Earnings Announcements
Company/Estimates
BRK/A/867.00
EVOL/.09
JAS/1.21
Splits
SSNC 3-for-2
VAPH 3-for-1
WGO 2-for-1
Economic Data
None of note.
Weekend Recommendations
Barron's has positive articles on L, FIX and the U.S. dollar. It has a negative column on GRMN. Goldman Sachs says the Supreme Court's decision last week in favor of Class II gaming was a milestone for the slot industry and will propel industry growth for 3-4 years. Goldman's favorites are IGT and AGI. GS reiterates XOM as its favorite large-cap integrated oil play ahead of its annual analyst meeting March 10. Goldman also reiterated Outperform on ITT. Merrill Lynch named QLGC Focus 1 stock on Fri. TheStreet.com has a positive editorial on semis. XLNX, TXN, ADI, GNSS and OVTI are mentioned favorably. Warren Buffet reported 2 new positions in his annual letter to shareholders. He added HCA and PTR. He also trimmed HRB and added to WFC. Buffet also said he doesn't like the high-yield market right now. Louis Rukeyser's Wall Street had guests that were positive on COCO, FLEX, DRI, LMT, JNJ, MSFT, WY, APA, PBI, HSY and DELL. Forbes on Fox had guests that were positive on XOM. Wall Street Week had guests that were positive on RHAT, NOVL, ZBRA, AMAT, IP, MDT, JNPR and CMVT. Cashin' In had guests that were positive on real estate, ICF, TSN, UHCO and DG. Guests were mixed on ORCL and negative on RIMM.
Weekend News
The U.S. is preparing to apply sanctions against Syria, Agence France-Presse said. OPEC has scaled back plans to cut the group's daily output by 2.5M barrels on April 1. GE is planning to sell stock worth $5B in its Genworth mortgage and insurance business as early as April. Affluent homebuyers are camping out days in tents and under tarps to snatch up expensive new homes in the latest sign of the booming Washington-area real-estate market, the Washington Post reported. Michael Eisner may receive up to $374M if he is ousted from the company, the Sunday Times reported. Shares of SINA, SOHU and NTES may be poised to fall because of Chinese state control of the wireless industry, the NY Times said. A case of H7 avian flu was discovered on a commercial chicken farm in Maryland, the fourth state affected by the virus since last month. Total ticket sales for Gibson's The Passion of the Christ topped $212M over the weekend. Iraqi leaders are set to sign their constitution tomorrow, the NY Times reported. McData's CEO said there are going to be some big opportunities this year in storage and that spending is clearly up on all fronts. Corporate spending will rise 9.8% this year, more than 3 times higher than last year, according to the Blue Chip survey. IBM CEO Palmisano said he was more optimistic than he has been in a long time. Economists are currently projecting the economy to grow 4.6% this year, the fastest since the mid-80's.
Late-Night Trading
Asian indices are down on average about .5% with the exception of Hong Kong which is up 1.6%.
S&P 500 indicated -.07%.
NASDAQ indicated +.14%.
BOTTOM LINE: Not much in the way of market-moving news reported over the weekend. I expect a pretty decent week. The Portfolio is currently 100% net long.
Monday, March 08, 2004
Sunday, March 07, 2004
Chart of the Week
NASDAQ Biotechnology Index 1-Year Candlestick Chart
BOTTOM LINE: The NASDAQ Biotech Index has been in a trading range for 10 months. My short-term trading indicators generated buy signals on this index early last week. It proceeded to break through the 800 resistance level on Thursday, with a confirmation of the break on Friday. Partnerships with major pharmaceutical companies, FDA approvals and low interests rates should propel this sector higher in the intermediate-term.
BOTTOM LINE: The NASDAQ Biotech Index has been in a trading range for 10 months. My short-term trading indicators generated buy signals on this index early last week. It proceeded to break through the 800 resistance level on Thursday, with a confirmation of the break on Friday. Partnerships with major pharmaceutical companies, FDA approvals and low interests rates should propel this sector higher in the intermediate-term.
Weekly Outlook
U.S. stocks should continue drifting higher this week without much in the way of market-moving news. The Trade Balance, Inventories, Advance Retail Sales, Current Account Balance and preliminary reading of the Univ. of Michigan Consumer Confidence for March are the main reports scheduled for release. Oracle's(ORCL) 3Q report and Texas Instruments mid-quarter update are the only reports with market-moving potential this week. Other companies of note scheduled to report include Ann Taylor(ANN), Kroger(KR), Albertson's(ABS), Krispy Kreme(KKD), Talbots(TLB), El Paso(EP) and Border's Group(BGP).
Retail Sales and Consumer Confidence are the two most important releases this week. Advance Retail Sales are expected to have risen .6% in February vs. a .3% decline in January. The Univ. of Michigan Consumer Confidence preliminary reading is expected to come in at 95.4 for March vs. 94.4 in February.
BOTTOM LINE: I expect the majority of stocks to have a pretty good week. I will be monitoring tech closely for any signs that investors are shifting to a more positive stance on the sector as my short-term indictors turned positive on the group last week. As well, NASDAQ short interest relative to NASDAQ volume, a measure akin to the short interest ratio of an individual stock, is currently very high which will result in buying pressure as shorts cover their postions. Homebuilders have had a 20% move in just a few weeks, thus it is likely they will at least consolidate this week. Biotechnology, Financial Services, Retail and Basic Materials should continue to outperform with lower rates and a lower dollar. Overall, I will use pull-backs to buy in select areas and leave the Portfolio's market exposure relatively high. It is currently 100% net long.
I have five main concerns right now with respect to the U.S. equities markets:
1) The possibility of a terrorist attack on U.S. soil.
2) A change in the government's attitudes towards more protectionist economic policies and higher taxes.
3) A further rise in energy prices throughout the spring.
4) A sudden sharp move up in interest rates.
5) A continuation of the recent fall in consumer confidence over the next few months.
All five of these are currently not an issue, but any one could occur and would likely result in a change of my bullish outlook for 04.
Retail Sales and Consumer Confidence are the two most important releases this week. Advance Retail Sales are expected to have risen .6% in February vs. a .3% decline in January. The Univ. of Michigan Consumer Confidence preliminary reading is expected to come in at 95.4 for March vs. 94.4 in February.
BOTTOM LINE: I expect the majority of stocks to have a pretty good week. I will be monitoring tech closely for any signs that investors are shifting to a more positive stance on the sector as my short-term indictors turned positive on the group last week. As well, NASDAQ short interest relative to NASDAQ volume, a measure akin to the short interest ratio of an individual stock, is currently very high which will result in buying pressure as shorts cover their postions. Homebuilders have had a 20% move in just a few weeks, thus it is likely they will at least consolidate this week. Biotechnology, Financial Services, Retail and Basic Materials should continue to outperform with lower rates and a lower dollar. Overall, I will use pull-backs to buy in select areas and leave the Portfolio's market exposure relatively high. It is currently 100% net long.
I have five main concerns right now with respect to the U.S. equities markets:
1) The possibility of a terrorist attack on U.S. soil.
2) A change in the government's attitudes towards more protectionist economic policies and higher taxes.
3) A further rise in energy prices throughout the spring.
4) A sudden sharp move up in interest rates.
5) A continuation of the recent fall in consumer confidence over the next few months.
All five of these are currently not an issue, but any one could occur and would likely result in a change of my bullish outlook for 04.
Saturday, March 06, 2004
Market Week in Review
S&P 500 1,156.87 +1.04%
A broad array of sectors contributed to another positive weekly performance for U.S. stocks. Homebuilders led the way with Gaming and Biotech stocks not far behind. With corporate executive corruption, Intel's conservative conference call and a weaker-than-expected jobs report dominating headlines, it is surprising and quite positive that stocks rose at all.
There were several developments that brought back investor concerns over executive corruption. First, Martha Stewart was found guilty of conpiring to obstruct an investigation of her sale of Imclone stock. Bernie Ebbers, the former CEO of WorldCom, was indicted on Federal charges that he masterminded the largest accounting fraud in U.S. history. Ex-CFO Sullivan pleaded guilty to the same charges. Finally, the New York Supreme Court dismissed the most serious charge against former Tyco CEO Kozlowski, however he still faces a possible 30 years in prison on other charges.
There were changes in leadership at a couple of America's top companies last week. Disney(DIS) decided to split the role of Chairman and CEO, leaving Eisner as CEO and naming George Mitchell as Chairman. Michael Dell will hand over his CEO title to President Kevin Rollins, but will remain Chairman of Dell.
In other developments, Clear Channel(CCU), the largest U.S. radio broadcaster, agreed to pay a $775,000 fine for airing lewd material. It was the second biggest fine ever for indecency. Intel lowered its 1Q guidance modestly after citing a small inventory buildup overseas, which it said it has since "worked through." Lehman Brothers was named manager of California's $15B bond approved by voters Tues. Walmart(WMT) opened its first grocery store in California. It plans to open 40 more in the next 4 years in Cali. to compete with Kroger, Safeway and Albertson's. Finally, Boston Scientific(BSX) won FDA approval for its drug-coated Taxus stent, allowing the co. to challenge Johnson and Johnson(JNJ) for the no. 1 spot.
BOTTOM LINE: Considering the fact that the headlines last week were dominated once again by negative news, obscuring the very positive economic data, it is a good sign that most stocks rose. Many sectors have broken out technically in recent days, with the exception of technology. I believe the catalyst to propel tech shares higher will be next quarter's earnings reports and guidance. While it is possible that semiconductor and equipment stocks may experience one more down-leg before they find a bottom, I think most are at good entry points right now. A 10% correction in the SOX, combined with rapidly improving fundamentals, makes valuations much more compelling than just a few months ago. I think the current semiconductor cycle will last much longer than analysts are now suggesting.
A broad array of sectors contributed to another positive weekly performance for U.S. stocks. Homebuilders led the way with Gaming and Biotech stocks not far behind. With corporate executive corruption, Intel's conservative conference call and a weaker-than-expected jobs report dominating headlines, it is surprising and quite positive that stocks rose at all.
There were several developments that brought back investor concerns over executive corruption. First, Martha Stewart was found guilty of conpiring to obstruct an investigation of her sale of Imclone stock. Bernie Ebbers, the former CEO of WorldCom, was indicted on Federal charges that he masterminded the largest accounting fraud in U.S. history. Ex-CFO Sullivan pleaded guilty to the same charges. Finally, the New York Supreme Court dismissed the most serious charge against former Tyco CEO Kozlowski, however he still faces a possible 30 years in prison on other charges.
There were changes in leadership at a couple of America's top companies last week. Disney(DIS) decided to split the role of Chairman and CEO, leaving Eisner as CEO and naming George Mitchell as Chairman. Michael Dell will hand over his CEO title to President Kevin Rollins, but will remain Chairman of Dell.
In other developments, Clear Channel(CCU), the largest U.S. radio broadcaster, agreed to pay a $775,000 fine for airing lewd material. It was the second biggest fine ever for indecency. Intel lowered its 1Q guidance modestly after citing a small inventory buildup overseas, which it said it has since "worked through." Lehman Brothers was named manager of California's $15B bond approved by voters Tues. Walmart(WMT) opened its first grocery store in California. It plans to open 40 more in the next 4 years in Cali. to compete with Kroger, Safeway and Albertson's. Finally, Boston Scientific(BSX) won FDA approval for its drug-coated Taxus stent, allowing the co. to challenge Johnson and Johnson(JNJ) for the no. 1 spot.
BOTTOM LINE: Considering the fact that the headlines last week were dominated once again by negative news, obscuring the very positive economic data, it is a good sign that most stocks rose. Many sectors have broken out technically in recent days, with the exception of technology. I believe the catalyst to propel tech shares higher will be next quarter's earnings reports and guidance. While it is possible that semiconductor and equipment stocks may experience one more down-leg before they find a bottom, I think most are at good entry points right now. A 10% correction in the SOX, combined with rapidly improving fundamentals, makes valuations much more compelling than just a few months ago. I think the current semiconductor cycle will last much longer than analysts are now suggesting.
Economic Week in Review
ECRI Weekly Leading Index 133.70 unch.
The Institute for Supply Management's Factory Index held close to a 20-yr. high at 61.4, as more factories said they were hiring to meet demand. The ISM employment gauge rose to its highest level since 1987. Moreover, this was the 4th straight month the index stayed above 60, the longest stretch since 83-84. The breadth of the improvement was impressive as all 20 manufacturing industries reported growth.
The Institute for Supply Management's Service Index came in at a very strong 60.8, down from its all-time high reading of 65.7 the month before. As well, the Intl. Council of Shopping Centers predicted sales of U.S. retailers rose 7% last month, the most in almost 4 years as tax refunds are boosting incomes by over $70B the first 6 months of the year.
The final Non-farm Productivity reading was 2.6%, growing at the slowest pace in a year. Fed Governor Bernanke said he expected companies to increase hiring soon as productivity gains slow. As well, first-time claims for unemployment insurance fell to 345k last week, near a three-year low. The Index of Aggregate Hours Worked per Week rose last month at the fastest pace in almost 8 years, as companies tried to keep up with demand. Finally, the Temporary Help Services Index has risen 10% in the last 10 months, the best showing since 1999 and a leading indicator of employment growth.
The unemployment rate met expectations and held steady at 5.6% for the month of February. However, the Change in Non-farm Payrolls was a much weaker-than-expected 21K. This number resulted in a significant rally in the Bond market and a modest decline in the U.S. dollar. Trading in interest rates futures now indicates that investors don't expect the Fed to raise the benchmark overnight bank lending rate from 1%, the lowest since 1958, until December at the earliest.
BOTTOM LINE: The vast majority of the data released last week point to continued strong economic growth with a pick-up in hiring in the next few months. Inflation remains subdued as well. The Personal Consumption Expenditure Price Index, the Fed's favorite gauge of inflation, rose a scant .3% last month even with record-high energy prices. In my opinion, the more momentum the economy builds before the first Fed rate hike, the better. Companies will find it increasingly more difficult to meet rapidly rising demand with their current labor force. Employment growth has always been a lagging indicator. Investors and pundits focused on this one number are looking in the rear-view mirror of the economic automobile. Those looking out the front window see improvement in the near future.
The Institute for Supply Management's Factory Index held close to a 20-yr. high at 61.4, as more factories said they were hiring to meet demand. The ISM employment gauge rose to its highest level since 1987. Moreover, this was the 4th straight month the index stayed above 60, the longest stretch since 83-84. The breadth of the improvement was impressive as all 20 manufacturing industries reported growth.
The Institute for Supply Management's Service Index came in at a very strong 60.8, down from its all-time high reading of 65.7 the month before. As well, the Intl. Council of Shopping Centers predicted sales of U.S. retailers rose 7% last month, the most in almost 4 years as tax refunds are boosting incomes by over $70B the first 6 months of the year.
The final Non-farm Productivity reading was 2.6%, growing at the slowest pace in a year. Fed Governor Bernanke said he expected companies to increase hiring soon as productivity gains slow. As well, first-time claims for unemployment insurance fell to 345k last week, near a three-year low. The Index of Aggregate Hours Worked per Week rose last month at the fastest pace in almost 8 years, as companies tried to keep up with demand. Finally, the Temporary Help Services Index has risen 10% in the last 10 months, the best showing since 1999 and a leading indicator of employment growth.
The unemployment rate met expectations and held steady at 5.6% for the month of February. However, the Change in Non-farm Payrolls was a much weaker-than-expected 21K. This number resulted in a significant rally in the Bond market and a modest decline in the U.S. dollar. Trading in interest rates futures now indicates that investors don't expect the Fed to raise the benchmark overnight bank lending rate from 1%, the lowest since 1958, until December at the earliest.
BOTTOM LINE: The vast majority of the data released last week point to continued strong economic growth with a pick-up in hiring in the next few months. Inflation remains subdued as well. The Personal Consumption Expenditure Price Index, the Fed's favorite gauge of inflation, rose a scant .3% last month even with record-high energy prices. In my opinion, the more momentum the economy builds before the first Fed rate hike, the better. Companies will find it increasingly more difficult to meet rapidly rising demand with their current labor force. Employment growth has always been a lagging indicator. Investors and pundits focused on this one number are looking in the rear-view mirror of the economic automobile. Those looking out the front window see improvement in the near future.
Weekly Scoreboard*
Indices
S&P 500 1,156.87 +1.04%
Dow 10,595.55 +.11%
NASDAQ 2,047.63 +.88%
Russell 2000 599.54 +2.39%
Wilshire 5000 11,314.42 +1.27%
Volatility(VIX) 14.48 -.48%
AAII Bullish % 47.83 +15.03%
US Dollar 88.17 +.99%
CRB 274.00 +.46%
Futures Spot Prices
Gold 401.60 +1.11%
Crude Oil 37.26 +3.30%
Natural Gas 5.44 +.52%
Base Metals 109.87 -2.81%
10-year US Treasury Yield 3.83% -3.02%
Average 30-year Mortgage Rate 5.59% +.18%
Leading Sectors
Homebuilders +8.87%
Gaming +5.83%
Biotech +4.18%
Lagging Sectors
Internet +.15%
Transports -.65%
Hospitals -.79%
*% Gain or loss for the week
S&P 500 1,156.87 +1.04%
Dow 10,595.55 +.11%
NASDAQ 2,047.63 +.88%
Russell 2000 599.54 +2.39%
Wilshire 5000 11,314.42 +1.27%
Volatility(VIX) 14.48 -.48%
AAII Bullish % 47.83 +15.03%
US Dollar 88.17 +.99%
CRB 274.00 +.46%
Futures Spot Prices
Gold 401.60 +1.11%
Crude Oil 37.26 +3.30%
Natural Gas 5.44 +.52%
Base Metals 109.87 -2.81%
10-year US Treasury Yield 3.83% -3.02%
Average 30-year Mortgage Rate 5.59% +.18%
Leading Sectors
Homebuilders +8.87%
Gaming +5.83%
Biotech +4.18%
Lagging Sectors
Internet +.15%
Transports -.65%
Hospitals -.79%
*% Gain or loss for the week
Subscribe to:
Posts (Atom)