S&P 500 1,116.14 -.12%
NASDAQ 1,939.78 +.05%
Leading Sectors
Networking +1.78%
Iron/Steel +1.70%
Semis +1.30%
Lagging Sectors
Biotech -1.23%
HMO's -1.60%
Gaming -3.30%
Other
Crude Oil 38.88 +1.75%
Natural Gas 6.28 +.79%
Gold 392.80 +1.37%
Base Metals 105.76 +1.51%
U.S. Dollar 89.96 -.88%
10-Yr. Long-Bond Yield 4.50% +.09%
VIX 17.02 +2.29%
Put/Call .58 -28.40%
NYSE Arms .85 +4.94%
Market Movers
TYC +3.6% after beating 2Q estimate and raising 3Q/04 forecast.
MVSN +25.91% after substantially beating 1Q estimate and raising 2Q/04 guidance.
PSS +19.37% after boosting 1Q estimates significantly.
VISG +20.98% after missing 1Q estimate, but boosting 04 forecast.
KTR +14.15% after announcing it will be acquired by ProLogis for $1.6B.
GPRO +11.12% after significantly beating 1Q estimate and raising 04 forecast.
HNT -8.7% after missing 1Q estimate and lowering 2Q guidance.
Economic Data
Factory Orders for March +4.3% versus expectations of +2.4% and 1.1% in February.
Recommendations
Goldman Sachs reiterated Outperform on IACI, MET, KR, PFGC and BBY. Citi SmithBarney said to Buy IGT on weakness, target $50. Citi also said to Buy CSCO ahead of quarter, target $34. Citi reiterated Buy on RDWR, target $25. Citi reiterated Buy on LPX, target $32. Citi reiterated Buy on SEBL, target $19. EOG raised to Overweight at JP Morgan. EMN raised to Buy at UBS. ISLE raised to Sector Outperform at CIBC. MGG, IGT and AGY cut to Sector Underperform at CIBC. CDN added to Focus List at JP Morgan, target $18.
Mid-day News
U.S. stocks are mixed mid-day on rising energy prices, rebounding technology shares and nervousness ahead of the Fed's rate announcement. Citi SmithBarney now believes this year's budget deficit will total $370B or 3.1% of GDP, much better-than-expected, as vigorous U.S. economic growth is generating higher tax revenues. Guidant, Boston Scientific and Johnson & Johnson generated about $6B in sales of angioplasty products last year as the procedure displaces bypass surgery in repairing blood vessels, the Wall Street Journal reported. The U.S. Transportation Security Administration has designated United Airlines Flight 200 from LA to DC as a "flight of interest", an indication it is a possible terrorist target, the Washington Times reported. Crude oil rose to its highest since the 1990 Gulf War after foreign workers were killed at a chemical plant in Saudi Arabia Saturday, raising concern supplies from the world's biggest oil exported would be disrupted, Bloomberg reported. California regulators may declare the first motor-fuels emergency in 15 years amid concern the rupture of a Kinder Morgan pipeline may cause shortages of gasoline and diesel, Bloomberg reported. Pioneer Natural Resources agreed to buy Evergreen Resources for about $1.7B to tap increasing natural-gas output in the Rockies, Bloomberg reported. Orders placed with U.S. factories rose 10.8% year-over-year, the strongest showing since the stock market bubble burst in 2000, Bloomberg reported. "With inventories low and firms finding it hard to gain traction to both meet demand and bring stocks to a more comfortable level, we can expect increased hiring and accelerated production," said Drew Matus, an economist at Lehman Brothers.
BOTTOM LINE: The Portfolio is unchanged today as my shorts and longs are mixed. I have not traded and the Portfolio is still 25% net short. I am waiting to see the bond market's reaction to the Fed's statement before trading.
Tuesday, May 04, 2004
Monday, May 03, 2004
Tuesday Watch
Earnings of Note
Company/Estimate
CCU/.14
ECLG/.08
EMR/.68
JILL/.04
KOSP/.28
MBI/1.27
NOC/1.21
TYC/.36
THC/.03
Splits
LACO 2-for-1
Economic Data
Factory Orders in March estimated +2.4% versus +.3% in February.
FOMC rate decision.
Recommendations
Goldman Sachs reiterated Outperform on DVN, AMGN and WMT.
Late-Night News
Asian indices are higher on strength in Hong Kong and Taiwanese semiconductor companies. Motorola may scrap plans to sell shares in Freescale Semiconductor, the company's chip-making unit, Silicon Strategies reported. North Korea said it won't sell nuclear materials to terrorist groups and is seeking friendship with the U.S. because it doesn't want to suffer the fate of Iraq, the Financial Times reported. MetLife, the second-biggest U.S. life insurer, said first-quarter profit rose 44% as stock market gains increased annuities fees and its own income from investments, Bloomberg reported.
Late-Night Trading
Asian Indices +.25% to +2.50%.
S&P 500 indicated +.13%.
NASDAQ indicated +.25%.
BOTTOM LINE: I expect U.S. stocks to open mixed in the morning ahead of the Fed's announcement. It is likely the Fed will change several of its policy statements. The bond market's reaction to these changes will probably dictate the direction of equity trading later in the afternoon. The Portfolio is 25% net short heading into tomorrow.
Company/Estimate
CCU/.14
ECLG/.08
EMR/.68
JILL/.04
KOSP/.28
MBI/1.27
NOC/1.21
TYC/.36
THC/.03
Splits
LACO 2-for-1
Economic Data
Factory Orders in March estimated +2.4% versus +.3% in February.
FOMC rate decision.
Recommendations
Goldman Sachs reiterated Outperform on DVN, AMGN and WMT.
Late-Night News
Asian indices are higher on strength in Hong Kong and Taiwanese semiconductor companies. Motorola may scrap plans to sell shares in Freescale Semiconductor, the company's chip-making unit, Silicon Strategies reported. North Korea said it won't sell nuclear materials to terrorist groups and is seeking friendship with the U.S. because it doesn't want to suffer the fate of Iraq, the Financial Times reported. MetLife, the second-biggest U.S. life insurer, said first-quarter profit rose 44% as stock market gains increased annuities fees and its own income from investments, Bloomberg reported.
Late-Night Trading
Asian Indices +.25% to +2.50%.
S&P 500 indicated +.13%.
NASDAQ indicated +.25%.
BOTTOM LINE: I expect U.S. stocks to open mixed in the morning ahead of the Fed's announcement. It is likely the Fed will change several of its policy statements. The bond market's reaction to these changes will probably dictate the direction of equity trading later in the afternoon. The Portfolio is 25% net short heading into tomorrow.
Monday Close
S&P 500 1,117.56 +.93%
NASDAQ 1,938.72 +.97%
Leading Sectors
Energy +2.55%
Gaming +2.55%
Airlines +2.28%
Lagging Sectors
Disk Drives -.26%
Semis -.59%
Iron/Steel -1.43%
Other
Crude Oil 38.18 -.08%
Natural Gas 6.23 -.02%
Gold 387.80 +.08%
Base Metals 104.19 +.72%
U.S. Dollar 90.77 +.32%
10-Yr. Long-Bond Yield 4.50% -.09%
VIX 16.62 -3.32%
Put/Call .81 -14.74%
NYSE Arms .81 -53.45%
After-hours Movers
MVSN +12.19% after substantially beating 1Q estimate and raising 2Q/04 guidance.
PHRM +5.14% after beating 1Q estimate and raising 04 forecast.
GPRO +4.87% after substantially beating 1Q estimate and raising 04 forecast.
CEPH -4.89% after meeting 1Q estimate and lowering 2Q guidance.
PCLN -3.5% after beating 1Q estimate and announcing acquisition.
Recommendations
Jim Cramer, of TheStreet.com, thinks cyclicals will rally on the Fed rate hike. Goldman Sachs reiterated Outperform on KO, PEP and STZ. GS reiterated Underperform on SGP and FHCC.
After-hours News
U.S. stocks finished higher Monday as strength in energy, gaming and airline stocks offset continued weakness in technology shares. After the close, the Semiconductor Industry Association said it will soon hike its forecast for 04 chip growth to over 20%, TheStreet.com reported. Thomas Siebel will step down as chief executive of Siebel Systems, CNBC reported. UK business optimism and output are at their highest in almost 10 years, the London-based Times said. Global air traffic rose 10% in the first-quarter of 2004 compared with year-earlier figures, beating expectations, the BBC reported. The U.S. government cut its planned borrowing to a net $38 billion from April through June, half the amount it initially forecast, as strong economic growth has resulted in rising tax revenues, Bloomberg reported. The IEA said in a study that higher oil prices are reducing U.S. economic growth by about .3%, Bloomberg reported.
BOTTOM LINE: The Portfolio fell slightly today and I added a few health care service longs in the afternoon, bringing market exposure back to 25% net short. Volume and breadth were weak today. As well, investor complacency remains relatively high. Thus, I believe today's rally was likely an oversold technical bounce and that selling will resurface later in the week.
NASDAQ 1,938.72 +.97%
Leading Sectors
Energy +2.55%
Gaming +2.55%
Airlines +2.28%
Lagging Sectors
Disk Drives -.26%
Semis -.59%
Iron/Steel -1.43%
Other
Crude Oil 38.18 -.08%
Natural Gas 6.23 -.02%
Gold 387.80 +.08%
Base Metals 104.19 +.72%
U.S. Dollar 90.77 +.32%
10-Yr. Long-Bond Yield 4.50% -.09%
VIX 16.62 -3.32%
Put/Call .81 -14.74%
NYSE Arms .81 -53.45%
After-hours Movers
MVSN +12.19% after substantially beating 1Q estimate and raising 2Q/04 guidance.
PHRM +5.14% after beating 1Q estimate and raising 04 forecast.
GPRO +4.87% after substantially beating 1Q estimate and raising 04 forecast.
CEPH -4.89% after meeting 1Q estimate and lowering 2Q guidance.
PCLN -3.5% after beating 1Q estimate and announcing acquisition.
Recommendations
Jim Cramer, of TheStreet.com, thinks cyclicals will rally on the Fed rate hike. Goldman Sachs reiterated Outperform on KO, PEP and STZ. GS reiterated Underperform on SGP and FHCC.
After-hours News
U.S. stocks finished higher Monday as strength in energy, gaming and airline stocks offset continued weakness in technology shares. After the close, the Semiconductor Industry Association said it will soon hike its forecast for 04 chip growth to over 20%, TheStreet.com reported. Thomas Siebel will step down as chief executive of Siebel Systems, CNBC reported. UK business optimism and output are at their highest in almost 10 years, the London-based Times said. Global air traffic rose 10% in the first-quarter of 2004 compared with year-earlier figures, beating expectations, the BBC reported. The U.S. government cut its planned borrowing to a net $38 billion from April through June, half the amount it initially forecast, as strong economic growth has resulted in rising tax revenues, Bloomberg reported. The IEA said in a study that higher oil prices are reducing U.S. economic growth by about .3%, Bloomberg reported.
BOTTOM LINE: The Portfolio fell slightly today and I added a few health care service longs in the afternoon, bringing market exposure back to 25% net short. Volume and breadth were weak today. As well, investor complacency remains relatively high. Thus, I believe today's rally was likely an oversold technical bounce and that selling will resurface later in the week.
Mid-day Update
S&P 500 1,115.19 +.71%
NASDAQ 1,935.61 +.81%
Leading Sectors
Gaming +2.53%
Energy +2.32%
Airlines +1.71%
Lagging Sectors
Disk Drives -.41%
Iron/Steel -1.43%
Semis -1.80%
Other
Crude Oil 38.07 +1.85%
Natural Gas 6.15 +5.0%
Gold 387.50 unch.
Base Metals 104.19 +.72%
U.S. Dollar 90.81 +.36%
10-Yr. Long-Bond Yield 4.49% -.31%
VIX 16.92 -1.63%
Put/Call .83 -12.63%
NYSE Arms .82 -52.87%
Market Movers
IACI -4.77% on profit-taking after beating 1Q estimates.
RDWR -29.21% after meeting 1Q estimates and lowering 2Q guidance.
ACCL -29.56% after completing the spin-off of its drug discovery business.
NTE -16.93% after disappointing 1Q results.
Economic Data
Construction Spending for March +1.5% versus expectations of +.5% and -.1% in February.
ISM Manufacturing was 62.4 in April versus 62.7 forecast and 62.5 prior month.
ISM Prices Paid was 88.0 in April versus 85.0 estimate and 86.0 in March.
Recommendations
Goldman Sachs says momentum is gaining in lodging sector, favorite beneficiary is FS. GS reiterated Outperform on AMGN, AGN, DDR, SPG, IACI, DTV, BIIB, MDT, EBAY and AMX. Citi SmithBarney downgraded the Capital Goods and Retailing industry groups and upgraded the Health Care Services and Foods industry groups. Citi removed CAT from focus list and added WMT, MSFT and AW. Citi reiterated Sell on SPW, target $42. Citi reiterated Buy on CI, target $75. UBS raised FS to Buy, target $62.50. UBS raised NCX to Buy, target $30. GTIV raised to Buy at Legg Mason, target $18. DJ raised to Overweight by Prudential, target $55. IPMT rated Buy at Deutsche Bank, target $45. PKG raised to Outperform at CSFB, target $25. ESV and THE raised to Overweight at Moran Stanley. RDK raised to Buy at Merrill Lynch, target $25.
Mid-day News
U.S. stocks are rising this afternoon as strong manufacturing and construction reports lifted optimism corporate profits would continue to beat estimates. The U.S. health care system must adopt electronic medical records technology to boost efficiency and guard against mistakes in the treatment of patients, the NY Times said. A list of about 270 recipients of suspected bribes, from Saddam Hussein's regime under the UN oil-for-food program, is filled with countries and politicians that opposed the Iraq war, the Washington Times reported. Nortel Networks is in default of rules for filing financial statements with "significant" deficiencies, the Ontario Securities Commission said. A computer worm called Sasser is infecting computers worldwide through the Internet and is still spreading, Bloomberg reported. U.S. companies including Caterpillar and Marriott have begun to raise prices, signaling a rise in demand that may spur more corporate investment and hiring, Bloomberg reported. The ISM Manufacturing Index held close to a 20-year high last month as production increased and more factories added workers than at any time since 1987, Bloomberg reported. Frank Quattrone, who managed more IPOs for Internet companies than any banker, was found guilty of obstructing investigations of IPOs by urging bankers to discard records after learning of the probes, Bloomberg reported.
BOTTOM LINE: The Portfolio is down slightly today as my shorts are mixed. I added few new shorts into this morning's strength and one new long, bringing the Portfolio's market exposure to 50% net short. Today's rally is not very strong as volume and breadth readings are weak. As well, investor complacency continues to be a problem. Natural Gas is breaking out today, thus I added a new long position in APA with a 42.25 stop-loss.
NASDAQ 1,935.61 +.81%
Leading Sectors
Gaming +2.53%
Energy +2.32%
Airlines +1.71%
Lagging Sectors
Disk Drives -.41%
Iron/Steel -1.43%
Semis -1.80%
Other
Crude Oil 38.07 +1.85%
Natural Gas 6.15 +5.0%
Gold 387.50 unch.
Base Metals 104.19 +.72%
U.S. Dollar 90.81 +.36%
10-Yr. Long-Bond Yield 4.49% -.31%
VIX 16.92 -1.63%
Put/Call .83 -12.63%
NYSE Arms .82 -52.87%
Market Movers
IACI -4.77% on profit-taking after beating 1Q estimates.
RDWR -29.21% after meeting 1Q estimates and lowering 2Q guidance.
ACCL -29.56% after completing the spin-off of its drug discovery business.
NTE -16.93% after disappointing 1Q results.
Economic Data
Construction Spending for March +1.5% versus expectations of +.5% and -.1% in February.
ISM Manufacturing was 62.4 in April versus 62.7 forecast and 62.5 prior month.
ISM Prices Paid was 88.0 in April versus 85.0 estimate and 86.0 in March.
Recommendations
Goldman Sachs says momentum is gaining in lodging sector, favorite beneficiary is FS. GS reiterated Outperform on AMGN, AGN, DDR, SPG, IACI, DTV, BIIB, MDT, EBAY and AMX. Citi SmithBarney downgraded the Capital Goods and Retailing industry groups and upgraded the Health Care Services and Foods industry groups. Citi removed CAT from focus list and added WMT, MSFT and AW. Citi reiterated Sell on SPW, target $42. Citi reiterated Buy on CI, target $75. UBS raised FS to Buy, target $62.50. UBS raised NCX to Buy, target $30. GTIV raised to Buy at Legg Mason, target $18. DJ raised to Overweight by Prudential, target $55. IPMT rated Buy at Deutsche Bank, target $45. PKG raised to Outperform at CSFB, target $25. ESV and THE raised to Overweight at Moran Stanley. RDK raised to Buy at Merrill Lynch, target $25.
Mid-day News
U.S. stocks are rising this afternoon as strong manufacturing and construction reports lifted optimism corporate profits would continue to beat estimates. The U.S. health care system must adopt electronic medical records technology to boost efficiency and guard against mistakes in the treatment of patients, the NY Times said. A list of about 270 recipients of suspected bribes, from Saddam Hussein's regime under the UN oil-for-food program, is filled with countries and politicians that opposed the Iraq war, the Washington Times reported. Nortel Networks is in default of rules for filing financial statements with "significant" deficiencies, the Ontario Securities Commission said. A computer worm called Sasser is infecting computers worldwide through the Internet and is still spreading, Bloomberg reported. U.S. companies including Caterpillar and Marriott have begun to raise prices, signaling a rise in demand that may spur more corporate investment and hiring, Bloomberg reported. The ISM Manufacturing Index held close to a 20-year high last month as production increased and more factories added workers than at any time since 1987, Bloomberg reported. Frank Quattrone, who managed more IPOs for Internet companies than any banker, was found guilty of obstructing investigations of IPOs by urging bankers to discard records after learning of the probes, Bloomberg reported.
BOTTOM LINE: The Portfolio is down slightly today as my shorts are mixed. I added few new shorts into this morning's strength and one new long, bringing the Portfolio's market exposure to 50% net short. Today's rally is not very strong as volume and breadth readings are weak. As well, investor complacency continues to be a problem. Natural Gas is breaking out today, thus I added a new long position in APA with a 42.25 stop-loss.
Monday Watch
Earnings of Note
Company/Estimate
ACDO/.42
ATN/.21
ASF/.12
ESPD/.18
IACI/.16
NBIX/-.36
PCLN/.08
Splits
None of Note.
Economic Data
Construction Spending for March estimated +.5% versus -.1% in February.
ISM Manufacturing for April estimated at 62.7 versus 62.5 prior month.
ISM Prices Paid for April estimated at 85.0 versus 86.0 in March.
Total Vehicles Sales for April estimated at 17.0M versus 16.7M in March.
Domestic Vehicle Sales for April estimated at 13.5M versus 13.3M prior month.
Weekend Recommendations
Forbes on Fox had guests that were positive on JNJ, WFMI, BBBY, BEAS, COGN, CSR and mixed on HAL and NMG/A. Bulls and Bears had guests that were positive on GE, NFX, MOT, LNCR, PETM, mixed on HAL and negative on DIS. Cashin' In had guests that were positive on MANT, MLNM, FLML, NVEC, CBT and mixed on MRVL. Louis Rukeyser's Wall Street had guests that were positive on COL, WAG, CCU, CLX, DVN, OSI and FNM. Wall St. Week w/Fortune had guests that were positive on BBH, CSCO, SIVB, BAC, GE, MSFT and CCE. Barron's had a positive column on VOD and negative columns on ZLC and TASR.
Weekend News
Economist.com has a positive article on California's economy, saying it is poised for a rebound. Google is being sued by a unit of rival Yahoo! over the way it sells advertising, the Daily Telegraph reported. UN Secretary-General Kofi Annan said on Sunday any UN official found guilty of corruption in the burgeoning Iraqi oil-for-food scandal would be dismissed and be held liable for legal action, Agence France-Presse reported. Tyco won a $1B contract to build a computerized network of radio transmitters across New York state designed to correct lapses among emergency response agencies, the New York Times reported. China is facing "severe" pressure to meet demand for oil products because of rapid consumption growth and production-capacity constraints, Xinhua News reported. The UK is set to send as many as 4,000 extra soldiers to secure Najaf in the biggest expansion of British forces in Iraq since the beginning of the war, the Sunday Telegraph said. The UK government has bought ani-radiation drugs worth $88.9M to cover half the country's population in the event of a dirty bomb. Chinese Vice Premier Huang Ju urged officials to curb money supply and suspend or halt work on industrial projects that aren't in line with government policy to ensure long-term stable economic growth, China Central TV reported. Wall Street firms are increasing their hiring in NYC as profits rebound, Crain's New York Business reported. Pfizer plans to buy more biotechnology companies to finance new drug discoveries, the Financial Times said. Photographs allegedly showing UK troops abusing a hooded Iraqi prisoner are probably fakes, the London-based Times said. Warren Buffett said he increased his bet against the U.S. dollar, Bloomberg reported. Paul Tudor Jones, founder of the $9.4B hedge fund firm Tudor Investment Corp., is increasing his investments in China, Bloomberg reported.
Late-Night Trading
Asian indices are mostly lower, -1.25% to +.25% on average.
S&P 500 indicated +.04%.
NASDAQ indicated +.36%.
BOTTOM LINE: The Portfolio is 25% net short heading into the week. While the market could rally at any time from its oversold state, I would like to see sentiment indicators such as the Bullish %, VIX, ARMS and Put/Call ratio show less investor complacency. Interest rates will likely rise further during the week in anticipation of Friday's employment report. U.S. stocks should open higher in the morning on some positive developments in Iraq, strong economic data and no significant terrorist acts over the weekend. I will monitor the strength of the open before deciding whether or not to shift market exposure.
Company/Estimate
ACDO/.42
ATN/.21
ASF/.12
ESPD/.18
IACI/.16
NBIX/-.36
PCLN/.08
Splits
None of Note.
Economic Data
Construction Spending for March estimated +.5% versus -.1% in February.
ISM Manufacturing for April estimated at 62.7 versus 62.5 prior month.
ISM Prices Paid for April estimated at 85.0 versus 86.0 in March.
Total Vehicles Sales for April estimated at 17.0M versus 16.7M in March.
Domestic Vehicle Sales for April estimated at 13.5M versus 13.3M prior month.
Weekend Recommendations
Forbes on Fox had guests that were positive on JNJ, WFMI, BBBY, BEAS, COGN, CSR and mixed on HAL and NMG/A. Bulls and Bears had guests that were positive on GE, NFX, MOT, LNCR, PETM, mixed on HAL and negative on DIS. Cashin' In had guests that were positive on MANT, MLNM, FLML, NVEC, CBT and mixed on MRVL. Louis Rukeyser's Wall Street had guests that were positive on COL, WAG, CCU, CLX, DVN, OSI and FNM. Wall St. Week w/Fortune had guests that were positive on BBH, CSCO, SIVB, BAC, GE, MSFT and CCE. Barron's had a positive column on VOD and negative columns on ZLC and TASR.
Weekend News
Economist.com has a positive article on California's economy, saying it is poised for a rebound. Google is being sued by a unit of rival Yahoo! over the way it sells advertising, the Daily Telegraph reported. UN Secretary-General Kofi Annan said on Sunday any UN official found guilty of corruption in the burgeoning Iraqi oil-for-food scandal would be dismissed and be held liable for legal action, Agence France-Presse reported. Tyco won a $1B contract to build a computerized network of radio transmitters across New York state designed to correct lapses among emergency response agencies, the New York Times reported. China is facing "severe" pressure to meet demand for oil products because of rapid consumption growth and production-capacity constraints, Xinhua News reported. The UK is set to send as many as 4,000 extra soldiers to secure Najaf in the biggest expansion of British forces in Iraq since the beginning of the war, the Sunday Telegraph said. The UK government has bought ani-radiation drugs worth $88.9M to cover half the country's population in the event of a dirty bomb. Chinese Vice Premier Huang Ju urged officials to curb money supply and suspend or halt work on industrial projects that aren't in line with government policy to ensure long-term stable economic growth, China Central TV reported. Wall Street firms are increasing their hiring in NYC as profits rebound, Crain's New York Business reported. Pfizer plans to buy more biotechnology companies to finance new drug discoveries, the Financial Times said. Photographs allegedly showing UK troops abusing a hooded Iraqi prisoner are probably fakes, the London-based Times said. Warren Buffett said he increased his bet against the U.S. dollar, Bloomberg reported. Paul Tudor Jones, founder of the $9.4B hedge fund firm Tudor Investment Corp., is increasing his investments in China, Bloomberg reported.
Late-Night Trading
Asian indices are mostly lower, -1.25% to +.25% on average.
S&P 500 indicated +.04%.
NASDAQ indicated +.36%.
BOTTOM LINE: The Portfolio is 25% net short heading into the week. While the market could rally at any time from its oversold state, I would like to see sentiment indicators such as the Bullish %, VIX, ARMS and Put/Call ratio show less investor complacency. Interest rates will likely rise further during the week in anticipation of Friday's employment report. U.S. stocks should open higher in the morning on some positive developments in Iraq, strong economic data and no significant terrorist acts over the weekend. I will monitor the strength of the open before deciding whether or not to shift market exposure.
Sunday, May 02, 2004
Weekly Outlook
There are number of economic reports scheduled for release this week as well as a few significant corporate earnings reports. Scheduled economic reports include ISM Manufacturing/Prices Paid, Vehicle Sales, Factory Orders, ISM Non-Manufacturing, Non-farm Productivity, Unit Labor Costs, Unemployment Rate and Change in Non-farm Payrolls. ISM Manufacturing/Non-Manufacturing, Unit Labor Costs and Change in Non-farm Payrolls have the most market-moving potential.
IAC/Interactive Corp.(IACI), Clear Channel(CCU), Emerson(EMR), Northrop Grumman(NOC), Tyco(TYC), CVS Corp.(CVS), Caremark(CMX), Fox Entertainment(FOX) and XM Satellite Radio(XMSR) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The JP Morgan Tech/Telecom Conference, FOMC Policy announcement, Morgan Stanley Healthcare Conference and FOMC minutes release may also impact the market.
BOTTOM LINE: The S&P 500's P/E on 04 estimates is 17.33 and falling, the lowest level since the depths of the Asian/Long-term capital crises in 1998. The S&P 500's current valuation is also lower than in 1992 and 1987, years preceding major bull moves. The economy is growing the fastest since the early 80's, American household net-worth is at all-time highs, American home ownership is at all-time highs, corporate profitability is at all-time highs, interest rates and inflation are relatively low and consumer spending is very strong, yet the stock market is falling. Multiple sectors appear to be breaking down technically. This leads me to conclude investor psychology has changed and the market is in the middle of a P/E multiple contraction phase. Market participants appear to be factoring in the likelihood of another major terrorist attack on U.S. soil. The strong fundamental backdrop for stocks should keep this phase from turning into another bear market. With my short-term trading indicators on sell signals, investor complacency still relatively high and deteriorating technicals in multiple sectors, I expect more weakness in the near-term. I will look to make additional short sales into any bounce from technically oversold levels.
IAC/Interactive Corp.(IACI), Clear Channel(CCU), Emerson(EMR), Northrop Grumman(NOC), Tyco(TYC), CVS Corp.(CVS), Caremark(CMX), Fox Entertainment(FOX) and XM Satellite Radio(XMSR) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The JP Morgan Tech/Telecom Conference, FOMC Policy announcement, Morgan Stanley Healthcare Conference and FOMC minutes release may also impact the market.
BOTTOM LINE: The S&P 500's P/E on 04 estimates is 17.33 and falling, the lowest level since the depths of the Asian/Long-term capital crises in 1998. The S&P 500's current valuation is also lower than in 1992 and 1987, years preceding major bull moves. The economy is growing the fastest since the early 80's, American household net-worth is at all-time highs, American home ownership is at all-time highs, corporate profitability is at all-time highs, interest rates and inflation are relatively low and consumer spending is very strong, yet the stock market is falling. Multiple sectors appear to be breaking down technically. This leads me to conclude investor psychology has changed and the market is in the middle of a P/E multiple contraction phase. Market participants appear to be factoring in the likelihood of another major terrorist attack on U.S. soil. The strong fundamental backdrop for stocks should keep this phase from turning into another bear market. With my short-term trading indicators on sell signals, investor complacency still relatively high and deteriorating technicals in multiple sectors, I expect more weakness in the near-term. I will look to make additional short sales into any bounce from technically oversold levels.
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