There are a few important economic reports and a number of significant corporate earnings reports scheduled for release this week. Economic reports this week include Existing Home Sales, Consumer Confidence, New Home Sales, Durable Goods Orders, Employment Cost Index, Initial Jobless Claims, GDP, Personal Consumption, GDP Price Deflator, Univ. of Mich. Consumer Confidence and Chicago Purchasing Manager report. Home Sales, Consumer Confidence readings, GDP and the Chicago Purchasing Manager report all have market-moving potential.
Andrew Corp.(ANDW), Boston Scientific(BSX), HCA Inc.(HCA), Intl. Paper(IP), American Express(AXP), Automatic Data Processing(ADP), E.I. du Pont(DD), Lockheed Martin(LMT), Nabors Industries(NBR), Phelps Dodge(PD), Verizon Communications(VZ), Veritas Software(VRTS), Boeing(BA), Comcast(CMCSA), Hilton Hotels(HLT), KLA-Tencor Corp.(KLAC), Gillette(G), Time Warner(TWX), BellSouth(BLS), Bristol-Myers Squibb(BMY), Ingram Micro(IM) and Liz Claiborne(LIZ) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The Fed's Hoening's speech on monetary policy, the Government Security Expo and Bank of America's Specialty Pharmaceutical Conference could also impact trading this week.
Bottom Line: I expect U.S. stocks to remain under pressure through mid-week, then to rise through week's end, leaving the major U.S. averages modestly higher for the week. The Morgan Stanley Technology Index is now down 17.8% from its recent high in January. Barring any domestic terror attacks, the end of the Democratic Convention should prompt at least a relief rally in many oversold stocks. My short-term trading indicators are still giving sell signals and the Portfolio is 50% net short heading into the week.
Sunday, July 25, 2004
Market Week in Review
S&P 500 1,086.20 -1.38%
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Overall, last week was not very good for the Bulls. The NASDAQ advance/decline line continued to deteriorate, technical damage spread, most good news went unrewarded, the Put/Call and Arms readings fell and energy prices rose. However, there were a few positives last week. The Financials rose, AAII % Bulls fell, the VIX increased and most commodities declined in price. As well, according to Thomson, companies boosted earnings by an estimated 24% in the second quarter, above the 19% estimate heading into earnings season. Moreover, only 11.0% of companies have missed estimates so far. Thomson also estimates earnings will increase a robust 15.3% in the second half of the year. The S&P 500's 04 estimated P/E is now 16.51, down 68.0% from its peak. This very reasonable valuation is also 24.2% lower than in 1992 and 11.5% lower than in 1987, years proceeding major bulls moves. Considering interest rates are still near historic lows, inflation is below its long-term average, the high level of U.S. economic and military leadership, economic growth near 20-year highs, record-high American net-worth, one could argue that stocks are actually cheap at current levels.
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Overall, last week was not very good for the Bulls. The NASDAQ advance/decline line continued to deteriorate, technical damage spread, most good news went unrewarded, the Put/Call and Arms readings fell and energy prices rose. However, there were a few positives last week. The Financials rose, AAII % Bulls fell, the VIX increased and most commodities declined in price. As well, according to Thomson, companies boosted earnings by an estimated 24% in the second quarter, above the 19% estimate heading into earnings season. Moreover, only 11.0% of companies have missed estimates so far. Thomson also estimates earnings will increase a robust 15.3% in the second half of the year. The S&P 500's 04 estimated P/E is now 16.51, down 68.0% from its peak. This very reasonable valuation is also 24.2% lower than in 1992 and 11.5% lower than in 1987, years proceeding major bulls moves. Considering interest rates are still near historic lows, inflation is below its long-term average, the high level of U.S. economic and military leadership, economic growth near 20-year highs, record-high American net-worth, one could argue that stocks are actually cheap at current levels.
Saturday, July 24, 2004
Economic Week in Review
ECRI Weekly Leading Index 131.20 -.23%
Housing Starts for June fell to 1802K versus estimates of 1990K and an upwardly revised 1970K in May. Building Permits for June fell to 1924K versus estimates of 2000K and an upwardly revised 2097K in May. The drop in permits was the biggest since 1994, when the Fed last started raising its target interest rate following a recession. Fed Chairman Greenspan told lawmakers that "housing starts, which have come up at an extraordinary pace in recent years, are very likely to shade lower over the next couple of years. It's hard to maintain the pace that we're maintaining. But we do not expect that the fall-off will be abrupt." Construction, which in 2003 was the strongest in 25 years, may also have been hampered by rainy weather last month. Rainfall averaged 7.46 inches in the South last month, the wettest June since record-keeping began in 1895. Moreover, 3.5 inches of rain fell on the entire U.S. last month, the seventh-wettest June on record. The number of homes authorized but not yet started increased 10% in June to 202,100, the most since April 1987, suggesting builders' backlogs still are widening, Bloomberg reported.
Fed Chairman Greenspan said a recent slowdown in consumer spending "should prove short-lived" and that the central bank can continue to raise interest rates at a "measured" pace. "Inflation also seems to have been boosted by transitory factors such as the surge in energy prices," Greenspan told the Senate Banking Committee. The FOMC, in a related report, predicted the economy will grow as much as 4.75% in 2004 from last year's fourth quarter, down from a 5% estimate in February. This would still be the fastest U.S. economic growth since the height of the internet bubble in 1999, Bloomberg said. The FOMC predicted its preferred inflation measure, the core personal consumption expenditures price index, will rise to a range of 1.5% to 2% this year, Bloomberg reported. "A sustained pick-up in the rate of inflation" is not likely as "businesses are limited in the degree to which they can raise prices because of global competition and slack resources in the economy", Greenspan said. The FOMC also predicted that the unemployment rate would drop in the fourth quarter, averaging 5.25-5.5%. Businesses have now added an average of 211,000 new jobs per month over the past six months, Bloomberg said. "Nothing is frightening them that growth will stall out or that inflation is getting out of hand," said James Paulsen, who oversees about $125 billion as chief investment strategist at Wells Capital Management.
Initial Jobless Claims fell to 339,000 versus estimates of 345,000 and 350,000 the prior week. Continuing Claims were 2,797,000 versus estimates of 2,930,000 and 2,964,000 prior. "Job growth went through a soft patch in June and is picking up again in July," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi. The Fed Bank of Philadelphia's measure of factory hiring rose to the highest ever this month and the Fed Bank of New York also reported a rise in the number of factories hiring more workers, Bloomberg reported. "I know a number of people looked at recent data and took it as some indication that there is some significant weakness developing. If that were the case, I think we would have seen it in a marked pick-up in initial claims for unemployment insurance which, of course, we did not," Greenspan told the Senate Banking Committee.
Leading Indicators for June fell .2% versus estimates of an unchanged reading and a .4% rise in May. The index fell for the first time in more than a year in June, as a decrease in building permits and hours worked restrained the measure, Bloomberg reported. Recent reports of gains in the manufacturing sector show any slowdown may be temporary, economists said. "These data still suggest that, on balance, the economy has shifted to a moderate self-sustaining expansion from a robust stimulus-led one," said Steven Wood, president of Insight Economics. "Strong economic performance in May gave way to a weaker June. The index is still about 3.4% higher in the second quarter than in the first," said Ken Goldstein, an economist at the Conference Board.
Bottom Line: Housing starts were definitely affected by the weather. As well, the spike in mortgage rates in March likely scared many potential new home buyers into locking-in rates. This likely resulted in a depletion of some pent-up demand. However, with mortgage rates falling 46 basis points from recent highs, building will likely stabilize in the near future. It is obvious from multiple Fed members' comments that they perceive the recent economic weakness as only temporary and that they will continue to raise rates in 25 basis point increments as inflation is not currently a problem. However, a rise in the Core PCE Price Index of greater than 2% would likely result in an acceleration of the rate of hikes. Data also suggest that the recent slowdown in job growth was only temporary, as well. The change in non-farm payrolls for July should meet or exceed the current estimate of 223,000. The decline in the Leading Indicators Index, while hurt to an extent by bad weather, likely portends a slowdown in GDP growth for this quarter. I agree with the Fed that current economic weakness is only temporary and that growth will accelerate in the fourth quarter.
Overall, the data were mixed and likely point to continued weakness in the short-run. It is my belief that three main issues are currently slowing economic growth. First, recent polls suggest that the largest number of small-business owners and executives in recent memory feel that the Democratic ticket will damage the economy. This perception, combined with President Bush's slide in some polls, is actually resulting in a decrease in business spending in anticipation of a weaker economy. The still nagging overcapacity generated by the excesses of the late nineties and increased global competition result in earnings shortfalls in some sectors with any slight downtick in demand. Second, there is the growing perception that a domestic terror act, to disrupt the U.S. election or political conventions, is inevitable. This is also likely affecting energy prices, confidence and spending by corporate America. Finally, the extremely wet conditions in much of the country and the spike in home-buying in the first half of the year have dampened consumer spending recently. I view this as only temporary as I do not believe rates have risen enough or that inflation is a big enough problem to damage consumer spending longer-term.
Housing Starts for June fell to 1802K versus estimates of 1990K and an upwardly revised 1970K in May. Building Permits for June fell to 1924K versus estimates of 2000K and an upwardly revised 2097K in May. The drop in permits was the biggest since 1994, when the Fed last started raising its target interest rate following a recession. Fed Chairman Greenspan told lawmakers that "housing starts, which have come up at an extraordinary pace in recent years, are very likely to shade lower over the next couple of years. It's hard to maintain the pace that we're maintaining. But we do not expect that the fall-off will be abrupt." Construction, which in 2003 was the strongest in 25 years, may also have been hampered by rainy weather last month. Rainfall averaged 7.46 inches in the South last month, the wettest June since record-keeping began in 1895. Moreover, 3.5 inches of rain fell on the entire U.S. last month, the seventh-wettest June on record. The number of homes authorized but not yet started increased 10% in June to 202,100, the most since April 1987, suggesting builders' backlogs still are widening, Bloomberg reported.
Fed Chairman Greenspan said a recent slowdown in consumer spending "should prove short-lived" and that the central bank can continue to raise interest rates at a "measured" pace. "Inflation also seems to have been boosted by transitory factors such as the surge in energy prices," Greenspan told the Senate Banking Committee. The FOMC, in a related report, predicted the economy will grow as much as 4.75% in 2004 from last year's fourth quarter, down from a 5% estimate in February. This would still be the fastest U.S. economic growth since the height of the internet bubble in 1999, Bloomberg said. The FOMC predicted its preferred inflation measure, the core personal consumption expenditures price index, will rise to a range of 1.5% to 2% this year, Bloomberg reported. "A sustained pick-up in the rate of inflation" is not likely as "businesses are limited in the degree to which they can raise prices because of global competition and slack resources in the economy", Greenspan said. The FOMC also predicted that the unemployment rate would drop in the fourth quarter, averaging 5.25-5.5%. Businesses have now added an average of 211,000 new jobs per month over the past six months, Bloomberg said. "Nothing is frightening them that growth will stall out or that inflation is getting out of hand," said James Paulsen, who oversees about $125 billion as chief investment strategist at Wells Capital Management.
Initial Jobless Claims fell to 339,000 versus estimates of 345,000 and 350,000 the prior week. Continuing Claims were 2,797,000 versus estimates of 2,930,000 and 2,964,000 prior. "Job growth went through a soft patch in June and is picking up again in July," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi. The Fed Bank of Philadelphia's measure of factory hiring rose to the highest ever this month and the Fed Bank of New York also reported a rise in the number of factories hiring more workers, Bloomberg reported. "I know a number of people looked at recent data and took it as some indication that there is some significant weakness developing. If that were the case, I think we would have seen it in a marked pick-up in initial claims for unemployment insurance which, of course, we did not," Greenspan told the Senate Banking Committee.
Leading Indicators for June fell .2% versus estimates of an unchanged reading and a .4% rise in May. The index fell for the first time in more than a year in June, as a decrease in building permits and hours worked restrained the measure, Bloomberg reported. Recent reports of gains in the manufacturing sector show any slowdown may be temporary, economists said. "These data still suggest that, on balance, the economy has shifted to a moderate self-sustaining expansion from a robust stimulus-led one," said Steven Wood, president of Insight Economics. "Strong economic performance in May gave way to a weaker June. The index is still about 3.4% higher in the second quarter than in the first," said Ken Goldstein, an economist at the Conference Board.
Bottom Line: Housing starts were definitely affected by the weather. As well, the spike in mortgage rates in March likely scared many potential new home buyers into locking-in rates. This likely resulted in a depletion of some pent-up demand. However, with mortgage rates falling 46 basis points from recent highs, building will likely stabilize in the near future. It is obvious from multiple Fed members' comments that they perceive the recent economic weakness as only temporary and that they will continue to raise rates in 25 basis point increments as inflation is not currently a problem. However, a rise in the Core PCE Price Index of greater than 2% would likely result in an acceleration of the rate of hikes. Data also suggest that the recent slowdown in job growth was only temporary, as well. The change in non-farm payrolls for July should meet or exceed the current estimate of 223,000. The decline in the Leading Indicators Index, while hurt to an extent by bad weather, likely portends a slowdown in GDP growth for this quarter. I agree with the Fed that current economic weakness is only temporary and that growth will accelerate in the fourth quarter.
Overall, the data were mixed and likely point to continued weakness in the short-run. It is my belief that three main issues are currently slowing economic growth. First, recent polls suggest that the largest number of small-business owners and executives in recent memory feel that the Democratic ticket will damage the economy. This perception, combined with President Bush's slide in some polls, is actually resulting in a decrease in business spending in anticipation of a weaker economy. The still nagging overcapacity generated by the excesses of the late nineties and increased global competition result in earnings shortfalls in some sectors with any slight downtick in demand. Second, there is the growing perception that a domestic terror act, to disrupt the U.S. election or political conventions, is inevitable. This is also likely affecting energy prices, confidence and spending by corporate America. Finally, the extremely wet conditions in much of the country and the spike in home-buying in the first half of the year have dampened consumer spending recently. I view this as only temporary as I do not believe rates have risen enough or that inflation is a big enough problem to damage consumer spending longer-term.
Weekly Scoreboard*
Indices
S&P 500 1,086.20 -1.38%
Dow 9,962.22 -1.75%
NASDAQ 1,849.09 -1.81%
Russell 2000 539.23 -2.92%
S&P Equity Long/Short Index 965.90 -.45%
Put/Call .78 -28.44%
NYSE Arms 1.74 -5.43%
Volatility(VIX) 16.50 +15.06%
AAII % Bulls 35.71 -24.61%
US Dollar 89.26 +2.44%
CRB 270.21 -.77%
Futures Spot Prices
Gold 390.50 -4.05%
Crude Oil 41.71 +1.16%
Unleaded Gasoline 127.88 -1.78%
Natural Gas 6.13 +4.14%
Base Metals 108.18 -4.29%
10-year US Treasury Yield 4.43% +1.84%
Average 30-year Mortgage Rate 5.98% -.33%
Leading Sectors
Telecom +2.13%
I-Banks +1.53%
Banks +.39%
Lagging Sectors
Commodity -4.24%
Disk Drives -4.32%
Biotech -4.59%
*% Gain or loss for the week
S&P 500 1,086.20 -1.38%
Dow 9,962.22 -1.75%
NASDAQ 1,849.09 -1.81%
Russell 2000 539.23 -2.92%
S&P Equity Long/Short Index 965.90 -.45%
Put/Call .78 -28.44%
NYSE Arms 1.74 -5.43%
Volatility(VIX) 16.50 +15.06%
AAII % Bulls 35.71 -24.61%
US Dollar 89.26 +2.44%
CRB 270.21 -.77%
Futures Spot Prices
Gold 390.50 -4.05%
Crude Oil 41.71 +1.16%
Unleaded Gasoline 127.88 -1.78%
Natural Gas 6.13 +4.14%
Base Metals 108.18 -4.29%
10-year US Treasury Yield 4.43% +1.84%
Average 30-year Mortgage Rate 5.98% -.33%
Leading Sectors
Telecom +2.13%
I-Banks +1.53%
Banks +.39%
Lagging Sectors
Commodity -4.24%
Disk Drives -4.32%
Biotech -4.59%
*% Gain or loss for the week
Friday, July 23, 2004
Mid-day Update
S&P 500 1,087.62 -.84%
NASDAQ 1,856.77 -1.72%
Leading Sectors
Telecom +1.74%
Papers +.58%
Gaming +.33%
Lagging Sectors
Internet -2.69%
Semis -2.74%
Networking -3.02%
Other
Crude Oil 41.34 -.05%
Natural Gas 6.15 -.03%
Gold 389.30 -1.52%
Base Metals 108.18 -2.52%
U.S. Dollar 89.13 +.77%
10-Yr. T-note Yield 4.44% -.05%
VIX 16.42 +4.25%
Put/Call .71 -21.98%
NYSE Arms 1.85 +128.39%
Market Movers
AMZN -9.65% after missing 2Q estimates and giving weak guidance.
KO -7.9% after missing 2Q sales estimates and giving weak guidance.
ERTS -6.1% after beating 1Q estimates, but making cautious comments on year.
TKLC +12.7% after substantially beating 2Q estimates and raising 3Q guidance.
EFII +8.7% on rebound after fall on earnings yesterday.
CCMP +7.6% after beating 3Q estimates substantially and WR Hambrecht upgrade to Buy.
ARTI +9.3% after beating 3Q estimates.
NTMD +11.2% on continued optimism over recent study showing an experimental medicine showed "significant survival benefits" in African American patients with heart failure.
TWP +14.0% after beating 2Q estimates and giving positive guidance.
RHI +7.4% after beating 2Q estimates substantially and multiple upgrades.
FOE -20.2% after cutting 2Q estimates after finding an accounting error.
MTLG -14.6% after missing 2Q estimates and reaffirming 04 guidance.
CLSR -14.8% after beating 2Q estimates, but giving disappointing guidance.
NTY -18.3% after disappointing 3Q estimates.
Economic Data
None of note.
Recommendations
BLS raised to Buy at UBS, target $30. VZ raised to Buy at UBS, target $40. EMT cut to Reduce at UBS, target $10.50. BEAV raised to Outperform at CSFB, target $12. MCIP rated Underweight at Morgan Stanley, target $8. Merrill Lynch cut IGT to Sell from Buy. Goldman Sachs reiterated Underperform on SAY, PYX, DCLK, T and VRSN. Goldman reiterated Outperform on BAX, GE, AVP, SVU, STA, SLB, SBC, GDT and MSFT. Citi SmithBarney reiterated Buy on TXT, target $70. Citi reiterated Buy on AMGN, target $90. Citi reiterated Buy on MSFT, target $33. Citi reiterated Buy on VIAB, target $50. Citi reiterated Buy on MDU, target $28. Citi reiterated Buy on MCD, target $34. Citi reiterated Buy on BA, target $36. Citi reiterated Buy on PLUG, target $13. Citi reiterated Buy on RYL, target $125. Citi reiterated Buy on IGT, target $50. Citi reiterated Buy on RSAS, target $22. Citi reiterated Buy on FDRY, target $15. Citi reiterated Buy on WC, target $53. Citi reiterated Buy on AA, target $48. Citi reiterated Buy on ERTS, target $60. Citi reiterated Sell on T, target $14.
Mid-day News
U.S. stocks are falling mid-day on terrorism fears, earnings worries and upcoming negative political rhetoric. Lawmakers and corporate executives have discussed the possibility of amending part of the Sarbanes-Oxley Act, which bolstered requirements for corporate governance, the Washington Post reported. China's electricity consumption surged to a record yesterday as rising temperatures across the country increased usage of air-conditioners, Xinhua news said. Al-Qaeda members caught in Saudi Arabia, Pakistan and Afghanistan have provided details about a possible terrorist attack similar in scale to the attacks carried out on Sept. 11, the NY Times reported. An increasing number of Germans support working longer hours to save their jobs, ZDF tv reported. The FBI said terrorists may try to attack tv news trucks in an attempt to disrupt the July 26-29 Democratic convention in Boston, the Boston Globe reported. Copper prices in New York had their biggest decline in six weeks after Grupo Mexico SA, the world's third-biggest copper producer, won a ruling to stop two strikes that threatened to reduce half of the company's production, Bloomberg said. The U.S. FCC approved a six-month freeze on rates paid by AT&T and other telephone companies to rent lines from local carriers such as Verizon, Bloomberg reported. Goldman Sachs economists disagree with fears of a job-creation slowdown and have raised their July forecast to 300,000 non-farm payroll gains from 250,000 amid an "auspicious confluence" of events that has occurred only two other times in the past 30 years, Bloomberg reported. United Air and Northwest Air each won U.S. approval for a new daily flight between the U.S. and China, the first awards under an agreement the countries reached last month, Bloomberg said.
BOTTOM LINE: The Portfolio is substantially higher today as my software and semiconductor shorts are falling significantly. I have not traded today and the Portfolio is still 50% net short. The tone of the market is bad. The advance/decline line is poor, technology shares are very weak, oil remains high and the Put/Call ratio is falling. However, it is good to see the ARMS index spiking and the AAII % Bulls falling. The Morgan Stanley Tech Index is now down 17.5% from its January high. The P/E on the S&P 500's 04 estimated earnings is now 16.5 and falling. I continue to believe the major U.S. indices will make a bottom sometime during the next 2 months and show a significant gain in the 4th quarter. Longer-term investors should use any extreme weakness during the next several weeks to add to favorite long positions.
NASDAQ 1,856.77 -1.72%
Leading Sectors
Telecom +1.74%
Papers +.58%
Gaming +.33%
Lagging Sectors
Internet -2.69%
Semis -2.74%
Networking -3.02%
Other
Crude Oil 41.34 -.05%
Natural Gas 6.15 -.03%
Gold 389.30 -1.52%
Base Metals 108.18 -2.52%
U.S. Dollar 89.13 +.77%
10-Yr. T-note Yield 4.44% -.05%
VIX 16.42 +4.25%
Put/Call .71 -21.98%
NYSE Arms 1.85 +128.39%
Market Movers
AMZN -9.65% after missing 2Q estimates and giving weak guidance.
KO -7.9% after missing 2Q sales estimates and giving weak guidance.
ERTS -6.1% after beating 1Q estimates, but making cautious comments on year.
TKLC +12.7% after substantially beating 2Q estimates and raising 3Q guidance.
EFII +8.7% on rebound after fall on earnings yesterday.
CCMP +7.6% after beating 3Q estimates substantially and WR Hambrecht upgrade to Buy.
ARTI +9.3% after beating 3Q estimates.
NTMD +11.2% on continued optimism over recent study showing an experimental medicine showed "significant survival benefits" in African American patients with heart failure.
TWP +14.0% after beating 2Q estimates and giving positive guidance.
RHI +7.4% after beating 2Q estimates substantially and multiple upgrades.
FOE -20.2% after cutting 2Q estimates after finding an accounting error.
MTLG -14.6% after missing 2Q estimates and reaffirming 04 guidance.
CLSR -14.8% after beating 2Q estimates, but giving disappointing guidance.
NTY -18.3% after disappointing 3Q estimates.
Economic Data
None of note.
Recommendations
BLS raised to Buy at UBS, target $30. VZ raised to Buy at UBS, target $40. EMT cut to Reduce at UBS, target $10.50. BEAV raised to Outperform at CSFB, target $12. MCIP rated Underweight at Morgan Stanley, target $8. Merrill Lynch cut IGT to Sell from Buy. Goldman Sachs reiterated Underperform on SAY, PYX, DCLK, T and VRSN. Goldman reiterated Outperform on BAX, GE, AVP, SVU, STA, SLB, SBC, GDT and MSFT. Citi SmithBarney reiterated Buy on TXT, target $70. Citi reiterated Buy on AMGN, target $90. Citi reiterated Buy on MSFT, target $33. Citi reiterated Buy on VIAB, target $50. Citi reiterated Buy on MDU, target $28. Citi reiterated Buy on MCD, target $34. Citi reiterated Buy on BA, target $36. Citi reiterated Buy on PLUG, target $13. Citi reiterated Buy on RYL, target $125. Citi reiterated Buy on IGT, target $50. Citi reiterated Buy on RSAS, target $22. Citi reiterated Buy on FDRY, target $15. Citi reiterated Buy on WC, target $53. Citi reiterated Buy on AA, target $48. Citi reiterated Buy on ERTS, target $60. Citi reiterated Sell on T, target $14.
Mid-day News
U.S. stocks are falling mid-day on terrorism fears, earnings worries and upcoming negative political rhetoric. Lawmakers and corporate executives have discussed the possibility of amending part of the Sarbanes-Oxley Act, which bolstered requirements for corporate governance, the Washington Post reported. China's electricity consumption surged to a record yesterday as rising temperatures across the country increased usage of air-conditioners, Xinhua news said. Al-Qaeda members caught in Saudi Arabia, Pakistan and Afghanistan have provided details about a possible terrorist attack similar in scale to the attacks carried out on Sept. 11, the NY Times reported. An increasing number of Germans support working longer hours to save their jobs, ZDF tv reported. The FBI said terrorists may try to attack tv news trucks in an attempt to disrupt the July 26-29 Democratic convention in Boston, the Boston Globe reported. Copper prices in New York had their biggest decline in six weeks after Grupo Mexico SA, the world's third-biggest copper producer, won a ruling to stop two strikes that threatened to reduce half of the company's production, Bloomberg said. The U.S. FCC approved a six-month freeze on rates paid by AT&T and other telephone companies to rent lines from local carriers such as Verizon, Bloomberg reported. Goldman Sachs economists disagree with fears of a job-creation slowdown and have raised their July forecast to 300,000 non-farm payroll gains from 250,000 amid an "auspicious confluence" of events that has occurred only two other times in the past 30 years, Bloomberg reported. United Air and Northwest Air each won U.S. approval for a new daily flight between the U.S. and China, the first awards under an agreement the countries reached last month, Bloomberg said.
BOTTOM LINE: The Portfolio is substantially higher today as my software and semiconductor shorts are falling significantly. I have not traded today and the Portfolio is still 50% net short. The tone of the market is bad. The advance/decline line is poor, technology shares are very weak, oil remains high and the Put/Call ratio is falling. However, it is good to see the ARMS index spiking and the AAII % Bulls falling. The Morgan Stanley Tech Index is now down 17.5% from its January high. The P/E on the S&P 500's 04 estimated earnings is now 16.5 and falling. I continue to believe the major U.S. indices will make a bottom sometime during the next 2 months and show a significant gain in the 4th quarter. Longer-term investors should use any extreme weakness during the next several weeks to add to favorite long positions.
Friday Watch
Earnings of Note
Company/Estimate
AAII/-.20
ATN/.42
CCU/.41
CMI/1.34
FO/1.25
IT/.09
HAL/.33
LSCC/.03
ITT/1.15
MYG/.40
SLB/.49
WY/1.13
XRX/1.17
Splits
None of note.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on NUE, TPX, KO, VIAB, MCK, AMGN, SII, AA, CLS, LEA, DHR, IGT and SKYW. Goldman reiterated Underperform on VC and FISV.
Late-Night News
Asian indices are mostly lower on continuing concerns that high energy prices will affect exporters. ConocoPhillips is near an agreement to buy a 7.6% stake in Russia's OAO Lukoil for about $1.7 billion, the Wall Street Journal reported. Acambis Plc said it could still win a third contract to supply smallpox vaccines for the U.S. government, the Telegraph said. Huaneng Power plans to expand capacity by at least two-thirds in the next 4 years to meet China's expanding demand for electricity, the China Daily reported. Fast-food chains including Burger King are losing their value as consumers turn away from food brands that don't endorse healthier menus, the London-based Times said. Apple Computer starts a trade-in service for its iPod digital music player in Japan today to help prevent customers from switching to rival products, the Nikkei English News reported. Shares of LG.Philips LCD, the world's second-largest marker of liquid crystal displays, slumped on their first day of trading in the U.S. on concern falling prices will slow earnings growth, Bloomberg reported. The U.S. Congress approved an increase in defense spending to $416 billion next fiscal year, including $25 billion for military operations in Iraq. The appropriations bill passed the Senate on a vote of 96-0 and passed the House of Representatives 410-12, Bloomberg reported.
Late-Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.43%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on weakness in technology shares. The market will likely make another rally attempt tomorrow. I will closely monitor the quality of any rally and decide whether or not to add market exposure. My short-term trading indicators are still giving sell signals and the Portfolio is 50% net short heading into tomorrow.
Company/Estimate
AAII/-.20
ATN/.42
CCU/.41
CMI/1.34
FO/1.25
IT/.09
HAL/.33
LSCC/.03
ITT/1.15
MYG/.40
SLB/.49
WY/1.13
XRX/1.17
Splits
None of note.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on NUE, TPX, KO, VIAB, MCK, AMGN, SII, AA, CLS, LEA, DHR, IGT and SKYW. Goldman reiterated Underperform on VC and FISV.
Late-Night News
Asian indices are mostly lower on continuing concerns that high energy prices will affect exporters. ConocoPhillips is near an agreement to buy a 7.6% stake in Russia's OAO Lukoil for about $1.7 billion, the Wall Street Journal reported. Acambis Plc said it could still win a third contract to supply smallpox vaccines for the U.S. government, the Telegraph said. Huaneng Power plans to expand capacity by at least two-thirds in the next 4 years to meet China's expanding demand for electricity, the China Daily reported. Fast-food chains including Burger King are losing their value as consumers turn away from food brands that don't endorse healthier menus, the London-based Times said. Apple Computer starts a trade-in service for its iPod digital music player in Japan today to help prevent customers from switching to rival products, the Nikkei English News reported. Shares of LG.Philips LCD, the world's second-largest marker of liquid crystal displays, slumped on their first day of trading in the U.S. on concern falling prices will slow earnings growth, Bloomberg reported. The U.S. Congress approved an increase in defense spending to $416 billion next fiscal year, including $25 billion for military operations in Iraq. The appropriations bill passed the Senate on a vote of 96-0 and passed the House of Representatives 410-12, Bloomberg reported.
Late-Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.43%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on weakness in technology shares. The market will likely make another rally attempt tomorrow. I will closely monitor the quality of any rally and decide whether or not to add market exposure. My short-term trading indicators are still giving sell signals and the Portfolio is 50% net short heading into tomorrow.
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