S&P 500 1,103.52 -.59%
NASDAQ 1,859.88 -1.04%
Leading Sectors
Broadcasting +1.03%
Homebuilders +.91%
Utilities +.31%
Lagging Sectors
Biotech -1.85%
Networking -2.31%
Airlines -4.01%
Other
Crude Oil 49.92 +.62%
Natural Gas 5.30 +.72%
Gold 410.40 -.07%
Base Metals 117.14 +.98%
U.S. Dollar 88.29 -.12%
10-Yr. T-note Yield 3.98% -.95%
VIX 14.62 +2.38%
Put/Call .97 +4.30%
NYSE Arms 1.60 +52.38%
After-hours Movers
AGIX +64.0% after saying its experimental drug for clogged arteries significantly reduced the amount of fatty plaque in blood vessels.
NSTK +4.7% on continued optimism over its nasal spray for obesity.
MCHX +8.3% after announcing agreements with two of the Internet's leading shopping services through its TrafficLeader subsidiary.
HGSI -5.4% after announcing that it intends to offer $200 million aggregate principal amount of convertible subordinated notes.
MCIP -5.1% after saying Leucadia National has sold its 5% stake for $20 million pretax profit.
Recommendations
Goldman Sachs reiterated Outperform on HOT, FD, HD, WAG, AGN, CAT and PPL.
After-hours News
U.S. stocks finished lower today on rising commodity prices and profit-taking. After the close, Apollo Management is the leading bidder for News Corp.'s Hughes Network Systems unit after offering $300 million, Dow Jones reported. Iraq and the International Monetary Fund likely will reach an agreement this week or next on a program aimed at rebuilding Iraq's economy, Goldman Sachs International Vice Chairman Hormats told CNBC. American Airlines dropped a $10 per round trip fare increase on most U.S. and U.S.-Canada flights after competitors declined to match the change on all routes, Bloomberg reported. Nextel Communications said it purchased 6 million of its own shares, and some shares of Nextel Partners, from Motorola, Bloomberg said. Orange-juice prices in NY surged the most in more than three years to a 15-month high on supply concerns after Hurricane Jeanne hit Florida, Bloomberg reported.
BOTTOM LINE: The Portfolio finished slightly lower today as declines in my security longs offset gains in my homebuilding longs. I exited a few security-related longs in the afternoon as they hit stop-losses, thus leaving the Portfolio 25% net short. Volume was light today and the advance/decline line was poor. On the positive side, measures of investor anxiety are rising and interest rates continue to fall. I still expect homebuilders to reach all-time highs in the fourth quarter.
Monday, September 27, 2004
Mid-day Update
S&P 500 1,107.10 -.27%
NASDAQ 1,868.72 -.57%
Leading Sectors
Homebuilders +1.89%
Broadcasting +.38%
Drugs +.30%
Lagging Sectors
I-Banks -1.29%
Networking -1.31%
Airlines -3.45%
Other
Crude Oil 49.30 +.86%
Natural Gas 5.23 -2.91%
Gold 411.10 +.34%
Base Metals 117.02 +.88%
U.S. Dollar 88.21 -.21%
10-Yr. T-note Yield 3.99% -.76%
VIX 14.62 +2.38%
Put/Call .72 -22.58%
NYSE Arms 1.17 +11.43%
Market Movers
CX -7.5% after saying it agreed to buy RMC Group Plc for $4.15 billion to double revenue and expand in concrete markets in Europe and the U.S.
TOM -20.1% after saying U.S. authorities are investigating commissions the company paid to an overseas-purchasing unit.
VSEC +38.6% after saying it received a cost-plus-fixed-fee contract from the U.S. Navy valued as much as $1 billion.
NSTK +33.7% after announcing a global alliance with Merck(MRK) to develop an experimental nasal spray treatment for obesity.
PER +11.4% after boosting 3Q estimates.
CNCT after saying it had commenced the Phase III clinical trial program for Desilux, a low-potency topical steroid.
GMAI -14.7% on negative Barron's article.
Economic Data
New Home Sales for August were 1184K versus estimates of 1155K and 1082K in July.
Recommendations
Goldman Sachs reiterated Outperform on RE, ALL, ENH, AGN, FSL, HOT, KO, BSX, DNA, AMGN, STLD, FS, IGT, HD, GDT, MDT, MRVL and PFE. Goldman reiterated Underperform on AMCC. Citi SmithBarney reiterated Buy on MMM, target $95. Citi reiterated Buy on VIAB, target $50. Citi reiterated Buy on WMT, target $65. Citi reiterated Buy on HAL, target $44. Citi reiterated Sell on PGN, target $38.50. Citi reiterated Buy on UNM, target $20. Citi reiterated Buy on FNM, target $81. ISG raised to Outperform on CSFB. VISG rated Buy at UBS. WMT upgraded to Buy at Bank of America, target $60. JBLU, FRNT and AAI cut to Underweight at JP Morgan. FDO raised to Buy at Bank of America, target $33.50. IMOS raised to Outperform at Thomas Weisel, target $10. PTEN cut to Underweight at Morgan Stanley. TOM downgraded to Underweight, target $8.
Mid-day News
U.S. stocks are falling modestly mid-day on profit-taking and continuing fears over higher energy prices. IBM will invest $250 million over the next five years and employ1,000 people in a new business unit supporting products and services related to sensor networks, the NY Times reported. PalmSource will announce tomorrow its first operating system for so-called smart phones, the International Herald Tribune reported. Bank of America may close or merge as many as 38 mutual funds as part of its acquisition of FleetBoston Financial, the Boston Herald reported. Starbucks will raise beverage prices 11 cents on average, the Wall Street Journal reported. JP Morgan agreed to buy hedge fund company Highbridge Capital, Bloomberg reported. Anglo American Platinum, Impala Platinum and Northam Platinum may face strikes over pay at South African mines, crippling 60% of the world's platinum production and boosting prices of the metal, Bloomberg said. Walgreen said fourth-quarter profit rose 18%, helped by sales of prescription drugs, Bloomberg reported. Fannie Mae agreed to correct its bookkeeping policies to meet generally accepted accounting principles, Bloomberg said. A series of small tremors culminating in more than 10 larger earthquakes near Mount St. Helens may be a precursor to explosions, landslides and the release of ash clouds, the U.S. Geological Survey said. U.S. new home sales surged 9.4% in August, propelled by the lowest mortgage rates in four months, Bloomberg reported. Comcast is working with Time Warner to explore a potential transaction regarding bankrupt cable-tv operator Adelphia Communications, Bloomberg reported. Jeanne, the fourth hurricane to hit Florida in two months, weakened as it moved into Georgia, leaving behind a trail of destruction and at least 7 deaths, Bloomberg said. Crude oil is rising amid concern rebel attacks in Nigeria will reduce production and U.S. refiners will struggle to replenish supplies disrupted by Hurricane Ivan, Bloomberg reported.
BOTTOM LINE: The Portfolio is slightly lower mid-day as my declining security longs are more than offsetting my rising homebuilding longs. I have not traded today and the Portfolio is still market neutral. The tone of the market is negative today and the CRB is spiking up, mostly as a result of the hurricanes. I expect U.S. stocks to traded mixed into the afternoon.
NASDAQ 1,868.72 -.57%
Leading Sectors
Homebuilders +1.89%
Broadcasting +.38%
Drugs +.30%
Lagging Sectors
I-Banks -1.29%
Networking -1.31%
Airlines -3.45%
Other
Crude Oil 49.30 +.86%
Natural Gas 5.23 -2.91%
Gold 411.10 +.34%
Base Metals 117.02 +.88%
U.S. Dollar 88.21 -.21%
10-Yr. T-note Yield 3.99% -.76%
VIX 14.62 +2.38%
Put/Call .72 -22.58%
NYSE Arms 1.17 +11.43%
Market Movers
CX -7.5% after saying it agreed to buy RMC Group Plc for $4.15 billion to double revenue and expand in concrete markets in Europe and the U.S.
TOM -20.1% after saying U.S. authorities are investigating commissions the company paid to an overseas-purchasing unit.
VSEC +38.6% after saying it received a cost-plus-fixed-fee contract from the U.S. Navy valued as much as $1 billion.
NSTK +33.7% after announcing a global alliance with Merck(MRK) to develop an experimental nasal spray treatment for obesity.
PER +11.4% after boosting 3Q estimates.
CNCT after saying it had commenced the Phase III clinical trial program for Desilux, a low-potency topical steroid.
GMAI -14.7% on negative Barron's article.
Economic Data
New Home Sales for August were 1184K versus estimates of 1155K and 1082K in July.
Recommendations
Goldman Sachs reiterated Outperform on RE, ALL, ENH, AGN, FSL, HOT, KO, BSX, DNA, AMGN, STLD, FS, IGT, HD, GDT, MDT, MRVL and PFE. Goldman reiterated Underperform on AMCC. Citi SmithBarney reiterated Buy on MMM, target $95. Citi reiterated Buy on VIAB, target $50. Citi reiterated Buy on WMT, target $65. Citi reiterated Buy on HAL, target $44. Citi reiterated Sell on PGN, target $38.50. Citi reiterated Buy on UNM, target $20. Citi reiterated Buy on FNM, target $81. ISG raised to Outperform on CSFB. VISG rated Buy at UBS. WMT upgraded to Buy at Bank of America, target $60. JBLU, FRNT and AAI cut to Underweight at JP Morgan. FDO raised to Buy at Bank of America, target $33.50. IMOS raised to Outperform at Thomas Weisel, target $10. PTEN cut to Underweight at Morgan Stanley. TOM downgraded to Underweight, target $8.
Mid-day News
U.S. stocks are falling modestly mid-day on profit-taking and continuing fears over higher energy prices. IBM will invest $250 million over the next five years and employ1,000 people in a new business unit supporting products and services related to sensor networks, the NY Times reported. PalmSource will announce tomorrow its first operating system for so-called smart phones, the International Herald Tribune reported. Bank of America may close or merge as many as 38 mutual funds as part of its acquisition of FleetBoston Financial, the Boston Herald reported. Starbucks will raise beverage prices 11 cents on average, the Wall Street Journal reported. JP Morgan agreed to buy hedge fund company Highbridge Capital, Bloomberg reported. Anglo American Platinum, Impala Platinum and Northam Platinum may face strikes over pay at South African mines, crippling 60% of the world's platinum production and boosting prices of the metal, Bloomberg said. Walgreen said fourth-quarter profit rose 18%, helped by sales of prescription drugs, Bloomberg reported. Fannie Mae agreed to correct its bookkeeping policies to meet generally accepted accounting principles, Bloomberg said. A series of small tremors culminating in more than 10 larger earthquakes near Mount St. Helens may be a precursor to explosions, landslides and the release of ash clouds, the U.S. Geological Survey said. U.S. new home sales surged 9.4% in August, propelled by the lowest mortgage rates in four months, Bloomberg reported. Comcast is working with Time Warner to explore a potential transaction regarding bankrupt cable-tv operator Adelphia Communications, Bloomberg reported. Jeanne, the fourth hurricane to hit Florida in two months, weakened as it moved into Georgia, leaving behind a trail of destruction and at least 7 deaths, Bloomberg said. Crude oil is rising amid concern rebel attacks in Nigeria will reduce production and U.S. refiners will struggle to replenish supplies disrupted by Hurricane Ivan, Bloomberg reported.
BOTTOM LINE: The Portfolio is slightly lower mid-day as my declining security longs are more than offsetting my rising homebuilding longs. I have not traded today and the Portfolio is still market neutral. The tone of the market is negative today and the CRB is spiking up, mostly as a result of the hurricanes. I expect U.S. stocks to traded mixed into the afternoon.
Monday Watch
Earnings of Note
Company/Estimate
WAG/.31
Splits
AMWD 2-for-1
LM 3-for-2
Economic Data
New Home Sales for August estimated at 1155K versus 1134K in July.
Weekend Recommendations
Louis Rukeyser's Wall Street had guests that were positive on EK, INTC, DIA, PFE, BK and CMCSA. Wall St. Week w/Fortune had guests that were positive on CMCSA, NXTL, EBAY and EK. Bulls and Bears had guests that were positive on ERES, BAC, SLM, LDG, JBHT, CCL, AH, CL and mixed on KMRT, ORCL. Forbes on Fox had guests that were positive on INGR, QSTR, MSFT, WIT and MSO. Cashin' In had guests that were positive on FLIR, MMC, mixed on ISSX, KKD, ESPD, EDP and negative on MSO. Barron's had positive comments on BBI, F, TM, HMC, DCX and negative comments on VLKAY and GMAI. Goldman Sachs reiterated Outperform on EBAY. Goldman reiterated Attractive view on Gold stocks.
Weekend News
China may let its insurance companies buy stocks directly as early as next month, the 21st Century Business Herald said. Tesco Plc, Britain's biggest retailer, is testing RFID tags that will replace the bar code on products from bread to stereos, the Financial Times said. KarstadtQuelle AG, the largest German department store operator, plans to end its joint venture with Starbucks, Frankfurter Allgemeine Sonntagszeitung said. Iraq's Prime Minister Allawi and Secretary of State Colin Powell said they expected all Iraqis would participate in the election planned for January, the Washington Post reported. Semiconductor Manufacturing International has started making 12-inch wafers at its newest plant in Beijing, Xinhua news said. The world economy is at its best in five years, said IMF Managing Director Rodrigo Rato in an interview with El Pais. Senator Kerry, who supported extending a U.S. assault-weapons ban that expired two weeks ago, said that he owns a Chinese assault rifle, the NY Times reported. Viacom CEO Redstone said he will wait on a report by a panel investigating Dan Rather's use of questionable documents before deciding on the CBS News anchorman's future, Time magazine reported. Johnson & Johnson's may enter the hearing aid market and expand its over-the-counter drugs business in an effort to boost sales, the Financial Times said. France and Germany won't increase military aid to Iraq even if Senator Kerry wins the U.S. election, the Financial Times reported, citing French and German officials. Texas Instruments and Xilinx have cut chip orders at United Microelectronics after paring forecasts for their quarterly sales, the Commercial Times reported. Hewlett-Packard will stop making desktop computers based on Intel's Itanium chip, the Wall Street Journal reported. Asian traders said any declines in Fannie Mae debt, after regulators told the company to amend account ting procedures, are a buying opportunity, the Asian Wall Street Journal reported. U.S. oil inventories should make a quick recovery to normal levels after Hurricane Ivan disrupted supply to the U.S. Gulf of Mexico over the last two weeks, Qatar's oil minister said. Hurricane Jeanne, which slammed into Florida's Atlantic coast overnight, may cost insurers $6 billion to $14 billion, rivaling Hurricane Charley as the most expensive storm of the season, Bloomberg reported. Inco, the world's second-biggest nickel producer, and Falconbridge may spend $3.5 billion for the metal from Chinese stainless steel makers soars, Bloomberg said. The U.S. Army may reduce the length of time soldiers are required to spend in combat zones in Iraq and Afghanistan, the NY Times reported. Fannie Mae may have to sell assets or turn to investors to raise cash to meet its regulatory capital standards, the Wall Street Journal said.
Late-Night Trading
Asian indices are mixed, -.75% to +.25% on average.
S&P 500 indicated +.04%.
NASDAQ indicated +.04%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on higher energy prices and greater-than-expected damage from Hurricane Jeanne. The Portfolio is market neutral heading into the week.
Company/Estimate
WAG/.31
Splits
AMWD 2-for-1
LM 3-for-2
Economic Data
New Home Sales for August estimated at 1155K versus 1134K in July.
Weekend Recommendations
Louis Rukeyser's Wall Street had guests that were positive on EK, INTC, DIA, PFE, BK and CMCSA. Wall St. Week w/Fortune had guests that were positive on CMCSA, NXTL, EBAY and EK. Bulls and Bears had guests that were positive on ERES, BAC, SLM, LDG, JBHT, CCL, AH, CL and mixed on KMRT, ORCL. Forbes on Fox had guests that were positive on INGR, QSTR, MSFT, WIT and MSO. Cashin' In had guests that were positive on FLIR, MMC, mixed on ISSX, KKD, ESPD, EDP and negative on MSO. Barron's had positive comments on BBI, F, TM, HMC, DCX and negative comments on VLKAY and GMAI. Goldman Sachs reiterated Outperform on EBAY. Goldman reiterated Attractive view on Gold stocks.
Weekend News
China may let its insurance companies buy stocks directly as early as next month, the 21st Century Business Herald said. Tesco Plc, Britain's biggest retailer, is testing RFID tags that will replace the bar code on products from bread to stereos, the Financial Times said. KarstadtQuelle AG, the largest German department store operator, plans to end its joint venture with Starbucks, Frankfurter Allgemeine Sonntagszeitung said. Iraq's Prime Minister Allawi and Secretary of State Colin Powell said they expected all Iraqis would participate in the election planned for January, the Washington Post reported. Semiconductor Manufacturing International has started making 12-inch wafers at its newest plant in Beijing, Xinhua news said. The world economy is at its best in five years, said IMF Managing Director Rodrigo Rato in an interview with El Pais. Senator Kerry, who supported extending a U.S. assault-weapons ban that expired two weeks ago, said that he owns a Chinese assault rifle, the NY Times reported. Viacom CEO Redstone said he will wait on a report by a panel investigating Dan Rather's use of questionable documents before deciding on the CBS News anchorman's future, Time magazine reported. Johnson & Johnson's may enter the hearing aid market and expand its over-the-counter drugs business in an effort to boost sales, the Financial Times said. France and Germany won't increase military aid to Iraq even if Senator Kerry wins the U.S. election, the Financial Times reported, citing French and German officials. Texas Instruments and Xilinx have cut chip orders at United Microelectronics after paring forecasts for their quarterly sales, the Commercial Times reported. Hewlett-Packard will stop making desktop computers based on Intel's Itanium chip, the Wall Street Journal reported. Asian traders said any declines in Fannie Mae debt, after regulators told the company to amend account ting procedures, are a buying opportunity, the Asian Wall Street Journal reported. U.S. oil inventories should make a quick recovery to normal levels after Hurricane Ivan disrupted supply to the U.S. Gulf of Mexico over the last two weeks, Qatar's oil minister said. Hurricane Jeanne, which slammed into Florida's Atlantic coast overnight, may cost insurers $6 billion to $14 billion, rivaling Hurricane Charley as the most expensive storm of the season, Bloomberg reported. Inco, the world's second-biggest nickel producer, and Falconbridge may spend $3.5 billion for the metal from Chinese stainless steel makers soars, Bloomberg said. The U.S. Army may reduce the length of time soldiers are required to spend in combat zones in Iraq and Afghanistan, the NY Times reported. Fannie Mae may have to sell assets or turn to investors to raise cash to meet its regulatory capital standards, the Wall Street Journal said.
Late-Night Trading
Asian indices are mixed, -.75% to +.25% on average.
S&P 500 indicated +.04%.
NASDAQ indicated +.04%
BOTTOM LINE: I expect U.S. stocks to open modestly lower in the morning on higher energy prices and greater-than-expected damage from Hurricane Jeanne. The Portfolio is market neutral heading into the week.
Sunday, September 26, 2004
Chart of the Week
Phelps Dodge Corporation
Bottom Line: Phelps Dodge(PD), the leading U.S. copper producer, rose 8.82% to a new all-time high last week. Accelerating demand for copper bodes well for future U.S. economic growth. I expect PD to break $100/share before year-end.
Bottom Line: Phelps Dodge(PD), the leading U.S. copper producer, rose 8.82% to a new all-time high last week. Accelerating demand for copper bodes well for future U.S. economic growth. I expect PD to break $100/share before year-end.
Weekly Outlook
There are a number of important economic reports and a few significant corporate earnings reports scheduled for release this week. Economic reports include New Home Sales, Consumer Confidence, Final 2Q GDP readings, Personal Income, Personal Spending, PCE Deflator, Initial Jobless Claims, Help Wanted Index, Chicago Purchasing Manager, Final Univ. of Mich. Consumer Confidence, Construction Spending, ISM Manufacturing/Prices Paid and Vehicle Sales. New Home Sales, Consumer Confidence, GDP readings, Personal Spending, Chicago Purchasing Manager and ISM all have market-moving potential.
Walgreen(WAG), Solectron(SLR), American Greeting(AM), Micron Technology(MU), Constellation Brands(STZ) and Family Dollar Stores(FDO) are some of the more important companies that release quarterly earnings this week. There are also a number of other events that have market-moving potential. The UBS Global Life Sciences Conference, Oil & Gas Investment Symposium West, Deutsche Bank Global Oil & Gas Conference, Merrill Lynch Media Conference, Thomas Weisel Consumer Conference, Fed's Hoenig speaking, CSFB Chemical Conference, Fed's McTeer speaking and the Fed's Geithner speaking could also impact trading this week.
Bottom Line: I expect U.S. stocks to finish the week mixed as earnings worries and profit-taking offset better economic data and quarter-end window dressing. As well, investor complacency and the market's technically overbought state should lead to further consolidation. Investors are overreacting to slowing earnings growth as 3Q earnings are projected to rise 14.2% versus a historical average of 7%. Moreover, the negative-to-positive preannouncement ratio is currently around 2.0, below the market's long-term average. My short-term trading indicators are giving mixed signals and the Portfolio is market neutral(longs-shorts=0% market exposure) heading into the week.
Walgreen(WAG), Solectron(SLR), American Greeting(AM), Micron Technology(MU), Constellation Brands(STZ) and Family Dollar Stores(FDO) are some of the more important companies that release quarterly earnings this week. There are also a number of other events that have market-moving potential. The UBS Global Life Sciences Conference, Oil & Gas Investment Symposium West, Deutsche Bank Global Oil & Gas Conference, Merrill Lynch Media Conference, Thomas Weisel Consumer Conference, Fed's Hoenig speaking, CSFB Chemical Conference, Fed's McTeer speaking and the Fed's Geithner speaking could also impact trading this week.
Bottom Line: I expect U.S. stocks to finish the week mixed as earnings worries and profit-taking offset better economic data and quarter-end window dressing. As well, investor complacency and the market's technically overbought state should lead to further consolidation. Investors are overreacting to slowing earnings growth as 3Q earnings are projected to rise 14.2% versus a historical average of 7%. Moreover, the negative-to-positive preannouncement ratio is currently around 2.0, below the market's long-term average. My short-term trading indicators are giving mixed signals and the Portfolio is market neutral(longs-shorts=0% market exposure) heading into the week.
Market Week in Review
S&P 500 1,110.11 -1.63%
Click here for the Weekly Wrap by Briefing.com
Bottom Line: Last week's market action was mostly negative as U.S. stocks fell, driving the S&P 500 to its first weekly loss in seven, amid disappointing earnings and rising energy prices. However, most cyclicals continued to hold up well, pointing towards a re-acceleration of economic growth. Moreover, the Base Metal Spot Price Index broke out last week, which also bodes well for a pick-up in growth. Many investors view the current decline in long-term interest rates as a forecast of very slow economic growth or recession. I do not agree with this assessment at this point and view the decline as a big positive. Measures of investor anxiety were mixed last week and will likely head higher over the next few weeks. Finally, most stocks remain technically overbought after recent gains.
Click here for the Weekly Wrap by Briefing.com
Bottom Line: Last week's market action was mostly negative as U.S. stocks fell, driving the S&P 500 to its first weekly loss in seven, amid disappointing earnings and rising energy prices. However, most cyclicals continued to hold up well, pointing towards a re-acceleration of economic growth. Moreover, the Base Metal Spot Price Index broke out last week, which also bodes well for a pick-up in growth. Many investors view the current decline in long-term interest rates as a forecast of very slow economic growth or recession. I do not agree with this assessment at this point and view the decline as a big positive. Measures of investor anxiety were mixed last week and will likely head higher over the next few weeks. Finally, most stocks remain technically overbought after recent gains.
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