Earnings of Note
Company/Estimate
BBOX/.70
CHINA/.04
TBUS/.02
CDCY/.03
MSO/-.19
PCTY/-.14
Splits
None of Note.
Economic Data
Unemployment Rate for April estimated at 5.7% versus 5.7% in March.
Change in Non-farm Payrolls for April estimated at 170K versus 308K in March.
Change in Manufacturing Payrolls for April estimated at 5K versus 0K in March.
Average Hourly Earnings for April estimated +.2% versus +.1% in March.
Average Weekly Hours for April estimated at 33.8 versus 33.7 in March.
Wholesale Inventories for March estimated +.5% versus +1.3% in February.
Recommendations
Goldman Sachs reiterated Outperform on DVN and RSE. GS reiterated Underperform on VICL. Jim Cramer, of TheStreet.com, thinks there is a good chance stocks will rise tomorrow no matter what the employment numbers are. VISX is expected to rise as demand for corrective eye surgery grows, Business Week reported. CGFW may be an acquisition target of a larger company seeking to expand in online security, Business Week reported.
Late-Night News
Asian indices are mixed on a rebound in Taiwan and slight weakness elsewhere. GE's NBC network told the NFL that it would be interested in broadcasting Sunday and Monday night games, Business Week reported. The UN tightened security around Secretary-General Kofi Annan after reports that a statement attributed to al-Qaeda's Osama bin Laden offered a reward to anyone who kills top U.S. and UN officials, Bloomberg reported. Major League Baseball dropped plans to adorn the bases in 15 ballparks with the logo for an upcoming Spider-Man movie one day after announcing the promotion, the Wall Street Journal reported. Hong Kong Dragon Air plans to spend as much as $300 million to buy five Boeing 747-400 aircraft as it aims to enter the U.S. cargo market by the end of 2006, the South China Morning Post reported. Ukrainian security officers arrested three men and seized almost 375 pounds of cesium-137, a potential ingredient in a radioactive "dirty bomb," the AP said. The U.S. Congressional Budget Office said the federal budget deficit for 04 will be smaller-than-expected because a vigorous economy is generating tax revenues $30-$40 billion above expectations. The FBI arrested an Oregon lawyer after Madrid authorities said they found evidence that linked him to material associated with the March commuter train bombing, Newsweek reported.
Late-Night Trading
Asian Indices -.50% to +1.50%.
S&P 500 indicated +.11%.
NASDAQ indicated +.14%.
BOTTOM LINE: I expect Non-farm Payrolls to rise above expectations of 170K and interest rates to rise further, pressuring stocks in the morning. However, I am not overly confident in this prediction, thus my market neutral position in the Portfolio. I will likely add long positions into any extreme weakness in stocks on the open as a result of falling bonds. If I am wrong in my assumptions and job growth falls below expectations or bonds rally, I would expect stocks to rally as well. Investors will incorrectly assume the Fed will wait longer than is currently expected to hike rates. I still expect the Fed to make their first move at the June 29-30 meeting irregardless of tomorrow's report. The Fed Funds rate is currently at emergency levels which are unwarranted in today's strong economic environment. Any stock rally, as a result of falling interest rates, will likely last a few days as the major indices are at oversold technical levels. Thus, I would likely increase market exposure under this scenario.
Thursday, May 06, 2004
Thursday Close
S&P 500 1,113.99 -.67%
NASDAQ 1,937.74 -1.00%
Leading Sectors
Broadcasting +.70%
Utilities +.22%
Foods +.13%
Lagging Sectors
Retail -2.35%
Nanotechnology -2.69%
Airlines -3.28%
Other
Crude Oil 39.42 +.13%
Natural Gas 6.22 +.10%
Gold 388.00 -.10%
Base Metals 105.68 +.46%
U.S. Dollar 89.89 +.64%
10-Yr. Long-Bond Yield 4.60% +.41%
VIX 17.05 +8.12%
Put/Call 1.26 +48.24%
NYSE Arms .95 +23.38%
After-hours Movers
FARO +11.41% after beating 1Q estimates and reaffirming 04 forecast.
NPSP +5.40% after beating 1Q estimates.
CAMD -3.97% after beating 1Q estimates, but disappointing guidance.
Recommendations
WERN raised to Buy at UBS, target $24. Goldman Sachs reiterated Underperform on VRSN. GS reiterated Outperform on ARG, CMX and CLX.
After-hours News
U.S. stocks finished lower Thursday as better-than-expected reports on jobs and wages fueled inflation fears ahead of tomorrow's important employment numbers. After the close, the AP reported that a Web site statement attributed to Osama bin Laden offered a reward of $125,00 in gold bullion to anyone who kills the top U.S. civilian official in Iraq, Paul Bremer, "or the American chief commander or his deputy in Iraq." Univision, the largest U.S. Spanish-language tv and radio broadcaster, said first-quarter profit more than doubled to $31.6 million, Bloomberg reported. Fannie Mae improperly accounted for some manufactured housing and aircraft lease securities, and must further write down the value of the securities, Bloomberg reported. Emerging-market bonds had their biggest decline in almost 2 years on worries over rising world interest rates, JP Morgan said. The U.S. Senate confirmed John Negroponte as the first U.S. ambassador to Iraq since the 1991 Gulf War, Bloomberg reported.
BOTTOM LINE: The Portfolio rose today as my tech and retail shorts fell and my healthcare and energy longs were mixed. I added to one of my retail shorts in the afternoon and initiated a new long position in MSFT. I am keeping a close below $26 stop-loss on this position. These new trades leave the Portfolio at a market neutral(shorts-longs=0) position. U.S. stocks could rally on a weaker-than-expected jobs report tomorrow or an unexpected bond rally. However, I expect Non-farm payrolls to come in above expectations of 170K and interest rates to move higher. This will likely pressure stocks on the open. I continue to feel there is too much investor complacency for a meaningful bottom in this recent correction. However, a counter-trend trading rally could occur at anytime from current oversold levels.
NASDAQ 1,937.74 -1.00%
Leading Sectors
Broadcasting +.70%
Utilities +.22%
Foods +.13%
Lagging Sectors
Retail -2.35%
Nanotechnology -2.69%
Airlines -3.28%
Other
Crude Oil 39.42 +.13%
Natural Gas 6.22 +.10%
Gold 388.00 -.10%
Base Metals 105.68 +.46%
U.S. Dollar 89.89 +.64%
10-Yr. Long-Bond Yield 4.60% +.41%
VIX 17.05 +8.12%
Put/Call 1.26 +48.24%
NYSE Arms .95 +23.38%
After-hours Movers
FARO +11.41% after beating 1Q estimates and reaffirming 04 forecast.
NPSP +5.40% after beating 1Q estimates.
CAMD -3.97% after beating 1Q estimates, but disappointing guidance.
Recommendations
WERN raised to Buy at UBS, target $24. Goldman Sachs reiterated Underperform on VRSN. GS reiterated Outperform on ARG, CMX and CLX.
After-hours News
U.S. stocks finished lower Thursday as better-than-expected reports on jobs and wages fueled inflation fears ahead of tomorrow's important employment numbers. After the close, the AP reported that a Web site statement attributed to Osama bin Laden offered a reward of $125,00 in gold bullion to anyone who kills the top U.S. civilian official in Iraq, Paul Bremer, "or the American chief commander or his deputy in Iraq." Univision, the largest U.S. Spanish-language tv and radio broadcaster, said first-quarter profit more than doubled to $31.6 million, Bloomberg reported. Fannie Mae improperly accounted for some manufactured housing and aircraft lease securities, and must further write down the value of the securities, Bloomberg reported. Emerging-market bonds had their biggest decline in almost 2 years on worries over rising world interest rates, JP Morgan said. The U.S. Senate confirmed John Negroponte as the first U.S. ambassador to Iraq since the 1991 Gulf War, Bloomberg reported.
BOTTOM LINE: The Portfolio rose today as my tech and retail shorts fell and my healthcare and energy longs were mixed. I added to one of my retail shorts in the afternoon and initiated a new long position in MSFT. I am keeping a close below $26 stop-loss on this position. These new trades leave the Portfolio at a market neutral(shorts-longs=0) position. U.S. stocks could rally on a weaker-than-expected jobs report tomorrow or an unexpected bond rally. However, I expect Non-farm payrolls to come in above expectations of 170K and interest rates to move higher. This will likely pressure stocks on the open. I continue to feel there is too much investor complacency for a meaningful bottom in this recent correction. However, a counter-trend trading rally could occur at anytime from current oversold levels.
Mid-day Update
S&P 500 1,109.87 -1.04%
NASDAQ 1,929.85 -1.40%
Leading Sectors
Foods -.03%
Drugs -.31%
Utilities -.38%
Lagging Sectors
Retail -2.70%
Disk Drives -2.70%
Airlines -3.42%
Other
Crude Oil 39.42 -.38%
Natural Gas 6.25 -1.03%
Gold 387.40 -1.60%
Base Metals 105.68 +.46%
U.S. Dollar 89.85 +.58%
10-Yr. Long-Bond Yield 4.59% +.32%
VIX 17.34 +9.96%
Put/Call 1.31 +54.12%
NYSE Arms 1.29 +67.53%
Market Movers
KG -16.6% after substantially missing 1Q estimates and withdrawing 04 forecast.
GMST -23.81% after missing 1Q estimates and lowering 04 forecast.
MGPI +28.47% after strong 3Q estimates and raising 04 forecast.
ASYT +22.16% after substantially beating 4Q estimates and raising 1Q forecast.
HANS +13.67% after beating 1Q estimates.
THQI +9.9% after beating 4Q estimates and raising 1Q/04 forecast.
IPMT +5.96% after beating 1Q estimates and raising 04 forecast.
WMS +6.42% on strong 3Q results, raised to Buy at Roth Capital, $35 target.
HB -17.03% after substantially missing 2Q estimate and lowering 3Q/04 forecast.
PPCO -17.85% after saying it will begin a new study on a painkilling drug as the FDA said its prior results were favorably biased.
CHS -7.11% on profit-taking after announcing above-expectations 16% same-store-sales.
MIK -7.0% after missing April same-store-sales estimate and lowering 1Q guidance.
Economic Data
Preliminary 1Q Non-farm Productivity +3.5%, meeting estimates, versus 2.5% in 4Q.
Preliminary 1Q Unit Labor Costs +.5% versus 0.0% expectations and -.4% in 4Q.
Initial Jobless Claims for last week 315K versus 335K expectations and 340K prior week.
Continuing Claims 2935K versus expectations of 2971K and 3004K prior week.
Recommendations
Goldman Sachs upgraded NOI to Outperform. GS reiterated Attractive view on oil service stocks, saying they prefer equipment/service stocks over drillers. GS reiterated Underperform on AMCC, LVLT and T. GS reiterated Outperform on TRW, CMX, HD, AET, GE, IGT, AGI and BSX. Citi Smith Barney upgraded HIG to Buy, target $81. Citi said to Sell ADBE and Buy VRTS, target $33. Citi reiterated Buy on MCD, target $33. Citi reiterated Buy on PMI, raised target to $55. Citi also said 2 restaurants well-positioned to battle rising costs are SBUX and WEN. JWN raised to Buy at UBS, target $44. VSH raised to Buy, target $24. ADTN raised to Buy at Legg Mason, target $32. MU raised to Outperform at CSFB, target $19. NOC raised to Buy at Bank of America, target $115. COLM rated Outperform at CSFB, target $67. DDR raised to Overweight at Morgan Stanley, target $35. EXPD raised to Outperform at Bear Stearns.
Mid-day News
U.S. stocks are falling mid-day as better-than-expected reports on jobs and wages fueled concerns that inflation is accelerating. Goldman Sachs said key takeaways from its Electrical Products Group Conference are that companies are seeing strong organic growth, higher capital spending, a pick-up in price increases and improved balance sheets which can help fund stock repurchases or acquisitions. Goldman says the bottom line is that the industrial recovery is accelerating. AOL unveiled a new video game site yesterday to try to win over more customers to its high-speed broadband Internet service, Reuters reported. Adidas plans to introduce a $250 running-shoe line, the Wall Street Journal reported. XM Satellite Radio Chairman Parsons told CNBC he expects to have 2M subscribers by the end of the second quarter and that subscribers will exceed 2.8M in 04. The legal voting age in California could drop to 14, after the Senate Elections Committee voted 3-2 to pass legislation that would lower the state's age, the San Francisco Chronicle reported. News Corp., owner of the FOX network, said its fiscal 3Q profit increased by 69% on higher ad sales from its "American Idol" show and Fox News Channel. The Madrid terrorist bombings which killed 191 people three days before national elections, influenced the voting decisions of 28.5% of Spaniards, according to a Center for Sociological Research Poll. A slowdown in China's economy will push global commodities prices lower, helping restrain inflation, said Alan Greenspan. Sales at U.S. retailers including Wal-Mart, Nordstrom and JC Penney increased less than expected in April, causing retail shares to fall, Bloomberg reported. Unit Labor costs rose last quarter for the first time in a year, which may herald faster growth in wages and fuel concern about inflation, Bloomberg reported. The number of Americans filing applications for unemployment benefits fell to the lowest since the stock market bubble burst in 2000 and productivity trailed economic growth for a second quarter, suggesting companies will increase hiring, Bloomberg reported.
BOTTOM LINE: The Portfolio is up today as my healthcare and energy longs are down less than my retail and technology shorts. I have not traded today and the Portfolio is still positioned market neutral(shorts-longs=0). While it is good to see investor complacency is starting to fall as evidenced by the soaring ARMS, Put/Call readings and falling AAII Bullish %, their current levels are still not sufficient to form a meaningful bottom in this correction. The recent slew of better-than-expected economic reports points to a better-than-expected jobs' report tomorrow, which would likely send interest rates higher and stocks lower. However, a below-expectations report could provide the catalyst for a short-term oversold trading rally. The key will be the bond markets reaction to this report.
NASDAQ 1,929.85 -1.40%
Leading Sectors
Foods -.03%
Drugs -.31%
Utilities -.38%
Lagging Sectors
Retail -2.70%
Disk Drives -2.70%
Airlines -3.42%
Other
Crude Oil 39.42 -.38%
Natural Gas 6.25 -1.03%
Gold 387.40 -1.60%
Base Metals 105.68 +.46%
U.S. Dollar 89.85 +.58%
10-Yr. Long-Bond Yield 4.59% +.32%
VIX 17.34 +9.96%
Put/Call 1.31 +54.12%
NYSE Arms 1.29 +67.53%
Market Movers
KG -16.6% after substantially missing 1Q estimates and withdrawing 04 forecast.
GMST -23.81% after missing 1Q estimates and lowering 04 forecast.
MGPI +28.47% after strong 3Q estimates and raising 04 forecast.
ASYT +22.16% after substantially beating 4Q estimates and raising 1Q forecast.
HANS +13.67% after beating 1Q estimates.
THQI +9.9% after beating 4Q estimates and raising 1Q/04 forecast.
IPMT +5.96% after beating 1Q estimates and raising 04 forecast.
WMS +6.42% on strong 3Q results, raised to Buy at Roth Capital, $35 target.
HB -17.03% after substantially missing 2Q estimate and lowering 3Q/04 forecast.
PPCO -17.85% after saying it will begin a new study on a painkilling drug as the FDA said its prior results were favorably biased.
CHS -7.11% on profit-taking after announcing above-expectations 16% same-store-sales.
MIK -7.0% after missing April same-store-sales estimate and lowering 1Q guidance.
Economic Data
Preliminary 1Q Non-farm Productivity +3.5%, meeting estimates, versus 2.5% in 4Q.
Preliminary 1Q Unit Labor Costs +.5% versus 0.0% expectations and -.4% in 4Q.
Initial Jobless Claims for last week 315K versus 335K expectations and 340K prior week.
Continuing Claims 2935K versus expectations of 2971K and 3004K prior week.
Recommendations
Goldman Sachs upgraded NOI to Outperform. GS reiterated Attractive view on oil service stocks, saying they prefer equipment/service stocks over drillers. GS reiterated Underperform on AMCC, LVLT and T. GS reiterated Outperform on TRW, CMX, HD, AET, GE, IGT, AGI and BSX. Citi Smith Barney upgraded HIG to Buy, target $81. Citi said to Sell ADBE and Buy VRTS, target $33. Citi reiterated Buy on MCD, target $33. Citi reiterated Buy on PMI, raised target to $55. Citi also said 2 restaurants well-positioned to battle rising costs are SBUX and WEN. JWN raised to Buy at UBS, target $44. VSH raised to Buy, target $24. ADTN raised to Buy at Legg Mason, target $32. MU raised to Outperform at CSFB, target $19. NOC raised to Buy at Bank of America, target $115. COLM rated Outperform at CSFB, target $67. DDR raised to Overweight at Morgan Stanley, target $35. EXPD raised to Outperform at Bear Stearns.
Mid-day News
U.S. stocks are falling mid-day as better-than-expected reports on jobs and wages fueled concerns that inflation is accelerating. Goldman Sachs said key takeaways from its Electrical Products Group Conference are that companies are seeing strong organic growth, higher capital spending, a pick-up in price increases and improved balance sheets which can help fund stock repurchases or acquisitions. Goldman says the bottom line is that the industrial recovery is accelerating. AOL unveiled a new video game site yesterday to try to win over more customers to its high-speed broadband Internet service, Reuters reported. Adidas plans to introduce a $250 running-shoe line, the Wall Street Journal reported. XM Satellite Radio Chairman Parsons told CNBC he expects to have 2M subscribers by the end of the second quarter and that subscribers will exceed 2.8M in 04. The legal voting age in California could drop to 14, after the Senate Elections Committee voted 3-2 to pass legislation that would lower the state's age, the San Francisco Chronicle reported. News Corp., owner of the FOX network, said its fiscal 3Q profit increased by 69% on higher ad sales from its "American Idol" show and Fox News Channel. The Madrid terrorist bombings which killed 191 people three days before national elections, influenced the voting decisions of 28.5% of Spaniards, according to a Center for Sociological Research Poll. A slowdown in China's economy will push global commodities prices lower, helping restrain inflation, said Alan Greenspan. Sales at U.S. retailers including Wal-Mart, Nordstrom and JC Penney increased less than expected in April, causing retail shares to fall, Bloomberg reported. Unit Labor costs rose last quarter for the first time in a year, which may herald faster growth in wages and fuel concern about inflation, Bloomberg reported. The number of Americans filing applications for unemployment benefits fell to the lowest since the stock market bubble burst in 2000 and productivity trailed economic growth for a second quarter, suggesting companies will increase hiring, Bloomberg reported.
BOTTOM LINE: The Portfolio is up today as my healthcare and energy longs are down less than my retail and technology shorts. I have not traded today and the Portfolio is still positioned market neutral(shorts-longs=0). While it is good to see investor complacency is starting to fall as evidenced by the soaring ARMS, Put/Call readings and falling AAII Bullish %, their current levels are still not sufficient to form a meaningful bottom in this correction. The recent slew of better-than-expected economic reports points to a better-than-expected jobs' report tomorrow, which would likely send interest rates higher and stocks lower. However, a below-expectations report could provide the catalyst for a short-term oversold trading rally. The key will be the bond markets reaction to this report.
Wednesday, May 05, 2004
Thursday Watch
Earnings of Note
Company/Estimate
ATVI/.00
ATK/.87
BE/.04
CPN/-.11
CMX/.31
DISH/.15
TOL/.87
UVN/.08
XMSR/-.79
Splits
BEBE 3-for-2
EXC 2-for-1
Economic Data
Preliminary Non-farm Productivity for 1Q estimated +3.5% versus 2.6% in 4Q.
Preliminary Unit Labor Costs for 1Q estimated unch. versus -.4% in 4Q.
Initial Jobless Claims for last week estimated at 335K versus 338K prior week.
Continuing Claims estimated at 2971K versus 3013K prior.
FOMC minutes.
Recommendations
Goldman Sachs reiterated Outperform on RRI, IGT, CLX, CCI and PPH. GS reiterated Underperform on BPL and PPS.
Late-Night News
Asian indices are mixed as strength in Hong Kong and Taiwan is being offset by weakness in Korea and Japan. China's central bank probably won't raise interest rates immediately after the weeklong Labor Day holiday, which ends tomorrow, Ming Pao Daily reported. Three wildfires in Southern California that have burned more than 22,000 acres and destroyed at least 14 homes are nearly contained as cooler weather helps firefighters, AP reported. China's government has closed more than 8,600 unlicensed Internet cafes since February because they violated rules covering the admission of juveniles, Xinhua News reported. Fannie Mae is seeking the support of the SEC in defending its accounting policies, the Wall Street Journal reported. New York Attorney General Spitzer is preparing to file a lawsuit against Richard Grasso seeking repayment of some of the $139.5M in pay the former NYSE chairman received, the Washington Post reported.
Late-Night Trading
Asian Indices -2.50% to +2.0%.
S&P 500 indicated -.03%.
NASDAQ indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to remain weaker to neutral tomorrow ahead of Friday's employment report. An unexpected rise in Unit Labor Costs or fall in initial jobless claims will likely send interest rates higher, thus pressuring stocks. The Portfolio is positioned market neutral heading into trading tomorrow.
Company/Estimate
ATVI/.00
ATK/.87
BE/.04
CPN/-.11
CMX/.31
DISH/.15
TOL/.87
UVN/.08
XMSR/-.79
Splits
BEBE 3-for-2
EXC 2-for-1
Economic Data
Preliminary Non-farm Productivity for 1Q estimated +3.5% versus 2.6% in 4Q.
Preliminary Unit Labor Costs for 1Q estimated unch. versus -.4% in 4Q.
Initial Jobless Claims for last week estimated at 335K versus 338K prior week.
Continuing Claims estimated at 2971K versus 3013K prior.
FOMC minutes.
Recommendations
Goldman Sachs reiterated Outperform on RRI, IGT, CLX, CCI and PPH. GS reiterated Underperform on BPL and PPS.
Late-Night News
Asian indices are mixed as strength in Hong Kong and Taiwan is being offset by weakness in Korea and Japan. China's central bank probably won't raise interest rates immediately after the weeklong Labor Day holiday, which ends tomorrow, Ming Pao Daily reported. Three wildfires in Southern California that have burned more than 22,000 acres and destroyed at least 14 homes are nearly contained as cooler weather helps firefighters, AP reported. China's government has closed more than 8,600 unlicensed Internet cafes since February because they violated rules covering the admission of juveniles, Xinhua News reported. Fannie Mae is seeking the support of the SEC in defending its accounting policies, the Wall Street Journal reported. New York Attorney General Spitzer is preparing to file a lawsuit against Richard Grasso seeking repayment of some of the $139.5M in pay the former NYSE chairman received, the Washington Post reported.
Late-Night Trading
Asian Indices -2.50% to +2.0%.
S&P 500 indicated -.03%.
NASDAQ indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to remain weaker to neutral tomorrow ahead of Friday's employment report. An unexpected rise in Unit Labor Costs or fall in initial jobless claims will likely send interest rates higher, thus pressuring stocks. The Portfolio is positioned market neutral heading into trading tomorrow.
Wednesday Close
S&P 500 1,121.53 +.18%
NASDAQ 1,957.26 +.35%
Leading Sectors
Biotech +1.52%
Gaming +1.52%
HMO’s +1.51%
Lagging Sectors
Networking -.69%
Papers -.97%
Oil Service -1.77%
Other
Crude Oil 39.57 unch.
Natural Gas 6.31 unch.
Gold 393.60 -.05%
Base Metals 105.20 -.53%
U.S. Dollar 89.35 +.03%
10-Yr. Long-Bond Yield 4.57% +.23%
VIX 15.77 -4.71%
Put/Call .85 +28.79%
NYSE Arms .77 -2.53%
After-hours Movers
ADRX +7.03% on strong 1Q earnings from royalty payments from its generic version of the Wellbutrin antidepressant.
THQI +10.88% after beating 1Q estimates, lowering 2Q guidance and raising 04 forecast.
Recommendations
Goldman Sachs reiterated Underperform on KZL.
After-hours News
U.S. stocks finished mostly higher Tuesday as strength in biotechnology and gaming shares offset weakness in the energy sector. After the close, the staff of the U.S. FTC said it may urge commissioners to try to block R.J. Reynolds Tobacco's $3B purchase of British American Tobacco's Brown & Williamson unit, Bloomberg reported. Chinese Premier Wen Jiabao said the earlier investment bubbles are pricked, the less damage to the economy, but the government won't slam the brakes on growth, the South China Morning Post reported. Crude oil rose to a 13-year high for a third straight day after an Energy Department report showed that U.S. inventories increased less than expected last week. Lockheed Martin won an order to develop and build a new common missile, a program the company estimates could be worth as much as $5.5B over 20 years, Bloomberg reported. President Bush asked Congress for a $25B reserve to cover further military operations in Iraq. Spending on Iraq now totals about 1% of annual U.S. GDP versus 12% during the Vietnam War, 15% during the Korean War and 130% during WWII, Bloomberg reported.
BOTTOM LINE: The Portfolio rose today as my biotech and healthcare longs rose and my technology and retail shorts fell. I did not trade in the afternoon, leaving the Portfolio with market neutral exposure. Continuing weakness in the tech sector and the relentless rise in crude oil prices are weighing on the market. Breadth/volume readings continue to disappoint and investor complacency is still relatively high. My guess is another spike-up in interest rates or $40+/bbl oil will be the catalyst for another down-leg in the current correction. I will maintain a relatively market neutral stance until I evaluate the bond market's reaction to Friday's employment report.
NASDAQ 1,957.26 +.35%
Leading Sectors
Biotech +1.52%
Gaming +1.52%
HMO’s +1.51%
Lagging Sectors
Networking -.69%
Papers -.97%
Oil Service -1.77%
Other
Crude Oil 39.57 unch.
Natural Gas 6.31 unch.
Gold 393.60 -.05%
Base Metals 105.20 -.53%
U.S. Dollar 89.35 +.03%
10-Yr. Long-Bond Yield 4.57% +.23%
VIX 15.77 -4.71%
Put/Call .85 +28.79%
NYSE Arms .77 -2.53%
After-hours Movers
ADRX +7.03% on strong 1Q earnings from royalty payments from its generic version of the Wellbutrin antidepressant.
THQI +10.88% after beating 1Q estimates, lowering 2Q guidance and raising 04 forecast.
Recommendations
Goldman Sachs reiterated Underperform on KZL.
After-hours News
U.S. stocks finished mostly higher Tuesday as strength in biotechnology and gaming shares offset weakness in the energy sector. After the close, the staff of the U.S. FTC said it may urge commissioners to try to block R.J. Reynolds Tobacco's $3B purchase of British American Tobacco's Brown & Williamson unit, Bloomberg reported. Chinese Premier Wen Jiabao said the earlier investment bubbles are pricked, the less damage to the economy, but the government won't slam the brakes on growth, the South China Morning Post reported. Crude oil rose to a 13-year high for a third straight day after an Energy Department report showed that U.S. inventories increased less than expected last week. Lockheed Martin won an order to develop and build a new common missile, a program the company estimates could be worth as much as $5.5B over 20 years, Bloomberg reported. President Bush asked Congress for a $25B reserve to cover further military operations in Iraq. Spending on Iraq now totals about 1% of annual U.S. GDP versus 12% during the Vietnam War, 15% during the Korean War and 130% during WWII, Bloomberg reported.
BOTTOM LINE: The Portfolio rose today as my biotech and healthcare longs rose and my technology and retail shorts fell. I did not trade in the afternoon, leaving the Portfolio with market neutral exposure. Continuing weakness in the tech sector and the relentless rise in crude oil prices are weighing on the market. Breadth/volume readings continue to disappoint and investor complacency is still relatively high. My guess is another spike-up in interest rates or $40+/bbl oil will be the catalyst for another down-leg in the current correction. I will maintain a relatively market neutral stance until I evaluate the bond market's reaction to Friday's employment report.
Mid-day Update
S&P 500 1,121.16 +.14%
NASDAQ 1,958.89 +.43%
Leading Sectors
Airlines +1.72%
Wireless +1.53%
HMO's +1.49%
Lagging Sectors
I-Banks -.34%
Papers -1.05%
Oil Service -2.94%
Other
Crude Oil 39.50 +1.21%
Natural Gas 6.24 -.46%
Gold 392.50 +.18%
Base Metals 105.20 +.18%
U.S. Dollar 89.30 -.57%
10-Yr. Long-Bond Yield 4.55% -.22%
VIX 16.16 -2.36%
Put/Call .94 +42.42%
NYSE Arms .74 -6.33%
Market Movers
WWCA +15.0% after substantially beating 1Q estimates.
LGND -17.2% after missing 1Q estimate and lowering 04 forecast.
CF +22.0% after acquisition by Royal Bank of Scotland for $10.5B.
IPXL +19.33% after substantially beating 1Q estimates.
GIVN + 9.93% on rebound from yesterday's decline after reporting 1Q results.
DIGE +8.2% after saying United Healthcare will reimburse doctors or patients for its DNAwithPap test to detect cervical cancer.
ZIXI -15.5% after missing 1Q estimates and lowering 2Q guidance.
OTEX -9.44% after beating 3Q estimate, widening 4Q guidance and reaffirming 04 forecast.
Oil Service stocks down across the board on Bank of America downgrade.
Economic Data
ISM Non-Manufacturing for April 68.4 versus expectations of 65.0 and 65.8 in March.
Recommendations
Goldman Sachs reiterated Outperform on BBY, TYC and DDR. Citi SmithBarney said to Buy Metal stocks on weakness, favorites are AA, FCX and NEM. Citi also says to Buy selected auto parts and equipment stocks on weakness, BWA, AXL and MGA. Citi reiterated Buy on TYC, target $35. Citi reiterated Buy on AMGN, target $90. Deutsche Bank raised FON to Buy. GLG raised to Buy at UBS, target $20.25. ICOS rated Underperform at Thomas Weisel. BK raised to Overweight at Morgan Stanley. KEY cut to Underweight at Morgan Stanley. BWS raised to Buy at Merrill, target $44. DELL raised to Buy at Bank of America, target $40. MWD raised to Overweight at Prudential, target $63. HNT cut to Underweight at Prudential. CA rated Buy at Bank of America, target $36.
Mid-day News
U.S. stocks are mostly higher mid-day on an all-time record high reading from the ISM Non-manufacturing index and stable interest rates. The average 2003 U.S. vehicle weighs 4,021 pounds, the heaviest since the mid-70's, the New York Times said, citing an Environmental Protection Agency report. An East Texas man was sentenced to 11 years in federal prison for possessing a sodium cyanide bomb capable of killing everyone inside a basketball arena, the LA Times reported. Royal Bank of Scotland CEO Fred Goodwin said he plans more U.S. takeovers as opportunities for growth in the UK diminish. Ford boosted incentives on three sport-utility vehicles and a minivan after sales for the models declined last month. The Institute for Supply Management's index of financial services, construction, retail and other non-manufacturing enterprises that make up the largest share of the economy climbed to 68.4 in April, an all-time record high. The employment component of the index reached its highest reading since the stock market bubble burst in 2000.
BOTTOM LINE: The Portfolio is up today as my healthcare longs are rising and my tech and retail shorts are falling. I added a new biotech long and a new tech short this morning, leaving the Portfolio with market neutral exposure. With investor complacency readings relatively high, a continuing rise in crude oil prices and poor volume/breadth readings, I will likely keep the Portfolio close to market neutral heading into Friday's important employment report.
NASDAQ 1,958.89 +.43%
Leading Sectors
Airlines +1.72%
Wireless +1.53%
HMO's +1.49%
Lagging Sectors
I-Banks -.34%
Papers -1.05%
Oil Service -2.94%
Other
Crude Oil 39.50 +1.21%
Natural Gas 6.24 -.46%
Gold 392.50 +.18%
Base Metals 105.20 +.18%
U.S. Dollar 89.30 -.57%
10-Yr. Long-Bond Yield 4.55% -.22%
VIX 16.16 -2.36%
Put/Call .94 +42.42%
NYSE Arms .74 -6.33%
Market Movers
WWCA +15.0% after substantially beating 1Q estimates.
LGND -17.2% after missing 1Q estimate and lowering 04 forecast.
CF +22.0% after acquisition by Royal Bank of Scotland for $10.5B.
IPXL +19.33% after substantially beating 1Q estimates.
GIVN + 9.93% on rebound from yesterday's decline after reporting 1Q results.
DIGE +8.2% after saying United Healthcare will reimburse doctors or patients for its DNAwithPap test to detect cervical cancer.
ZIXI -15.5% after missing 1Q estimates and lowering 2Q guidance.
OTEX -9.44% after beating 3Q estimate, widening 4Q guidance and reaffirming 04 forecast.
Oil Service stocks down across the board on Bank of America downgrade.
Economic Data
ISM Non-Manufacturing for April 68.4 versus expectations of 65.0 and 65.8 in March.
Recommendations
Goldman Sachs reiterated Outperform on BBY, TYC and DDR. Citi SmithBarney said to Buy Metal stocks on weakness, favorites are AA, FCX and NEM. Citi also says to Buy selected auto parts and equipment stocks on weakness, BWA, AXL and MGA. Citi reiterated Buy on TYC, target $35. Citi reiterated Buy on AMGN, target $90. Deutsche Bank raised FON to Buy. GLG raised to Buy at UBS, target $20.25. ICOS rated Underperform at Thomas Weisel. BK raised to Overweight at Morgan Stanley. KEY cut to Underweight at Morgan Stanley. BWS raised to Buy at Merrill, target $44. DELL raised to Buy at Bank of America, target $40. MWD raised to Overweight at Prudential, target $63. HNT cut to Underweight at Prudential. CA rated Buy at Bank of America, target $36.
Mid-day News
U.S. stocks are mostly higher mid-day on an all-time record high reading from the ISM Non-manufacturing index and stable interest rates. The average 2003 U.S. vehicle weighs 4,021 pounds, the heaviest since the mid-70's, the New York Times said, citing an Environmental Protection Agency report. An East Texas man was sentenced to 11 years in federal prison for possessing a sodium cyanide bomb capable of killing everyone inside a basketball arena, the LA Times reported. Royal Bank of Scotland CEO Fred Goodwin said he plans more U.S. takeovers as opportunities for growth in the UK diminish. Ford boosted incentives on three sport-utility vehicles and a minivan after sales for the models declined last month. The Institute for Supply Management's index of financial services, construction, retail and other non-manufacturing enterprises that make up the largest share of the economy climbed to 68.4 in April, an all-time record high. The employment component of the index reached its highest reading since the stock market bubble burst in 2000.
BOTTOM LINE: The Portfolio is up today as my healthcare longs are rising and my tech and retail shorts are falling. I added a new biotech long and a new tech short this morning, leaving the Portfolio with market neutral exposure. With investor complacency readings relatively high, a continuing rise in crude oil prices and poor volume/breadth readings, I will likely keep the Portfolio close to market neutral heading into Friday's important employment report.
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