S&P 500 1,122.47 +1.30%
NASDAQ 1,992.57 +1.66%
Leading Sectors
Biotech +3.11%
Wireless +2.61%
Airlines +2.60%
Lagging Sectors
Energy +.47%
Homebuilders -.16%
Oil Service -.54%
Other
Crude Oil 35.42 -.08%
Natural Gas 5.37 -.56%
Gold 419.00 +.19%
Base Metals 112.26 +.13%
U.S. Dollar 88.54 -.39%
10-Yr. Long-Bond Yield 3.89% +1.54%
VIX 16.50 -4.79%
Put/Call .65 -15.58%
NYSE Arms .35 -60.23%
After-hours Movers
VASC +28.0% after announcing that it had received 510(K) clearance by the FDA for its D-Stat Dry 3x3 hemostatic bandage.
BLTI +6.85% on no news.
ACS +3.65% after saying it would replace Travelers in the S&P 500 index.
Recommendations
Goldman Sachs reiterated Outperform on STN. GS says they expect upwards earnings guidance from a number of retailers given sold same-store sales, tight inventories and low markdowns.
After-hours News
U.S. stocks finished broadly higher Monday on falling energy prices, positive comments from WalMart, multiple takeover announcements and speculation that Friday's employment report will exceed consensus. A recent Australian poll found that 61% of voters thought Australian troops should stay in Iraq, supporting Prime Minister John Howard's stance, the Sydney Morning Herald reported.
BOTTOM LINE: The Portfolio had a very good day today. I rotated out of a few winning longs and into technology stocks that are just beginning to break-out technically, leaving Portfolio market exposure at 125% net long. I believe we have seen the lows for this recent correction. A test will likely occur in the early part of April and succeed. Long-term investors should use any weakness in the coming weeks to add to favorite long positions. In the short-term, the NASDAQ will likely begin a consolidation on a breach of the 2000 level. The employment report on Friday will dictate trading in the near-term, as well.
Monday, March 29, 2004
Mid-day Update
S&P 500 1,123.22 +1.37%
NASDAQ 1,995.49 +1.81%
Leading Sectors
Biotech +3.28%
Wireless +2.72%
Networking +2.49%
Lagging Sectors
Utilities +.33%
Homebuilders +.22%
Oil Service -.41%
Other
Crude Oil 35.32 -1.15%
Natural Gas 5.38 -.19%
Gold 421.20 -.47%
Base Metals 112.26 +.13%
U.S. Dollar 88.64 -.28%
10-Yr. Long-Bond Yield 3.90% +1.84%
VIX 16.35 -5.65%
Put/Call .64 -16.88%
NYSE Arms .32 -63.64%
Market Movers
HLYW +27.6% after saying a management-led group would take it private in an $840M cash deal.
TLRK + 44.2% after announcing AMGN will acquire it for $1.3B in stock.
MCH +25.1% after announcing LYO will acquire it for $1B in stock.
HPQ +4.2% after positive Barron's article.
AWIN +29.8% after announcing MTOH will acquire it for $281.3M in cash and stock. MTOH -8.3%.
GVHR +10.2% after acquiring Epix HR outsourcing portfolio and raising estimates.
NFLX +10.2% after opening new shipping center, saying it expects 5M more members and $1B in revenue by 06 and upgrade to Buy at Roth Capital, target $36.
FMC +10.2% after significantly boosting 1Q forecast.
LWAY -8.1% after reporting disappointing earnings report.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on ATYT ahead of earnings release. GS reiterated Outperform on RCL and AMGN. GS says March same-store sales for retailers will be broadly strong, serving as catalyst for further stock gains due to EPS upside. Citi Smith Barney said to Buy TCB on any earnings related weakness(sees potential $2 downside) after it reports. Citi expects a positive earnings surprise from JPM and trimmed MER estimates $.03 for a one-time insurance adjustment and expects MER to begin expensing options, which would require restatement of prior results. Citi lowering DISH to Hold, target $38, prefers DTV. Citi maintains bullish stance on life insurance stocks, favorites are PRU, PFG, AMH, LNC, UNM and AFC. MXO cut to Underperform at JP Morgan. Qualcomm raised to Outperform at Schwab Soundview, target $75. C raised to Overweight at Prudential. PTEN raised to Buy at Merrill Lynch. STAK rated Buy at Merrill. KO and PEP raised to Outperform at Bear Stearns. TheStreet.com has positive article on MHS, CMX and ESRX, saying they will benefit from prescription drug benefit. State Street's Global Resource Fund says coal is the best place to be in energy, favorite is CNX, reported TheStreet.com. TSC has a positive article on railroad stocks, favorites are NSC and BNI. TSC also positive on CLB.
Mid-day News
U.S. stocks are rising sharply mid-day on multiple takeover announcements, falling energy prices and positive comments from WalMart. Citi Smith Barney said small-medium business demand for software remains solid as customers are using the tax code benefit of accelerated depreciation as a reason to buy. Sarbanes Oxley/other regulatory requirements have emerged as new demand drivers, and value-added-resellers are hiring. Citi is also looking for an above-consensus 200,000 rise in non-farm payrolls and a drop in the unemployment rate to 5.5%. WalMart said March same-store sales are coming in at the high-end of estimates. Federal Forge filed for Chapter 11 bankruptcy after GM refused to pay more for the supplier's steel components, Automotive News reported. The chief of al-Qaeda's intelligence operations was killed in last week's Pakistani raid, Agence France-Presse said. Qualcomm(QCOM) plans to hire 1,000 workers and increase its research budget to develop chips that will induce U.S. consumers to buy a handset as often as every year, Bloomberg reported.
BOTTOM LINE: The Portfolio is having a very good day today as its 125% net long exposure is paying dividends on today's rally. I will likely rotate out of a few of my significant winners on the long-side and into stocks that are just beginning to break-out technically. I may also trim my homebuilding exposure as I am beginning to believe the risk to Friday's jobs report is a blow-out number on the upside which would send interest rates higher. I am shifting my jobs report expectations to an "at-consensus" number to a slightly "above-consensus" number. This should evoke a positive response from the equity market. A jobs report that is significantly below expectations or significantly above expectations will likely result in a sell-off.
NASDAQ 1,995.49 +1.81%
Leading Sectors
Biotech +3.28%
Wireless +2.72%
Networking +2.49%
Lagging Sectors
Utilities +.33%
Homebuilders +.22%
Oil Service -.41%
Other
Crude Oil 35.32 -1.15%
Natural Gas 5.38 -.19%
Gold 421.20 -.47%
Base Metals 112.26 +.13%
U.S. Dollar 88.64 -.28%
10-Yr. Long-Bond Yield 3.90% +1.84%
VIX 16.35 -5.65%
Put/Call .64 -16.88%
NYSE Arms .32 -63.64%
Market Movers
HLYW +27.6% after saying a management-led group would take it private in an $840M cash deal.
TLRK + 44.2% after announcing AMGN will acquire it for $1.3B in stock.
MCH +25.1% after announcing LYO will acquire it for $1B in stock.
HPQ +4.2% after positive Barron's article.
AWIN +29.8% after announcing MTOH will acquire it for $281.3M in cash and stock. MTOH -8.3%.
GVHR +10.2% after acquiring Epix HR outsourcing portfolio and raising estimates.
NFLX +10.2% after opening new shipping center, saying it expects 5M more members and $1B in revenue by 06 and upgrade to Buy at Roth Capital, target $36.
FMC +10.2% after significantly boosting 1Q forecast.
LWAY -8.1% after reporting disappointing earnings report.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on ATYT ahead of earnings release. GS reiterated Outperform on RCL and AMGN. GS says March same-store sales for retailers will be broadly strong, serving as catalyst for further stock gains due to EPS upside. Citi Smith Barney said to Buy TCB on any earnings related weakness(sees potential $2 downside) after it reports. Citi expects a positive earnings surprise from JPM and trimmed MER estimates $.03 for a one-time insurance adjustment and expects MER to begin expensing options, which would require restatement of prior results. Citi lowering DISH to Hold, target $38, prefers DTV. Citi maintains bullish stance on life insurance stocks, favorites are PRU, PFG, AMH, LNC, UNM and AFC. MXO cut to Underperform at JP Morgan. Qualcomm raised to Outperform at Schwab Soundview, target $75. C raised to Overweight at Prudential. PTEN raised to Buy at Merrill Lynch. STAK rated Buy at Merrill. KO and PEP raised to Outperform at Bear Stearns. TheStreet.com has positive article on MHS, CMX and ESRX, saying they will benefit from prescription drug benefit. State Street's Global Resource Fund says coal is the best place to be in energy, favorite is CNX, reported TheStreet.com. TSC has a positive article on railroad stocks, favorites are NSC and BNI. TSC also positive on CLB.
Mid-day News
U.S. stocks are rising sharply mid-day on multiple takeover announcements, falling energy prices and positive comments from WalMart. Citi Smith Barney said small-medium business demand for software remains solid as customers are using the tax code benefit of accelerated depreciation as a reason to buy. Sarbanes Oxley/other regulatory requirements have emerged as new demand drivers, and value-added-resellers are hiring. Citi is also looking for an above-consensus 200,000 rise in non-farm payrolls and a drop in the unemployment rate to 5.5%. WalMart said March same-store sales are coming in at the high-end of estimates. Federal Forge filed for Chapter 11 bankruptcy after GM refused to pay more for the supplier's steel components, Automotive News reported. The chief of al-Qaeda's intelligence operations was killed in last week's Pakistani raid, Agence France-Presse said. Qualcomm(QCOM) plans to hire 1,000 workers and increase its research budget to develop chips that will induce U.S. consumers to buy a handset as often as every year, Bloomberg reported.
BOTTOM LINE: The Portfolio is having a very good day today as its 125% net long exposure is paying dividends on today's rally. I will likely rotate out of a few of my significant winners on the long-side and into stocks that are just beginning to break-out technically. I may also trim my homebuilding exposure as I am beginning to believe the risk to Friday's jobs report is a blow-out number on the upside which would send interest rates higher. I am shifting my jobs report expectations to an "at-consensus" number to a slightly "above-consensus" number. This should evoke a positive response from the equity market. A jobs report that is significantly below expectations or significantly above expectations will likely result in a sell-off.
Sunday, March 28, 2004
Monday Watch
Earnings Announcements
Company/Estimates
JOSB/.83
SCS/-.04
Splits
HOV 2-for-1
MVL 3-for-2
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on XOM and PG. Bulls and Bears had guests that were positive on PWI, JNJ, LMT, WMS, SGMS, PLMO and mixed on DLM, CTL, MSFT and CMCSK. Cashin' In had guests that were mixed on BBBY. Wall Street Week had guests that were positive on GE, XOM, AIG, BRK/A, C, IBM, DELL, MDT and negative on FNM, HPQ, GM, VZ, HD, CH, MCK and MO. Goldman Sachs reiterated Outperform on DOW, LIZ, EBAY, AMGN, KO, CCE and PEP. Barron's has positive articles on HPQ, RBK, the oil market and HDI.
Weekend News
Bloomberg has an article saying that companies are spending again on capital equipment and hiring will be next. A Pakistani military offensive against al-Qaeda in a tribal region bordering Afghanistan is almost complete after the terrorists' refuge was destroyed, Agence France-Presse reported. Israeli prosecutors will recommend that Prime Minister Ariel Sharon be indicted for allegedly accepting a bribe from a property developer, Maariv said. Barrick Gold(ABX) may receive a takeover offer from larger rival Newmont Mining(NEM), the Sunday Telegraph reported. Celgene's(CELG) Revlimid drug may triple the company's revenue within two years, the Star-Ledger of Newark reported. Japan's policy of selling yen "has officially come to an end" because the country's economy is gathering strength and no longer needs a weaker currency to bolster exports, the Times of London reported. Dell is ahead of its goal to make $60B in sales for the year ended Jan. 31, 2007, Michael Dell said. Taiwan's stocks are rising significantly amid optimism that the island's political leaders are moving toward resolution of an election crisis that brought a record 500,000 people onto the streets in protest Saturday, Bloomberg reported. Global sales of liquid crystal displays geared for televisions and monitors will increase 56% this year, driven by torrid growth in demand for flat-panel TVs, industry researcher IDC said.
Late-Night Trading
Asian indices are -.25% to +1.25% on average, with Taiwan's TWSE Index the exception, rising 5.06%.
S&P 500 indicated +.30%.
NASDAQ indicated +.42%.
BOTTOM LINE: Political stabilization in Taiwan, more positive news regarding Japan's economy and further declines in crude oil may lead to strength in U.S. shares tomorrow morning. I expect short-covering, quarter-end positioning, strong earnings reports and falling energy prices to mostly boost stock prices through Wednesday. The Portfolio is 125% net long.
Company/Estimates
JOSB/.83
SCS/-.04
Splits
HOV 2-for-1
MVL 3-for-2
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on XOM and PG. Bulls and Bears had guests that were positive on PWI, JNJ, LMT, WMS, SGMS, PLMO and mixed on DLM, CTL, MSFT and CMCSK. Cashin' In had guests that were mixed on BBBY. Wall Street Week had guests that were positive on GE, XOM, AIG, BRK/A, C, IBM, DELL, MDT and negative on FNM, HPQ, GM, VZ, HD, CH, MCK and MO. Goldman Sachs reiterated Outperform on DOW, LIZ, EBAY, AMGN, KO, CCE and PEP. Barron's has positive articles on HPQ, RBK, the oil market and HDI.
Weekend News
Bloomberg has an article saying that companies are spending again on capital equipment and hiring will be next. A Pakistani military offensive against al-Qaeda in a tribal region bordering Afghanistan is almost complete after the terrorists' refuge was destroyed, Agence France-Presse reported. Israeli prosecutors will recommend that Prime Minister Ariel Sharon be indicted for allegedly accepting a bribe from a property developer, Maariv said. Barrick Gold(ABX) may receive a takeover offer from larger rival Newmont Mining(NEM), the Sunday Telegraph reported. Celgene's(CELG) Revlimid drug may triple the company's revenue within two years, the Star-Ledger of Newark reported. Japan's policy of selling yen "has officially come to an end" because the country's economy is gathering strength and no longer needs a weaker currency to bolster exports, the Times of London reported. Dell is ahead of its goal to make $60B in sales for the year ended Jan. 31, 2007, Michael Dell said. Taiwan's stocks are rising significantly amid optimism that the island's political leaders are moving toward resolution of an election crisis that brought a record 500,000 people onto the streets in protest Saturday, Bloomberg reported. Global sales of liquid crystal displays geared for televisions and monitors will increase 56% this year, driven by torrid growth in demand for flat-panel TVs, industry researcher IDC said.
Late-Night Trading
Asian indices are -.25% to +1.25% on average, with Taiwan's TWSE Index the exception, rising 5.06%.
S&P 500 indicated +.30%.
NASDAQ indicated +.42%.
BOTTOM LINE: Political stabilization in Taiwan, more positive news regarding Japan's economy and further declines in crude oil may lead to strength in U.S. shares tomorrow morning. I expect short-covering, quarter-end positioning, strong earnings reports and falling energy prices to mostly boost stock prices through Wednesday. The Portfolio is 125% net long.
Chart of the Week
S&P 500 current earnings(Blue), 200 week exponential moving average(Red) and 30 week rate-of-change(Bottom Green)
BOTTOM LINE: Earnings are improving at the fastest rate in over 40 years as illustrated by the bottom-half of the graph. This may explain the constant talk of bubbles and overvaluation. Analysts and pundits are behind the curve. The S&P's 04 P/E is 17.81(down 64.6% from its recent high) and falling almost daily. With interest rates near 46-year lows, corporate profitability at all-time highs, economic growth the fastest in 20 years, American household net worth at all-time highs, corporate spending improving and consumer spending remaining strong I would argue that the market deserves a premium valuation relative to past history.
BOTTOM LINE: Earnings are improving at the fastest rate in over 40 years as illustrated by the bottom-half of the graph. This may explain the constant talk of bubbles and overvaluation. Analysts and pundits are behind the curve. The S&P's 04 P/E is 17.81(down 64.6% from its recent high) and falling almost daily. With interest rates near 46-year lows, corporate profitability at all-time highs, economic growth the fastest in 20 years, American household net worth at all-time highs, corporate spending improving and consumer spending remaining strong I would argue that the market deserves a premium valuation relative to past history.
Weekly Outlook
Some relatively important economic reports and a few earnings reports are due for release this week. The economic reports are the Conference Board's Consumer Confidence reading, Chicago Purchasing Manager report, Factory Orders, Initial Jobless Claims, ISM Manufacturing/Prices Paid Indices, Unemployment Rate, Change in Non-farm Payrolls and Average Weekly Hours. The Chicago Purchasing Manager, ISM Manufacturing/Prices Paid, Unemployment Rate and Change in Non-farm Payrolls are the most important releases. The Chicago Purchasing Manager report for March is estimated at 61.0 versus 63.6 in February. The ISM Manufacturing Index for March is estimated at 59.5 versus 61.4 in February. The ISM Prices Paid Index for March is estimated at 81.0 versus 81.5 in February. The Unemployment Rate for March is estimated at 5.6% versus 5.6% in February. Finally, the Change in Non-farm Payrolls for March is estimated at 120K versus 21K in February.
Monsanto(MON), Best Buy(BBY), Circuit City(CC), Pier 1(PIR), Bed Bath & Beyond(BBBY), Fisher Scientific(FSH), CarMax(KMX) and Steelcase(SCS) are some of the more important companies that release quarterly earnings this week.
BOTTOM LINE: The Portfolio is 125% net long heading into the week. The late-day sell-off Friday may lead to more weakness Monday morning. However, I expect another decent rally before quarter-end on Wednesday. I will cut market exposure on any significant rallies before the employment report on Friday. Several forecasters raised their change in Non-farm Payroll estimates on Friday as a result of the ending of the California grocer strike. UBS went from estimates of 125K to 160K, Bank 1 raised its estimates from 75K to 150K and Briefing.com went from 90K to 120K. This was one of the main reasons interest rates rose Friday. I believe the report will be slightly lower to right at expectations of 120K. The market should respond favorably to this. However, if the number comes in significantly below expectations or significantly above expectations the market will fall, thus I do not want to have a lot of market exposure heading into the report on Friday.
Monsanto(MON), Best Buy(BBY), Circuit City(CC), Pier 1(PIR), Bed Bath & Beyond(BBBY), Fisher Scientific(FSH), CarMax(KMX) and Steelcase(SCS) are some of the more important companies that release quarterly earnings this week.
BOTTOM LINE: The Portfolio is 125% net long heading into the week. The late-day sell-off Friday may lead to more weakness Monday morning. However, I expect another decent rally before quarter-end on Wednesday. I will cut market exposure on any significant rallies before the employment report on Friday. Several forecasters raised their change in Non-farm Payroll estimates on Friday as a result of the ending of the California grocer strike. UBS went from estimates of 125K to 160K, Bank 1 raised its estimates from 75K to 150K and Briefing.com went from 90K to 120K. This was one of the main reasons interest rates rose Friday. I believe the report will be slightly lower to right at expectations of 120K. The market should respond favorably to this. However, if the number comes in significantly below expectations or significantly above expectations the market will fall, thus I do not want to have a lot of market exposure heading into the report on Friday.
Market Week in Review
S&P 500 1,108.06 -.15%
U.S. equity markets drifted lower early in the week on more geopolitical concerns. Israel's assassination of the spiritual head of the Palestinian militant group Hamas and Taiwan's increasing turmoil over its recent presidential election both weighed on equities Monday morning. These concerns, multiple terror threats in France and inflation jitters sent Gold up 2.3% for the week. The Volatility Index(VIX), a gauge of investor anxiety, reached 22.67 on Monday, 63.91% above its recent lows set in the first week of the month. The NYSE Arms Index reached 4.52, its highest reading since the market bottomed last March. Finally, the AAII Bullish Sentiment Index fell to 31.48, down 54.71% from its recent high set in late January.
Goldman Sachs(GS) annihilated 1st quarter earnings and revenue estimates after the close on Tuesday, yet the markets shrugged. Seemingly overnight, investors' attitudes towards stocks turned more positive. On Wednesday after the close, Micron Technology(MU) missed sales targets for its second quarter report. However, the semiconductor index, which began to rally on Wednesday in anticipation of a strong report, continued rising on Thursday. The 6.0% rally in the SOX led to gains in the entire tech sector and eventually the broad market. Moreover, the price of crude oil fell over 5% from its recent high, leading some pundits to call a bottom for the recent correction. The unexpected rise in consumer sentiment helped propel equities further early Friday. However, stocks fell late in the afternoon on profit-taking, weekend terror fears and interest rate worries, leaving major indices mixed on the week.
BOTTOM LINE: The spike in the VIX and Arms, the significant fall in the AAII Bullish Sentiment Index, a breakdown in crude oil futures, an unexpected rise in consumer sentiment and outperformance by the semiconductors are all very positive developments for U.S. equities. The fall in energy stocks and underperformance by defensive sectors during the rally are also positive signs. Finally, the two-day 7.6% rally in airline stocks was mainly a result of falling energy prices, but may also signal investors fixation on terrorism is temporarily subsiding.
U.S. equity markets drifted lower early in the week on more geopolitical concerns. Israel's assassination of the spiritual head of the Palestinian militant group Hamas and Taiwan's increasing turmoil over its recent presidential election both weighed on equities Monday morning. These concerns, multiple terror threats in France and inflation jitters sent Gold up 2.3% for the week. The Volatility Index(VIX), a gauge of investor anxiety, reached 22.67 on Monday, 63.91% above its recent lows set in the first week of the month. The NYSE Arms Index reached 4.52, its highest reading since the market bottomed last March. Finally, the AAII Bullish Sentiment Index fell to 31.48, down 54.71% from its recent high set in late January.
Goldman Sachs(GS) annihilated 1st quarter earnings and revenue estimates after the close on Tuesday, yet the markets shrugged. Seemingly overnight, investors' attitudes towards stocks turned more positive. On Wednesday after the close, Micron Technology(MU) missed sales targets for its second quarter report. However, the semiconductor index, which began to rally on Wednesday in anticipation of a strong report, continued rising on Thursday. The 6.0% rally in the SOX led to gains in the entire tech sector and eventually the broad market. Moreover, the price of crude oil fell over 5% from its recent high, leading some pundits to call a bottom for the recent correction. The unexpected rise in consumer sentiment helped propel equities further early Friday. However, stocks fell late in the afternoon on profit-taking, weekend terror fears and interest rate worries, leaving major indices mixed on the week.
BOTTOM LINE: The spike in the VIX and Arms, the significant fall in the AAII Bullish Sentiment Index, a breakdown in crude oil futures, an unexpected rise in consumer sentiment and outperformance by the semiconductors are all very positive developments for U.S. equities. The fall in energy stocks and underperformance by defensive sectors during the rally are also positive signs. Finally, the two-day 7.6% rally in airline stocks was mainly a result of falling energy prices, but may also signal investors fixation on terrorism is temporarily subsiding.
Subscribe to:
Posts (Atom)