Tuesday, June 10, 2008

Wednesday Watch

Late-Night Headlines
Bloomberg:
- The US dollar traded near a three-month high against the yen on speculation Federal Reserve officials speaking today will highlight the risks of inflation.
- Short interest on the Nasdaq stock market surged another 2.01% the last two weeks of May to a new record 9,860,000,000 shares.
- S&P 500 Short Interest Changes by Industry Group. Short interest in the Banking industry soared 12.8% the last two weeks of May.
- New S&P 500 short-selling targets. Here are the 25 S&P 500 companies with the largest percentage change in short interest relative to their floats over the last two weeks of May.

- Ohio Governor Ted Strickland is ruling out any chance he would join the Democratic presidential ticket as Barack Obama’s running mate. Strickland, who backed former Democratic candidate Hillary Clinton, told National Public Radio today that he would “absolutely not” accept an invitation to run as vice president with Illinois Senator Obama. “If drafted, I will not run; nominated, I will not accept; and if elected, I will not serve,” said Strickland. “I don’t know how more crystal clear I can be,” he said.
- Elpida Memory Inc., Japan’s largest maker of computer memory chips, rose 3.7% in Tokyo trading after Mizuho Financial raised its rating on the stock to “strong buy.”
- Australian consumer confidence slumped to the lowest level in almost 16 years in June after oil prices climbed to a record and the central bank signaled it may increase interest rates.
- Global retailers may cut orders from China and India and source more goods locally in developed markets because of increased energy and transportation costs, PricewaterhouseCoopers said. Companies from supermarket owner Tesco Plc to jeans maker Levi Strauss & Co. are forging partnerships with local producers to reduce shipping expenses, ease environmental concerns and improve quality, according to “Global Sourcing: Shifting Strategies,” a study by the consulting firm released today.
- New Zealand home sales slumped 53% to a 16-year low in May, reinforcing speculation the central bank will cut interest rates fr4om a record high.
- Emerging-market stocks fell the most since March, led by Chinese companies after the central bank ordered lenders to increase their reserves, an anti-inflation measure that threatens to curb growth. “China and India are very populous countries and have a very low degree of tolerance for inflation, even at the cost of slowing down the economy,” said Jerry Zhang, Boston-based manager of the $800 million Evergreen Emerging Markets Growth fund. Markets in resource-based economies of Brazil and Russia “are vulnerable” because they “haven’t discounted cyclical slowdown in China and India,” Evergreen’s Zhang said. His fund outperformed 97% of rivals over the past three years.
- The Russell 2000 Index’s 14% rebound this year may slow after the annual reorganization of the small-cap benchmark removes the best-performing energy stocks and adds slumping banks and retailers. A rally in oil, coal and fertilizer prices has driven shares so high that 8.1% of the Russell 2000’s energy and raw-material stocks are too big for the index.

MarketWatch.com:
- McCain takes tax fight to Obama. Arizona senator lays out tax, trade, health-care plans in economy speech. "Under Sen. Obama's tax plan, Americans of every background would see their taxes rise -- seniors, parents, small business owners and just about everyone who has even a modest investment in the market," McCain said in a speech to the National Federation of Independent Business.
- Global oil consumption climbed 37% less than expected during the first quarter of this year, and lower US oil demand is expected to continue weighing on the outlook, the Energy Information Administration said.
- Where is gold’s wall of worry? Contrarians remain concerned about reaction to bullion price.
- Big brokerage firms may be regulated like banks. Geithner, Citi’s Pandi call for greater oversight of firms like Goldman(GS), Lehman(LEH).

CNBC.com:
- Bubble, Bubble, Oil is Trouble…The commodity bubble will likely burst when the CFTC closes the “swaps loophole” which grants the banks an exemption from speculative position limits when banks hedge over the counter swap transactions.

BusinessWeek.com:
- Nontoxic Financial Stocks.

IBD:
- Despite Price Fears, There Are Few Hikes Past Food, Energy.

CNNMoney.com:
- GM plans humorous ‘Dear Oil’ ad. The US’s biggest automaker is expected to promote cars not dependent on petroleum in an upcoming TV spot.

USA Today.com:
- Carmakers can’t keep up with buyers’ hunger for hybrids.

Reuters:
- Volume sales are key to new Apple(AAPL) iPhone strategy. Apple hopes that consumer gadgets like the iPhone and its popular iPod media players will help convert people into buyers of its highly lucrative Macintosh computers, which have been gaining market share in recent years. Demand for the cheaper iPhone 3G is expected to be "highly elastic" -- economic speak for the ability of price cuts to drive sales significantly higher. An analyst with Sanford Bernstein, estimated Apple's profit would be between $250 and $450 per phone, compared to about $500 for the previous model after adding in two years of monthly service payments.
- Oil major BP Plc(BP) has told US government regulators it will begin early production from its giant Thunder Horse oil field in the US Gulf of Mexico by June 14. The Thunder Horse platform is designed to handle up to 250,000 barrels per day of oil and 200 million cubic feet of natural gas.

Financial Times:
- The US energy markets watchdog on Tuesday held talks with its UK counterpart about the possibility of introducing limits on traders’ positions in London’s oil markets, underlining in a sign of persistent US congressional concern that London is being exploited by “speculators” contributing to record oil prices.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (CVH), target $56.
- Reiterated Buy on (HS), target $22.

William Blair:
- Rated (ISRG) Outperform.

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 futures +.10%.
NASDAQ 100 futures +.08%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories

Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (KFY)/.36
- (NDN)/.00

Upcoming Splits
- (SF) 3-for-2

Economic Releases
10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil drawdown of -1,500,000 barrels versus a -4,802,000 barrel decline the prior week. Gasoline Inventories are estimated to rise by 1,450,000 barrels versus a 2,935,000 barrel build the prior week. Distillate Inventories are expected to rise by 2,000,000 barrels versus a 2,273,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to rise by .30% versus a 1.82% increase the prior week.

2:00 pm EST
- The Fed’s Beige Book
- The Monthly Budget Deficit for May is estimated to widen to -$164.5 billion versus -$67.7 billion in April.

Other Potential Market Movers
- The Fed’s Kohn speaking, Fed’s Fisher speaking, Fed’s Kroszner speaking, Fed’s Pianalto speaking, Fed’s Bullard speaking, weekly MBA Mortgage Applications report, Needham Biotech/Medical Tech Conference, Piper Jaffray Consumer Conference, Goldman Sachs Healthcare Conference and Piper Jaffray Industrial Growth Conference could also impact trading today.

BOTTOM LINE: Asian indices are mixed as weakness in commodity shares is offsetting strength in technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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