S&P 500 1,141.81 +3.05% for the week.
U.S. equity markets rose all week on better-than-expected earnings reports, multiple corporate takeovers, falling energy prices and strong manufacturing and employment reports. Best Buy(BBY), Circuit City(CC), Allegheny Technologies(ATI), Schnitzer Steel(SCHN), Autodesk(ADSK), WalMart(WMT) and PepsiCo(PEP) all made positive statements regarding the strength of their businesses. Hollywood Entertainment(HLYW), Tularik(TLRK), Millennium Chemicals(MCH) and Arch Wireless(AWIN) all announced their acquisition this week, continuing a very strong trend since the beginning of the year.
Crude Oil fell 3.4% for the week as traders took profits on OPEC's 4% production cut. As well, speculation the Bush administration would implement measures to cut U.S. demand pressured crude prices. This resulted in outperformance by the Airline sector(+8.6%) and underperformance by the Oil service sector(+.59%) for the week.
The very strong ISM Manufacturing report and Friday's blow-out jobs report were the main catalysts for U.S. stocks throughout the week. However, these great reports sent bond prices lower for the week, resulting in a rise in the 10-yr. T-note yield to 4.14%. This led to outperformance by the technology sector and underformance by the financials and homebuilders for the week.
Another market-moving announcement came Thursday when Dow Jones reported its first changes to the Dow average since 1999. Eastman Kodak(EK), International Paper(IP) and AT&T(T) will be removed this Thursday in favor of American International Group(AIG), Verizon Communications(VZ) and Pfizer(PFE).
BOTTOM LINE: This was a very good week for the bulls. The NASDAQ broke its recent downtrend on Friday with a gap-up move on good volume and breadth. I think tech stocks will outperform this quarter, led by semiconductors. The SOX fell 18.4% from its recent highs over the last couple of months, while fundamentals continued to improve. I suspect this semi cycle will last longer than is currently expected, thus making the recent decline a significant buying opportunity. Oil Service stocks have corrected about 10% from their recent highs. This group may see a little more deterioration in the short-run as crude moves towards $30/bbl., however long-term investors should begin adding to favorite longs now as current weakness in energy prices is only temporary in nature. Homebuilders are up 92.6% over the last 12 months. This stunning performance, combined with Fed rate-hike fears, will lead to more profit-taking in the short-run. I expect this group to fall over 15% from its recent highs. Companies that build for the low-end market should see their stocks decline the most.
Sunday, April 04, 2004
Saturday, April 03, 2004
Economic Week in Review
ECRI Weekly Leading Index 134.10 (no update this week)
The Chicago Purchasing Manager Index for March fell to 57.6 vs. 63.6 the prior month and expectations of 61.0. "The upsurge in manufacturing activity that has occurred over the last several months is continuing, but at a slower pace," said Kevin Logan, a senior economist at Dresdner Kleinwort Wasserstein.
The Producer Price Index for February rose .1% vs. .3% the prior month and expectations of .3%. The PPI Ex Food & Energy for February rose .1% vs. .3% the prior month and expectations of .1%. "People will probably express some relief at the small gain in producer prices after the increase in January, but the bigger story is in the early stages of production," said Stephen Stanley, chief economist at RBS Greenwich Capital.
The ISM Manufacturing Index for March rose to 62.5 vs. 61.4 the prior month and expectations of 59.5. The ISM Prices Paid Index for March rose to 86.0 vs. 81.5 the prior month and estimates of 82.0. The ISM Manufacturing Index and its employment component were both near two-decade highs. Companies produced more cars, electronics and business equipment as they attempted to restock depleted shelves. "The breadth of the expansion as well as its speed is breathtaking. No need for fancy over-thinking. Plain and simple, this report tells us that the manufacturing sector is smoking," said Stephen Stanley.
The world economy, led by Asia and the U.S., is projected to grow 4.75% this year, the strongest performance in a generation, according to a semiannual forecast from the Institute for International Economics. "It is clear we are in boom right now -- a U.S. boom, a world boom," C. Fred Bergsten, director of the research group, told an audience at its Washington headquarters.
The Change in Non-farm Payrolls for March was 308,000 vs. 46,000 the prior month and expectations of 120,000. Manufacturing Payrolls were unchanged for March vs. a loss of 4,000 the prior month and expectations of a 5,000 gain. The Unemployment Rate for March was 5.7% vs. 5.6% the prior month and expectations of 5.6%. The 308,000 jobs added was the largest gain since the stock market bubble burst in early 2000. Strength was apparent across the board. Alan Binder, former Fed vice chairman said, "Once job creation is firmly established at a solid pace, the Fed is going to start raising rates."
BOTTOM LINE: The key takeaway for the week is that the U.S. economy is in great shape and getting better. The one missing component of this recovery was job creation. Historically, significant job creation occurs 6-9 months after the first real burst in economic growth coming out of a recession. This happened in the 3rd quarter of last year and right on schedule the U.S. economy has its first exceptional jobs report. I now believe the Fed will raise rates at the June 29-30 meeting as I expect another really good jobs report in the next 2 months and hints of inflation are cropping up in the early stages of production. The market is currently expecting the Fed to make its first move at the August 10 meeting.
The fact that the economy added the most jobs since early 2000 and is growing at the fastest rate since the early 80's is even more impressive considering the environment at the time of the stock market bubble. Many companies employing hundreds of thousands of people were created on pure hype. Inexperienced and corrupt management teams, with faulty business models, used "creative" accounting to boost their stock prices to sell more shares to the public. This gave them the capital to hire more people to rapidly increase sales at the expense of profits, giving the appearance of growth. In the current environment, companies with good business models, selling real products, using relatively little "creative" accounting are the most profitable in history. It took awhile to burn off the excess capacity generated by the greatest economic bubble in U.S. history. This is why the recovery appeared to be in slow-motion. However, beginning with the 8.2% growth of the 3rd quarter of 03, the fastest since the early 80's, and now with the best job creation since the stock market bubble in 2000, the U.S. economy is in a full-fledged boom.
The Chicago Purchasing Manager Index for March fell to 57.6 vs. 63.6 the prior month and expectations of 61.0. "The upsurge in manufacturing activity that has occurred over the last several months is continuing, but at a slower pace," said Kevin Logan, a senior economist at Dresdner Kleinwort Wasserstein.
The Producer Price Index for February rose .1% vs. .3% the prior month and expectations of .3%. The PPI Ex Food & Energy for February rose .1% vs. .3% the prior month and expectations of .1%. "People will probably express some relief at the small gain in producer prices after the increase in January, but the bigger story is in the early stages of production," said Stephen Stanley, chief economist at RBS Greenwich Capital.
The ISM Manufacturing Index for March rose to 62.5 vs. 61.4 the prior month and expectations of 59.5. The ISM Prices Paid Index for March rose to 86.0 vs. 81.5 the prior month and estimates of 82.0. The ISM Manufacturing Index and its employment component were both near two-decade highs. Companies produced more cars, electronics and business equipment as they attempted to restock depleted shelves. "The breadth of the expansion as well as its speed is breathtaking. No need for fancy over-thinking. Plain and simple, this report tells us that the manufacturing sector is smoking," said Stephen Stanley.
The world economy, led by Asia and the U.S., is projected to grow 4.75% this year, the strongest performance in a generation, according to a semiannual forecast from the Institute for International Economics. "It is clear we are in boom right now -- a U.S. boom, a world boom," C. Fred Bergsten, director of the research group, told an audience at its Washington headquarters.
The Change in Non-farm Payrolls for March was 308,000 vs. 46,000 the prior month and expectations of 120,000. Manufacturing Payrolls were unchanged for March vs. a loss of 4,000 the prior month and expectations of a 5,000 gain. The Unemployment Rate for March was 5.7% vs. 5.6% the prior month and expectations of 5.6%. The 308,000 jobs added was the largest gain since the stock market bubble burst in early 2000. Strength was apparent across the board. Alan Binder, former Fed vice chairman said, "Once job creation is firmly established at a solid pace, the Fed is going to start raising rates."
BOTTOM LINE: The key takeaway for the week is that the U.S. economy is in great shape and getting better. The one missing component of this recovery was job creation. Historically, significant job creation occurs 6-9 months after the first real burst in economic growth coming out of a recession. This happened in the 3rd quarter of last year and right on schedule the U.S. economy has its first exceptional jobs report. I now believe the Fed will raise rates at the June 29-30 meeting as I expect another really good jobs report in the next 2 months and hints of inflation are cropping up in the early stages of production. The market is currently expecting the Fed to make its first move at the August 10 meeting.
The fact that the economy added the most jobs since early 2000 and is growing at the fastest rate since the early 80's is even more impressive considering the environment at the time of the stock market bubble. Many companies employing hundreds of thousands of people were created on pure hype. Inexperienced and corrupt management teams, with faulty business models, used "creative" accounting to boost their stock prices to sell more shares to the public. This gave them the capital to hire more people to rapidly increase sales at the expense of profits, giving the appearance of growth. In the current environment, companies with good business models, selling real products, using relatively little "creative" accounting are the most profitable in history. It took awhile to burn off the excess capacity generated by the greatest economic bubble in U.S. history. This is why the recovery appeared to be in slow-motion. However, beginning with the 8.2% growth of the 3rd quarter of 03, the fastest since the early 80's, and now with the best job creation since the stock market bubble in 2000, the U.S. economy is in a full-fledged boom.
Weekly Scoreboard
Indices
S&P 500 1,141.81 +3.05%
Dow 10,470.59 +2.52%
NASDAQ 2,057.17 +4.96%
Russell 2000 603.45 +5.33%
Wilshire 5000 11,202.42 +3.34%
Volatility(VIX) 15.64 -9.75%
AAII Bullish % 55.17 +75.25%
US Dollar 88.51 -.32%
CRB 281.25 +.90%
Futures Spot Prices
Gold 422.50 -.24%
Crude Oil 34.39 -3.40%
Natural Gas 5.81 +5.77%
Base Metals 114.77 +2.37%
10-year US Treasury Yield 4.14% +8.2%
Average 30-year Mortgage Rate 5.52% +2.22%
Leading Sectors
Broadband +9.38%
Airlines +8.62%
Broadcasting +7.51%
Lagging Sectors
Banks +1.06%
Oil Service +.59%
Homebuilders -2.23%
*% Gain or loss for the week
S&P 500 1,141.81 +3.05%
Dow 10,470.59 +2.52%
NASDAQ 2,057.17 +4.96%
Russell 2000 603.45 +5.33%
Wilshire 5000 11,202.42 +3.34%
Volatility(VIX) 15.64 -9.75%
AAII Bullish % 55.17 +75.25%
US Dollar 88.51 -.32%
CRB 281.25 +.90%
Futures Spot Prices
Gold 422.50 -.24%
Crude Oil 34.39 -3.40%
Natural Gas 5.81 +5.77%
Base Metals 114.77 +2.37%
10-year US Treasury Yield 4.14% +8.2%
Average 30-year Mortgage Rate 5.52% +2.22%
Leading Sectors
Broadband +9.38%
Airlines +8.62%
Broadcasting +7.51%
Lagging Sectors
Banks +1.06%
Oil Service +.59%
Homebuilders -2.23%
*% Gain or loss for the week
Friday, April 02, 2004
Friday Close
S&P 500 1,141.81 +.85%
NASDAQ 2,057.17 +2.09%
Leading Sectors
Semis +3.74%
Airlines +3.59%
Broadband +3.46%
Lagging Sectors
Tobacco -.57%
Banks -1.20%
Homebuilders -3.95%
Other
Crude Oil 34.39 +.35%
Natural Gas 5.81 +.82%
Gold 422.50 -1.47%
Base Metals 114.77 -.26%
U.S. Dollar 88.51 +1.49%
10-Yr. Long-Bond Yield 4.14% +6.83%
VIX 15.64 -6.07%
Put/Call .66 +15.79%
NYSE Arms .50 -43.18%
After-hours Movers
SEBL +4.72% after raising 1Q estimates and saying revenue will come in at high end of forecasts.
Recommendations
Goldman Sachs reiterated Outperform on MO, WAG, RCL, HD, WMT, PFE, reiterated Underperform on BMY and TER.
After-hours News
U.S. stocks finished sharply higher Friday on a much stronger-than-expected jobs report. The economy added 308,000 jobs in March, 157% above economist's expectations and the most since the stock market bubble burst in early 2000. After the close, Goldman Sachs chief U.S. economist Dudley told CNBC that the Fed will likely wait for a tighter labor market before raising interest rates. The CEO of Korn/Ferry, an international executive search firm, said on CNBC he sees employment improving for the foreseeable future and that the employers he talks to say "all their people are working to the gills."
BOTTOM LINE: The Portfolio had a very good day today as my technology longs rose substantially. I did not trade in the afternoon, leaving the Portfolio with 100% net long market exposure. This was a very good day for the bulls. I expected a sell-off on a much better-than-expected jobs report that sent bonds tumbling. This did not happen and the NASDAQ finished at its highs for the day on strong volume and good breadth, breaking up through its recent downtrend line. While I expect the market to test its highs for the year in the next 6 weeks, the major indices are getting extended short-term.
NASDAQ 2,057.17 +2.09%
Leading Sectors
Semis +3.74%
Airlines +3.59%
Broadband +3.46%
Lagging Sectors
Tobacco -.57%
Banks -1.20%
Homebuilders -3.95%
Other
Crude Oil 34.39 +.35%
Natural Gas 5.81 +.82%
Gold 422.50 -1.47%
Base Metals 114.77 -.26%
U.S. Dollar 88.51 +1.49%
10-Yr. Long-Bond Yield 4.14% +6.83%
VIX 15.64 -6.07%
Put/Call .66 +15.79%
NYSE Arms .50 -43.18%
After-hours Movers
SEBL +4.72% after raising 1Q estimates and saying revenue will come in at high end of forecasts.
Recommendations
Goldman Sachs reiterated Outperform on MO, WAG, RCL, HD, WMT, PFE, reiterated Underperform on BMY and TER.
After-hours News
U.S. stocks finished sharply higher Friday on a much stronger-than-expected jobs report. The economy added 308,000 jobs in March, 157% above economist's expectations and the most since the stock market bubble burst in early 2000. After the close, Goldman Sachs chief U.S. economist Dudley told CNBC that the Fed will likely wait for a tighter labor market before raising interest rates. The CEO of Korn/Ferry, an international executive search firm, said on CNBC he sees employment improving for the foreseeable future and that the employers he talks to say "all their people are working to the gills."
BOTTOM LINE: The Portfolio had a very good day today as my technology longs rose substantially. I did not trade in the afternoon, leaving the Portfolio with 100% net long market exposure. This was a very good day for the bulls. I expected a sell-off on a much better-than-expected jobs report that sent bonds tumbling. This did not happen and the NASDAQ finished at its highs for the day on strong volume and good breadth, breaking up through its recent downtrend line. While I expect the market to test its highs for the year in the next 6 weeks, the major indices are getting extended short-term.
Mid-day Update
S&P 500 1,140.45 +.73%
NASDAQ 2,048.10 +1.64%
Leading Sectors
Airlines +3.52%
Semis +3.04%
Broadband +2.61%
Lagging Sectors
Utilities -.52%
Banks -1.06%
Homebuilders -3.16%
Other
Crude Oil 33.95 -.93%
Natural Gas 5.79 +.43%
Gold 420.50 -1.94%
Base Metals 114.77 -.26%
U.S. Dollar 88.62 +1.62%
10-Yr. Long-Bond Yield 4.14% +6.63%
VIX 15.84 -4.74%
Put/Call .67 +17.54%
NYSE Arms .55 -37.50%
Market Movers
SWIR +12.5% after raising 1Q sales and earnings estimates.
SCHN +14.66% after beating 2Q estimates substantially and raising 3Q guidance.
MNST +9.7% on much stronger-than expected jobs report.
ZMH +5.54% after boosting 1Q guidance substantially and multiple upgrades.
SUNW +18.6% after announcing 2Q earnings shortfall, layoffs and settlement with MSFT.
VISG +15.75% after announcing U.S. government contract for $6-10M in smart cards.
Homebuilders/Financials down across the board on much stronger-than-expected jobs report, resulting in higher interest rates.
Economic Data
Unemployment Rate for March 5.7% vs. 5.6% estimate.
Change in Non-farm Payrolls for March +308K vs. estimates of +120K.
Change in Manufacturing Payrolls for March unch. 0K vs. expectations of 5K.
Average Weekly Hours for March 33.7 vs. 33.9 estimates.
Recommendations
Goldman Sachs reiterated Outperform on DELL, PFE, MSFT, ADP, CEN, PAYX and YHOO. GS maintains Attractive on Machinery sector, expects PH, IR and ETN to post greatest upside surprises in coming reports. GS rates STA Outperform. Citi Smith Barney upgraded HNT to 1H. Citi says recent survey backs up bullish thesis on restaurant stocks, MCD, SBUX, WEN, YUM and PFCB are favorites. Citi reiterated Buy on CAM and HAL. Citi expects defense companies to post strong quarterly results, believes NOC, LMT and LLL will beat estimates. JP Morgan rated GMRK, ARW and SERO Overweight. JP Morgan rated TECD and SYY Underweight. INTC rated new Buy at Legg Mason. BYD and CZR raised to Outperform at Thomas Weisel. Merrill Lynch rated HD, LIN, AAP and LOW Buy. CLX raised to Overweight at Prudential. FTO, SUN and VLO cut to Underweight at Prudential.
Mid-day News
U.S. stocks are substantially higher mid-day after a government report showed the economy added 308,000 jobs in March, the most in 4 years and 157% above expectations. This resulted in the largest drop in Treasury notes in 8 months on concern the Fed would move rates higher in the near future. Worldwide semiconductor revenue for February was $15.8B, +14.2% M/M(vs. 19-yr historical avg. of up 5.4%), up .6% Q/Q(vs. historical avg. of -3.4%), and up 39.2% Y/Y(vs. historical average of up 11.5%). Microsoft and Sun Micro announced an agreement that resolves outstanding antitrust issues(MSFT pays Sun $700M), resolves patent issues(MSFT pays $900M), and co-licensing of each others technology(MSFT paying advanced fees of $350M). Total cost to MSFT $1.95B. Police found explosives on a railway between Seville and Madrid and halted all trains between the Spanish cities three weeks after the March 11 bombings that killed 191 people, altering the outcome of the Spanish presidential election, Bloomberg reported. The six-month trial of former Tyco CEO Kozlowski and his top lieutenant Swartz ended today after the judge declared a mistrial, citing outside pressure on a juror, Bloomberg reported.
BOTTOM LINE: The Portfolio is having a very good day today as longs are up substantially and shorts are even. I took profits in a few recent winners that are showing relative weakness today and rotated into new tech positions that have good fundamentals, low valuations and positive technical patterns. I also initiated a couple of new shorts in the homebuilding sector as a result of the jobs report. This is just a trade, as I believe this group will correct until the first rate hike. Fundamentally, I like the sector and expect it to reach new highs in the intermediate-term. The bond market's reaction is about what I expected on a much stronger jobs number. Rates are up, but not dramatically, leaving their short-term downtrend still in tact. The jobs report today was the blow-out number I have been expecting, although it arrived earlier than anticipated. I believe it will take one more very strong report before the Fed starts to move. This will likely come within the next 2 months. Retailers, drugs, homebuilders and financial should underperform under this scenario, while technology and cyclicals should outperform. The Portfolio is now 100% net long.
NASDAQ 2,048.10 +1.64%
Leading Sectors
Airlines +3.52%
Semis +3.04%
Broadband +2.61%
Lagging Sectors
Utilities -.52%
Banks -1.06%
Homebuilders -3.16%
Other
Crude Oil 33.95 -.93%
Natural Gas 5.79 +.43%
Gold 420.50 -1.94%
Base Metals 114.77 -.26%
U.S. Dollar 88.62 +1.62%
10-Yr. Long-Bond Yield 4.14% +6.63%
VIX 15.84 -4.74%
Put/Call .67 +17.54%
NYSE Arms .55 -37.50%
Market Movers
SWIR +12.5% after raising 1Q sales and earnings estimates.
SCHN +14.66% after beating 2Q estimates substantially and raising 3Q guidance.
MNST +9.7% on much stronger-than expected jobs report.
ZMH +5.54% after boosting 1Q guidance substantially and multiple upgrades.
SUNW +18.6% after announcing 2Q earnings shortfall, layoffs and settlement with MSFT.
VISG +15.75% after announcing U.S. government contract for $6-10M in smart cards.
Homebuilders/Financials down across the board on much stronger-than-expected jobs report, resulting in higher interest rates.
Economic Data
Unemployment Rate for March 5.7% vs. 5.6% estimate.
Change in Non-farm Payrolls for March +308K vs. estimates of +120K.
Change in Manufacturing Payrolls for March unch. 0K vs. expectations of 5K.
Average Weekly Hours for March 33.7 vs. 33.9 estimates.
Recommendations
Goldman Sachs reiterated Outperform on DELL, PFE, MSFT, ADP, CEN, PAYX and YHOO. GS maintains Attractive on Machinery sector, expects PH, IR and ETN to post greatest upside surprises in coming reports. GS rates STA Outperform. Citi Smith Barney upgraded HNT to 1H. Citi says recent survey backs up bullish thesis on restaurant stocks, MCD, SBUX, WEN, YUM and PFCB are favorites. Citi reiterated Buy on CAM and HAL. Citi expects defense companies to post strong quarterly results, believes NOC, LMT and LLL will beat estimates. JP Morgan rated GMRK, ARW and SERO Overweight. JP Morgan rated TECD and SYY Underweight. INTC rated new Buy at Legg Mason. BYD and CZR raised to Outperform at Thomas Weisel. Merrill Lynch rated HD, LIN, AAP and LOW Buy. CLX raised to Overweight at Prudential. FTO, SUN and VLO cut to Underweight at Prudential.
Mid-day News
U.S. stocks are substantially higher mid-day after a government report showed the economy added 308,000 jobs in March, the most in 4 years and 157% above expectations. This resulted in the largest drop in Treasury notes in 8 months on concern the Fed would move rates higher in the near future. Worldwide semiconductor revenue for February was $15.8B, +14.2% M/M(vs. 19-yr historical avg. of up 5.4%), up .6% Q/Q(vs. historical avg. of -3.4%), and up 39.2% Y/Y(vs. historical average of up 11.5%). Microsoft and Sun Micro announced an agreement that resolves outstanding antitrust issues(MSFT pays Sun $700M), resolves patent issues(MSFT pays $900M), and co-licensing of each others technology(MSFT paying advanced fees of $350M). Total cost to MSFT $1.95B. Police found explosives on a railway between Seville and Madrid and halted all trains between the Spanish cities three weeks after the March 11 bombings that killed 191 people, altering the outcome of the Spanish presidential election, Bloomberg reported. The six-month trial of former Tyco CEO Kozlowski and his top lieutenant Swartz ended today after the judge declared a mistrial, citing outside pressure on a juror, Bloomberg reported.
BOTTOM LINE: The Portfolio is having a very good day today as longs are up substantially and shorts are even. I took profits in a few recent winners that are showing relative weakness today and rotated into new tech positions that have good fundamentals, low valuations and positive technical patterns. I also initiated a couple of new shorts in the homebuilding sector as a result of the jobs report. This is just a trade, as I believe this group will correct until the first rate hike. Fundamentally, I like the sector and expect it to reach new highs in the intermediate-term. The bond market's reaction is about what I expected on a much stronger jobs number. Rates are up, but not dramatically, leaving their short-term downtrend still in tact. The jobs report today was the blow-out number I have been expecting, although it arrived earlier than anticipated. I believe it will take one more very strong report before the Fed starts to move. This will likely come within the next 2 months. Retailers, drugs, homebuilders and financial should underperform under this scenario, while technology and cyclicals should outperform. The Portfolio is now 100% net long.
Friday Watch
Earnings Announcements
Company/Estimate
FLML/unch.
PTMK/.31
BCF/.80
Splits
None of note.
Economic Data
Unemployment Rate for March is estimated at 5.6% vs. 5.6% in February.
Change in Non-farm Payrolls for March estimated +120K vs. +21K in February.
Change in Manufacturing Payrolls for March estimated +5K vs. -3K in February.
Average Weekly Hours for March estimated at 33.9 vs. 33.8 in February.
Recommendations
Goldman Sachs says AA will miss estimates by .04 when it reports next week. GS reiterated Underperform on GAS. GS reiterated Outperform on CAL.
Late-Night News
Asian stocks are mostly higher on strength in Japan as investors bid up exporters in anticipation of stronger sales to the U.S. Reebok(RBK) may be a takeover target of a U.S. apparel company seeking new brands, Business Week reported. European Union member states unanimously backed the ruling against Microsoft, the London-based Times said. Borland(BORL) may become a possible acquisition target of Microsoft, Business Week reported. ATS Medical(ATSI) is expected to rise to a new high this year as the maker of mechanical heart valves gains market share, Business Week reported. Governor Schwarzenegger hopes to raise as much as $2B more a year from Indian gambling revenue to help cover the budget deficit. In return, the Tribes want the right to add thousands of slot machines, the Wall Street Journal reported. U.S. forensics expert Henry Lee said Taiwan's President probably didn't stage his own shooting, Thompson TV reported. Israel may act against Palestinian leader Yasser Arafat in the future, the AP said. U.S. commanders in Iraq are preparing to occupy Fallujah and carry out combat operations and civil-affairs rebuilding missions to defeat resistance, Bloomberg reported. The U.S. plans to seek a new UN resolution covering peacekeeping troops in Iraq before it hands power to a provisional Iraqi government July 1, the U.S. State Dept. said.
Late-Night Trading
Asian Indices unch. to +1.25%.
S&P 500 indicated -.02%.
NASDAQ indicated -.07%.
BOTTOM LINE: Bond investors are so bearish heading into the "big" jobs report tomorrow that I believe it would take a number north of 250,000 to cause rates to rise substantially. I do not feel a number of this magnitude is likely as of yet. Executives and managers are definitely looking to hire more, but I feel that it will be a few more months before hiring really gets cranked up. I also think February's report was artificially low due to the California grocers strike and very bad weather. Thus, I am expecting a number between 120,000 to 150,000 and an unemployment rate of 5.5-5.6%. This should result in a positive reaction by the stock market as it will be viewed as a significant improvement, but not enough to cause rates to rise substantially. A number that is well below expectations or way above expectations will probably prompt a sell-off. However, with energy prices falling, great earnings reports on the horizon and the market's recent technical improvement, I expect any weakness will be temporary. The Portfolio is 75% net long heading into tomorrow.
Company/Estimate
FLML/unch.
PTMK/.31
BCF/.80
Splits
None of note.
Economic Data
Unemployment Rate for March is estimated at 5.6% vs. 5.6% in February.
Change in Non-farm Payrolls for March estimated +120K vs. +21K in February.
Change in Manufacturing Payrolls for March estimated +5K vs. -3K in February.
Average Weekly Hours for March estimated at 33.9 vs. 33.8 in February.
Recommendations
Goldman Sachs says AA will miss estimates by .04 when it reports next week. GS reiterated Underperform on GAS. GS reiterated Outperform on CAL.
Late-Night News
Asian stocks are mostly higher on strength in Japan as investors bid up exporters in anticipation of stronger sales to the U.S. Reebok(RBK) may be a takeover target of a U.S. apparel company seeking new brands, Business Week reported. European Union member states unanimously backed the ruling against Microsoft, the London-based Times said. Borland(BORL) may become a possible acquisition target of Microsoft, Business Week reported. ATS Medical(ATSI) is expected to rise to a new high this year as the maker of mechanical heart valves gains market share, Business Week reported. Governor Schwarzenegger hopes to raise as much as $2B more a year from Indian gambling revenue to help cover the budget deficit. In return, the Tribes want the right to add thousands of slot machines, the Wall Street Journal reported. U.S. forensics expert Henry Lee said Taiwan's President probably didn't stage his own shooting, Thompson TV reported. Israel may act against Palestinian leader Yasser Arafat in the future, the AP said. U.S. commanders in Iraq are preparing to occupy Fallujah and carry out combat operations and civil-affairs rebuilding missions to defeat resistance, Bloomberg reported. The U.S. plans to seek a new UN resolution covering peacekeeping troops in Iraq before it hands power to a provisional Iraqi government July 1, the U.S. State Dept. said.
Late-Night Trading
Asian Indices unch. to +1.25%.
S&P 500 indicated -.02%.
NASDAQ indicated -.07%.
BOTTOM LINE: Bond investors are so bearish heading into the "big" jobs report tomorrow that I believe it would take a number north of 250,000 to cause rates to rise substantially. I do not feel a number of this magnitude is likely as of yet. Executives and managers are definitely looking to hire more, but I feel that it will be a few more months before hiring really gets cranked up. I also think February's report was artificially low due to the California grocers strike and very bad weather. Thus, I am expecting a number between 120,000 to 150,000 and an unemployment rate of 5.5-5.6%. This should result in a positive reaction by the stock market as it will be viewed as a significant improvement, but not enough to cause rates to rise substantially. A number that is well below expectations or way above expectations will probably prompt a sell-off. However, with energy prices falling, great earnings reports on the horizon and the market's recent technical improvement, I expect any weakness will be temporary. The Portfolio is 75% net long heading into tomorrow.
Subscribe to:
Comments (Atom)