S&P 500 1,143.92 +.1%
NASDAQ 2072.71 +.42%
Leading/Lagging Sectors
Oil Service+2.72%
Fashion+1.98%
Iron/Steel+1.59%
Drugs-.43%
Telecom-.49%
Networking-.71%
Market Movers
JNPR down on NSCN acquisition....$3.3B price tag, 58% premium seen as steep.
TSN,PPC,SAFM down on Japanese import ban due to bird flu outbreak in Delaware.
SLAB up on new semi for mobile phones...seen adding $100M in revenue/.20 eps in 05....Wachovia upgrades to Outperform.
SHI,ACH,YZC,HNP,BYH up as Chinese cyclicals continue to outperform on strengthening fundamentals/technicals...relatively low valuations.
NTE up on strong earnings report.
AAII down on unexpectedly early generic competition.
IACI up on strong earnings as Expedia travel division reported a 41% increase in sales.
Mid-day News
Bush administration is now projecting 2.6M new jobs created in 04. Visa CEO said they saw 16% growth in Jan. and bankruptcies down 5%. SAP may lower prices to compete as MSFT takes share. PIMCO's McCulley told CNBC bond prices will fall soon as Fed raises rates. He is especially negative on long-dated and low-rated corporate paper. Nintendo will exit video game console market to focus on software.
BOTTOM LINE: Quiet day for the most part. JNPR acquisition and continued rotation into cyclicals and out of healthcare are 2 main areas of focus. I would like to see more follow-through from Fri. Small-cap growth is outperforming market. I haven't made any trades today. Very good day so far for the Portfolio. I will look to take profits into any unexpected weakness later today, otherwise I will maintain 100% net long stance.
Monday, February 09, 2004
Monday Watch
Earnings Announcements
Company/Estimates
CKSW/.02
FII/.47
FWHT/.14
IACI/.23
ZMH/.48
Economic Data
None of significance
Weekend News
Voice-over-internet-protocol is rapidly becoming a disruptive technology in Asia. James Cramer of the Street.com likes FFIV,YHOO,NT,JNPR and BRCM for a quick trade on the long-side. Barron's positive on RIG,TXN,LOW,TOY and DCN. Walmart talking up its RFID plans in Business Week, saying it will be buying printers and scanners as well as the tags. This should benefit ZBRA and UNA. Close analysis of the recent budget proposal for 04 shows a significant decrease in the rate of growth in Federal IT spending. The head of the IAEA, Mr El Baradei, says Dr Khan's admission shows many countries now have the ability to produce the necessary materials for nuclear weapons programs. An Arab newspaper is reporting that Al-Qaeda purchased nuclear arms from the Ukraine in 1998 and is storing them for later use. John Kerry won the Maine caucus a day after winning political contests in Michigan and Washington. His nomination is now just a formality. Shortages in components starting to appear in some areas of tech. 2 more human cases of bird flu in Vietnam. Officials in Delaware have ordered a flock of 12,000 chickens be destroyed on avian flu fears. This strain is not transferable to humans. Analysts underestimated earnings forecasts by 6% last year, the widest margin of error since tracking began in 1994. The US and Australia reached a free trade agreement that would reduce tariffs on almost all manufactured goods. Should benefit heavy machinery manufacturers most.
Asian stocks are up on avg. 1.5%.
S&P 500 indicated unch.
NASDAQ indicated +.1%
BOTTOM LINE: US equity markets should continue rallying tomorrow. I will re-evaluate my 100% net long stance based on tomorrow's action. I would like to see more volume on a follow-through rally. I will look to take profits on any unexpected weakness.
Company/Estimates
CKSW/.02
FII/.47
FWHT/.14
IACI/.23
ZMH/.48
Economic Data
None of significance
Weekend News
Voice-over-internet-protocol is rapidly becoming a disruptive technology in Asia. James Cramer of the Street.com likes FFIV,YHOO,NT,JNPR and BRCM for a quick trade on the long-side. Barron's positive on RIG,TXN,LOW,TOY and DCN. Walmart talking up its RFID plans in Business Week, saying it will be buying printers and scanners as well as the tags. This should benefit ZBRA and UNA. Close analysis of the recent budget proposal for 04 shows a significant decrease in the rate of growth in Federal IT spending. The head of the IAEA, Mr El Baradei, says Dr Khan's admission shows many countries now have the ability to produce the necessary materials for nuclear weapons programs. An Arab newspaper is reporting that Al-Qaeda purchased nuclear arms from the Ukraine in 1998 and is storing them for later use. John Kerry won the Maine caucus a day after winning political contests in Michigan and Washington. His nomination is now just a formality. Shortages in components starting to appear in some areas of tech. 2 more human cases of bird flu in Vietnam. Officials in Delaware have ordered a flock of 12,000 chickens be destroyed on avian flu fears. This strain is not transferable to humans. Analysts underestimated earnings forecasts by 6% last year, the widest margin of error since tracking began in 1994. The US and Australia reached a free trade agreement that would reduce tariffs on almost all manufactured goods. Should benefit heavy machinery manufacturers most.
Asian stocks are up on avg. 1.5%.
S&P 500 indicated unch.
NASDAQ indicated +.1%
BOTTOM LINE: US equity markets should continue rallying tomorrow. I will re-evaluate my 100% net long stance based on tomorrow's action. I would like to see more volume on a follow-through rally. I will look to take profits on any unexpected weakness.
Sunday, February 08, 2004
Outlook
Investors will focus on Greenspan's testimony to Congress on Wed. for affirmation that an imminent rate hike is not forthcoming. A preliminary reading from the Univ. of Mich. on consumer confidence will be released Fri. These are the only 2 significant economic events for the week. The short-term technical indicators I follow turned positive on Fri. I expect the recent strength in retail, homebuilding and technology will continue this week. Consumer spending will only strengthen throughout the year with major tax cuts, low interest rates and decreasing unemployment continuing. Investors are anticipating this now.
BOTTOM LINE: On Fri. I positioned the portfolio 100% net long(%longs-%shorts). I covered some shorts and added a few new longs in the above mentioned sectors. I initiated a position in OHB, a small-cap homebuilder, on fri. It is down 40% from its high on interest rate fears. It has a great track record, low valuation and strong fundamentals. Technicals confirmed my buy decision and I expect it to outperform until interest rate fears resurface.
BOTTOM LINE: On Fri. I positioned the portfolio 100% net long(%longs-%shorts). I covered some shorts and added a few new longs in the above mentioned sectors. I initiated a position in OHB, a small-cap homebuilder, on fri. It is down 40% from its high on interest rate fears. It has a great track record, low valuation and strong fundamentals. Technicals confirmed my buy decision and I expect it to outperform until interest rate fears resurface.
Markets Week in Review
The S&P 500 Index rose for the 10th time in the last 11 weeks as strong economic reports and subsequent comments by a Fed Governor led investors to conclude that an imminent interest rate hike was not in the cards. Wednesday's technology weakness, led on the downside by CSCO, proved fleeting as investors focused on improving corporate profits with exceptionally low inflation. Profits for the S&P 500 are now projected to rise a healthy 14.2% in the 1st Q and 13.6% for all of 04. Thursday and Friday saw a rotation back into cyclicals, especially retail and technology.
BOTTOM LINE: Friday's strong positive reaction to underwhelming employment numbers shows the underlying strength in the US equity market. I would like to see follow-through on Mon. I expect we will. Seemingly overnight, investors decided that interest rates were not going to rise significantly anytime soon, thus rotating viciously back into cyclicals. I suspect a short-squeeze also contributed to the strength Fri.
BOTTOM LINE: Friday's strong positive reaction to underwhelming employment numbers shows the underlying strength in the US equity market. I would like to see follow-through on Mon. I expect we will. Seemingly overnight, investors decided that interest rates were not going to rise significantly anytime soon, thus rotating viciously back into cyclicals. I suspect a short-squeeze also contributed to the strength Fri.
Economic Week in Review
ECRI Weekly Leading Index 132.60 -.15%
The ISM Manufacturing index rose to 63.6 in January, a 21-year high, as factories boosted production to replace depleted inventories and meet improving demand. The pace of growth in the last 6 months of 2003 was the strongest in 2 decades, causing inventories to drop to record lows. Manufacturing may also be getting a boost from rising exports. Growth last quarter was augmented by a 19.1% jump in exports, the biggest increase in 7 years. A weaker US dollar has resulted in a dramatic increase in competitiveness for US companies overseas. The ISM Services Index rose to 65.7, its highest level since its inception in July 97. This is a very important number since services account for 85% of the US economy. Productivity came in at 2.7%, down from 9.4% last quarter. This bodes well for an increase in hiring. However, January's change in non-farm payrolls was only an increase of 112,000, below estimates of 172,000. This was the largest increase in jobs created in over 3 years, yet disappointed analysts. The headline unemployment rate dropped to 5.6%. Retail sales climbed a brisk 5.8% in January on increased sales of cold-weather clothing and increasing consumer confidence. Fed Governor Ben Bernanke said that he expects "some large employment gains fairly soon." He also stated that the Fed could be patient over the next few months because inflation will remain subdued through 05.
BOTTOM LINE: The very high readings for services, manufacturing and retail sales leads me to expect a very good 1Q GDP number. Currently, economists are projecting 4.4% GDP growth. I believe a number north of 5% is more likely. This, combined with record low inventories and decreasing productivity leads me to conclude that we are finally at the cusp of a significant pick-up in hiring. Within the next 2 months, we should finally see employment growth exceed expectations.
The ISM Manufacturing index rose to 63.6 in January, a 21-year high, as factories boosted production to replace depleted inventories and meet improving demand. The pace of growth in the last 6 months of 2003 was the strongest in 2 decades, causing inventories to drop to record lows. Manufacturing may also be getting a boost from rising exports. Growth last quarter was augmented by a 19.1% jump in exports, the biggest increase in 7 years. A weaker US dollar has resulted in a dramatic increase in competitiveness for US companies overseas. The ISM Services Index rose to 65.7, its highest level since its inception in July 97. This is a very important number since services account for 85% of the US economy. Productivity came in at 2.7%, down from 9.4% last quarter. This bodes well for an increase in hiring. However, January's change in non-farm payrolls was only an increase of 112,000, below estimates of 172,000. This was the largest increase in jobs created in over 3 years, yet disappointed analysts. The headline unemployment rate dropped to 5.6%. Retail sales climbed a brisk 5.8% in January on increased sales of cold-weather clothing and increasing consumer confidence. Fed Governor Ben Bernanke said that he expects "some large employment gains fairly soon." He also stated that the Fed could be patient over the next few months because inflation will remain subdued through 05.
BOTTOM LINE: The very high readings for services, manufacturing and retail sales leads me to expect a very good 1Q GDP number. Currently, economists are projecting 4.4% GDP growth. I believe a number north of 5% is more likely. This, combined with record low inventories and decreasing productivity leads me to conclude that we are finally at the cusp of a significant pick-up in hiring. Within the next 2 months, we should finally see employment growth exceed expectations.
Saturday, February 07, 2004
Weekly Scoreboard*
Indices
S&P 500 1,142.76+1.03%
Dow 10,593.03+1.00%
NASDAQ 2,064.01-.10%
Russell 2000 584.07+.57%
Wilshire 5000 11,129.42+.91%
Volatility(VIX) 16.0-3.79%
AAII Bullish % 50.91-10.5%
US Dollar 86.02-1.31%
CRB 260.5-.48%
Futures Spot Prices
Gold 404.2+.22%
Crude Oil 32.48-2.02%
Natural Gas 5.35-.76%
Lumber 363.6+8.89%
10-year US Treasury Yield 4.08%-1.21%
Average 30-year Mortgage Rate 5.72%+.7%
Sectors
Leading
Retail 128.20+4.06%
Homebuilders 239.57+3.02%
Drugs 351.41+3.21%
Lagging
Networking 295.23-2.78%
HMO's 870.28-2.47%
Computer Services 129.34-1.84%
*% Gain or loss for the week
S&P 500 1,142.76+1.03%
Dow 10,593.03+1.00%
NASDAQ 2,064.01-.10%
Russell 2000 584.07+.57%
Wilshire 5000 11,129.42+.91%
Volatility(VIX) 16.0-3.79%
AAII Bullish % 50.91-10.5%
US Dollar 86.02-1.31%
CRB 260.5-.48%
Futures Spot Prices
Gold 404.2+.22%
Crude Oil 32.48-2.02%
Natural Gas 5.35-.76%
Lumber 363.6+8.89%
10-year US Treasury Yield 4.08%-1.21%
Average 30-year Mortgage Rate 5.72%+.7%
Sectors
Leading
Retail 128.20+4.06%
Homebuilders 239.57+3.02%
Drugs 351.41+3.21%
Lagging
Networking 295.23-2.78%
HMO's 870.28-2.47%
Computer Services 129.34-1.84%
*% Gain or loss for the week
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