Wednesday, February 20, 2008

Today's Headlines

Bloomberg:
- Credit Suisse’s Parker Says Subprime Writedowns Ending: Video.
- Federal Reserve officials judged that low interest rates “were appropriate for a time,” as they enacted the fastest easing of monetary policy in two decades last month.
- Fewer elderly Americans have memory loss or other symptoms of dementia today than their counterparts did a decade ago, a nationwide survey found.

- Advanced Micro(AMD) rose the most in almost three weeks in NY after American Technology Research said a merger with rival Nvidia Corp.(NVDA) would benefit both companies.
- The US Supreme Court put new limits on lawsuits against Medtronic(MDT) and other medical-device makers, saying patients generally can’t sue over products cleared for sale under the most intensive federal review process.
- MBIA’s(MBI) Brown Sees Decision This Week to Retain AAA Rating.

Wall Street Journal:
- Exile Group Claims Iran Is Developing Nuclear Warheads.

NY Times:
- Mexico Attracts Gold Prospectors as Prices Soar.
- Muscular Dystrophy Research Seeks to Ease Illness.
- Cinemark Holdings Inc.(CNK), Regal Entertainment Group(RGC) and National Amusements Inc. are spending millions to renovate and build more elaborate movie theaters to fight declining attendance.

MIT Technology Review:
- 10 Emerging Technologies 2008.

Conference Board:
- Recession Unlikely, Housing Sector Correction Nearly Over.

LA Times:
- US Farmers Want Trade with Post-Castro Cuba.

The American:
- US Markets Hurt by Regulation, Wallison Says.

Detroit Free Press:
- Ford Motor(F) is preparing to once again give bonuses to its executives, salaried workers and hourly employees.

San Francisco Chronicle:
- Stanford University will cease charging tuition to students whose families earn less than $100,000 a year, citing university Provost John Etchemendy.

Market News Intl.:
- The European Central Bank is not “ready to lower interest rates” yet, citing unidentified officials.

The Peninsula:
- Iraq announced that it will buy 40 new aircraft from US manufacturer Boeing(BA) plus another six from Canadian firm Bombadier to revitalize an ailing fleet depleted by UN sanctions.

Bear Radar

Style Underperformer:

Small-cap Growth +.07%

Sector Underperformers:

Telecom (-2.95%), Biotech (-1.23%) and Defense (-.95%)

Stocks Falling on Unusual Volume:

ANW, NDAQ, IMA, USM, SWC, NTRI, TRAK, ONXX, GRMN, CROX, EEFT, ALXN, AUXL, STP, T, HCC and TWB

CPI Rises More Than Estimates, Housing Starts Rise Slightly

- The Consumer Price Index for January rose .4% versus estimates of a .3% gain and an upwardly revised .4% increase in December.

- The CPI Ex Food & Energy for January rose .3% versus estimates of a .2% gain and a .2% gain in December.

- Housing Starts for January rose to 1012K versus estimates of 1010K and 1004K in December.

- Building Permits for January fell to 1048K versus estimates of 1050K and an upwardly revised 1080K in December.

BOTTOM LINE: The CPI for January exceeded forecasts, Bloomberg reported. Energy prices rose .7% versus a 1.7% gain the prior month. The CPI core rose 2.5% year-over-year versus a 2.4% gain the prior month. The 10-year yield is unch. on the report and gold is falling .7%. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis points to 2.38% today, but is still down from 2.48% in November. Fed fund futures now imply a 100% probability of a 50 basis point rate cut at the upcoming March 18 meeting. The recent acceleration in inflation measures is almost exclusively a function of the historic speculation for commodities by investment funds. I still expect inflation measures to decelerate meaningfully over the intermediate-term as speculation diminishes on decelerating global demand, rising production and a firmer US dollar.

Housing starts in the US remained near their lowest level since 1991 in January, Bloomberg reported. For all of last year, construction began on 1.35 million housing units, the fewest since 1993, and down 25% from the prior year. Housing starts jumped 19% in the Northeast and 12% in the Midwest last month. Starts fell 3% in the South and 6% in the West. New home construction will remain muted over the intermediate-term as homebuilders continue to work down inventories.

Bull Radar

Style Outperformer:

Small-cap Value (-.11%)

Sector Outperformers:

Retail (+1.7%), Semis (+1.36%) and Computer Hardware (+1.29%)

Stocks Rising on Unusual Volume:

HPQ, XEC, TJX, PQ, IM, AKS, PGI, KALU, BCS, AXYS, TRMA, HURN, WINN, JAKK, KALU, CYBX, RCRC, LBTYK, IRBT, EXBD, SPLS, KLAC, CENX, DWSN, CEC, KOP, WLT, PMR and OIS

Links of Interest

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In Play

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Tuesday, February 19, 2008

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Hewlett-Packard(HPQ), the world’s largest personal-computer maker, posted first-quarter profit and sales that beat estimates and raised its annual forecast on demand overseas, spurring a 6.5% gain in the stock.

Wall Street Journal:
- The next chapter of the increasingly combative Democratic primary race ended this evening with Sen. Barack Obama landing his ninth straight victory in his nomination battle against Sen. Hillary Clinton with a decisive win in Wisconsin’s Democratic primary. Sen. John McCain sailed to victory in Wisconsin’s Republican primary Tuesday night, beating former Arkansas Gov. Mike Huckabee and edging closer to the 1,191 delegates he needs to clinch the nomination.
- Musharraf Insists He’ll Stay in Job After Defeat.
- Crude-oil prices finished just above $100 a barrel for the first time yesterday despite signs the world’s petroleum thirst may be subsiding.

BusinessWeek.com:
- Health Care Equipment’s Quickening Pulse. S&P says the group’s strong stock-price performance and positive fundamentals point to the potential for further gains.
- Priceline.com(PCLN) Flies High.

CNNMoney.com:
- How to profit from Castro’s resignation.

SmartMoney.com:
- Good Near-Term Visibility Favors Two Small Caps.

Forbes.com:
- Democratic presidential hopeful Barack Obamaq accused rival Hillary Clinton Tuesday of rewarding the rich and hurting future mortgage seekers with her plan to end the US housing crisis.
- The Next VMware.

Chicagotribune.com:
- Lufthansa is mulling investing in a United-Continental merger.

USA Today.com:
- A railroad based smack in the center of the country isn’t the most obvious play on globalization. But tiny Kansas City Southern(KSU) is emerging as a major beneficiary of surging trade between the USA and an increasingly prosperous Mexico.

Financial Times:
- Barack Obama’s campaign on Tuesday accused Hillary Clinton of planning to “subvert the will of the voters” following reports that she would be prepared to lobby elected delegates to change their vote if the battle for the nomination went to the Democratic convention in August.
- Investors in two Bear Stearns(BSC) hedge funds began legal action in the Cayman Islands yesterday in an attempt to seize control of the funds, which they hope to use as a platform to demand compensation from the bank.

TimesOnline:
- London’s position as an international financial center is threatened, citing the Global Financial Centres Index. Two developments are cited in the index, due out next month, as affecting the city’s popularity as a business hub: the government’s handling of the Northern Rock Plc crisis and the proposal to levy the offshore income of wealthy foreigners living in the UK.
- Wal-Mart(WMT), the world’s biggest retailer, achieved another milestone yesterday by reporting sales of more than $100 billion for a three-month period for the first time.
- Forget biofuel, forget hydrogen cells, how about a car that runs on air?

Handelsblatt:
- The US economy is expected to grow 1.7% this year, citing a report from the European Economic Advisory Group. Germany’s GDP is forecast to increase by 1.6% this year, citing the report.

China Daily:
- China Diabetes Suffers Rise to 40 Million. Diabetes is fast becoming a major health problem in the country with close to 40 million currently suffering from the disease, a health expert said.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (JCP), target $53.
- Maintained Buy on (AMAT), target $26.
- Reiterated Buy on (WMB), target raised to $45.

Night Trading
Asian Indices are -1.50% to -.50% on average.
S&P 500 futures -.47%.
NASDAQ 100 futures -.21%.

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Earnings of Note
Company/EPS Estimate
- (GRMN)/1.12
- (STP)/.37
- (XEC)/1.20
- (JBX)/.56
- (TJX)/.62
- (ADI)/.40
- (OII)/.81
- (CECO)/.31
- (TEX)/1.39
- (HTZ)/.26
- (SINA)/.32
- (SNPS)/.38
- (HMA)/.08
- (NTES)/.32
- (WCG)/1.62
- (RIG)/2.52

Upcoming Splits
- None of note

Economic Releases
8:30 am EST

- The Consumer Price Index for January is estimated to rise .3% versus a .4% gain in December.
- The CPI Ex Food & Energy for January is estimated to rise .2% versus a .2% gain in December.
- Housing Starts for January are estimated to rise to 1010K versus 1006K in December.
- Building Permits for January are estimated to fall to 1050K versus 1068K in December.

2:00 pm EST
- Minutes of Jan. 29-30 FOMC Meeting

Other Potential Market Movers
- The Fed’s Poole speaking, weekly MBA Mortgage Applications report, (KMT) analyst meeting, (FFIN) analyst meeting, (TKR) analyst day, (SFY) analyst meeting, (NSR) analyst meeting, Morgan Stanley Basic Materials Conference, Piper Jaffray Clean Tech & Renewables Conference and Roth Capital Growth Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by automaker and utility stocks in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

Stocks Finish Mostly Lower, Weighed Down by Tech, Retail, Airline and Financial Shares

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In Play

Stocks Mostly Lower into Final Hour on Rise in Commodities, Long-term Rates

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Internet longs, Semi longs and Commodity shorts. I added (IWM)/(QQQQ) hedges and took a loss on my (OMCL) long today, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is below average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 4.2% today to a high 26.1. The ISE Sentiment Index is a below average 110.0 and the total put/call is an above-average .99 today. Tech, retail, financials and airlines are under pressure today from the rise in commodities and long-term rates. The rise in commodities is boosting inflation worries, at a time of significant economic concern, which is a large negative. Investors are worried that this may prevent an otherwise more aggressive response to the ongoing housing/credit problems from the Fed. The odds of a 75 basis point cut at the March 18th meeting are down to 2% today from 32% on Friday. If the commodity rise continues, I would expect to begin to hear slightly more hawkish Fed commentary. The decline in my (SIGM) long looks like a severe overreaction to today’s Robert Baird downgrade of the stock to Neutral and $50 target, however I have not added to the position yet. Nikkei futures indicate a -100 open in Japan and DAX futures indicate a -7 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting and short-covering.

Today's Headlines

Bloomberg:
- Confidence among US homebuilders rose for a second straight month, the first back-to-back increase in almost a year, as signs emerged that lower house prices attracted more buyers.
- The Herzfeld Caribbean Basin Fund, which aims to profit from the resumption of US trade with Cuba, surged the most in its 13-year history after Fidel Castro resigned as the country’s president and commander-in-chief.
- Verizon Wireless(VZ) is offering a flat-rate subscription for unlimited calls, intensifying price competition with rivals Sprint Nextel(S) and AT&T(T).
- If Exxon, (XOM), Corning(GLW) Earn So Much, How Can S&P Be Cheap?

- Lansdowne Partners Ltd. and LNG Capital LLP were among investors that profited from an “easy” bet over the past year on the 93% decline in Northern Rock Plc, the bank being nationalized by the British government.
- Mortgage companies including Fannie Mae(FNM) and HSBC Finance jointed a US Treasury Dept.-led effort to offer 30-day foreclosure freezes to give delinquent borrowers more time to arrange payment plans. Remaining members of the Hope Now alliance adopted the initiative announced last week by Treasury Secretary Henry Paulson and six banks, including JPMorgan Chase(JPM) and Citigroup(C), the group said.
- Crude oil is surging above $99/bbl. in NY on record investment fund speculation after the dollar weakened, Iran said OPEC would likely cut production and a refinery fire in Texas curbed gasoline production.

Wall Street Journal:
- As Oil Prices Soar, Prospectors Return To Pennsylvania.
- Disney(DIS), Viacom(VIA) and Others Take Videogames In-House, Seeking Cut of Hot Market.
- Sweet Home, Santiago: Cuba’s Ethanol Future.

AppleInsider:
-
Apple(AAPL) taps Linkin Park to perform at "secret" NYC event.

Finansavisen:
- Saudi Aramco CEO Abdallah Jum’ah said the so-called “peak oil” theory is a myth. Saudi Aramco plans to boost oil production capacity to 12 million barrels a day in 2009 from about 10 million barrels a day in 2004 by developing new fields and increasing output at existing fields.

Seoul Economic Daily:
- South Korean companies may win oil-exploration rights in Iraq, citing a South Korean official. Companies including Korea National Oil Corp. may be able to develop oil fields with combined reserves of about 3 billion barrels in the Kurdish-controlled region of Iraq, under an initial agreement with Iraqi Kurdish Prime Minister Nechirvan Barzani.

Bear Radar

Style Underperformer:

Small-cap Value +.40%

Sector Underperformers:

Telecom (-3.22%), I-Banks (+1.39%) and Airlines (-1.02%)

Stocks Falling on Unusual Volume:

ALJ, ONXX, TONE, USTR, DDUP and SIGM

Bull Radar

Style Outperformer:

Mid-cap Growth (+1.21%)

Sector Outperformers:

Steel (+4.98%), Oil Service (+3.3%) and Construction (+2.2%)

Stocks Rising on Unusual Volume:

HOC, BCS, WNR, KALU, SWC, TM, PBR, NMR, JOE, BBW, MICC, VIP, NTES, TITN, QDEL, KALU, JAKK, TRMA, SHPGY, SHOO, FOSL, RBCN, FEED, APPX, FNDT, GMXR, IMCL, FARO, SSRI, DRYS, ROCK, ASTE, OCNF, SID, B, GNI, MSB and OMX

Links of Interest

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Monday, February 18, 2008

Tuesday Watch

Weekend Headlines
Bloomberg:

- Exxon Mobil(XOM) earned more in 2007 than any public company ever. Profit at Eli Lilly(LLY) this year may climb by the most this decade, while Corning(GLW) is forecast to make more per dollar of sales than at any time in 20 years. All three companies also are trading at cheaper valuations than the S&P 500, which itself is the least expensive in 18 years. Fourth-quarter net income for the S&P 500’s 412 members that have reported dropped an average 19%, hurt by more than $146 billion in bank credit losses. Take out financials and profits climbed 18%. The earnings growth and low prices make non-bank stocks including energy companies, pharmaceuticals and consumer-electronics suppliers attractive, say BlackRock, the Hartford and Wells Capital Management, which oversee more than $1 trillion. “Fear has taken control of valuations more than fundamentals, which are pretty good,” said James Paulson, chief investment strategist at Wells Capital, which oversees $220 billion and is recommending industrial companies, metals producers and retailers. Companies in the S&P 500 trade at 13.71 times estimated 2008 profit. Non-financial companies are on track to post their biggest quarterly profit increase in almost two years. “Incorporated in consensus estimates for ’08 is a sharp snapback in profits in the second half,” said Henry Herrmann, president of Waddell & Reed, which oversees $65 billion. Bank of NY Mellon’s Christopher Sheldon says current multiples may underestimate the potential for Federal Reserve interest-rate cuts and the government’s $168 billion economic stimulus measure to reignite consumer demand. “It’s time to begin to go fishing,” said Sheldon, who helps oversee about 4150 billion as director of investment strategy at Bank of NY Mellon.
- Qatar is accumulating shares in Credit Suisse Group and plans to spend as much as $15 billion on European and US bank stocks over the next year, the Gulf state’s prime minister said in an interview.
- President bush chastised Congress for refusing to pass electronic surveillance legislation, saying it had made Americans more vulnerable to terrorists.
- OAO Rosneft, Russia’s largest oil producer, plans to spend as much as $24.4 billion through 2020 to boost oil production in eastern Siberia, CEO Sergei Bogdanchikov said. The state-owned company will spend 50 billion rubles this year and 600 billion rubles over the 12-year period as it seeks to raise annual oil output to 170 million tons by 2020. The company produced 102 million tons of oil last year.
- Africa’s coffee production may rise 67% by 2015 as growing global demand drives increased plantings on the continent, the Inter-Africa Coffee Organization said.
- Democratic presidential candidate Hillary Clinton said her rival Barack Obama was offering “speeches vs. solutions” and portrayed herself as the candidate best able to spur the US economy.
- Democratic presidential candidate Barack Obama delivered a populist message in Wisconsin today as he shot back at rival Hillary Clinton’s claim that he’s all talk and no action.
- Abbott Labs(ABT) won US approval for Simcor, a combination pill to lower harmful cholesterol and increase the beneficial type.

- President Bush said the US will urge a political compromise in Kenya to end tribal fighting that has claimed more than 1,000 lives since a disputed election in December.

- OPEC may agree to cut oil output when it meets in Vienna March 5, Iran’s Oil Minister Gholamhossein Nozari said.
- Record platinum prices may slash jewelry demand by almost two-thirds, Blue Oar Securities said. Platinum demand for auto catalysts, the biggest use, will also decline as manufacturers seek substitutes, helping to bring consumption and supplies into balance.
- The Baltic Dry Index, a measure of shipping costs for commodities, advanced to a one-month high and may rise further on speculation that demand for ships will accelerate as coal-supply backlogs are cleared.
- Copper rose to a four-month high in London as imports of the metal into China, the world’s largest users, advanced to the most since April.
- Bayer AG, Germany’s biggest drugmaker, and Onyx Pharmaceuticals(ONXX) stopped a study of the Nexavar cancer drug against lung tumors because the product failed to help patients live longer than standard treatment.

- Pakistan President Pervez Musharraf urged defeated political parties to accept the results of parliamentary elections as private television channels predicted opposition gains.
- The US Toy Industry Association, whose members include Mattel Inc.(MAT) and Lego A/S, said its board unanimously approved a plan for a new testing system following the recall of tens of millions of Chinese-made toys last year.
- Motorola Inc.(MOT) and BlackBerry maker Research In Motion Ltd.(RIMM) sued one another over mobile-phone patents, each claiming their competitor is using handset technology without permission.
- Former President George H.W. Bush endorsed Republican presidential candidate John McCain today, saying he is best prepared to succeed his son and has the “right values and experience to guide our nation forward.”
- Euro Declines Against Dollar as Noyer Sees Weaker EU Growth.
- The US market for auction-rate securities that failed to draw enough buyers last week is luring new investors as interest rates soar to as much as 20%, Bank of America(BAC) analysts said.

- President George W. Bush and leading European allies offered diplomatic recognition to Kosovo, pledging economic and political aid for the newly independent state in the face of Serbian and Russian protests.

Wall Street Journal:
- Democrats’ Attacks On Business Heat Up. As the Democratic presidential contest moves to the distressed industrial Midwest, Hillary Clinton and Barack Obama have ratcheted up their anti-trade, anti-corporate rhetoric.
- Continental Spoke to AMR Amid Airlines’ Merger Drive.

NY Times:
- Thousands of Apple Inc.’s(AAPL) iPhones are brought into China by tourists, entrepreneurs and smugglers, who help distribute the phone in a country where it hasn’t yet been released. This helps explain the difference between the 3.7 million iPhones Apple sold last year and the 2.3 million registered on the networks of Apple’s partners in the US and Europe.
- Former Vice President Al Gore and other senior Democratic Party officials have held talks in recent weeks seeking to avoid a possible split at the convention and what could be a deciding vote by superdelegates.
- If you can’t manage a trip abroad to learn a foreign language, the Internet and a broadband computer connection may do the job, too.
- Where the Heads No Longer Roll. In the wake of the Societe Generale scandal, France’s business aristocracy finds itself in a place it never wants to be: the spotlight.

CNBC.com:
- Manager Sees Real Upside In Real Estate.
- European Stocks Rally as Banks Surge.

MarketWatch.com:
- A merger of Microsoft Corp.(MSFT) and Yahoo!(YHOO) would have a curious impact on tens of millions of Internet users: Their email accounts would eventually be processed by a single tech behemoth.
- South Korea’s Hana Bank is considering buying a stake in Merrill Lynch(MER).
- UK government to nationalize Northern Rock.
- More and more children are turning, at increasingly younger ages, to Internet toys in a major shift in play habits.

Portfolio.com:
- Misleading Chart of the Day, CDS Edition. This graphic comes from Gretchen Morgenson’s front-page in the NYT yesterday. It shows the market in credit default swaps, at $45.5 trillion, dwarfing the markets in US stocks($21.9 trillion), mortgage securities($7.1 trillion) and US Treasuries($4.4 trillion).

TheStreet.com:
- EA Sees a Blockbuster in Spore.

Boston Globe:
- As hybrids come into their own, road ahead promises more eco-friendly technologies.
- TV signal switch may help cable business.

Washingtonpost.com:
- Struggling bond insurer FGIC said Friday that it would seek to split its business in two in a move that cold help settle jitters in the municipal bond market that have raised the cost of financing public projects.

San Francisco Chronicle:
- High-end home sales soar in Bay Area.

Atlanta Journal Constitution:
- Google’s(GOOG) big bucks back green ideas.

Business Week:
- Google(GOOG) Wins Japan’s Mobile Net Battle.

LA Times:
- Hedge funds and Hollywood. Hedge funds have been a major source of capital for Hollywood studios over the last three years.

USA Today:
- ‘Old-fashioned’ banks manage to avoid credit crisis.

GLG:
- US Can Become #1 in Global Wind Power Soon.

CNNMoney.com:
- GameStop(GME) said preliminary same-store sales for the quarter exceeded expectations, increasing 17.4% on “impressive” domestic and international sales.

SmartMoney.com:
- I’ll never cease to be amazed by Warren Buffett. No, not by his wealth. Not by his investment acumen. And not by his folksy wisdom. I’m amazed at the shameless greed of the man, and the fact that despite it, the media continues to treat him like a saint.
- The Economic Stimulus package signed by President Bush on Wednesday includes two significant tax breaks for small-business owners.

Reuters:
- Insurgent attacks in Baghdad have dropped by about 80% and concrete blast walls dividing the Iraqi capital could be removed, citing an Iraqi government official. An average of 43 bodies a day were found in Baghdad during the final six weeks of 2006. In the first six weeks of this year, that figure dropped to four per day. To demonstrate how life had improved, Prime Minister Nuri al-Maliki toured parts of the city on Saturday, visiting Iraqi forces and checkpoints. “He wanted…to send a message to the terrorists that security in Baghdad is prevailing now,” one official said. While Iraqi and US officials laud the security gains, humanitarian groups say it is still too early to encourage around 2 million refugees who fled Iraq to return home.
- Toshiba Corp. is planning to give up on its HD DVD format for high definition DVDs, conceding defeat to the competing Blu-Ray technology backed by Sony Corp.(SNE).
- Hedge fund Saracen Energy suffered heavy losses in natural gas futures this week, forcing it to liquidate some positions, the fund said.
- Merger talks between United Airlines and Continental Airlines have picked up pace, but a deal still hinges on the outcome of discussions between Delta Air Lines and Northwest Airlines people briefed on the situation said.
- Fed will continue to act decisively: Mishkin.

Financial Times:
- Shorting is back in vogue after private equity calls it a day. The shift by many hedge funds in recent months away from using indices to provide generic hedges back to picking losers follows the evaporation of private equity bids – and the losses they can create for short sellers. Short-selling touches raw nerves – and has long raised the ire of politicians. Criticism of short sellers dates back at least to the Wall Street crash of 1929, which many in Congress blamed speculators selling short. Similar concerns are again being raised, this time by MPs on the influential Treasury select committee who are considering an inquiry into hedge funds. Such an inquiry could subject the industry to a repeat of the pain private equity was put through by MPs last year. Bill Ackman, head of Pershing Square Capital, a US hedge fund, has for years set his research to regulators, politicians and ratings agencies as part of a campaign against MBIA(MBI), the troubled bond insurer. Other short sellers operate in a more underhand way, bombarding journalists with documents in an effort to generate negative publicity for companies, which could drive down share prices, or circulating negative research to other investors.
- The US Pension Benefit Guaranty Corp. plans to double the number of equity investments it makes. About $55 billion worth of assets will be invested under the new policy.
- Ambac(ABK), the bond insurer, is seeking to raise capital to support a split of its operations in an attempt to avoid a sharp cut in its credit rating.
- The world’s leading engineers have proposed 14 “grand challenges” that would do the most to protect and enhance life during the 21st century. They range from engineering better medicines to making solar energy affordable.

- NY’s insurance regulator will hold talks this weekend with sovereign wealth funds, Warren Buffett and other investors in an urgent effort to stabilize credit ratings on $220 billion of municipal bonds guaranteed by FGIC, the troubled insurer.
- Delta Air Lines(DAL) board plans to meet on Wednesday to approve the US carrier’s merger with rival Northwest Airlines(NWAC).
- Wal-Mart(WMT) puts Blu-ray on brink of victory.

- The South Korean stem cell scientists who produced a cloned Afghan hound have received the world’s first commercial order to clone a dog. RNL Bio will help Seoul National Univ. recreated Booger, a pitbull terrier from California for $50,000. The scientists hope to produce as many as 500 cloned pets a year.
- Allies of Barack Obama have warned of chaos if unelected “super delegates” overturn the will of grassroots Democrats when the party’s presidential candidate is chosen at its national convention in August.

TimesOnline:
- Two of Britain’s biggest banks, Barclays and Lloyds TSB, will this week attempt to lift the climate of fear surrounding Britain’s financial institutions by declaring an unexpected increase in dividend payments.

Figaro Magazine:
- France’s Prime Minister Francois Fillon said growth of Europe’s third-largest economy in 2008 will be “close to 2%.”

Neue Zuercher Zeitung:
- The ongoing crisis in the banking industry could bottom out “in a few months” rather than in a few quarters, Credit Suissee Group CEO Brady Dougan said.

El Universal:
- Venezuela’s consumer protection agency seized a half ton of chicken and a similar amount of milk from the restaurant at a Caracas hospital, saying the food had been diverted from the state-run subsidized supermarket chain.

Xinhua:
- China’s 2007 winter was the coldest in 20 years.

ANP:
- Dutch politician Geert Wilders is making a movie critical of Islam. The Dutch government in November asked Wilders to consider the risks of making the movie after film director Theo van Gogh was murdered in 2004 following the release of a movie he made on the topic.

Shana:
- Iran will start to build at least 30 industrial projects worth $4 billion in Venezuela this year, citing the Minister of Industries and Mines. Contracts valued at more than $6 billion are under negotiation.

Weekend Recommendations
Barron's:
- Made positive comments on (WFC) and (AIG).

Night Trading
Asian indices are +.50% to +1.0% on avg.
S&P 500 futures +.98%.
NASDAQ 100 futures +1.53%.

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
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Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (OMX)/.52
- (MHS)/.41
- (MSO)/.63
- (MVL)/.29
- (JOE)/.08
- (MDT)/.61
- (CROX)/.44
- (JCOM)/.34
- (CQB)/-.49
- (WFMI)/.35
- (GPC)/.76
- (HPQ)/.81
- (AES)/.33
- (ONXX)/-.10
- (FOSL)/.68
- (WMT)/1.01

Upcoming Splits
- None of note

Economic Data
1:00 pm EST

- The NAHB Housing Market Index for February is estimated at 19 versus 19 in January.

Other Potential Market Movers
- The Fed’s Stern speaking, (EDS) analyst meeting, (KMT) analyst meeting, Morgan Stanley Basic Materials Conference and Roth Capital Growth Stock Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for Stocks in focus Tuesday by MarketWatch.

There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – US Markets Closed

Tues. – NAHB Housing Market Index

Wed. – Weekly MBA Mortgage Applications Report, Consumer Prices Index, Housing Starts, Building Permits, FOMC Meeting Minutes

Thur. – Initial Jobless Claims, Philly Fed, Leading Indicators, Weekly EIA energy inventory report

Fri. – None of note

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – US Markets Closed

Tues. St. Joe(JOE), Martha Stewart(MSO), Marvel Entertainment(MVL), OfficeMax(OMX), Medco Health(MHS), Medtronic(MDT), CROCS(CROX), Chiquita(CQB), Whole Foods(WFMI), AES Corp.(AES), Onyx Pharma(ONXX), Fossil(FOSL), Genuine Parts(GPC), Hewlett-Packard(HPQ), Wal-Mart(WMT)

Wed. – Garmin(GRMN), Suntech Power(STP), Jack in the Box(JBX), TJX Cos(TJX), Analog Devices(ADI), Sina Corp.(SINA), Health Management Assoc.(HMA), Terex Corp.(TEX), Netease.com(NTES), Synopsys(SNPS), Hertz Global(HTZ), Transocean Inc.(RIG), WellCare(WCG)

Thur. – Quanta Services(PWR), Quest Diagnostics(DGX), Williams Cos(WMB), Reliance Steel(RS), Eaton Vance(EV), Ruth’s Chris(RUTH), Cleavland-Cliffs(CLF), Intuit(INTU), Chesapeake(CSK), Express Scripts(ESRX), Morningstar(MORN), Zale Corp.(ZLC), Newmont Mining(NEM), JC Penney(JCP), Safeway(SWY), MGM Mirage(MGM)

Fri. – PG&E Corp.(PCG), Oakley(OO)

Other events that have market-moving potential this week include:

Mon. – US Markets Closed

Tue. – Fed’s Stern speaking, (EDS) analyst meeting, (KMT) analyst meeting, Morgan Stanley Basic Materials Conference, Roth Capital Growth Stock Conference

Wed. – Fed’s Poole speaking, (NSR) analyst meeting, (SFY) analyst meeting, (TKR) analyst meeting, (FFIN) analyst meeting, (KMT) analyst meeting, Morgan Stanley Basic Materials Conference, Piper Jaffray Clean Tech Conference, Roth Capital Growth Stock Conference

Thur. – (SVR) analyst meeting, (CR) analyst conference, (CBE) investor outlook, (MDZ) analyst meeting, CIBC Institutional Investor Conference, DA Davidson Electronic Systems Design Conference, Oppenheimer Semi Summit, Morgan Stanley Basic Materials Conference, Susquehanna Intl. Group Footwear Conference, Roth Capital Growth Stock Conference

Fri. – CIBC Institutional Investor Conference, UBS Aerospace/Defense Conference, DA Davidson Electronic Systems Design Conference

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, mostly positive earnings reports, less economic pessimism, bargain hunting, diminishing bond insurer uncertainty, constructive fed commentary and short-covering. My trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Friday, February 15, 2008

Market Week in Review

S&P 500 1,349.99 +1.4%*

Photobucket

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,349.99 +1.4%
DJIA 12,348.21 +1.36%
NASDAQ 2,321.80 +.73%
Russell 2000 701.52 +.37%
Wilshire 5000 13,591.01 +1.24%
Russell 1000 Growth 557.18 +1.43%
Russell 1000 Value 742.14 +1.22%
Morgan Stanley Consumer 691.10 +1.38%
Morgan Stanley Cyclical 941.78 +1.23%
Morgan Stanley Technology 539.56 +1.49%
Transports 4,702.71 -.19%
Utilities 500.41 +1.22%
MSCI Emerging Markets 138.61 +4.27%

Sentiment/Internals
NYSE Cumulative A/D Line 58,877 -.7%
Bloomberg New Highs-Lows Index -224
Bloomberg Crude Oil % Bulls 19.0 +216.7%
CFTC Oil Large Speculative Longs 217,510 +5.8%
Total Put/Call 1.12 -.88%
NYSE Arms .80 -32.5%
Volatility(VIX) 25.02 -10.7%
G7 Currency Volatility (VXY) 9.84 -5.4%
ISE Sentiment 80.0 -14.9%
AAII % Bulls 33.3 -2.3%
AAII % Bears 41.9 -11.3%

Futures Spot Prices
Crude Oil 95.66 +4.25%
Reformulated Gasoline 249.0 +5.77%
Natural Gas 8.67 +5.24%
Heating Oil 265.0 +3.81%
Gold 905.30 -2.26%
Base Metals 243.93 +2.91%
Copper 354.25 +.83%

Economy
10-year US Treasury Yield 3.77% +13 basis points
10-year TIPS Spread 2.3% -2 basis points
TED Spread .88 +1 basis point
Fed Fund Futures 68.0% chance of 50 cut, 32.0% chance of 75 cut on 3/18
Investment Grade Credit Default Swap Index 146.0 +7.6%
Iraqi 2028 Govt Bonds 72.25 +1.31%
4-Wk MA of Jobless Claims 347,300 +3.6%
Average 30-year Mortgage Rate 5.72% +5 basis point
Weekly Mortgage Applications 1,063,500 -2.13%
Weekly Retail Sales +.6%
Nationwide Gas $2.98/gallon +.01/gallon.
US Heating Demand Next 7 Days right at normal
ECRI Weekly Leading Economic Index 133.4 -.07%
US Dollar Index 76.08 -.74%
CRB Index 384.23 +2.28%

Best Performing Style
Large-cap Growth +1.43%

Worst Performing Style
Small-cap Value +.10%

Leading Sectors
Steel +5.7%
Oil Service +5.4%
Construction +4.9%
Tobacco +4.7%
Telecom +3.5%

Lagging Sectors
Retail -1.06%
Gaming -1.6%
Gold -2.5%
Insurance -2.3%
Airlines -2.9%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Mildly Lower into Final Hour on 3-day Weekend Worries, Option Expiration

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Internet longs, ETF hedges and commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is about average. Investor anxiety is above average. Today’s overall market action is mildly bearish. The VIX is falling 1.2% today, but remains high at 25.2. The ISE Sentiment Index is a very low 78.0 and the total put/call is a high 1.16 today. Cyclicals are under mild pressure across the board today after some disappointing economic data. Tech stocks are weak on comments from electronics retailer Best Buy(BBY). However, (BBY) itself is only down 2.2% and is near session highs. Moreover, a boutique firm cut its 1Q estimates for (GS) yet it is .9% higher, at session highs. The (XLF) is also .7% higher, at session highs. Finally, (CMG) missed estimates, but is up 8 points from morning lows and is also at session highs. These are very positive signs and indicate how much bad news is already factored into many stocks at current levels. One of my longs (PWR) is jumping 6.2% today after CSFB added the stock to its Focus List with a $40 target, almost 100% higher from current levels. They said PWR is one of the most interesting infrastructure and derivative renewable power plays in their universe. With existing US power grid in dire need of an upgrade and the expected strong growth in renewable energy generation, they see several years of accelerating spending on power transmission. I agree and think their price target is reasonable. There are rumors again of a (GE) takeover of (ILMN), which I am long. Finally, the Hollywood Reporter is saying that Toshiba is expected to drop HDDVD and Wal-Mart(WMT) said it is moving exclusively towards the blu-ray format, both of which benefit my (SIGM) long. There will be a bit more competition for the company over the next year, however the market is getting significantly larger and I still think the stock will rise substantially from current levels. Corporate insiders remain very bullish on US stocks, despite the overwhelming belief by the herd that the US is plunging into a recession and protracted bear market. I suspect some of today’s selling is also related to option expiration and apprehension over the coming three-day weekend, considering what happened in Asia over the last US holiday weekend. Nikkei futures indicate a -137 open in Japan and DAX futures indicate a +70 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting and short-covering.

Today's Headlines

Bloomberg:
- OPEC cut its estimate of demand growth for crude oil this year. OPEC lowered its estimate of first-quarter demand this year by 130,000 barrels a day to 87.19 million barrels a day. The overall 2008 estimate was cut 80,000 barrels a day to 86.99 million barrels.
- President Bush urged Congress to pass electronic surveillance legislation when lawmakers return from the President’s Day recess, saying the nation is at risk when the current law expires tomorrow.

- A rescue plan for troubled bond insurers MBIA Inc.(MBI) and Ambac Financial(ABK) may be in place before they lose their top AAA ratings, NY Insurance Dept. Superintendent Eric Dinallo said.
- Venezuelan President Hugo Chavez has seized on a legal battle between the state oil company and Exxon Mobil(XOM) to drum up backing for his campaign against the US and President Bush.
- Freee vibrating toys, a packed lecture by sex therapist Dr. Ruth, skin-tight latex bodysuits and a party at a bar name the Toad. Welcome to Sex Week at Yale University.

- The US should extend tax credits for renewable energy suppliers that are set to expire at the end of 2008, the head of the International Energy Agency said.
- BP Plc(BP), Europe’s second-largest oil company, and its partners will invest $1.4 billion in US wind farm projects to generate more power. BP and partners are building five wind parks in four US states – California, Kansas, Indiana and Texas. “Wind power is growing at a phenomenal rate,” Robert Lukefahr, the president at BP Alternative Energy North American said.
- Copper rose 1.1% after inventories monitored by the LME fell 9.7% this week, the most since October 2005.
- Cognex Corp.(CGNX), the maker of industrial cameras used to detect manufacturing defects, rose the most since it began trading in 1989 after fourth-quarter earnings topped analysts’ estimates.

- Best Buy(BBY) Cuts Forecast, Citing Fourth-Quarter Sales.

Wall Street Journal:
- Citigroup Inc.(C) has barred investors in one of its hedge funds from withdrawing their money.
- US Networks, including CBS Corp.(CBS) and Sony Corp.(SNE), want to scale back television pilot shows and make the television season last all year.
- New Nike(NKE) Sneaker Targets Jocks, Greens, Wall Street.
- Qualcomm Inc.(QCOM) and Nokia(NOK) are close to an agreement on procedural issues relating to a court case between them, the two companies said.

NY Times:
- UN to Help Organize Iraqi Elections Set for October.

TheStreet.com:
- Sprint(S), Clearwire(CLWR) Near New WiMax Deal.

Walmartfacts.com:
- Wal-Mart(WMT) Moving Exclusively Toward Blu-ray Format Movies and Players.

AFP:
- Hamas staged a rally in the Gaza Strip attended by hundreds of people protesting the reprinting in Danish newspapers of cartoons depicting the Prophet Muhammad.

Handelsblatt:
- Publicis Groupe SA wants to jointly develop video-marketing tools with Google(GOOG), citing CEO Levy.

Bear Radar

Style Underperformer:

Small-cap Growth -1.49%

Sector Underperformers:

Coal (-6.76%), Homebuilders (-3.35%) and Gaming (-2.64%)

Stocks Falling on Unusual Volume:

BLX, AZPN, SONO, ULBI, GPRO, RCRC, ALXN, BJRI, DRYS, EMKR, B, CMG, VMI and BLX

Bull Radar

Style Outperformer:

Large-cap Value (-.13%)

Sector Outperformers:

Airlines (+2.36%), HMOs (+.52%) and I-Banks (+.35%)

Stocks Rising on Unusual Volume:

PEET, CPB, HPQ, CI, CHA, CN, NPBC, STO, BMA, ALE, CGNX, EHTH, PCLN, AMMD, RADS, GIII, USTR, CENX, ASIA, SPSX, DRYS, GIFI, IPCR, IBKR, HANS, ANST, LUFK, WTW, AW and SDA

Links of Interest

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