Earnings Announcements
Company/Estimate
AZ/1.00
CHS/.28
LDG/.42
MIK/1.32
NMG.B/1.03
SKS/.68
TOY/1.05
Splits
None of Note
Economic Data
ISM Non-Manufacturing estimated at 63.5 in Feb. vs. 65.7 in Jan.
Fed's Beige Book Report
Late-Night News
China's semiconductor consumption will jump 30% to $37B this year as expansion by television, mobile-phone and digital camera-makers fuels demand, Gartner Inc. said. It will rise another 27% to $47B in 05, with overseas chipmakers accounting for 90% of the market. Ask Jeeves will no longer allow advertisers and web site operators to pay to boost their ranking in its search index, the Wall Street Journal said. California's plan to sell as much as $15B in bonds appears headed for voter approval, the LA Times reported. South Korean business confidence reached a 17-month high in February as exports grew at their fastest pace in 15 years. Senator Kerry won primaries in 8 states on the biggest night of voting in the Democratic presidential nomination race. Kerry's victories prompted Senator Edwards to drop out of the race.
Late-Night Trading
Asian markets are mostly lower, ranging from unch. to -2.5%.
S&P 500 indicated -.06%.
NASDAQ indicated -.03%.
BOTTOM LINE: The weakness in Asia could lead to more selling in the U.S. markets in the morning. While I don't expect a substantial down day, modest deterioration is likely. I will closely monitor the relative strength of the Portfolio on the open before making any reductions in market exposure.
Wednesday, March 03, 2004
Tuesday, March 02, 2004
Tuesday Close
S&P 500 1,149.10 -.59%
NASDAQ 2,039.65 -.88%
Leading Sectors
Telecom +2.13%
Fashion +.40%
Oil Service +.31%
Lagging Sectors
Commodities -1.32%
Internet -1.67%
Airlines -2.88%
Other
Crude Oil 36.66 unch.
Natural Gas 5.56 unch.
Gold 393.70 -.03%
Base Metals 114.35 -.88%
U.S. Dollar 88.90 +1.58%
10-Yr. Long-Bond Yield 4.04% +1.74%
VIX 14.86 +2.91%
Put/Call .70 -5.41%
NYSE Arms 1.36 +97.10%
After-hours Movers
COO +5.64% on exceeding 1Q estimates and raising 2Q and 04/05 guidance.
ADEX +11% after significantly beating 3Q estimates and raising 4Q guidance.
AVNC +16.7% after announcing partnership with Par Pharma. to collaborate on development and marketing of new branded version of amoxicillin; Product could be introduced as soon as 06.
SEAC -9.6% after beating 4Q estimates and leaving guidance unchanged; Also, a jury threw out claims by SEAC against CCUR; CCUR unch.
XLNX -3% on profit-taking after raising 4Q guidance.
Economic Data
Total Vehicle Sales for Feb. were 16.4M vs. expectations of 16.6M.
Domestic Vehicle Sales were 13.2M vs. expectations of 13.3M.
Recommendations
Goldman says lower tier auto suppliers VC and DPH are vulnerable to earnings disappointments. GS reiterates Outperform on WAG, its favorite drug retailer. GS also saying that MERQ continues to be a favorite and that accounting rumor has no basis.
After-hours News
U.S. stocks fell today as interest rate jitters, a rising U.S. dollar and middle-eastern violence led to profit-taking in a broad array of sectors. However, the big local phone companies surged in late trading after a judge struck down a costly line-sharing rule. The federal appeals court's move means the Bells may not have to share their networks with rivals at cut-rate prices, TheStreet.com reported. After the close, TheStreet.com said same-store-sales at retailers are expected to rise 6-7%, blowing away the previous year's results, when they report on Thur. The NRF said customer traffic soared in Feb. at most mall retailers, reported TheStreet.com. Europe is failing to assert itself against the U.S. economy because Europeans are more afraid to start their own businesses, the Financial Times reported. Comcast won't support re-election of Disney's Eisner, FT said. Alberto-Culver may be purchased by L'Oreal, BuinessWeek says. The U.S. tells Haitian rebels to disarm, as intl. peacekeeper force grows.
BOTTOM LINE: The Portfolio had a good day today, notwithstanding the weakness in most stocks. I did not sell into the weakness in the late afternoon, thus leaving the Portfolio 75% net long. The market's reaction to a 2% increase in the U.S. dollar and interest rates seemed overdone by late afternoon. I may trim exposure if the weakness continues on the open tomorrow. While I think there is a good chance Friday's employment numbers will meet or slightly exceed expectations, I do not think it will be the type of blow-out report that would panic the bond and currency markets. If weakness in U.S. stocks continues through Thur., I would expect to see a rally on the news Fri.
NASDAQ 2,039.65 -.88%
Leading Sectors
Telecom +2.13%
Fashion +.40%
Oil Service +.31%
Lagging Sectors
Commodities -1.32%
Internet -1.67%
Airlines -2.88%
Other
Crude Oil 36.66 unch.
Natural Gas 5.56 unch.
Gold 393.70 -.03%
Base Metals 114.35 -.88%
U.S. Dollar 88.90 +1.58%
10-Yr. Long-Bond Yield 4.04% +1.74%
VIX 14.86 +2.91%
Put/Call .70 -5.41%
NYSE Arms 1.36 +97.10%
After-hours Movers
COO +5.64% on exceeding 1Q estimates and raising 2Q and 04/05 guidance.
ADEX +11% after significantly beating 3Q estimates and raising 4Q guidance.
AVNC +16.7% after announcing partnership with Par Pharma. to collaborate on development and marketing of new branded version of amoxicillin; Product could be introduced as soon as 06.
SEAC -9.6% after beating 4Q estimates and leaving guidance unchanged; Also, a jury threw out claims by SEAC against CCUR; CCUR unch.
XLNX -3% on profit-taking after raising 4Q guidance.
Economic Data
Total Vehicle Sales for Feb. were 16.4M vs. expectations of 16.6M.
Domestic Vehicle Sales were 13.2M vs. expectations of 13.3M.
Recommendations
Goldman says lower tier auto suppliers VC and DPH are vulnerable to earnings disappointments. GS reiterates Outperform on WAG, its favorite drug retailer. GS also saying that MERQ continues to be a favorite and that accounting rumor has no basis.
After-hours News
U.S. stocks fell today as interest rate jitters, a rising U.S. dollar and middle-eastern violence led to profit-taking in a broad array of sectors. However, the big local phone companies surged in late trading after a judge struck down a costly line-sharing rule. The federal appeals court's move means the Bells may not have to share their networks with rivals at cut-rate prices, TheStreet.com reported. After the close, TheStreet.com said same-store-sales at retailers are expected to rise 6-7%, blowing away the previous year's results, when they report on Thur. The NRF said customer traffic soared in Feb. at most mall retailers, reported TheStreet.com. Europe is failing to assert itself against the U.S. economy because Europeans are more afraid to start their own businesses, the Financial Times reported. Comcast won't support re-election of Disney's Eisner, FT said. Alberto-Culver may be purchased by L'Oreal, BuinessWeek says. The U.S. tells Haitian rebels to disarm, as intl. peacekeeper force grows.
BOTTOM LINE: The Portfolio had a good day today, notwithstanding the weakness in most stocks. I did not sell into the weakness in the late afternoon, thus leaving the Portfolio 75% net long. The market's reaction to a 2% increase in the U.S. dollar and interest rates seemed overdone by late afternoon. I may trim exposure if the weakness continues on the open tomorrow. While I think there is a good chance Friday's employment numbers will meet or slightly exceed expectations, I do not think it will be the type of blow-out report that would panic the bond and currency markets. If weakness in U.S. stocks continues through Thur., I would expect to see a rally on the news Fri.
Mid-day Update
S&P 500 1,150.08 -.51%
NASDAQ 2,047.33 -.50%
Leading Sectors
Iron/Steel +.56%
Fashion +.39%
I-Banks +.30%
Lagging Sectors
Telecom -1.22%
Wireless -1.51%
Airlines -2.5%
Other
Crude Oil 36.68 -.3%
Natural Gas 5.55 +.09%
Gold 392.80 -1.7%
Base Metals 114.35 -.88%
U.S. Dollar 88.99 +1.68%
10-Yr. Long-Bond Yield 4.06% +2.27%
VIX 14.75 +2.42%
Put/Call .71 -4.05%
NYSE Arms 1.48 +114.49%
Market Movers
MAMA +113% on 4Q sales up 127%.
MU +4.1% on SoundView upgrade to Outperform.
SLNK +23.44% after signing an OEM agreement with NT. NT will brand and sell SLNK's wireless phones as components of its enterprise voice over IP product suite.
VAPH +8.9% on continued optimism over its Athlete's Foot treatment.
MVK +9.7% after presentation at Raymond James conference.
MVL -6.9% after beating 4Q estimates, announcing 3-for-2 split and lowering 04 guidance.
MERQ -4.3% on downgrade to Sell at Oppenheimer.
MVSN -9.0% on beating 4Q estimates, but lowering 1Q guidance.
Economic Data
Auto sales have not yet been reported. Greenspan is currently speaking at the Economics Club of NY.
Recommendations
SEPR price target raised at Deutshe Bank to $49. MU raised to Outperform at SoundView. UOPX and GSF cut to Neutral at CSFB. TXN, PXD, PPP, TLM, NXY and CHK raised to Buy at Bank of America. BOFA cut UHS to Neutral. UBS raised price target on URBN to $52. Morgan Stanley rates TYC Overweight. MERQ rated Sell at Oppenheimer, while FFIV and PKTR were raised to Buy. BMC and BEAS rated Underperform at Bear Stearns, while CA, ORCL and TIBX were rated Outperform. Goldman Sachs is saying carrier spending on cell-towers will continue to accelerate through 05, raised estimates on AMT, CCI and SSI. GS says online advertising is showing continued strength. GS also positive on BBY ahead of earnings. Goldman is also recommending RRI for a turnaround play. Finally, GS would be buying MERQ on weakness. Citi Smith Barney initiating coverage of Oil majors with Cautious View, XOM and COP sell. Citi also thinks Oil Service stocks fully valued. Citi reiterated 1L rating on AXP. XLNX and IDTI may raise guidance before open tomorrow, according to Citi. TheStreet.com is saying PSUN will likely exceed estimates after close.
Mid-day News
U.S. stocks are mostly lower mid-day on concerns that rising interest rates and U.S. dollar could crimp future profit growth. U.S. Attorney General John Ashcroft announced criminal charges against former WorldCom CEO Bernie Ebbers. As well, former WorldCom CFO Scott Sullivan has agreed to plead guilty and will cooperate with the U.S. government. AT&T is being investigated in Mass. for allegedly sending phone bills to people who weren't customers and then trying to sell them services when they complained, the Boston Globe reported. The U.S. dollar had its biggest rally against the euro in a year, and surged to a 4-month high against the yen, on speculation U.S. employment growth is accelerating. Bombers attacked Shiite Muslims in Iraq and Pakistan on a holy day, killing at least 184 and injuring 590, the U.S. suspects al-Qaeda involvement. Applied Materials said it may add 500 manufacturing jobs this year to help fill increasing orders from chipmakers.
BOTTOM LINE: The recent market leaders are pulling back today. Tech is outperforming in a down market. I took profits in a few cyclical longs, bringing market exposure for the Portfolio down to 75% net long. The Portfolio is up slightly today, as a few longs are up significantly, offsetting small losses elsewhere. The market seems to be anticipating a strong jobs report on Fri. Further deterioration on the close will likely result in more long sales for the Portfolio. However, with such a high Arms Index reading, it is more likely the markets will rally modestly late afternoon.
NASDAQ 2,047.33 -.50%
Leading Sectors
Iron/Steel +.56%
Fashion +.39%
I-Banks +.30%
Lagging Sectors
Telecom -1.22%
Wireless -1.51%
Airlines -2.5%
Other
Crude Oil 36.68 -.3%
Natural Gas 5.55 +.09%
Gold 392.80 -1.7%
Base Metals 114.35 -.88%
U.S. Dollar 88.99 +1.68%
10-Yr. Long-Bond Yield 4.06% +2.27%
VIX 14.75 +2.42%
Put/Call .71 -4.05%
NYSE Arms 1.48 +114.49%
Market Movers
MAMA +113% on 4Q sales up 127%.
MU +4.1% on SoundView upgrade to Outperform.
SLNK +23.44% after signing an OEM agreement with NT. NT will brand and sell SLNK's wireless phones as components of its enterprise voice over IP product suite.
VAPH +8.9% on continued optimism over its Athlete's Foot treatment.
MVK +9.7% after presentation at Raymond James conference.
MVL -6.9% after beating 4Q estimates, announcing 3-for-2 split and lowering 04 guidance.
MERQ -4.3% on downgrade to Sell at Oppenheimer.
MVSN -9.0% on beating 4Q estimates, but lowering 1Q guidance.
Economic Data
Auto sales have not yet been reported. Greenspan is currently speaking at the Economics Club of NY.
Recommendations
SEPR price target raised at Deutshe Bank to $49. MU raised to Outperform at SoundView. UOPX and GSF cut to Neutral at CSFB. TXN, PXD, PPP, TLM, NXY and CHK raised to Buy at Bank of America. BOFA cut UHS to Neutral. UBS raised price target on URBN to $52. Morgan Stanley rates TYC Overweight. MERQ rated Sell at Oppenheimer, while FFIV and PKTR were raised to Buy. BMC and BEAS rated Underperform at Bear Stearns, while CA, ORCL and TIBX were rated Outperform. Goldman Sachs is saying carrier spending on cell-towers will continue to accelerate through 05, raised estimates on AMT, CCI and SSI. GS says online advertising is showing continued strength. GS also positive on BBY ahead of earnings. Goldman is also recommending RRI for a turnaround play. Finally, GS would be buying MERQ on weakness. Citi Smith Barney initiating coverage of Oil majors with Cautious View, XOM and COP sell. Citi also thinks Oil Service stocks fully valued. Citi reiterated 1L rating on AXP. XLNX and IDTI may raise guidance before open tomorrow, according to Citi. TheStreet.com is saying PSUN will likely exceed estimates after close.
Mid-day News
U.S. stocks are mostly lower mid-day on concerns that rising interest rates and U.S. dollar could crimp future profit growth. U.S. Attorney General John Ashcroft announced criminal charges against former WorldCom CEO Bernie Ebbers. As well, former WorldCom CFO Scott Sullivan has agreed to plead guilty and will cooperate with the U.S. government. AT&T is being investigated in Mass. for allegedly sending phone bills to people who weren't customers and then trying to sell them services when they complained, the Boston Globe reported. The U.S. dollar had its biggest rally against the euro in a year, and surged to a 4-month high against the yen, on speculation U.S. employment growth is accelerating. Bombers attacked Shiite Muslims in Iraq and Pakistan on a holy day, killing at least 184 and injuring 590, the U.S. suspects al-Qaeda involvement. Applied Materials said it may add 500 manufacturing jobs this year to help fill increasing orders from chipmakers.
BOTTOM LINE: The recent market leaders are pulling back today. Tech is outperforming in a down market. I took profits in a few cyclical longs, bringing market exposure for the Portfolio down to 75% net long. The Portfolio is up slightly today, as a few longs are up significantly, offsetting small losses elsewhere. The market seems to be anticipating a strong jobs report on Fri. Further deterioration on the close will likely result in more long sales for the Portfolio. However, with such a high Arms Index reading, it is more likely the markets will rally modestly late afternoon.
Tuesday Watch
Earnings Announcements
Company/Estimate
BIIB/.32
BJ/.65
CVC/-.45
PSUN/.42
PETM/.36
SEAC/.07
FL/.45
MVL/.17
Splits
BMS 2-for-1
HCSG 3-for-2
Economic Data
Total Vehicle Sales estimated at 16.6M for Feb. vs. 16.1M in Jan.
Domestic Vehicle Sales estimated at 13.3M in Feb. vs. 13.2M in Jan.
Recommendations
Goldman Sachs expects a very bullish tone from FLEX on their mid-quarter conf. call Thur. and thinks it has 20% upside by year-end.
Late-Night News
Jean-Bertrand Aristide, former President of Haiti, told CNN that he was the victim of a coup d'etat and would like to live in the United States. Advanced Semiconductor Engineering and other chip packagers are raising prices by as much as 20% on higher component prices and strong demand. IBM will spend $1B in an attempt to win over software developers and grab market share from MSFT, the Financial Times reported. Nigeria and Algeria have ordered intl. energy companies operating in the two countries to reduce oil output by 10 percent along with OPEC's plan to cut production quotas in March, FT reported. The Vietnamese government says it has contained the bird flu.
Late-Night Trading
Asian markets are mostly up, ranging from -.25% to +2.5%.
S&P 500 indicated +.01%.
NASDAQ indicated unch.
BOTTOM LINE: I expect tech to outperform the broad market tomorrow, as the leaders take a well deserved rest. The Portfolio is 110% net long and I will likely begin to pare positions into strength between tomorrow and Friday's employment report.
Company/Estimate
BIIB/.32
BJ/.65
CVC/-.45
PSUN/.42
PETM/.36
SEAC/.07
FL/.45
MVL/.17
Splits
BMS 2-for-1
HCSG 3-for-2
Economic Data
Total Vehicle Sales estimated at 16.6M for Feb. vs. 16.1M in Jan.
Domestic Vehicle Sales estimated at 13.3M in Feb. vs. 13.2M in Jan.
Recommendations
Goldman Sachs expects a very bullish tone from FLEX on their mid-quarter conf. call Thur. and thinks it has 20% upside by year-end.
Late-Night News
Jean-Bertrand Aristide, former President of Haiti, told CNN that he was the victim of a coup d'etat and would like to live in the United States. Advanced Semiconductor Engineering and other chip packagers are raising prices by as much as 20% on higher component prices and strong demand. IBM will spend $1B in an attempt to win over software developers and grab market share from MSFT, the Financial Times reported. Nigeria and Algeria have ordered intl. energy companies operating in the two countries to reduce oil output by 10 percent along with OPEC's plan to cut production quotas in March, FT reported. The Vietnamese government says it has contained the bird flu.
Late-Night Trading
Asian markets are mostly up, ranging from -.25% to +2.5%.
S&P 500 indicated +.01%.
NASDAQ indicated unch.
BOTTOM LINE: I expect tech to outperform the broad market tomorrow, as the leaders take a well deserved rest. The Portfolio is 110% net long and I will likely begin to pare positions into strength between tomorrow and Friday's employment report.
Monday, March 01, 2004
Monday Close
S&P 500 1,155.97 +.96%
NASDAQ 2,057.80 +1.38%
Leading Sectors
Homebuilders +3.92%
Iron/Steel +3.79%
Gaming +3.38%
Lagging Sectors
Insurance +.27%
Transports -.29%
Hospitals -1.58%
Other
Crude Oil 36.80 -.16%
Natural Gas 5.56 +.36%
Gold 400.00 +.10%
Base Metals 115.37 +2.05%
U.S. Dollar 87.51 +.23%
10-Yr. Long-Bond Yield 3.98% +.34%
VIX 14.44 -.76%
Put/Call .74 +2.78%
NYSE Arms .69 -48.12%
After-hours Movers
MAMA +25.7% after reporting strong 4Q on 127% sales gain.
MVSN -5.87% after meeting 4Q estimates, but lowering 1Q outlook.
Recommendations
Goldman Sachs is reiterating their Outperform rating for KO and CCE. Goldman expects hospitals to remain under pressure from UHS news. GS also says that certain parts of tech have attractive entry points now. They highlighted the systems software, storage and semi sub-sectors and INTC, EMC and MSFT stocks. TheStreet.com is recommending a short on Inco(N). Cramer says that the analyst from JP Morgan that downgraded INTC and AMD has a very bad track record. He also says he isn't buying the dip in hospitals, as their trouble will continue throughout the year. TheSteet.com is also positive on NUTR.
After-hours News
U.S. stocks rose broadly, as a gauge of manufacturing employment surged to its highest reading in more than 16 years, leading to speculation that Friday's employment report would meet expectations. As well, the ISM Manufacturing Index held steady near a 2-decade high. All 20 manufacturing industries reported growth. Homebuilders again led the way, with help from the Gaming and Commodity sectors. Tech lagged early in the day, only to strengthen significantly by the close. Hospitals were the only negative standout as earnings concerns weighed on the group. Crude Oil futures rose to the highest price in almost a year on concerns gasoline supplies won't increase fast enough to meet peak demand during the summer driving season. The intl. force sent to Haiti should reach 5,000 troops soon.
BOTTOM LINE: The Portfolio had a very good day today. I took profits in a few of my consumer cyclical positions and added some beaten-up tech on the close, leaving the Portfolio 110% net long. One of the new additions to the Portfolio is SEAC, a leader in Video-on-demand servers and software. I am using a $17.50 stop. The most positive aspect to today's trading was the fact that we had such a strong manufacturing number, with good evidence of an improving jobs market, yet interest rates barely moved. Interest rates are the key to whether this is just a good year or a VERY good year for the U.S. equity markets.
NASDAQ 2,057.80 +1.38%
Leading Sectors
Homebuilders +3.92%
Iron/Steel +3.79%
Gaming +3.38%
Lagging Sectors
Insurance +.27%
Transports -.29%
Hospitals -1.58%
Other
Crude Oil 36.80 -.16%
Natural Gas 5.56 +.36%
Gold 400.00 +.10%
Base Metals 115.37 +2.05%
U.S. Dollar 87.51 +.23%
10-Yr. Long-Bond Yield 3.98% +.34%
VIX 14.44 -.76%
Put/Call .74 +2.78%
NYSE Arms .69 -48.12%
After-hours Movers
MAMA +25.7% after reporting strong 4Q on 127% sales gain.
MVSN -5.87% after meeting 4Q estimates, but lowering 1Q outlook.
Recommendations
Goldman Sachs is reiterating their Outperform rating for KO and CCE. Goldman expects hospitals to remain under pressure from UHS news. GS also says that certain parts of tech have attractive entry points now. They highlighted the systems software, storage and semi sub-sectors and INTC, EMC and MSFT stocks. TheStreet.com is recommending a short on Inco(N). Cramer says that the analyst from JP Morgan that downgraded INTC and AMD has a very bad track record. He also says he isn't buying the dip in hospitals, as their trouble will continue throughout the year. TheSteet.com is also positive on NUTR.
After-hours News
U.S. stocks rose broadly, as a gauge of manufacturing employment surged to its highest reading in more than 16 years, leading to speculation that Friday's employment report would meet expectations. As well, the ISM Manufacturing Index held steady near a 2-decade high. All 20 manufacturing industries reported growth. Homebuilders again led the way, with help from the Gaming and Commodity sectors. Tech lagged early in the day, only to strengthen significantly by the close. Hospitals were the only negative standout as earnings concerns weighed on the group. Crude Oil futures rose to the highest price in almost a year on concerns gasoline supplies won't increase fast enough to meet peak demand during the summer driving season. The intl. force sent to Haiti should reach 5,000 troops soon.
BOTTOM LINE: The Portfolio had a very good day today. I took profits in a few of my consumer cyclical positions and added some beaten-up tech on the close, leaving the Portfolio 110% net long. One of the new additions to the Portfolio is SEAC, a leader in Video-on-demand servers and software. I am using a $17.50 stop. The most positive aspect to today's trading was the fact that we had such a strong manufacturing number, with good evidence of an improving jobs market, yet interest rates barely moved. Interest rates are the key to whether this is just a good year or a VERY good year for the U.S. equity markets.
Mid-day Update
S&P 500 1,151.96 +.61%
NASDAQ 2,040.39 +.52%
Leading Sectors
Homebuilders +3.47%
Gaming +3.37%
Iron/Steel +3.06%
Lagging Sectors
Computer Services -.08%
Transports -.68%
Hospitals -2.51%
Other
Crude Oil 36.36 +.53%
Natural Gas 5.50 +1.64%
Gold 399.80 +.76%
Base Metals 115.37 +2.05%
U.S. Dollar 87.52 +.25%
10-Yr. Long-Bond Yield 3.98% +.34%
VIX 14.63 +.55%
Put/Call 1.09 +51.39%
NYSE Arms .66 -50.38%
Market Movers
SEPR +45.2% as the company neared U.S. regulatory approval of its Estorra sleeping pill.
MEDI -6.7% on statement that FluMist won't lift revenue before 2007.
SNDK +5.0% on positive comments in Barrons.
AAII -36.0% as the company appointed a committee of its board to look into reported sales of Brethine and Darvocet. It believes their findings will materially affect their 1Q and full-year forecasts.
IDSA +23.4% due to small-cap with increasing sales to China.
MGAM +14% as U.S. Supreme Court avoids Indian gambling dispute over machines. MGAM says significant legal uncertainties have ended.
CYTC +14.6% on acquisition of privately held Novacept for $311M to add to its women's health products.
UHS -16.2% on comments that its 1Q earnings would drop 25%, as unpaid bills hurt results.
HCA -5.5% on UHS news.
Homebuilders up across the board on a technical break-out and continued rotation out of tech.
Economic Data
Personal Income rose .2% vs. expectations of a .5% rise.
Personal Spending rose .4% vs. expectations of a .3% rise.
Construction Spending fell .3% vs. expectations of a .3% rise.
ISM Manufacturing for Feb. came in at 61.4 vs. expectations of 62.0.
ISM Prices Paid for Feb. came in at 81.5 vs. expectations of 71.7.
Recommendations
FON raised to Buy at UBS. UBS also raised price target on FS. SEPR raised to Buy at Deutshe Bank. Deutshe also raised price targets on MWD and GS. PHS raised to Overweight at Lehman. AAII cut to Neutral at Bank of America. JP Morgan cut ratings on INTC and AMD to Neutral. JPM also raised IGT to Overweight. Goldman Sachs is reiterating that the cruise industry is a multi-year investment opportunity. GS lowering estimates on STX ahead of quarterly update. Easy comps, tax-cut stimulus and good weather should deliver robust February results for retailers, says Goldman. GS favorite retailers are WMT, TGT and TIF. GS says drugstores should have good February, likes WAG best. Goldman says 04 should be very strong year for computer resellers CDWC and NSIT, as average selling prices are stabilizing and replacement cycle is accelerating. GS also still likes PMMAY and raised estimates and target. GS doesn't expect INTC to raise guidance at mid-quarter update Thur. Finally, GS raised FON to Outperform. Citi Smith Barney reiterates Buy on FDC.
Mid-day News
Major U.S. indices are having a very good day, as the employment portion of the ISM Manufacturing Index rose to its highest reading since 1987. The rally is broad-based outside of tech, with homebuilding, gaming and commodity-related stocks taking the lead. For the first time in years, Citi Smith Barney is hearing that telecom equipment biz is so strong that they are beginning to hire sales people, engineers and service/support staff to keep up with customer demand. Citi is also hearing that PC chip demand appears to have rebounded strongly in recent weeks after what appears to be a seasonal bottom on a monthly basis in Jan. The weaker US dollar is helping US competitiveness in Europe, Robert Hormats of Goldman Sachs told CNBC. IBM's CEO told investors at the PartnerWorld conference in Las Vegas that he is more optimistic about 04 than he has been in a long time. The ISM Manufacturing Index remained near a two-decade high, with all 20 manufacturing industries reporting growth. The ISM Prices Paid Index was the highest since 1995, resulting in some inflation worries by traders. Economists are now predicting that corporate spending will be 3 times higher than last year, the Blue Chip Survey reported.
BOTTOM LINE: The Portfolio is having a good day. I added a few longs on the open to bring net long market exposure to 100%. The huge rise in the Put/Call ratio shows that traders are skeptical of this rally, thus making it more likely to continue. This is turning into the most broad-based economic recovery since the mid-80's, with almost every industry participating. The signs are everywhere that the economy is in the midst of a significant expansion that will lead to strong job growth. With interest rates near 46-year lows and a P/E for the S&P 500 of a relatively low 18.7 on 04 estimates, I continue to expect a very good year for U.S. stocks.
NASDAQ 2,040.39 +.52%
Leading Sectors
Homebuilders +3.47%
Gaming +3.37%
Iron/Steel +3.06%
Lagging Sectors
Computer Services -.08%
Transports -.68%
Hospitals -2.51%
Other
Crude Oil 36.36 +.53%
Natural Gas 5.50 +1.64%
Gold 399.80 +.76%
Base Metals 115.37 +2.05%
U.S. Dollar 87.52 +.25%
10-Yr. Long-Bond Yield 3.98% +.34%
VIX 14.63 +.55%
Put/Call 1.09 +51.39%
NYSE Arms .66 -50.38%
Market Movers
SEPR +45.2% as the company neared U.S. regulatory approval of its Estorra sleeping pill.
MEDI -6.7% on statement that FluMist won't lift revenue before 2007.
SNDK +5.0% on positive comments in Barrons.
AAII -36.0% as the company appointed a committee of its board to look into reported sales of Brethine and Darvocet. It believes their findings will materially affect their 1Q and full-year forecasts.
IDSA +23.4% due to small-cap with increasing sales to China.
MGAM +14% as U.S. Supreme Court avoids Indian gambling dispute over machines. MGAM says significant legal uncertainties have ended.
CYTC +14.6% on acquisition of privately held Novacept for $311M to add to its women's health products.
UHS -16.2% on comments that its 1Q earnings would drop 25%, as unpaid bills hurt results.
HCA -5.5% on UHS news.
Homebuilders up across the board on a technical break-out and continued rotation out of tech.
Economic Data
Personal Income rose .2% vs. expectations of a .5% rise.
Personal Spending rose .4% vs. expectations of a .3% rise.
Construction Spending fell .3% vs. expectations of a .3% rise.
ISM Manufacturing for Feb. came in at 61.4 vs. expectations of 62.0.
ISM Prices Paid for Feb. came in at 81.5 vs. expectations of 71.7.
Recommendations
FON raised to Buy at UBS. UBS also raised price target on FS. SEPR raised to Buy at Deutshe Bank. Deutshe also raised price targets on MWD and GS. PHS raised to Overweight at Lehman. AAII cut to Neutral at Bank of America. JP Morgan cut ratings on INTC and AMD to Neutral. JPM also raised IGT to Overweight. Goldman Sachs is reiterating that the cruise industry is a multi-year investment opportunity. GS lowering estimates on STX ahead of quarterly update. Easy comps, tax-cut stimulus and good weather should deliver robust February results for retailers, says Goldman. GS favorite retailers are WMT, TGT and TIF. GS says drugstores should have good February, likes WAG best. Goldman says 04 should be very strong year for computer resellers CDWC and NSIT, as average selling prices are stabilizing and replacement cycle is accelerating. GS also still likes PMMAY and raised estimates and target. GS doesn't expect INTC to raise guidance at mid-quarter update Thur. Finally, GS raised FON to Outperform. Citi Smith Barney reiterates Buy on FDC.
Mid-day News
Major U.S. indices are having a very good day, as the employment portion of the ISM Manufacturing Index rose to its highest reading since 1987. The rally is broad-based outside of tech, with homebuilding, gaming and commodity-related stocks taking the lead. For the first time in years, Citi Smith Barney is hearing that telecom equipment biz is so strong that they are beginning to hire sales people, engineers and service/support staff to keep up with customer demand. Citi is also hearing that PC chip demand appears to have rebounded strongly in recent weeks after what appears to be a seasonal bottom on a monthly basis in Jan. The weaker US dollar is helping US competitiveness in Europe, Robert Hormats of Goldman Sachs told CNBC. IBM's CEO told investors at the PartnerWorld conference in Las Vegas that he is more optimistic about 04 than he has been in a long time. The ISM Manufacturing Index remained near a two-decade high, with all 20 manufacturing industries reporting growth. The ISM Prices Paid Index was the highest since 1995, resulting in some inflation worries by traders. Economists are now predicting that corporate spending will be 3 times higher than last year, the Blue Chip Survey reported.
BOTTOM LINE: The Portfolio is having a good day. I added a few longs on the open to bring net long market exposure to 100%. The huge rise in the Put/Call ratio shows that traders are skeptical of this rally, thus making it more likely to continue. This is turning into the most broad-based economic recovery since the mid-80's, with almost every industry participating. The signs are everywhere that the economy is in the midst of a significant expansion that will lead to strong job growth. With interest rates near 46-year lows and a P/E for the S&P 500 of a relatively low 18.7 on 04 estimates, I continue to expect a very good year for U.S. stocks.
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