Earnings of Note
Company/Estimate
CPB/.18
CKR/.20
Splits
CVX 2-for-1
CHZ 5-for-4
POOL 3-for-2
SSP 2-for-1
Economic Data
Monthly Budget Statement for August estimated at -$40.0B versus -$76.6B in July.
Weekend Recommendations
Louis Rukeyser's Wall Street had guests that were positive on APD, WAG, BBV, CVX, BA and VZ. Wall St. Week w/Fortune had guests that were positive on DVY, ENDP, DIS, FOX, CVX, MGM, C, MLS, PFE, MDT, JNJ, GE, WFC and BR. Barron's had a positive column on MKSI and negative column on SPX. Goldman Sachs reiterated Outperform on AMGN.
Weekend News
Iraq will create an independent oil company to run its oil and gas industry and invite international companies to develop fields, Middle East Economic Survey said. Saudi Arabia boosted output from two oilfields by a third in August as the country seeks to add 800,000 barrels a day to its oil output capacity, Middle East Economic Survey said. The first U.S. military intelligence soldier to stand trial for prisoner abuse at Iraq's Abu Gharaib prison was sentenced to eight months in jail, Agence France-Presse reported. SAP AG expects to gain customers if Oracle's hostile takeover bid for PeopleSoft succeeds, CEO Kagermann told newspaper Welt am Sonntag. Iran, holder of the world's second largest gas reserves, would reject any limits on the development of its "peaceful" nuclear technology program imposed by the UN, Bloomberg said. A former Texas National Guard commander, whom CBS News cited as vouching for the authenticity of memos that suggested President Bush received preferential treatment in his service, said he believes the documents are falsified, the NY Times reported. Vodafone Group may delay so-called third-generation services because of a handset shortage, the Sunday Times reported. More than 70,000 al-Qaeda terrorists who received training in camps in Afghanistan are still at large, the Independent on Sunday said, citing Daniel Benjamin, former counter-terrorism adviser to Bill Clinton. Toys "R" Us may be driven out of business by lower-cost competition led by Wal-Mart, the NY Times reported. Bill Rammell, the first U.K. government minister to visit North Korea, said he will ask North Korea today to explain a blast last week that created a mushroom cloud, the BBC said. NTL Inc. the U.K.'s biggest cable-tv operator, plans to sell its tv and radio broadcasting business for at least $2.16 billion, the Financial Times said. Families of World Trade Center victims returned to where New York's twin towers once stood to market the third anniversary of the Sept. 11 attacks and hear parents and grandparents who lost loved ones recite the names of the 2,749 people who died there, Bloomberg said. Hurricane Ivan, with winds speeds near 155 mph, is approaching Grand Cayman and moving toward Cuba, as Florida residents brace for a third storm to hit the state in a month, Bloomberg reported. Federal Reserve Governor Susan Bies said the central bank faces "no urgency" to lift the benchmark U.S. interest rate while awaiting more evidence that economic growth is steady, Bloomberg reported. US Airways, which failed to wrest a critical $800 million in concessions from workers, filed today for Chapter 11 bankruptcy protection for the second time since 2002, Bloomberg said. Crude oil futures are up 1.9% in New York on speculation Hurricane Ivan could disrupt output from platforms in the Gulf of Mexico, Bloomberg reported. Copper futures may fall this week amid speculation that China's government may step up moves to slow the economy, curbing demand from the world's biggest user of the metal, Bloomberg said. Broadcom said third-quarter sales won't meet its previous forecast because some customers are delaying deliveries, Bloomberg reported. U.S. orders for machine tools surged 77% to $243.1 million in July over the same month a year earlier as factories boosted investment in equipment to meet rising demand, Bloomberg said.
Late-Night Trading
Asian indices are higher, +.50% to +1.50% on average.
S&P 500 indicated -.04%.
NASDAQ indicated -.14%.
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on fears over damage from Hurricane Ivan, rising energy prices and Broadcom's negative pre-announcement. However, equities should rise later in the day on optimism over decelerating inflation, diminishing terrorism fears, future U.S. economic growth and short-covering. The Portfolio is 125% net long heading into tomorrow.
Monday, September 13, 2004
Sunday, September 12, 2004
Chart of the Week
iShares Lehman 20+ Year Treasury Bond Fund
Bottom Line: One way to play the acceleration in economic growth I envision during the fourth quarter would be to short TLT as long-term interest rates should rise from current levels. There are also options available on this security.
Bottom Line: One way to play the acceleration in economic growth I envision during the fourth quarter would be to short TLT as long-term interest rates should rise from current levels. There are also options available on this security.
Weekly Outlook
There are several important economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports include the Monthly Budget Statement, Current Account Balance, Advance Retail Sales, Empire Manufacturing, Business Inventories, Industrial Production, Capacity Utilization, Consumer Price Index, Initial Jobless Claims, Philly Fed and Univ. of Mich. Consumer Confidence. Retail Sales, CPI, Philly Fed and Consumer Confidence all have market-moving potential.
Oracle Corp.(ORCL), Best Buy(BBY), Cintas(CTAS), General Mills(GIS), AG Edwards(AGE), Carnival Corp.(CCL), Circuit City(CC) and Jabil Circuit(JBL) 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. Rosh Hashanah and an OPEC meeting could also impact trading this week.
Bottom Line: I expect U.S. stocks to finish the week modestly higher as traders and investors boost shares on optimism over diminishing terrorism fears, more merger activity, declining energy prices, falling inflation/interest rate concerns and economic data showing stabilizing sustainable growth. With measures of investor anxiety beginning to reach excessively complacent levels, I expect U.S. equities to put in a shot-term top during the next 2 weeks. However, I continue to believe stocks will resume their rally during the latter part of October and move meaningfully higher during the fourth quarter. My short-term trading indicators are still giving Buy signals and the Portfolio is 125% net long heading into the week.
Oracle Corp.(ORCL), Best Buy(BBY), Cintas(CTAS), General Mills(GIS), AG Edwards(AGE), Carnival Corp.(CCL), Circuit City(CC) and Jabil Circuit(JBL) 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. Rosh Hashanah and an OPEC meeting could also impact trading this week.
Bottom Line: I expect U.S. stocks to finish the week modestly higher as traders and investors boost shares on optimism over diminishing terrorism fears, more merger activity, declining energy prices, falling inflation/interest rate concerns and economic data showing stabilizing sustainable growth. With measures of investor anxiety beginning to reach excessively complacent levels, I expect U.S. equities to put in a shot-term top during the next 2 weeks. However, I continue to believe stocks will resume their rally during the latter part of October and move meaningfully higher during the fourth quarter. My short-term trading indicators are still giving Buy signals and the Portfolio is 125% net long heading into the week.
Market Week in Review
S&P 500 1,123.92 +.50%
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Last week's action was positive for the Bulls as the overall market consolidated recent gains and most sectors/stocks rose. The technology and steel sectors led the way. Technology investors bid shares higher from very oversold levels after a few bell-weathers made positive comments with respect to future growth and traders speculated the bad news had already been discounted in the stocks. Steel stocks broke higher from their recent consolidation on earnings optimism, low valuations and speculation that energy prices would fall further in coming weeks. Falling interest rates, after better-than-expected inflation readings and positive comments from Greenspan, also helped lift shares. Finally, the comments by Judge Walker, who ruled against the Justice Dept. in the Oracle/PeopleSoft case, were a big positive for technology stocks towards week's end. This should provide the catalyst for imminent consolidation within this sector still burdened by the overcapacity generated during the bubble of the late 90's. On the negative side, most measures of investor anxiety are now approaching levels of complacency normally associated with short-term tops.
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Last week's action was positive for the Bulls as the overall market consolidated recent gains and most sectors/stocks rose. The technology and steel sectors led the way. Technology investors bid shares higher from very oversold levels after a few bell-weathers made positive comments with respect to future growth and traders speculated the bad news had already been discounted in the stocks. Steel stocks broke higher from their recent consolidation on earnings optimism, low valuations and speculation that energy prices would fall further in coming weeks. Falling interest rates, after better-than-expected inflation readings and positive comments from Greenspan, also helped lift shares. Finally, the comments by Judge Walker, who ruled against the Justice Dept. in the Oracle/PeopleSoft case, were a big positive for technology stocks towards week's end. This should provide the catalyst for imminent consolidation within this sector still burdened by the overcapacity generated during the bubble of the late 90's. On the negative side, most measures of investor anxiety are now approaching levels of complacency normally associated with short-term tops.
Economic Week in Review
ECRI Weekly Leading Index 132.60 +1.14%
Consumer Credit for July rose to $10.9 billion versus estimates of $7.5 billion and a downwardly revised $4.3 billion in June. The more rapid growth in debt coincides with a rebound in consumer spending, which accounts for two-thirds of the U.S. economy. "Consumers charged up a storm in July, taking advantage of heavily discounted merchandise," said Richard Yamarone, chief economist at Argus Research. Consumers are watching their finances, other measures suggest. The rate at which cardholders repaid debt climbed to a record in June, and the delinquency rate fell to a four-year low, Moody's Investors Service reported. The so-called payment rate climbed to almost 17%, Bloomberg reported.
The Import Price Index for August rose 1.7% versus estimates of a .6% increase and a .3% rise in July. Costs of imported business equipment, consumer goods and vehicles were unchanged last month, suggesting profit margins will shrink until companies can pass along rising raw materials prices. The cost of imported petroleum surged 9.6% after rising 2% in July. Imports account for about 15% of all goods and services bought in the U.S., Bloomberg reported.
Initial Jobless Claims plunged to 319,000 last week versus estimates of 345,000 and 363,000 the prior week. Continuing Claims fell to 2.9M versus estimates of 2.87M and 2.88M prior. There were 3.19M job openings in July, the most since September 2001 and a sign hiring may pick up and propel the economy, Bloomberg said. Claims during the next several weeks may be difficult to interpret because of distortions stemming from Hurricane Frances and the timing of the Labor Day holiday, said Stephen Stanley, chief economist at RBS Greenwich Capital.
Wholesales Inventories for July rose 1.3% versus estimates of a .6% rise and a 1.1% increase in June. "The fact that businesses are willing to accumulate inventories shows a good degree of business optimism and suggests that we are indeed emerging from the soft patch," said Wesley M. Beal, an economist at IDEAglobal. "This indicates to me that we're seeing some inventory rebuilding, which is good news because levels have been so low they actually posed the risk of missed sales," said Timothy Rogers, chief economist at Briefing.com.
The Producer Price Index for August fell .1% versus estimates of a .2% increase and a .1% rise in July. The PPI Ex Food & Energy for August fell .1% versus estimates of a .1% increase and a .1% gain in July. "This lets the Fed continue raising rates at a moderate pace," said Richard Yamarone. "Despite the rise in oil prices through mid-August, inflation and inflation expectations have eased in recent months," Alan Greenspan said.
The Trade Balance for July fell to -$50.1 billion versus estimates of -$51.5 billion and -$55.0 billion in June. The trade gap with China grew to $14.9 billion, the widest ever, and accounted for almost a third of the imbalance, Bloomberg reported. The shortfall is likely to intensify pressure for the country to stop pegging its currency to the dollar, which holds down the price of Chinese exports, Bloomberg said.
Bottom Line: Overall, last week's data were positive. The ECRI Weekly Leading Index, which has been a very accurate predictor of future economic growth, broke its recent downtrend last week. Consumers, after a brief respite, are beginning to spend again. Moreover, it also appears they are beginning to shore up their finances, which is a very good sign. Measures of inflation are decelerating, thus leading to falling interest rates as future inflation expectations diminish. I continue to anticipate a decline in crude prices to around $35/bbl. which should lead to a further deceleration in inflation measures. The plunge in jobless claims was likely a result of hurricane disruptions, however they continue to head in the right direction. Finally, managers are displaying more optimism as inventories are at more healthy levels, which should also help to boost current growth. I continue to expect U.S. economic growth to approach 5% during the fourth quarter. Falling energy prices, declining interest rates, stabilizing Chinese growth, rebuilding in Florida, an end to the uncertainty and bitterness over the U.S. election, companies purchasing equipment before tax incentives expire at year-end, diminishing terrorism fears and an improving big picture in Iraq should provide the catalysts.
Consumer Credit for July rose to $10.9 billion versus estimates of $7.5 billion and a downwardly revised $4.3 billion in June. The more rapid growth in debt coincides with a rebound in consumer spending, which accounts for two-thirds of the U.S. economy. "Consumers charged up a storm in July, taking advantage of heavily discounted merchandise," said Richard Yamarone, chief economist at Argus Research. Consumers are watching their finances, other measures suggest. The rate at which cardholders repaid debt climbed to a record in June, and the delinquency rate fell to a four-year low, Moody's Investors Service reported. The so-called payment rate climbed to almost 17%, Bloomberg reported.
The Import Price Index for August rose 1.7% versus estimates of a .6% increase and a .3% rise in July. Costs of imported business equipment, consumer goods and vehicles were unchanged last month, suggesting profit margins will shrink until companies can pass along rising raw materials prices. The cost of imported petroleum surged 9.6% after rising 2% in July. Imports account for about 15% of all goods and services bought in the U.S., Bloomberg reported.
Initial Jobless Claims plunged to 319,000 last week versus estimates of 345,000 and 363,000 the prior week. Continuing Claims fell to 2.9M versus estimates of 2.87M and 2.88M prior. There were 3.19M job openings in July, the most since September 2001 and a sign hiring may pick up and propel the economy, Bloomberg said. Claims during the next several weeks may be difficult to interpret because of distortions stemming from Hurricane Frances and the timing of the Labor Day holiday, said Stephen Stanley, chief economist at RBS Greenwich Capital.
Wholesales Inventories for July rose 1.3% versus estimates of a .6% rise and a 1.1% increase in June. "The fact that businesses are willing to accumulate inventories shows a good degree of business optimism and suggests that we are indeed emerging from the soft patch," said Wesley M. Beal, an economist at IDEAglobal. "This indicates to me that we're seeing some inventory rebuilding, which is good news because levels have been so low they actually posed the risk of missed sales," said Timothy Rogers, chief economist at Briefing.com.
The Producer Price Index for August fell .1% versus estimates of a .2% increase and a .1% rise in July. The PPI Ex Food & Energy for August fell .1% versus estimates of a .1% increase and a .1% gain in July. "This lets the Fed continue raising rates at a moderate pace," said Richard Yamarone. "Despite the rise in oil prices through mid-August, inflation and inflation expectations have eased in recent months," Alan Greenspan said.
The Trade Balance for July fell to -$50.1 billion versus estimates of -$51.5 billion and -$55.0 billion in June. The trade gap with China grew to $14.9 billion, the widest ever, and accounted for almost a third of the imbalance, Bloomberg reported. The shortfall is likely to intensify pressure for the country to stop pegging its currency to the dollar, which holds down the price of Chinese exports, Bloomberg said.
Bottom Line: Overall, last week's data were positive. The ECRI Weekly Leading Index, which has been a very accurate predictor of future economic growth, broke its recent downtrend last week. Consumers, after a brief respite, are beginning to spend again. Moreover, it also appears they are beginning to shore up their finances, which is a very good sign. Measures of inflation are decelerating, thus leading to falling interest rates as future inflation expectations diminish. I continue to anticipate a decline in crude prices to around $35/bbl. which should lead to a further deceleration in inflation measures. The plunge in jobless claims was likely a result of hurricane disruptions, however they continue to head in the right direction. Finally, managers are displaying more optimism as inventories are at more healthy levels, which should also help to boost current growth. I continue to expect U.S. economic growth to approach 5% during the fourth quarter. Falling energy prices, declining interest rates, stabilizing Chinese growth, rebuilding in Florida, an end to the uncertainty and bitterness over the U.S. election, companies purchasing equipment before tax incentives expire at year-end, diminishing terrorism fears and an improving big picture in Iraq should provide the catalysts.
Saturday, September 11, 2004
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