Indices
S&P 500 1,122.50 +.11%
Dow 10,242.82 +.37%
NASDAQ 1,978.62 -.30%
Russell 2000 567.75 -.14%
Wilshire 5000 10,934.60 +.11%
Volatility(VIX) 16.78 +9.82%
AAII % Bulls 33.33 -7.70%
US Dollar 88.54 -.18%
CRB 274.75 -.35%
Futures Spot Prices
Gold 391.70 -1.14%
Crude Oil 38.49 -2.48%
Natural Gas 6.26 -4.41%
Base Metals 106.26 -2.34%
10-year US Treasury Yield 4.77% +2.58%
Average 30-year Mortgage Rate 6.28% -.63%
Leading Sectors
Gaming +3.18%
HMO's +2.13%
Broadcasting +2.09%
Lagging Sectors
Homebuilders -1.89%
Semis -2.39%
Disk Drives -2.60%
*% Gain or loss for the week
Friday, June 04, 2004
Mid-day Update
S&P 500 1,125.57 +.80%
NASDAQ 1,988.91 +1.46%
Leading Sectors
Gaming +3.01%
Semis +2.63%
Airlines +2.35%
Lagging Sectors
Iron/Steel +.06%
Oil Service -.38%
Energy -.69%
Other
Crude Oil 38.58 -1.60%
Natural Gas 6.28 -1.30%
Gold 390.50 +.44%
Base Metals 105.74 -2.20%
U.S. Dollar 88.72 -.26%
10-Yr. T-note Yield 4.73% +.50%
VIX 16.05 -5.75%
Put/Call .83 -26.55%
NYSE Arms .67 -56.77%
Market Movers
SKIL -24.83% after beating 1Q estimates and lowering 05 guidance.
DYAX +21.83% after saying the FDA allowed it to resume clinical trials on a rare genetic disorder.
PETS +10.0% on continued rise after being named Business Week's #1 hot growth company.
KMRT +11.0% after saying Home Depot may buy as many as 24 stores for $365 million.
MBG +8.29% after beating 1Q estimates substantially.
CRDN +6.19% after Roth Capital raised to Buy, target $38.
RDEN -13.5% after meeting 1Q estimates and CL King downgrade.
FBN -8.0% after cutting 2Q forecast.
MYG -7.42% after cutting 2Q/04 forecast and announcing restructuring.
Economic Data
Unemployment Rate for May was 5.6%, meeting estimates and the same as April.
Average Hourly Earnings for May +.3% versus estimates of +.2% and +.3% in April.
Change in Non-farm Payrolls for May was +248,000 versus estimates of +225,000 and an upwardly revised +346,000 in April.
Change in Manufacturing Payrolls for May was +32,000 versus estimates of +20,000 and an upwardly revised +29,000 in April.
Average Weekly Hours for May came in at 33.8 versus an estimate of 33.8 and an upwardly revised 33.8 in April.
Recommendations
WSH rated Buy at UBS, target $43. Goldman Sachs raised SLB to Outperform, target $72. Goldman reiterated Outperform on EMC, target $14-17. Goldman reiterated Outperform on AMD, IR, ADP, CEN, PAYX and INTC. MBG rated Buy at Legg Mason, target $70. FD raised to Outperform at CSFB, target $55. Citi SmithBarney reiterated Buy on INTC, target $33. Citi said tone of analog semi companies on day 2 of semi conference was upbeat, favorites are MXIM and LLTC. Citi reiterated Sell on KFT, target $29.50. Citi reiterated Buy on NMG/A, target $68. Citi reiterated Buy on AV, target $25.
Mid-day News
U.S. stocks are higher mid-day as a government report showing significant U.S. job growth and falling energy prices boost investor optimism. China will start on Sunday a weeklong energy-saving campaign, aiming to avoid a repeat this summer of the power shortages that affected parts of the country last year, Bloomberg reported. GM expects China to become its second-biggest vehicle market this year behind the U.S., Xinhua reported. Amazon.com is targeting a new subscription service to entertainment-industry insiders, hoping to not only sell movies but also help Hollywood make them, the LA Times said. Crude oil prices have plummeted 8.6% from recent highs, heading toward the third straight weekly drop, as rising OPEC production bolsters U.S. inventories and eases concern over summer fuel supplies, Bloomberg reported. U.S. employers added 248,000 workers to payrolls in May, helped by the biggest gain in manufacturing employment in almost six years. The only major category showing job losses was government employment, which declined by 27,000. The economy has now recouped all the jobs lost in the aftermath of 9/11 and the recession, Bloomberg reported. Moreover, American's incomes are now rising at a 5.7% annual rate, the fastest pace since the stock market bubble burst in early 2000, Bloomberg said.
BOTTOM LINE: The Portfolio is having a very good day today as most of my long positions are higher. I added a few internet and semiconductor longs in the morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is PMCS and I am using a $13.25 stop-loss on the position. I expect U.S. stocks to rise into the close on falling oil prices, great economic news, stabilizing interest rates and positive technology sector comments.
NASDAQ 1,988.91 +1.46%
Leading Sectors
Gaming +3.01%
Semis +2.63%
Airlines +2.35%
Lagging Sectors
Iron/Steel +.06%
Oil Service -.38%
Energy -.69%
Other
Crude Oil 38.58 -1.60%
Natural Gas 6.28 -1.30%
Gold 390.50 +.44%
Base Metals 105.74 -2.20%
U.S. Dollar 88.72 -.26%
10-Yr. T-note Yield 4.73% +.50%
VIX 16.05 -5.75%
Put/Call .83 -26.55%
NYSE Arms .67 -56.77%
Market Movers
SKIL -24.83% after beating 1Q estimates and lowering 05 guidance.
DYAX +21.83% after saying the FDA allowed it to resume clinical trials on a rare genetic disorder.
PETS +10.0% on continued rise after being named Business Week's #1 hot growth company.
KMRT +11.0% after saying Home Depot may buy as many as 24 stores for $365 million.
MBG +8.29% after beating 1Q estimates substantially.
CRDN +6.19% after Roth Capital raised to Buy, target $38.
RDEN -13.5% after meeting 1Q estimates and CL King downgrade.
FBN -8.0% after cutting 2Q forecast.
MYG -7.42% after cutting 2Q/04 forecast and announcing restructuring.
Economic Data
Unemployment Rate for May was 5.6%, meeting estimates and the same as April.
Average Hourly Earnings for May +.3% versus estimates of +.2% and +.3% in April.
Change in Non-farm Payrolls for May was +248,000 versus estimates of +225,000 and an upwardly revised +346,000 in April.
Change in Manufacturing Payrolls for May was +32,000 versus estimates of +20,000 and an upwardly revised +29,000 in April.
Average Weekly Hours for May came in at 33.8 versus an estimate of 33.8 and an upwardly revised 33.8 in April.
Recommendations
WSH rated Buy at UBS, target $43. Goldman Sachs raised SLB to Outperform, target $72. Goldman reiterated Outperform on EMC, target $14-17. Goldman reiterated Outperform on AMD, IR, ADP, CEN, PAYX and INTC. MBG rated Buy at Legg Mason, target $70. FD raised to Outperform at CSFB, target $55. Citi SmithBarney reiterated Buy on INTC, target $33. Citi said tone of analog semi companies on day 2 of semi conference was upbeat, favorites are MXIM and LLTC. Citi reiterated Sell on KFT, target $29.50. Citi reiterated Buy on NMG/A, target $68. Citi reiterated Buy on AV, target $25.
Mid-day News
U.S. stocks are higher mid-day as a government report showing significant U.S. job growth and falling energy prices boost investor optimism. China will start on Sunday a weeklong energy-saving campaign, aiming to avoid a repeat this summer of the power shortages that affected parts of the country last year, Bloomberg reported. GM expects China to become its second-biggest vehicle market this year behind the U.S., Xinhua reported. Amazon.com is targeting a new subscription service to entertainment-industry insiders, hoping to not only sell movies but also help Hollywood make them, the LA Times said. Crude oil prices have plummeted 8.6% from recent highs, heading toward the third straight weekly drop, as rising OPEC production bolsters U.S. inventories and eases concern over summer fuel supplies, Bloomberg reported. U.S. employers added 248,000 workers to payrolls in May, helped by the biggest gain in manufacturing employment in almost six years. The only major category showing job losses was government employment, which declined by 27,000. The economy has now recouped all the jobs lost in the aftermath of 9/11 and the recession, Bloomberg reported. Moreover, American's incomes are now rising at a 5.7% annual rate, the fastest pace since the stock market bubble burst in early 2000, Bloomberg said.
BOTTOM LINE: The Portfolio is having a very good day today as most of my long positions are higher. I added a few internet and semiconductor longs in the morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is PMCS and I am using a $13.25 stop-loss on the position. I expect U.S. stocks to rise into the close on falling oil prices, great economic news, stabilizing interest rates and positive technology sector comments.
Friday Watch
Company/Estimate
HLR/.09
Splits
None of note.
Economic Data
Unemployment Rate for May is estimated at 5.6% versus 5.6% in April.
Average Hourly Earnings for May estimated +.2% versus +.3% in April.
Change in Non-farm Payrolls for May estimated at 225K versus 288K in April.
Change in Manufacturing Payrolls for May estimated at 20K versus 21K in April.
Average Weekly Hours for May estimated at 33.8 versus 33.7 in April.
Recommendations
Goldman Sachs reiterated Outperform on BSX, NKE and SRE. Goldman reiterated Underperform on PSS. Goldman said to Buy FLEX after mid-quarter update, sees 20%+ upside. Goldman said INTC's comments on mid-quarter update bode well for second half of year. Staples is benefiting from the growing economy and continues to increase its market share in the office-supplies business, Business Week reported. Shares of Trend Micro, the world's third-largest maker of anti-virus software, may extend their gains as computer virus attacks lift sales of the Japanese company's PC-cillin and Network VirusWall programs, Bloomberg reported.
Late-Night News
Asian indices are higher after a fall in energy prices and an optimistic outlook from Intel boosted investments in technology shares in the region. Pakistan and India agreed to avoid public comments that may hinder their efforts to move the peace process forward between the South Asian neighbors, Reuters reported. Merrill Lynch, dissatisfied with a $513 billion asset-management business that is a third less profitable than independent fund managers, may sell a stake in the unit or seek to expand it, Bloomberg said. New York crude oil futures are likely to fall next week after OPEC agreed to increase production quotas by the most in more than six years, according to a Bloomberg survey of traders and analysts. Nestle SA, is considering a bid for General Mills to add brands such as Cheerios cereal and Betty Crocker dessert mixes, Bloomberg reported. Citigroup will start offering life insurance products in China next year after gaining regulatory approval to start a venture with Shanghai Alliance Investment, Bloomberg reported. Exxon Mobil, ChevronTexaco, ConocoPhilliops and Marathon Oil aren't ready to boost exploration budgets they set last year because previous market surges have been followed by plunges. Price drops averaging 54% followed the five biggest rallies in crude oil over the past two decades, Bloomberg reported. President Bush's visit to Rome Friday may disrupt transportation as 10,000 police and soldiers guard against terrorist attacks, Bloomberg said.
Late-Night Trading
Asian Indices unch. to +1.0% on average.
S&P 500 indicated +.22%.
NASDAQ indicated +.42%.
BOTTOM LINE: As I stated below in the Thursday Close, U.S. stocks will likely open modestly lower in the morning as an above-expectations jobs report sends interest rates higher. However, I will add market exposure into any excessive weakness in anticipation of a rally later in the day. High levels of investor anxiety heading into tomorrow, falling oil prices, Intel's strong comments and the recent positive shift in investor psychology leads me to believe that tomorrow's numbers will provide the catalyst to send shares higher by day's end.
HLR/.09
Splits
None of note.
Economic Data
Unemployment Rate for May is estimated at 5.6% versus 5.6% in April.
Average Hourly Earnings for May estimated +.2% versus +.3% in April.
Change in Non-farm Payrolls for May estimated at 225K versus 288K in April.
Change in Manufacturing Payrolls for May estimated at 20K versus 21K in April.
Average Weekly Hours for May estimated at 33.8 versus 33.7 in April.
Recommendations
Goldman Sachs reiterated Outperform on BSX, NKE and SRE. Goldman reiterated Underperform on PSS. Goldman said to Buy FLEX after mid-quarter update, sees 20%+ upside. Goldman said INTC's comments on mid-quarter update bode well for second half of year. Staples is benefiting from the growing economy and continues to increase its market share in the office-supplies business, Business Week reported. Shares of Trend Micro, the world's third-largest maker of anti-virus software, may extend their gains as computer virus attacks lift sales of the Japanese company's PC-cillin and Network VirusWall programs, Bloomberg reported.
Late-Night News
Asian indices are higher after a fall in energy prices and an optimistic outlook from Intel boosted investments in technology shares in the region. Pakistan and India agreed to avoid public comments that may hinder their efforts to move the peace process forward between the South Asian neighbors, Reuters reported. Merrill Lynch, dissatisfied with a $513 billion asset-management business that is a third less profitable than independent fund managers, may sell a stake in the unit or seek to expand it, Bloomberg said. New York crude oil futures are likely to fall next week after OPEC agreed to increase production quotas by the most in more than six years, according to a Bloomberg survey of traders and analysts. Nestle SA, is considering a bid for General Mills to add brands such as Cheerios cereal and Betty Crocker dessert mixes, Bloomberg reported. Citigroup will start offering life insurance products in China next year after gaining regulatory approval to start a venture with Shanghai Alliance Investment, Bloomberg reported. Exxon Mobil, ChevronTexaco, ConocoPhilliops and Marathon Oil aren't ready to boost exploration budgets they set last year because previous market surges have been followed by plunges. Price drops averaging 54% followed the five biggest rallies in crude oil over the past two decades, Bloomberg reported. President Bush's visit to Rome Friday may disrupt transportation as 10,000 police and soldiers guard against terrorist attacks, Bloomberg said.
Late-Night Trading
Asian Indices unch. to +1.0% on average.
S&P 500 indicated +.22%.
NASDAQ indicated +.42%.
BOTTOM LINE: As I stated below in the Thursday Close, U.S. stocks will likely open modestly lower in the morning as an above-expectations jobs report sends interest rates higher. However, I will add market exposure into any excessive weakness in anticipation of a rally later in the day. High levels of investor anxiety heading into tomorrow, falling oil prices, Intel's strong comments and the recent positive shift in investor psychology leads me to believe that tomorrow's numbers will provide the catalyst to send shares higher by day's end.
Thursday, June 03, 2004
Thursday Close
S&P 500 1,116.64 -.74%
NASDAQ 1,960.26 -1.44%
Leading Sectors
Drugs -.02%
HMO's -.08%
Retail -.11%
Lagging Sectors
Semis -2.45%
Nanotechnology -2.83%
Airlines -3.86%
Other
Crude Oil 39.25 -.08%
Natural Gas 6.36 +.03%
Gold 389.00 +.03%
Base Metals 108.12 -.29%
U.S. Dollar 88.95 +.12%
10-Yr. T-note Yield 4.71% -.59%
VIX 17.03 +5.91%
Put/Call 1.13 +20.21%
NYSE Arms 1.55 +38.39%
After-hours Movers
MBG +3.24% after beating 1Q estimates substantially.
FLSH +4.01% after INTC said flash memory biz was exceptionally strong.
SKIL -14.39% after beating 1Q estimates and lowering 05 guidance.
Recommendations
Citigroup Inc. said investors should buy the yen versus the dollar on the view that increased investment in Japan's stock market will boost the currency. Apex Silver(SIL) shares are expected to double in a year as the company prepares to develop its property in Bolivia, Business Week reported. Adelphia Communication's assets would be more valuable if combined with another company, Business Week reported. Pain Therapeutics(PTIE) is undervalued at $8 as its Remoxy painkilling medication has $1 billion market potential, Business Week reported.
After-hours News
U.S. stocks finished lower Thursday on investor fears over Intel's mid-quarter update and tomorrow's jobs report. After the close, McDonald's said it will begin giving away Sony Corp. music downloads with Big Macs to help extend its monthly sales gains, Bloomberg said. Wal-Mart may change its employee wage scales in the coming months, Business Week said. The Nasdaq is trying to attract European companies to list their shares on the U.S. exchange, the FT Deutschland said. Hoshyar Zebari, Iraq's foreign misister-designate, told the UN today that Iraqi soldiers must be under command of the interim government, while declaring that the U.S.-led military coalition is necessary for the stability of the country. The U.S. Commerce Dept. said it will cut duties on $4.6 billion in Canadian lumber imports to as low as 13% from about 27%. Tyco had its debt ratings raised to investment grade by Moody's Investors Service, Bloomberg reported. Intel said sales may meet its highest estimates this quarter as demand rises for flash-memory chips used in mobile phones, Bloomberg said. James Pavitt, the CIA's director of operations, will step down later this summer, CNN reported.
BOTTOM LINE: The Portfolio fell today on weakness in my technology long positions. I took profits in several of my biotech and security long positions in the afternoon as they hit stop-loss levels and I added a semiconductor long in the after-hours session, leaving the Portfolio with 75% net long exposure. I added SNDK long and I am using a $22.75 stop-loss on the position. As I expected, Intel had a good mid-quarter report, raising its revenue guidance range and upping gross margin expectations. With oil declining and Intel giving a positive mid-quarter update, the bond market's reaction to tomorrow's data will determine whether or not the recent rally reignites or stalls. I expect tomorrow's Non-farm Payrolls to modestly exceed economists' estimates of 225,000. However, I expect Manufacturing payrolls to significantly exceed expectations of 20,000. Under this scenario, I would expect bonds and stocks to move lower in the morning and then rally into the afternoon, leaving U.S. stocks higher on the day. A payroll number below or at expectations would likely result in a higher opening for U.S. stocks and bonds that would be sustainable throughout the day.
NASDAQ 1,960.26 -1.44%
Leading Sectors
Drugs -.02%
HMO's -.08%
Retail -.11%
Lagging Sectors
Semis -2.45%
Nanotechnology -2.83%
Airlines -3.86%
Other
Crude Oil 39.25 -.08%
Natural Gas 6.36 +.03%
Gold 389.00 +.03%
Base Metals 108.12 -.29%
U.S. Dollar 88.95 +.12%
10-Yr. T-note Yield 4.71% -.59%
VIX 17.03 +5.91%
Put/Call 1.13 +20.21%
NYSE Arms 1.55 +38.39%
After-hours Movers
MBG +3.24% after beating 1Q estimates substantially.
FLSH +4.01% after INTC said flash memory biz was exceptionally strong.
SKIL -14.39% after beating 1Q estimates and lowering 05 guidance.
Recommendations
Citigroup Inc. said investors should buy the yen versus the dollar on the view that increased investment in Japan's stock market will boost the currency. Apex Silver(SIL) shares are expected to double in a year as the company prepares to develop its property in Bolivia, Business Week reported. Adelphia Communication's assets would be more valuable if combined with another company, Business Week reported. Pain Therapeutics(PTIE) is undervalued at $8 as its Remoxy painkilling medication has $1 billion market potential, Business Week reported.
After-hours News
U.S. stocks finished lower Thursday on investor fears over Intel's mid-quarter update and tomorrow's jobs report. After the close, McDonald's said it will begin giving away Sony Corp. music downloads with Big Macs to help extend its monthly sales gains, Bloomberg said. Wal-Mart may change its employee wage scales in the coming months, Business Week said. The Nasdaq is trying to attract European companies to list their shares on the U.S. exchange, the FT Deutschland said. Hoshyar Zebari, Iraq's foreign misister-designate, told the UN today that Iraqi soldiers must be under command of the interim government, while declaring that the U.S.-led military coalition is necessary for the stability of the country. The U.S. Commerce Dept. said it will cut duties on $4.6 billion in Canadian lumber imports to as low as 13% from about 27%. Tyco had its debt ratings raised to investment grade by Moody's Investors Service, Bloomberg reported. Intel said sales may meet its highest estimates this quarter as demand rises for flash-memory chips used in mobile phones, Bloomberg said. James Pavitt, the CIA's director of operations, will step down later this summer, CNN reported.
BOTTOM LINE: The Portfolio fell today on weakness in my technology long positions. I took profits in several of my biotech and security long positions in the afternoon as they hit stop-loss levels and I added a semiconductor long in the after-hours session, leaving the Portfolio with 75% net long exposure. I added SNDK long and I am using a $22.75 stop-loss on the position. As I expected, Intel had a good mid-quarter report, raising its revenue guidance range and upping gross margin expectations. With oil declining and Intel giving a positive mid-quarter update, the bond market's reaction to tomorrow's data will determine whether or not the recent rally reignites or stalls. I expect tomorrow's Non-farm Payrolls to modestly exceed economists' estimates of 225,000. However, I expect Manufacturing payrolls to significantly exceed expectations of 20,000. Under this scenario, I would expect bonds and stocks to move lower in the morning and then rally into the afternoon, leaving U.S. stocks higher on the day. A payroll number below or at expectations would likely result in a higher opening for U.S. stocks and bonds that would be sustainable throughout the day.
Mid-day Update
S&P 500 1,122.03 -.26%
NASDAQ 1,976.15 -.65%
Leading Sectors
Broadcasting +.70%
Restaurants +.61%
Drugs +.58%
Lagging Sectors
Nanotechnology -1.60%
Semis -1.63%
Airlines -1.97%
Other
Crude Oil 38.75 -3.03%
Natural Gas 6.33 -2.90%
Gold 389.10 -.89%
Base Metals 108.12 -.29%
U.S. Dollar 89.05 +.24%
10-Yr. T-note Yield 4.71% -.42%
VIX 16.41 +2.05%
Put/Call 1.20 +27.66%
NYSE Arms 1.17 +4.46%
Market Movers
IPIX +37.5% after Tom Ridge commended the company for helping to make America more secure.
CVTX +19.38% after the company's plan to test its Ranexa heart drug for chronic chest pain was approved by the FDA.
CMVT +7.92% after beating 1Q estimates and raising 2Q and 05 forecasts.
GSL +13.28% on strong demand for its IPO.
TLB +8.77% after announcing May same-store-sales increase of 10% versus estimates of 2.3%.
ARO +7.36% after announcing May same-store-sales increase of 27% versus estimates of 13.4%.
PGTV -14.9% after saying two of its units filed for bankruptcy protection from creditors under Chapter 11.
FCEL -12.36% after missing 2Q estimates.
BRLI -10.39% after missing 2Q estimates.
Economic Data
Final Non-farm Productivity for 1Q was +3.8% versus estimates of +3.7% and +3.5% prior.
Final Unit Labor Costs for 1Q were +.8% versus +.4% estimates and +.5% prior.
Initial Jobless Claims last week came in at 339K versus 335K estimate and 345k prior week.
Continuing Claims came in at 3003K versus 2925K estimate and 2938K prior.
Factory Orders for April -1.7% versus -1.4% estimate and revised +5.0% in March.
ISM Non-Manufacturing for May was 65.2 versus estimates of 66.0 and 68.4 in April.
Recommendations
PD raised to Sector Outperform at CIBC, target $95. SFNT raised to Strong Buy at Raymond James, target $32. Goldman Sachs said there is no evidence in yesterday's auto numbers that high gas prices are impacting pick-up or SUV sales. Goldman reiterated Outperform on RSE, CCL, SRE, FD, BBY, RCL, FS, HOT, IGT, STN, GCI and CBL. Goldman reiterated Underperform on DJ, SKS, F and HRB. Goldman said to Buy retail-oriented REITS ahead of the annual National Assoc. of REITs Investor Forum in NY next week, favorite is DDR. Citi SmithBarney said to Buy MCD ahead of their comp report next Mon, target $34. Citi said to Buy GIS on weakness ahead of EPS report, target $51. Citi reiterated Buy ratings on HIG and ALL, price targets are $55 and $81, respectively. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on IR, target $83. Citi reiterated Buy on BJ, target $30. Citi reiterated Buy on NMGA, target $68. Citi reiterated Buy on WYE, target $47. Citi reiterated Buy on DTV, target $21.
Mid-day News
U.S. stocks are modestly lower mid-day as investor nervousness persists ahead of Intel's mid-quarter update, tomorrow's jobs report and Bush's trip to Rome. Symbol Technologies today will likely announce a settlement with the U.S. SEC, which has been investigating Symbol's business practices, the NY Times reported. Honeywell International is testing a prototype electronic system for large airlines that would prevent commercial aircraft from crashing into nuclear power and chemical plants, the Star-Ledger reported. China has halted loans made to fixed-asset investment projects that aren't approved by the government in a bid to help slow the pace of economic growth, Agence-France Presse reported. Dust on PCs may contain a flame retardant with a chemical known to cause brain damage in animals, the San Jose Mercury News reported. About 250 investors are attending a convention in Las Vegas on opportunities in Iraq, the Washington Post reported. Cendant plans to offer 37.5 million shares of its Jackson Hewitt tax preparation unit in an IPO, Bloomberg reported. Children's Place said its in talks with Disney for the purchase of the Disney Store chain in the U.S. and Canada. Wal-Mart said May U.S. sales rose 5.9%, at the high end of forecasts, as consumers bought more groceries and electronics, Bloomberg said. OPEC agreed to the biggest increase in oil quotas in more than 6 years, seeking to prevent near-record prices from slowing world economic growth, Bloomberg said. American’s risk of getting cancer or dying of the disease is on the decline, according to a government report, Bloomberg reported. Crude oil stockpiles in the U.S. rose by a larger-than-expected 2.8 million barrels last week, sending oil prices lower, Bloomberg reported. George Tenet resigned as director of the CIA for personal reasons, Bloomberg reported. A gauge of activity at U.S. service companies, which make up the largest share of the economy, reached the fourth highest on record in May as businesses increased hiring, Bloomberg reported.
BOTTOM LINE: The Portfolio is down slightly today as one of my retail longs is up substantially, mostly offsetting losses in my technology long positions. I have not traded today and the Portfolio is still 100% net long. I continue to believe worries over Intel's report are overdone. I also expect tomorrow's Non-farm payrolls to exceed estimates of 225K. U.S. markets should respond favorably tomorrow. Finally, I expect stocks to strengthen into the close. High Put/Call and ARMs readings should cushion any unexpected afternoon weakness. Some short-covering will likely occur as well.
NASDAQ 1,976.15 -.65%
Leading Sectors
Broadcasting +.70%
Restaurants +.61%
Drugs +.58%
Lagging Sectors
Nanotechnology -1.60%
Semis -1.63%
Airlines -1.97%
Other
Crude Oil 38.75 -3.03%
Natural Gas 6.33 -2.90%
Gold 389.10 -.89%
Base Metals 108.12 -.29%
U.S. Dollar 89.05 +.24%
10-Yr. T-note Yield 4.71% -.42%
VIX 16.41 +2.05%
Put/Call 1.20 +27.66%
NYSE Arms 1.17 +4.46%
Market Movers
IPIX +37.5% after Tom Ridge commended the company for helping to make America more secure.
CVTX +19.38% after the company's plan to test its Ranexa heart drug for chronic chest pain was approved by the FDA.
CMVT +7.92% after beating 1Q estimates and raising 2Q and 05 forecasts.
GSL +13.28% on strong demand for its IPO.
TLB +8.77% after announcing May same-store-sales increase of 10% versus estimates of 2.3%.
ARO +7.36% after announcing May same-store-sales increase of 27% versus estimates of 13.4%.
PGTV -14.9% after saying two of its units filed for bankruptcy protection from creditors under Chapter 11.
FCEL -12.36% after missing 2Q estimates.
BRLI -10.39% after missing 2Q estimates.
Economic Data
Final Non-farm Productivity for 1Q was +3.8% versus estimates of +3.7% and +3.5% prior.
Final Unit Labor Costs for 1Q were +.8% versus +.4% estimates and +.5% prior.
Initial Jobless Claims last week came in at 339K versus 335K estimate and 345k prior week.
Continuing Claims came in at 3003K versus 2925K estimate and 2938K prior.
Factory Orders for April -1.7% versus -1.4% estimate and revised +5.0% in March.
ISM Non-Manufacturing for May was 65.2 versus estimates of 66.0 and 68.4 in April.
Recommendations
PD raised to Sector Outperform at CIBC, target $95. SFNT raised to Strong Buy at Raymond James, target $32. Goldman Sachs said there is no evidence in yesterday's auto numbers that high gas prices are impacting pick-up or SUV sales. Goldman reiterated Outperform on RSE, CCL, SRE, FD, BBY, RCL, FS, HOT, IGT, STN, GCI and CBL. Goldman reiterated Underperform on DJ, SKS, F and HRB. Goldman said to Buy retail-oriented REITS ahead of the annual National Assoc. of REITs Investor Forum in NY next week, favorite is DDR. Citi SmithBarney said to Buy MCD ahead of their comp report next Mon, target $34. Citi said to Buy GIS on weakness ahead of EPS report, target $51. Citi reiterated Buy ratings on HIG and ALL, price targets are $55 and $81, respectively. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on IR, target $83. Citi reiterated Buy on BJ, target $30. Citi reiterated Buy on NMGA, target $68. Citi reiterated Buy on WYE, target $47. Citi reiterated Buy on DTV, target $21.
Mid-day News
U.S. stocks are modestly lower mid-day as investor nervousness persists ahead of Intel's mid-quarter update, tomorrow's jobs report and Bush's trip to Rome. Symbol Technologies today will likely announce a settlement with the U.S. SEC, which has been investigating Symbol's business practices, the NY Times reported. Honeywell International is testing a prototype electronic system for large airlines that would prevent commercial aircraft from crashing into nuclear power and chemical plants, the Star-Ledger reported. China has halted loans made to fixed-asset investment projects that aren't approved by the government in a bid to help slow the pace of economic growth, Agence-France Presse reported. Dust on PCs may contain a flame retardant with a chemical known to cause brain damage in animals, the San Jose Mercury News reported. About 250 investors are attending a convention in Las Vegas on opportunities in Iraq, the Washington Post reported. Cendant plans to offer 37.5 million shares of its Jackson Hewitt tax preparation unit in an IPO, Bloomberg reported. Children's Place said its in talks with Disney for the purchase of the Disney Store chain in the U.S. and Canada. Wal-Mart said May U.S. sales rose 5.9%, at the high end of forecasts, as consumers bought more groceries and electronics, Bloomberg said. OPEC agreed to the biggest increase in oil quotas in more than 6 years, seeking to prevent near-record prices from slowing world economic growth, Bloomberg said. American’s risk of getting cancer or dying of the disease is on the decline, according to a government report, Bloomberg reported. Crude oil stockpiles in the U.S. rose by a larger-than-expected 2.8 million barrels last week, sending oil prices lower, Bloomberg reported. George Tenet resigned as director of the CIA for personal reasons, Bloomberg reported. A gauge of activity at U.S. service companies, which make up the largest share of the economy, reached the fourth highest on record in May as businesses increased hiring, Bloomberg reported.
BOTTOM LINE: The Portfolio is down slightly today as one of my retail longs is up substantially, mostly offsetting losses in my technology long positions. I have not traded today and the Portfolio is still 100% net long. I continue to believe worries over Intel's report are overdone. I also expect tomorrow's Non-farm payrolls to exceed estimates of 225K. U.S. markets should respond favorably tomorrow. Finally, I expect stocks to strengthen into the close. High Put/Call and ARMs readings should cushion any unexpected afternoon weakness. Some short-covering will likely occur as well.
Thursday Watch
Company/Estimate
CPST/.14
FCEL/-.34
COO/.59
MBG/1.12
Splits
None of note.
Economic Data
Final Non-farm Productivity reading for 1Q is estimated +3.7% versus +3.5% prior.
Final Unit Labor Costs for 1Q estimated +.4% versus +.5% prior.
Initial Jobless Claims for last week estimated at 335K versus 344K prior week.
Continuing Claims estimated at 2925K versus 2948K prior.
Factory Orders for April estimated -1.4% versus +4.3% in March.
ISM Non-Manufacturing for May estimated at 66.0 versus 68.4 in April.
Recommendations
Goldman Sachs reiterated Outperform on NFP, TRMS and ITT. Goldman reiterated Outperform on STN and IGT ahead of June 9th Gaming Conference in NYC, favorite is IGT.
Late-Night News
Asian indices are lower on concerns over Intel's mid-quarter update and another rise in oil prices. Viacom Entertainment said its Group Chairman Jonathan Dolgen resigned after a decade of leading Paramount Pictures, the Wall Street Journal reported. Serono SA, one of Europe's biggest biotechnology companies, may relocate its Swiss-based headquarters to the U.S. if industry conditions in Europe continue to worsen, the Wall Street Journal said. India will start work late this year to build a strategic oil reserve scheduled for completion by late 2007, the Asian Wall Street Journal reported. Japanese companies increased capital spending 10.2% in the first quarter from a year earlier, the fastest since 1997, as companies including Sharp invested rising earnings on expansion, Bloomberg reported. Crude oil futures are rising tonight as hedge funds and speculators bet increased production by OPEC will take several weeks to reach markets and ease concern about fuel shortages, Bloomberg said.
Late-Night Trading
Asian Indices -2.5% to unch. on average.
S&P 500 indicated -.44%.
NASDAQ indicated -.61%.
BOTTOM LINE: I expect U.S. stocks to open modestly lower on weakness in Asia and rising oil prices. I will decide whether or not to change the Portfolio's market exposure after evaluating the many economic reports and the market's reaction to them. While I do not have a position in Intel, I believe that fears over its mid-quarter update are overdone. It is unlikely the market will mount any serious rally ahead of Intel's comments, the jobs report and Bush's Rome trip. The Portfolio is 100% long heading into tomorrow.
CPST/.14
FCEL/-.34
COO/.59
MBG/1.12
Splits
None of note.
Economic Data
Final Non-farm Productivity reading for 1Q is estimated +3.7% versus +3.5% prior.
Final Unit Labor Costs for 1Q estimated +.4% versus +.5% prior.
Initial Jobless Claims for last week estimated at 335K versus 344K prior week.
Continuing Claims estimated at 2925K versus 2948K prior.
Factory Orders for April estimated -1.4% versus +4.3% in March.
ISM Non-Manufacturing for May estimated at 66.0 versus 68.4 in April.
Recommendations
Goldman Sachs reiterated Outperform on NFP, TRMS and ITT. Goldman reiterated Outperform on STN and IGT ahead of June 9th Gaming Conference in NYC, favorite is IGT.
Late-Night News
Asian indices are lower on concerns over Intel's mid-quarter update and another rise in oil prices. Viacom Entertainment said its Group Chairman Jonathan Dolgen resigned after a decade of leading Paramount Pictures, the Wall Street Journal reported. Serono SA, one of Europe's biggest biotechnology companies, may relocate its Swiss-based headquarters to the U.S. if industry conditions in Europe continue to worsen, the Wall Street Journal said. India will start work late this year to build a strategic oil reserve scheduled for completion by late 2007, the Asian Wall Street Journal reported. Japanese companies increased capital spending 10.2% in the first quarter from a year earlier, the fastest since 1997, as companies including Sharp invested rising earnings on expansion, Bloomberg reported. Crude oil futures are rising tonight as hedge funds and speculators bet increased production by OPEC will take several weeks to reach markets and ease concern about fuel shortages, Bloomberg said.
Late-Night Trading
Asian Indices -2.5% to unch. on average.
S&P 500 indicated -.44%.
NASDAQ indicated -.61%.
BOTTOM LINE: I expect U.S. stocks to open modestly lower on weakness in Asia and rising oil prices. I will decide whether or not to change the Portfolio's market exposure after evaluating the many economic reports and the market's reaction to them. While I do not have a position in Intel, I believe that fears over its mid-quarter update are overdone. It is unlikely the market will mount any serious rally ahead of Intel's comments, the jobs report and Bush's Rome trip. The Portfolio is 100% long heading into tomorrow.
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