 388.00 +.26%
Base Metals 108.33 -.74%
U.S. Dollar 89.73 +.79%
10-Yr. T-note Yield 4.60% +2.68%
VIX 16.55 -4.34%
Put/Call .72 -12.2%
NYSE Arms .78 -32.76%
After-hours Movers
CREE +6.76% after beating 4Q estimates and raising 1Q guidance.
VRTS +4.10% after beating 2Q estimates and raising 3Q forecast.
ZRAN +10.04% after beating 2Q estimates and raising 3Q/04 outlook.
MFE +7.84% after beating 2Q estimates and raising 3Q guidance.
UTSI -13.4% after missing 2Q forecast and lowering 3Q/04 outlook.
MNST +6.1% after beating 2Q estimates and lowering 3Q outlook.
Recommendations
Goldman Sachs reiterated Attractive view of Paper sector, favorite is IP. Goldman reiterated Outperform on AMGN, ADP, MSFT and GDT.
After-hours News
U.S. stocks finished higher today on better-than-expected economic reports and strong telecom earnings. After the close, Electronic Data Systems, the world's second-biggest computer-services provider, reduced its quarterly dividend to 5 cents a share, Bloomberg reported. Chubb, the second-biggest liability insurer for U.S. corporate boards, said second-quarter profit climbed 41% as premiums and investment income rose, Bloomberg said. New Jersey faces higher borrowing costs after S&P and Fitch cut credit ratings on more than $18 billion in debt, Bloomberg said.
BOTTOM LINE: The Portfolio finished slightly higher today as strength in my biotech, security and technology longs offset my rising retail shorts. I added a few more longs in the afternoon, bringing the Portfolio's market exposure to 100% net long. One of my new longs is ERES and I am using a $22.00 stop-loss on this position. The strength of today's rally was impressive given the extent to which rates rose and oil climbed. The advance/decline line and volume were much improved today as well. Finally, the CRB Index continued its recent slide, breaking down through its 200-day moving-average today, which bodes well for future inflation readings. While the major U.S. averages should continue to rally for awhile longer, recent lows will likely be tested in the coming weeks as investor complacency is still too high for a meaningful bottom.
Mid-day Update
S&P 500 1,089.19 +.47%
NASDAQ 1,853.49 +.75%
Leading Sectors
Telecom +2.60%
Retail +2.15%
I-Banks +1.8%
Lagging Sectors
Hospitals -1.33%
Airlines -1.67%
HMO's -5.37%
Other
Crude Oil 41.95 +1.23%
Natural Gas 5.98 +.39%
Gold 387.50 -.72%
Base Metals 108.33 -.74%
U.S. Dollar 89.68 +.73%
10-Yr. T-note Yield 4.57% +1.93%
VIX 16.85 -2.60%
Put/Call .69 -15.58%
NYSE Arms 1.23 +6.03%
Market Movers
NT -15.5% after saying it won't meet its gross margin target because of higher-than-expected operating costs.
VZ +3.9% after beating 2Q estimates and boosting 2H outlook.
CAH -13.7% after the company said yesterday that it CFO resigned amid U.S. accounting investigations.
ATH -8.4% after lowering 04 forecast.
SLAB -17.7% after beating 2Q estimates and lowering 3Q guidance.
TRMB +18.6% after beating 2Q estimates and raising 3Q/04 outlook.
IFLO +20.5% after beating 2Q revenue forecast and announcing 1M share buy-back.
GNSS +14.6% after beating 1Q estimates.
ATRS +13.2% after beating 2Q estimates.
RTEC +14.3% after beating 2Q estimates and raising 3Q outlook.
HYDL +9.6% after strong 2Q results and CSFB upgrade to Neutral.
ICLR -19.1% after beating 4Q estimates and lowering 05 outlook.
LNCR -7.6% after the NY Times reported that it may be hurt by a proposed 89% drop in the price paid by the U.S. government for two lung treatments.
SWK -5.2% after missing 2Q estimates and lowering outlook.
Economic Data
Consumer Confidence for July rose to 106.1 versus estimates of 102.0 and an upwardly revised 102.8 in June.
New Home Sales for June were 1326K versus estimates of 1272K and a downwardly revised 1337K in May.
Recommendations
Kellogg raised to Buy at Deutsche Bank, target $46. AXP raised to Buy at Deutsche Bank, target $57. CMCSA raised to Overweight at Prudential, target $39. Goldman Sachs reiterated Outperform on ATYT, ADP, CMX, PFE, BHI, SSL and CTSH. Goldman reiterated Underperform on ASH and TGS. Citi SmithBarney said to Sell DAL, target $1. Citi said to Buy AAI, target $18. Citi reiterated Sell on COP, target $65. Citi reiterated Sell on XOM, target $40.50. Citi reiterated Buy on CHE, target $64. Citi reiterated Buy on KIND, target $35. Citi reiterated Buy on WLP, target $150. Citi reiterated Buy on ATH, target $131. Citi reiterated Buy on BLS, target $32. Citi reiterated Buy on HCA, target $48. Citi reiterated Buy on CVH, target $65.
Mid-day News
U.S. stocks are rising mid-day on stronger-than-expected economic reports. Saks Fifth Avenue may close an undisclosed number of stores and remodel its flagship in Manhattan as part of an overhaul, the NY Times reported. Advertising dollars spent on Internet sites and other online media are expected to equal spending on magazines by 2007, and overtake more traditional areas in 2008, the Wall Street Journal reported. Starwood Hotels plans to build two of its W designer hotels in China, the Wall Street Journal reported. More than 35 bloggers received media credentials to cover the Democratic Convention, giving the Internet postings a new place in the press, the Wall Street Journal reported. The U.S. State Dept. wants to increase the pace of its rebuilding effort in Iraq, hoping to provide more jobs and show off the results of projects more quickly to Iraqis, the NY Times reported. Closely held Flight Options is expected to off business customers the opportunity to rent time on aircraft instead of forcing them to buy a share in the plane, the Wall Street Journal reported. Iran has resumed building and installing equipment that could be used to make nuclear weapons, the AP reported. U.S. new home sales fell less than forecast to a 1.326 million annual rate in June, the second-fastest on record, evidence more jobs and higher incomes are keeping homes affordable as interest rates rise, Bloomberg reported. Consumer confidence in the U.S. economy rose this month to a two-year high as expectations for the job market improved, Bloomberg said. Crude oil and interest rates are rising on strong U.S. economic reports, Bloomberg reported. California Republican Governor Schwarzenegger and legislative leaders reached agreement on a $103 billion spending plan that has no tax increases and relies on $7 billion in bonds, loans and spending cuts to cover a $14 billion projected deficit, Bloomberg reported. The Democratic Party is giving filmmaker Michael Moore what he called "red carpet treatment" at the party convention, including a box inside the FleetCenter and credentials to mingle with the delegates and press, Bloomberg reported. The Holy Land Foundation for Relief and Development, the largest Muslim charity in the U.S., was indicted on charges it provided financial support to the Islamist terror group Hamas, Bloomberg said.
BOTTOM LINE: The Portfolio is slightly lower today as my retail and technology shorts are rising more than my longs. I took profits in a number of shorts this morning and added a few longs, bringing the Portfolio's market exposure to 25% net long. One of my new longs is CCMP and I am using a $31.25 stop-loss on the position. I expect U.S. stocks to rise modestly into the close, notwithstanding rising interest rates and oil prices. This appears to be the beginning stages of a tradable rally, however I do not believe we have seen the lows as of yet. Weakness will likely resurface in the next couple of weeks.
NASDAQ 1,853.49 +.75%
Leading Sectors
Telecom +2.60%
Retail +2.15%
I-Banks +1.8%
Lagging Sectors
Hospitals -1.33%
Airlines -1.67%
HMO's -5.37%
Other
Crude Oil 41.95 +1.23%
Natural Gas 5.98 +.39%
Gold 387.50 -.72%
Base Metals 108.33 -.74%
U.S. Dollar 89.68 +.73%
10-Yr. T-note Yield 4.57% +1.93%
VIX 16.85 -2.60%
Put/Call .69 -15.58%
NYSE Arms 1.23 +6.03%
Market Movers
NT -15.5% after saying it won't meet its gross margin target because of higher-than-expected operating costs.
VZ +3.9% after beating 2Q estimates and boosting 2H outlook.
CAH -13.7% after the company said yesterday that it CFO resigned amid U.S. accounting investigations.
ATH -8.4% after lowering 04 forecast.
SLAB -17.7% after beating 2Q estimates and lowering 3Q guidance.
TRMB +18.6% after beating 2Q estimates and raising 3Q/04 outlook.
IFLO +20.5% after beating 2Q revenue forecast and announcing 1M share buy-back.
GNSS +14.6% after beating 1Q estimates.
ATRS +13.2% after beating 2Q estimates.
RTEC +14.3% after beating 2Q estimates and raising 3Q outlook.
HYDL +9.6% after strong 2Q results and CSFB upgrade to Neutral.
ICLR -19.1% after beating 4Q estimates and lowering 05 outlook.
LNCR -7.6% after the NY Times reported that it may be hurt by a proposed 89% drop in the price paid by the U.S. government for two lung treatments.
SWK -5.2% after missing 2Q estimates and lowering outlook.
Economic Data
Consumer Confidence for July rose to 106.1 versus estimates of 102.0 and an upwardly revised 102.8 in June.
New Home Sales for June were 1326K versus estimates of 1272K and a downwardly revised 1337K in May.
Recommendations
Kellogg raised to Buy at Deutsche Bank, target $46. AXP raised to Buy at Deutsche Bank, target $57. CMCSA raised to Overweight at Prudential, target $39. Goldman Sachs reiterated Outperform on ATYT, ADP, CMX, PFE, BHI, SSL and CTSH. Goldman reiterated Underperform on ASH and TGS. Citi SmithBarney said to Sell DAL, target $1. Citi said to Buy AAI, target $18. Citi reiterated Sell on COP, target $65. Citi reiterated Sell on XOM, target $40.50. Citi reiterated Buy on CHE, target $64. Citi reiterated Buy on KIND, target $35. Citi reiterated Buy on WLP, target $150. Citi reiterated Buy on ATH, target $131. Citi reiterated Buy on BLS, target $32. Citi reiterated Buy on HCA, target $48. Citi reiterated Buy on CVH, target $65.
Mid-day News
U.S. stocks are rising mid-day on stronger-than-expected economic reports. Saks Fifth Avenue may close an undisclosed number of stores and remodel its flagship in Manhattan as part of an overhaul, the NY Times reported. Advertising dollars spent on Internet sites and other online media are expected to equal spending on magazines by 2007, and overtake more traditional areas in 2008, the Wall Street Journal reported. Starwood Hotels plans to build two of its W designer hotels in China, the Wall Street Journal reported. More than 35 bloggers received media credentials to cover the Democratic Convention, giving the Internet postings a new place in the press, the Wall Street Journal reported. The U.S. State Dept. wants to increase the pace of its rebuilding effort in Iraq, hoping to provide more jobs and show off the results of projects more quickly to Iraqis, the NY Times reported. Closely held Flight Options is expected to off business customers the opportunity to rent time on aircraft instead of forcing them to buy a share in the plane, the Wall Street Journal reported. Iran has resumed building and installing equipment that could be used to make nuclear weapons, the AP reported. U.S. new home sales fell less than forecast to a 1.326 million annual rate in June, the second-fastest on record, evidence more jobs and higher incomes are keeping homes affordable as interest rates rise, Bloomberg reported. Consumer confidence in the U.S. economy rose this month to a two-year high as expectations for the job market improved, Bloomberg said. Crude oil and interest rates are rising on strong U.S. economic reports, Bloomberg reported. California Republican Governor Schwarzenegger and legislative leaders reached agreement on a $103 billion spending plan that has no tax increases and relies on $7 billion in bonds, loans and spending cuts to cover a $14 billion projected deficit, Bloomberg reported. The Democratic Party is giving filmmaker Michael Moore what he called "red carpet treatment" at the party convention, including a box inside the FleetCenter and credentials to mingle with the delegates and press, Bloomberg reported. The Holy Land Foundation for Relief and Development, the largest Muslim charity in the U.S., was indicted on charges it provided financial support to the Islamist terror group Hamas, Bloomberg said.
BOTTOM LINE: The Portfolio is slightly lower today as my retail and technology shorts are rising more than my longs. I took profits in a number of shorts this morning and added a few longs, bringing the Portfolio's market exposure to 25% net long. One of my new longs is CCMP and I am using a $31.25 stop-loss on the position. I expect U.S. stocks to rise modestly into the close, notwithstanding rising interest rates and oil prices. This appears to be the beginning stages of a tradable rally, however I do not believe we have seen the lows as of yet. Weakness will likely resurface in the next couple of weeks.
Tuesday Watch
Earnings of Note
Company/Estimate
ADP/.35
ATH/1.64
AV/.11
ABX/.06
BMCS/.13
CELL/.21
CB/1.58
DD/.81
JNY/.59
LLL/.79
LMT/.61
MFE/.06
MNST/.13
PSFT/.14
PD/2.48
SFA/.35
SINA/.31
TROW/.62
RIG/.10
UTSI/.33
VRTS/.19
VZ/.60
Splits
None of note.
Economic Data
Consumer Confidence for July estimated at 102.0 versus 101.9 in June.
New Home Sales for June estimated at 1272K versus 1369K in May.
Recommendations
Goldman Sachs reiterated Underperform on EK, SMP and VRTX. Goldman reiterated Outperform on AXP, BSX, IP, SLB, SII, BHI, EPD, ENH, AMGN, IDPH, DNA, GILD, AMLN, TRMS and BIIB.
Late-Night News
Asian indices are mixed as strength in Taiwan is being offset by weakness in Japan. Intel will cut prices of its processors used in desktop computers by as much as 35% next month to help reduce inventory and stimulate demand, the Commercial Times reported. China's first-half vehicle exports increased 84% to $290 million, the China news agency said. Cardinal Health said Richard Miller resigned as CFO after U.S. regulators stepped up a probe of the company's accounting, Bloomberg reported. Sleep Apnea, a breathing disorder that interrupts air flow during slumber, raises the risk of dying from a stroke, the European Respiratory Journal said. Almost 80% of Afghanistan's estimated 10 million eligible voters have registered to take part in presidential elections in October and a parliamentary poll next April, the UN said. Comcast will announce tomorrow that it is buying back more than $500 million of its own stock, the Wall Street Journal Reported.
Late-Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated +.29%
BOTTOM LINE: I expect U.S. stocks to open mixed in the morning on better economic reports, continuing earnings worries and negative political rhetoric. The CRB Index is trading very close to its 200-day moving-average and I expect it to break this level in the near future. This continues to be an unreported positive development as inflation worries stem mainly from the rise in commodities' prices. The Portfolio is 50% net short heading into tomorrow.
Company/Estimate
ADP/.35
ATH/1.64
AV/.11
ABX/.06
BMCS/.13
CELL/.21
CB/1.58
DD/.81
JNY/.59
LLL/.79
LMT/.61
MFE/.06
MNST/.13
PSFT/.14
PD/2.48
SFA/.35
SINA/.31
TROW/.62
RIG/.10
UTSI/.33
VRTS/.19
VZ/.60
Splits
None of note.
Economic Data
Consumer Confidence for July estimated at 102.0 versus 101.9 in June.
New Home Sales for June estimated at 1272K versus 1369K in May.
Recommendations
Goldman Sachs reiterated Underperform on EK, SMP and VRTX. Goldman reiterated Outperform on AXP, BSX, IP, SLB, SII, BHI, EPD, ENH, AMGN, IDPH, DNA, GILD, AMLN, TRMS and BIIB.
Late-Night News
Asian indices are mixed as strength in Taiwan is being offset by weakness in Japan. Intel will cut prices of its processors used in desktop computers by as much as 35% next month to help reduce inventory and stimulate demand, the Commercial Times reported. China's first-half vehicle exports increased 84% to $290 million, the China news agency said. Cardinal Health said Richard Miller resigned as CFO after U.S. regulators stepped up a probe of the company's accounting, Bloomberg reported. Sleep Apnea, a breathing disorder that interrupts air flow during slumber, raises the risk of dying from a stroke, the European Respiratory Journal said. Almost 80% of Afghanistan's estimated 10 million eligible voters have registered to take part in presidential elections in October and a parliamentary poll next April, the UN said. Comcast will announce tomorrow that it is buying back more than $500 million of its own stock, the Wall Street Journal Reported.
Late-Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated +.29%
BOTTOM LINE: I expect U.S. stocks to open mixed in the morning on better economic reports, continuing earnings worries and negative political rhetoric. The CRB Index is trading very close to its 200-day moving-average and I expect it to break this level in the near future. This continues to be an unreported positive development as inflation worries stem mainly from the rise in commodities' prices. The Portfolio is 50% net short heading into tomorrow.
Monday, July 26, 2004
Monday Close
S&P 500 1,084.07 -.20%
NASDAQ 1,839.02 -.54%
Leading Sectors
Telecom +1.94%
Insurance +.83%
HMO's +.44%
Lagging Sectors
Networking -1.79%
Biotechnology -1.92%
Hospitals -2.69%
Other
Crude Oil 41.39 -.12%
Natural Gas 5.95 -.12%
Gold 390.70 +.10%
Base Metals 109.14 +.89%
U.S. Dollar 89.01 -.28%
10-Yr. T-note Yield 4.48% +1.19%
VIX 17.30 +4.85%
Put/Call .82 +5.13%
NYSE Arms 1.16 -33.33%
After-hours Movers
SLAB -4.58% after beating 2Q estimates, but lowering 3Q forecast.
NVTL -7.5% after beating 2Q estimates and raising 3Q guidance.
IPIX +15.6% after announcing it has received an order for the purchase of $3 million of it ComandView video surveillance cameras from its UK distributor.
RTEC +6.7% after beating 2Q estimates and raising 3Q forecast.
Recommendations
TLAB raised to Buy at Merrill Lynch, target $10.60. Goldman Sachs reiterated Outperform on AXP, MET and Underperform on CVH.
After-hours News
U.S. stocks finished modestly lower today, led by healthcare-related companies, ahead of negative political rhetoric, earnings worries and rising interest rates. After the close, stem cells injected into the human brain may help people recover from strokes and regain their ability to speak and move normally, according to a study of rats in the Proceedings of the National Academies of Science, Bloomberg reported. Google's search engine malfunctioned after it was infected by the Mydoom virus that also struck corporate and personal computers, Bloomberg reported. Stanley Works, the biggest U.S. maker of hand tools, said second-quarter profit surged as sales rose 22%, Bloomberg said. Former President Clinton's address before the Democratic Convention will be watched by almost half the registered voters in the country, Bloomberg reported. Kellogg and General Mills are among food manufacturers that may be stuck with too many products aimed at dieters as the number of U.S. consumers on low-carb diets probably has peaked, Bloomberg said. American Express said second-quarter profit rose 15% as an expanding economy prompted more travel than any time sine the terrorist attacks of Sept. 2001, Bloomberg reported. The Fed's benchmark interest rate is still "highly accommodative" and far below a neutral rate, said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City.
BOTTOM LINE: The Portfolio finished unchanged today as my falling technology longs offset my declining retail shorts. I did not trade today and the Portfolio is still 50% net short. I continue to expect the major U.S. indices will make a short-term bottom later this week. Beaten-up tech shares will likely lead for a brief period. My short-term trading indicators are still giving sell signals.
NASDAQ 1,839.02 -.54%
Leading Sectors
Telecom +1.94%
Insurance +.83%
HMO's +.44%
Lagging Sectors
Networking -1.79%
Biotechnology -1.92%
Hospitals -2.69%
Other
Crude Oil 41.39 -.12%
Natural Gas 5.95 -.12%
Gold 390.70 +.10%
Base Metals 109.14 +.89%
U.S. Dollar 89.01 -.28%
10-Yr. T-note Yield 4.48% +1.19%
VIX 17.30 +4.85%
Put/Call .82 +5.13%
NYSE Arms 1.16 -33.33%
After-hours Movers
SLAB -4.58% after beating 2Q estimates, but lowering 3Q forecast.
NVTL -7.5% after beating 2Q estimates and raising 3Q guidance.
IPIX +15.6% after announcing it has received an order for the purchase of $3 million of it ComandView video surveillance cameras from its UK distributor.
RTEC +6.7% after beating 2Q estimates and raising 3Q forecast.
Recommendations
TLAB raised to Buy at Merrill Lynch, target $10.60. Goldman Sachs reiterated Outperform on AXP, MET and Underperform on CVH.
After-hours News
U.S. stocks finished modestly lower today, led by healthcare-related companies, ahead of negative political rhetoric, earnings worries and rising interest rates. After the close, stem cells injected into the human brain may help people recover from strokes and regain their ability to speak and move normally, according to a study of rats in the Proceedings of the National Academies of Science, Bloomberg reported. Google's search engine malfunctioned after it was infected by the Mydoom virus that also struck corporate and personal computers, Bloomberg reported. Stanley Works, the biggest U.S. maker of hand tools, said second-quarter profit surged as sales rose 22%, Bloomberg said. Former President Clinton's address before the Democratic Convention will be watched by almost half the registered voters in the country, Bloomberg reported. Kellogg and General Mills are among food manufacturers that may be stuck with too many products aimed at dieters as the number of U.S. consumers on low-carb diets probably has peaked, Bloomberg said. American Express said second-quarter profit rose 15% as an expanding economy prompted more travel than any time sine the terrorist attacks of Sept. 2001, Bloomberg reported. The Fed's benchmark interest rate is still "highly accommodative" and far below a neutral rate, said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City.
BOTTOM LINE: The Portfolio finished unchanged today as my falling technology longs offset my declining retail shorts. I did not trade today and the Portfolio is still 50% net short. I continue to expect the major U.S. indices will make a short-term bottom later this week. Beaten-up tech shares will likely lead for a brief period. My short-term trading indicators are still giving sell signals.
Mid-day Update
S&P 500 1,080.04 -.57%
NASDAQ 1,831.54 -.93%
Leading Sectors
Telecom +1.31%
Insurance +.46%
Computer Services -.12%
Lagging Sectors
Internet -1.99%
Biotech -2.68%
Hospitals -3.20%
Other
Crude Oil 41.40 -.74%
Natural Gas 5.97 -2.59%
Gold 389.80 -.18%
Base Metals 109.14 +.89%
U.S. Dollar 89.02 -.27%
10-Yr. T-note Yield 4.47% +1.01%
VIX 17.63 +6.85%
Put/Call .73 -6.41%
NYSE Arms 1.36 -21.84%
Market Movers
ANDW -26.2% after beating 2Q estimates and lowering 3Q/4Q guidance.
CHKP -13.65% after slightly missing 2Q estimates and lowering 3Q forecast.
MYL -15.5% after agreeing to buy KG for $4 billion in stock to expand into heart treatments and add sales force to call on cardiologists. KG +25.2%.
IMCL -15.0% after Citi downgrade to Neutral, price target cut to $72.
OCR -31.0% after missing 2Q estimates and lowering 04 guidance.
BSX +4.88% after 2Q estimates mostly met expectations after stent recall.
AGYS +18.88% after beating 1Q estimates and raising 05 forecast.
MANT +11.1% after saying it received a four-year contract to provide the federal government with security clearance background investigations.
CTSH +11.8% after beating 2Q estimates and raising 3Q and 04 forecast.
CRS +7.2% after JP Morgan upgrade to Overweight.
BEC -8.4% after missing 2Q estimates and lowering 3Q forecast.
TASR -9.9% on news that CBS News will run a negative story on the company.
Economic Data
Existing Home Sales for June were 6.95M versus estimates of 6.65M and 6.81M in May.
Recommendations
CRS raised to Overweight at JP Morgan. IGT raised to Sector Outperform at CIBC, target $38. HCR raised to Buy at Legg Mason, target $38. UHS raised to Buy at Oppenheimer, target $52. NTLI raised to Overweight at JP Morgan. Goldman Sachs reiterated Outperform on AMT, VZ, XRX, SRE, NEM, PDG, ENH, BSX, AMLN, FS, IGT, GCI, HOT, PG, SLB and ITT. Goldman reiterated Underperform on CYT, SGP, PGL, CR and DJ. Citi SmithBarney reiterated Buy on HAL, target $37. Citi reiterated Sell on MYG, target $15. Citi reiterated Buy on WY, target $72. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on SSCC, target $23. Citi reiterated Buy on UTX, target $109. Citi thinks banks will outperform in second half, favorite is BAC. Citi said with semi-equipment shipment delays finally beginning, the final phase of the correction in those stocks has begun, Buy on weakness, favorite is LRCX. Citi reiterated Buy on ATH, target $90. Citi reiterated Buy on WLP, target $111.70.
Mid-day News
U.S. stocks are falling mid-day, led lower by healthcare-related companies, on concerns over negative political rhetoric, earnings shortfalls and rising interest rates. Iraqi Defense minister Hazima al-Shalan said Iran has sent spies into Iraq, infiltrated the country's new government and taken positions along Iraq's border, the Washington Post reported. Sun Micro plans to debut two computer system lines with microprocessors from Advanced Micro, the Wall Street Journal reported. Sprint will likely announce today it is offering local telephone service to business customers in 35 markets, the Wall Street Journal said. Shares of AO Yukos Oil, Russia's largest oil exporter, fell after Interfax reported a major shareholder was placed on a wanted list by a Moscow court on murder-related charges. An Alzheimer's drug called donepezil might slow the onset of the disease in high-risk patients by six months, the LA Times reported. Roche Holding and Chiron are competing for the lead in the market for tests that can screen donated blood for the West Nile virus, the LA Times reported. Career Education, which is being probed by the U.S. SEC, is also being investigated by federal law-enforcement officials, the Financial Times reported. Nokia may have its credit rating reduced by S&P on concern the company will continue to lose market share to competitors, Bloomberg reported. HCA, the biggest U.S. hospital chain, said second-quarter profit rose 47% as lower malpractice expenses compensated for an increase in unpaid bills, Bloomberg reported. Google plans to sell 24.6 million shares in its IPO for between $108-$135/share and the symbol will be GOOG, Bloomberg said. U.S. sales of previously owned houses rose more than expected in June to a record annual pace of 6.95 million, the National Assoc. of Realtors said. U.S. Treasuries fell in New York after home sales unexpectedly rose and speculation increased that other economic reports this week will add to evidence growth is accelerating, Bloomberg reported. Medicare proposed rules for its 2006 program to help the elderly pay for prescription drugs, including how the agency will work with pharmacy-benefit managers such as Express Scripts to get discounts on drugs, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged today as my longs are falling more than my shorts. I have not traded today and the Portfolio is still 50% net short. It is good to see the VIX continue higher, however the Put/Call and Arms readings are falling. My short-term trading indicators are still giving sell signals. I expect U.S. stocks to fall modestly into the close.
NASDAQ 1,831.54 -.93%
Leading Sectors
Telecom +1.31%
Insurance +.46%
Computer Services -.12%
Lagging Sectors
Internet -1.99%
Biotech -2.68%
Hospitals -3.20%
Other
Crude Oil 41.40 -.74%
Natural Gas 5.97 -2.59%
Gold 389.80 -.18%
Base Metals 109.14 +.89%
U.S. Dollar 89.02 -.27%
10-Yr. T-note Yield 4.47% +1.01%
VIX 17.63 +6.85%
Put/Call .73 -6.41%
NYSE Arms 1.36 -21.84%
Market Movers
ANDW -26.2% after beating 2Q estimates and lowering 3Q/4Q guidance.
CHKP -13.65% after slightly missing 2Q estimates and lowering 3Q forecast.
MYL -15.5% after agreeing to buy KG for $4 billion in stock to expand into heart treatments and add sales force to call on cardiologists. KG +25.2%.
IMCL -15.0% after Citi downgrade to Neutral, price target cut to $72.
OCR -31.0% after missing 2Q estimates and lowering 04 guidance.
BSX +4.88% after 2Q estimates mostly met expectations after stent recall.
AGYS +18.88% after beating 1Q estimates and raising 05 forecast.
MANT +11.1% after saying it received a four-year contract to provide the federal government with security clearance background investigations.
CTSH +11.8% after beating 2Q estimates and raising 3Q and 04 forecast.
CRS +7.2% after JP Morgan upgrade to Overweight.
BEC -8.4% after missing 2Q estimates and lowering 3Q forecast.
TASR -9.9% on news that CBS News will run a negative story on the company.
Economic Data
Existing Home Sales for June were 6.95M versus estimates of 6.65M and 6.81M in May.
Recommendations
CRS raised to Overweight at JP Morgan. IGT raised to Sector Outperform at CIBC, target $38. HCR raised to Buy at Legg Mason, target $38. UHS raised to Buy at Oppenheimer, target $52. NTLI raised to Overweight at JP Morgan. Goldman Sachs reiterated Outperform on AMT, VZ, XRX, SRE, NEM, PDG, ENH, BSX, AMLN, FS, IGT, GCI, HOT, PG, SLB and ITT. Goldman reiterated Underperform on CYT, SGP, PGL, CR and DJ. Citi SmithBarney reiterated Buy on HAL, target $37. Citi reiterated Sell on MYG, target $15. Citi reiterated Buy on WY, target $72. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on SSCC, target $23. Citi reiterated Buy on UTX, target $109. Citi thinks banks will outperform in second half, favorite is BAC. Citi said with semi-equipment shipment delays finally beginning, the final phase of the correction in those stocks has begun, Buy on weakness, favorite is LRCX. Citi reiterated Buy on ATH, target $90. Citi reiterated Buy on WLP, target $111.70.
Mid-day News
U.S. stocks are falling mid-day, led lower by healthcare-related companies, on concerns over negative political rhetoric, earnings shortfalls and rising interest rates. Iraqi Defense minister Hazima al-Shalan said Iran has sent spies into Iraq, infiltrated the country's new government and taken positions along Iraq's border, the Washington Post reported. Sun Micro plans to debut two computer system lines with microprocessors from Advanced Micro, the Wall Street Journal reported. Sprint will likely announce today it is offering local telephone service to business customers in 35 markets, the Wall Street Journal said. Shares of AO Yukos Oil, Russia's largest oil exporter, fell after Interfax reported a major shareholder was placed on a wanted list by a Moscow court on murder-related charges. An Alzheimer's drug called donepezil might slow the onset of the disease in high-risk patients by six months, the LA Times reported. Roche Holding and Chiron are competing for the lead in the market for tests that can screen donated blood for the West Nile virus, the LA Times reported. Career Education, which is being probed by the U.S. SEC, is also being investigated by federal law-enforcement officials, the Financial Times reported. Nokia may have its credit rating reduced by S&P on concern the company will continue to lose market share to competitors, Bloomberg reported. HCA, the biggest U.S. hospital chain, said second-quarter profit rose 47% as lower malpractice expenses compensated for an increase in unpaid bills, Bloomberg reported. Google plans to sell 24.6 million shares in its IPO for between $108-$135/share and the symbol will be GOOG, Bloomberg said. U.S. sales of previously owned houses rose more than expected in June to a record annual pace of 6.95 million, the National Assoc. of Realtors said. U.S. Treasuries fell in New York after home sales unexpectedly rose and speculation increased that other economic reports this week will add to evidence growth is accelerating, Bloomberg reported. Medicare proposed rules for its 2006 program to help the elderly pay for prescription drugs, including how the agency will work with pharmacy-benefit managers such as Express Scripts to get discounts on drugs, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged today as my longs are falling more than my shorts. I have not traded today and the Portfolio is still 50% net short. It is good to see the VIX continue higher, however the Put/Call and Arms readings are falling. My short-term trading indicators are still giving sell signals. I expect U.S. stocks to fall modestly into the close.
Monday Watch
Earnings of Note
Company/Estimate
AXP/.67
ANDW/.13
BLS/.50
BSX/.45
CTX/1.29
CHKP/.25
CHK/.29
HCA/.65
HUM/.39
IP/.38
PETS/.10
PBI/.61
PVN/.21
PHM/1.43
SWK/.67
SLAB/.38
UNA/.08
VECO/.13
Splits
CWTR 3-for-2
Economic Data
Existing Home Sales for June estimated at 6.66M versus 6.8M in May.
Weekend Recommendations
Forbes on Fox had guests that were positive on SLM and TEVA. Bulls and Bears had guests that were positive on LU, AAPL, MMC, EOG, RTN, F, DCX, TM, ROST and mixed on MSFT. Cashin' In had guests that were positive on JNJ, FLO, PTR, TXN and mixed on MSFT, RHAT. Louis Rukeyser's Wall Street had guests that were positive on UPS, WMT, XMSR, SIRI, JCP and VLO. Wall St. Week w/Fortune had guests that were positive on FO, STZ, PEP, DIS, HDI, GE, SHFL, MGAM, BUD, POOL, MSFT and UTX. Barron's had positive comments on MSFT, DEX, OLN, GTOP, SGR, WG, HGR, MHR, DNR, NR and negative comments on NXTL. Goldman Sachs reiterated Outperform on AGN, DD, AMT, HOT, EBAY, ITT, SLB and Underperform on SIAL, WM, SGP.
Weekend News
North Korea rejected a U.S. proposition to end its nuclear program in exchange for economic aid and improved relations as having "little worthy to be discussed," Agence France-Presse reported. Ford Motor, which accounts for about 80% of all police patrol cars sold in the U.S., may face a challenge from a police version of DaimlerChrysler's Dodge Magnum sports wagon, the LA Times reported. The U.S. Senate gave final approval to a bill that requires states to close loopholes in unemployment insurance laws that allow companies to avoid paying millions of dollars in premiums, the Washington Post reported. A group claiming to be the European arm of al-Qaeda has threatened to attack Australia an Italy with car bombs if their troops aren't withdrawn from Iraq, the Australian Broadcasting Corp. reported. Iraq and Syria agreed to restore diplomatic ties severed in 1982 and control security along their common borders to stop militants from crossing into Iraq, Al-Hayat reported. The campaign of John Edwards will return $44,035 in contributions raised by a LA attorney under scrutiny by California election officials, Newsweek reported. A 312-111 vote last week in the U.S. House favoring the technology industry's position of expensing options shows Silicon Valley's influence in Congress may be reviving, the NY Times said. Consumers fed up with having to pay more costly phone bills have been switching in increasing numbers to phone service over the Internet, the New York Times reported. AT&T will probably be the target of a takeover bid, Newsweek reported. Google may announce the estimated price range for its IPO as early as today, the Financial Times reported. President Bush wants to make decisions within days about enacting some of the recommendations of the commission that investigated the Sept. 11, 2001, terrorist attacks, the Washington Post said. Intel is looking for ways to return some of its $16.7 billion in cash to shareholders, the Financial Times reported. Former President Clinton will play a prominent role in the campaign of Democratic presidential candidate Kerry over the next three months, the Financial Times said. Mylan Labs plans to buy King Pharmaceuticals in a transaction valued at $4 billion, as it seeks to expand its branded-drug business, the Wall Street Journal reported.
Late-Night Trading
Asian indices are mostly lower, -1.0% to -.25% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.29%.
BOTTOM LINE: I expect U.S. stocks to open mixed in the morning ahead of a number of important earnings releases, economic reports and the Democratic convention. The Portfolio is 50% net short heading into the week.
Company/Estimate
AXP/.67
ANDW/.13
BLS/.50
BSX/.45
CTX/1.29
CHKP/.25
CHK/.29
HCA/.65
HUM/.39
IP/.38
PETS/.10
PBI/.61
PVN/.21
PHM/1.43
SWK/.67
SLAB/.38
UNA/.08
VECO/.13
Splits
CWTR 3-for-2
Economic Data
Existing Home Sales for June estimated at 6.66M versus 6.8M in May.
Weekend Recommendations
Forbes on Fox had guests that were positive on SLM and TEVA. Bulls and Bears had guests that were positive on LU, AAPL, MMC, EOG, RTN, F, DCX, TM, ROST and mixed on MSFT. Cashin' In had guests that were positive on JNJ, FLO, PTR, TXN and mixed on MSFT, RHAT. Louis Rukeyser's Wall Street had guests that were positive on UPS, WMT, XMSR, SIRI, JCP and VLO. Wall St. Week w/Fortune had guests that were positive on FO, STZ, PEP, DIS, HDI, GE, SHFL, MGAM, BUD, POOL, MSFT and UTX. Barron's had positive comments on MSFT, DEX, OLN, GTOP, SGR, WG, HGR, MHR, DNR, NR and negative comments on NXTL. Goldman Sachs reiterated Outperform on AGN, DD, AMT, HOT, EBAY, ITT, SLB and Underperform on SIAL, WM, SGP.
Weekend News
North Korea rejected a U.S. proposition to end its nuclear program in exchange for economic aid and improved relations as having "little worthy to be discussed," Agence France-Presse reported. Ford Motor, which accounts for about 80% of all police patrol cars sold in the U.S., may face a challenge from a police version of DaimlerChrysler's Dodge Magnum sports wagon, the LA Times reported. The U.S. Senate gave final approval to a bill that requires states to close loopholes in unemployment insurance laws that allow companies to avoid paying millions of dollars in premiums, the Washington Post reported. A group claiming to be the European arm of al-Qaeda has threatened to attack Australia an Italy with car bombs if their troops aren't withdrawn from Iraq, the Australian Broadcasting Corp. reported. Iraq and Syria agreed to restore diplomatic ties severed in 1982 and control security along their common borders to stop militants from crossing into Iraq, Al-Hayat reported. The campaign of John Edwards will return $44,035 in contributions raised by a LA attorney under scrutiny by California election officials, Newsweek reported. A 312-111 vote last week in the U.S. House favoring the technology industry's position of expensing options shows Silicon Valley's influence in Congress may be reviving, the NY Times said. Consumers fed up with having to pay more costly phone bills have been switching in increasing numbers to phone service over the Internet, the New York Times reported. AT&T will probably be the target of a takeover bid, Newsweek reported. Google may announce the estimated price range for its IPO as early as today, the Financial Times reported. President Bush wants to make decisions within days about enacting some of the recommendations of the commission that investigated the Sept. 11, 2001, terrorist attacks, the Washington Post said. Intel is looking for ways to return some of its $16.7 billion in cash to shareholders, the Financial Times reported. Former President Clinton will play a prominent role in the campaign of Democratic presidential candidate Kerry over the next three months, the Financial Times said. Mylan Labs plans to buy King Pharmaceuticals in a transaction valued at $4 billion, as it seeks to expand its branded-drug business, the Wall Street Journal reported.
Late-Night Trading
Asian indices are mostly lower, -1.0% to -.25% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.29%.
BOTTOM LINE: I expect U.S. stocks to open mixed in the morning ahead of a number of important earnings releases, economic reports and the Democratic convention. The Portfolio is 50% net short heading into the week.
Sunday, July 25, 2004
Chart of the Week
Bottom Line: Since the first of the month,the Nasdaq is down almost 10%. It is approaching very oversold levels. A tradeable rally ensued the last two times this index reached these levels.
Weekly Outlook
There are a few important economic reports and a number of significant corporate earnings reports scheduled for release this week. Economic reports this week include Existing Home Sales, Consumer Confidence, New Home Sales, Durable Goods Orders, Employment Cost Index, Initial Jobless Claims, GDP, Personal Consumption, GDP Price Deflator, Univ. of Mich. Consumer Confidence and Chicago Purchasing Manager report. Home Sales, Consumer Confidence readings, GDP and the Chicago Purchasing Manager report all have market-moving potential.
Andrew Corp.(ANDW), Boston Scientific(BSX), HCA Inc.(HCA), Intl. Paper(IP), American Express(AXP), Automatic Data Processing(ADP), E.I. du Pont(DD), Lockheed Martin(LMT), Nabors Industries(NBR), Phelps Dodge(PD), Verizon Communications(VZ), Veritas Software(VRTS), Boeing(BA), Comcast(CMCSA), Hilton Hotels(HLT), KLA-Tencor Corp.(KLAC), Gillette(G), Time Warner(TWX), BellSouth(BLS), Bristol-Myers Squibb(BMY), Ingram Micro(IM) and Liz Claiborne(LIZ) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The Fed's Hoening's speech on monetary policy, the Government Security Expo and Bank of America's Specialty Pharmaceutical Conference could also impact trading this week.
Bottom Line: I expect U.S. stocks to remain under pressure through mid-week, then to rise through week's end, leaving the major U.S. averages modestly higher for the week. The Morgan Stanley Technology Index is now down 17.8% from its recent high in January. Barring any domestic terror attacks, the end of the Democratic Convention should prompt at least a relief rally in many oversold stocks. My short-term trading indicators are still giving sell signals and the Portfolio is 50% net short heading into the week.
Andrew Corp.(ANDW), Boston Scientific(BSX), HCA Inc.(HCA), Intl. Paper(IP), American Express(AXP), Automatic Data Processing(ADP), E.I. du Pont(DD), Lockheed Martin(LMT), Nabors Industries(NBR), Phelps Dodge(PD), Verizon Communications(VZ), Veritas Software(VRTS), Boeing(BA), Comcast(CMCSA), Hilton Hotels(HLT), KLA-Tencor Corp.(KLAC), Gillette(G), Time Warner(TWX), BellSouth(BLS), Bristol-Myers Squibb(BMY), Ingram Micro(IM) and Liz Claiborne(LIZ) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The Fed's Hoening's speech on monetary policy, the Government Security Expo and Bank of America's Specialty Pharmaceutical Conference could also impact trading this week.
Bottom Line: I expect U.S. stocks to remain under pressure through mid-week, then to rise through week's end, leaving the major U.S. averages modestly higher for the week. The Morgan Stanley Technology Index is now down 17.8% from its recent high in January. Barring any domestic terror attacks, the end of the Democratic Convention should prompt at least a relief rally in many oversold stocks. My short-term trading indicators are still giving sell signals and the Portfolio is 50% net short heading into the week.
Market Week in Review
S&P 500 1,086.20 -1.38%
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Overall, last week was not very good for the Bulls. The NASDAQ advance/decline line continued to deteriorate, technical damage spread, most good news went unrewarded, the Put/Call and Arms readings fell and energy prices rose. However, there were a few positives last week. The Financials rose, AAII % Bulls fell, the VIX increased and most commodities declined in price. As well, according to Thomson, companies boosted earnings by an estimated 24% in the second quarter, above the 19% estimate heading into earnings season. Moreover, only 11.0% of companies have missed estimates so far. Thomson also estimates earnings will increase a robust 15.3% in the second half of the year. The S&P 500's 04 estimated P/E is now 16.51, down 68.0% from its peak. This very reasonable valuation is also 24.2% lower than in 1992 and 11.5% lower than in 1987, years proceeding major bulls moves. Considering interest rates are still near historic lows, inflation is below its long-term average, the high level of U.S. economic and military leadership, economic growth near 20-year highs, record-high American net-worth, one could argue that stocks are actually cheap at current levels.
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Overall, last week was not very good for the Bulls. The NASDAQ advance/decline line continued to deteriorate, technical damage spread, most good news went unrewarded, the Put/Call and Arms readings fell and energy prices rose. However, there were a few positives last week. The Financials rose, AAII % Bulls fell, the VIX increased and most commodities declined in price. As well, according to Thomson, companies boosted earnings by an estimated 24% in the second quarter, above the 19% estimate heading into earnings season. Moreover, only 11.0% of companies have missed estimates so far. Thomson also estimates earnings will increase a robust 15.3% in the second half of the year. The S&P 500's 04 estimated P/E is now 16.51, down 68.0% from its peak. This very reasonable valuation is also 24.2% lower than in 1992 and 11.5% lower than in 1987, years proceeding major bulls moves. Considering interest rates are still near historic lows, inflation is below its long-term average, the high level of U.S. economic and military leadership, economic growth near 20-year highs, record-high American net-worth, one could argue that stocks are actually cheap at current levels.
Saturday, July 24, 2004
Economic Week in Review
ECRI Weekly Leading Index 131.20 -.23%
Housing Starts for June fell to 1802K versus estimates of 1990K and an upwardly revised 1970K in May. Building Permits for June fell to 1924K versus estimates of 2000K and an upwardly revised 2097K in May. The drop in permits was the biggest since 1994, when the Fed last started raising its target interest rate following a recession. Fed Chairman Greenspan told lawmakers that "housing starts, which have come up at an extraordinary pace in recent years, are very likely to shade lower over the next couple of years. It's hard to maintain the pace that we're maintaining. But we do not expect that the fall-off will be abrupt." Construction, which in 2003 was the strongest in 25 years, may also have been hampered by rainy weather last month. Rainfall averaged 7.46 inches in the South last month, the wettest June since record-keeping began in 1895. Moreover, 3.5 inches of rain fell on the entire U.S. last month, the seventh-wettest June on record. The number of homes authorized but not yet started increased 10% in June to 202,100, the most since April 1987, suggesting builders' backlogs still are widening, Bloomberg reported.
Fed Chairman Greenspan said a recent slowdown in consumer spending "should prove short-lived" and that the central bank can continue to raise interest rates at a "measured" pace. "Inflation also seems to have been boosted by transitory factors such as the surge in energy prices," Greenspan told the Senate Banking Committee. The FOMC, in a related report, predicted the economy will grow as much as 4.75% in 2004 from last year's fourth quarter, down from a 5% estimate in February. This would still be the fastest U.S. economic growth since the height of the internet bubble in 1999, Bloomberg said. The FOMC predicted its preferred inflation measure, the core personal consumption expenditures price index, will rise to a range of 1.5% to 2% this year, Bloomberg reported. "A sustained pick-up in the rate of inflation" is not likely as "businesses are limited in the degree to which they can raise prices because of global competition and slack resources in the economy", Greenspan said. The FOMC also predicted that the unemployment rate would drop in the fourth quarter, averaging 5.25-5.5%. Businesses have now added an average of 211,000 new jobs per month over the past six months, Bloomberg said. "Nothing is frightening them that growth will stall out or that inflation is getting out of hand," said James Paulsen, who oversees about $125 billion as chief investment strategist at Wells Capital Management.
Initial Jobless Claims fell to 339,000 versus estimates of 345,000 and 350,000 the prior week. Continuing Claims were 2,797,000 versus estimates of 2,930,000 and 2,964,000 prior. "Job growth went through a soft patch in June and is picking up again in July," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi. The Fed Bank of Philadelphia's measure of factory hiring rose to the highest ever this month and the Fed Bank of New York also reported a rise in the number of factories hiring more workers, Bloomberg reported. "I know a number of people looked at recent data and took it as some indication that there is some significant weakness developing. If that were the case, I think we would have seen it in a marked pick-up in initial claims for unemployment insurance which, of course, we did not," Greenspan told the Senate Banking Committee.
Leading Indicators for June fell .2% versus estimates of an unchanged reading and a .4% rise in May. The index fell for the first time in more than a year in June, as a decrease in building permits and hours worked restrained the measure, Bloomberg reported. Recent reports of gains in the manufacturing sector show any slowdown may be temporary, economists said. "These data still suggest that, on balance, the economy has shifted to a moderate self-sustaining expansion from a robust stimulus-led one," said Steven Wood, president of Insight Economics. "Strong economic performance in May gave way to a weaker June. The index is still about 3.4% higher in the second quarter than in the first," said Ken Goldstein, an economist at the Conference Board.
Bottom Line: Housing starts were definitely affected by the weather. As well, the spike in mortgage rates in March likely scared many potential new home buyers into locking-in rates. This likely resulted in a depletion of some pent-up demand. However, with mortgage rates falling 46 basis points from recent highs, building will likely stabilize in the near future. It is obvious from multiple Fed members' comments that they perceive the recent economic weakness as only temporary and that they will continue to raise rates in 25 basis point increments as inflation is not currently a problem. However, a rise in the Core PCE Price Index of greater than 2% would likely result in an acceleration of the rate of hikes. Data also suggest that the recent slowdown in job growth was only temporary, as well. The change in non-farm payrolls for July should meet or exceed the current estimate of 223,000. The decline in the Leading Indicators Index, while hurt to an extent by bad weather, likely portends a slowdown in GDP growth for this quarter. I agree with the Fed that current economic weakness is only temporary and that growth will accelerate in the fourth quarter.
Overall, the data were mixed and likely point to continued weakness in the short-run. It is my belief that three main issues are currently slowing economic growth. First, recent polls suggest that the largest number of small-business owners and executives in recent memory feel that the Democratic ticket will damage the economy. This perception, combined with President Bush's slide in some polls, is actually resulting in a decrease in business spending in anticipation of a weaker economy. The still nagging overcapacity generated by the excesses of the late nineties and increased global competition result in earnings shortfalls in some sectors with any slight downtick in demand. Second, there is the growing perception that a domestic terror act, to disrupt the U.S. election or political conventions, is inevitable. This is also likely affecting energy prices, confidence and spending by corporate America. Finally, the extremely wet conditions in much of the country and the spike in home-buying in the first half of the year have dampened consumer spending recently. I view this as only temporary as I do not believe rates have risen enough or that inflation is a big enough problem to damage consumer spending longer-term.
Housing Starts for June fell to 1802K versus estimates of 1990K and an upwardly revised 1970K in May. Building Permits for June fell to 1924K versus estimates of 2000K and an upwardly revised 2097K in May. The drop in permits was the biggest since 1994, when the Fed last started raising its target interest rate following a recession. Fed Chairman Greenspan told lawmakers that "housing starts, which have come up at an extraordinary pace in recent years, are very likely to shade lower over the next couple of years. It's hard to maintain the pace that we're maintaining. But we do not expect that the fall-off will be abrupt." Construction, which in 2003 was the strongest in 25 years, may also have been hampered by rainy weather last month. Rainfall averaged 7.46 inches in the South last month, the wettest June since record-keeping began in 1895. Moreover, 3.5 inches of rain fell on the entire U.S. last month, the seventh-wettest June on record. The number of homes authorized but not yet started increased 10% in June to 202,100, the most since April 1987, suggesting builders' backlogs still are widening, Bloomberg reported.
Fed Chairman Greenspan said a recent slowdown in consumer spending "should prove short-lived" and that the central bank can continue to raise interest rates at a "measured" pace. "Inflation also seems to have been boosted by transitory factors such as the surge in energy prices," Greenspan told the Senate Banking Committee. The FOMC, in a related report, predicted the economy will grow as much as 4.75% in 2004 from last year's fourth quarter, down from a 5% estimate in February. This would still be the fastest U.S. economic growth since the height of the internet bubble in 1999, Bloomberg said. The FOMC predicted its preferred inflation measure, the core personal consumption expenditures price index, will rise to a range of 1.5% to 2% this year, Bloomberg reported. "A sustained pick-up in the rate of inflation" is not likely as "businesses are limited in the degree to which they can raise prices because of global competition and slack resources in the economy", Greenspan said. The FOMC also predicted that the unemployment rate would drop in the fourth quarter, averaging 5.25-5.5%. Businesses have now added an average of 211,000 new jobs per month over the past six months, Bloomberg said. "Nothing is frightening them that growth will stall out or that inflation is getting out of hand," said James Paulsen, who oversees about $125 billion as chief investment strategist at Wells Capital Management.
Initial Jobless Claims fell to 339,000 versus estimates of 345,000 and 350,000 the prior week. Continuing Claims were 2,797,000 versus estimates of 2,930,000 and 2,964,000 prior. "Job growth went through a soft patch in June and is picking up again in July," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi. The Fed Bank of Philadelphia's measure of factory hiring rose to the highest ever this month and the Fed Bank of New York also reported a rise in the number of factories hiring more workers, Bloomberg reported. "I know a number of people looked at recent data and took it as some indication that there is some significant weakness developing. If that were the case, I think we would have seen it in a marked pick-up in initial claims for unemployment insurance which, of course, we did not," Greenspan told the Senate Banking Committee.
Leading Indicators for June fell .2% versus estimates of an unchanged reading and a .4% rise in May. The index fell for the first time in more than a year in June, as a decrease in building permits and hours worked restrained the measure, Bloomberg reported. Recent reports of gains in the manufacturing sector show any slowdown may be temporary, economists said. "These data still suggest that, on balance, the economy has shifted to a moderate self-sustaining expansion from a robust stimulus-led one," said Steven Wood, president of Insight Economics. "Strong economic performance in May gave way to a weaker June. The index is still about 3.4% higher in the second quarter than in the first," said Ken Goldstein, an economist at the Conference Board.
Bottom Line: Housing starts were definitely affected by the weather. As well, the spike in mortgage rates in March likely scared many potential new home buyers into locking-in rates. This likely resulted in a depletion of some pent-up demand. However, with mortgage rates falling 46 basis points from recent highs, building will likely stabilize in the near future. It is obvious from multiple Fed members' comments that they perceive the recent economic weakness as only temporary and that they will continue to raise rates in 25 basis point increments as inflation is not currently a problem. However, a rise in the Core PCE Price Index of greater than 2% would likely result in an acceleration of the rate of hikes. Data also suggest that the recent slowdown in job growth was only temporary, as well. The change in non-farm payrolls for July should meet or exceed the current estimate of 223,000. The decline in the Leading Indicators Index, while hurt to an extent by bad weather, likely portends a slowdown in GDP growth for this quarter. I agree with the Fed that current economic weakness is only temporary and that growth will accelerate in the fourth quarter.
Overall, the data were mixed and likely point to continued weakness in the short-run. It is my belief that three main issues are currently slowing economic growth. First, recent polls suggest that the largest number of small-business owners and executives in recent memory feel that the Democratic ticket will damage the economy. This perception, combined with President Bush's slide in some polls, is actually resulting in a decrease in business spending in anticipation of a weaker economy. The still nagging overcapacity generated by the excesses of the late nineties and increased global competition result in earnings shortfalls in some sectors with any slight downtick in demand. Second, there is the growing perception that a domestic terror act, to disrupt the U.S. election or political conventions, is inevitable. This is also likely affecting energy prices, confidence and spending by corporate America. Finally, the extremely wet conditions in much of the country and the spike in home-buying in the first half of the year have dampened consumer spending recently. I view this as only temporary as I do not believe rates have risen enough or that inflation is a big enough problem to damage consumer spending longer-term.
Weekly Scoreboard*
Indices
S&P 500 1,086.20 -1.38%
Dow 9,962.22 -1.75%
NASDAQ 1,849.09 -1.81%
Russell 2000 539.23 -2.92%
S&P Equity Long/Short Index 965.90 -.45%
Put/Call .78 -28.44%
NYSE Arms 1.74 -5.43%
Volatility(VIX) 16.50 +15.06%
AAII % Bulls 35.71 -24.61%
US Dollar 89.26 +2.44%
CRB 270.21 -.77%
Futures Spot Prices
Gold 390.50 -4.05%
Crude Oil 41.71 +1.16%
Unleaded Gasoline 127.88 -1.78%
Natural Gas 6.13 +4.14%
Base Metals 108.18 -4.29%
10-year US Treasury Yield 4.43% +1.84%
Average 30-year Mortgage Rate 5.98% -.33%
Leading Sectors
Telecom +2.13%
I-Banks +1.53%
Banks +.39%
Lagging Sectors
Commodity -4.24%
Disk Drives -4.32%
Biotech -4.59%
*% Gain or loss for the week
S&P 500 1,086.20 -1.38%
Dow 9,962.22 -1.75%
NASDAQ 1,849.09 -1.81%
Russell 2000 539.23 -2.92%
S&P Equity Long/Short Index 965.90 -.45%
Put/Call .78 -28.44%
NYSE Arms 1.74 -5.43%
Volatility(VIX) 16.50 +15.06%
AAII % Bulls 35.71 -24.61%
US Dollar 89.26 +2.44%
CRB 270.21 -.77%
Futures Spot Prices
Gold 390.50 -4.05%
Crude Oil 41.71 +1.16%
Unleaded Gasoline 127.88 -1.78%
Natural Gas 6.13 +4.14%
Base Metals 108.18 -4.29%
10-year US Treasury Yield 4.43% +1.84%
Average 30-year Mortgage Rate 5.98% -.33%
Leading Sectors
Telecom +2.13%
I-Banks +1.53%
Banks +.39%
Lagging Sectors
Commodity -4.24%
Disk Drives -4.32%
Biotech -4.59%
*% Gain or loss for the week
Friday, July 23, 2004
Mid-day Update
S&P 500 1,087.62 -.84%
NASDAQ 1,856.77 -1.72%
Leading Sectors
Telecom +1.74%
Papers +.58%
Gaming +.33%
Lagging Sectors
Internet -2.69%
Semis -2.74%
Networking -3.02%
Other
Crude Oil 41.34 -.05%
Natural Gas 6.15 -.03%
Gold 389.30 -1.52%
Base Metals 108.18 -2.52%
U.S. Dollar 89.13 +.77%
10-Yr. T-note Yield 4.44% -.05%
VIX 16.42 +4.25%
Put/Call .71 -21.98%
NYSE Arms 1.85 +128.39%
Market Movers
AMZN -9.65% after missing 2Q estimates and giving weak guidance.
KO -7.9% after missing 2Q sales estimates and giving weak guidance.
ERTS -6.1% after beating 1Q estimates, but making cautious comments on year.
TKLC +12.7% after substantially beating 2Q estimates and raising 3Q guidance.
EFII +8.7% on rebound after fall on earnings yesterday.
CCMP +7.6% after beating 3Q estimates substantially and WR Hambrecht upgrade to Buy.
ARTI +9.3% after beating 3Q estimates.
NTMD +11.2% on continued optimism over recent study showing an experimental medicine showed "significant survival benefits" in African American patients with heart failure.
TWP +14.0% after beating 2Q estimates and giving positive guidance.
RHI +7.4% after beating 2Q estimates substantially and multiple upgrades.
FOE -20.2% after cutting 2Q estimates after finding an accounting error.
MTLG -14.6% after missing 2Q estimates and reaffirming 04 guidance.
CLSR -14.8% after beating 2Q estimates, but giving disappointing guidance.
NTY -18.3% after disappointing 3Q estimates.
Economic Data
None of note.
Recommendations
BLS raised to Buy at UBS, target $30. VZ raised to Buy at UBS, target $40. EMT cut to Reduce at UBS, target $10.50. BEAV raised to Outperform at CSFB, target $12. MCIP rated Underweight at Morgan Stanley, target $8. Merrill Lynch cut IGT to Sell from Buy. Goldman Sachs reiterated Underperform on SAY, PYX, DCLK, T and VRSN. Goldman reiterated Outperform on BAX, GE, AVP, SVU, STA, SLB, SBC, GDT and MSFT. Citi SmithBarney reiterated Buy on TXT, target $70. Citi reiterated Buy on AMGN, target $90. Citi reiterated Buy on MSFT, target $33. Citi reiterated Buy on VIAB, target $50. Citi reiterated Buy on MDU, target $28. Citi reiterated Buy on MCD, target $34. Citi reiterated Buy on BA, target $36. Citi reiterated Buy on PLUG, target $13. Citi reiterated Buy on RYL, target $125. Citi reiterated Buy on IGT, target $50. Citi reiterated Buy on RSAS, target $22. Citi reiterated Buy on FDRY, target $15. Citi reiterated Buy on WC, target $53. Citi reiterated Buy on AA, target $48. Citi reiterated Buy on ERTS, target $60. Citi reiterated Sell on T, target $14.
Mid-day News
U.S. stocks are falling mid-day on terrorism fears, earnings worries and upcoming negative political rhetoric. Lawmakers and corporate executives have discussed the possibility of amending part of the Sarbanes-Oxley Act, which bolstered requirements for corporate governance, the Washington Post reported. China's electricity consumption surged to a record yesterday as rising temperatures across the country increased usage of air-conditioners, Xinhua news said. Al-Qaeda members caught in Saudi Arabia, Pakistan and Afghanistan have provided details about a possible terrorist attack similar in scale to the attacks carried out on Sept. 11, the NY Times reported. An increasing number of Germans support working longer hours to save their jobs, ZDF tv reported. The FBI said terrorists may try to attack tv news trucks in an attempt to disrupt the July 26-29 Democratic convention in Boston, the Boston Globe reported. Copper prices in New York had their biggest decline in six weeks after Grupo Mexico SA, the world's third-biggest copper producer, won a ruling to stop two strikes that threatened to reduce half of the company's production, Bloomberg said. The U.S. FCC approved a six-month freeze on rates paid by AT&T and other telephone companies to rent lines from local carriers such as Verizon, Bloomberg reported. Goldman Sachs economists disagree with fears of a job-creation slowdown and have raised their July forecast to 300,000 non-farm payroll gains from 250,000 amid an "auspicious confluence" of events that has occurred only two other times in the past 30 years, Bloomberg reported. United Air and Northwest Air each won U.S. approval for a new daily flight between the U.S. and China, the first awards under an agreement the countries reached last month, Bloomberg said.
BOTTOM LINE: The Portfolio is substantially higher today as my software and semiconductor shorts are falling significantly. I have not traded today and the Portfolio is still 50% net short. The tone of the market is bad. The advance/decline line is poor, technology shares are very weak, oil remains high and the Put/Call ratio is falling. However, it is good to see the ARMS index spiking and the AAII % Bulls falling. The Morgan Stanley Tech Index is now down 17.5% from its January high. The P/E on the S&P 500's 04 estimated earnings is now 16.5 and falling. I continue to believe the major U.S. indices will make a bottom sometime during the next 2 months and show a significant gain in the 4th quarter. Longer-term investors should use any extreme weakness during the next several weeks to add to favorite long positions.
NASDAQ 1,856.77 -1.72%
Leading Sectors
Telecom +1.74%
Papers +.58%
Gaming +.33%
Lagging Sectors
Internet -2.69%
Semis -2.74%
Networking -3.02%
Other
Crude Oil 41.34 -.05%
Natural Gas 6.15 -.03%
Gold 389.30 -1.52%
Base Metals 108.18 -2.52%
U.S. Dollar 89.13 +.77%
10-Yr. T-note Yield 4.44% -.05%
VIX 16.42 +4.25%
Put/Call .71 -21.98%
NYSE Arms 1.85 +128.39%
Market Movers
AMZN -9.65% after missing 2Q estimates and giving weak guidance.
KO -7.9% after missing 2Q sales estimates and giving weak guidance.
ERTS -6.1% after beating 1Q estimates, but making cautious comments on year.
TKLC +12.7% after substantially beating 2Q estimates and raising 3Q guidance.
EFII +8.7% on rebound after fall on earnings yesterday.
CCMP +7.6% after beating 3Q estimates substantially and WR Hambrecht upgrade to Buy.
ARTI +9.3% after beating 3Q estimates.
NTMD +11.2% on continued optimism over recent study showing an experimental medicine showed "significant survival benefits" in African American patients with heart failure.
TWP +14.0% after beating 2Q estimates and giving positive guidance.
RHI +7.4% after beating 2Q estimates substantially and multiple upgrades.
FOE -20.2% after cutting 2Q estimates after finding an accounting error.
MTLG -14.6% after missing 2Q estimates and reaffirming 04 guidance.
CLSR -14.8% after beating 2Q estimates, but giving disappointing guidance.
NTY -18.3% after disappointing 3Q estimates.
Economic Data
None of note.
Recommendations
BLS raised to Buy at UBS, target $30. VZ raised to Buy at UBS, target $40. EMT cut to Reduce at UBS, target $10.50. BEAV raised to Outperform at CSFB, target $12. MCIP rated Underweight at Morgan Stanley, target $8. Merrill Lynch cut IGT to Sell from Buy. Goldman Sachs reiterated Underperform on SAY, PYX, DCLK, T and VRSN. Goldman reiterated Outperform on BAX, GE, AVP, SVU, STA, SLB, SBC, GDT and MSFT. Citi SmithBarney reiterated Buy on TXT, target $70. Citi reiterated Buy on AMGN, target $90. Citi reiterated Buy on MSFT, target $33. Citi reiterated Buy on VIAB, target $50. Citi reiterated Buy on MDU, target $28. Citi reiterated Buy on MCD, target $34. Citi reiterated Buy on BA, target $36. Citi reiterated Buy on PLUG, target $13. Citi reiterated Buy on RYL, target $125. Citi reiterated Buy on IGT, target $50. Citi reiterated Buy on RSAS, target $22. Citi reiterated Buy on FDRY, target $15. Citi reiterated Buy on WC, target $53. Citi reiterated Buy on AA, target $48. Citi reiterated Buy on ERTS, target $60. Citi reiterated Sell on T, target $14.
Mid-day News
U.S. stocks are falling mid-day on terrorism fears, earnings worries and upcoming negative political rhetoric. Lawmakers and corporate executives have discussed the possibility of amending part of the Sarbanes-Oxley Act, which bolstered requirements for corporate governance, the Washington Post reported. China's electricity consumption surged to a record yesterday as rising temperatures across the country increased usage of air-conditioners, Xinhua news said. Al-Qaeda members caught in Saudi Arabia, Pakistan and Afghanistan have provided details about a possible terrorist attack similar in scale to the attacks carried out on Sept. 11, the NY Times reported. An increasing number of Germans support working longer hours to save their jobs, ZDF tv reported. The FBI said terrorists may try to attack tv news trucks in an attempt to disrupt the July 26-29 Democratic convention in Boston, the Boston Globe reported. Copper prices in New York had their biggest decline in six weeks after Grupo Mexico SA, the world's third-biggest copper producer, won a ruling to stop two strikes that threatened to reduce half of the company's production, Bloomberg said. The U.S. FCC approved a six-month freeze on rates paid by AT&T and other telephone companies to rent lines from local carriers such as Verizon, Bloomberg reported. Goldman Sachs economists disagree with fears of a job-creation slowdown and have raised their July forecast to 300,000 non-farm payroll gains from 250,000 amid an "auspicious confluence" of events that has occurred only two other times in the past 30 years, Bloomberg reported. United Air and Northwest Air each won U.S. approval for a new daily flight between the U.S. and China, the first awards under an agreement the countries reached last month, Bloomberg said.
BOTTOM LINE: The Portfolio is substantially higher today as my software and semiconductor shorts are falling significantly. I have not traded today and the Portfolio is still 50% net short. The tone of the market is bad. The advance/decline line is poor, technology shares are very weak, oil remains high and the Put/Call ratio is falling. However, it is good to see the ARMS index spiking and the AAII % Bulls falling. The Morgan Stanley Tech Index is now down 17.5% from its January high. The P/E on the S&P 500's 04 estimated earnings is now 16.5 and falling. I continue to believe the major U.S. indices will make a bottom sometime during the next 2 months and show a significant gain in the 4th quarter. Longer-term investors should use any extreme weakness during the next several weeks to add to favorite long positions.
Friday Watch
Earnings of Note
Company/Estimate
AAII/-.20
ATN/.42
CCU/.41
CMI/1.34
FO/1.25
IT/.09
HAL/.33
LSCC/.03
ITT/1.15
MYG/.40
SLB/.49
WY/1.13
XRX/1.17
Splits
None of note.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on NUE, TPX, KO, VIAB, MCK, AMGN, SII, AA, CLS, LEA, DHR, IGT and SKYW. Goldman reiterated Underperform on VC and FISV.
Late-Night News
Asian indices are mostly lower on continuing concerns that high energy prices will affect exporters. ConocoPhillips is near an agreement to buy a 7.6% stake in Russia's OAO Lukoil for about $1.7 billion, the Wall Street Journal reported. Acambis Plc said it could still win a third contract to supply smallpox vaccines for the U.S. government, the Telegraph said. Huaneng Power plans to expand capacity by at least two-thirds in the next 4 years to meet China's expanding demand for electricity, the China Daily reported. Fast-food chains including Burger King are losing their value as consumers turn away from food brands that don't endorse healthier menus, the London-based Times said. Apple Computer starts a trade-in service for its iPod digital music player in Japan today to help prevent customers from switching to rival products, the Nikkei English News reported. Shares of LG.Philips LCD, the world's second-largest marker of liquid crystal displays, slumped on their first day of trading in the U.S. on concern falling prices will slow earnings growth, Bloomberg reported. The U.S. Congress approved an increase in defense spending to $416 billion next fiscal year, including $25 billion for military operations in Iraq. The appropriations bill passed the Senate on a vote of 96-0 and passed the House of Representatives 410-12, Bloomberg reported.
Late-Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.43%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on weakness in technology shares. The market will likely make another rally attempt tomorrow. I will closely monitor the quality of any rally and decide whether or not to add market exposure. My short-term trading indicators are still giving sell signals and the Portfolio is 50% net short heading into tomorrow.
Company/Estimate
AAII/-.20
ATN/.42
CCU/.41
CMI/1.34
FO/1.25
IT/.09
HAL/.33
LSCC/.03
ITT/1.15
MYG/.40
SLB/.49
WY/1.13
XRX/1.17
Splits
None of note.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on NUE, TPX, KO, VIAB, MCK, AMGN, SII, AA, CLS, LEA, DHR, IGT and SKYW. Goldman reiterated Underperform on VC and FISV.
Late-Night News
Asian indices are mostly lower on continuing concerns that high energy prices will affect exporters. ConocoPhillips is near an agreement to buy a 7.6% stake in Russia's OAO Lukoil for about $1.7 billion, the Wall Street Journal reported. Acambis Plc said it could still win a third contract to supply smallpox vaccines for the U.S. government, the Telegraph said. Huaneng Power plans to expand capacity by at least two-thirds in the next 4 years to meet China's expanding demand for electricity, the China Daily reported. Fast-food chains including Burger King are losing their value as consumers turn away from food brands that don't endorse healthier menus, the London-based Times said. Apple Computer starts a trade-in service for its iPod digital music player in Japan today to help prevent customers from switching to rival products, the Nikkei English News reported. Shares of LG.Philips LCD, the world's second-largest marker of liquid crystal displays, slumped on their first day of trading in the U.S. on concern falling prices will slow earnings growth, Bloomberg reported. The U.S. Congress approved an increase in defense spending to $416 billion next fiscal year, including $25 billion for military operations in Iraq. The appropriations bill passed the Senate on a vote of 96-0 and passed the House of Representatives 410-12, Bloomberg reported.
Late-Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.43%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on weakness in technology shares. The market will likely make another rally attempt tomorrow. I will closely monitor the quality of any rally and decide whether or not to add market exposure. My short-term trading indicators are still giving sell signals and the Portfolio is 50% net short heading into tomorrow.
Thursday, July 22, 2004
Thursday Close
S&P 500 1,096.84 +.27%
NASDAQ 1,889.06 +.78%
Leading Sectors
Semis +3.10%
Wireless +1.87%
Homebuilders +1.68%
Lagging Sectors
Transports -.84%
Computer Services -.95%
Fashion -2.24%
Other
Crude Oil 41.38 +1.97%
Natural Gas 6.11 +3.10%
Gold 395.50 +.05%
Base Metals 110.98 +.12%
U.S. Dollar 88.45 -.12%
10-Yr. T-note Yield 4.44% -.48%
VIX 15.75 -4.02%
Put/Call .91 +21.33%
NYSE Arms .81 -43.36%
After-hours Movers
AMZN -4.85% after missing 2Q estimates, but raising 04 guidance.
FLEX -4.88% after announcing 24M share secondary and reaffirming guidance.
RSAS -6.12% after beating 2Q estimates and lowering 3Q guidance.
CLSR -7.59% after beating 2Q estimates, but giving disappointing guidance.
NTY -7.7% after disappointing 3Q estimates.
HTCH -9.4% after beating 3Q estimates and lowering 4Q guidance.
MENT -14.86% after missing 2Q revenues estimate and lowering 3Q forecast.
FDRY -14.11% after missing 2Q estimates and lowering 3Q forecast.
ARTI +13.9% after beating 3Q estimates.
TKLC +6.55% after beating 2Q estimates and raising 3Q guidance.
OSTK +5.2% after beating 2Q estimates.
AVID +3.0% after beating 2Q estimates.
MSCC +3.6% after beating 3Q estimates and raising 4Q guidance.
FINL +3.7% after the board launched a quarterly dividend and buyback plan.
Recommendations
Merrill Lynch raised SGP to Buy from Neutral. Goldman Sachs reiterated Outperform on AMGN, IR, SUN, UST, UPS and ALK. Goldman reiterated Underperform on SLG and DCLK. WGA, which makes color monitors and video displays for slot machines and other devices, is expected to benefit as demand for gambling grows, Business Week said. RDWR may recover now that new programs have been implemented, Business Week said. POT is expected to benefit from growing demand from farmers for its products, Business Week reported.
After-hours News
U.S. stocks finished modestly higher today on short-covering and speculation the major indices formed a double-bottom. After the close, nineteen Los Alamos National Laboratory workers were placed on leave as officials probe the disappearance of computer disks that held classified information, the AP reported. Motorola CEO Zander may restructure the world's No. 2 maker of mobile phones into customer-based divisions instead of product-based units, Business Week reported. Japan's seven-month ban on U.S. beef may end if officials in Washington and Tokyo accept a compromise recommended by Japanese and U.S. scientists, the AP reported. Iowa Republican Senator Charles Grassley said he'd push in September for a five-year renewal of tax breaks for middle-income families requested by President Bush, Bloomberg reported. Microsoft said fourth-quarter profit rose 81% as sales of Office programs and Windows corporate network software increased. Crude oil and gasoline futures rose, lifted by surging natural gas prices, after the U.S. Energy Department reported gas inventories gained less than forecast, Bloomberg reported. A state-appointed arbitrator's settlement of a two-year-old contract dispute between Boston's police union and the city won't keep police from picketing events at next week's Democratic National Convention, Bloomberg said. Metabolife Intl. and its founder were indicted by a federal grand jury for making false statements to U.S. regulators about consumer claims over and ephedra-based diet supplement, Bloomberg reported.
BOTTOM LINE: The Portfolio finished higher today and I added a few new shorts into afternoon strength, leaving market exposure 50% net short. One of my new shorts is ARO and I am using a $31 stop-loss on this position. The strength of the afternoon rally today was surprising and could continue for a few more days. However, I still believe that the major U.S. indices will fall through their recent lows set in May in the near future.
NASDAQ 1,889.06 +.78%
Leading Sectors
Semis +3.10%
Wireless +1.87%
Homebuilders +1.68%
Lagging Sectors
Transports -.84%
Computer Services -.95%
Fashion -2.24%
Other
Crude Oil 41.38 +1.97%
Natural Gas 6.11 +3.10%
Gold 395.50 +.05%
Base Metals 110.98 +.12%
U.S. Dollar 88.45 -.12%
10-Yr. T-note Yield 4.44% -.48%
VIX 15.75 -4.02%
Put/Call .91 +21.33%
NYSE Arms .81 -43.36%
After-hours Movers
AMZN -4.85% after missing 2Q estimates, but raising 04 guidance.
FLEX -4.88% after announcing 24M share secondary and reaffirming guidance.
RSAS -6.12% after beating 2Q estimates and lowering 3Q guidance.
CLSR -7.59% after beating 2Q estimates, but giving disappointing guidance.
NTY -7.7% after disappointing 3Q estimates.
HTCH -9.4% after beating 3Q estimates and lowering 4Q guidance.
MENT -14.86% after missing 2Q revenues estimate and lowering 3Q forecast.
FDRY -14.11% after missing 2Q estimates and lowering 3Q forecast.
ARTI +13.9% after beating 3Q estimates.
TKLC +6.55% after beating 2Q estimates and raising 3Q guidance.
OSTK +5.2% after beating 2Q estimates.
AVID +3.0% after beating 2Q estimates.
MSCC +3.6% after beating 3Q estimates and raising 4Q guidance.
FINL +3.7% after the board launched a quarterly dividend and buyback plan.
Recommendations
Merrill Lynch raised SGP to Buy from Neutral. Goldman Sachs reiterated Outperform on AMGN, IR, SUN, UST, UPS and ALK. Goldman reiterated Underperform on SLG and DCLK. WGA, which makes color monitors and video displays for slot machines and other devices, is expected to benefit as demand for gambling grows, Business Week said. RDWR may recover now that new programs have been implemented, Business Week said. POT is expected to benefit from growing demand from farmers for its products, Business Week reported.
After-hours News
U.S. stocks finished modestly higher today on short-covering and speculation the major indices formed a double-bottom. After the close, nineteen Los Alamos National Laboratory workers were placed on leave as officials probe the disappearance of computer disks that held classified information, the AP reported. Motorola CEO Zander may restructure the world's No. 2 maker of mobile phones into customer-based divisions instead of product-based units, Business Week reported. Japan's seven-month ban on U.S. beef may end if officials in Washington and Tokyo accept a compromise recommended by Japanese and U.S. scientists, the AP reported. Iowa Republican Senator Charles Grassley said he'd push in September for a five-year renewal of tax breaks for middle-income families requested by President Bush, Bloomberg reported. Microsoft said fourth-quarter profit rose 81% as sales of Office programs and Windows corporate network software increased. Crude oil and gasoline futures rose, lifted by surging natural gas prices, after the U.S. Energy Department reported gas inventories gained less than forecast, Bloomberg reported. A state-appointed arbitrator's settlement of a two-year-old contract dispute between Boston's police union and the city won't keep police from picketing events at next week's Democratic National Convention, Bloomberg said. Metabolife Intl. and its founder were indicted by a federal grand jury for making false statements to U.S. regulators about consumer claims over and ephedra-based diet supplement, Bloomberg reported.
BOTTOM LINE: The Portfolio finished higher today and I added a few new shorts into afternoon strength, leaving market exposure 50% net short. One of my new shorts is ARO and I am using a $31 stop-loss on this position. The strength of the afternoon rally today was surprising and could continue for a few more days. However, I still believe that the major U.S. indices will fall through their recent lows set in May in the near future.
Mid-day Update
S&P 500 1,091.01 -.26%
NASDAQ 1,869.78 -.24%
Leading Sectors
Semis +1.54%
Wireless +1.21%
Homebuilding +1.08%
Lagging Sectors
Airlines -1.64%
Computer Services -1.66%
Fashion -2.23%
Other
Crude Oil 41.45 +2.14%
Natural Gas 6.18 +4.28%
Gold 397.70 +.10%
Base Metals 110.98 +.12%
U.S. Dollar 88.30 -.29%
10-Yr. T-note Yield 4.46% -.13%
VIX 16.21 -1.22%
Put/Call .85 +13.33%
NYSE Arms 1.0 -30.07%
Market Movers
LRCX +16.6% after substantially beating 4Q estimates and multiple upgrades.
ELN -9.4% after a presentation by the company and its partner Wyeth contained little new information about their experimental Alzheimer's vaccine.
ISSX +10.7% after beating 2Q estimates and raising 04 guidance.
FLIR +10.4% after beating 2Q estimates and raising 04 outlook.
ALGN +9.2% after beating 2Q estimates.
PTRY +8.97% after beating 3Q estimates and raising 04 guidance.
PHCC +9.8% after beating 2Q sales estimate.
KAR -21.9% after missing 2Q forecast and lowering 04 guidance.
ROG -21.3% after missing 2Q estimates and lowering 3Q forecast.
AFCO -18.4% after missing 4Q estimates and lowering 1Q guidance.
TSA -18.5% after cutting 2Q forecast and multiple downgrades.
AVCT -9.1% after only meeting 2Q estimates.
ELAB -15.7% after largest holder filed to sell 14.7 million shares and disappointing earnings guidance.
Economic Data
Initial Jobless Claims for last week were 339K versus estimates of 345K and an upwardly revised 350K prior week.
Continuing Claims were 2797K versus estimates of 2930K and a downwardly revised 2964K prior.
Leading Indicators for June fell .2% versus estimates of unch. and an increase of .4% in May.
Recommendations
SYMC raised to Buy at Deutsche Bank, target $53. OMM raised to Sector Outperform, target $20. SKYW cut to Underweight at Morgan Stanley. COP raised to Overweight at Prudential, target $80. LRCX raised to Buy at Bank of America, target $30.70. SIGI cut to Underperform at CSFB, target $34. SGP raised to Buy at Merrill, target $23. MXO cut to sell at Merrill. CVG cut to Underperform at Raymond James. Goldman Sachs reiterated Attractive view of Paper sector, favorites are IP, DTC and SPP. Goldman reiterated Outperform on AIG, SYMC, DD, GLK, BAC, WFC, FS, EBAY and FON. Goldman reiterated Underperform on TLAB, AZR, EK, CL, PYX, DO, AKS and CVD. Citi SmithBarney reiterated Buy on SBUX, target $54. Citi reiterated Buy on EXTR, target $11. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on LRCX, target $35. Citi reiterated Buy on DPMI, target $26. Citi reiterated Buy on NCX, target $32. Citi reiterated Buy on TGT, target $50. Citi reiterated Buy on FON, target $22. Citi reiterated Sell on GD, target $84. Citi reiterated Buy on TEX, target $52. Citi reiterated Buy on JPM, target $50. Citi reiterated Buy on SEBL, target $11. Citi reiterated Sell on USM, target $38.
Mid-day News
U.S. stocks are modestly lower mid-day on rising oil prices and a weaker-than-expected economic report. TiVo, which makes video recorders that can pause and replay live tv, faces opposition from film studios and the NFL over its plan to introduce technology allowing copies of shows to be transferred to computers, the Washington Post reported. China wants to reform its system of allocating investments and reduce government interference in business decisions, China Central tv said. French wine growers sought government help in coping with one of the industry's biggest slumps in a meeting last night with the Agriculture Minister, the Times of London reported. The New York state legislature is the least deliberative in the U.S., "strikingly inefficient" and has the lowest rate of bills that become law, the NY Times reported. Tribune's Newsday has been sued by 50 car dealerships who say the newspaper charged them advertising rates that were tied to inflated circulation figures, the NY Times reported. OAO Yukos Oil, Russia's biggest oil exporter, said it will go bankrupt if the government carries out plans to sell the company's main unit, after a freeze on its assets left Yukos with enough cash to produce oil for three more weeks, Bloomberg reported. The number of Americans filing new claims for unemployment benefits fell more than forecast last week, Bloomberg reported. The index of leading U.S. economic indicators fell for the first time in more than a year in June, as a decrease in building permits and hours worked restrained the measure, Bloomberg said. JP Morgan's buyout unit agreed to acquire a majority stake in AMC Entertainment for $2 billion and plans to take the movie chain private, Bloomberg reported. With 181 S&P 500 companies reporting, 71.3% have exceeded estimates, 11.05% have missed estimates and the average profit gain has been 22.4%, CNBC reported.
BOTTOM LINE: The Portfolio is higher today as my medical and technology shorts are falling substantially and my gold longs are rising. I have not traded and the Portfolio is still 25% net short. While the market has rallied off its lows from this morning, it appears to me to be mainly a result of short-covering. With oil rising again and investor complacency readings still too high, I expect stocks to fall into the afternoon.
NASDAQ 1,869.78 -.24%
Leading Sectors
Semis +1.54%
Wireless +1.21%
Homebuilding +1.08%
Lagging Sectors
Airlines -1.64%
Computer Services -1.66%
Fashion -2.23%
Other
Crude Oil 41.45 +2.14%
Natural Gas 6.18 +4.28%
Gold 397.70 +.10%
Base Metals 110.98 +.12%
U.S. Dollar 88.30 -.29%
10-Yr. T-note Yield 4.46% -.13%
VIX 16.21 -1.22%
Put/Call .85 +13.33%
NYSE Arms 1.0 -30.07%
Market Movers
LRCX +16.6% after substantially beating 4Q estimates and multiple upgrades.
ELN -9.4% after a presentation by the company and its partner Wyeth contained little new information about their experimental Alzheimer's vaccine.
ISSX +10.7% after beating 2Q estimates and raising 04 guidance.
FLIR +10.4% after beating 2Q estimates and raising 04 outlook.
ALGN +9.2% after beating 2Q estimates.
PTRY +8.97% after beating 3Q estimates and raising 04 guidance.
PHCC +9.8% after beating 2Q sales estimate.
KAR -21.9% after missing 2Q forecast and lowering 04 guidance.
ROG -21.3% after missing 2Q estimates and lowering 3Q forecast.
AFCO -18.4% after missing 4Q estimates and lowering 1Q guidance.
TSA -18.5% after cutting 2Q forecast and multiple downgrades.
AVCT -9.1% after only meeting 2Q estimates.
ELAB -15.7% after largest holder filed to sell 14.7 million shares and disappointing earnings guidance.
Economic Data
Initial Jobless Claims for last week were 339K versus estimates of 345K and an upwardly revised 350K prior week.
Continuing Claims were 2797K versus estimates of 2930K and a downwardly revised 2964K prior.
Leading Indicators for June fell .2% versus estimates of unch. and an increase of .4% in May.
Recommendations
SYMC raised to Buy at Deutsche Bank, target $53. OMM raised to Sector Outperform, target $20. SKYW cut to Underweight at Morgan Stanley. COP raised to Overweight at Prudential, target $80. LRCX raised to Buy at Bank of America, target $30.70. SIGI cut to Underperform at CSFB, target $34. SGP raised to Buy at Merrill, target $23. MXO cut to sell at Merrill. CVG cut to Underperform at Raymond James. Goldman Sachs reiterated Attractive view of Paper sector, favorites are IP, DTC and SPP. Goldman reiterated Outperform on AIG, SYMC, DD, GLK, BAC, WFC, FS, EBAY and FON. Goldman reiterated Underperform on TLAB, AZR, EK, CL, PYX, DO, AKS and CVD. Citi SmithBarney reiterated Buy on SBUX, target $54. Citi reiterated Buy on EXTR, target $11. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on LRCX, target $35. Citi reiterated Buy on DPMI, target $26. Citi reiterated Buy on NCX, target $32. Citi reiterated Buy on TGT, target $50. Citi reiterated Buy on FON, target $22. Citi reiterated Sell on GD, target $84. Citi reiterated Buy on TEX, target $52. Citi reiterated Buy on JPM, target $50. Citi reiterated Buy on SEBL, target $11. Citi reiterated Sell on USM, target $38.
Mid-day News
U.S. stocks are modestly lower mid-day on rising oil prices and a weaker-than-expected economic report. TiVo, which makes video recorders that can pause and replay live tv, faces opposition from film studios and the NFL over its plan to introduce technology allowing copies of shows to be transferred to computers, the Washington Post reported. China wants to reform its system of allocating investments and reduce government interference in business decisions, China Central tv said. French wine growers sought government help in coping with one of the industry's biggest slumps in a meeting last night with the Agriculture Minister, the Times of London reported. The New York state legislature is the least deliberative in the U.S., "strikingly inefficient" and has the lowest rate of bills that become law, the NY Times reported. Tribune's Newsday has been sued by 50 car dealerships who say the newspaper charged them advertising rates that were tied to inflated circulation figures, the NY Times reported. OAO Yukos Oil, Russia's biggest oil exporter, said it will go bankrupt if the government carries out plans to sell the company's main unit, after a freeze on its assets left Yukos with enough cash to produce oil for three more weeks, Bloomberg reported. The number of Americans filing new claims for unemployment benefits fell more than forecast last week, Bloomberg reported. The index of leading U.S. economic indicators fell for the first time in more than a year in June, as a decrease in building permits and hours worked restrained the measure, Bloomberg said. JP Morgan's buyout unit agreed to acquire a majority stake in AMC Entertainment for $2 billion and plans to take the movie chain private, Bloomberg reported. With 181 S&P 500 companies reporting, 71.3% have exceeded estimates, 11.05% have missed estimates and the average profit gain has been 22.4%, CNBC reported.
BOTTOM LINE: The Portfolio is higher today as my medical and technology shorts are falling substantially and my gold longs are rising. I have not traded and the Portfolio is still 25% net short. While the market has rallied off its lows from this morning, it appears to me to be mainly a result of short-covering. With oil rising again and investor complacency readings still too high, I expect stocks to fall into the afternoon.
Thursday Watch
Earnings of Note
Company/Estimate
AIG/1.11
AMZN/.19
AMGN/.59
ABC/.98
T/.07
AVID/.43
BRCM/.32
CME/1.64
CAT/1.74
DECK/.35
ERTS/.05
GDT/.58
MSFT/.28
NUE/2.94
ODP/.23
OSTK/-.14
VRSN/.15
XLNX/.28
Splits
None of note.
Economic Data
Initial Jobless Claims for last week estimated at 345K versus 349K prior week.
Continuing Claims estimated at 2930K versus 2971K prior.
Leading Indicators for June estimated unch. versus +.5% in May.
Recommendations
Goldman Sachs reiterated Attractive view of Lodging sector, favorites are FS, PFE, AMR, GLK, CVD, UTX, KMI, KMR, HOT, MAR and HLT. Goldman reiterated Underperform on SGP, FISV, DO, EK, AKS, AZR and PLXS. Goldman reiterated Outperform on ACS.
Late-Night News
Asian indices are mostly lower on broad-based weakness in technology shares. Verizon Wireless, Cingular Wireless and the mobile unit of Sprint reached agreement with 32 states, ending an investigation into alleged false advertising, the AP said. Monster.com may acquire a company to boost its market share in Singapore to 50%, the Business Times reported. LG Electronics of South Korea may receive billions of dollars in royalty payments from the U.S. until 2020 because of a digital broadcasting technology, Korea Economic Daily reported. A surveillance video from Washington's Dulles Airport shows four of the five Sept. 11, 2001, hijackers being checked before they boarded the airplane that crashed into the Pentagon, the AP reported. Avon Products won Chinese government approval to start direct selling in the country, the Oriental Morning Post reported. The NASD has stepped up its scrutiny of how brokerage firms are marketing hedge funds to their customers, the Wall Street Journal reported. Structural problems are limiting the ability of Europe's economy to grow without generating inflation and that suggests expansion has reached its limit, the Wall Street Journal reported. OAO Yukos Oil, Russia's biggest oil exporter, holds a briefing in Moscow today amid speculation the company may file for bankruptcy to prevent the state from seizing and selling its assets to help pay $3.4 billion in taxes, Bloomberg reported. Corning said a Taiwanese customer agreed to pay $510 million for products in advance to help Corning expand its glass production, Bloomberg said. SAP AG, the world's largest maker of business-management software, said second-quarter net income rose 14% as it won more mid-sized customers and took market share. The company said it is sticking to its full-year forecasts, Bloomberg said.
Late-Night Trading
Asian Indices are -1.25% to -.50% on average.
S&P 500 indicated +.06%.
NASDAQ 100 indicated unch.
BOTTOM LINE: I expect U.S. stocks to open lower in the morning on weakness in Asia, a weaker-than-expected leading indicators report and a continuation of today's sell-off. My short-term trading indicators are giving sell signals and the Portfolio is 25% net short heading into tomorrow.
Company/Estimate
AIG/1.11
AMZN/.19
AMGN/.59
ABC/.98
T/.07
AVID/.43
BRCM/.32
CME/1.64
CAT/1.74
DECK/.35
ERTS/.05
GDT/.58
MSFT/.28
NUE/2.94
ODP/.23
OSTK/-.14
VRSN/.15
XLNX/.28
Splits
None of note.
Economic Data
Initial Jobless Claims for last week estimated at 345K versus 349K prior week.
Continuing Claims estimated at 2930K versus 2971K prior.
Leading Indicators for June estimated unch. versus +.5% in May.
Recommendations
Goldman Sachs reiterated Attractive view of Lodging sector, favorites are FS, PFE, AMR, GLK, CVD, UTX, KMI, KMR, HOT, MAR and HLT. Goldman reiterated Underperform on SGP, FISV, DO, EK, AKS, AZR and PLXS. Goldman reiterated Outperform on ACS.
Late-Night News
Asian indices are mostly lower on broad-based weakness in technology shares. Verizon Wireless, Cingular Wireless and the mobile unit of Sprint reached agreement with 32 states, ending an investigation into alleged false advertising, the AP said. Monster.com may acquire a company to boost its market share in Singapore to 50%, the Business Times reported. LG Electronics of South Korea may receive billions of dollars in royalty payments from the U.S. until 2020 because of a digital broadcasting technology, Korea Economic Daily reported. A surveillance video from Washington's Dulles Airport shows four of the five Sept. 11, 2001, hijackers being checked before they boarded the airplane that crashed into the Pentagon, the AP reported. Avon Products won Chinese government approval to start direct selling in the country, the Oriental Morning Post reported. The NASD has stepped up its scrutiny of how brokerage firms are marketing hedge funds to their customers, the Wall Street Journal reported. Structural problems are limiting the ability of Europe's economy to grow without generating inflation and that suggests expansion has reached its limit, the Wall Street Journal reported. OAO Yukos Oil, Russia's biggest oil exporter, holds a briefing in Moscow today amid speculation the company may file for bankruptcy to prevent the state from seizing and selling its assets to help pay $3.4 billion in taxes, Bloomberg reported. Corning said a Taiwanese customer agreed to pay $510 million for products in advance to help Corning expand its glass production, Bloomberg said. SAP AG, the world's largest maker of business-management software, said second-quarter net income rose 14% as it won more mid-sized customers and took market share. The company said it is sticking to its full-year forecasts, Bloomberg said.
Late-Night Trading
Asian Indices are -1.25% to -.50% on average.
S&P 500 indicated +.06%.
NASDAQ 100 indicated unch.
BOTTOM LINE: I expect U.S. stocks to open lower in the morning on weakness in Asia, a weaker-than-expected leading indicators report and a continuation of today's sell-off. My short-term trading indicators are giving sell signals and the Portfolio is 25% net short heading into tomorrow.
Wednesday, July 21, 2004
Wednesday Close
S&P 500 1,093.88 -1.33%
NASDAQ 1,874.37 -2.23%
Leading Sectors
Fashion +.96%
Banks -.60%
Drugs -.63%
Lagging Sectors
Airlines -4.25%
Biotech -4.43%
Disk Drives -4.48%
Other
Crude Oil 40.58 +.35%
Natural Gas 5.96 +.47%
Gold 397.20 -.03%
Base Metals 110.85 -.77%
U.S. Dollar 88.50 +.76%
10-Yr. T-note Yield 4.47% +.57%
VIX 16.40 +15.88%
Put/Call .75 +13.64%
NYSE Arms 1.43 +116.67%
After-hours Movers
LRCX +5.56% after beating 4Q estimates.
FFIV +4.46% after beating 3Q estimates and raising 4Q guidance.
AFCO -19.0% after missing 4Q estimates and lowering 1Q forecast substantially.
ORBZ -14.2% after cutting 2Q and 04 forecast.
ERES -10.7% on profit-taking after beating 2Q forecast, raising 3Q guidance and 04 outlook.
EFII -10.5% after missing 2Q estimates and lowering 3Q guidance.
EBAY -5.57% after beating 2Q estimates, but weaker 3Q/4Q guidance.
SWIR -4.92% on profit-taking after beating 2Q estimates and lowering 3Q guidance.
Recommendations
Goldman Sachs rated DD Outperform. Goldman reiterated Underperform on CL.
After-hours News
U.S. stocks finished lower today on some weaker-than-expected earnings reports and rising interest rates. After the close, PepsiCo topped Coca-Cola in supermarket soft-drink sales in the New York metropolitan area after Coke shrank bottle sizes without cutting prices, the Atlanta Journal-Constitution reported. Starbucks said net income climbed 44% in its fiscal third quarter, and the coffee-shop chain again raised its earnings outlook for the full fiscal year, Bloomberg reported. Qualcomm, the world's second-largest maker of microchips that power mobile telephones, said third-quarter profit more than doubled to $486.4 million on rising demand for phones based on its technology, Bloomberg reported. EBay said second-quarter earnings more than doubled to $190.4 million as a record number of users bought and sold merchandise online and utilized its electronic-payment system, Bloomberg said. Microsoft's decision to spend $75 billion on dividends and stock buybacks may pressure other companies to increase their payouts, Bloomberg reported.
BOTTOM LINE: The Portfolio finished lower today on across-the-board weakness in my long positions. I took profits in a few longs in the afternoon and added some more shorts, leaving the Portfolio with 25% net short market exposure. This was very bad day for the Bulls. Volume expanded and the advance/decline ratio was very poor. Many stocks in the NASDAQ are sustaining significant technical damage. Moreover, there is still way too much complacency for the amount of damage that is being done. I expect the major U.S. averages to take out their May lows within the next few days. It is my belief that investors are very worried over political developments, potential terrorist acts on U.S. soil, stubbornly high oil prices and the possibility that the economy is slowing substantially when the Fed is in the beginning stages of raising rates.
NASDAQ 1,874.37 -2.23%
Leading Sectors
Fashion +.96%
Banks -.60%
Drugs -.63%
Lagging Sectors
Airlines -4.25%
Biotech -4.43%
Disk Drives -4.48%
Other
Crude Oil 40.58 +.35%
Natural Gas 5.96 +.47%
Gold 397.20 -.03%
Base Metals 110.85 -.77%
U.S. Dollar 88.50 +.76%
10-Yr. T-note Yield 4.47% +.57%
VIX 16.40 +15.88%
Put/Call .75 +13.64%
NYSE Arms 1.43 +116.67%
After-hours Movers
LRCX +5.56% after beating 4Q estimates.
FFIV +4.46% after beating 3Q estimates and raising 4Q guidance.
AFCO -19.0% after missing 4Q estimates and lowering 1Q forecast substantially.
ORBZ -14.2% after cutting 2Q and 04 forecast.
ERES -10.7% on profit-taking after beating 2Q forecast, raising 3Q guidance and 04 outlook.
EFII -10.5% after missing 2Q estimates and lowering 3Q guidance.
EBAY -5.57% after beating 2Q estimates, but weaker 3Q/4Q guidance.
SWIR -4.92% on profit-taking after beating 2Q estimates and lowering 3Q guidance.
Recommendations
Goldman Sachs rated DD Outperform. Goldman reiterated Underperform on CL.
After-hours News
U.S. stocks finished lower today on some weaker-than-expected earnings reports and rising interest rates. After the close, PepsiCo topped Coca-Cola in supermarket soft-drink sales in the New York metropolitan area after Coke shrank bottle sizes without cutting prices, the Atlanta Journal-Constitution reported. Starbucks said net income climbed 44% in its fiscal third quarter, and the coffee-shop chain again raised its earnings outlook for the full fiscal year, Bloomberg reported. Qualcomm, the world's second-largest maker of microchips that power mobile telephones, said third-quarter profit more than doubled to $486.4 million on rising demand for phones based on its technology, Bloomberg reported. EBay said second-quarter earnings more than doubled to $190.4 million as a record number of users bought and sold merchandise online and utilized its electronic-payment system, Bloomberg said. Microsoft's decision to spend $75 billion on dividends and stock buybacks may pressure other companies to increase their payouts, Bloomberg reported.
BOTTOM LINE: The Portfolio finished lower today on across-the-board weakness in my long positions. I took profits in a few longs in the afternoon and added some more shorts, leaving the Portfolio with 25% net short market exposure. This was very bad day for the Bulls. Volume expanded and the advance/decline ratio was very poor. Many stocks in the NASDAQ are sustaining significant technical damage. Moreover, there is still way too much complacency for the amount of damage that is being done. I expect the major U.S. averages to take out their May lows within the next few days. It is my belief that investors are very worried over political developments, potential terrorist acts on U.S. soil, stubbornly high oil prices and the possibility that the economy is slowing substantially when the Fed is in the beginning stages of raising rates.
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