S&P 500 1,095.34 +.16%
NASDAQ 1,922.98 +.57%
Leading Sectors
Oil Service +4.38%
Homebuilders +3.08%
Disk Drives +2.27%
Lagging Sectors
Drugs -.78%
Telecom -.90%
Tobacco -3.60%
Other
Crude Oil 41.68 -.10%
Natural Gas 6.69 -.07%
Gold 385.60 -.03%
Base Metals 106.28 +1.23%
U.S. Dollar 90.50 +.01%
10-Yr. T-note Yield 4.73 -.46%
VIX 18.08 -2.22%
Put/Call .76 -37.70%
NYSE Arms 1.18 +22.92%
After-hours Movers
NOVL -7.72% on profit-taking after meeting 2Q estimates.
CHTR +5.2% after S&P revised outlook to positive.
Recommendations
Doug Kass, hedge fund manager and writer for TheStreet.com, says the market looks headed for a pretty good year.
After-hours News
U.S. stocks finished mostly higher today led by homebuilders and energy-related stocks as oil rose and interest rates fell. After the close, Virgin USA said it expects to choose between San Francisco and New York when selecting a U.S. location to house the national headquarters for the company's low-cost domestic carrier, CNN reported. Medtronic, the world's largest maker of devices that regulate heartbeats, said 4th quarter revenue rose 24%, beating expectations. Crude oil and gasoline futures in New York surged today on concern Saudi Arabia's promised production rise and any increase in OPEC quotas at a meeting next week won't satisfy expanding demand, Bloomberg reported. New York City had a 5.18% drop in crime in 2003, making it the safest of the nation's 10 largest cities, according to FBI statistics.
BOTTOM LINE: The Portfolio had a very good day today as my internet and basic materials longs rose substantially. I took profits in a couple of airline longs and added a couple of internet longs, leaving the Portfolio with 125% net long market exposure. I added AMZN in the afternoon and will use a $40.50 stop-loss on the position. The advance/decline line continues to improve and small-caps are outperforming again. The fact that most stocks rose today with oil rising substantially is a very good sign for the Bulls. As well, the stabilization of interest rates is a big positive.
Monday, May 24, 2004
Mid-day Update
There will not be a mid-day update today as I have a scheduling conflict. However, I will publish the Monday Close at its regular time. This is an interesting article titled "The Comprehensive Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry" from GlobalInsight. There is a conclusion on page 10 if you are short on time.
Monday Watch
Earnings of Note
Company/Estimate
CHP/.08
CPB/.31
DY/.23
MDT/.46
NOVL/.03
Splits
SONC 3-for-2
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on GE, AA and mixed on BBBY, TIF, VRTSE and HOV. Bulls and Bears had guests that were positive on GRMN, KKD, ADP and mixed on NEM, SLR, PNRA, NSM, MSO, TWX, INTC and DNA. Cashin' In had guests that were positive on LDG and mixed on ZNT, TOL and NOVL. Louis Rukeyser's Wall Street had guests that were positive on FCX, GPC, FLR, HAR, RL, BIIB, JPM, ABT, RDA, CCH, SNN and CAT. Wall St. Week w/Fortune had guests that were positive on C, MER, ATVI, ERTS, ZIXI and negative on TTWO, LF, NLS and SFP. Barron's had positive columns on BZH, CMCSA, ATK, ABMD and a negative column on SYMC. Goldman Sachs reiterated Outperform on ACN, EBAY. Business Week has a positive article on JNPR.
Weekend News
New York City has spent about $100 million to reinforce security at its reservoirs elsewhere in New York state to prevent terrorists from poisoning drinking water, the New York Post reported. Ford Motor Co.'s Escape, a sport-utility vehicle that gets about 23 miles to the gallon, and similar rivals are being snapped up as gas prices rise, the New York Times reported. International inspectors have found evidence that North Korea sold Libya two tons of weapons-grade uranium in 2001, the NY Times said. HSBC may bid for New York Community Bancorp, the Independent newspaper reported. Saudi Arabia is ready to increase oil production by more than 15% if needed to help lower prices, Oil Minister Ali al-Naimi said. Amec has agreed to help Korea National Oil Co. develop oil projects in Iraq, the Observer reported. U.S. military commanders said Iraqi militants loyal to al-Sadr seem to have abandoned their effort to control Karbala, the New York Times reported. Lloyds TSB Group Plc, the UK's no.5 bank, is in talks with IBM over a $1.8 billion technology contract, the Mail on Sunday said. Spending on Internet advertising reached $7.3 billion in 2003, a 21% increase, the San Francisco Chronicle reported. Halliburton's CEO said his company has never overcharged the U.S. Army for work in Iraq, the NY Times reported. Pakistan's President and India's new Prime Minister discussed peace moves between the countries and pledged to continue the process, Agence France-Presse reported. Starwood Hotels & Resorts Worldwide Chairman Sternlicht said he is "seeing group bookings making a significant comeback" and that the U.S. economy is "definitely getting legs under it," Bloomberg reported. Hewlett-Packard will offer its first mobile phone that combines the functions of a hand-held computer during the second half of this year, the Commercial Times reported. Vodafone may raise its dividend 20% this week, Bloomberg reported. Wells Fargo may buy Strong Capital Management, which settle lawsuits last week over allegations of engaging in improper mutual fund trading, Bloomberg reported.
Late-Night Trading
Asian indices are mostly higher, -.25% to +2.0% on average.
S&P 500 indicated +.38%.
NASDAQ indicated +.39%.
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on strength in Asia and falling oil prices. I have had some huge winners in the last couple of weeks and may rotate out of a few of these tomorrow. The Portfolio is 125% net long.
Company/Estimate
CHP/.08
CPB/.31
DY/.23
MDT/.46
NOVL/.03
Splits
SONC 3-for-2
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on GE, AA and mixed on BBBY, TIF, VRTSE and HOV. Bulls and Bears had guests that were positive on GRMN, KKD, ADP and mixed on NEM, SLR, PNRA, NSM, MSO, TWX, INTC and DNA. Cashin' In had guests that were positive on LDG and mixed on ZNT, TOL and NOVL. Louis Rukeyser's Wall Street had guests that were positive on FCX, GPC, FLR, HAR, RL, BIIB, JPM, ABT, RDA, CCH, SNN and CAT. Wall St. Week w/Fortune had guests that were positive on C, MER, ATVI, ERTS, ZIXI and negative on TTWO, LF, NLS and SFP. Barron's had positive columns on BZH, CMCSA, ATK, ABMD and a negative column on SYMC. Goldman Sachs reiterated Outperform on ACN, EBAY. Business Week has a positive article on JNPR.
Weekend News
New York City has spent about $100 million to reinforce security at its reservoirs elsewhere in New York state to prevent terrorists from poisoning drinking water, the New York Post reported. Ford Motor Co.'s Escape, a sport-utility vehicle that gets about 23 miles to the gallon, and similar rivals are being snapped up as gas prices rise, the New York Times reported. International inspectors have found evidence that North Korea sold Libya two tons of weapons-grade uranium in 2001, the NY Times said. HSBC may bid for New York Community Bancorp, the Independent newspaper reported. Saudi Arabia is ready to increase oil production by more than 15% if needed to help lower prices, Oil Minister Ali al-Naimi said. Amec has agreed to help Korea National Oil Co. develop oil projects in Iraq, the Observer reported. U.S. military commanders said Iraqi militants loyal to al-Sadr seem to have abandoned their effort to control Karbala, the New York Times reported. Lloyds TSB Group Plc, the UK's no.5 bank, is in talks with IBM over a $1.8 billion technology contract, the Mail on Sunday said. Spending on Internet advertising reached $7.3 billion in 2003, a 21% increase, the San Francisco Chronicle reported. Halliburton's CEO said his company has never overcharged the U.S. Army for work in Iraq, the NY Times reported. Pakistan's President and India's new Prime Minister discussed peace moves between the countries and pledged to continue the process, Agence France-Presse reported. Starwood Hotels & Resorts Worldwide Chairman Sternlicht said he is "seeing group bookings making a significant comeback" and that the U.S. economy is "definitely getting legs under it," Bloomberg reported. Hewlett-Packard will offer its first mobile phone that combines the functions of a hand-held computer during the second half of this year, the Commercial Times reported. Vodafone may raise its dividend 20% this week, Bloomberg reported. Wells Fargo may buy Strong Capital Management, which settle lawsuits last week over allegations of engaging in improper mutual fund trading, Bloomberg reported.
Late-Night Trading
Asian indices are mostly higher, -.25% to +2.0% on average.
S&P 500 indicated +.38%.
NASDAQ indicated +.39%.
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on strength in Asia and falling oil prices. I have had some huge winners in the last couple of weeks and may rotate out of a few of these tomorrow. The Portfolio is 125% net long.
Sunday, May 23, 2004
Weekly Outlook
There are a number of important economic reports and a few significant corporate earnings reports scheduled for release this week. Economic reports this week include Consumer Confidence, Existing Home Sales, Durable Goods Orders, New Home sales, Preliminary GDP, Initial Jobless Claims, Personal Income, Personal Spending, PCE Deflator, Univ. of Mich. Consumer Confidence and the Chicago Purchasing Manager report. Consumer Confidence readings, Durable Goods Orders, PCE Deflator and the Chicago Purchasing Manager report all have market-moving potential.
Novell(NOVL), Medtronic(MDT), Computer Associates(CA), Williams-Sonoma(WSM), Sports Authority(TSA), Toll Brothers(TOL), Vodafone(VOD), Krispy Kreme(KKD), Autozone(AZ), Costco(COST) and Vivendi Universal(V) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The CSFB Semiconductor & Equipment Conference, UBS Software and Services Conference and the CSFB Small-cap Conference could all impact trading this week.
Bottom Line: I expect U.S. stocks to rise modestly throughout the week as oil and interest rates decline. As well, continued positive news on the earnings front and from several conferences should push stocks higher. While the major indices were mostly flat last week, breadth improved as many stocks posted significant gains. Recent Put/Call and Arms Index readings are also consistent with a rise this week. I expect basic materials stocks will continue their outperformance, while energy-related stocks should remain laggards. I took a long position in NKTR on Friday afternoon and I am using a $17 stop-loss on the position. The Portfolio is 125% net long heading into the week.
Novell(NOVL), Medtronic(MDT), Computer Associates(CA), Williams-Sonoma(WSM), Sports Authority(TSA), Toll Brothers(TOL), Vodafone(VOD), Krispy Kreme(KKD), Autozone(AZ), Costco(COST) and Vivendi Universal(V) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The CSFB Semiconductor & Equipment Conference, UBS Software and Services Conference and the CSFB Small-cap Conference could all impact trading this week.
Bottom Line: I expect U.S. stocks to rise modestly throughout the week as oil and interest rates decline. As well, continued positive news on the earnings front and from several conferences should push stocks higher. While the major indices were mostly flat last week, breadth improved as many stocks posted significant gains. Recent Put/Call and Arms Index readings are also consistent with a rise this week. I expect basic materials stocks will continue their outperformance, while energy-related stocks should remain laggards. I took a long position in NKTR on Friday afternoon and I am using a $17 stop-loss on the position. The Portfolio is 125% net long heading into the week.
Chart of the Week
Bottom Line: The Index of Leading Economic Indicators, released last week, rose .1% in April. However, the March number was revised to show a .8% increase, the largest since May of 2003, right before US economic growth exploded upwards. Moreover, the Index rose 4.9% year-over-year in April, the largest 12-month gain since March 1984. "It's hard to see a second-half slowdown here. The increase in the Index of Leading Indicators during the past year is consistent with GDP growth of about 6.75%," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Market Week in Review
S&P 500 1,093.56 -.19%
U.S. stocks were mixed last week as more violence in Iraq and high oil prices once again dominated headlines, drowning out continuing strength in the economy and better-than-expected corporate reports. Stocks rose from their lows on Monday morning after the President of the Iraqi governing council was assassinated. As well, a continued rise in energy prices and political instability in India and Taiwan could not take stocks meaningfully lower early in the week. However, as the week progressed, strong corporate earnings, several mergers, constructive comments from OPEC and stabilizing interest rates could not push stocks higher.
There were a number of very positive stories during the week. Applied Materials, Hewlett Packard, Home Depot, Lowe's, Synopsys, Nordstrom and STMicroelectronics all reported strong quarterly earnings. In merger news, Cardinal Health paid an 18% premium for Alaris Medical, Tellabs paid a 13% premium for Advanced Fiber and Marsh & McLennan agreed to purchase Kroll for a 32% premium. Delta Air had its biggest weekly advance in 14 months after a Lehman analyst said shares may double if the company reaches an agreement with its pilots. Shares of Internet jewelry retailer Blue Nile rose 31% following its IPO. Finally, shares in Millennium Pharmaceuticals rose after the company said its Velcade medicine helped people with a blood cancer called multiple myeloma live longer.
Bottom Line: Overall, last week was characterized by trend-less choppy trading. However, if positioned properly, profits were attainable. Basic material, airline, gaming, retail, foreign and some tech stocks registered good gains. Energy-related stocks fell as crude oil had its worst weekly performance in 7 weeks in anticipation of an OPEC production increase. Again, I believe investor psychology is being affected by the mainstream media's obsession with negativity. Very little attention was paid last week to the many strong earnings and economic reports, mergers, falling oil prices and positive biotechnology news. Instead, negative stories on Iraq and inflation made headlines once again. The CPI, a measure of consumer inflation, is projected to rise 2.2% this year, below its 84-year average of 3.0%. Oil accounts for less than 5% of inflation. Even if oil stayed unexpectedly high at $40/bbl., it would only shave .3% off of U.S. GDP growth each of the next two years. Oil, currently $39.93/bbl., has barely risen over the last 23 years. It would have to rise to $78/bbl. to reach the inflation-adjusted levels it hit during the height of the Iran hostage crisis during the early 80's. Oil-related stocks are breaking down in anticipation of lower prices in the near future. Mild inflation is historically good for stocks, yet 90% of the financial stories last week seemed to revolve around inflation worries. There are many positive stories relating to the current state of the U.S. economy that are not being told or are spun in a negative light in the media's quest for negativity. With the S&P's 04 P/E at 16.95 and falling almost daily and economic growth the best in two decades, fundamentals should win out over the longer-term. However, it is still possible that investor psychology is so greatly damaged from the constant barrage of negative stories that it results in a self-fulfilling prophecy of slower economic growth.
U.S. stocks were mixed last week as more violence in Iraq and high oil prices once again dominated headlines, drowning out continuing strength in the economy and better-than-expected corporate reports. Stocks rose from their lows on Monday morning after the President of the Iraqi governing council was assassinated. As well, a continued rise in energy prices and political instability in India and Taiwan could not take stocks meaningfully lower early in the week. However, as the week progressed, strong corporate earnings, several mergers, constructive comments from OPEC and stabilizing interest rates could not push stocks higher.
There were a number of very positive stories during the week. Applied Materials, Hewlett Packard, Home Depot, Lowe's, Synopsys, Nordstrom and STMicroelectronics all reported strong quarterly earnings. In merger news, Cardinal Health paid an 18% premium for Alaris Medical, Tellabs paid a 13% premium for Advanced Fiber and Marsh & McLennan agreed to purchase Kroll for a 32% premium. Delta Air had its biggest weekly advance in 14 months after a Lehman analyst said shares may double if the company reaches an agreement with its pilots. Shares of Internet jewelry retailer Blue Nile rose 31% following its IPO. Finally, shares in Millennium Pharmaceuticals rose after the company said its Velcade medicine helped people with a blood cancer called multiple myeloma live longer.
Bottom Line: Overall, last week was characterized by trend-less choppy trading. However, if positioned properly, profits were attainable. Basic material, airline, gaming, retail, foreign and some tech stocks registered good gains. Energy-related stocks fell as crude oil had its worst weekly performance in 7 weeks in anticipation of an OPEC production increase. Again, I believe investor psychology is being affected by the mainstream media's obsession with negativity. Very little attention was paid last week to the many strong earnings and economic reports, mergers, falling oil prices and positive biotechnology news. Instead, negative stories on Iraq and inflation made headlines once again. The CPI, a measure of consumer inflation, is projected to rise 2.2% this year, below its 84-year average of 3.0%. Oil accounts for less than 5% of inflation. Even if oil stayed unexpectedly high at $40/bbl., it would only shave .3% off of U.S. GDP growth each of the next two years. Oil, currently $39.93/bbl., has barely risen over the last 23 years. It would have to rise to $78/bbl. to reach the inflation-adjusted levels it hit during the height of the Iran hostage crisis during the early 80's. Oil-related stocks are breaking down in anticipation of lower prices in the near future. Mild inflation is historically good for stocks, yet 90% of the financial stories last week seemed to revolve around inflation worries. There are many positive stories relating to the current state of the U.S. economy that are not being told or are spun in a negative light in the media's quest for negativity. With the S&P's 04 P/E at 16.95 and falling almost daily and economic growth the best in two decades, fundamentals should win out over the longer-term. However, it is still possible that investor psychology is so greatly damaged from the constant barrage of negative stories that it results in a self-fulfilling prophecy of slower economic growth.
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