Bloomberg:
- GM, after selling an average of about $13.5 billion of unsecured bonds annually for the past decade, may stay out of the market this year as investors demand yields typically paid by companies with credit ratings five levels lower.
- Obesity is growing fastest among people in households that earn more than $60,000 a year, reversing a trend of higher rates of obesity among the poor, according to a study for the American Heart Assoc.
- Crude oil fell to a two-month low this morning amid speculation that slower economic growth in the US, Europe and Japan and increased output will bolster stockpiles.
Wall Street Journal:
- Oracle isn’t in talks now to buy Siebel Systems.
- The US newspaper industry may face the steepest decline in readership in more than 10 years when circulation figures are released today.
- News Corp.’s Fox News, ABC, CBS and NBC face a challenge for young viewers from Univision Communications, the largest US Spanish-language television and radio broadcaster.
- Texans are giving up their longstanding fondness for SUVs, as the cost of filling them up reaches almost $100.
- Slower growth in Europe, Japan and Canada is expected to push US exports below 2004 levels, citing economists.
- Brazil refused $40 million in US grants to fight AIDS because of a clause requiring recipients to discourage prostitution.
NY Times:
- Dominion Resources and Exelon Corp. are among power companies planning to build nuclear reactors as rising natural gas prices make other energy sources more expensive.
- McDonald’s, Kraft Foods and PepsiCo are among companies that have hired more than two dozen nutrition experts and scientists for their advisory boards, as food companies have been threatened with lawsuits over diet-related illnesses.
- Penalties against US companies that repeatedly commit workplace safety violations may rise as government agencies coordinate to apply laws often used to prosecute white-collar criminals.
- Verizon may raise its $7.6 billion offer for MCI Inc. if MCI agrees to state publicly that some of its customers are against Qwest’s competing offer.
- GM’s Saturn and Hummer brands and Ford’s Volvo division are among the growing number of automaker units led by women.
- Novell said that it purchased a set of electronic commerce patents in a bankruptcy auction on Dec. 6.
NY Post:
- AOL Music has signed a sponsorship agreement with GM’s Chevrolet, the online service’s largest advertising deal.
Boston Globe:
- Executives of medical device companies in Massachusetts said they plan to hire as many as 5,000 people within three years.
Financial Times:
- High oil prices have reduced the incentive for divestments in the North Sea oil business and companies are now developing assets rather than selling them.
Le Parisien:
- France’s Industry Minister Devedjian said EU countries should sell some of their oil reserves when speculators boost prices.
eHomeday.com:
- New home prices in Shanghai, China’s biggest commercial city, fell last month after the government raised interest rates and tightened rules for mortgages.
Monday, May 02, 2005
Construction Booming, ISM Still Healthy
- Construction Spending for March rose .5% versus estimates of a .3% increase and an upwardly revised .5% increase in February.
- ISM Manufacturing for April fell to 53.3 in April versus estimates of 55.0 and a reading of 55.2 in March.
- ISM Prices Paid for April fell to 71.0 versus estimates of 71.2 and a reading of 73.0 in March.
- ISM Manufacturing for April fell to 53.3 in April versus estimates of 55.0 and a reading of 55.2 in March.
- ISM Prices Paid for April fell to 71.0 versus estimates of 71.2 and a reading of 73.0 in March.
Bottom Line: The rise in construction spending to a record $1.052 trillion annual rate was driven by increased work on new homes, factories and commercial buildings. Construction spending has risen every month since January of last year, the best performance on record. The record pace of new home sales and rising builder backlogs will spur further gains in construction. This should cushion any economic weakness over the coming months. For the first quarter, construction is up 9.3%(YoY).
The modest decline in the ISM should have been anticipated after the GDP report. The production index component of the ISM, a measure of the work being performed, actually rose to 56.7 versus estimates of 56.5. As well, the new export orders component of the index rose to 57.2 from 55.4. Considering the rise in commodity prices during the first part of the year, the decline in the prices paid index is a big positive and corresponds with the drop in the Chicago Purchasing Manager’s prices paid component. The first quarter rise in inventories may limit factory demand over the next few months.
Monday Watch
Weekend Headlines
Bloomberg:
- French voters planning to endorse the EU constitution in a referendum May 29 regained the lead against opponents of the proposed treaty for the first time in more than a month, a poll by TNS-Sofres showed.
- Wal-Mart Stores said US sales rose about .9% in April as shoppers bought more food.
- Berkshire Hathaway Chairman Warren Buffett is maintaining his bet against the US dollar after his company had about $310 million in first-quarter losses from his foreign currency bets.
- Warren Buffett praised Maurice "Hank" Greenberg, the ousted CEO of AIG, and defended the use of a type of reinsurance that has come under regulatory scrutiny.
- Warren Buffett, who campaigned for John Kerry, said he opposes President Bush's plan for small private accounts as part of the solution to the Social Security problem.
- Asian technology stocks, the region's worst performers in the past year, may rebound as forecasts by companies such as Taiwan Semiconductor Manufacturing and Elpida Memory show an industry-wide slump may be ending.
- Morgan Stanley said its board decided to keep Philip J. Purcell as Chairman and CEO, rejecting demands by former executives that he be ousted.
- Crude oil feel to a two-month low on speculation slower economic growth in the US, Europe and Japan and an increase in inventories will curb demand.
- North Korea's reported missile launch yesterday may be an effort to force the US into direct talks over the communist country's nuclear program.
- AIG prolonged a review of improper accounting and said corrections will lower its net worth by about $2.7 billion, $1 billion more than an earlier estimate.
Wall Street Journal:
- Washington Mutual received a letter from NY Attorney General Spitzer in connection with an investigation into mortgage lending practices.
- Private-equity firms Warburg Pincus and Texas Pacific Group are close to an agreement to buy retailer Neiman Marcus Group for $100 a share, or about $5 billion.
New York Times:
- Managers at AIG artificially boosted sales by booking insurance premiums before clients have formally agreed to purchase them.
- China's yuan appreciated for about 20 minutes yesterday to the strongest in a decade, boosting speculation the country's government may allow the currency to trade more freely.
- John Wiley & Sons doubled the initial printing of an unauthorized biography of Apple Computer's Steve Jobs to 100,000 because of increased interest in the book, "iCon: Steve Jobs, The Greatest Second Act in the History of Business."
Washington Post:
- US reports of credible terrorist threats against domestic targets have decreased by as much as 50% on average and are at their lowest level since before Sept. 11, 2001.
Rocky Mountain News:
- Lockheed Martin's Space Systems may win part of a $500 million contract to design and build the National Aeronautics and Space Administration's Mars Telecommunications Orbiter.
LA Times:
- Walt Disney is introducing interactive attractions at its theme parks designed to appeal to children raised on computer games, digital effects and mobile phones.
MLB.Com:
- Baseball commissioner Bud Selig wants a player caught using steroids for the first time to receive a 50-game suspension.
Newsweek:
- Billionaire Ken Langone expects to deliver the details of his proposal to buy the NYSE this week.
Sunday Times:
- Marconi Corp. is accelerating efforts to sell itself to a US, European or Chinese competitor.
Nihon Keizai:
- Toyota Motor will start producing Camry cars that run on both gasoline and battery-supplied electricity in the US next year.
Times of London:
- UK Prime Minister Toy Blair is headed for a majority of between 90 and 100 seats in the May 5 general election.
Estado de S. Paulo:
- Saudi Arabia is ready to use its spare capacity of 1.5 million barrels a day to ease prices when needed, said Abdallah S. Jum'ah, chief executive of Saudi Aramco.
Financial Mail:
- IBM will next month cut 15,000 jobs across Europe as part of a companywide reorganization.
Xinhua News Agency:
- China's phone-revenue growth slowed to 8.8% in the first quarter after companies offered cheaper rates amid competition.
South China Morning Post:
- Walt Disney is considering opening a theme park in India.
El Pais:
- Sun Microsystems plans to acquire companies to boost revenue, citing an interview with CEO Scott McNealy.
Weekend Recommendations
Bulls and Bears:
- Had guests that were positive on PA, MOT, JNPR, CSCO and mixed on FDG, EBAY, MXIM, CMCSA, SBUX, HPQ.
Forbes on Fox:
- Had guests that were positive on SIRI, F, AW, NOVL, FEIC and SMMX.
Cashin' In:
- Had guests that were positive on CP, DYN, UPS, EBAY, mixed on BA, NKE, ERTS and negative on DTPI.
Cavuto on Business:
- Had guests that were positive on WLP, RAD, VZ and mixed on GLW, EEM and ABB.
Barron's:
- Had positive comments on SOV, NWS, IACI, AZR, IGT and HLT.
- Had negative comments on TM and SHRP.
Goldman Sachs:
- Reiterated Outperform on CCU and AMLN.
Night Trading
Asian indices are +.25% to +.50% on average.
S&P 500 indicated -.06%.
NASDAQ 100 indicated -.04%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/Estimate
AVP/.35
CECO/.51
EDS/.03
HUM/.48
OSIP/-.67
PDLI/-.11
TSN/.17
Splits
CLC 2-for-1
Economic Releases
10:00 EST
- Construction Spending for March is estimated to rise .3% versus a .4% increase in February.
- ISM Manufacturing for April is estimated to fall to 55.0 versus a reading of 55.2 in March.
- ISM Prices Paid for April is estimated to fall to 72.1 versus a reading of 73.0 in March.
Bloomberg:
- French voters planning to endorse the EU constitution in a referendum May 29 regained the lead against opponents of the proposed treaty for the first time in more than a month, a poll by TNS-Sofres showed.
- Wal-Mart Stores said US sales rose about .9% in April as shoppers bought more food.
- Berkshire Hathaway Chairman Warren Buffett is maintaining his bet against the US dollar after his company had about $310 million in first-quarter losses from his foreign currency bets.
- Warren Buffett praised Maurice "Hank" Greenberg, the ousted CEO of AIG, and defended the use of a type of reinsurance that has come under regulatory scrutiny.
- Warren Buffett, who campaigned for John Kerry, said he opposes President Bush's plan for small private accounts as part of the solution to the Social Security problem.
- Asian technology stocks, the region's worst performers in the past year, may rebound as forecasts by companies such as Taiwan Semiconductor Manufacturing and Elpida Memory show an industry-wide slump may be ending.
- Morgan Stanley said its board decided to keep Philip J. Purcell as Chairman and CEO, rejecting demands by former executives that he be ousted.
- Crude oil feel to a two-month low on speculation slower economic growth in the US, Europe and Japan and an increase in inventories will curb demand.
- North Korea's reported missile launch yesterday may be an effort to force the US into direct talks over the communist country's nuclear program.
- AIG prolonged a review of improper accounting and said corrections will lower its net worth by about $2.7 billion, $1 billion more than an earlier estimate.
Wall Street Journal:
- Washington Mutual received a letter from NY Attorney General Spitzer in connection with an investigation into mortgage lending practices.
- Private-equity firms Warburg Pincus and Texas Pacific Group are close to an agreement to buy retailer Neiman Marcus Group for $100 a share, or about $5 billion.
New York Times:
- Managers at AIG artificially boosted sales by booking insurance premiums before clients have formally agreed to purchase them.
- China's yuan appreciated for about 20 minutes yesterday to the strongest in a decade, boosting speculation the country's government may allow the currency to trade more freely.
- John Wiley & Sons doubled the initial printing of an unauthorized biography of Apple Computer's Steve Jobs to 100,000 because of increased interest in the book, "iCon: Steve Jobs, The Greatest Second Act in the History of Business."
Washington Post:
- US reports of credible terrorist threats against domestic targets have decreased by as much as 50% on average and are at their lowest level since before Sept. 11, 2001.
Rocky Mountain News:
- Lockheed Martin's Space Systems may win part of a $500 million contract to design and build the National Aeronautics and Space Administration's Mars Telecommunications Orbiter.
LA Times:
- Walt Disney is introducing interactive attractions at its theme parks designed to appeal to children raised on computer games, digital effects and mobile phones.
MLB.Com:
- Baseball commissioner Bud Selig wants a player caught using steroids for the first time to receive a 50-game suspension.
Newsweek:
- Billionaire Ken Langone expects to deliver the details of his proposal to buy the NYSE this week.
Sunday Times:
- Marconi Corp. is accelerating efforts to sell itself to a US, European or Chinese competitor.
Nihon Keizai:
- Toyota Motor will start producing Camry cars that run on both gasoline and battery-supplied electricity in the US next year.
Times of London:
- UK Prime Minister Toy Blair is headed for a majority of between 90 and 100 seats in the May 5 general election.
Estado de S. Paulo:
- Saudi Arabia is ready to use its spare capacity of 1.5 million barrels a day to ease prices when needed, said Abdallah S. Jum'ah, chief executive of Saudi Aramco.
Financial Mail:
- IBM will next month cut 15,000 jobs across Europe as part of a companywide reorganization.
Xinhua News Agency:
- China's phone-revenue growth slowed to 8.8% in the first quarter after companies offered cheaper rates amid competition.
South China Morning Post:
- Walt Disney is considering opening a theme park in India.
El Pais:
- Sun Microsystems plans to acquire companies to boost revenue, citing an interview with CEO Scott McNealy.
Weekend Recommendations
Bulls and Bears:
- Had guests that were positive on PA, MOT, JNPR, CSCO and mixed on FDG, EBAY, MXIM, CMCSA, SBUX, HPQ.
Forbes on Fox:
- Had guests that were positive on SIRI, F, AW, NOVL, FEIC and SMMX.
Cashin' In:
- Had guests that were positive on CP, DYN, UPS, EBAY, mixed on BA, NKE, ERTS and negative on DTPI.
Cavuto on Business:
- Had guests that were positive on WLP, RAD, VZ and mixed on GLW, EEM and ABB.
Barron's:
- Had positive comments on SOV, NWS, IACI, AZR, IGT and HLT.
- Had negative comments on TM and SHRP.
Goldman Sachs:
- Reiterated Outperform on CCU and AMLN.
Night Trading
Asian indices are +.25% to +.50% on average.
S&P 500 indicated -.06%.
NASDAQ 100 indicated -.04%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/Estimate
AVP/.35
CECO/.51
EDS/.03
HUM/.48
OSIP/-.67
PDLI/-.11
TSN/.17
Splits
CLC 2-for-1
Economic Releases
10:00 EST
- Construction Spending for March is estimated to rise .3% versus a .4% increase in February.
- ISM Manufacturing for April is estimated to fall to 55.0 versus a reading of 55.2 in March.
- ISM Prices Paid for April is estimated to fall to 72.1 versus a reading of 73.0 in March.
BOTTOM LINE: Asian Indices are mostly higher on optimism over earnings and lower energy prices. I expect US stocks to open modestly higher in the morning on bargain-hunting, short-covering and lower energy prices. The Portfolio is 100% net long heading into the week.
Sunday, May 01, 2005
Weekly Outlook
There are several important economic reports and a few significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Construction Spending, ISM Manufacturing/Prices Paid
Tues. - Factory Orders, FOMC Rate Decision, Vehicle Sales
Wed. - ISM Non-Manufacturing
Thur. - 1Q Non-farm Productivity, 1Q Unit Labor Costs, Initial Jobless Claims
Fri. - Unemployment Rate, Average Hourly Earnings, Change in Non-farm Payrolls, Consumer Credit
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Avon Products(AVP), Electronic Data Systems(EDS), Tyson Foods(TSN)
Tues. - Caremark Rx(CMX), Electronic Arts(ERTS), Emerson Electric(EMR), Marsh & McLennan(MMC), MBIA(MBI), Maxim Integrated(MXIM), Transocean Inc.(RIG), Tyco Intl.(TYC), Veritas Software(VRTS)
Wed. - Cigna(CI), Duke Energy(DUK), IAC/InterActiveCorp.(IACI), Time Warner(TWX), Univision Communications(UVN), Whole Foods Market(WFMI)
Thur. - CVS Corp.(CVS), EchoStar Communications(DISH), Gillette(G), McAfee(MFE), MCI Inc.(MCIP), McKesson(MCK)
Fri. - Berkshire Hathaway(BRK/A)
Other events that have market-moving potential this week include:
Mon. - Deutsche Bank Health Care Conference, Bear Stearns Aerospace/Defense Conference
Tue. - GM/F Sales Conference Call, Banc of America Basic Industries Conference, Merrill Tech Gathering Conference, Deutsche Bank Health Care Conference
Wed. - Banc of America Basic Industries Conference, JP Morgan Gaming & Lodging Conference, Morgan Stanley Healthcare Conference, Merrill Tech Gathering Conference, Deutsche Bank Health Care Conference
Thur. - Morgan Stanley Healthcare Conference, INTC Analyst Meeting, Morgan Stanley Media & Communications Conference, QCOM Analyst Meeting, SEBL Analyst Meeting, Fed's Greenspan speaks, Fed's Moskow speaks, Fed's Olson speaks
Fri. - Morgan Stanley Healthcare Conference, Morgan Stanley Media & Communications Conference
Economic reports for the week include:
Mon. - Construction Spending, ISM Manufacturing/Prices Paid
Tues. - Factory Orders, FOMC Rate Decision, Vehicle Sales
Wed. - ISM Non-Manufacturing
Thur. - 1Q Non-farm Productivity, 1Q Unit Labor Costs, Initial Jobless Claims
Fri. - Unemployment Rate, Average Hourly Earnings, Change in Non-farm Payrolls, Consumer Credit
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Avon Products(AVP), Electronic Data Systems(EDS), Tyson Foods(TSN)
Tues. - Caremark Rx(CMX), Electronic Arts(ERTS), Emerson Electric(EMR), Marsh & McLennan(MMC), MBIA(MBI), Maxim Integrated(MXIM), Transocean Inc.(RIG), Tyco Intl.(TYC), Veritas Software(VRTS)
Wed. - Cigna(CI), Duke Energy(DUK), IAC/InterActiveCorp.(IACI), Time Warner(TWX), Univision Communications(UVN), Whole Foods Market(WFMI)
Thur. - CVS Corp.(CVS), EchoStar Communications(DISH), Gillette(G), McAfee(MFE), MCI Inc.(MCIP), McKesson(MCK)
Fri. - Berkshire Hathaway(BRK/A)
Other events that have market-moving potential this week include:
Mon. - Deutsche Bank Health Care Conference, Bear Stearns Aerospace/Defense Conference
Tue. - GM/F Sales Conference Call, Banc of America Basic Industries Conference, Merrill Tech Gathering Conference, Deutsche Bank Health Care Conference
Wed. - Banc of America Basic Industries Conference, JP Morgan Gaming & Lodging Conference, Morgan Stanley Healthcare Conference, Merrill Tech Gathering Conference, Deutsche Bank Health Care Conference
Thur. - Morgan Stanley Healthcare Conference, INTC Analyst Meeting, Morgan Stanley Media & Communications Conference, QCOM Analyst Meeting, SEBL Analyst Meeting, Fed's Greenspan speaks, Fed's Moskow speaks, Fed's Olson speaks
Fri. - Morgan Stanley Healthcare Conference, Morgan Stanley Media & Communications Conference
BOTTOM LINE: I expect US stocks to finish the week higher on bargain hunting, falling energy prices, short-covering, good earnings reports, less hawkish Fed comments and low long-term interest rates. However, if the Fed fails to acknowledge the recent weakening in some economic data points, stocks will likely remain mired in their recent trading range. The combination of the Fed hinting at a pause in the rate of hikes and oil moving back to the mid-$40s could push stocks substantially higher. While I am very confident we have seen the highs in oil for this cycle, I am not ruling out a countertrend rally over the next few weeks. Investor sentiment is still near levels normally associated with meaningful market bottoms. I continue to expect the second half of the year to be much better for US equities than the first half as inflation decelerates, commodities prices fall, long-term interest rates remain low, low valuations tempt investors, growth accelerates, the US dollar remains firm, employment continues to improve, consumer sentiment strengthens and merger activity continues. Homebuilder, Retail, Biotech, Airline, Financial, Internet and Gaming shares should outperform in the second half of the year, given my outlook. My trading indicators are still bearish and the Portfolio is 100% net long heading into the week.
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