Friday, February 06, 2004
Mid-day Update
BOTTOM LINE: A technical glitch has resulted in another day without a mid-day report. Briefly, I have taken the portfolio to a net 100% long position by covering a few shorts and adding several longs. I will look for follow-through on Mon. to maintain this level of market exposure. The economy created 112,000 jobs in January, the most in 3 years, but below expectations. The headline unemployment rate dropped to 5.6%. This resulted in a decline in interest rates, a decline in the US dollar, a rise in gold and a rotation back into cyclicals. The positive response by the US equity markets to these numbers shows the underlying strength is still there.
Friday Watch
Earnings Announcements
Company/Estimates
NTE/.26
SILI/.40
VECO/.02
VSH/.09
Economic Data
Unemployment estimated at 5.7% vs. 5.7% last month.
Change in Non-farm payrolls estimated at 175,000 vs. 1,000 last month.
Change in Manufacturing payrolls estimated at -5,000 vs. -26,000 last month.
Late-night News
Moscow Metro train was just hit by an explosion while underground. There are casualties. OPEC will likely maintain oil-production quotas next week and leave cuts for later. PIMCO's McCulley said the Fed shouldn't raise rates just to stem the dollars fall. Greenspan's testimony next Wed. may telegraph timing of rate hike. Business Week....ECLG may rise to $30 within the year according to Trace Urdan of ThinkEquity Partners. Bloomberg article says that the last 4 times the Fed made the first move in a sustained series of rate increases, the market averaged healthy gains over the ensuing 6 months. The NASDAQ averaged a 17% gain and the S&P 500 a 9% advance. The average stock mutual fund is up 40.9% over the last 12 months.
Asian indices up about 1-2% on avg.
S&P 500 indicated up .06%.
NASDAQ indicated up .14%
BOTTOM LINE: A lot depends on the employment numbers tomorrow. If they come in as expected or exceed expectations we should see a good rally. If they come in below expectations, the major indices will likely fall. It would also be negative if we meet or beat expectations, yet the market doesn't rally. Conversely, it would be positive if we come in below expectations and see a rally. The most likely scenario is that the employment numbers beat expectations and the market has a good rally. I am 20% long and will look to add more market exposure under this scenario.
Company/Estimates
NTE/.26
SILI/.40
VECO/.02
VSH/.09
Economic Data
Unemployment estimated at 5.7% vs. 5.7% last month.
Change in Non-farm payrolls estimated at 175,000 vs. 1,000 last month.
Change in Manufacturing payrolls estimated at -5,000 vs. -26,000 last month.
Late-night News
Moscow Metro train was just hit by an explosion while underground. There are casualties. OPEC will likely maintain oil-production quotas next week and leave cuts for later. PIMCO's McCulley said the Fed shouldn't raise rates just to stem the dollars fall. Greenspan's testimony next Wed. may telegraph timing of rate hike. Business Week....ECLG may rise to $30 within the year according to Trace Urdan of ThinkEquity Partners. Bloomberg article says that the last 4 times the Fed made the first move in a sustained series of rate increases, the market averaged healthy gains over the ensuing 6 months. The NASDAQ averaged a 17% gain and the S&P 500 a 9% advance. The average stock mutual fund is up 40.9% over the last 12 months.
Asian indices up about 1-2% on avg.
S&P 500 indicated up .06%.
NASDAQ indicated up .14%
BOTTOM LINE: A lot depends on the employment numbers tomorrow. If they come in as expected or exceed expectations we should see a good rally. If they come in below expectations, the major indices will likely fall. It would also be negative if we meet or beat expectations, yet the market doesn't rally. Conversely, it would be positive if we come in below expectations and see a rally. The most likely scenario is that the employment numbers beat expectations and the market has a good rally. I am 20% long and will look to add more market exposure under this scenario.
Thursday, February 05, 2004
Thursday Close
S&P 500 1,128.59 +.18%
NASDAQ 2,019.56 +.27%
Leading/Lagging Sectors
Gaming+2.02%
Airlines+1.78%
Retail+1.68%
Oil Service-1.45%
Hospitals-1.43%
Biotech-.97%
After-hours Movers
CAMD up after earnings exceeded expectations.
MXIM up after beating earnings expectations and raising guidance.
PGTV down significantly after Direct TV said it ended mediation over the companies' marketing relationship and will proceed to trial.
CELL down significantly on earnings and revenue miss.
APCC down after beating earnings estimates, but lowering guidance.
After-hours News
Morgan Stanley Capital Intl. may upgrade S. Korea status to developed market from emerging market. This would likely increase foreign fund flows to S. Korea. Gephardt will endorse Kerry tomorrow. President Bush named Senator John McCain to Iraq investigation panel. Australian Prime Minister John Howard and President Bush are likely to negotiate directly on a free-trade deal.
BOTTOM LINE: US equity markets rallied after Fed Governor Bernanke said the Fed can be patient with monetary policy "over the next few months" because a significant rise in inflation this year or next is unlikely. Productivity has averaged 4.6% the last 2 years, the highest since 1950-51, keeping a lid on job creation and inflation. However, Bernanke said he "expects to see big job growth numbers fairly soon." This statement led traders to the conclusion that tomorrow's employment report would exceed the 175,000 estimate for job creation. I am a little concerned that the market didn't rally more. Thus, I covered a few shorts, but kept my net long exposure to only 20%. I will monitor the markets reaction to tomorrow's number before making any further adjustments to the portfolio.
NASDAQ 2,019.56 +.27%
Leading/Lagging Sectors
Gaming+2.02%
Airlines+1.78%
Retail+1.68%
Oil Service-1.45%
Hospitals-1.43%
Biotech-.97%
After-hours Movers
CAMD up after earnings exceeded expectations.
MXIM up after beating earnings expectations and raising guidance.
PGTV down significantly after Direct TV said it ended mediation over the companies' marketing relationship and will proceed to trial.
CELL down significantly on earnings and revenue miss.
APCC down after beating earnings estimates, but lowering guidance.
After-hours News
Morgan Stanley Capital Intl. may upgrade S. Korea status to developed market from emerging market. This would likely increase foreign fund flows to S. Korea. Gephardt will endorse Kerry tomorrow. President Bush named Senator John McCain to Iraq investigation panel. Australian Prime Minister John Howard and President Bush are likely to negotiate directly on a free-trade deal.
BOTTOM LINE: US equity markets rallied after Fed Governor Bernanke said the Fed can be patient with monetary policy "over the next few months" because a significant rise in inflation this year or next is unlikely. Productivity has averaged 4.6% the last 2 years, the highest since 1950-51, keeping a lid on job creation and inflation. However, Bernanke said he "expects to see big job growth numbers fairly soon." This statement led traders to the conclusion that tomorrow's employment report would exceed the 175,000 estimate for job creation. I am a little concerned that the market didn't rally more. Thus, I covered a few shorts, but kept my net long exposure to only 20%. I will monitor the markets reaction to tomorrow's number before making any further adjustments to the portfolio.
Mid-day Update
I was in the process of publishing the mid-day update and my system crashed. I don't have time for a do-over. Basically, a Fed governor made comments that led the market to believe tomorrow's jobs report will be very good, thus the market is rallying in advance of this number. I am covering some shorts and adding a couple of longs to move the portfolio to a 20% net long position.
Thursday Watch
Earnings Announcements
Company/Estimate
AES/-.02
Dox/.24
CELL/.34
EDS/.11
JNY/.32
LVLT/-.32
MXIM/.27
THQI/.77
Economic Data
Non-farm productivity estimated at 2.5% vs. 9.4% last Q.
Initial jobless claims estimated at 340K vs. 342K last week.
Continuing claims estimated at 3114K vs. 3131K last week.
After-Hours News
Progress made in containing Asian bird flu in China and Thailand.
Israeli police will question Sharon today in bribe investigation.
Toyota, which probably overtook Ford as the world's second-largest car-maker, said third-quarter profit rose 60% as it sold more Tundra pickup trucks and Sienna minivans in the US.
The continuing tightness is some components is causing CSCO to increase component stocking and inventory....suppliers are IDTI(23% of sales),AVNX(18%),PWER(16%),MERX(15%),PMCS(13%),TXCC(11%),BRCM(9%),JBL(24%),SLR(8%). This was one of the main problems with their quarter.
Asian markets are quiet...ranging from -.5% to +.5%.
S&P 500 indicated -.06%.
NASDAQ incdicated +.07%.
BOTTOM LINE: The recent rotation from all cyclicals and mainly tech, into consumer stocks is a result of Fed tightening fears, temporary slowdown in GDP, US dollar stabilization,anemic job growth and the strengthening of Kerry with anti-business rhetoric. Like I have said before, I don't think the Fed will tighten until employment strengthens considerably. I do think this will happen and most likely around 2nd/3rd quarter. Historically, cyclicals do well for another 6 months after the first tightening. I believe GDP is re-accelerating and will come in above 5% for the first quarter. The US dollar will likely move in a trading range for awhile. Our strengthening economy and improving trade deficit should counter budget deficit fears. I feel that most of Kerry's anti-business rhetoric is a result of fact that the other democratic candidates are pushing him into this stance. I expect him to win the nomination and tone down the anti-business rhetoric against President Bush. As mentioned earlier in the day, I am 10% net short and will look to cover a few of these tomorrow in anticipation of a good jobs report on Fri.
Company/Estimate
AES/-.02
Dox/.24
CELL/.34
EDS/.11
JNY/.32
LVLT/-.32
MXIM/.27
THQI/.77
Economic Data
Non-farm productivity estimated at 2.5% vs. 9.4% last Q.
Initial jobless claims estimated at 340K vs. 342K last week.
Continuing claims estimated at 3114K vs. 3131K last week.
After-Hours News
Progress made in containing Asian bird flu in China and Thailand.
Israeli police will question Sharon today in bribe investigation.
Toyota, which probably overtook Ford as the world's second-largest car-maker, said third-quarter profit rose 60% as it sold more Tundra pickup trucks and Sienna minivans in the US.
The continuing tightness is some components is causing CSCO to increase component stocking and inventory....suppliers are IDTI(23% of sales),AVNX(18%),PWER(16%),MERX(15%),PMCS(13%),TXCC(11%),BRCM(9%),JBL(24%),SLR(8%). This was one of the main problems with their quarter.
Asian markets are quiet...ranging from -.5% to +.5%.
S&P 500 indicated -.06%.
NASDAQ incdicated +.07%.
BOTTOM LINE: The recent rotation from all cyclicals and mainly tech, into consumer stocks is a result of Fed tightening fears, temporary slowdown in GDP, US dollar stabilization,anemic job growth and the strengthening of Kerry with anti-business rhetoric. Like I have said before, I don't think the Fed will tighten until employment strengthens considerably. I do think this will happen and most likely around 2nd/3rd quarter. Historically, cyclicals do well for another 6 months after the first tightening. I believe GDP is re-accelerating and will come in above 5% for the first quarter. The US dollar will likely move in a trading range for awhile. Our strengthening economy and improving trade deficit should counter budget deficit fears. I feel that most of Kerry's anti-business rhetoric is a result of fact that the other democratic candidates are pushing him into this stance. I expect him to win the nomination and tone down the anti-business rhetoric against President Bush. As mentioned earlier in the day, I am 10% net short and will look to cover a few of these tomorrow in anticipation of a good jobs report on Fri.
Wednesday, February 04, 2004
Wednesday Close
S&P 500 1,126.52-.84%
NASDAQ 2,014.14-2.52%
Leading/Lagging Sectors
Drugs+.7%
Fashion+.23%
Restaurants+.16%
Networking-5.2%
Internet-3.76%
Semis-2.99%
After-Hours Movers
OPTV+9.29% up on pact with Matsushita.
AEOS+8.9% up on better than expected 4Q earnings.
ESST+7.49% up on better than expected 4Q and raised 1Q guidance.
UNM-10.31% down on disappointing earnings due to increased claims reserves.
MDT-4.3% down on earnings report...profit-taking.
After-hours News
US bans Asian bird imports to try and prevent flu from spreading here. China plans to slow investment growth in steel, aluminum and cement industries to curb future inflation.
BOTTOM LINE: Market will likely be up modestly tomorrow. Probably a quiet day in anticipation of Fri. employment numbers. Initial jobless claims and productivity reports could provide sparks, but not likely. My portfolio was essentially flat today with the major indices down. I am about 10% net short and will be looking to cover a few of these at some point tomorrow.
NASDAQ 2,014.14-2.52%
Leading/Lagging Sectors
Drugs+.7%
Fashion+.23%
Restaurants+.16%
Networking-5.2%
Internet-3.76%
Semis-2.99%
After-Hours Movers
OPTV+9.29% up on pact with Matsushita.
AEOS+8.9% up on better than expected 4Q earnings.
ESST+7.49% up on better than expected 4Q and raised 1Q guidance.
UNM-10.31% down on disappointing earnings due to increased claims reserves.
MDT-4.3% down on earnings report...profit-taking.
After-hours News
US bans Asian bird imports to try and prevent flu from spreading here. China plans to slow investment growth in steel, aluminum and cement industries to curb future inflation.
BOTTOM LINE: Market will likely be up modestly tomorrow. Probably a quiet day in anticipation of Fri. employment numbers. Initial jobless claims and productivity reports could provide sparks, but not likely. My portfolio was essentially flat today with the major indices down. I am about 10% net short and will be looking to cover a few of these at some point tomorrow.
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