S&P 500 1,098.70 -.78% for the week.
U.S. stocks fell modestly last week as broad-based weakness in commodity and interest rate-sensitive shares outweighed relative strength in technology stocks. Rising energy prices and fears that the Fed is falling behind the curve with respect to inflation dominated trading throughout the week. Commodity-related stocks took another beating on comments by Alan Greenspan that a slowing Chinese economy would further pressure commodity prices. As well, a Bank of America downgrade of the oil service sector sent energy-related stocks reeling even as the price of crude hits its highest level since the Gulf War. The selling in the later part of the week seemed to climax on Friday as 3,185 stocks fell and 261 advanced on the NYSE. This 12-to-1 negative ratio was the broadest since Oct. 27, 1997. On this day, the S&P 500 ended an 11% slide and proceeded to rally almost 37% over the next 9 months.
There were also a number of positive developments throughout the week. Tyco, the world's largest marker of security systems, said second-quarter profit rose more than 600%. The company also raised its third-quarter and 04 forecasts. Royal Bank of Scotland agreed to buy Charter One Financial for $10.5 billion, sending the shares 22% higher, and said it will continue to hunt for U.S. acquisition targets. The Semiconductor Industry Association said it will soon hike industry growth forecasts to 20% for 04 and DRAMeXchange.com said prices for memory chips are rising for the first time in over a month. This resulted in a 3.05% gain for the SOX on the week, in a significant show of relative strength. This is important as this group had fallen 21.4% from its recent highs and led the entire market lower. Finally, block trades on the NASDAQ rose 24.3% from the prior week, implying that large institutions or "smart money" is moving back into technology shares.
Bottom Line: I believe fears of inflation, slowing earnings growth and a hard-landing by the Chinese economy are exaggerated. Most commodity prices are currently falling and the U.S. economy in not nearly as dependent on low oil prices as it once was. Crude Oil accounts for less than 5% of inflation. Almost 70% of inflation is derived from rising Unit Labor Costs, which are currently subdued. Furthermore, the U.S. dollar appears to be breaking up through its downtrend line that has held since February 02, which should further pressure commodity prices. Earnings acceleration has always peaked during the first few quarters of a recovery from recessions. Earnings are currently accelerating at the fastest pace on record. It is inevitable that growth will soon decelerate from these unsustainable levels. However, I find no empirical evidence of any correlation between decelerating earnings growth from very high levels and a significant decline in stock prices. Finally, investors seem to think that China has all of a sudden imploded, which is currently not the case. Any company that sells to China or benefits from Chinese economic strength has been ravaged over the last several weeks. I would recommend investors with a long-term horizon that are looking for a bit of international exposure begin to accumulate a basket of these shares at current levels. In my opinion, China is still in the early stages of a multi-year surge in economic growth that will yield huge benefits to companies that operate in the region.
Sunday, May 09, 2004
Saturday, May 08, 2004
Economic Week in Review
ECRI Weekly Leading Index 136.00 +.59%
Construction Spending rose 1.5% in March versus expectations of a .5% gain and a .1% drop in February. Moreover, total U.S. construction spending is rising at a record annual pace of $944.1 billion, as work increases on highways and other public works as well as private homes and office buildings. "We've been seeing an improving economy for the last year and a half and I think we're going to see improved occupancy in both apartments and offices," said Sam Zell, chairman of Equity Residential and Equity Office Properties, the largest office and apartment landlord in the U.S. Finally, Wienerberger AG, the world's biggest brick-maker, said it is spending $50 million in the U.S. to enlarge capacity at plants in Rome, Georgia; Brickhaven, North Carolina; Louisville, Kentucky, Bloomberg reported.
The ISM Manufacturing Index for April held near a two-decade high coming in at 62.4 versus expectations of 62.7 and 62.5 in March. Production increased and more factories added workers than at any time since 1987. "The combination of lean inventories, strong demand and a weak dollar is clearly leading to an underlying pick-up in factory activity," said David Greenlaw, chief U.S. fixed income economist at Morgan Stanley. The ISM Prices Paid Index rose to 88.0 in April, the highest since 1979, versus expectations of 85.0 and a reading of 86.0 in March. Finally, the Backlog of Orders Index rose to an all-time high.
Factory Orders for March rose 4.3% versus expectations of a 2.4% rise and .3% in February. This was the largest year-over-year increase since the stock market bubble burst in 2000, as the strongest economic growth since 1984 prompted companies to buy more machines, electronics and petroleum. Manufacturers had a record-low 1.23 months worth of inventories at the current sales pace in March. "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.
Federal Reserve policy makers voted unanimously to keep the benchmark U.S. interest rate at a 45-year low of 1%. "At this juncture, with inflation low and resources use slack, the committee believes that policy accommodation can be removed at a pace that is likely to be measured," members of the rate-setting Open Market Committee said in a statement following their meeting in Washington, Bloomberg reported.
The U.S. budget deficit may narrow to $370 billion this year, 29% lower than White House estimates, as a vigorous economy boosts tax revenues, economists at Citigroup said in a weekly report. "This sharp upturn in tax receipts has sweeping positive implications for the Treasury's financial position," the report said. State tax receipts are also rising as the U.S. economy expands. The National Conference of State Legislatures said last week that 32 states predict they will have surpluses this year. States had posted a record $78.4 billion in deficits last year.
The ISM Non-manufacturing(Services) Index rose to an all-time record of 68.4 in April versus expectations of 65.0 and a reading of 65.8 in March. "The economy is getting even better as business spending and hiring are driving things," said Robert Mellman, an economist at J.P. Morgan. Services account for 85% of the $11.3 trillion U.S. economy. The survey's employment index rose to the highest level since 2000, as well. Economic conditions "are extremely strong, really everywhere," Jeff Immelt, CEO of General Electric said. "We're seeing volume up in the U.S. and Europe in every one of our businesses."
Non-farm Productivity for the 1st quarter rose 3.5%, meeting expectations, versus 2.5% in the 4th quarter. Unit Labor Costs for the 1st quarter rose .5% versus expectations of 0.0% and 0.0% in the 4th quarter. "It's really labor that is the most important input and stable labor costs suggest little inflation and more willingness on the Fed's part to move very slowly" in raising rates, said Tim Rogers, Chief Economist at Briefing.com.
The Unemployment Rate in April fell to 5.6% versus expectations of 5.7% and a 5.7% rate in March. Change in Non-farm Payrolls was a positive 288,000 in April versus a 170,000 estimate and 337,000 jobs created in March. Change in Manufacturing Payrolls in April was a positive 21,000 versus a 5,000 estimate and 9,000 jobs created in March. The revised March figures showed that manufactures increased hiring for the first time in 42 months. Total job gains in the last two months were the most since early 2000, Bloomberg reported. Since the job market turned around in September, the economy has added 1.1 million jobs. "After March, it looked like payrolls were finally getting into synch with everything else. Now they've really caught up with what everything else was telling us, and that is the economy is growing at a really strong rate," said Robert McGee, chief economist at U.S. Trust. The economy is now projected to grow 4.6% this year, the most since 1984, Bloomberg reported.
Bottom Line: The main economic data points released last week were almost universally above-expectations and continued to paint a very strong picture of the current state of the U.S. economy. However, as each report during the week seemed stronger than the previous, investors began to sell bonds and send interest rates higher. The 10-yr T-note is now yielding 4.77%, the highest since July 2002. The long-term downtrend line in interest rates, dating back to 1987, is around 5.7%. I highly doubt the downtrend will be broken at this point, but a move near this level is possible, barring any significant negative jolt to world economic growth. Retail sales came in a bit below expectations last week, but this may be explained by extraordinarily good weather and a rush by consumers to spend their time buying homes and lock in relatively low rates before any further increases. Almost every commodity is currently falling in price with the exception of energy. This is troubling considering this is a seasonally weak time of the year for energy demand. Crude oil is now at its highest level since the Gulf War in 1990. However, the U.S economy is much less dependent on low energy prices than in the past. The International Energy Agency, in a recent report, estimates high energy prices are shaving only about .3% off of current U.S. economic growth.
Home sales should remain relatively robust as job growth accelerates, offsetting higher interest rates. The ISM and Factory Orders reports both point to an accelerated rate of hiring and production in the coming months. I am not sure of the extent to which a falling budget deficit will lower interest rates, but it is a very positive development nonetheless. Unit labor costs, the largest component of inflation, rose for the first time in a year, but remain at relatively subdued levels. The two blow-out jobs reports I anticipated have occurred, thus the Fed could move interest rates higher at any time from their current 45-year low emergency levels. Barring an intra-meeting move, the June 29-30 meeting will likely result in the first Fed rate hike. The Fed will probably raise rates by 50 basis points at this time. Overall, last week's data were very positive as the "jobless recovery" myth perpetuated by the mainstream media is no longer debatable. Historically, mild inflation has been good for stocks as companies regain pricing power, profits soar and hiring accelerates. The main worry I have at this point is that the media's obsession with negativity is hurting investor psychology, thus potentially creating a self-fulfilling prophecy of slower economic growth.
Construction Spending rose 1.5% in March versus expectations of a .5% gain and a .1% drop in February. Moreover, total U.S. construction spending is rising at a record annual pace of $944.1 billion, as work increases on highways and other public works as well as private homes and office buildings. "We've been seeing an improving economy for the last year and a half and I think we're going to see improved occupancy in both apartments and offices," said Sam Zell, chairman of Equity Residential and Equity Office Properties, the largest office and apartment landlord in the U.S. Finally, Wienerberger AG, the world's biggest brick-maker, said it is spending $50 million in the U.S. to enlarge capacity at plants in Rome, Georgia; Brickhaven, North Carolina; Louisville, Kentucky, Bloomberg reported.
The ISM Manufacturing Index for April held near a two-decade high coming in at 62.4 versus expectations of 62.7 and 62.5 in March. Production increased and more factories added workers than at any time since 1987. "The combination of lean inventories, strong demand and a weak dollar is clearly leading to an underlying pick-up in factory activity," said David Greenlaw, chief U.S. fixed income economist at Morgan Stanley. The ISM Prices Paid Index rose to 88.0 in April, the highest since 1979, versus expectations of 85.0 and a reading of 86.0 in March. Finally, the Backlog of Orders Index rose to an all-time high.
Factory Orders for March rose 4.3% versus expectations of a 2.4% rise and .3% in February. This was the largest year-over-year increase since the stock market bubble burst in 2000, as the strongest economic growth since 1984 prompted companies to buy more machines, electronics and petroleum. Manufacturers had a record-low 1.23 months worth of inventories at the current sales pace in March. "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.
Federal Reserve policy makers voted unanimously to keep the benchmark U.S. interest rate at a 45-year low of 1%. "At this juncture, with inflation low and resources use slack, the committee believes that policy accommodation can be removed at a pace that is likely to be measured," members of the rate-setting Open Market Committee said in a statement following their meeting in Washington, Bloomberg reported.
The U.S. budget deficit may narrow to $370 billion this year, 29% lower than White House estimates, as a vigorous economy boosts tax revenues, economists at Citigroup said in a weekly report. "This sharp upturn in tax receipts has sweeping positive implications for the Treasury's financial position," the report said. State tax receipts are also rising as the U.S. economy expands. The National Conference of State Legislatures said last week that 32 states predict they will have surpluses this year. States had posted a record $78.4 billion in deficits last year.
The ISM Non-manufacturing(Services) Index rose to an all-time record of 68.4 in April versus expectations of 65.0 and a reading of 65.8 in March. "The economy is getting even better as business spending and hiring are driving things," said Robert Mellman, an economist at J.P. Morgan. Services account for 85% of the $11.3 trillion U.S. economy. The survey's employment index rose to the highest level since 2000, as well. Economic conditions "are extremely strong, really everywhere," Jeff Immelt, CEO of General Electric said. "We're seeing volume up in the U.S. and Europe in every one of our businesses."
Non-farm Productivity for the 1st quarter rose 3.5%, meeting expectations, versus 2.5% in the 4th quarter. Unit Labor Costs for the 1st quarter rose .5% versus expectations of 0.0% and 0.0% in the 4th quarter. "It's really labor that is the most important input and stable labor costs suggest little inflation and more willingness on the Fed's part to move very slowly" in raising rates, said Tim Rogers, Chief Economist at Briefing.com.
The Unemployment Rate in April fell to 5.6% versus expectations of 5.7% and a 5.7% rate in March. Change in Non-farm Payrolls was a positive 288,000 in April versus a 170,000 estimate and 337,000 jobs created in March. Change in Manufacturing Payrolls in April was a positive 21,000 versus a 5,000 estimate and 9,000 jobs created in March. The revised March figures showed that manufactures increased hiring for the first time in 42 months. Total job gains in the last two months were the most since early 2000, Bloomberg reported. Since the job market turned around in September, the economy has added 1.1 million jobs. "After March, it looked like payrolls were finally getting into synch with everything else. Now they've really caught up with what everything else was telling us, and that is the economy is growing at a really strong rate," said Robert McGee, chief economist at U.S. Trust. The economy is now projected to grow 4.6% this year, the most since 1984, Bloomberg reported.
Bottom Line: The main economic data points released last week were almost universally above-expectations and continued to paint a very strong picture of the current state of the U.S. economy. However, as each report during the week seemed stronger than the previous, investors began to sell bonds and send interest rates higher. The 10-yr T-note is now yielding 4.77%, the highest since July 2002. The long-term downtrend line in interest rates, dating back to 1987, is around 5.7%. I highly doubt the downtrend will be broken at this point, but a move near this level is possible, barring any significant negative jolt to world economic growth. Retail sales came in a bit below expectations last week, but this may be explained by extraordinarily good weather and a rush by consumers to spend their time buying homes and lock in relatively low rates before any further increases. Almost every commodity is currently falling in price with the exception of energy. This is troubling considering this is a seasonally weak time of the year for energy demand. Crude oil is now at its highest level since the Gulf War in 1990. However, the U.S economy is much less dependent on low energy prices than in the past. The International Energy Agency, in a recent report, estimates high energy prices are shaving only about .3% off of current U.S. economic growth.
Home sales should remain relatively robust as job growth accelerates, offsetting higher interest rates. The ISM and Factory Orders reports both point to an accelerated rate of hiring and production in the coming months. I am not sure of the extent to which a falling budget deficit will lower interest rates, but it is a very positive development nonetheless. Unit labor costs, the largest component of inflation, rose for the first time in a year, but remain at relatively subdued levels. The two blow-out jobs reports I anticipated have occurred, thus the Fed could move interest rates higher at any time from their current 45-year low emergency levels. Barring an intra-meeting move, the June 29-30 meeting will likely result in the first Fed rate hike. The Fed will probably raise rates by 50 basis points at this time. Overall, last week's data were very positive as the "jobless recovery" myth perpetuated by the mainstream media is no longer debatable. Historically, mild inflation has been good for stocks as companies regain pricing power, profits soar and hiring accelerates. The main worry I have at this point is that the media's obsession with negativity is hurting investor psychology, thus potentially creating a self-fulfilling prophecy of slower economic growth.
Weekly Scoreboard
Indices
S&P 500 1,098.70 -.78%
Dow 10,117.34 -1.06%
NASDAQ 1,917.96 -.11%
Russell 2000 548.56 -2.01%
Wilshire 5000 10,793.66 -3.20%
Volatility(VIX) 18.13 +5.47%
AAII Bullish % 38.98 -22.04%
US Dollar 91.13 +.69%
CRB 273.53 +.36%
Futures Spot Prices
Gold 379.10 -2.29%
Crude Oil 39.93 +7.05%
Natural Gas 6.29 +7.32%
Base Metals 103.27 -.88%
10-year US Treasury Yield 4.77% +5.76%
Average 30-year Mortgage Rate 6.12% +1.83%
Leading Sectors
Semis +3.05%
Drugs +1.67%
Software +1.54%
Lagging Sectors
Oil Service -4.94%
Airlines -5.26%
Homebuilders -6.36%
*% Gain or loss for the week
S&P 500 1,098.70 -.78%
Dow 10,117.34 -1.06%
NASDAQ 1,917.96 -.11%
Russell 2000 548.56 -2.01%
Wilshire 5000 10,793.66 -3.20%
Volatility(VIX) 18.13 +5.47%
AAII Bullish % 38.98 -22.04%
US Dollar 91.13 +.69%
CRB 273.53 +.36%
Futures Spot Prices
Gold 379.10 -2.29%
Crude Oil 39.93 +7.05%
Natural Gas 6.29 +7.32%
Base Metals 103.27 -.88%
10-year US Treasury Yield 4.77% +5.76%
Average 30-year Mortgage Rate 6.12% +1.83%
Leading Sectors
Semis +3.05%
Drugs +1.67%
Software +1.54%
Lagging Sectors
Oil Service -4.94%
Airlines -5.26%
Homebuilders -6.36%
*% Gain or loss for the week
Friday, May 07, 2004
Mid-day Update
***There will not be a mid-day update today due to a scheduling conflict. However, the Weekly Scoreboard, Economic Week in Review, Market Week in Review and Weekly Outlook will be released tonight and this weekend at their regularly scheduled times.
Thursday, May 06, 2004
Friday Watch
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.
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 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.
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