S&P 500 1,126.51 -1.25%
NASDAQ 2,014.60 -1.62%
Leading Sectors
Defense +1.11%
Nanotechnology +1.07%
Restaurants +.64%
Lagging Sectors
Networking -3.45%
Disk Drives -3.67%
Semis -4.08%
Other
Crude Oil 38.70 +4.59%
Natural Gas 6.24 +1.38%
Gold 396.20 +.84%
Base Metals 109.87 +.50%
U.S. Dollar 88.84%
10-Yr. T-note Yield 4.60% +.43%
VIX 15.39 +7.25%
Put/Call 1.0 +28.21%
NYSE Arms 2.58 +142.99%
Market Movers
CAH -24.7% after saying 2004 profit missed forecasts and U.S. attorneys are probing its accounting.
YHOO -5.2% after Citi SmithBarney cut to Hold from Buy.
RIMM +3.6% on a continuation of yesterday's strong move after better-than-expected earnings report and forecast.
ELX -18.1% after cutting 4Q and 1Q forecasts, multiple downgrades.
DRS +22.69% after LLL offered to buy the company for $1.1 billion in cash.
IRGI +16.5% after CRL agreed to buy it for about $1.5 billion in cash and stock.
BNNY +10.77% after saying it may put itself up for sale.
SYPR -26.7% after lowering 2Q estimates, but raising 04/05 sales guidance.
ISIL -10.5% after Schwab SoundView cut rating to Neutral, saying it experienced a slowdown in business at the end of the second quarter.
WMAR -8.2% after lowering 2Q forecast.
Economic Data
Initial Jobless Claims for last week came in at 351K versus estimates of 342K and 350K prior week.
Continuing Claims came in at 2966K versus estimates of 2937K and 2953K prior.
Construction Spending for May rose .3% versus expectations of a .7% rise and an increase of 1.2% in April.
ISM Manufacturing for June came in at 61.1 versus estimates of 61.0 and 62.8 in May.
ISM Prices Paid for June came in at 81.0 versus estimates of 82.0 and 86.0 in May.
Recommendations
Goldman Sachs reiterated Outperform on MCK, MON, IGT, MSFT, STZ, GCI, HOT, AMGN, DNA and FS. Goldman reiterated Underperform on DJ. Citi SmithBarney initiated PNR with a Buy, target $40. Citi reiterated Buy on FON, target $22. Citi reiterated Buy on APCS, target $11. Citi reiterated Buy on SBUX, target $46. NUE rated Sector Underperform at CIBC. LOW rated Overweight and HD rated Underweight at JP Morgan. FRO ratied Overweight at JP Morgan. AMSG, DVA rated Overweight at JP Morgan.
Mid-day News
U.S. stocks are lower mid-day on rising energy prices and weakness in technology shares. Ousted Iraqi dictator Saddam Hussein refused to sign a legal document in court today, insisted on being called President and defended his country's invasion in 1990 of Kuwait, saying "Kuwait is an Iraqi territory. It was not an invasion," Agence France-Presse reported. The ISM Manufacturing Index held close to a 20-year high in June and construction spending increased for a fourth straight month, Bloomberg reported. Senator John Kerry may make his running-mate selection as early as Tuesday, the Boston Globe reported. Delta Air plans to use RFID tags to monitor all bags it handles at domestic airports, the NY Times reported. United Airlines is trying to reassure its 40 million frequent fliers that the U.S. government's loan rejection won't hurt service, the Washington Post reported. Information-technology companies such as Internet jewelry retailer Blue Nile were among 29 venture-backed companies that went public in the second quarter as venture capitalists began to recoup on investments, the Wall Street Journal said. Members of al-Qaeda led by al-Zarqawi in Iraq are targeting females U.S. military personnel, the Washington Times reported. The Houston Police will buy as much as $3.6 million worth of Taser stun guns during the next five years, Bloomberg said. Copper futures rose in New York for a second day on concern a strike in Chile, the world's largest producer, would reduce supplies from a mine owned by Falconbridge and AngloAmerican, Bloomberg said. Crude oil is rising for a second day on concerns that a terrorist attack could limit supplies over the three-day weekend, Bloomberg reported. Ford Motor said U.S. sales of cars and trucks fell 7.7% in June from a year earlier, however DaimlerChrysler's sales rose 5.2%, Bloomberg said. Shares of U.S. REITS may rise as job growth boosts office and apartment occupancies for the first time since 2000, helping landlords weather higher rates, Bloomberg reported.
BOTTOM LINE: The Portfolio is lower today on weakness in my technology longs. I took profits in a few long positions this morning, leaving the Portfolio with 100% net long market exposure. The market's manic behavior of late is frustrating, but quite profitable for nimble investors. A couple of weeks ago, inflation was the worry on rising commodity prices and a 20-year high in U.S. economic growth. Commodity prices have fallen over the last 2 weeks and a few economic reports have come off their highs, thus resulting in concerns the economy is slowing too much. U.S. growth is likely slowing from its torrid pace to more sustainable levels, which should alleviate some concerns over inflation. I continue to believe technology shares will outperform in the second half of the year, notwithstanding today's weakness. A significant rally is unlikely today, ahead of tomorrow's jobs report and the three-day weekend. However, with soaring ARMS index and Put/Call readings, a substantial fall in the afternoon is unlikely as well. The rise in oil today is of concern, but likely a countertrend move that will reverse next week.
Thursday, July 01, 2004
Thursday Watch
Earnings of Note
Company/Estimate
BMET/.36
CAG/.42
FLML/.07
Splits
ARBA 1-for-6
CNT 2-for-1
IRM 3-for-2
PTEN 2-for-1
KWK 2-for-1
TEVA 2-for-1
Economic Data
Initial Jobless Claims for last week estimated at 342K versus 349K prior week.
Continuing Claims estimated at 2937K versus 2967K prior.
Construction Spending for May estimated +.7% versus +1.3% in April.
ISM Manufacturing for June estimated at 61.0 versus 62.8 in May.
ISM Prices Paid for June estimated at 82.0 versus 86.0 in May.
Total Vehicle Sales for June estimated at 16.8M versus 17.8M in May.
Domestic Vehicle Sales for June estimated at 13.5M versus 14.3M in May.
Recommendations
Goldman Sachs reiterated Outperform on STZ. Goldman reiterated Underperform on ELX and QLGC. Goldman said momentum shifting away from low-fare airlines, would shift out of AAI, FRNT, JBLU and into AMR, CAL, ALK. Goldman said MSFT win in Mass. appeal clears the last hurdle regarding use of cash, reiterated Outperform.
Late-Night News
Asian indices are mostly higher after Japan said business confidence rose to a 13-year high and U.S. interest rates fell. Iraq's new leadership and coalition government are drawing up a plan for the withdrawal of coalition troops, the Financial Times said. China will soon loosen controls and allow more money out of the country as part of efforts to move its currency toward full convertibility, Shanghai Securities News reported. Time Warner has made a preliminary offer to buy Metro-Goldwyn-Mayer, the Wall Street Journal reported. The U.S. raised its reward for al-Zarqawi, an al-Qaeda linked terrorist operating in Iraq, from $10 million to $25 million, the State Department said. Saddam Hussein will appear before a special tribunal today to hear charges arising from his 23-year dictatorship. TradeSports.com is showing that the chances of Hillary Clinton being named the Democratic VP Nominee are rising 14.0% to 16.8%., while John Edwards' chances are falling 5.6% to 52.0%.
Late-Night Trading
Asian Indices are -.25 to +1.0% on average.
S&P 500 indicated +.10%.
NASDAQ 100 indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on strength in Asia, falling oil prices and stronger-than-expected construction/ISM reports. My short-term trading indicators are still giving buy signals and the Portfolio is 150% net long heading into tomorrow.
Company/Estimate
BMET/.36
CAG/.42
FLML/.07
Splits
ARBA 1-for-6
CNT 2-for-1
IRM 3-for-2
PTEN 2-for-1
KWK 2-for-1
TEVA 2-for-1
Economic Data
Initial Jobless Claims for last week estimated at 342K versus 349K prior week.
Continuing Claims estimated at 2937K versus 2967K prior.
Construction Spending for May estimated +.7% versus +1.3% in April.
ISM Manufacturing for June estimated at 61.0 versus 62.8 in May.
ISM Prices Paid for June estimated at 82.0 versus 86.0 in May.
Total Vehicle Sales for June estimated at 16.8M versus 17.8M in May.
Domestic Vehicle Sales for June estimated at 13.5M versus 14.3M in May.
Recommendations
Goldman Sachs reiterated Outperform on STZ. Goldman reiterated Underperform on ELX and QLGC. Goldman said momentum shifting away from low-fare airlines, would shift out of AAI, FRNT, JBLU and into AMR, CAL, ALK. Goldman said MSFT win in Mass. appeal clears the last hurdle regarding use of cash, reiterated Outperform.
Late-Night News
Asian indices are mostly higher after Japan said business confidence rose to a 13-year high and U.S. interest rates fell. Iraq's new leadership and coalition government are drawing up a plan for the withdrawal of coalition troops, the Financial Times said. China will soon loosen controls and allow more money out of the country as part of efforts to move its currency toward full convertibility, Shanghai Securities News reported. Time Warner has made a preliminary offer to buy Metro-Goldwyn-Mayer, the Wall Street Journal reported. The U.S. raised its reward for al-Zarqawi, an al-Qaeda linked terrorist operating in Iraq, from $10 million to $25 million, the State Department said. Saddam Hussein will appear before a special tribunal today to hear charges arising from his 23-year dictatorship. TradeSports.com is showing that the chances of Hillary Clinton being named the Democratic VP Nominee are rising 14.0% to 16.8%., while John Edwards' chances are falling 5.6% to 52.0%.
Late-Night Trading
Asian Indices are -.25 to +1.0% on average.
S&P 500 indicated +.10%.
NASDAQ 100 indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on strength in Asia, falling oil prices and stronger-than-expected construction/ISM reports. My short-term trading indicators are still giving buy signals and the Portfolio is 150% net long heading into tomorrow.
Wednesday, June 30, 2004
Wednesday Close
S&P 500 1,140.75 +.40%
NASDAQ 2,047.79 +.63%
Leading Sectors
Hospitals +2.10%
Homebuilders +1.87%
Oil Service +1.75%
Lagging Sectors
Fashion -.44%
Restaurants -.48%
Disk Drives -.64%
Other
Crude Oil 36.98 -.13%
Natural Gas 6.14 -.24%
Gold 394.80 +.46
Base Metals 109.32 +1.34%
U.S. Dollar 88.76 -.73%
10-Yr. T-note Yield 4.59% -2.03%
VIX 14.34 -7.30%
Put/Call .78 -15.22%
NYSE Arms 1.07 +27.38%
After-hours Movers
DRS +16.05% after CNBC reported that LLL offered to buy the company.
CPKI +4.23% after raising 2Q forecast.
ABC -4.45% on CAH news.
MCK -5.36% on CAH news.
MERX -9.61% after missing 4Q estimates and lowering 1Q forecast.
CAH -13.20% after saying federal regulators are investigating its accounting and the company cut its fiscal 05 forecast.
ELX -13.99% after cutting 4Q and 1Q forecasts.
Recommendations
Goldman Sachs reiterated Underperform on S and Outperform on ADP.
After-hours News
U.S. stocks finished higher today, led by homebuilding and energy-related shares. Federal Reserve policy makers raised the U.S. benchmark interest rate by 25 basis points to 1.25% and reiterated that further increases can come at a "measured" pace, Bloomberg reported. After the close, the SEC said it knows of more than 40 hedge funds that were involved in trading abuses at mutual funds, SEC Chairman Donaldson said without naming them. More than 200,000 current and former employees at Boeing stood to receive a stock distribution today if the price remained above $44 a share, the Seattle Times reported. The al-Qaeda terrorist network plotted to bomb the Panama Canal, one of the world's most important shipping routes, Agence France-Presse reported. Texas Instruments may accelerate plans to build a new factory, the Dallas Morning News reported. Syngenta AG, the world's biggest maker of crop chemicals, said it will move its U.K.-based biotechnology research facilities to the U.S., the Financial Times said. Whitehouse.com, a pornography Web site that included parodies about first ladies and interns, removed all political references to quality for a trademark, the AP reported. Barneys New York may put itself up for sale as the company seeks to expand its chain of namesake stores, Bloomberg reported. Japan's Tankan survey showed executives at Japanese manufacturers are the most confident since the nation's asset-price bubble burst in 1991, helped by surging demand from China and the U.S., Bloomberg reported.
BOTTOM LINE: The Portfolio finished slightly higher today and I did not trade in the afternoon, thus leaving market exposure at 150% net long. While I was a little disappointed in the market's muted reaction to a break-down in the 10-yr T-note yield, a stronger upwards move may materialize over the course of a few days. Investor apprehension over tomorrow's ISM report, Friday's employment data and the possibility of terrorism over the July 4th holiday weekend may lead to a delayed positive response to the fall in interest rates. As well, it was positive that the CRB Index broke down through its recent trading range today. The recent fall in gas prices, subsiding inflation fears, rising consumer confidence, falling interest rates and exceptional fundamentals should provide the catalysts for a continuation of the recent rally.
NASDAQ 2,047.79 +.63%
Leading Sectors
Hospitals +2.10%
Homebuilders +1.87%
Oil Service +1.75%
Lagging Sectors
Fashion -.44%
Restaurants -.48%
Disk Drives -.64%
Other
Crude Oil 36.98 -.13%
Natural Gas 6.14 -.24%
Gold 394.80 +.46
Base Metals 109.32 +1.34%
U.S. Dollar 88.76 -.73%
10-Yr. T-note Yield 4.59% -2.03%
VIX 14.34 -7.30%
Put/Call .78 -15.22%
NYSE Arms 1.07 +27.38%
After-hours Movers
DRS +16.05% after CNBC reported that LLL offered to buy the company.
CPKI +4.23% after raising 2Q forecast.
ABC -4.45% on CAH news.
MCK -5.36% on CAH news.
MERX -9.61% after missing 4Q estimates and lowering 1Q forecast.
CAH -13.20% after saying federal regulators are investigating its accounting and the company cut its fiscal 05 forecast.
ELX -13.99% after cutting 4Q and 1Q forecasts.
Recommendations
Goldman Sachs reiterated Underperform on S and Outperform on ADP.
After-hours News
U.S. stocks finished higher today, led by homebuilding and energy-related shares. Federal Reserve policy makers raised the U.S. benchmark interest rate by 25 basis points to 1.25% and reiterated that further increases can come at a "measured" pace, Bloomberg reported. After the close, the SEC said it knows of more than 40 hedge funds that were involved in trading abuses at mutual funds, SEC Chairman Donaldson said without naming them. More than 200,000 current and former employees at Boeing stood to receive a stock distribution today if the price remained above $44 a share, the Seattle Times reported. The al-Qaeda terrorist network plotted to bomb the Panama Canal, one of the world's most important shipping routes, Agence France-Presse reported. Texas Instruments may accelerate plans to build a new factory, the Dallas Morning News reported. Syngenta AG, the world's biggest maker of crop chemicals, said it will move its U.K.-based biotechnology research facilities to the U.S., the Financial Times said. Whitehouse.com, a pornography Web site that included parodies about first ladies and interns, removed all political references to quality for a trademark, the AP reported. Barneys New York may put itself up for sale as the company seeks to expand its chain of namesake stores, Bloomberg reported. Japan's Tankan survey showed executives at Japanese manufacturers are the most confident since the nation's asset-price bubble burst in 1991, helped by surging demand from China and the U.S., Bloomberg reported.
BOTTOM LINE: The Portfolio finished slightly higher today and I did not trade in the afternoon, thus leaving market exposure at 150% net long. While I was a little disappointed in the market's muted reaction to a break-down in the 10-yr T-note yield, a stronger upwards move may materialize over the course of a few days. Investor apprehension over tomorrow's ISM report, Friday's employment data and the possibility of terrorism over the July 4th holiday weekend may lead to a delayed positive response to the fall in interest rates. As well, it was positive that the CRB Index broke down through its recent trading range today. The recent fall in gas prices, subsiding inflation fears, rising consumer confidence, falling interest rates and exceptional fundamentals should provide the catalysts for a continuation of the recent rally.
Mid-day Update
S&P 500 1,135.15 -.23%
NASDAQ 2,035.04 +.01%
Leading Sectors
Nanotechnology +1.34%
Oil Service +1.33%
Hospitals +1.23%
Lagging Sectors
I-Banks -.62%
Restaurants -1.11%
Disk Drives -1.86%
Other
Crude Oil 36.25 +1.65%
Natural Gas 6.13 +.20%
Gold 395.80 +.76%
Base Metals 109.32 +1.34%
U.S. Dollar 89.02 -.44%
10-Yr. T-note Yield 4.62% -1.40%
VIX 15.56 +.58%
Put/Call .89 -3.26%
NYSE Arms 1.23 +46.43%
Market Movers
TASR +8.3% after receiving a $1.8 million contract to supply more of its stun guns to U.S. troops, the largest award in company history.
RIMM +15.2% after beating 1Q estimates and raising 2Q/3Q guidance.
CBH -8.3% after saying 2 officers of its Philly bank subsidiary have been suspended as a result of their indictment and multiple downgrades.
THOR -22.4% after lowering 2Q and 04 forecast.
ESIO +16.6% after beating 4Q estimates substantially and raising 1Q guidance significantly.
KMRT +5.9% after saying it will sell as many as 54 stores to Sears for about $621 million.
SMG +6.8% after raising 3Q and 04 forecasts.
GTK -10.5% after cutting 2Q and 05 guidance and multiple downgrades.
AZO -7.4% after reporting disappointing same-store-sales.
Economic Data
Chicago Purchasing Manager for June came in at 56.4 versus expectations of 65.0 and a reading of 68.0 in May.
Recommendations
ALK rated Underweight at JP Morgan. ARG rated Buy at Deutsche Bank, target $28. BRCM rated Outperform at CSFB, target $54. MRVL rated Outperform at CSFB, target $30. PUMP rated Outperform at Thomas Weisel, target $24. PDG raised to Overweight at Prudential, target $20. SSCC cut to Underweight at Prudential, target $15. Goldman Sachs reiterated Outperform on ROH, CIT, AMLN, BSX, KRB, WAG and MERQ. Citi SmithBarney said to swap out of CCI and into AMT or SSI. Citi said to Buy PFG ahead of quarter, target $42. Citi reiterated Buy on NFLX, target $42. Citi reiterated Buy on FLEX, target $26. Citi reiterated Buy on CYH, target $33. Citi reiterated Buy on HCA, target $48. Citi reiterated Buy on THC, target $17.50. Citi reiterated Buy on TGT, target $50. Citi reiterated Buy on AZO, target $98.
Mid-day News
U.S. stocks are slightly lower mid-day as investor apprehension rises ahead of the Fed's announcement later today. Procter & Gamble will run three two-minute advertisements that tell a story during a single program, as traditional 30-second commercials have lost some appeal, the Wall Street Journal reported. The U.S. Coast Guard will deploy 600 personnel to provide armed escorts for VIP and tour boats, board freighters entering the Boston Harbor and randomly search ships during the Democratic National Convention, the Boston Globe reported. French President Chirac vetoed a U.S.-backed plan for the new NATO response force to provide extra security in Afghanistan during elections, the Washington Times reported. The first Fed rate increase in four years is unlikely to cause investors to rapidly exit so-called carry trades, or positions that borrow at short-maturity interest rates to invest at longer-term rates, CBS MarketWatch reported. New York's Nassau County is mailing free prescription-drug discount cards to 500,000 homes in the largest locally sponsored effort in the U.S. to curb drug costs, the NY Times reported. Proposed legislation designed to revamp California's electricity grid received preliminary approval from a state Senate panel yesterday, the LA Times reported. A Minnesota man the FBI identified as a terror suspect before Sept. 11, received a license to haul hazardous waster and to drive a school bus, the Minneapolis Star Tribune reported. Ousted Iraqi President Hussein and 11 of his officials were handed over today by the U.S. into Iraqi legal custody, Bloomberg reported. The UNs' shipping agency said 53% of the world's ships and ports have adopted anti-terrorism security measures before tomorrow's deadline, reducing the threat of trade disruptions, Bloomberg said. An index of growth for Chicago-area manufacturers and other businesses fell more than forecast this month after reaching a 16-year high, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged today as my longs are mixed. I have not traded and the Portfolio is still 150% net long. I expect U.S. stocks to rise into the afternoon as rates fall further after a 25 basis point increase in the Fed Funds rate and the retention of the word "measured" in the Fed's policy statement, with respect to the future pace of rate hikes. Volume and volatility will likely accelerate in the afternoon as well. The decline in the Chicago Purchasing Manager Index should have been expected after reaching a 16-year high last month. I do not currently believe the U.S. economy is in the midst of a significant slowdown, rather a pause that refreshes. 3-4% economic growth with lower inflation is more positive for stocks than 4+% growth with higher inflation.
NASDAQ 2,035.04 +.01%
Leading Sectors
Nanotechnology +1.34%
Oil Service +1.33%
Hospitals +1.23%
Lagging Sectors
I-Banks -.62%
Restaurants -1.11%
Disk Drives -1.86%
Other
Crude Oil 36.25 +1.65%
Natural Gas 6.13 +.20%
Gold 395.80 +.76%
Base Metals 109.32 +1.34%
U.S. Dollar 89.02 -.44%
10-Yr. T-note Yield 4.62% -1.40%
VIX 15.56 +.58%
Put/Call .89 -3.26%
NYSE Arms 1.23 +46.43%
Market Movers
TASR +8.3% after receiving a $1.8 million contract to supply more of its stun guns to U.S. troops, the largest award in company history.
RIMM +15.2% after beating 1Q estimates and raising 2Q/3Q guidance.
CBH -8.3% after saying 2 officers of its Philly bank subsidiary have been suspended as a result of their indictment and multiple downgrades.
THOR -22.4% after lowering 2Q and 04 forecast.
ESIO +16.6% after beating 4Q estimates substantially and raising 1Q guidance significantly.
KMRT +5.9% after saying it will sell as many as 54 stores to Sears for about $621 million.
SMG +6.8% after raising 3Q and 04 forecasts.
GTK -10.5% after cutting 2Q and 05 guidance and multiple downgrades.
AZO -7.4% after reporting disappointing same-store-sales.
Economic Data
Chicago Purchasing Manager for June came in at 56.4 versus expectations of 65.0 and a reading of 68.0 in May.
Recommendations
ALK rated Underweight at JP Morgan. ARG rated Buy at Deutsche Bank, target $28. BRCM rated Outperform at CSFB, target $54. MRVL rated Outperform at CSFB, target $30. PUMP rated Outperform at Thomas Weisel, target $24. PDG raised to Overweight at Prudential, target $20. SSCC cut to Underweight at Prudential, target $15. Goldman Sachs reiterated Outperform on ROH, CIT, AMLN, BSX, KRB, WAG and MERQ. Citi SmithBarney said to swap out of CCI and into AMT or SSI. Citi said to Buy PFG ahead of quarter, target $42. Citi reiterated Buy on NFLX, target $42. Citi reiterated Buy on FLEX, target $26. Citi reiterated Buy on CYH, target $33. Citi reiterated Buy on HCA, target $48. Citi reiterated Buy on THC, target $17.50. Citi reiterated Buy on TGT, target $50. Citi reiterated Buy on AZO, target $98.
Mid-day News
U.S. stocks are slightly lower mid-day as investor apprehension rises ahead of the Fed's announcement later today. Procter & Gamble will run three two-minute advertisements that tell a story during a single program, as traditional 30-second commercials have lost some appeal, the Wall Street Journal reported. The U.S. Coast Guard will deploy 600 personnel to provide armed escorts for VIP and tour boats, board freighters entering the Boston Harbor and randomly search ships during the Democratic National Convention, the Boston Globe reported. French President Chirac vetoed a U.S.-backed plan for the new NATO response force to provide extra security in Afghanistan during elections, the Washington Times reported. The first Fed rate increase in four years is unlikely to cause investors to rapidly exit so-called carry trades, or positions that borrow at short-maturity interest rates to invest at longer-term rates, CBS MarketWatch reported. New York's Nassau County is mailing free prescription-drug discount cards to 500,000 homes in the largest locally sponsored effort in the U.S. to curb drug costs, the NY Times reported. Proposed legislation designed to revamp California's electricity grid received preliminary approval from a state Senate panel yesterday, the LA Times reported. A Minnesota man the FBI identified as a terror suspect before Sept. 11, received a license to haul hazardous waster and to drive a school bus, the Minneapolis Star Tribune reported. Ousted Iraqi President Hussein and 11 of his officials were handed over today by the U.S. into Iraqi legal custody, Bloomberg reported. The UNs' shipping agency said 53% of the world's ships and ports have adopted anti-terrorism security measures before tomorrow's deadline, reducing the threat of trade disruptions, Bloomberg said. An index of growth for Chicago-area manufacturers and other businesses fell more than forecast this month after reaching a 16-year high, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged today as my longs are mixed. I have not traded and the Portfolio is still 150% net long. I expect U.S. stocks to rise into the afternoon as rates fall further after a 25 basis point increase in the Fed Funds rate and the retention of the word "measured" in the Fed's policy statement, with respect to the future pace of rate hikes. Volume and volatility will likely accelerate in the afternoon as well. The decline in the Chicago Purchasing Manager Index should have been expected after reaching a 16-year high last month. I do not currently believe the U.S. economy is in the midst of a significant slowdown, rather a pause that refreshes. 3-4% economic growth with lower inflation is more positive for stocks than 4+% growth with higher inflation.
Wednesday Watch
Earnings of Note
Company/Estimate
VOXX/.09
STZ/.49
EMMS/.07
FRE/1.61
GIS/.72
MERX/-.02
MON/.85
Splits
None of note.
Economic Data
Chicago Purchasing Manager for June estimated at 65.0 versus 68.0 in May.
The Fed is expected to raise the Fed Funds Rate by 25 basis points.
Recommendations
Goldman Sachs reiterated Underperform on VTS and Outperform on MUR. Goldman sees another strong quarter for MOT and increased estimates.
Late-Night News
Asian indices are higher, led by exporters, after a better-than-expected consumer confidence report in the U.S. OPEC President Yusgiantoro said oil prices should continue to ease back to the organization's $22-$28 target band, the Financial Times said. Disney's ESPN is in talks with British Sky Broadcasting to start a 24-hour sports channel in the U.K., the London-based Times said. General Motors Vice Chairman Lutz said Western Europe may be discouraging investment in manufacturing through high labor and regulatory costs, the Financial Times said. Passive smoking may be more dangerous than previously thought, raising the risk of heart disease among non-smokers by as much as 60%, Bloomberg reported. The U.S. Department of Agriculture reported its second possible case of made cow disease in less than a week as part of a screening program that the government expanded following a confirmed case in December, Bloomberg reported.
Late-Night Trading
Asian Indices are +.25 to +1.25% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.13%.
BOTTOM LINE: I expect U.S. stocks to open higher in the morning, led by technology and cyclical shares. The Chicago Purchasing Manager report will probably meet or fall slightly below expectations. I also expect the Fed to raise rates by 25 basis points and to keep the word "measured" in their policy statement with respect to the pace of future rate hikes. The extent of tomorrow's rally will likely be determined by the bond market's reaction to the rate increase and Fed statements. An increase in volatility and volume should be expected. Since May 17, the S&P 500 is up 5.0% and the Morgan Stanley Technology Index is up 10.3%. I continue to expect the rally will accelerate by no later than next Tuesday. However, if this does not occur I will have to re-think the current environment and the extent to which "irrational pessimism" is dominating investor psychology, thus leading to a continuation of the P/E multiple contractions that began in March of 2002. The Portfolio is 150% net long heading into tomorrow.
Company/Estimate
VOXX/.09
STZ/.49
EMMS/.07
FRE/1.61
GIS/.72
MERX/-.02
MON/.85
Splits
None of note.
Economic Data
Chicago Purchasing Manager for June estimated at 65.0 versus 68.0 in May.
The Fed is expected to raise the Fed Funds Rate by 25 basis points.
Recommendations
Goldman Sachs reiterated Underperform on VTS and Outperform on MUR. Goldman sees another strong quarter for MOT and increased estimates.
Late-Night News
Asian indices are higher, led by exporters, after a better-than-expected consumer confidence report in the U.S. OPEC President Yusgiantoro said oil prices should continue to ease back to the organization's $22-$28 target band, the Financial Times said. Disney's ESPN is in talks with British Sky Broadcasting to start a 24-hour sports channel in the U.K., the London-based Times said. General Motors Vice Chairman Lutz said Western Europe may be discouraging investment in manufacturing through high labor and regulatory costs, the Financial Times said. Passive smoking may be more dangerous than previously thought, raising the risk of heart disease among non-smokers by as much as 60%, Bloomberg reported. The U.S. Department of Agriculture reported its second possible case of made cow disease in less than a week as part of a screening program that the government expanded following a confirmed case in December, Bloomberg reported.
Late-Night Trading
Asian Indices are +.25 to +1.25% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.13%.
BOTTOM LINE: I expect U.S. stocks to open higher in the morning, led by technology and cyclical shares. The Chicago Purchasing Manager report will probably meet or fall slightly below expectations. I also expect the Fed to raise rates by 25 basis points and to keep the word "measured" in their policy statement with respect to the pace of future rate hikes. The extent of tomorrow's rally will likely be determined by the bond market's reaction to the rate increase and Fed statements. An increase in volatility and volume should be expected. Since May 17, the S&P 500 is up 5.0% and the Morgan Stanley Technology Index is up 10.3%. I continue to expect the rally will accelerate by no later than next Tuesday. However, if this does not occur I will have to re-think the current environment and the extent to which "irrational pessimism" is dominating investor psychology, thus leading to a continuation of the P/E multiple contractions that began in March of 2002. The Portfolio is 150% net long heading into tomorrow.
Tuesday, June 29, 2004
Tuesday Close
S&P 500 1,136.23 +.25%
NASDAQ 2,034.93 +.75%
Leading Sectors
Broadband +2.76%
Disk Drives +2.56%
Iron/Steel +2.31%
Lagging Sectors
Utilities -.92%
Homebuilders -.98%
Retail -2.09%
Other
Crude Oil 35.60 -.17%
Natural Gas 6.11 -.05%
Gold 392.80 unch.
Base Metals 107.87 -1.41%
U.S. Dollar 89.42 +.79%
10-Yr. T-note Yield 4.68% -1.14%
VIX 15.48 -3.67%
Put/Call .92 +53.33%
NYSE Arms .84 -23.64%
After-hours Movers
ESIO +22.04% after beating 4Q estimates substantially and raising 1Q guidance significantly.
QTWW +10.78% after beating 4Q estimates.
RIMM +6.85% after beating 1Q estimates and raising 2Q/3Q guidance.
Recommendations
Goldman Sachs reiterated Outperform on CTSH and Underperform on ATI.
After-hours News
U.S. stocks finished higher today on falling oil prices, declining interest rates and a strong consumer confidence report. After the close, Bank of America said it bought about 160,000 DaimlerChrysler AG credit-card accounts for an undisclosed price, Bloomberg reported. Former President Clinton's memoir has sold almost 1 million copies, CNN reported. Carlyle Group and Providence Equity Partners will each buy a 27% stake in PanAmSat for about $953 million, or a total of $1.9 billion, Bloomberg said. The U.S. will begin talks tomorrow at the UN on a resolution to disarm the Arab Janjaweed militias accused of atrocities against black Africans in Sudan's Darfur region, Bloomberg reported. Crude oil in New York fell to the lowest price in almost three months on optimism over Iraq and increasing production for OPEC, Bloomberg reported. Research In Motion, the maker of BlackBerry e-mail pagers, reported sales more than doubled to $269 million form $104.5 million, topping estimates, Bloomberg said. The U.S. Financial Accounting Standards Board may consider delaying for as much as a year a rule requiring stock options to be expensed, Bloomberg reported.
BOTTOM LINE: The Portfolio finished higher today and I added a few new technology longs in the afternoon, leaving the Portfolio with 150% net long market exposure. One of my new longs is MOT and I am using a stop-loss of $17.75 on this position. The fact that interest rates fell on a much better-than-expected consumer confidence reading is very positive. Moreover, crude oil has fallen 14% from its recent highs in a very short period of time. Finally, stocks are responding very well to good news as evidenced by the after-hours action in ESIO and RIMM. I continue to expect a move higher in the major U.S. indices by week's end on an increase in volume.
NASDAQ 2,034.93 +.75%
Leading Sectors
Broadband +2.76%
Disk Drives +2.56%
Iron/Steel +2.31%
Lagging Sectors
Utilities -.92%
Homebuilders -.98%
Retail -2.09%
Other
Crude Oil 35.60 -.17%
Natural Gas 6.11 -.05%
Gold 392.80 unch.
Base Metals 107.87 -1.41%
U.S. Dollar 89.42 +.79%
10-Yr. T-note Yield 4.68% -1.14%
VIX 15.48 -3.67%
Put/Call .92 +53.33%
NYSE Arms .84 -23.64%
After-hours Movers
ESIO +22.04% after beating 4Q estimates substantially and raising 1Q guidance significantly.
QTWW +10.78% after beating 4Q estimates.
RIMM +6.85% after beating 1Q estimates and raising 2Q/3Q guidance.
Recommendations
Goldman Sachs reiterated Outperform on CTSH and Underperform on ATI.
After-hours News
U.S. stocks finished higher today on falling oil prices, declining interest rates and a strong consumer confidence report. After the close, Bank of America said it bought about 160,000 DaimlerChrysler AG credit-card accounts for an undisclosed price, Bloomberg reported. Former President Clinton's memoir has sold almost 1 million copies, CNN reported. Carlyle Group and Providence Equity Partners will each buy a 27% stake in PanAmSat for about $953 million, or a total of $1.9 billion, Bloomberg said. The U.S. will begin talks tomorrow at the UN on a resolution to disarm the Arab Janjaweed militias accused of atrocities against black Africans in Sudan's Darfur region, Bloomberg reported. Crude oil in New York fell to the lowest price in almost three months on optimism over Iraq and increasing production for OPEC, Bloomberg reported. Research In Motion, the maker of BlackBerry e-mail pagers, reported sales more than doubled to $269 million form $104.5 million, topping estimates, Bloomberg said. The U.S. Financial Accounting Standards Board may consider delaying for as much as a year a rule requiring stock options to be expensed, Bloomberg reported.
BOTTOM LINE: The Portfolio finished higher today and I added a few new technology longs in the afternoon, leaving the Portfolio with 150% net long market exposure. One of my new longs is MOT and I am using a stop-loss of $17.75 on this position. The fact that interest rates fell on a much better-than-expected consumer confidence reading is very positive. Moreover, crude oil has fallen 14% from its recent highs in a very short period of time. Finally, stocks are responding very well to good news as evidenced by the after-hours action in ESIO and RIMM. I continue to expect a move higher in the major U.S. indices by week's end on an increase in volume.
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