Earnings Announcements
Company/Estimates
ANF/.95
A/.22
DE/.52
NTES/.32
NTAP/.10
Economic Data
Empire Manufacturing estimated at 37 vs. 39.2 last month.
Industrial Production estimated at .8% vs. .1% last month.
Capacity Utilization estimated at 76.4% vs. 75.8% last month.
Weekend News
U.N. says bird flu eradication may take years. Disney(DIS) may be worth up to $35/share according to Goldman Sachs and Bear Stearns, the company's advisers. The Democratic Party wants to increase taxes on the wealthy to spend as much as $6B more annually on education, according to the Washington Post. Senator Kerry's chances of winning the Democratic nomination rebounded to 95% over the weekend, as no additional news regarding the intern scandal surfaced. The NYPD has been preparing for possible nuclear, biological or chemical weapons attacks, the NY Times reported. Wal-Mart said February sales at U.S. stores are rising at the high end of its forecast, as shoppers purchased more coats, food and Valentine's items last week. U.K. warns major terror attacks may be imminent in Saudi Arabia. North Fork Bancorp confirmed rumors that it would buy GreenPoint Financial for $6.3B.
Weekend Recommendations
Guests on "Forbes on Fox" made positive comments on APC,COP,CAM,POG and NWL. On "Cashin N", ATVI, MX, TELK, NGG and VE were talked up. ATVI, NTOP, GNSS, LUV, and TXN were recommended on "Bulls and Bears". Barron's had positive comments on LORLF, DIS, JNS, HZO, CLE, FITE, ANN and CHS. It had negative analysis on CMCSK, FD, MAY, DDS, SKS and the technology sector.
Late-Night Trading
Asian indices are up on average .75% to 1.25%.
S&P 500 indicated +.24%.
NASDAQ indicated +.47%.
BOTTOM LINE: With my short-term indicators on "sell", I have positioned the Portfolio conservatively at 40% net long. It looks like the markets may try and rebound on the open from the end-of-week selling. I will closely watch the strength of this rebound and my short-term indicators. I am very bullish intermediate-term, but I don't want to fight the tape.
Tuesday, February 17, 2004
Monday, February 16, 2004
Weekly Outlook
U.S. stocks should extend recent gains this week, as the release of a number of key economic indicators should confirm brisk growth with little inflation. As well, recent merger activity should continue and a number of leading U.S. companies are set to release earnings. Reports over the weekend say North Fork is nearing an agreement to acquire GreenPoint Financial for about $6.2B in a union of two similarly sized New York regional banks. Shares of AT&T Wireless and Disney gained in Europe on Mon., as investors speculated there will be takeover battles for the 3rd-largest U.S. mobile phone provider and the No. 2 U.S. media company. Agilent(A), Applied Materials(AMAT), Hewlett-Packard(HPQ), Intuit(INTU), Nextel(NXTL), Nordstrom(JWN), Wal-Mart(WMT) and Target(TGT) report this week. Options expiration should add to volatility towards the end of the week.
BOTTOM LINE: The short-term technical indicators I follow turned negative last week, thus my Portfolio's relatively low(40% net long) level of market exposure. I believe we are still consolidating from the markets extraordinary strength over the last 12 months before we make new highs. While I am cautious short-term, I am getting more and more positive on the markets potential performance for the year. Valuations are LOW for the general market on expected 04 earnings relative to interest rates. With an expected P/E of 18.8 and interest rates at 46-year lows, the S&P 500 should continue a meaningful advance. Fed Fund futures are now showing market expectations that the Fed will remain on hold until Oct. I can't emphasize enough how positive the recent acceleration in merger and acquisition activity is for the market. Venture capital, for the first time in several years, is accelerating its flow into many promising U.S. start-ups. Investors have poured $31B into equity mutual funds just this year, according to recent data. The media harps on the decline in the dollar and large budget/trade deficits scaring away foreign investors, yet recent data suggest otherwise. Foreigners' appetite for U.S. stocks and bonds remains voracious. In November, foreign purchases of U.S. stocks and bonds jumped 217% to 87.6 billion, after a 560% jump in October according to The Street.com. A quiet IPO/secondary market, major Merger/acquisition activity and increasing inflows into U.S. equity funds all paint a very bright supply/demand picture for the market. Economic data points released this week should confirm accelerated spending by corporate America. Finally, with asset values increasing, debt service burdens decreasing, interest rates/inflation low, large increases in income tax refunds and income/job growth steadily accelerating, the consumer should continue to contribute meaningfully to economic growth. Strong housing and retail markets will provide a significant boost to 1st Q GDP, propelling it above 5% for the quarter. Overall, despite the negativity conveyed by most of the mainstream media, 04 is shaping up to be another very good year.
BOTTOM LINE: The short-term technical indicators I follow turned negative last week, thus my Portfolio's relatively low(40% net long) level of market exposure. I believe we are still consolidating from the markets extraordinary strength over the last 12 months before we make new highs. While I am cautious short-term, I am getting more and more positive on the markets potential performance for the year. Valuations are LOW for the general market on expected 04 earnings relative to interest rates. With an expected P/E of 18.8 and interest rates at 46-year lows, the S&P 500 should continue a meaningful advance. Fed Fund futures are now showing market expectations that the Fed will remain on hold until Oct. I can't emphasize enough how positive the recent acceleration in merger and acquisition activity is for the market. Venture capital, for the first time in several years, is accelerating its flow into many promising U.S. start-ups. Investors have poured $31B into equity mutual funds just this year, according to recent data. The media harps on the decline in the dollar and large budget/trade deficits scaring away foreign investors, yet recent data suggest otherwise. Foreigners' appetite for U.S. stocks and bonds remains voracious. In November, foreign purchases of U.S. stocks and bonds jumped 217% to 87.6 billion, after a 560% jump in October according to The Street.com. A quiet IPO/secondary market, major Merger/acquisition activity and increasing inflows into U.S. equity funds all paint a very bright supply/demand picture for the market. Economic data points released this week should confirm accelerated spending by corporate America. Finally, with asset values increasing, debt service burdens decreasing, interest rates/inflation low, large increases in income tax refunds and income/job growth steadily accelerating, the consumer should continue to contribute meaningfully to economic growth. Strong housing and retail markets will provide a significant boost to 1st Q GDP, propelling it above 5% for the quarter. Overall, despite the negativity conveyed by most of the mainstream media, 04 is shaping up to be another very good year.
Sunday, February 15, 2004
Market Week in Review
The S&P 500 advanced for an 11th week in 12 on Greenspan's testimony to Congress, takeover announcements and interest rates near 46-year lows. Greenspan told lawmakers Wednesday the U.S. economy may grow as much as 5% this year, the strongest pace since 1984, without sparking inflation. As a result, he said the Fed can be "patient" with respect to raising rates. Comcast's hostile bid for Disney and Juniper's acquisition of NetScreen generated excitement for further takeover announcements. Consolidation, in the form of increased mergers and acquisitions, is generally very positive for the overall market.
In other positive developments, Imclone's Erbitux received FDA approval for the treatment of colon cancer. PC motherboard shipments in Jan. rose much more than expected according to Smith Barney. The FCC ruled a computer-to-computer calling service isn't subject to traditional telephone rules, signaling it will take a hands-off approach to other internet-phone services as it begins a regulatory review of the VOIP industry. Commodity-related sectors exhibited tremendous strength throughout the week on price increases resulting from voracious Chinese demand and a significant improvement in U.S. growth.
While the S&P 500 rose modestly for the week, the NASDAQ fell .5%. This divergence and weakening breadth readings are a little worrisome and merit attention. OPEC's decision to cut production in April and stick to quotas resulted in a significant increase in energy prices. While Dell met expectations, it was more conservative than most investors expected on its conference call. I believe they are managing expectations to enable them to report a very good upside surprise next quarter. Lastly, Bank of America lowered expectations for Intel's 1st quarter sales and profits. I am not sure what to make of this, as it contradicts the Smith Barney motherboard report. Investors took profits across the board in technology the last two days of the week.
BOTTOM LINE: It appears as though last week's market action was a continuation of the recent consolidation that began a month ago. It wasn't a bad week, but with the exception of commodity-related sectors, not good either. It seems as though more consolidation needs to occur before a meaningful thrust through recent highs.
In other positive developments, Imclone's Erbitux received FDA approval for the treatment of colon cancer. PC motherboard shipments in Jan. rose much more than expected according to Smith Barney. The FCC ruled a computer-to-computer calling service isn't subject to traditional telephone rules, signaling it will take a hands-off approach to other internet-phone services as it begins a regulatory review of the VOIP industry. Commodity-related sectors exhibited tremendous strength throughout the week on price increases resulting from voracious Chinese demand and a significant improvement in U.S. growth.
While the S&P 500 rose modestly for the week, the NASDAQ fell .5%. This divergence and weakening breadth readings are a little worrisome and merit attention. OPEC's decision to cut production in April and stick to quotas resulted in a significant increase in energy prices. While Dell met expectations, it was more conservative than most investors expected on its conference call. I believe they are managing expectations to enable them to report a very good upside surprise next quarter. Lastly, Bank of America lowered expectations for Intel's 1st quarter sales and profits. I am not sure what to make of this, as it contradicts the Smith Barney motherboard report. Investors took profits across the board in technology the last two days of the week.
BOTTOM LINE: It appears as though last week's market action was a continuation of the recent consolidation that began a month ago. It wasn't a bad week, but with the exception of commodity-related sectors, not good either. It seems as though more consolidation needs to occur before a meaningful thrust through recent highs.
Economic Week in Review
ECRI Weekly Leading Index 131.7-.68%
Sales at U.S. retailers excluding auto dealers increased .9% in January, the biggest rise in 5 months, as consumers used their Christmas gift cards, taking advantage of post-holiday discounts. As well, cold weather across much of the nation led to increased sales of sweaters and coats. There does not appear to be a retail slow-down so far in February. The same bad weather that helped retailers hurt auto dealers. Including autos, sales fell .3% in January, the first drop since Sept. of 03. However, economists are expecting auto sales to snap back sharply in February with better weather conditions.
The number of Americans filing first-time jobless claims unexpectedly rose by 6,000 last week. Bad weather may have resulted in temporary layoffs at construction related companies, a government spokesman said. It is my opinion that the over-capacity created by the bubble of the late 90's is resulting in an extended time-line for our current recovery. All the expected signs of economic recovery are occurring, but at a leisurely pace. However, this over-capacity is finally being burned off with vigorous U.S. demand in many sectors reported during the last 2 quarters and extending into this quarter. Recently, Cisco Systems and Micron Technology, two of the largest U.S. tech companies, stated that component shortages in their latest quarters are causing them to increase purchases for their inventories from suppliers. Vanguard, one of the largest investment firms in the world, stated this week that a substantial increase in customer interest and activity has resulted in a need to hire a lot of new people quickly.
Furthermore, recent reports showing the ratio of inventories-to-sales at all-time record lows, orders improving for manufacturers more than at any time in 50 years, and a decrease in productivity from 9.2% in the 3rd Q to 2.7% in the 4th Q also point to an increase in hiring very soon. Greenspan went out of his way to point this out several times in his testimony to Congress. Companies have finally squeezed every last ounce of productivity out of their current employees. With GDP growth rising at its fastest past in 20 years, during the last six months, burning off most of the excess capacity produced during the bubble, companies are ready to start hiring again to meet increased demand. Employment has always been a lagging indicator by about 6 months after substantial economic growth. Since substantial growth didn't occur in this recovery until the 3rd Q of 03 and the over-capacity issue is resulting in a push-out of usual recovery characteristics, I believe we are right on schedule for significant job growth within the next 3 months.
The University of Michigan Consumer Confidence Index fell unexpectedly in February to 93.1 from January's near 4-year high reading of 103.8. It is my belief that this decline was a result of several factors. First, I have never seen a greater disconnect between what is really occurring and what the mainstream media are reporting. The media's constant focus and obsession with all things negative could be the result of election year politics or the incorrect assumption that Americans prefer this type of reporting. It is very rare to turn on the nightly news without hearing about how bad the employment situation is, another new terror threat, an attack in Iraq or a new political scandal. I also think an increase in energy prices may have contributed to the decline in sentiment. I am closely following this situation. I am worried that energy prices could cause significant harm to the U.S. economy within the next couple of years. Finally, January's reading of 103.8 was the highest reading since November of 2000. A fall in February from this sharp spike up should have been expected.
BOTTOM LINE: With tax refunds and an improving labor market on the near-tear horizon, it is likely that the consumer will continue to spend. As well, interest rates remain near 46-year lows. These factors, combined with the multi-decade highs in many data points related to increased corporate profitability and spending, leads me to believe that the possibility of a substantial period of U.S. economic prosperity is rising.
Sales at U.S. retailers excluding auto dealers increased .9% in January, the biggest rise in 5 months, as consumers used their Christmas gift cards, taking advantage of post-holiday discounts. As well, cold weather across much of the nation led to increased sales of sweaters and coats. There does not appear to be a retail slow-down so far in February. The same bad weather that helped retailers hurt auto dealers. Including autos, sales fell .3% in January, the first drop since Sept. of 03. However, economists are expecting auto sales to snap back sharply in February with better weather conditions.
The number of Americans filing first-time jobless claims unexpectedly rose by 6,000 last week. Bad weather may have resulted in temporary layoffs at construction related companies, a government spokesman said. It is my opinion that the over-capacity created by the bubble of the late 90's is resulting in an extended time-line for our current recovery. All the expected signs of economic recovery are occurring, but at a leisurely pace. However, this over-capacity is finally being burned off with vigorous U.S. demand in many sectors reported during the last 2 quarters and extending into this quarter. Recently, Cisco Systems and Micron Technology, two of the largest U.S. tech companies, stated that component shortages in their latest quarters are causing them to increase purchases for their inventories from suppliers. Vanguard, one of the largest investment firms in the world, stated this week that a substantial increase in customer interest and activity has resulted in a need to hire a lot of new people quickly.
Furthermore, recent reports showing the ratio of inventories-to-sales at all-time record lows, orders improving for manufacturers more than at any time in 50 years, and a decrease in productivity from 9.2% in the 3rd Q to 2.7% in the 4th Q also point to an increase in hiring very soon. Greenspan went out of his way to point this out several times in his testimony to Congress. Companies have finally squeezed every last ounce of productivity out of their current employees. With GDP growth rising at its fastest past in 20 years, during the last six months, burning off most of the excess capacity produced during the bubble, companies are ready to start hiring again to meet increased demand. Employment has always been a lagging indicator by about 6 months after substantial economic growth. Since substantial growth didn't occur in this recovery until the 3rd Q of 03 and the over-capacity issue is resulting in a push-out of usual recovery characteristics, I believe we are right on schedule for significant job growth within the next 3 months.
The University of Michigan Consumer Confidence Index fell unexpectedly in February to 93.1 from January's near 4-year high reading of 103.8. It is my belief that this decline was a result of several factors. First, I have never seen a greater disconnect between what is really occurring and what the mainstream media are reporting. The media's constant focus and obsession with all things negative could be the result of election year politics or the incorrect assumption that Americans prefer this type of reporting. It is very rare to turn on the nightly news without hearing about how bad the employment situation is, another new terror threat, an attack in Iraq or a new political scandal. I also think an increase in energy prices may have contributed to the decline in sentiment. I am closely following this situation. I am worried that energy prices could cause significant harm to the U.S. economy within the next couple of years. Finally, January's reading of 103.8 was the highest reading since November of 2000. A fall in February from this sharp spike up should have been expected.
BOTTOM LINE: With tax refunds and an improving labor market on the near-tear horizon, it is likely that the consumer will continue to spend. As well, interest rates remain near 46-year lows. These factors, combined with the multi-decade highs in many data points related to increased corporate profitability and spending, leads me to believe that the possibility of a substantial period of U.S. economic prosperity is rising.
Saturday, February 14, 2004
Weekly Scoreboard*
Indices
S&P 500 1,145.81+.27%
Dow 10,627.85+.33%
NASDAQ 2,053.56-.51%
Russell 2000 585.14+.18%
Wilshire 5000 11,174.00+.40%
Volatility(VIX) 15.58-2.63%
AAII Bullish % 56.1+10.2%
US Dollar 85.55-.43%
CRB 264.85+1.59%
Futures Spot Prices
Gold 410.8+1.61%
Crude Oil 34.56+6.4%
Natural Gas 5.54+3.38%
Copper 124.35+5.38%
10-year US Treasury Yield 4.04%-.98%
Average 30-year Mortgage Rate 5.66%-1.05%
Leading Sectors
Oil Service+6.12%
Iron/Steel+5.07%
Broadcasting+3.59%
Lagging
Drugs-1.36%
Semis-1.7%
Disk Drives-4.09%
*% Gain or loss for the week
S&P 500 1,145.81+.27%
Dow 10,627.85+.33%
NASDAQ 2,053.56-.51%
Russell 2000 585.14+.18%
Wilshire 5000 11,174.00+.40%
Volatility(VIX) 15.58-2.63%
AAII Bullish % 56.1+10.2%
US Dollar 85.55-.43%
CRB 264.85+1.59%
Futures Spot Prices
Gold 410.8+1.61%
Crude Oil 34.56+6.4%
Natural Gas 5.54+3.38%
Copper 124.35+5.38%
10-year US Treasury Yield 4.04%-.98%
Average 30-year Mortgage Rate 5.66%-1.05%
Leading Sectors
Oil Service+6.12%
Iron/Steel+5.07%
Broadcasting+3.59%
Lagging
Drugs-1.36%
Semis-1.7%
Disk Drives-4.09%
*% Gain or loss for the week
Friday, February 13, 2004
Friday Close
S&P 500 1,145.81-.55%
NASDAQ 2,053.56-.97%
Leading Sectors
HMO's+1.16%%
Broadcasting+.10%
Banks-.17%
Lagging Sectors
Semis-1.58%
Airlines-2.03%
Disk Drives-3.26%
Other
Crude Oil 34.56+1.71%
Natural Gas 5.54+1.56%
Lumber 376.3-2.18%
After-hours Movers
None of note
After-hours News
U.S. stocks declined after an unexpected drop in the Univ. of Michigan consumer confidence index. Moreover, Bank of America reduced Intel's profit and sales forecasts for the 1st Q, leading to across-the-board profit-taking in the technology sector. Finally, terror worries also contributed to the decline. A white suspicious powder was found in a New Jersey post office and a fire alarm caused the evacuation of the U.S Senate building on Capitol Hill. Both scares proved to be false alarms. China has put 7,793 people under medical supervision to ensure they haven't contracted the bird flu virus. GE, MSFT, PFE, ESRX, INTC, UTX, COH and PEP were recommended on Rukeyser's Wall Street. DELL, MRK and PFE were recommended on Wall Street Week. SBC and Bellsouth are preparing to raise their $30B offer for AT&T Wireless to counter an expected higher bid from Vodafone. Disney will likely reject Comcast's hostile bid because it is too low, according to the Washington Post. Senator Kerry's recent failure to issue a flat-out denial that he had an extramarital affair or relationship "is very Clintonian," a top Democratic aide told Insight Online. "It's very worrying." Separately, President Bush has ordered the release of hundreds of pages of his military records to try and put to rest questions about his National Guard service. The U.S. financial markets will be closed on Monday for President's Day.
BOTTOM LINE: I ended the day with a net long position of 40% in the Portfolio. It wasn't a terrible day, but I don't want to trade against the short-term sell signals generated by the indicators I follow. Most of my long positions did relatively well today and my shorts declined, but not enough to offset my net long exposure. I will look to add some more shorts on any futher weakness Tue. taking the Portfolio to market neutral.
NASDAQ 2,053.56-.97%
Leading Sectors
HMO's+1.16%%
Broadcasting+.10%
Banks-.17%
Lagging Sectors
Semis-1.58%
Airlines-2.03%
Disk Drives-3.26%
Other
Crude Oil 34.56+1.71%
Natural Gas 5.54+1.56%
Lumber 376.3-2.18%
After-hours Movers
None of note
After-hours News
U.S. stocks declined after an unexpected drop in the Univ. of Michigan consumer confidence index. Moreover, Bank of America reduced Intel's profit and sales forecasts for the 1st Q, leading to across-the-board profit-taking in the technology sector. Finally, terror worries also contributed to the decline. A white suspicious powder was found in a New Jersey post office and a fire alarm caused the evacuation of the U.S Senate building on Capitol Hill. Both scares proved to be false alarms. China has put 7,793 people under medical supervision to ensure they haven't contracted the bird flu virus. GE, MSFT, PFE, ESRX, INTC, UTX, COH and PEP were recommended on Rukeyser's Wall Street. DELL, MRK and PFE were recommended on Wall Street Week. SBC and Bellsouth are preparing to raise their $30B offer for AT&T Wireless to counter an expected higher bid from Vodafone. Disney will likely reject Comcast's hostile bid because it is too low, according to the Washington Post. Senator Kerry's recent failure to issue a flat-out denial that he had an extramarital affair or relationship "is very Clintonian," a top Democratic aide told Insight Online. "It's very worrying." Separately, President Bush has ordered the release of hundreds of pages of his military records to try and put to rest questions about his National Guard service. The U.S. financial markets will be closed on Monday for President's Day.
BOTTOM LINE: I ended the day with a net long position of 40% in the Portfolio. It wasn't a terrible day, but I don't want to trade against the short-term sell signals generated by the indicators I follow. Most of my long positions did relatively well today and my shorts declined, but not enough to offset my net long exposure. I will look to add some more shorts on any futher weakness Tue. taking the Portfolio to market neutral.
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