Friday, February 04, 2005

Mid-day Report

Indices
S&P 500 1,195.52 +.47%
Dow 10,642.83 +.47%
NASDAQ 2,071.34 +.67%
Russell 2000 633.02 +.59%
DJ Wilshire 5000 11,780.21 +.52%
S&P Barra Growth 574.39 +.36%
S&P Barra Value 616.83 +.59%
Morgan Stanley Consumer 588.18 +.05%
Morgan Stanley Cyclical 760.74 -.14%
Morgan Stanley Technology 470.61 +.92%
Transports 3,582.24 +.08%
Utilities 351.58 +.84%
Put/Call .76 -11.63%
NYSE Arms 1.01 -19.20%
Volatility(VIX) 11.36 -3.65%
ISE Sentiment 144.00 -15.29%
US Dollar 84.28 +.42%
CRB 281.60 unch.

Futures Spot Prices
Crude Oil 46.65 +.43%
Unleaded Gasoline 125.80 -.82%
Natural Gas 6.15 +.02%
Heating Oil 128.25 +.35%
Gold 416.10 -.57%
Base Metals 120.19 -.74%
Copper 137.20 -1.19%
10-year US Treasury Yield 4.05% -2.57%

Leading Sectors
Homebuilders +3.76%
Semis +2.72%
Papers +2.41%

Lagging Sectors
Oil Service -.14%
Commodity -.35%
Iron/Steel -.37%

Market Movers
ASKJ -5.1% after missing 4Q revenue estimates slightly, reiterating 1Q/05 guidance and JP Morgan reiterated Overweight.
TXN +5.0% on Prudential upgrade to Overweight.
GOOG -3.6% on worries over upcoming lock-up expiration.
GRU +22.22% on continuing optimism over its search technology.
TIN +15.7% after announcing 2-for-1 split, 6M share buyback and notice from regulators that Carl Icahn and his hedge fund each filed to buy between $100M-$500M of its stock.
TSCO +12.94% after beating 4Q estimates and raising 05 guidance.
MATK +10.56% after announcing that it has entered into a 15 year, non-exclusive docosahexaenoic acid license and supply agreement with a Fortune 500 consumer food products company.
RMD +12.64% after beating 2Q estimates and multiple upgrades.
ASCA +8.73% after beating 4Q estimates and raising 1Q guidance.
LNY +10.0% after agreeing to buy the Golden Nugget Casino in Las Vegas for $140 million to enter the gaming industry.
SHOP -20.45% after meeting 4Q estimates and lowering 1Q/05 guidance.
SEAC -15.3% after cutting 4Q forecast.
SAXN -8.52% after missing 4Q estimates.
ADBL -8.1% on jitters ahead of 4Q report.
*Homebuilders up across the board on falling long-term interest rates.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
-The Unemployment Rate for January fell to 5.2% versus estimates of 5.4% and 5.4% in December.
-Average Hourly Earnings for January rose .2% versus estimates of a .2% increase and a .1% gain in December.
-The Change in Non-farm Payrolls for January was 146K versus estimates of 200K and a downwardly revised 133K in December.
-The Change in Manufacturing Payrolls for January was -25K versus estimates of 5K and a downwardly revised -7K in December.
-Average Weekly Hours for January fell to 33.7 versus estimates of 33.8 and 33.8 in December.
-Final Univ. of Michigan Consumer Confidence for January fell to 95.5 versus estimates of 96.0 and a prior estimate of 95.8.

Recommendations
-Goldman Sachs: Reiterated Outperform on KO, EPD, GLK, HEW, SBC and NEM. Reiterated Underperform on MCRL and PBG. Downgraded CTL to Underperform.
-Citi SmithBarney: Upgraded ROP to Buy, target $70. Downgraded WHR to Sell, target $55. Reiterated Buy on THC, target $16. Reiterated Buy on ACE, target $53. Reiterated Sell on MEDI, target $19. Reiterated Buy on SPF, target $103. Reiterated Buy on PEP, target $65. Reiterated Buy on ASCL, target $20. Reiterated Buy on FON, target $27. Reiterated Buy on PHM, target $87. Reiterated Buy on ACLS, target $9.50. Reiterated Buy on MCRL, target $13. Reiterated Buy on AES, target $18. Reiterated Buy on PHS, target $76.
-Deutsche Bank: Downgraded GT to Sell, target $10. Raised CFC to Buy, target $43.
-UBS: Rated MTW Buy, target $44. Raised SQM to Buy, target $74.
-CIBC: Downgraded IP to Sector Underperform, target $42.
-Prudential: Raised Semiconductor industry to Favorable from Unfavorable. Raised TXN to Overweight, target $29. Cut LLTC to Underweight, target $44. Cut G to Underweight, target $50. Raised GPS to Overweight, target $24. Cut XLNX to Underweight, target $30. ALTR cut to Underweight, target $20. Raised ANN to Overweight, target $26.
-Morgan Stanley: Rated ITG Underweight, target $16.
-Legg Mason: Downgraded DRI to Sell. Raised OSTK to Buy, target $61.

Mid-day News
US stocks are higher mid-day on falling interest rates, short-covering and a stabilizing US dollar. Barclay Shipping, a company controlled by Evangelos Marinakis, plans to be the second Greek ship-owner to sell shares in New York this year, shipping weekly TradeWinds reported. General Electric may expand its operation in Turkey to take advantage of the improvements in the country as it prepares to join the European Union, Milliyet reported. Buraq Air, a Libyan carrier, has agreed to buy as many as six 737-800 jets from Boeing to boost market share in the region, the Wall Street Journal reported. Qwest Communications’ CEO met MCI’s CEO on Wednesday in Chicago to discuss Qwest’s possible $6.3 billion offer for MCI, the Wall Street Journal said. Google, Yahoo! and other companies are reaping the benefits of technology that enables computer users to click directly to an advertiser’s Web site as Internet ads come of age, the NY Times reported. OAO Yukos Oil expects to repay all the tax fines that have been upheld by Russian courts within three months, Interfax reported. Iran agreed “in principle” to let UN arms inspectors have another look at a military complex that may be used for nuclear weapons research, the AP reported. Intrawest Corp. and closely held Aspen Skiing won voter approval to develop a skiing village in Snowmass Village, Colorado, which is intended to compete with Vail and other resorts, the Denver Post reported. The St. Regis Hotel, which will open this summer in San Francisco, will be the city’s first new luxury hotel in four years, the San Francisco Chronicle reported. Crude oil prices may decline next week as temperatures rise in the US, cutting demand for heating oil in the world’s biggest energy-consuming nation, according to a Bloomberg survey. Support for German Chancellor Schroeder’s government fell this week as voters reacted to a surge in unemployment to the highest since WW II, a monthly poll for ARD tv found. The US dollar’s decline and fiscal restraint by the Bush administration may soon begin to reduce the US current account deficit, Fed Chairman Greenspan said. Barr Pharmaceuticals said it filed suit against the US FDA to challenge the agency’s policy of awarding exclusive rights on generic drugs on a patent-by-patent basis, Bloomberg reported. Qwest Communications executives, in talks to buy MCI, are betting the deal would help the company save $2.5 billion to $3 billion in annual costs, Bloomberg reported. The US dollar advanced to a three-month high against the euro after Fed Chairman Greenspan said the US current-account deficit could narrow, Bloomberg said. US employers added 146,000 workers in January, recouping all the jobs lost since the start of the last recession, sending the unemployment rate down to 5.2%. US Treasury notes rose, pushing the yield on the benchmark 10-year security to a three-month low, after a government report showed the economy added fewer jobs than forecast in January, Bloomberg reported. Equity funds reported net cash inflows totaling $4.294 billion in the week ended 2/2/05, according to AMG Data. The DJ US Real Estate Index fund and Russell 2000 Index iShares saw the largest inflows, at $681M and $630M respectively.

BOTTOM LINE: The Portfolio is higher mid-day on gains in my homebuilding, alternative energy, semiconductor and networking longs. I added to a few of my technology longs and oil service shorts this morning, thus leaving the Portfolio 100% net long. I added to my long MSTR and I am using a stop-loss of $70 on this position. I continue to believe that commodity prices will decline or remain neutral in 05. While current price levels remain very profitable for most companies, the consensus is that commodity prices will continue to rise. Thus, a correction in the stocks is highly probable in the near future. I also continue to believe the yield on the 10-year T-note will test the lows set in March of last year at 3.68% sometime during the first half of this year. This should continue to spur outperformance in homebuilding stocks. I expect US stocks to rise modestly into the close on lower long-term interest rates, weakening energy prices, a stabilizing US dollar, increasing fund inflows and possible merger activity.

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