Earnings Announcements
Company/Estimate
APOL/.32
MOV/.47
ALOG/.11
Splits
None of note.
Economic Data
Business Inventories for Jan. estimated +.3% vs. +.3% in Dec.
Preliminary Univ. of Mich. Consumer Confidence estimated at 94.5 in March vs. 94.4 last month.
Recommendations
Goldman Sachs reiterating Outperform on FCE. Goldman, Morgan Stanley and ABN Amro said they lowered forecasts for the euro against the dollar amid signs Europe's economy is barely growing. PLCE is expected to benefit as it stocks its stores with better-quality merchandise and as rival Kids 'R' Us closes 146 outlets, Business Week reported in its "Inside Wall Street" column. GENZ may consider acquiring BIV, Business Week reported.
Late-Night News
Starbucks(SBUX) plans to start an in-store music service where customers will be able to make a custom CD from a selection of 250,000 songs, Business Week reported. U.S. local and long-distance telephone carriers have reached a tentative agreement to resolve a years-old dispute over how much long-distance phone companies should pay local carriers to connect their calls, Business Week said. France has stepped-up security on its border with Spain to high alert following the terrorist attacks in Madrid, the Financial Times said. Morgan Stanley is to reorganize its fixed-income dept. and will separate analysts from trading and sales staff to avoid potential conflicts of interest, FT said. The purported al-Qaeda letter sent to an Arabic Newspaper in London contained statements saying that an attack on the U.S. was 90% ready and would be carried out soon. President Roh Moo Hyun of South Korea was impeached by lawmakers who accused him of breaking laws that bar the president from publicly taking sides in parliamentary elections. The Korean KOSPI is down 3% on the news.
Late-Night Trading
Asian markets are lower, ranging from -1.0% to -1.75%, with South Korea dropping 3.0%.
S&P 500 indicated -.12%.
NASDAQ indicated -.21%.
BOTTOM LINE: Tomorrow should be another volatile day, as terror fears and declines in Asia will likely result in a lower open for U.S. shares. The short-term oversold state of the major indices, option expiration and high readings on various gauges of fear should lead to a good rally at some point tomorrow. I will look to add positions slowly into any significant weakness in the morning.
Friday, March 12, 2004
Thursday, March 11, 2004
Thursday Close
S&P 500 1,106.78 -1.52%
NASDAQ 1,943.89 -1.03%
Leading Sectors
Broadcasting +.47%
Transports +.02%
Homebuilders -.15%
Lagging Sectors
Wireless -2.4%
Fashion -2.98%
Airlines -3.42%
Other
Crude Oil 37.05 +.73%
Natural Gas 5.63 -.14%
Gold 403.30 +.57%
Base Metals 109.62 +2.07%
U.S. Dollar 88.32 +.02%
10-Yr. Long-Bond Yield 3.69% -.80%
VIX 20.67 +10.71%
Put/Call 1.10 +29.41%
NYSE Arms 2.17 -10.33%
After-hours Movers
IDXX +4.12% after raising guidance for 1Q and 04.
FLML +7.7% after reporting strong license and rev. growth during 4Q.
PETC -6.43% after missing 4Q estimates and lowering 1Q guidance.
VRTY -12.2% after meeting 3Q estimates and lowering 4Q guidance.
CAMD -15.5% after lowering 4Q forecast.
Recommendations
Goldman Sachs reiterating its very positive view on non-life insurance stocks. Favorites are ALL, AIG, ENH and RE.
After-hours News
U.S. stocks, already under pressure, fell precipitously after rumors surfaced that al-Qaeda had taken credit for the rush-hour train bombings in Spain, which killed at least 192 and injured another 1,400. After the close, U.S. regulators said they are demanding that 23 companies stop selling products containing androstenedione, the diet supplement known as andro, Bloomberg reported. Oracle(ORCL) reported 3Q results that met expectations as database sales and favorable exchange rates boosted license sales 13% year-over-year.
BOTTOM LINE: The Portfolio had a good day, finishing down slightly. I sold a few of my relatively strong longs and rotated into some beaten-up stocks that look ready for an oversold bounce. I also added an overbought retail short, bringing the Portfolio's market exposure back to 0% or market neutral. Signs of fear are emerging, with high put/call, vix and arms readings. Thus, I suspect we are very close to a short-term bottom. I will look to slowly add market exposure into further weakness.
NASDAQ 1,943.89 -1.03%
Leading Sectors
Broadcasting +.47%
Transports +.02%
Homebuilders -.15%
Lagging Sectors
Wireless -2.4%
Fashion -2.98%
Airlines -3.42%
Other
Crude Oil 37.05 +.73%
Natural Gas 5.63 -.14%
Gold 403.30 +.57%
Base Metals 109.62 +2.07%
U.S. Dollar 88.32 +.02%
10-Yr. Long-Bond Yield 3.69% -.80%
VIX 20.67 +10.71%
Put/Call 1.10 +29.41%
NYSE Arms 2.17 -10.33%
After-hours Movers
IDXX +4.12% after raising guidance for 1Q and 04.
FLML +7.7% after reporting strong license and rev. growth during 4Q.
PETC -6.43% after missing 4Q estimates and lowering 1Q guidance.
VRTY -12.2% after meeting 3Q estimates and lowering 4Q guidance.
CAMD -15.5% after lowering 4Q forecast.
Recommendations
Goldman Sachs reiterating its very positive view on non-life insurance stocks. Favorites are ALL, AIG, ENH and RE.
After-hours News
U.S. stocks, already under pressure, fell precipitously after rumors surfaced that al-Qaeda had taken credit for the rush-hour train bombings in Spain, which killed at least 192 and injured another 1,400. After the close, U.S. regulators said they are demanding that 23 companies stop selling products containing androstenedione, the diet supplement known as andro, Bloomberg reported. Oracle(ORCL) reported 3Q results that met expectations as database sales and favorable exchange rates boosted license sales 13% year-over-year.
BOTTOM LINE: The Portfolio had a good day, finishing down slightly. I sold a few of my relatively strong longs and rotated into some beaten-up stocks that look ready for an oversold bounce. I also added an overbought retail short, bringing the Portfolio's market exposure back to 0% or market neutral. Signs of fear are emerging, with high put/call, vix and arms readings. Thus, I suspect we are very close to a short-term bottom. I will look to slowly add market exposure into further weakness.
Mid-day Update
S&P 500 1,122.39 -.15%
NASDAQ 1972.64 +.43%
Leading Sectors
Iron/Steel +1.79%
Semis +1.31%
Internet +1.13%
Lagging Sectors
Drugs -.89%
Wireless -1.36%
Fashion -2.98%
Other
Crude Oil 36.38 +.78%
Natural Gas 5.47 +1.35%
Gold 400.30 -.05%
Base Metals 109.62 +2.07%
U.S. Dollar 88.77 -.20%
10-Yr. Long-Bond Yield 3.77% +1.31%
VIX 17.92 -3.91%
Put/Call 1.13 +32.94%
NYSE Arms 1.28 -47.11%
Market Movers
NT -3.3% after it said it may restate results for 03 after an accounting review.
DCTH +76.0% after it said clinicians at the Sydney Melanoma Unit in Australia successfully completed the first treatment in the company's Phase III clinical trial for inoperable cancer in the liver.
TGT +8.3% on plans to sell its Mervyn's and Marshall Field's department stores and multiple upgrades.
LF -26.3% after lowering 1Q and 04 guidance and multiple downgrades.
HAL -4.7% after the U.S. Justice Dept. said it would take over a criminal investigation looking into whether or not HAL inflated fees for its work in Iraq.
YELL +11.2% after raising 1Q estimates significantly.
TASR +6.6% on short-covering.
NSM +5.6% after significantly beating 3Q estimates and raising 4Q guidance.
Economic Data
Advance Retail Sales for Feb. were up.6%, meeting estimates.
Retail Sales Less Autos for Feb. unch. vs. expectations of a .5% increase.
Initial Jobless Claims 341K last week vs. expectations of 343K.
Continuing Claims were 3032K vs. expectations of 3075K.
Recommendations
Goldman Sachs reiterates Underperform on DDS. GS reiterating Outperform on BBY. Goldman would buy steel stocks on current weakness, favorites are STLD and X. Citi Smith Barney is recommending AMTD before they release Daily Avg. Revenue Trade data on Fri. Citi initiated coverage of LXK with a 1M rating and $95 target. Citi is upgrading TGT to 1M and raising target to $50. Citi reiterating Buy rating on MATK. Citi says tone of presentations at their industrial conference was almost universally upbeat. They reiterate Buys on GE, TYC, ASD and ITT. LAMR is mentioned positively on Barron's Online saying the company should benefit from a rebound in local ad revenues. RHAT raised to Outperform at Thomas Weisel. LF lowered to Underperform at CSFB with $18 target. TGT raised to Outperform at CSFB. DG rated Buy at Bank of America, $35 target. CENX raised to Buy at Merrill, $28 target. CKFR raised to Outperform at Lehman, $34 target. ERES cut to Underperform at Raymond James.
Mid-day News
U.S. stocks are mixed mid-day on strength in Cyclicals and weakness in wireless and pharmaceuticals. Spains's government said the ETA terror group was behind rush-hour train bombings that killed more than 190 people and injured 1,247 in Spain's worst-ever terrorist attack. Codelco, the world's largest copper producer, sold 3/4 of its stockpile of the metal, raising the risk of a shortage this year, Reuters reported. Crude oil rose for the first time in 4 days after the IEA said that demand this year will rise to the highest since 1997 because of surging global economies. Alan Greenspan reiterated his belief that U.S. job growth will soon accelerate. He also said the U.S. should not pursue protectionist policies as it will cost more jobs than it will save. He said we need to focus on retraining our un-skilled labor force. The surge in Lucent bonds, which have almost doubled since the beginning of last year, is a sign that communications companies' debt-reductions efforts are paying off, Bloomberg reported. The U.S. House passed a bill that stiffens federal penalties against t.v. and radio broadcasters for indecency.
BOTTOM LINE: The market's ability to rally in the face of the Spanish terror attacks is a good sign. National Semis exceptional numbers are also being rewarded as it leads the SOX higher. I added a few technology and base metal longs on the morning weakness, bringing the Portfolio's market exposure to 25% net long. While I am not ready to be aggressive on the long-side, the market's tone is much better today. I may add another 25% long exposure if the market can hold today's gains and strengthen into the close.
NASDAQ 1972.64 +.43%
Leading Sectors
Iron/Steel +1.79%
Semis +1.31%
Internet +1.13%
Lagging Sectors
Drugs -.89%
Wireless -1.36%
Fashion -2.98%
Other
Crude Oil 36.38 +.78%
Natural Gas 5.47 +1.35%
Gold 400.30 -.05%
Base Metals 109.62 +2.07%
U.S. Dollar 88.77 -.20%
10-Yr. Long-Bond Yield 3.77% +1.31%
VIX 17.92 -3.91%
Put/Call 1.13 +32.94%
NYSE Arms 1.28 -47.11%
Market Movers
NT -3.3% after it said it may restate results for 03 after an accounting review.
DCTH +76.0% after it said clinicians at the Sydney Melanoma Unit in Australia successfully completed the first treatment in the company's Phase III clinical trial for inoperable cancer in the liver.
TGT +8.3% on plans to sell its Mervyn's and Marshall Field's department stores and multiple upgrades.
LF -26.3% after lowering 1Q and 04 guidance and multiple downgrades.
HAL -4.7% after the U.S. Justice Dept. said it would take over a criminal investigation looking into whether or not HAL inflated fees for its work in Iraq.
YELL +11.2% after raising 1Q estimates significantly.
TASR +6.6% on short-covering.
NSM +5.6% after significantly beating 3Q estimates and raising 4Q guidance.
Economic Data
Advance Retail Sales for Feb. were up.6%, meeting estimates.
Retail Sales Less Autos for Feb. unch. vs. expectations of a .5% increase.
Initial Jobless Claims 341K last week vs. expectations of 343K.
Continuing Claims were 3032K vs. expectations of 3075K.
Recommendations
Goldman Sachs reiterates Underperform on DDS. GS reiterating Outperform on BBY. Goldman would buy steel stocks on current weakness, favorites are STLD and X. Citi Smith Barney is recommending AMTD before they release Daily Avg. Revenue Trade data on Fri. Citi initiated coverage of LXK with a 1M rating and $95 target. Citi is upgrading TGT to 1M and raising target to $50. Citi reiterating Buy rating on MATK. Citi says tone of presentations at their industrial conference was almost universally upbeat. They reiterate Buys on GE, TYC, ASD and ITT. LAMR is mentioned positively on Barron's Online saying the company should benefit from a rebound in local ad revenues. RHAT raised to Outperform at Thomas Weisel. LF lowered to Underperform at CSFB with $18 target. TGT raised to Outperform at CSFB. DG rated Buy at Bank of America, $35 target. CENX raised to Buy at Merrill, $28 target. CKFR raised to Outperform at Lehman, $34 target. ERES cut to Underperform at Raymond James.
Mid-day News
U.S. stocks are mixed mid-day on strength in Cyclicals and weakness in wireless and pharmaceuticals. Spains's government said the ETA terror group was behind rush-hour train bombings that killed more than 190 people and injured 1,247 in Spain's worst-ever terrorist attack. Codelco, the world's largest copper producer, sold 3/4 of its stockpile of the metal, raising the risk of a shortage this year, Reuters reported. Crude oil rose for the first time in 4 days after the IEA said that demand this year will rise to the highest since 1997 because of surging global economies. Alan Greenspan reiterated his belief that U.S. job growth will soon accelerate. He also said the U.S. should not pursue protectionist policies as it will cost more jobs than it will save. He said we need to focus on retraining our un-skilled labor force. The surge in Lucent bonds, which have almost doubled since the beginning of last year, is a sign that communications companies' debt-reductions efforts are paying off, Bloomberg reported. The U.S. House passed a bill that stiffens federal penalties against t.v. and radio broadcasters for indecency.
BOTTOM LINE: The market's ability to rally in the face of the Spanish terror attacks is a good sign. National Semis exceptional numbers are also being rewarded as it leads the SOX higher. I added a few technology and base metal longs on the morning weakness, bringing the Portfolio's market exposure to 25% net long. While I am not ready to be aggressive on the long-side, the market's tone is much better today. I may add another 25% long exposure if the market can hold today's gains and strengthen into the close.
Thursday Watch
Earnings Announcements
Company/Estimate
ARO/.69
BGP/1.51
DKS/.99
DISH/.10
ELBO/1.41
NSM/.41
ORCL/.12
URBN/.42
Splits
FIC 3-for-2
Economic Data
Advance Retail Sales for Feb. estimated up .6% vs. -.3% in Jan.
Retail Sales Less Autos estimated up .5% in Feb. vs. +.9% in Jan.
Initial Jobless Claims for last week estimated at 343K vs. 345K the prior week.
Continuing Claims estimated at 3075K vs. 3091K the prior week.
Recommendations
Goldman Sachs reiterates Outperform on FDC. GS reiterating Outperform on AG after an end to SEC investigation into its revenue recognition practices. GS reiterates Outperform on DNA based on momentum from launch of Avastin and a robust pipeline. GS reiterated Outperform on DHR and raised estimates. Finally, Goldman is saying the recent weakness in base metal prices/stocks is a great buying opportunity. Their favorites are N, AL and AA.
Late-Night News
General Motors will start selling one-ton pickup trucks in Thailand for the first time to boost sales in Southeast Asia's biggest automobile market. China will begin operating the first nuclear power plant designed and built in the country, needed to ease power shortages along the east coast, China Daily reported. The U.S. Senate approved a plan by Democrats that will make it tougher to make President Bush's tax cuts permanent or to extend tax cuts that expire this year, Bloomberg reported. Terrorist groups trying to establish bases in Western Iraq are in total disarray, Major General Charles Swannack said. Shares of TOM Online, a Chinese Internet company controlled by Asia's richest business man, fell as much as 11% on the company's Hong Kong debut. The yen gained against the euro and the dollar in Asia after the Ministry of Finance said overseas investors bought the most Japanese shares last week in over 3 years, Bloomberg reported. As well, the euro dropped against the dollar for a third day in Asia on speculation the European economic expansion is falling further behind that of America. Martha Stewart may start serving a 10-16 month sentence in June as it is unlikely that she will remain free pending her planned appeal, Bloomberg reported.
Late-Night Trading
Asian markets are mostly lower, ranging from unch. to down 1.4%. China is the exception, rising 1.17%.
S&P 500 indicated +.05%.
NASDAQ indicated +.11%.
BOTTOM LINE: I think a few main things are currently troubling the U.S. equity markets. High energy prices, politics, profit-taking and investor complacency. I believe energy prices are very close to a short-term top. The tone of political rhetoric is especially nasty with the election still 9 months away. Hopefully, this will create a backlash and the candidates will turn it down a notch. I doubt it, but it is possible. The markets had an exceptional run over the last 12 months without so much as a 5% correction. Corrections are normal and healthy in bull markets. Finally, the volatility indices and investor bullish % surveys were both showing a large amount of complacency. I do not view any of these reasons as sufficiently large enough problems to derail the current bull. The NASDAQ is down about 9% from its recent high. I expect that it is nearing a bottom. At the very worst it may test 1900, which is around the 200 day m.a. and another 3% drop from here. I don't think the S&P will fall as much in total. I expect it to find support around 1,100 which is also down another 3% from current levels. The market is a discounting mechanism and one of the problems I have mentioned in the last couple of days may continue to worsen and justify the current fall. However, as of now I believe this is a healthy correction within the confines of a bull market and I would view extreme weakness in favorite stocks as a buying opportunity.
Company/Estimate
ARO/.69
BGP/1.51
DKS/.99
DISH/.10
ELBO/1.41
NSM/.41
ORCL/.12
URBN/.42
Splits
FIC 3-for-2
Economic Data
Advance Retail Sales for Feb. estimated up .6% vs. -.3% in Jan.
Retail Sales Less Autos estimated up .5% in Feb. vs. +.9% in Jan.
Initial Jobless Claims for last week estimated at 343K vs. 345K the prior week.
Continuing Claims estimated at 3075K vs. 3091K the prior week.
Recommendations
Goldman Sachs reiterates Outperform on FDC. GS reiterating Outperform on AG after an end to SEC investigation into its revenue recognition practices. GS reiterates Outperform on DNA based on momentum from launch of Avastin and a robust pipeline. GS reiterated Outperform on DHR and raised estimates. Finally, Goldman is saying the recent weakness in base metal prices/stocks is a great buying opportunity. Their favorites are N, AL and AA.
Late-Night News
General Motors will start selling one-ton pickup trucks in Thailand for the first time to boost sales in Southeast Asia's biggest automobile market. China will begin operating the first nuclear power plant designed and built in the country, needed to ease power shortages along the east coast, China Daily reported. The U.S. Senate approved a plan by Democrats that will make it tougher to make President Bush's tax cuts permanent or to extend tax cuts that expire this year, Bloomberg reported. Terrorist groups trying to establish bases in Western Iraq are in total disarray, Major General Charles Swannack said. Shares of TOM Online, a Chinese Internet company controlled by Asia's richest business man, fell as much as 11% on the company's Hong Kong debut. The yen gained against the euro and the dollar in Asia after the Ministry of Finance said overseas investors bought the most Japanese shares last week in over 3 years, Bloomberg reported. As well, the euro dropped against the dollar for a third day in Asia on speculation the European economic expansion is falling further behind that of America. Martha Stewart may start serving a 10-16 month sentence in June as it is unlikely that she will remain free pending her planned appeal, Bloomberg reported.
Late-Night Trading
Asian markets are mostly lower, ranging from unch. to down 1.4%. China is the exception, rising 1.17%.
S&P 500 indicated +.05%.
NASDAQ indicated +.11%.
BOTTOM LINE: I think a few main things are currently troubling the U.S. equity markets. High energy prices, politics, profit-taking and investor complacency. I believe energy prices are very close to a short-term top. The tone of political rhetoric is especially nasty with the election still 9 months away. Hopefully, this will create a backlash and the candidates will turn it down a notch. I doubt it, but it is possible. The markets had an exceptional run over the last 12 months without so much as a 5% correction. Corrections are normal and healthy in bull markets. Finally, the volatility indices and investor bullish % surveys were both showing a large amount of complacency. I do not view any of these reasons as sufficiently large enough problems to derail the current bull. The NASDAQ is down about 9% from its recent high. I expect that it is nearing a bottom. At the very worst it may test 1900, which is around the 200 day m.a. and another 3% drop from here. I don't think the S&P will fall as much in total. I expect it to find support around 1,100 which is also down another 3% from current levels. The market is a discounting mechanism and one of the problems I have mentioned in the last couple of days may continue to worsen and justify the current fall. However, as of now I believe this is a healthy correction within the confines of a bull market and I would view extreme weakness in favorite stocks as a buying opportunity.
Wednesday, March 10, 2004
Wednesday Close
S&P 500 1,123.89 -1.46%
NASDAQ 1,964.15 -1.55%
Leading Sectors
Tobacco -.32%
Fashion -.33%
Foods -.46%
Lagging Sectors
Papers -2.92%
Oil Service -3.13%
Iron/Steel -3.21%
Other
Crude Oil 36.14 +.11%
Natural Gas 5.40 +.06%
Gold 400.50 +.05%
Base Metals 107.40 +.67%
U.S. Dollar 88.95 +.59%
10-Yr. Long-Bond Yield 3.73% +.25%
VIX 18.67 +12.47%
Put/Call .85 -13.27%
NYSE Arms 2.42 -11.68%
After-hours Movers
AMSY +24.19% after $415M purchase of their Defense and Intelligence Group by CAI.
ZQK +6.74% after significantly beating 1Q estimates and raising 04 forecast.
YELL +6.32% after boosting 1Q forecast at mid-quarter update.
LF -31.54% after significantly lowering 1Q forecast.
MATK -5.37% after slightly missing 1Q estimates.
Recommendations
Goldman Sachs reiterates positive view on capital goods stocks. TheStreet.com is saying that AFCI is down on the possibility of losing the Verizon FTTP contract. Jim Cramer, of TheStreet.com, thinks panic selling has begun and it is necessary to put in a good sustainable bottom.
After-hours News
U.S. stocks dropped Wednesday as investors fear the economy may be slowing and the NASDAQ broke through a key support level. Cyclicals and pharmaceuticals bore the brunt of the selling. After the close, the Financial Times said NATO may announce plans to take over full control of Afghanistan to guarantee security. Intel, which spent $300M promoting its Centrino chip package last year, will stop selling the chipset in China after balking at the government's demands to alter the product to meet its new standards. Target may sell its Mervyn's and Marshall Field's stores, Bloomberg reported.
BOTTOM LINE: Today was a very bad day for the bulls. Almost all sectors participated in the decline. Cyclicals dropped significantly on expectations the economy is slowing and profit-taking. I think profit-taking is healthy, but I do not agree that the economy is slowing. However, it is possible that enough negative talk and reporting could lead to a self-fulfilling prophecy. If enough people believe all the negative news being reported right now, they won't spend as much and that would hurt the economy. Retail spending is very strong right now, but I will closely monitor this area for any signs of weakness resulting from a continued decline in confidence. The accelerating rate of attacks on the pharmaceutical industry is finally taking its toll, as these stocks broke down technically today. I expect drug stocks to remain in a trading range until the political attacks subside towards the end of the year. The Portfolio ended the day modestly down as the selling spread throughout most sectors. I added a few shorts in the oil service and technology sectors, bringing net market exposure to 0% or market neutral.
NASDAQ 1,964.15 -1.55%
Leading Sectors
Tobacco -.32%
Fashion -.33%
Foods -.46%
Lagging Sectors
Papers -2.92%
Oil Service -3.13%
Iron/Steel -3.21%
Other
Crude Oil 36.14 +.11%
Natural Gas 5.40 +.06%
Gold 400.50 +.05%
Base Metals 107.40 +.67%
U.S. Dollar 88.95 +.59%
10-Yr. Long-Bond Yield 3.73% +.25%
VIX 18.67 +12.47%
Put/Call .85 -13.27%
NYSE Arms 2.42 -11.68%
After-hours Movers
AMSY +24.19% after $415M purchase of their Defense and Intelligence Group by CAI.
ZQK +6.74% after significantly beating 1Q estimates and raising 04 forecast.
YELL +6.32% after boosting 1Q forecast at mid-quarter update.
LF -31.54% after significantly lowering 1Q forecast.
MATK -5.37% after slightly missing 1Q estimates.
Recommendations
Goldman Sachs reiterates positive view on capital goods stocks. TheStreet.com is saying that AFCI is down on the possibility of losing the Verizon FTTP contract. Jim Cramer, of TheStreet.com, thinks panic selling has begun and it is necessary to put in a good sustainable bottom.
After-hours News
U.S. stocks dropped Wednesday as investors fear the economy may be slowing and the NASDAQ broke through a key support level. Cyclicals and pharmaceuticals bore the brunt of the selling. After the close, the Financial Times said NATO may announce plans to take over full control of Afghanistan to guarantee security. Intel, which spent $300M promoting its Centrino chip package last year, will stop selling the chipset in China after balking at the government's demands to alter the product to meet its new standards. Target may sell its Mervyn's and Marshall Field's stores, Bloomberg reported.
BOTTOM LINE: Today was a very bad day for the bulls. Almost all sectors participated in the decline. Cyclicals dropped significantly on expectations the economy is slowing and profit-taking. I think profit-taking is healthy, but I do not agree that the economy is slowing. However, it is possible that enough negative talk and reporting could lead to a self-fulfilling prophecy. If enough people believe all the negative news being reported right now, they won't spend as much and that would hurt the economy. Retail spending is very strong right now, but I will closely monitor this area for any signs of weakness resulting from a continued decline in confidence. The accelerating rate of attacks on the pharmaceutical industry is finally taking its toll, as these stocks broke down technically today. I expect drug stocks to remain in a trading range until the political attacks subside towards the end of the year. The Portfolio ended the day modestly down as the selling spread throughout most sectors. I added a few shorts in the oil service and technology sectors, bringing net market exposure to 0% or market neutral.
Mid-day Update
S&P 500 1,134.25 -.55%
NASDAQ 1985.73 -.47%
Leading Sectors
Computer Boxmakers +.28%
Gaming +.17%
Homebuilders +.11%
Lagging Sectors
Drugs -1.57%
Telecom -1.73%
Oil Service -2.13%
Other
Crude Oil 35.75 -1.41%
Natural Gas 5.39 -.79%
Gold 401.20 -.82%
Base Metals 107.40 +.67%
U.S. Dollar 88.90 +.53%
10-Yr. Long-Bond Yield 3.71% -.20%
VIX 16.86 +1.57%
Put/Call .77 -21.43%
NYSE Arms 1.66 -41.61%
Market Movers
THC -12.2% on cash crunch concerns.
PG +4.4% after raising 3Q estimates, raising 04 guidance and announcing 2-for-1 split.
ROK +6.3% after raising 2Q estimates.
KKD -7.8% after meeting 4Q estimates and lowering 1Q guidance. Will have sugar-free doughnut by year-end.
INTV +9.7% after Wedbush Morgan analyst made positive comments and added to recommended list.
MMSI +7.8% after announcing it will be added to the S&P 600 index.
IDCC -19.6% after missing 4Q estimates and lowering 1Q guidance.
Economic Data
Trade Balance came in at -$43.1B in Jan. vs. expectations of -$42.0B.
Wholesale Inventories rose .1% in Jan. vs. expectations of a .4% rise.
Recommendations
MDT raised to Overweight at Morgan Stanley, target $60. CDN raised to Buy at Merrill, target $20. Goldman Sachs reiterating Outperform on GDT. Goldman saying there are a lot of misconceptions right now about pre-clinical service providers and that they are very bullish on the group for 04. GS is raising estimates for ICLR, likes CVD and IRGI best. GS reiterating Outperform on PG, raising estimates. GS thinks DOW is a great buy at current levels. Citi Smith Barney initiating DISH with Buy 1H and $43 target. Citi reiterating Buy on FDRY, thinks market is overreacting. Citi says CSCO is clearly seeing a dramatic increase in enterprise activity around converged IP networks. Jim Cramer, of TheStreet.com, is starting to buy right now, saying investors are too focused on the negative, which is wrong. He likes cyclicals a lot and the NASDAQ over the S&P.
Mid-day News
U.S. stocks are falling mid-day as cyclical and pharmaceutical shares fall on concerns the economy is slowing and constant attacks by government, respectively. The SEC plans to propose rules tomorrow that would require mutual fund managers to disclose compensation and their holdings in the funds they control, the Wall Street Journal reported. Harrah's will beat out its competitors for a Chicago-area casino license with a $375M bid, CEO Loveman told CNBC. Microsoft claimed 11% of the business-management software market less than 5 years after beginning to sell the products, SAP said. Nokia and Motorola lost handset market share in the 4th Q to competitors such as Siemens and Samsung, researcher Gartner said. S&P raised Lucent's credit rating to B as telecom industry revenues stabilize. El Paso may restate earnings because part of last month's 41% cut to its assessment of oil and natural gas reserves may be applied to past years. Pennsylvania Attorney General said he will sue several pharmaceutical companies on grounds that they unlawfully inflated prices to capture market share. Pfizer said the Justice Dept. is investigating the company's marketing and sale of its Genotropin and Bextra drugs and some managed-care payments.
BOTTOM LINE: The correction that began with semis and spread throughout the whole tech sector is now engulfing the entire market. The NASDAQ appears to be breaking support in a convincing manner. The Portfolio is flat for the day, however I sold a few longs in the last hour bringing the Portfolio's market exposure down to 25% net long. If weakness persists this afternoon, I will look to add short positions in energy-related stocks as I think Oil has made an intermediate-term top. This should bring the Portfolio to near market neutral. I am not ruling out a late-day reversal to the up-side as I believe this correction is close to running its course.
NASDAQ 1985.73 -.47%
Leading Sectors
Computer Boxmakers +.28%
Gaming +.17%
Homebuilders +.11%
Lagging Sectors
Drugs -1.57%
Telecom -1.73%
Oil Service -2.13%
Other
Crude Oil 35.75 -1.41%
Natural Gas 5.39 -.79%
Gold 401.20 -.82%
Base Metals 107.40 +.67%
U.S. Dollar 88.90 +.53%
10-Yr. Long-Bond Yield 3.71% -.20%
VIX 16.86 +1.57%
Put/Call .77 -21.43%
NYSE Arms 1.66 -41.61%
Market Movers
THC -12.2% on cash crunch concerns.
PG +4.4% after raising 3Q estimates, raising 04 guidance and announcing 2-for-1 split.
ROK +6.3% after raising 2Q estimates.
KKD -7.8% after meeting 4Q estimates and lowering 1Q guidance. Will have sugar-free doughnut by year-end.
INTV +9.7% after Wedbush Morgan analyst made positive comments and added to recommended list.
MMSI +7.8% after announcing it will be added to the S&P 600 index.
IDCC -19.6% after missing 4Q estimates and lowering 1Q guidance.
Economic Data
Trade Balance came in at -$43.1B in Jan. vs. expectations of -$42.0B.
Wholesale Inventories rose .1% in Jan. vs. expectations of a .4% rise.
Recommendations
MDT raised to Overweight at Morgan Stanley, target $60. CDN raised to Buy at Merrill, target $20. Goldman Sachs reiterating Outperform on GDT. Goldman saying there are a lot of misconceptions right now about pre-clinical service providers and that they are very bullish on the group for 04. GS is raising estimates for ICLR, likes CVD and IRGI best. GS reiterating Outperform on PG, raising estimates. GS thinks DOW is a great buy at current levels. Citi Smith Barney initiating DISH with Buy 1H and $43 target. Citi reiterating Buy on FDRY, thinks market is overreacting. Citi says CSCO is clearly seeing a dramatic increase in enterprise activity around converged IP networks. Jim Cramer, of TheStreet.com, is starting to buy right now, saying investors are too focused on the negative, which is wrong. He likes cyclicals a lot and the NASDAQ over the S&P.
Mid-day News
U.S. stocks are falling mid-day as cyclical and pharmaceutical shares fall on concerns the economy is slowing and constant attacks by government, respectively. The SEC plans to propose rules tomorrow that would require mutual fund managers to disclose compensation and their holdings in the funds they control, the Wall Street Journal reported. Harrah's will beat out its competitors for a Chicago-area casino license with a $375M bid, CEO Loveman told CNBC. Microsoft claimed 11% of the business-management software market less than 5 years after beginning to sell the products, SAP said. Nokia and Motorola lost handset market share in the 4th Q to competitors such as Siemens and Samsung, researcher Gartner said. S&P raised Lucent's credit rating to B as telecom industry revenues stabilize. El Paso may restate earnings because part of last month's 41% cut to its assessment of oil and natural gas reserves may be applied to past years. Pennsylvania Attorney General said he will sue several pharmaceutical companies on grounds that they unlawfully inflated prices to capture market share. Pfizer said the Justice Dept. is investigating the company's marketing and sale of its Genotropin and Bextra drugs and some managed-care payments.
BOTTOM LINE: The correction that began with semis and spread throughout the whole tech sector is now engulfing the entire market. The NASDAQ appears to be breaking support in a convincing manner. The Portfolio is flat for the day, however I sold a few longs in the last hour bringing the Portfolio's market exposure down to 25% net long. If weakness persists this afternoon, I will look to add short positions in energy-related stocks as I think Oil has made an intermediate-term top. This should bring the Portfolio to near market neutral. I am not ruling out a late-day reversal to the up-side as I believe this correction is close to running its course.
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