S&P 500 1,098.41 +.27%
NASDAQ 1,912.83 +.15%
Leading Sectors
Iron/Steel +1.29%
Airlines +1.0%
Papers +.50%
Lagging Sectors
Biotech -1.10%
Telecom -1.50%
Oil Service -1.64%
Other
Crude Oil 37.35 +.81%
Natural Gas 5.49 -1.01%
Gold 420.20 +.67%
Base Metals 110.87 -1.28%
U.S. Dollar 87.71 -.11%
10-Yr. Long-Bond Yield 3.71% -.05%
VIX 21.02 -2.60%
Put/Call .68 -29.17%
NYSE Arms 1.29 -61.49%
Market Movers
PLMO +27.6% after significantly beating 3Q estimates and raising 4Q guidance.
ELN +7.7% after saying it will ask European regulators to approve its Antegren multiple sclerosis treatment this year.
SBNY +24.5% on strong demand for IPO.
SKIL +12.2% after better-than-expected 4Q estimates.
AKAM -9.2% after announcing COO will leave company.
Economic Data
None of note.
Recommendations
Goldman Sachs says that key takeaways from CTIA wireless show are 1)2G infrastructure market likely stronger than expected in 04 2)3G ramp continues to look steady in 04 3)3G ramp continues steady in 04. Overall, vendor sentiment remains in-line with recent positive demand comments, favorite is ERICY. GS reiterated Outperform on ACS, PETC and ATYT. GS says EU fine of $610M on MSFT is equivalent to 2 weeks of its cash flow, reiterated Outperform. GS positive on CSCO and NT ahead of their Voice on the Net conference next week. Citi Smith Barney raised RA to Buy 1M. Citi reiterated Buy on CCL, $53 target. Citi says NT oversold and is negotiating with FLEX to divest almost all it remaining optical, wireless and enterprise manufacturing operations. PFGC raised to Overweight at Morgan Stanley, target $41. PFE raised to Buy at Oppenheimer, target $39. SWY cut to Underweight at Lehman. TheStreet.com is positive on BRL.
Mid-day News
U.S. stocks are moving higher mid-day on a bounce from oversold levels and positive earnings news from Goldman Sachs. Jones Apparel Group began a hostile tender offer of about $297M for Maxwell Shoe, Bloomberg reported. The euro fell against the dollar after a European Central Bank report showed investors withdrew more than twice as much money from the euro region in January than in December. Advanced Micro(AMD) expects demand to rise in the second half of the year as companies buy new computers to replace those purchased in 1999. U.S. companies that have resisted making stock options an expense will have to do so starting next year under a rule the Financial Accounting Standards Board will issue this month.
BOTTOM LINE: The Portfolio is up slightly on the day as a few of my tech longs are up and my oil service shorts are down. I added a few new longs this morning on weakness in select securities. The Portfolio is now 50% net long. I will closely monitor the late-afternoon action for any signs that a significant bounce has begun as the major U.S. indices are oversold short-term.
Tuesday, March 23, 2004
Tuesday Watch
Earnings Announcements
Company/Estimate
FDO/.46
GS/1.66
RHAT/.03
Splits
NIHD 3-for-1
Economic Data
None of note.
Recommendations
CBA raised to Overweight at Morgan Stanley. Goldman Sachs reiterated Underperform on EDS. GS reiterated Outperform on YUM.
Late-Night News
Asian stocks are mixed as strength in Hong Kong, South Korea and India is overshadowed by another significant decline in Taiwan. A statement purportedly from the al-Qaeda terrorist network called for retaliation against the U.S. after Israeli forces killed Hamas leader Sheikh Ahmed Yassin, Agence France-Presse reported. Comcast will leave its bid to buy Disney on the table for no longer than three to six months, the New York Times reported. The U.S. is prepared to consider granting India the status of a non-NATO ally, New Delhi Television reported. General Motors is paying parts suppliers higher prices to cover rising steel costs, while at the same time suing two suppliers that threatened to stop deliveries, the WSJ reported. Anheuser-Busch is under pressure to spend more money on advertising its Bud Light brand because of growing competition from other beers, the WSJ reported. China protested a U.S. resolution prepared for a UN commission that criticizes the Chinese government for "backsliding" on human rights.
Late-Night Trading
Asian Indices -.50% to +1.0% on avg. with Taiwan's TWSE Index declining another 3.0%.
S&P 500 indicated +.27%.
NASDAQ indicated +.47%.
BOTTOM LINE: Asian stocks opened mostly lower and have rallied throughout the day. It is likely that U.S. stocks will attempt to rally in the morning off their oversold short-term condition. I will analyze the strength of the rally in the morning to decide whether or not to add some exposure on any weakness into the afternoon. However, if the indices open lower, I will likely add 25% long exposure in the morning. The Portfolio is 25% net long.
Company/Estimate
FDO/.46
GS/1.66
RHAT/.03
Splits
NIHD 3-for-1
Economic Data
None of note.
Recommendations
CBA raised to Overweight at Morgan Stanley. Goldman Sachs reiterated Underperform on EDS. GS reiterated Outperform on YUM.
Late-Night News
Asian stocks are mixed as strength in Hong Kong, South Korea and India is overshadowed by another significant decline in Taiwan. A statement purportedly from the al-Qaeda terrorist network called for retaliation against the U.S. after Israeli forces killed Hamas leader Sheikh Ahmed Yassin, Agence France-Presse reported. Comcast will leave its bid to buy Disney on the table for no longer than three to six months, the New York Times reported. The U.S. is prepared to consider granting India the status of a non-NATO ally, New Delhi Television reported. General Motors is paying parts suppliers higher prices to cover rising steel costs, while at the same time suing two suppliers that threatened to stop deliveries, the WSJ reported. Anheuser-Busch is under pressure to spend more money on advertising its Bud Light brand because of growing competition from other beers, the WSJ reported. China protested a U.S. resolution prepared for a UN commission that criticizes the Chinese government for "backsliding" on human rights.
Late-Night Trading
Asian Indices -.50% to +1.0% on avg. with Taiwan's TWSE Index declining another 3.0%.
S&P 500 indicated +.27%.
NASDAQ indicated +.47%.
BOTTOM LINE: Asian stocks opened mostly lower and have rallied throughout the day. It is likely that U.S. stocks will attempt to rally in the morning off their oversold short-term condition. I will analyze the strength of the rally in the morning to decide whether or not to add some exposure on any weakness into the afternoon. However, if the indices open lower, I will likely add 25% long exposure in the morning. The Portfolio is 25% net long.
Monday, March 22, 2004
Monday Close
S&P 500 1,095.40 -1.30%
NASDAQ 1,909.90 -1.58%
Leading Sectors
Restaurants +.11%
Defense -.31%
Foods -.68%
Lagging Sectors
Papers -2.72%
Networking -3.20%
Airlines -3.21%
Other
Crude Oil 37.15 +.27%
Natural Gas 5.55 +.07%
Gold 417.20 -.10%
Base Metals 112.31 -.67%
U.S. Dollar 87.81 -.36%
10-Yr. Long-Bond Yield 3.71% -1.55%
VIX 21.58 +12.69%
Put/Call .96 -5.88%
NYSE Arms 3.35 +65.02%
After-hours Movers
PLMO +11.3% after significantly beating 3Q estimates and raising 4Q guidance substantially.
PSRC +5.2% on PLMO earnings report.
SKIL +5.1% on better-than-expected 4Q earnings.
Recommendations
Goldman Sachs reiterated Outperform on AL, sees 31% upside from current levels. GS reiterated Outperform on CCL. Merrill Lynch raised Hong Kong to Overweight and cut Taiwan to Marketweight.
After-hours News
U.S. stocks fell again today as geopolitical concerns weighed heavily on airline and technology shares. Goldman Sachs says pension reform initiatives will have no major impact on equity and fixed income markets. Morgan Stanley and Credit Suisse First Boston Private Equity are the frontrunners to buy eight power plants in the southeastern U.S. from Duke Energy, Power Finance and Risk said. Taiwanese stocks slumped in the U.S., pointing to further declines Tuesday in Taipei, Bloomberg reported.
BOTTOM LINE: The Portfolio was down today as its 100% net long market exposure left it exposed to today's broad-based sell-off. I lowered market exposure to 25% net long in the afternoon. While I think we are getting very close to the bottom of this correction, I am not going to fight the tape. The SOX broke its 200-day moving average, but not convincingly. The NYSE Arms Index reached levels not seen since the bottom last March. However, the Put/Call ratio and VIX, which also spiked today, are still well off levels normally associated with bottoms. Finally, breadth was very bad today on average volume. Thus, I will keep the Portfolio close to market neutral, without adding new shorts, as I believe the major U.S. indices very oversold short-term.
NASDAQ 1,909.90 -1.58%
Leading Sectors
Restaurants +.11%
Defense -.31%
Foods -.68%
Lagging Sectors
Papers -2.72%
Networking -3.20%
Airlines -3.21%
Other
Crude Oil 37.15 +.27%
Natural Gas 5.55 +.07%
Gold 417.20 -.10%
Base Metals 112.31 -.67%
U.S. Dollar 87.81 -.36%
10-Yr. Long-Bond Yield 3.71% -1.55%
VIX 21.58 +12.69%
Put/Call .96 -5.88%
NYSE Arms 3.35 +65.02%
After-hours Movers
PLMO +11.3% after significantly beating 3Q estimates and raising 4Q guidance substantially.
PSRC +5.2% on PLMO earnings report.
SKIL +5.1% on better-than-expected 4Q earnings.
Recommendations
Goldman Sachs reiterated Outperform on AL, sees 31% upside from current levels. GS reiterated Outperform on CCL. Merrill Lynch raised Hong Kong to Overweight and cut Taiwan to Marketweight.
After-hours News
U.S. stocks fell again today as geopolitical concerns weighed heavily on airline and technology shares. Goldman Sachs says pension reform initiatives will have no major impact on equity and fixed income markets. Morgan Stanley and Credit Suisse First Boston Private Equity are the frontrunners to buy eight power plants in the southeastern U.S. from Duke Energy, Power Finance and Risk said. Taiwanese stocks slumped in the U.S., pointing to further declines Tuesday in Taipei, Bloomberg reported.
BOTTOM LINE: The Portfolio was down today as its 100% net long market exposure left it exposed to today's broad-based sell-off. I lowered market exposure to 25% net long in the afternoon. While I think we are getting very close to the bottom of this correction, I am not going to fight the tape. The SOX broke its 200-day moving average, but not convincingly. The NYSE Arms Index reached levels not seen since the bottom last March. However, the Put/Call ratio and VIX, which also spiked today, are still well off levels normally associated with bottoms. Finally, breadth was very bad today on average volume. Thus, I will keep the Portfolio close to market neutral, without adding new shorts, as I believe the major U.S. indices very oversold short-term.
Mid-day Update
S&P 500 1,095.61 -1.28%
NASDAQ 1,907.07 -1.72%
Leading Sectors
Restaurants +.25%
Drugs -.42%
Energy -.64%
Lagging Sectors
I-Banks -2.81%
Networking -3.05%
Airlines -3.17%
Other
Crude Oil 37.15 -2.44%
Natural Gas 5.51 -1.20%
Gold 418.30 +1.36%
Base Metals 112.31 -.67%
U.S. Dollar 87.62 -.58%
10-Yr. Long-Bond Yield 3.74% +.90%
VIX 21.61 +12.85%
Put/Call .82 -19.61%
NYSE Arms 3.18 +56.65%
Market Movers
USON +18.9% on $1.7B buyout by Welsh Carson.
MAGS +26% as investors anticipate increased demand for security systems.
NSSC +21.7% on positive Barron's recommendation.
EWT -11.7% on Taiwan political unrest.
IFF -6.6% after negative "Heard on the Street" column in the WSJ.
SSCC -7.0% after lowering 1Q earnings forecast.
Economic Data
None of note.
Recommendations
Tom Kurlak says in a Street.com editorial that he couldn't disagree more with Wall Street's concern that semiconductors have seen their best earnings growth rates for this cycle. His favorites are INTC, AMAT, TER, MU, BRCM and AVX. Goldman Sachs reiterates Underperform on TE and RKY. GS reiterates Outperform on EBAY, MO, BSX, PAYX, CAKE, WEN, YUM, KO, CCE and PEP. GS raising CBL to Outperform. Goldman becoming more confident in a significant employment pick-up, benefiting SIR, RMK, MLHR and SCS, favorite is KROL. Citi Smith Barney says MU will deliver strong 2Q results and make positive comments on 3Q. HTLD raised to Overweight at Morgan Stanley, $26 target. FON and CCI raised to Overweight at JP Morgan.
Mid-day News
U.S. stocks are falling mid-day on numerous geopolitical concerns, led by weakness in airline and technology shares. WalMart said same-store sales for March are tracking at the high end of the company's plan. Citi Smith Barney Chief North American Economist says that the recent Manpower employment survey is indicative of 700,000 new jobs being created in the second quarter, but that must be seen for investors to be convinced. Makers of antidepressants should better warn doctors and patients about suicide risk for people taking the medicines, the U.S. FDA said. Crude oil futures fell after officials from 2 members of OPEC said the group may postpone a cut in production quotas that was due to start April 1. Concerns that inflation will soon begin increasing are "premature" and it is unlikely inflation will increase significantly said Michael Moskow, president of the Federal Reserve Bank of Chicago. Moskow also said employment will pick-up as the economy continues to expand and that the Fed can be "patient" on policy accommodation.
BOTTOM LINE: The Portfolio is 100% net long and is down today on weakness in almost every sector. The NYSE Arms Index reached 4.52 this morning. The last time it reached such an extreme level was at the lows last March right before the bull market began. I have not traded as of yet. I am waiting to see if the morning lows on the S&P 500 will hold. I will likely cut market exposure significantly in the afternoon on a convincing break of the morning lows.
NASDAQ 1,907.07 -1.72%
Leading Sectors
Restaurants +.25%
Drugs -.42%
Energy -.64%
Lagging Sectors
I-Banks -2.81%
Networking -3.05%
Airlines -3.17%
Other
Crude Oil 37.15 -2.44%
Natural Gas 5.51 -1.20%
Gold 418.30 +1.36%
Base Metals 112.31 -.67%
U.S. Dollar 87.62 -.58%
10-Yr. Long-Bond Yield 3.74% +.90%
VIX 21.61 +12.85%
Put/Call .82 -19.61%
NYSE Arms 3.18 +56.65%
Market Movers
USON +18.9% on $1.7B buyout by Welsh Carson.
MAGS +26% as investors anticipate increased demand for security systems.
NSSC +21.7% on positive Barron's recommendation.
EWT -11.7% on Taiwan political unrest.
IFF -6.6% after negative "Heard on the Street" column in the WSJ.
SSCC -7.0% after lowering 1Q earnings forecast.
Economic Data
None of note.
Recommendations
Tom Kurlak says in a Street.com editorial that he couldn't disagree more with Wall Street's concern that semiconductors have seen their best earnings growth rates for this cycle. His favorites are INTC, AMAT, TER, MU, BRCM and AVX. Goldman Sachs reiterates Underperform on TE and RKY. GS reiterates Outperform on EBAY, MO, BSX, PAYX, CAKE, WEN, YUM, KO, CCE and PEP. GS raising CBL to Outperform. Goldman becoming more confident in a significant employment pick-up, benefiting SIR, RMK, MLHR and SCS, favorite is KROL. Citi Smith Barney says MU will deliver strong 2Q results and make positive comments on 3Q. HTLD raised to Overweight at Morgan Stanley, $26 target. FON and CCI raised to Overweight at JP Morgan.
Mid-day News
U.S. stocks are falling mid-day on numerous geopolitical concerns, led by weakness in airline and technology shares. WalMart said same-store sales for March are tracking at the high end of the company's plan. Citi Smith Barney Chief North American Economist says that the recent Manpower employment survey is indicative of 700,000 new jobs being created in the second quarter, but that must be seen for investors to be convinced. Makers of antidepressants should better warn doctors and patients about suicide risk for people taking the medicines, the U.S. FDA said. Crude oil futures fell after officials from 2 members of OPEC said the group may postpone a cut in production quotas that was due to start April 1. Concerns that inflation will soon begin increasing are "premature" and it is unlikely inflation will increase significantly said Michael Moskow, president of the Federal Reserve Bank of Chicago. Moskow also said employment will pick-up as the economy continues to expand and that the Fed can be "patient" on policy accommodation.
BOTTOM LINE: The Portfolio is 100% net long and is down today on weakness in almost every sector. The NYSE Arms Index reached 4.52 this morning. The last time it reached such an extreme level was at the lows last March right before the bull market began. I have not traded as of yet. I am waiting to see if the morning lows on the S&P 500 will hold. I will likely cut market exposure significantly in the afternoon on a convincing break of the morning lows.
Monday Watch
Earnings Announcements
Company/Estimates
AMHC/.15
CCL/.22
PLMO/-.33
WAG/.42
Splits
DCI 2-for-1
Economic Data
None of note.
Weekend Recommendations
Louis Rukeyser's Wall Street had featured guests that were positive on AXP, TRV, SPLS, CMCSK, XOM, FDC, LXK, DEO,MCY,PRV, LPNT and CPWM. Forbes on Fox had guests that were positive on BUD, MDT,HIBB, DKS, NKE and FL. Bulls and Bears had guests that were positive on OMM, ALVR, ING, OSTK, mixed on FAF, NT, AZO and negative on Airlines. Cashin' In had guests that were positive on LLL, PAL and mixed on GS, SIRI and MOT. Wall Street Week had guests that were positive on SYNM, FCEL, PLUG, AES, RRI, DPL, WTR, PNR and CUNO. Goldman Sachs says Airline Index has dropped 25% in six weeks and prices are below 9/11 lows. GS thinks top-line growth will accelerate in spring and any sign of a continuation of the profit recovery could result in dramatic outperformance, favorites are ALK, AMR and CAL. Barron's has positive columns on IDG, NSSC, MDT, BBH and SNE. It has negative pieces on the AAPL, the overall market and the U.S. dollar.
Weekend News
Iraq plans to boost crude oil production by 720,000 barrels a day to 2.6 million barrels a day this month. Some Syrians are openly questioning their government and challenging state oppression after watching the overthrow of Saddam Hussein across the border in Iraq, the NY Times reported. Cholesterol reduction and lowering blood pressure may be more effective at preventing heart attacks than medical procedures, the NY Times reported. Yahoo! Inc.'s revenue from its search engine is expected to exceed $3B this year, up from $400M in 2000, the NY Times reported. Taiwan President Chen Shuibian won election to a second term a day after he was shot. Nationalist Party leader Lien Chan, who lost by a quarter of a percentage point, said he will seek to overturn the poll. Lien said the shooting incident looked suspicious and had affected the outcome. Taiwan protestors demanding a recount in Saturday's election blocked a main Taipei boulevard for a second day, prompting a 6.7% decline in the TWSE Index, its worst decline in eight years. China put its army on alert on concern about the political crisis in nearby Taiwan, the South China Morning Post said. Al-Qaeda bought nuclear suitcase bombs on the black market from disgruntled Russian scientists, reported the Sydney Morning Herald. Pakistan's army halted an offensive against a force of suspected al-Qaeda and Taliban supporters to allow tribal leaders to negotiate a surrender, the military said. Rumors continue to swirl regarding al-Zawahiri, al-Qaeda's number 2 man, without confirmation regarding his whereabouts. 25% of all retail shopping will be done over the internet within five years compared to 4.2% last year, the Financial Times reported.
Late-Night Trading
Asian indices are mostly lower, with Taiwan's TWSE Index falling substantially. Losses range from -1.0% to -2.0%. Taiwan is down 6.7%.
S&P 500 indicated -.10%.
NASDAQ indicated -.14%.
BOTTOM LINE: Weakness in Asia will likely result in morning losses for U.S. stocks. I will closely monitor the breadth and volume readings on any gap down open. I will not sell into any substantial weakness in the morning. However, I will make a decision later in the day on whether or not to cut market exposure substantially. The Portfolio is currently 100% net long.
Company/Estimates
AMHC/.15
CCL/.22
PLMO/-.33
WAG/.42
Splits
DCI 2-for-1
Economic Data
None of note.
Weekend Recommendations
Louis Rukeyser's Wall Street had featured guests that were positive on AXP, TRV, SPLS, CMCSK, XOM, FDC, LXK, DEO,MCY,PRV, LPNT and CPWM. Forbes on Fox had guests that were positive on BUD, MDT,HIBB, DKS, NKE and FL. Bulls and Bears had guests that were positive on OMM, ALVR, ING, OSTK, mixed on FAF, NT, AZO and negative on Airlines. Cashin' In had guests that were positive on LLL, PAL and mixed on GS, SIRI and MOT. Wall Street Week had guests that were positive on SYNM, FCEL, PLUG, AES, RRI, DPL, WTR, PNR and CUNO. Goldman Sachs says Airline Index has dropped 25% in six weeks and prices are below 9/11 lows. GS thinks top-line growth will accelerate in spring and any sign of a continuation of the profit recovery could result in dramatic outperformance, favorites are ALK, AMR and CAL. Barron's has positive columns on IDG, NSSC, MDT, BBH and SNE. It has negative pieces on the AAPL, the overall market and the U.S. dollar.
Weekend News
Iraq plans to boost crude oil production by 720,000 barrels a day to 2.6 million barrels a day this month. Some Syrians are openly questioning their government and challenging state oppression after watching the overthrow of Saddam Hussein across the border in Iraq, the NY Times reported. Cholesterol reduction and lowering blood pressure may be more effective at preventing heart attacks than medical procedures, the NY Times reported. Yahoo! Inc.'s revenue from its search engine is expected to exceed $3B this year, up from $400M in 2000, the NY Times reported. Taiwan President Chen Shuibian won election to a second term a day after he was shot. Nationalist Party leader Lien Chan, who lost by a quarter of a percentage point, said he will seek to overturn the poll. Lien said the shooting incident looked suspicious and had affected the outcome. Taiwan protestors demanding a recount in Saturday's election blocked a main Taipei boulevard for a second day, prompting a 6.7% decline in the TWSE Index, its worst decline in eight years. China put its army on alert on concern about the political crisis in nearby Taiwan, the South China Morning Post said. Al-Qaeda bought nuclear suitcase bombs on the black market from disgruntled Russian scientists, reported the Sydney Morning Herald. Pakistan's army halted an offensive against a force of suspected al-Qaeda and Taliban supporters to allow tribal leaders to negotiate a surrender, the military said. Rumors continue to swirl regarding al-Zawahiri, al-Qaeda's number 2 man, without confirmation regarding his whereabouts. 25% of all retail shopping will be done over the internet within five years compared to 4.2% last year, the Financial Times reported.
Late-Night Trading
Asian indices are mostly lower, with Taiwan's TWSE Index falling substantially. Losses range from -1.0% to -2.0%. Taiwan is down 6.7%.
S&P 500 indicated -.10%.
NASDAQ indicated -.14%.
BOTTOM LINE: Weakness in Asia will likely result in morning losses for U.S. stocks. I will closely monitor the breadth and volume readings on any gap down open. I will not sell into any substantial weakness in the morning. However, I will make a decision later in the day on whether or not to cut market exposure substantially. The Portfolio is currently 100% net long.
Sunday, March 21, 2004
Charts of the Week
BOTTOM LINE: The above chart(shaded areas are recessions) shows the current unemployment rate of 5.6% is below the average for any ten-year period during the last 30 years. However, many say that this number isn't relevant as the number of people dropping out of the labor force is rising. These people are said to be so discouraged that they have given up on looking for a job. A recent Business Week article suggests that this is not the case. The article says that almost all of the drop in labor participation is in the 16-24 age group, specifically the 20-24 year olds. The above charts verify this analysis. It is my contention that with American's net worth at all-time highs, more and more 20-24 year olds are attending college and graduate school, thus resulting in a lower labor participation rate by this age group.
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