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 Personal Income, Personal Spending, Consumer Confidence, Chicago Purchasing Manager, Initial Jobless Claims, Construction Spending, ISM Manufacturing, Vehicle Sales, Unemployment Rate, Average Hourly Earnings, Change in Non-farm/Manufacturing Payrolls, Average Weekly Hours and Factory Orders. Consumer Confidence, Chicago Purchasing Manager, ISM Manufacturing, Change in Non-farm Payrolls all have market-moving potential.
McKormick(MKC), Research in Motion(RIMM), Sonic(SONC), Emmis Communications(EMMS), Monsanto(MON), Constellation Brands(STZ), Biomet(BMET), ConAgra(CAG) and General Mills(GIS) are some of the more important companies that release quarterly earnings this week. There are also a couple of other events that have market-moving potential. The FMOC Policy Announcement, end of the quarter repositioning, handover of power to the Iraqi government and the NYSSA Homeland Security Industry Conference will also impact trading this week.
Bottom Line: I expect U.S. stocks to rise this week, possibly by a substantial margin, led by technology shares. The handover of power to the Iraqis, the Fed keeping the word "measured" in its policy statement with respect to the pace of rate-hikes, falling energy prices, the recent decline in interest rates and positive economic reports should provide the catalysts for a good week for U.S. stocks. The AAII % Bulls increased by a substantial amount last week which would normally be a negative. However, I believe that while investors may feel more bullish, they are waiting for the uncertainty surrounding events of the coming week to lift before they actually buy in a significant way.
Here are some of the reasons for my current bullish stance on U.S. stocks:
1)Recently, NASDAQ short interest hit an all-time high and NYSE short interest approached an all-time high, which should result in a significant amount of short-covering in the very near future as fundamentals continue to improve.
2)Interest rates have declined by almost 30 basis points in the last few weeks. The 10-yr T-note is yielding 4.64%, over 40% lower than in 1994.
3)Gas prices have fallen 13% from their recent highs.
4)Inflation for 2004 is set to rise less than the 40-year average of 3.0%.
5)Valuations for most U.S. stocks(S&P 500 04 P/E=17.3, down 66% from peak) are very reasonable given the strong economic backdrop and relatively low interest rate picture.
6)Corporate profits and growth are near all-time highs.
7)Corporate balance sheets are much cleaner and healthier.
8)Executive corruption is down.
9)U.S. and world economic growth are on pace to reach 20-year highs this year.
10)Japan(the world's second largest economy) is contributing meaningfully to world growth for the first time in almost 15 years.
11)China's growth is slowing, but still exceptional.
12)The big picture in Iraq is improving. The cost of the
War in Iraq is set to come in at only 1% of U.S. GDP versus 12% for the Vietnam War, 15% for the Korean War and 130% for WWII.
13)There have been no major terror acts on U.S. soil since 9/11.
14)U.S. home ownership is at all-time highs.
15)American's are the wealthiest in U.S. history. Moreover, 1 out of every 125 are now millionaires, even excluding home equity.
16)Job opportunities and wages are improving substantially. 1.2 million jobs have been created in the last 6 months.
17)The Unemployment rate is lower than the average rate over any 10-year period during the last 40 years.
18)The Budget Deficit will come in significantly below estimates for 2004 as substantial economic growth increases incomes and profits, resulting in increased government tax receipts.
19)Consumer sentiment is improving with job gains and income growth.
20)U.S. manufacturing, which has been in a depression for many years, is rebounding at one of the fastest paces on record.
21)Corporate spending on services and equipment is on the rise for the first time in several years.
22)Consumers are continuing to spend at a very healthy rate.
23)The massive overcapacity, in many sectors, generated during the Internet bubble is almost burned off.
24)Current U.S economic growth is the result of real companies with real business models generating real profits. During the Internet bubble, companies with poor management teams, flawed business models, corrupt accounting and no profits were artificially inflating economic growth.
25)Stock market internals are rapidly improving.
Finally, my short-term trading indicators are giving buy signals and the Portfolio is 150% net long heading into the week.
Sunday, June 27, 2004
Market Week in Review
S&P 500 1,134.43 -.05%
U.S. indices finished mixed last week on a good pick-up in volume as technology shares outperformed substantially, offsetting declines in healthcare-related stocks. Stocks fell slightly on Monday, led lower by healthcare and energy-related shares. A mid-week rally began Tuesday, led by technology stocks, after SBC Communications announced a $6 billion capital spending spree to build a new fiber optic network. As well, the very successful IPO of Salesforce.com(CRM) boosted sentiment towards technology stocks. Finally, falling interest rates, increasing merger activity, strong corporate earnings reports and declining energy prices also spurred investor enthusiasm mid-week. The week ended on a mixed note as violence in the Middle East prevented investors from bidding shares higher in advance of the coming week's Iraqi handover of power. Moreover, the Russell rebalancing, end of the quarter repositioning and imminent Fed rate-hike continued to weigh on investors' psyche at week's end.
There were several notable movers last week. Shares of Taser International(TASR) rose 63.3% after boosting 04 annual revenue growth from 100% to 150% and speculation over a deal with Sharper Image to sell a personal version of its stun gun. NVE Corp.(NVEC) rose 46.7% after receiving a new patent on an innovative type of MRAM. PalmOne(PLMO) gained 62.5% after beating 4Q estimates and raising its 1Q forecast substantially. Dick's Sporting Goods(DKS) increased 14.5% after saying it would purchase Galyan's Trading for $305 million in cash. Career Education(CECO) fell 20.0% after the company said a SEC inquiry was raised to a formal investigation. Orasure Technologies(OSUR) gained 24.7% after it received FDA approval of it OraQuick Rapid HIV-1/2 Antibody Test. Shares of Performance Food Group(PFGC) fell 19.3% after lowering its second-quarter earnings estimate, saying the distribution of fruit products and retooling plants is costing more than anticipated. Finally, AT&T(T) fell 9.0% after it reduced its 2004 profit and revenue forecasts because it lowered prices to business customers.
Bottom Line: The tone of the market last week was very good, notwithstanding minimal movements in the major averages. The advance/decline line continued to improve and volume increased. Many sectors registered substantial gains with small-cap and technology shares outperforming significantly. According to Thomson First Call, positive-to-negative earnings pre-announcements are running at a record high. This is turning out to be one of the best years in recent history for stock-pickers as the major averages flounder while certain sectors and stocks register significant gains. Last weeks' market action, combined with declining interest rates and energy prices, bodes well for the future.
U.S. indices finished mixed last week on a good pick-up in volume as technology shares outperformed substantially, offsetting declines in healthcare-related stocks. Stocks fell slightly on Monday, led lower by healthcare and energy-related shares. A mid-week rally began Tuesday, led by technology stocks, after SBC Communications announced a $6 billion capital spending spree to build a new fiber optic network. As well, the very successful IPO of Salesforce.com(CRM) boosted sentiment towards technology stocks. Finally, falling interest rates, increasing merger activity, strong corporate earnings reports and declining energy prices also spurred investor enthusiasm mid-week. The week ended on a mixed note as violence in the Middle East prevented investors from bidding shares higher in advance of the coming week's Iraqi handover of power. Moreover, the Russell rebalancing, end of the quarter repositioning and imminent Fed rate-hike continued to weigh on investors' psyche at week's end.
There were several notable movers last week. Shares of Taser International(TASR) rose 63.3% after boosting 04 annual revenue growth from 100% to 150% and speculation over a deal with Sharper Image to sell a personal version of its stun gun. NVE Corp.(NVEC) rose 46.7% after receiving a new patent on an innovative type of MRAM. PalmOne(PLMO) gained 62.5% after beating 4Q estimates and raising its 1Q forecast substantially. Dick's Sporting Goods(DKS) increased 14.5% after saying it would purchase Galyan's Trading for $305 million in cash. Career Education(CECO) fell 20.0% after the company said a SEC inquiry was raised to a formal investigation. Orasure Technologies(OSUR) gained 24.7% after it received FDA approval of it OraQuick Rapid HIV-1/2 Antibody Test. Shares of Performance Food Group(PFGC) fell 19.3% after lowering its second-quarter earnings estimate, saying the distribution of fruit products and retooling plants is costing more than anticipated. Finally, AT&T(T) fell 9.0% after it reduced its 2004 profit and revenue forecasts because it lowered prices to business customers.
Bottom Line: The tone of the market last week was very good, notwithstanding minimal movements in the major averages. The advance/decline line continued to improve and volume increased. Many sectors registered substantial gains with small-cap and technology shares outperforming significantly. According to Thomson First Call, positive-to-negative earnings pre-announcements are running at a record high. This is turning out to be one of the best years in recent history for stock-pickers as the major averages flounder while certain sectors and stocks register significant gains. Last weeks' market action, combined with declining interest rates and energy prices, bodes well for the future.
Saturday, June 26, 2004
Economic Week in Review
ECRI Weekly Leading Index 132.30 -.30%
Durable Goods Orders for May fell 1.6% versus expectations of a 1.5% rise and a 2.6% fall in April. Durable Goods Orders Less Transportation for May fell .7% versus estimates of a 1.3% rise and a decline of 1.7% in April. "There is so much volatility in durable goods orders, and there was so much strength in February and March that it is too soon to say if the declines in April and May are meaningful," said Christopher Low, chief economist at FTN Financial. Company officials "haven't found the gas pedal yet, but they've got their foot off the brake" on spending for new equipment, said John Chambers, CEO of Cisco Systems. However, SBC Communications said it will spend $4-$6 billion over the next five years on building a fiber-optic network that offers digital television service, Bloomberg reported. Tax cuts approved last year included a greater allowance for depreciating investments in equipment, giving companies incentive to accelerate spending this year. This provision is set to expire in 2005, likely resulting in increased corporate spending in the second half of this year, Bloomberg said.
Initial Jobless Claims for last week were 349K versus estimates of 340K and 336K the prior week. Continuing Claims were 2967K versus estimates of 2875K and 2892K prior. The U.S. has added 1.2 million jobs from January through May and the average number of weekly claims this year has fallen to 347,000 from about 402,000 in 2003. "The longer trend is clearly that we're in a self-sustaining recovery, that employment growth will continue but not at the rate of the recent past," said Carl Steen, market analyst at MFR. However, companies may increase wages at an even faster rate as the economy grows, demand for their products continues to be high and the slack in the labor market lessens, Bloomberg reported.
New Home Sales for May were 1369K versus estimates of 1125K and an upwardly revised 1192K in April. The number of homes sold and waiting to be started rose to the second-highest level ever, suggesting builders are struggling to keep up with demand. The new-home sales pace so far this year corresponds with total 2004 sales of 1.343 million houses, which would shatter the record of 1.085 million new homes sold last year, Bloomberg reported. "Our home traffic is very strong, our sales are very strong and we have houses waiting to be started. Our backlog is at an all-time high," said Alan Levan, CEO of Levitt Corp. Furthermore, Levan said interest rates would have to rise another 200 to 300 basis points before borrowing costs started to erode demand. Finally, the inventory of new homes for sale fell to a record-low 3.3 months' supply in May from 3.9 months in April.
Final 1Q Gross Domestic Product rose 3.9% versus estimates of 4.4%. Final 1Q Personal Consumption rose 3.8% versus estimates of 3.9%. Final 1Q GDP Price Deflator rose 2.9% versus estimates of a 2.6% rise. The trade deficit subtracted .7 percentage points from growth, about twice as much as estimated last month. "The trade deficit could be viewed as a sign of strength in demand in the U.S. economy," said Michael Moran, chief economist at Daiwa Securities. The core personal consumption expenditures price index, a favorite measure of inflation watched by Greenspan, rose 2.0%, more than the 1.7% estimated last month.
The Final reading of the University of Michigan Consumer Confidence Index for June came in at 95.6 versus estimates of 95.0 and a 95.2 prior estimate. "Consumer confidence is improving" as some of the negative impact from higher gasoline prices and violence in the Middle East fades, said Wesley Beal, chief economist at IDEAglobal. "The employment recovery will be more than enough to keep consumers spending." The addition of 1.2 million jobs this year is boosting incomes, and retail gasoline prices have fallen the past four weeks, Bloomberg reported.
Existing Home Sales for May came in at 6.8 million versus estimates of 6.5 million and 6.63 million in April. The median price of an existing home climbed 3.6% to $183,600 last month, the highest on record, Bloomberg reported. "With employment picking up, driving personal income, people are certainly going to be able to afford more," said Ellen Beeson, an economist at Bank of Tokyo-Mitsubishi. "The housing markets are very, very healthy," said David Lereah, an economist with the housing association. "People think interest rates are still very reasonable and inventories are very tight," said Daryl Jesperson, chief executive officer of Re/Max International. "The surge in mortgage applications for purchase in the spring points to strength in purchases of existing homes over the next month or two" when those sales close, said Stephen Stanley, chief economist at RBS Greenwhich Capital.
Bottom Line: I believe Durable Goods Orders for May were below-expectations because of the extreme strength earlier in the year. I expect orders accelerated in June. As well, corporate spending on technology should lead the way in the second half of the year. Initial jobless claims were a bit above expectations due to the shortened government work-week and continued re-tooling of major auto plants. Hiring should remain strong throughout the second half of the year as corporate spending accelerates. Home sales continue to defy the bears and skeptics. While interest rates have risen, they are still relatively low by historical standards. Increasing job opportunities and incomes are more than offsetting rates increases. Moreover, Americans are the wealthiest than at any time in U.S. history. As a result, more people are moving from apartments to homes or purchasing second homes for vacation purposes. U.S. economic growth should remain very strong throughout the year as GDP rises at the fastest pace since 1984. Inflation pressures should moderate as the year progresses. Slowing Chinese demand and falling energy prices should help keep inflation relatively subdued throughout the remainder of the year. Inflation is set to rise about 2.4% this year, below the last 40-year average of 3.0%. Consumer confidence should continue to rise and break recent highs, as survey's point to more Americans figuring out how good things are economically, notwithstanding the media's attempts to underreport all positive news.
Durable Goods Orders for May fell 1.6% versus expectations of a 1.5% rise and a 2.6% fall in April. Durable Goods Orders Less Transportation for May fell .7% versus estimates of a 1.3% rise and a decline of 1.7% in April. "There is so much volatility in durable goods orders, and there was so much strength in February and March that it is too soon to say if the declines in April and May are meaningful," said Christopher Low, chief economist at FTN Financial. Company officials "haven't found the gas pedal yet, but they've got their foot off the brake" on spending for new equipment, said John Chambers, CEO of Cisco Systems. However, SBC Communications said it will spend $4-$6 billion over the next five years on building a fiber-optic network that offers digital television service, Bloomberg reported. Tax cuts approved last year included a greater allowance for depreciating investments in equipment, giving companies incentive to accelerate spending this year. This provision is set to expire in 2005, likely resulting in increased corporate spending in the second half of this year, Bloomberg said.
Initial Jobless Claims for last week were 349K versus estimates of 340K and 336K the prior week. Continuing Claims were 2967K versus estimates of 2875K and 2892K prior. The U.S. has added 1.2 million jobs from January through May and the average number of weekly claims this year has fallen to 347,000 from about 402,000 in 2003. "The longer trend is clearly that we're in a self-sustaining recovery, that employment growth will continue but not at the rate of the recent past," said Carl Steen, market analyst at MFR. However, companies may increase wages at an even faster rate as the economy grows, demand for their products continues to be high and the slack in the labor market lessens, Bloomberg reported.
New Home Sales for May were 1369K versus estimates of 1125K and an upwardly revised 1192K in April. The number of homes sold and waiting to be started rose to the second-highest level ever, suggesting builders are struggling to keep up with demand. The new-home sales pace so far this year corresponds with total 2004 sales of 1.343 million houses, which would shatter the record of 1.085 million new homes sold last year, Bloomberg reported. "Our home traffic is very strong, our sales are very strong and we have houses waiting to be started. Our backlog is at an all-time high," said Alan Levan, CEO of Levitt Corp. Furthermore, Levan said interest rates would have to rise another 200 to 300 basis points before borrowing costs started to erode demand. Finally, the inventory of new homes for sale fell to a record-low 3.3 months' supply in May from 3.9 months in April.
Final 1Q Gross Domestic Product rose 3.9% versus estimates of 4.4%. Final 1Q Personal Consumption rose 3.8% versus estimates of 3.9%. Final 1Q GDP Price Deflator rose 2.9% versus estimates of a 2.6% rise. The trade deficit subtracted .7 percentage points from growth, about twice as much as estimated last month. "The trade deficit could be viewed as a sign of strength in demand in the U.S. economy," said Michael Moran, chief economist at Daiwa Securities. The core personal consumption expenditures price index, a favorite measure of inflation watched by Greenspan, rose 2.0%, more than the 1.7% estimated last month.
The Final reading of the University of Michigan Consumer Confidence Index for June came in at 95.6 versus estimates of 95.0 and a 95.2 prior estimate. "Consumer confidence is improving" as some of the negative impact from higher gasoline prices and violence in the Middle East fades, said Wesley Beal, chief economist at IDEAglobal. "The employment recovery will be more than enough to keep consumers spending." The addition of 1.2 million jobs this year is boosting incomes, and retail gasoline prices have fallen the past four weeks, Bloomberg reported.
Existing Home Sales for May came in at 6.8 million versus estimates of 6.5 million and 6.63 million in April. The median price of an existing home climbed 3.6% to $183,600 last month, the highest on record, Bloomberg reported. "With employment picking up, driving personal income, people are certainly going to be able to afford more," said Ellen Beeson, an economist at Bank of Tokyo-Mitsubishi. "The housing markets are very, very healthy," said David Lereah, an economist with the housing association. "People think interest rates are still very reasonable and inventories are very tight," said Daryl Jesperson, chief executive officer of Re/Max International. "The surge in mortgage applications for purchase in the spring points to strength in purchases of existing homes over the next month or two" when those sales close, said Stephen Stanley, chief economist at RBS Greenwhich Capital.
Bottom Line: I believe Durable Goods Orders for May were below-expectations because of the extreme strength earlier in the year. I expect orders accelerated in June. As well, corporate spending on technology should lead the way in the second half of the year. Initial jobless claims were a bit above expectations due to the shortened government work-week and continued re-tooling of major auto plants. Hiring should remain strong throughout the second half of the year as corporate spending accelerates. Home sales continue to defy the bears and skeptics. While interest rates have risen, they are still relatively low by historical standards. Increasing job opportunities and incomes are more than offsetting rates increases. Moreover, Americans are the wealthiest than at any time in U.S. history. As a result, more people are moving from apartments to homes or purchasing second homes for vacation purposes. U.S. economic growth should remain very strong throughout the year as GDP rises at the fastest pace since 1984. Inflation pressures should moderate as the year progresses. Slowing Chinese demand and falling energy prices should help keep inflation relatively subdued throughout the remainder of the year. Inflation is set to rise about 2.4% this year, below the last 40-year average of 3.0%. Consumer confidence should continue to rise and break recent highs, as survey's point to more Americans figuring out how good things are economically, notwithstanding the media's attempts to underreport all positive news.
Friday, June 25, 2004
Weekly Scoreboard*
Indices
S&P 500 1,134.43 -.05%
Dow 10,371.84 -.43%
NASDAQ 2,025.47 +1.95%
Russell 2000 587.70 +3.0%
Volatility(VIX) 15.19 +1.33%
AAII % Bulls 56.41 +36.22%
US Dollar 88.88 -.20%
CRB 272.25 +.89%
Futures Spot Prices
Gold 403.20 +1.87%
Crude Oil 37.55 -3.59%
Natural Gas 6.35 -2.49%
Base Metals 109.49 +.15%
10-year US Treasury Yield 4.65% -1.27%
Average 30-year Mortgage Rate 6.25% -1.11%
Leading Sectors
Nanotechnology +9.41%
Disk Drives +8.01%
Networking +7.07%
Lagging Sectors
HMO's -2.43%
Drugs -2.57%
Broadcasting -3.76%
*% Gain or loss for the week
S&P 500 1,134.43 -.05%
Dow 10,371.84 -.43%
NASDAQ 2,025.47 +1.95%
Russell 2000 587.70 +3.0%
Volatility(VIX) 15.19 +1.33%
AAII % Bulls 56.41 +36.22%
US Dollar 88.88 -.20%
CRB 272.25 +.89%
Futures Spot Prices
Gold 403.20 +1.87%
Crude Oil 37.55 -3.59%
Natural Gas 6.35 -2.49%
Base Metals 109.49 +.15%
10-year US Treasury Yield 4.65% -1.27%
Average 30-year Mortgage Rate 6.25% -1.11%
Leading Sectors
Nanotechnology +9.41%
Disk Drives +8.01%
Networking +7.07%
Lagging Sectors
HMO's -2.43%
Drugs -2.57%
Broadcasting -3.76%
*% Gain or loss for the week
Mid-day Update
S&P 500 1,141.17 +.05%
NASDAQ 2,026.89 +.56%
Leading Sectors
Airlines +1.66%
Networking +1.53%
Semis +1.20%
Lagging Sectors
Fashion -.77%
Drugs -.94%
Defense -1.22%
Other
Crude Oil 37.20 -1.92%
Natural Gas 6.29 -2.93%
Gold 402.90 -.15%
Base Metals 109.49 -.52%
U.S. Dollar 89.0 +.34%
10-Yr. T-note Yield 4.66% +.25%
VIX 14.79 -.14%
Put/Call .63 -4.55%
NYSE Arms 1.0 -28.06%
Market Movers
TTN -21.6% after saying it wouldn't be able to settle a criminal probe by today's deadline and LMT won't extend its buyout offer again.
PAYX -6.3% after meeting 4Q estimates and lowering 05 guidance slightly.
CAB +32.5% on strong demand for IPO.
TASR +12.5% on continuing rumors of imminent deal to sell personal version of stun gun through Sharper Image stores and short squeeze.
SIMG +16.79% after raising 2Q guidance and Thomas Weisel upgrade to Outperform.
NKE +4.2% after beating 4Q estimates and announcing $1.5 billion share buy-back.
TEK +6.9% after beating 4Q estimates substantially and raising 1Q guidance.
MSA +7.9% on successful 2.63m share secondary.
REY -20.5% after lowering 3Q and 4Q forecasts.
SOL -12.68% after saying it is hiring consultants and adding staff members to address weakness in its internal accounting controls.
TTEK -12.9% after lowering 3Q and 4Q forecasts substantially and Robert Baird downgrade to Underperform.
ARB -6.1% after cutting 04 forecast.
Economic Data
Final 1Q GDP was +3.9% versus estimates of +4.4% and +4.4% prior.
Final 1Q personal Consumption was +3.8% versus estimates of +3.9% and 3.9% prior.
Final 1Q GDP Price Deflator was +2.9% versus 2.6% estimate and 2.6% prior.
Final U. of Mich. Consumer Confidence for June was 95.6 versus estimates of 95.0 and a reading of 95.2 prior.
Existing Home Sales for May were 6.80M versus estimates of 6.50M and 6.63M in April.
Recommendations
FTI rated Overweight at JP Morgan. CCUR cut to Sector Underperform at CIBC. HCA raised to Overweight at Morgan Stanley, target $49. ACH reiterated Overweight by Morgan Stanley. SIMG raised to Outperform at Thomas Weisel. DCN cut to Underweight at Prudential, target $15. JPM rated Outperform at Bear Stearns, target $45. FS raised to Outperform at Bear, target $71. DLM cut to Underperform at Bear. LYO raised to Buy at Merrill Lynch, target $20. Goldman Sachs reiterated Outperform on GCI, NKE, CLX, TYC, PAYX, MMP, N, AMGN and TRB. Goldman said to Buy INTC for potential upside to earnings estimates in second half. Goldman downgraded FRX to Underperform. ROH upgraded to Buy at Citi SmithBarney, target $47. Citi reiterated Buy on MAS, target $37. Citi reiterated Sell on BA, target $36. Citi reiterated Buy on ASD, target $46.
Mid-day News
U.S. stocks are slightly higher mid-day, led by technology, as energy prices fall and interest rates stabilize at lower levels. Iraqis, by a 2-to-1 margin, said they have confidence in the new interim government that will take over on June 30, citing a recent poll, the Washington Post reported. Pennsylvania soon might have more slot machines than New Jersey, cutting as much as 10% from Atlantic City's $4.5 billion gambling market, the Star-Ledger reported. New Jersey companies leased more office space in the second quarter than they vacated for the first time since the stock market bubble burst and economic growth plunged in 2000, the Star-Ledger reported. Celgene, which makes a drug aimed at lessening the severity of a blood cancer, could benefit from a pilot project by the U.S. government to reimburse patients for the cost of the drug, the Star-Ledger reported. Norway's government intervened for the second time in four years to end a labor strike that has threatened to halt all oil and gas production, Bloomberg reported. Pfizer will pay $620 million to acquire rights to Aventis SA's cancer drug, Bloomberg said. U.S. sales of previously owned homes rose to a record 6.8 million annual pace in May. The economy has created 1.2 million jobs so far this year and incomes are up 5.7% in 12 months, the most since 2000, which is underpinning housing demand as interest rates rise, Bloomberg reported. UN Secretary-General Annan said he and Colin Powell will demand that Sudan's government stop the killing in the Darfur region of the country, or face possible military intervention, Bloomberg reported. For the first time since former Federal Reserve Chairman Paul Volcker began his investigation into the Iraqi Oil-for-food program, the man charged with getting to the bottom of the scandal says he has uncovered "serious problems" with the program, Fox News reported.
BOTTOM LINE: The Portfolio up substantially today as my security, internet and telecom equipment longs are rising significantly. I have not traded today and the Portfolio is still 150% net long. Oil is headed for a test of its recent low of $36.80/bbl. I believe it will take out this low next week. U.S. stocks will likely remain mixed until the final hour. I then expect a modest rally as sellers finish ahead of a possible violent weekend in Iraq. The tone of the market is still very good, led by technology, as the advance/decline line continues to improve.
NASDAQ 2,026.89 +.56%
Leading Sectors
Airlines +1.66%
Networking +1.53%
Semis +1.20%
Lagging Sectors
Fashion -.77%
Drugs -.94%
Defense -1.22%
Other
Crude Oil 37.20 -1.92%
Natural Gas 6.29 -2.93%
Gold 402.90 -.15%
Base Metals 109.49 -.52%
U.S. Dollar 89.0 +.34%
10-Yr. T-note Yield 4.66% +.25%
VIX 14.79 -.14%
Put/Call .63 -4.55%
NYSE Arms 1.0 -28.06%
Market Movers
TTN -21.6% after saying it wouldn't be able to settle a criminal probe by today's deadline and LMT won't extend its buyout offer again.
PAYX -6.3% after meeting 4Q estimates and lowering 05 guidance slightly.
CAB +32.5% on strong demand for IPO.
TASR +12.5% on continuing rumors of imminent deal to sell personal version of stun gun through Sharper Image stores and short squeeze.
SIMG +16.79% after raising 2Q guidance and Thomas Weisel upgrade to Outperform.
NKE +4.2% after beating 4Q estimates and announcing $1.5 billion share buy-back.
TEK +6.9% after beating 4Q estimates substantially and raising 1Q guidance.
MSA +7.9% on successful 2.63m share secondary.
REY -20.5% after lowering 3Q and 4Q forecasts.
SOL -12.68% after saying it is hiring consultants and adding staff members to address weakness in its internal accounting controls.
TTEK -12.9% after lowering 3Q and 4Q forecasts substantially and Robert Baird downgrade to Underperform.
ARB -6.1% after cutting 04 forecast.
Economic Data
Final 1Q GDP was +3.9% versus estimates of +4.4% and +4.4% prior.
Final 1Q personal Consumption was +3.8% versus estimates of +3.9% and 3.9% prior.
Final 1Q GDP Price Deflator was +2.9% versus 2.6% estimate and 2.6% prior.
Final U. of Mich. Consumer Confidence for June was 95.6 versus estimates of 95.0 and a reading of 95.2 prior.
Existing Home Sales for May were 6.80M versus estimates of 6.50M and 6.63M in April.
Recommendations
FTI rated Overweight at JP Morgan. CCUR cut to Sector Underperform at CIBC. HCA raised to Overweight at Morgan Stanley, target $49. ACH reiterated Overweight by Morgan Stanley. SIMG raised to Outperform at Thomas Weisel. DCN cut to Underweight at Prudential, target $15. JPM rated Outperform at Bear Stearns, target $45. FS raised to Outperform at Bear, target $71. DLM cut to Underperform at Bear. LYO raised to Buy at Merrill Lynch, target $20. Goldman Sachs reiterated Outperform on GCI, NKE, CLX, TYC, PAYX, MMP, N, AMGN and TRB. Goldman said to Buy INTC for potential upside to earnings estimates in second half. Goldman downgraded FRX to Underperform. ROH upgraded to Buy at Citi SmithBarney, target $47. Citi reiterated Buy on MAS, target $37. Citi reiterated Sell on BA, target $36. Citi reiterated Buy on ASD, target $46.
Mid-day News
U.S. stocks are slightly higher mid-day, led by technology, as energy prices fall and interest rates stabilize at lower levels. Iraqis, by a 2-to-1 margin, said they have confidence in the new interim government that will take over on June 30, citing a recent poll, the Washington Post reported. Pennsylvania soon might have more slot machines than New Jersey, cutting as much as 10% from Atlantic City's $4.5 billion gambling market, the Star-Ledger reported. New Jersey companies leased more office space in the second quarter than they vacated for the first time since the stock market bubble burst and economic growth plunged in 2000, the Star-Ledger reported. Celgene, which makes a drug aimed at lessening the severity of a blood cancer, could benefit from a pilot project by the U.S. government to reimburse patients for the cost of the drug, the Star-Ledger reported. Norway's government intervened for the second time in four years to end a labor strike that has threatened to halt all oil and gas production, Bloomberg reported. Pfizer will pay $620 million to acquire rights to Aventis SA's cancer drug, Bloomberg said. U.S. sales of previously owned homes rose to a record 6.8 million annual pace in May. The economy has created 1.2 million jobs so far this year and incomes are up 5.7% in 12 months, the most since 2000, which is underpinning housing demand as interest rates rise, Bloomberg reported. UN Secretary-General Annan said he and Colin Powell will demand that Sudan's government stop the killing in the Darfur region of the country, or face possible military intervention, Bloomberg reported. For the first time since former Federal Reserve Chairman Paul Volcker began his investigation into the Iraqi Oil-for-food program, the man charged with getting to the bottom of the scandal says he has uncovered "serious problems" with the program, Fox News reported.
BOTTOM LINE: The Portfolio up substantially today as my security, internet and telecom equipment longs are rising significantly. I have not traded today and the Portfolio is still 150% net long. Oil is headed for a test of its recent low of $36.80/bbl. I believe it will take out this low next week. U.S. stocks will likely remain mixed until the final hour. I then expect a modest rally as sellers finish ahead of a possible violent weekend in Iraq. The tone of the market is still very good, led by technology, as the advance/decline line continues to improve.
Friday Watch
Earnings of Note
Company/Estimate
None of note.
Splits
WCN 3-for-2
Economic Data
Final Gross Domestic Product for 1Q estimated +4.4% versus +4.4% prior.
Final Univ. of Mich. Consumer Confidence reading for June estimated at 95.0 versus 95.2 prior.
Existing Home Sales for May estimated at 6.5M versus 6.64M in April.
Recommendations
Goldman Sachs reiterated Outperform on BSX, PAYX, IR, ETN, AMGN and TYC. Goldman reiterated Underperform on DCLK. ASH shares may benefit from the sale of the company's stake in Marathon Ashland Petroleum, Business Week reported. ACAP's business is improving as the insurer raises premiums and its underwriting losses are falling, Business Week reported.
Late-Night News
Asian indices are mostly higher, led by Korean cyclicals after the country's largest steelmaker said it is raising prices. Iraqi intelligence agents sought al-Qaeda's help against Saudi Arabia in the mid-90's, the NY Times reported. Three unidentified gunmen shot dead Air France's top executive in Haiti, Agence France-Presse said. R.H. Donnelley(RHD), which publishes Yellow Pages directories, may grow by acting as a local advertising sales agent for large online companies, Business Week reported. Avon Products forecasts its sales in China will rise by half this year as the government lifts its ban on direct selling, the China Daily reported. California may face another energy crisis this summer when temperatures rise as new power-plant construction slows, older plants are shut down and electricity demand accelerates as the economy recovers, Business Week said. New shipping security rules due to be implemented next week could disrupt world trade as many ships and ports still haven't complied with the regulation, the Financial Times reported. AU Optronics plans to increase monthly capacity at a so-called "sixth-generation" plant in the central Taiwan city of Taichung to 200,000 sheets from 150,000 sheets, the Commercial Times reported today. Gold prices, down 7% from a 15-year high in April, may be little changed during the next six months because of rising U.S. interest rates and gains in the dollar, a survey of traders, analysts and investors showed. President Bush will nominate U.S. Representative Porter Goss, a former intelligence officer, as the new head of the CIA, Bloomberg reported. Lockheed Martin's planned $1.65 billion purchase of Titan Corp. has probably been derailed by a U.S. Justice Dept. probe into allegations that Titan consultants bribed foreign officials, Bloomberg said. Tokyo's core consumer prices unexpectedly fell in June, suggesting the central bank will keep interest rates close to zero for longer than economists predicted as it seeks to stamp out six years of deflation, Bloomberg reported. Bill Gross, of PIMCO, said the rise in debt yields over the last three months has made U.S. Treasuries "the market where our money is," Bloomberg reported. BellSouth will begin testing a broadband-on-demand service next month that will allow customers to boost their Internet connection, Business Week said.
Late-Night Trading
Asian Indices are unch. to +1.25% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning and rise later in the day, barring any significant terrorist actions in the Middle East. My short-term trading indicators are still giving buy signals and the Portfolio is 150% net long heading into tomorrow.
Company/Estimate
None of note.
Splits
WCN 3-for-2
Economic Data
Final Gross Domestic Product for 1Q estimated +4.4% versus +4.4% prior.
Final Univ. of Mich. Consumer Confidence reading for June estimated at 95.0 versus 95.2 prior.
Existing Home Sales for May estimated at 6.5M versus 6.64M in April.
Recommendations
Goldman Sachs reiterated Outperform on BSX, PAYX, IR, ETN, AMGN and TYC. Goldman reiterated Underperform on DCLK. ASH shares may benefit from the sale of the company's stake in Marathon Ashland Petroleum, Business Week reported. ACAP's business is improving as the insurer raises premiums and its underwriting losses are falling, Business Week reported.
Late-Night News
Asian indices are mostly higher, led by Korean cyclicals after the country's largest steelmaker said it is raising prices. Iraqi intelligence agents sought al-Qaeda's help against Saudi Arabia in the mid-90's, the NY Times reported. Three unidentified gunmen shot dead Air France's top executive in Haiti, Agence France-Presse said. R.H. Donnelley(RHD), which publishes Yellow Pages directories, may grow by acting as a local advertising sales agent for large online companies, Business Week reported. Avon Products forecasts its sales in China will rise by half this year as the government lifts its ban on direct selling, the China Daily reported. California may face another energy crisis this summer when temperatures rise as new power-plant construction slows, older plants are shut down and electricity demand accelerates as the economy recovers, Business Week said. New shipping security rules due to be implemented next week could disrupt world trade as many ships and ports still haven't complied with the regulation, the Financial Times reported. AU Optronics plans to increase monthly capacity at a so-called "sixth-generation" plant in the central Taiwan city of Taichung to 200,000 sheets from 150,000 sheets, the Commercial Times reported today. Gold prices, down 7% from a 15-year high in April, may be little changed during the next six months because of rising U.S. interest rates and gains in the dollar, a survey of traders, analysts and investors showed. President Bush will nominate U.S. Representative Porter Goss, a former intelligence officer, as the new head of the CIA, Bloomberg reported. Lockheed Martin's planned $1.65 billion purchase of Titan Corp. has probably been derailed by a U.S. Justice Dept. probe into allegations that Titan consultants bribed foreign officials, Bloomberg said. Tokyo's core consumer prices unexpectedly fell in June, suggesting the central bank will keep interest rates close to zero for longer than economists predicted as it seeks to stamp out six years of deflation, Bloomberg reported. Bill Gross, of PIMCO, said the rise in debt yields over the last three months has made U.S. Treasuries "the market where our money is," Bloomberg reported. BellSouth will begin testing a broadband-on-demand service next month that will allow customers to boost their Internet connection, Business Week said.
Late-Night Trading
Asian Indices are unch. to +1.25% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning and rise later in the day, barring any significant terrorist actions in the Middle East. My short-term trading indicators are still giving buy signals and the Portfolio is 150% net long heading into tomorrow.
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