Tuesday, May 11, 2004
Tuesday Close
***There will not be a Tuesday close today as I will be traveling, however the Wednesday Watch will be posted at its regular time.
Mid-day Update
S&P 500 1,094.99 +.71%
NASDAQ 1,928.90 +1.73%
Leading Sectors
Airlines +3.08%
Nanotechnology +2.86%
Internet +2.79%
Lagging Sectors
Computer Services -.04%
Drugs -.38%
Tobacco -.68%
Other
Crude Oil 39.30 +.95%
Natural Gas 6.26 +1.31%
Gold 375.40 -.87%
Base Metals 101.22 +1.64%
U.S. Dollar 91.93 +.40%
10-Yr. Long-Bond Yield 4.76% -.65%
VIX 18.16 -8.14%
Put/Call 1.32 +5.60%
NYSE Arms 1.04 +55.22%
Market Movers
LTON +39.37% after substantially beating 1Q estimates and raising 2Q guidance.
SBL +15.9% after beating 1Q estimates and multiple upgrades.
GIVN +13.18% after saying a unit of JNJ will market a version for the esophagus of its "camera-in-a-capsule" used to diagnose ailments of the small intestine.
NFLX +7.7% after CSFB upgrade to Outperform, target $43.
ANPI -4.77% after disappointing 1Q estimates.
EDS -7.93% after saying it may lower dividend and issue stock to keep credit rating.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on AVP, BAX and PG. GS upgraded IP to Outperform. GS reiterated Underperform on LSI. DIS raised to Buy at UBS, target $30. WM raised to Buy at UBS, target $45. DJ raised to Buy at Citi SmithBarney, target $64. NVTL rated Outperform at Thomas Weisel. MER raised to Buy at Bank of America, target $65. AGE rated Buy at Bank of America, target $46. SCH rated Buy at Bank of America, target $13. ATK raised to Outperform at CSFB, target $68. PSUN cut to Underweight at Prudential, target $19. NSM raised to Overweight at Lehman, target $49.
Mid-day News
U.S. stocks are rising mid-day on strength in technology shares and falling interest rates. The U.S. economic recovery is strong enough to withstand the increase in energy prices Dallas Fed President McTeer wrote in a Wall Street Journal commentary. Support is growing among health insurers, state officials and pharmacy chains for the legalization of prescription-drug imports from pharmacies in Canada and other countries, the New York Times said. The OECD said it now expects global growth to reach 3.4% this year, up from a prior forecast of 3.0%, Bloomberg reported. The U.S. economy will expand 4.7% this year, which would be the fastest pace in two decades, up from an earlier prediction of 4.2% growth, the OECD said. Procter & Gamble bought the remaining 20% stake in its China venture for $1.8B, allowing the company to speed its expansion into the fast-growing Chinese market. Intel and Texas Instruments have increased inventories to their highest levels since 2001 in a bet that spending on electronics will rise, Bloomberg reported.
BOTTOM LINE: The Portfolio is up today as my new tech, Chinese and basic material longs are rising substantially. I added a few new internet, biotech and networking longs this morning, bringing the Portfolio's market exposure to 100% net long. I expect stocks to rise into the close as shorts take profits and investors bargain-hunt ahead of Cisco's earnings report. The continuing high Put/Call reading also bodes well for afternoon strength.
NASDAQ 1,928.90 +1.73%
Leading Sectors
Airlines +3.08%
Nanotechnology +2.86%
Internet +2.79%
Lagging Sectors
Computer Services -.04%
Drugs -.38%
Tobacco -.68%
Other
Crude Oil 39.30 +.95%
Natural Gas 6.26 +1.31%
Gold 375.40 -.87%
Base Metals 101.22 +1.64%
U.S. Dollar 91.93 +.40%
10-Yr. Long-Bond Yield 4.76% -.65%
VIX 18.16 -8.14%
Put/Call 1.32 +5.60%
NYSE Arms 1.04 +55.22%
Market Movers
LTON +39.37% after substantially beating 1Q estimates and raising 2Q guidance.
SBL +15.9% after beating 1Q estimates and multiple upgrades.
GIVN +13.18% after saying a unit of JNJ will market a version for the esophagus of its "camera-in-a-capsule" used to diagnose ailments of the small intestine.
NFLX +7.7% after CSFB upgrade to Outperform, target $43.
ANPI -4.77% after disappointing 1Q estimates.
EDS -7.93% after saying it may lower dividend and issue stock to keep credit rating.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on AVP, BAX and PG. GS upgraded IP to Outperform. GS reiterated Underperform on LSI. DIS raised to Buy at UBS, target $30. WM raised to Buy at UBS, target $45. DJ raised to Buy at Citi SmithBarney, target $64. NVTL rated Outperform at Thomas Weisel. MER raised to Buy at Bank of America, target $65. AGE rated Buy at Bank of America, target $46. SCH rated Buy at Bank of America, target $13. ATK raised to Outperform at CSFB, target $68. PSUN cut to Underweight at Prudential, target $19. NSM raised to Overweight at Lehman, target $49.
Mid-day News
U.S. stocks are rising mid-day on strength in technology shares and falling interest rates. The U.S. economic recovery is strong enough to withstand the increase in energy prices Dallas Fed President McTeer wrote in a Wall Street Journal commentary. Support is growing among health insurers, state officials and pharmacy chains for the legalization of prescription-drug imports from pharmacies in Canada and other countries, the New York Times said. The OECD said it now expects global growth to reach 3.4% this year, up from a prior forecast of 3.0%, Bloomberg reported. The U.S. economy will expand 4.7% this year, which would be the fastest pace in two decades, up from an earlier prediction of 4.2% growth, the OECD said. Procter & Gamble bought the remaining 20% stake in its China venture for $1.8B, allowing the company to speed its expansion into the fast-growing Chinese market. Intel and Texas Instruments have increased inventories to their highest levels since 2001 in a bet that spending on electronics will rise, Bloomberg reported.
BOTTOM LINE: The Portfolio is up today as my new tech, Chinese and basic material longs are rising substantially. I added a few new internet, biotech and networking longs this morning, bringing the Portfolio's market exposure to 100% net long. I expect stocks to rise into the close as shorts take profits and investors bargain-hunt ahead of Cisco's earnings report. The continuing high Put/Call reading also bodes well for afternoon strength.
Tuesday Watch
Earnings of Note
Company/Estimate
ANF/.30
CYD/.40
CSCO/.18
MAY/.15
OSIP/-1.03
SCMR/-.04
Splits
None of note.
Economic Data
Trade Balance for March estimated at -$43.0B versus -$42.1B in February.
Import Price Index for April estimated +.4% versus +.9% in March.
Recommendations
Goldman Sachs reiterated Outperform on MO, EXC and YHOO. GS reiterated Underperform on EDS and YBTVA.
Late-Night News
Asian indices are mixed as strength in Japan is being offset by weakness in Hong Kong. Tribesman in Pakistan's border region with Afghanistan plan to form a force of 1,800 militiamen to help hunt for suspected al-Qaeda leaders hiding in the area, the BBC reported. Chinese steel prices will continue to decline in the near term as the government's polices cool the economy and raw materials prices fall, the China Securities Journal reported. Prices of construction steel, including threaded steel rods, have fallen more than 17% from the beginning of March to $415/ton. The Senate Banking Committee will ask the SEC to investigate whether Citigroup, Merrill Lynch and other banks stuffed clients shares into mutual funds during the three-year stock market decline, Bloomberg reported.
Late-Night Trading
Asian Indices -.25% to +.50%.
S&P 500 indicated +.13%.
NASDAQ indicated +.18%.
BOTTOM LINE: The Portfolio is 50% net long heading into trading tomorrow. I will wait for signs that a significant rally has begun before adding additional market exposure. I expect this to occur at any time as the major U.S. indices are very oversold short-term. Bears will likely move to protect their recent gains heading into Cisco's earnings report after the close tomorrow.
Company/Estimate
ANF/.30
CYD/.40
CSCO/.18
MAY/.15
OSIP/-1.03
SCMR/-.04
Splits
None of note.
Economic Data
Trade Balance for March estimated at -$43.0B versus -$42.1B in February.
Import Price Index for April estimated +.4% versus +.9% in March.
Recommendations
Goldman Sachs reiterated Outperform on MO, EXC and YHOO. GS reiterated Underperform on EDS and YBTVA.
Late-Night News
Asian indices are mixed as strength in Japan is being offset by weakness in Hong Kong. Tribesman in Pakistan's border region with Afghanistan plan to form a force of 1,800 militiamen to help hunt for suspected al-Qaeda leaders hiding in the area, the BBC reported. Chinese steel prices will continue to decline in the near term as the government's polices cool the economy and raw materials prices fall, the China Securities Journal reported. Prices of construction steel, including threaded steel rods, have fallen more than 17% from the beginning of March to $415/ton. The Senate Banking Committee will ask the SEC to investigate whether Citigroup, Merrill Lynch and other banks stuffed clients shares into mutual funds during the three-year stock market decline, Bloomberg reported.
Late-Night Trading
Asian Indices -.25% to +.50%.
S&P 500 indicated +.13%.
NASDAQ indicated +.18%.
BOTTOM LINE: The Portfolio is 50% net long heading into trading tomorrow. I will wait for signs that a significant rally has begun before adding additional market exposure. I expect this to occur at any time as the major U.S. indices are very oversold short-term. Bears will likely move to protect their recent gains heading into Cisco's earnings report after the close tomorrow.
Monday, May 10, 2004
Monday Close
S&P 500 1,087.12 -1.05%
NASDAQ 1,896.07 -1.14%
Leading Sectors
Semiconductors +.41%
I-Banks -.50%
Papers -.51%
Lagging Sectors
Airlines -3.01%
Oil Service -3.05%
Nanotechnology -6.14%
Other
Crude Oil 38.95 +.05%
Natural Gas 6.18 -.06%
Gold 378.00 -.18%
Base Metals 99.59 -3.56%
U.S. Dollar 91.75 +.21%
10-Yr. Long-Bond Yield 4.79% +.31%
VIX 19.77 +9.05%
Put/Call 1.25 +25.00%
NYSE Arms .67 +3.08%
After-hours Movers
LTON +37.5% after substantially beating 1Q estimates and raising 2Q guidance.
PSUN +3.32% after beating 1Q estimates and raising 04 forecast.
MCIA +3.42% after announcing another 7,500 job cuts.
Recommendations
Goldman Sachs reiterated Underperform on PSS and RKY.
After-hours News
U.S. stocks finished lower Monday, sending the Dow below 10,000 for the first time this year, on continued fears of rising interest rates and slowing Chinese economic growth. After the close, Merrill Lynch said it gained approval to invest in China's stock markets, the first foreign bank to be licensed this year, the Financial Times reported. U.S. auto safety regulators Wednesday will release proposed rules that may reduce by as much as 11% the 9,000 deaths annually from side-impact crashes, Bloomberg reported. Electronic Data Systems said it may cut its dividend or issue stock to raise more than $1B to avoid a cut in its credit rating to below investment grade, Bloomberg reported. Chiquita Brands said the U.S. is investigating payments the company's Colombian subsidiary made to groups identified as foreign terrorists, Bloomberg reported. IBM, McDonald's, GE and other large U.S. employers said they may use their buying power to extend health insurance to workers who lack coverage, Bloomberg reported.
BOTTOM LINE: The Portfolio fell slightly today as I increased market exposure into the afternoon weakness by adding several new long positions. The Portfolio is now 50% net long. Semiconductors significantly outperformed again today in another sign that tech is stabilizing. I believe that the major U.S. indices are very close to at least a short-term bottom and possibly an intermediate-term one. I will look to increase market exposure into any extreme weakness tomorrow in anticipation of this expected rally. One of the new longs I added into afternoon weakness was SWIR. I am keeping a $21 stop-loss on this position.
NASDAQ 1,896.07 -1.14%
Leading Sectors
Semiconductors +.41%
I-Banks -.50%
Papers -.51%
Lagging Sectors
Airlines -3.01%
Oil Service -3.05%
Nanotechnology -6.14%
Other
Crude Oil 38.95 +.05%
Natural Gas 6.18 -.06%
Gold 378.00 -.18%
Base Metals 99.59 -3.56%
U.S. Dollar 91.75 +.21%
10-Yr. Long-Bond Yield 4.79% +.31%
VIX 19.77 +9.05%
Put/Call 1.25 +25.00%
NYSE Arms .67 +3.08%
After-hours Movers
LTON +37.5% after substantially beating 1Q estimates and raising 2Q guidance.
PSUN +3.32% after beating 1Q estimates and raising 04 forecast.
MCIA +3.42% after announcing another 7,500 job cuts.
Recommendations
Goldman Sachs reiterated Underperform on PSS and RKY.
After-hours News
U.S. stocks finished lower Monday, sending the Dow below 10,000 for the first time this year, on continued fears of rising interest rates and slowing Chinese economic growth. After the close, Merrill Lynch said it gained approval to invest in China's stock markets, the first foreign bank to be licensed this year, the Financial Times reported. U.S. auto safety regulators Wednesday will release proposed rules that may reduce by as much as 11% the 9,000 deaths annually from side-impact crashes, Bloomberg reported. Electronic Data Systems said it may cut its dividend or issue stock to raise more than $1B to avoid a cut in its credit rating to below investment grade, Bloomberg reported. Chiquita Brands said the U.S. is investigating payments the company's Colombian subsidiary made to groups identified as foreign terrorists, Bloomberg reported. IBM, McDonald's, GE and other large U.S. employers said they may use their buying power to extend health insurance to workers who lack coverage, Bloomberg reported.
BOTTOM LINE: The Portfolio fell slightly today as I increased market exposure into the afternoon weakness by adding several new long positions. The Portfolio is now 50% net long. Semiconductors significantly outperformed again today in another sign that tech is stabilizing. I believe that the major U.S. indices are very close to at least a short-term bottom and possibly an intermediate-term one. I will look to increase market exposure into any extreme weakness tomorrow in anticipation of this expected rally. One of the new longs I added into afternoon weakness was SWIR. I am keeping a $21 stop-loss on this position.
Mid-day Update
S&P 500 1,083.68 -1.37%
NASDAQ 1,889.18 -1.50%
Leading Sectors
Semis -.02%
Retail -.76%
Tobacco -.82%
Lagging Sectors
Gaming -2.70%
Iron/Steel -5.14%
Nanotechnology -5.68%
Other
Crude Oil 39.15 -1.95%
Natural Gas 6.23 -1.02%
Gold 376.30 -.71%
Base Metals 100.45 -2.73%
U.S. Dollar 91.80 +.74%
10-Yr. Long-Bond Yield 4.78% +.27%
VIX 19.99 +10.26%
Put/Call 1.33 +33.0%
NYSE Arms .80 +23.08%
Market Movers
ADSK -4.7% after announcing acquisition of Unreal Pictures and Citi SmithBarney downgrade to Hold.
BRK/A -3.0% after disappointing 1Q earnings.
C -3.3% after saying it will set aside $4.95B in 2Q to cover legal costs.
NAV -6.0% after JP Morgan downgrade to Neutral.
OSTK -13.0% after announcing 1.73M secondary offering.
STFC -14.0% after Gregory Shepard dropped his bid to buy 8M shares and instead will sell 1M to Carl Icahn for $13.
STI -6.9% after announcing the acquisition of NCF for $6.98B.
Chinese ADRs down across the board on continued worries over economic growth.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on SPG, FDC, CSCO, KO, PEP, STZ and CLI. QSFT raised to Buy at Citi SmithBarney, $16 target. CEY raised to Buy at Citi, target $44. POWI cut to Sell at Bank of America, target $22. STI cut to Underweight at Prudential. LEA raised to Overweight at Prudential, target $70.
Mid-day News
U.S. stocks are falling mid-day on fears over rising U.S. interest rates and slowing Chinese economic growth. Kuwait is backing Saudi Arabia's call for more OPEC production, Dow Jones reported. Some cable executives have pledged not to carry former Vice President Al Gore's new 24-hour network, as they were angered by his attempts at price controls, the LA Times reported. U.K. Defense Secretary Hoon said there are strong signs that Iraqi abuse photographs the Daily Mirror published may be fake, Bloomberg reported. Delta Air said it may be forced to seek Chapter 11 bankruptcy protection unless the company is able to reduce costs, stem losses and raise capital, Bloomberg reported.
BOTTOM LINE: The Portfolio is up slightly today as my retail shorts are down more than my healthcare longs. U.S. stocks appear to have entered the "shake-out" phase, which should result in a more meaningful intermediate-term bottom. I am currently in the process of rotating out of a few of my more defensive longs and into some of the leading basic material, industrial and tech companies. I will likely increase market exposure into any further extreme weakness this afternoon or tomorrow.
NASDAQ 1,889.18 -1.50%
Leading Sectors
Semis -.02%
Retail -.76%
Tobacco -.82%
Lagging Sectors
Gaming -2.70%
Iron/Steel -5.14%
Nanotechnology -5.68%
Other
Crude Oil 39.15 -1.95%
Natural Gas 6.23 -1.02%
Gold 376.30 -.71%
Base Metals 100.45 -2.73%
U.S. Dollar 91.80 +.74%
10-Yr. Long-Bond Yield 4.78% +.27%
VIX 19.99 +10.26%
Put/Call 1.33 +33.0%
NYSE Arms .80 +23.08%
Market Movers
ADSK -4.7% after announcing acquisition of Unreal Pictures and Citi SmithBarney downgrade to Hold.
BRK/A -3.0% after disappointing 1Q earnings.
C -3.3% after saying it will set aside $4.95B in 2Q to cover legal costs.
NAV -6.0% after JP Morgan downgrade to Neutral.
OSTK -13.0% after announcing 1.73M secondary offering.
STFC -14.0% after Gregory Shepard dropped his bid to buy 8M shares and instead will sell 1M to Carl Icahn for $13.
STI -6.9% after announcing the acquisition of NCF for $6.98B.
Chinese ADRs down across the board on continued worries over economic growth.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on SPG, FDC, CSCO, KO, PEP, STZ and CLI. QSFT raised to Buy at Citi SmithBarney, $16 target. CEY raised to Buy at Citi, target $44. POWI cut to Sell at Bank of America, target $22. STI cut to Underweight at Prudential. LEA raised to Overweight at Prudential, target $70.
Mid-day News
U.S. stocks are falling mid-day on fears over rising U.S. interest rates and slowing Chinese economic growth. Kuwait is backing Saudi Arabia's call for more OPEC production, Dow Jones reported. Some cable executives have pledged not to carry former Vice President Al Gore's new 24-hour network, as they were angered by his attempts at price controls, the LA Times reported. U.K. Defense Secretary Hoon said there are strong signs that Iraqi abuse photographs the Daily Mirror published may be fake, Bloomberg reported. Delta Air said it may be forced to seek Chapter 11 bankruptcy protection unless the company is able to reduce costs, stem losses and raise capital, Bloomberg reported.
BOTTOM LINE: The Portfolio is up slightly today as my retail shorts are down more than my healthcare longs. U.S. stocks appear to have entered the "shake-out" phase, which should result in a more meaningful intermediate-term bottom. I am currently in the process of rotating out of a few of my more defensive longs and into some of the leading basic material, industrial and tech companies. I will likely increase market exposure into any further extreme weakness this afternoon or tomorrow.
Monday Watch
Earnings of Note
Company/Estimate
AH/.38
CVC/-.37
CHTR/-.32
FOSL/.20
PSUN/.16
SBL/.08
Splits
None of Note.
Economic Data
None of Note.
Weekend Recommendations
Goldman Sachs reiterated Outperform on EBAY, PXD, BAC, GDT, BSX and DTV. Barron's has positive columns on MCIA and WMB.
Weekend News
Oil & Gas Journal has an interesting article, saying that technology will increase oil reserves 3x-4x current estimates. Americans have conflicting emotions about the photographs of abuse at the Abu Ghraib prison in Iraq, with many disgusted at the images yet protective of U.S. troops, the NY Times reported. President Bush plans to intensify a worldwide effort to gain support for Israeli Prime Minister Sharon's plan to withdraw from the Gaza Strip and retain some West Bank settlements, the NY Times reported. U.S. companies that sell products overseas say opposition to the war in Iraq and any anti-Americanism hasn't led to a loss in sales, the NY Times reported. BMW, the world's second-largest maker of luxury cars, may expand its Spartanburg, South Carolina, plant to build a third model there, the head of production said. A blast in the Russian republic of Chechnya killed President Kadyrov, Russian President Putin said. U.S. state governments are reporting the strongest tax revenue and the most positive outlook for budgets since the stock market began to crash in early 2000, the Washington Post reported. Iran won't oppose any move by OPEC to raise production when the group meets in Beirut next month, Reuters said. IBM said it has developed client middleware that will help companies avoid using Microsoft's operating system, the Financial Times said. SunTrust Banks agreed to buy National Commerce Financial for $6.98 billion in cash and stock, Bloomberg reported. Asian stocks are falling tonight by the most in 2 ½ years on concerns over rising interest rates in the U.S. and slowing Chinese economic growth.
Late-Night Trading
Asian indices are sharply lower, -6.00% to -1.00% on average.
S&P 500 indicated -.48%.
NASDAQ indicated -1.0%.
BOTTOM LINE: The Portfolio is 25% net short heading into the week. I expect U.S. stocks to put in a short-term bottom on Monday or Tuesday as strong economic reports, stabilizing interest rates and good corporate earnings lead investors to bargain hunt. It is possible, looking at the carnage in Asian indices tonight, that U.S. stocks may be in the process of forming an intermediate-term bottom rather than short-term. If this is the case, I would expect to see less investor complacency and an extreme surge in volume on a broadly negative day. I will likely begin to add selective long positions into any extreme weakness tomorrow in anticipation of a short-term rally.
Company/Estimate
AH/.38
CVC/-.37
CHTR/-.32
FOSL/.20
PSUN/.16
SBL/.08
Splits
None of Note.
Economic Data
None of Note.
Weekend Recommendations
Goldman Sachs reiterated Outperform on EBAY, PXD, BAC, GDT, BSX and DTV. Barron's has positive columns on MCIA and WMB.
Weekend News
Oil & Gas Journal has an interesting article, saying that technology will increase oil reserves 3x-4x current estimates. Americans have conflicting emotions about the photographs of abuse at the Abu Ghraib prison in Iraq, with many disgusted at the images yet protective of U.S. troops, the NY Times reported. President Bush plans to intensify a worldwide effort to gain support for Israeli Prime Minister Sharon's plan to withdraw from the Gaza Strip and retain some West Bank settlements, the NY Times reported. U.S. companies that sell products overseas say opposition to the war in Iraq and any anti-Americanism hasn't led to a loss in sales, the NY Times reported. BMW, the world's second-largest maker of luxury cars, may expand its Spartanburg, South Carolina, plant to build a third model there, the head of production said. A blast in the Russian republic of Chechnya killed President Kadyrov, Russian President Putin said. U.S. state governments are reporting the strongest tax revenue and the most positive outlook for budgets since the stock market began to crash in early 2000, the Washington Post reported. Iran won't oppose any move by OPEC to raise production when the group meets in Beirut next month, Reuters said. IBM said it has developed client middleware that will help companies avoid using Microsoft's operating system, the Financial Times said. SunTrust Banks agreed to buy National Commerce Financial for $6.98 billion in cash and stock, Bloomberg reported. Asian stocks are falling tonight by the most in 2 ½ years on concerns over rising interest rates in the U.S. and slowing Chinese economic growth.
Late-Night Trading
Asian indices are sharply lower, -6.00% to -1.00% on average.
S&P 500 indicated -.48%.
NASDAQ indicated -1.0%.
BOTTOM LINE: The Portfolio is 25% net short heading into the week. I expect U.S. stocks to put in a short-term bottom on Monday or Tuesday as strong economic reports, stabilizing interest rates and good corporate earnings lead investors to bargain hunt. It is possible, looking at the carnage in Asian indices tonight, that U.S. stocks may be in the process of forming an intermediate-term bottom rather than short-term. If this is the case, I would expect to see less investor complacency and an extreme surge in volume on a broadly negative day. I will likely begin to add selective long positions into any extreme weakness tomorrow in anticipation of a short-term rally.
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