S&P 500 1,122.14 -.83%
Click here for the Weekly Wrap by Briefing.com
Bottom Line: Market action last week was mostly negative as healthcare and homebuilding stocks led the major indices lower. As well, commodity prices rose further, which will likely generate higher inflation readings in the future. Healthcare-related stocks will remain under pressure until the election is resolved and more information is available on the important COX-2 inhibitor class of drugs. In my opinion, the selling in the homebuilding stocks was overdone. These stocks have beaten the Bears brains in for so long that any signs of a slowdown are called a "collapse" or "bursting of the bubble." While I do think fundamentals for homebuilders are decelerating, sales will remain good by historic standards and low valuations in the group should prevent a major sell-off. On the positive side, volume on the major indices declined last week and measures of investor anxiety mostly rose. Finally, the S&P 500 broke above its downtrend line that had been in place since early March.
Sunday, October 10, 2004
Saturday, October 09, 2004
Economic Week in Review
ECRI Weekly Leading Index 131.80 +.30%
Factory Orders for August fell .1% versus estimates of a .1% gain and an upwardly revised 1.7% increase in July. Bookings for products other than transportation equipment rose 1.3%, the biggest advance since March, Bloomberg said. "The manufacturing sector is doing quite well." said Stephen Stanley, chief economist at RBS Greenwich Capital. "We did have a soft patch in June, but we've recovered," and there's no sign of business spending weakness. Overall orders were restrained last month by a drop in bookings for commercial aircraft, which doubled in July. Through August, factory orders were up 12% compared with the same period in 2003, Bloomberg reported.
ISM Non-Manufacturing for September came in at 56.7 versus estimates of 59.0 and a reading of 58.2 in August. The gauge has now shown service sector expansion for 18 straight months, Bloomberg said. The effects of the record-setting hurricanes likely dampened an otherwise stronger report, Bloomberg reported. The survey's employment index rose to 54.6, the highest level since June. Lee Scott, CEO of Wal-Mart, told analysts and investors recently that he is "optimistic about sales in the November/December holiday season and expects a strong finish to the year." The index of prices paid, a measure of costs for purchased materials and services, fell to 67.1 last month, the lowest since March.
Initial Jobless Claims plunged to 335K last week versus estimates of 355K and 372K the prior week. Continuing Claims were 2864K versus estimates of 2875K and 2865K prior. Monster Worldwide, the NY-based operator of the biggest Internet job service, said earlier that its index of online job postings rose to the highest level since its inception last year, Bloomberg reported. "As the employment data arrive over the next several months, we may very well see the job numbers snap back," said Federal Reserve Bank of Cleveland President Pianalto. Claims in recent week have been difficult to interpret because of the effects of Hurricanes Charley, Frances, Ivan and Jeanne, which caused billons of dollars of damage while disrupting business substantially in some southern states, Bloomberg said.
Consumer Credit for August fell $2.4B versus estimates of a $6.0B rise and an increase of $11.2B in July. The decline in borrowing, which left total outstanding consumer debt at $2.4 trillion, coincided with a pause in consumer spending during August after the biggest jump in almost two years.
The Unemployment Rate for September was 5.4% versus estimates of 5.4% and 5.4% in August. Average Hourly Earnings rose .2% in September versus estimates of a .3% increase and a .3% gain in August. Change in Non-farm Payrolls for September was 96K versus estimates of 148K and a 128K gain in August. Change in Manufacturing Payrolls for September was -18K versus a 10K estimate and a 4K gain in August. The effects of the hurricanes likely dampened otherwise more positive numbers. Robert Gay, chief strategist at Commerzbank Capital Markets, said 1.89 million people in the household survey said they worked fewer hours because of bad weather. As well, the Labor Dept. said the economy likely gained an additional 236,000 jobs that weren't originally reported during the 12 months ended in March 2004. The U.S. economy has now created almost 2 million new jobs over the last 13 months, Bloomberg reported.
Wholesale Inventories for August rose .9% versus estimates of a .8% gain and a 1.5% rise in July. The report suggests wholesalers remain optimistic about the prospects for U.S. economic growth and are building inventories in anticipation of increased orders from customers, Bloomberg reported. "The fact that sales rose too means this was planned inventory growth, and that's good growth," said Wesley Beal, an economist at IDEAglobal in New York.
Bottom Line: Overall, last week's economic data were modestly positive. Recent measures of manufacturing activity continue to show acceleration from a mid-year pause and should strengthen into year-end. The ISM Non-manufacturing Index, a measure of activity in the service sector, should accelerate into year-end as the negative effects of the hurricanes diminish and consumers become more confident. Once again, the mainstream media and the Bears are downplaying the effects of these record-setting storms in an attempt to paint the U.S. economy in a negative light. There are STILL almost 1 million people in Florida without power. While the change in non-farm payrolls was disappointing, hiring activity was definitely suppressed to some extent by the storms. Moreover, other recent surveys and indices continue to point to an improving labor market. Finally, I believe the uncertainty over the course of the U.S. government and the possibility of election-related domestic terrorism is having a much larger impact on hiring activity than is suggested by most pundits and analysts. A recent survey by TEC International shows that 75% of the 5,700 small-to-medium-sized business owners that create 75% of all U.S. jobs favor President Bush for re-election. With a closely contested race for the Presidency and the prospects of having their taxes and regulations increased, these job creators will likely wait until the outcome of the election is clear to significantly alter hiring practices. I view the decline in consumer credit as a positive considering the excessive level of debt consumers have taken on over the years. As well, recent measures of home and car sales remain very strong, suggesting August's decline in consumer credit was just a pause that refreshes rather than a significant decline in consumer spending.
Factory Orders for August fell .1% versus estimates of a .1% gain and an upwardly revised 1.7% increase in July. Bookings for products other than transportation equipment rose 1.3%, the biggest advance since March, Bloomberg said. "The manufacturing sector is doing quite well." said Stephen Stanley, chief economist at RBS Greenwich Capital. "We did have a soft patch in June, but we've recovered," and there's no sign of business spending weakness. Overall orders were restrained last month by a drop in bookings for commercial aircraft, which doubled in July. Through August, factory orders were up 12% compared with the same period in 2003, Bloomberg reported.
ISM Non-Manufacturing for September came in at 56.7 versus estimates of 59.0 and a reading of 58.2 in August. The gauge has now shown service sector expansion for 18 straight months, Bloomberg said. The effects of the record-setting hurricanes likely dampened an otherwise stronger report, Bloomberg reported. The survey's employment index rose to 54.6, the highest level since June. Lee Scott, CEO of Wal-Mart, told analysts and investors recently that he is "optimistic about sales in the November/December holiday season and expects a strong finish to the year." The index of prices paid, a measure of costs for purchased materials and services, fell to 67.1 last month, the lowest since March.
Initial Jobless Claims plunged to 335K last week versus estimates of 355K and 372K the prior week. Continuing Claims were 2864K versus estimates of 2875K and 2865K prior. Monster Worldwide, the NY-based operator of the biggest Internet job service, said earlier that its index of online job postings rose to the highest level since its inception last year, Bloomberg reported. "As the employment data arrive over the next several months, we may very well see the job numbers snap back," said Federal Reserve Bank of Cleveland President Pianalto. Claims in recent week have been difficult to interpret because of the effects of Hurricanes Charley, Frances, Ivan and Jeanne, which caused billons of dollars of damage while disrupting business substantially in some southern states, Bloomberg said.
Consumer Credit for August fell $2.4B versus estimates of a $6.0B rise and an increase of $11.2B in July. The decline in borrowing, which left total outstanding consumer debt at $2.4 trillion, coincided with a pause in consumer spending during August after the biggest jump in almost two years.
The Unemployment Rate for September was 5.4% versus estimates of 5.4% and 5.4% in August. Average Hourly Earnings rose .2% in September versus estimates of a .3% increase and a .3% gain in August. Change in Non-farm Payrolls for September was 96K versus estimates of 148K and a 128K gain in August. Change in Manufacturing Payrolls for September was -18K versus a 10K estimate and a 4K gain in August. The effects of the hurricanes likely dampened otherwise more positive numbers. Robert Gay, chief strategist at Commerzbank Capital Markets, said 1.89 million people in the household survey said they worked fewer hours because of bad weather. As well, the Labor Dept. said the economy likely gained an additional 236,000 jobs that weren't originally reported during the 12 months ended in March 2004. The U.S. economy has now created almost 2 million new jobs over the last 13 months, Bloomberg reported.
Wholesale Inventories for August rose .9% versus estimates of a .8% gain and a 1.5% rise in July. The report suggests wholesalers remain optimistic about the prospects for U.S. economic growth and are building inventories in anticipation of increased orders from customers, Bloomberg reported. "The fact that sales rose too means this was planned inventory growth, and that's good growth," said Wesley Beal, an economist at IDEAglobal in New York.
Bottom Line: Overall, last week's economic data were modestly positive. Recent measures of manufacturing activity continue to show acceleration from a mid-year pause and should strengthen into year-end. The ISM Non-manufacturing Index, a measure of activity in the service sector, should accelerate into year-end as the negative effects of the hurricanes diminish and consumers become more confident. Once again, the mainstream media and the Bears are downplaying the effects of these record-setting storms in an attempt to paint the U.S. economy in a negative light. There are STILL almost 1 million people in Florida without power. While the change in non-farm payrolls was disappointing, hiring activity was definitely suppressed to some extent by the storms. Moreover, other recent surveys and indices continue to point to an improving labor market. Finally, I believe the uncertainty over the course of the U.S. government and the possibility of election-related domestic terrorism is having a much larger impact on hiring activity than is suggested by most pundits and analysts. A recent survey by TEC International shows that 75% of the 5,700 small-to-medium-sized business owners that create 75% of all U.S. jobs favor President Bush for re-election. With a closely contested race for the Presidency and the prospects of having their taxes and regulations increased, these job creators will likely wait until the outcome of the election is clear to significantly alter hiring practices. I view the decline in consumer credit as a positive considering the excessive level of debt consumers have taken on over the years. As well, recent measures of home and car sales remain very strong, suggesting August's decline in consumer credit was just a pause that refreshes rather than a significant decline in consumer spending.
Friday, October 08, 2004
Weekly Scoreboard*
Indices
S&P 500 1,122.14 -.83%
Dow 10,192.65 +10,055.20 -1.35%
NASDAQ 1,919.97 -1.14%
Russell 2000 575.65 -1.60%
S&P Equity Long/Short Index 980.54 +.93%
Put/Call 1.0 +5.26%
NYSE Arms 2.41 +423.91%
Volatility(VIX) 15.05 +18.04%
AAII % Bulls 56.93 +38.62%
US Dollar 87.51 -.15%
CRB 287.60 +.83%
Futures Spot Prices
Gold 424.50 +.78%
Crude Oil 53.31 +6.30%
Unleaded Gasoline 141.20 +4.44%
Natural Gas 7.16 +6.12%
Base Metals 125.40 +4.45%
10-year US Treasury Yield 4.13% -1.43%
Average 30-year Mortgage Rate 5.82% +1.75%
Leading Sectors
Iron/Steel +2.48%
Energy +2.16%
Hospitals +1.63%
Lagging Sectors
Biotech -4.33%
Airlines -4.33%
Homebuilders -8.98%
*% Gain or loss for the week
S&P 500 1,122.14 -.83%
Dow 10,192.65 +10,055.20 -1.35%
NASDAQ 1,919.97 -1.14%
Russell 2000 575.65 -1.60%
S&P Equity Long/Short Index 980.54 +.93%
Put/Call 1.0 +5.26%
NYSE Arms 2.41 +423.91%
Volatility(VIX) 15.05 +18.04%
AAII % Bulls 56.93 +38.62%
US Dollar 87.51 -.15%
CRB 287.60 +.83%
Futures Spot Prices
Gold 424.50 +.78%
Crude Oil 53.31 +6.30%
Unleaded Gasoline 141.20 +4.44%
Natural Gas 7.16 +6.12%
Base Metals 125.40 +4.45%
10-year US Treasury Yield 4.13% -1.43%
Average 30-year Mortgage Rate 5.82% +1.75%
Leading Sectors
Iron/Steel +2.48%
Energy +2.16%
Hospitals +1.63%
Lagging Sectors
Biotech -4.33%
Airlines -4.33%
Homebuilders -8.98%
*% Gain or loss for the week
Mid-day Update
S&P 500 1,125.20 -.48%
NASDAQ 1,930.34 -.93%
Leading Sectors
Oil Service +.59%
Commodity +.46%
Restaurants +.38%
Lagging Sectors
Internet -1.58%
Disk Drives -2.22%
Semis -3.16%
Other
Crude Oil 52.73 +.15%
Natural Gas 7.19 -.83%
Gold 424.40 +1.17%
Base Metals 125.40 +1.84%
U.S. Dollar 87.43 -1.04%
10-Yr. T-note Yield 4.13% -2.57%
VIX 14.82 +2.21%
Put/Call .96 +12.94%
NYSE Arms 2.0 +68.07%
Market Movers
ELN -5.5% after saying European regulators may ask for data comparing their multiple sclerosis drug Antegren to another available treatment in a so-called head-to-head study.
ANF +4.0% on Wells Fargo upgrade to Hold.
MANH -20.3% after lower 3Q estimates.
BCSI -13.5% after saying its CFO will step down to pursue other opportunities.
ADBL -10.6% after announcing $125M shelf registration.
GTI -14.6% after lowering 3Q estimates and Jefferies downgrade to Hold.
ZOLL -6.6% after lowering 4Q estimate and Adams Harkness downgrade to Market Perform.
Economic Data
Unemployment Rate for September was 5.4% versus estimates of 5.4% and 5.4% in August.
Average Hourly Earnings for September rose .2% versus estimates of a .3% rise and an increase of .3% in August.
Change in Non-farm Payrolls for September was 96K versus estimates of 148K and 128K in August. Last 12 months revised higher by 236K.
Change in Manufacturing Payrolls for September was -18K versus estimates of 10K and a gain of 4K in August.
Wholesales Inventories for August rose .9% versus estimates of a .8% rise and a 1.5% increase in July.
Recommendations
SBUX raised to Buy at UBS, target $56. DNA raised to Outperform at CSFB, target $65. RNR and MXRE cut to Underweight at Morgan Stanley. KLAC rated Overweight at Prudential, target $55. LRCX rated Overweight at Prudential, target $29. BRKS rated Underweight at Prudential, target $13. NVLS rated Underweight, target $25. Goldman Sachs reiterated Outperform at AMD, BIIB, IP, GE, BVF, YHOO, TPX, MDT, AA, Goldman lowered GPI to Underperform. Goldman reiterated Underperform on T. Citi SmithBarney said to Buy EEFT ahead of earnings, target $23. Citi reiterated Buy on WMT, target $65.
Mid-day News
U.S. stocks are lower mid-day on worries over the affects of oil on economic growth and concerns about tonight's Presidential debate. Google's new search engine, which lets customers search book pages online, could shift the balance of power between the makers and sellers of books, the NY Times said. More than 50 U.S. senators are urging SEC Chairman Donaldson to delay a rule forcing companies to count stock options as a business expense, the NY Times reported. Investcorp SA agreed to buy Thomson Media, which publishes American Banker and Bond Buyer, for $350 million in cash, Dow Jones reported. IBM CEO Palmisano expects an increase in technology-related capital spending of at least 8% in 2005 after a 4-7% gain this year, Reuters reported. General Electric said third-quarter profit rose as acquisitions and economic growth spurred the biggest quarterly sales increase in four years, Bloomberg reported. Afghanistan's election tomorrow, after 22 years of war, is likely to return Interim President Karzai to power, Bloomberg said. More California voters say their state is headed in the right direction for the first time in four years under Governor Schwarzenegger, who has the support of almost two-thirds of voters, Bloomberg reported. Krispy Kreme said the SEC opened a formal investigation of the company's accounting practices, Bloomberg said. Procter & Gamble said the skin patch it is developing to boost the sex drive of women who have had both ovaries removed may work for some post-menopausal women, Bloomberg said. U.S. employers added 96,000 workers in September, fewer than expected. However, the household survey showed 225,000 individuals "were not at work because of bad weather," Bloomberg reported. The Labor Dept. also said the economy gained approximately 236,000 more jobs than originally thought for the 12 months ended in March. The U.S. economy has now created roughly 2 million jobs since last August, Bloomberg reported. Crude oil in NY was little changed after the Louisiana Offshore Oil Port shut because of rough seas, limiting the arrival of supplies to the U.S., Bloomberg reported. U.S. education officials in six states were warned last month that a computer disk found in Iraq this summer contained details about their school districts, the AP reported.
BOTTOM LINE: The Portfolio is lower mid-day on weakness in my steel, alternative energy and software longs. I have not traded today and the Portfolio is still 50% net long. The employment report was about what I expected considering the affects from the record-setting hurricanes. The unemployment rate would likely have dropped if it were not for the storms. Measures of investor anxiety are rising and long-term interest rates are falling, which are positives. I expect U.S. stocks to remain mixed-to-higher into the close as short-covering and optimism over GE's report offsets rising energy prices.
NASDAQ 1,930.34 -.93%
Leading Sectors
Oil Service +.59%
Commodity +.46%
Restaurants +.38%
Lagging Sectors
Internet -1.58%
Disk Drives -2.22%
Semis -3.16%
Other
Crude Oil 52.73 +.15%
Natural Gas 7.19 -.83%
Gold 424.40 +1.17%
Base Metals 125.40 +1.84%
U.S. Dollar 87.43 -1.04%
10-Yr. T-note Yield 4.13% -2.57%
VIX 14.82 +2.21%
Put/Call .96 +12.94%
NYSE Arms 2.0 +68.07%
Market Movers
ELN -5.5% after saying European regulators may ask for data comparing their multiple sclerosis drug Antegren to another available treatment in a so-called head-to-head study.
ANF +4.0% on Wells Fargo upgrade to Hold.
MANH -20.3% after lower 3Q estimates.
BCSI -13.5% after saying its CFO will step down to pursue other opportunities.
ADBL -10.6% after announcing $125M shelf registration.
GTI -14.6% after lowering 3Q estimates and Jefferies downgrade to Hold.
ZOLL -6.6% after lowering 4Q estimate and Adams Harkness downgrade to Market Perform.
Economic Data
Unemployment Rate for September was 5.4% versus estimates of 5.4% and 5.4% in August.
Average Hourly Earnings for September rose .2% versus estimates of a .3% rise and an increase of .3% in August.
Change in Non-farm Payrolls for September was 96K versus estimates of 148K and 128K in August. Last 12 months revised higher by 236K.
Change in Manufacturing Payrolls for September was -18K versus estimates of 10K and a gain of 4K in August.
Wholesales Inventories for August rose .9% versus estimates of a .8% rise and a 1.5% increase in July.
Recommendations
SBUX raised to Buy at UBS, target $56. DNA raised to Outperform at CSFB, target $65. RNR and MXRE cut to Underweight at Morgan Stanley. KLAC rated Overweight at Prudential, target $55. LRCX rated Overweight at Prudential, target $29. BRKS rated Underweight at Prudential, target $13. NVLS rated Underweight, target $25. Goldman Sachs reiterated Outperform at AMD, BIIB, IP, GE, BVF, YHOO, TPX, MDT, AA, Goldman lowered GPI to Underperform. Goldman reiterated Underperform on T. Citi SmithBarney said to Buy EEFT ahead of earnings, target $23. Citi reiterated Buy on WMT, target $65.
Mid-day News
U.S. stocks are lower mid-day on worries over the affects of oil on economic growth and concerns about tonight's Presidential debate. Google's new search engine, which lets customers search book pages online, could shift the balance of power between the makers and sellers of books, the NY Times said. More than 50 U.S. senators are urging SEC Chairman Donaldson to delay a rule forcing companies to count stock options as a business expense, the NY Times reported. Investcorp SA agreed to buy Thomson Media, which publishes American Banker and Bond Buyer, for $350 million in cash, Dow Jones reported. IBM CEO Palmisano expects an increase in technology-related capital spending of at least 8% in 2005 after a 4-7% gain this year, Reuters reported. General Electric said third-quarter profit rose as acquisitions and economic growth spurred the biggest quarterly sales increase in four years, Bloomberg reported. Afghanistan's election tomorrow, after 22 years of war, is likely to return Interim President Karzai to power, Bloomberg said. More California voters say their state is headed in the right direction for the first time in four years under Governor Schwarzenegger, who has the support of almost two-thirds of voters, Bloomberg reported. Krispy Kreme said the SEC opened a formal investigation of the company's accounting practices, Bloomberg said. Procter & Gamble said the skin patch it is developing to boost the sex drive of women who have had both ovaries removed may work for some post-menopausal women, Bloomberg said. U.S. employers added 96,000 workers in September, fewer than expected. However, the household survey showed 225,000 individuals "were not at work because of bad weather," Bloomberg reported. The Labor Dept. also said the economy gained approximately 236,000 more jobs than originally thought for the 12 months ended in March. The U.S. economy has now created roughly 2 million jobs since last August, Bloomberg reported. Crude oil in NY was little changed after the Louisiana Offshore Oil Port shut because of rough seas, limiting the arrival of supplies to the U.S., Bloomberg reported. U.S. education officials in six states were warned last month that a computer disk found in Iraq this summer contained details about their school districts, the AP reported.
BOTTOM LINE: The Portfolio is lower mid-day on weakness in my steel, alternative energy and software longs. I have not traded today and the Portfolio is still 50% net long. The employment report was about what I expected considering the affects from the record-setting hurricanes. The unemployment rate would likely have dropped if it were not for the storms. Measures of investor anxiety are rising and long-term interest rates are falling, which are positives. I expect U.S. stocks to remain mixed-to-higher into the close as short-covering and optimism over GE's report offsets rising energy prices.
Friday Watch
Earnings of Note
Company/Estimate
GE/.38
Splits
VLO 2-for-1
Economic Data
Unemployment Rate for September estimated at 5.4% versus 5.4% in August.
Average Hourly Earnings for September estimated up .3% versus a .3% rise in August.
Change in Non-farm Payrolls for September estimated up 148K versus 144K in August.
Change in Manufacturing Payrolls for September estimated up 10K versus a 22K rise in August.
Average Weekly Hours for September estimated at 33.7 versus 33.8 in August.
Wholesale Inventories for August estimated up .8% versus a 1.3% gain in July.
Recommendations
Goldman Sachs reiterated Outperform on AMGN. Goldman reiterated Underperform on PSS.
Late-Night News
Asian indices are mixed as declining energy prices are offsetting jitters over tomorrow's U.S. jobs report. General Maritime, the second-largest owner of mid-size tankers, may issue a dividend because of record revenue in the oil shipping business, the company's CEO told CNBC. David Pottruck, former president and CEO of Charles Schwab, has started a buyout firm to invest his own money, Business Week reported. U.S. lawmakers have formally rejected a $23 billion deal to buy refueling tankers from Boeing, the Wall Street Journal reported. MetLife may acquire Taiwan's financial institutions in order to expand its business on the island, the Commercial Times reported. IBM and Sun Micro are among the companies forming a partnership this month specifically for grid computing, which uses the Internet to link computers, Business Week reported. Semiconductor Manufacturing Intl., China's biggest supplier of made-to-order chips, will expand production to meet an order from Texas Instruments, Reuters reported. Saddam Hussein transferred money through HSBC Holdings Plc, Europe's largest bank, as part of a financial web his bankers built to skirt sanctions imposed by the United Nations, a CIA report said. JP Morgan Chase will combine its capital markets businesses in North and South America as part of a reorganization of its investment bank, Bloomberg reported.
Late-Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.10%
BOTTOM LINE: I expect U.S. equities to open modestly lower in the morning on a weaker-than-expected jobs report as a result of the record-setting hurricanes. However, stocks should attempt a rally later in the day on a solid earnings report from GE, a substantial upward revision to prior employment reports, declining energy prices and short-covering. The Portfolio is 50% net long heading into tomorrow.
Company/Estimate
GE/.38
Splits
VLO 2-for-1
Economic Data
Unemployment Rate for September estimated at 5.4% versus 5.4% in August.
Average Hourly Earnings for September estimated up .3% versus a .3% rise in August.
Change in Non-farm Payrolls for September estimated up 148K versus 144K in August.
Change in Manufacturing Payrolls for September estimated up 10K versus a 22K rise in August.
Average Weekly Hours for September estimated at 33.7 versus 33.8 in August.
Wholesale Inventories for August estimated up .8% versus a 1.3% gain in July.
Recommendations
Goldman Sachs reiterated Outperform on AMGN. Goldman reiterated Underperform on PSS.
Late-Night News
Asian indices are mixed as declining energy prices are offsetting jitters over tomorrow's U.S. jobs report. General Maritime, the second-largest owner of mid-size tankers, may issue a dividend because of record revenue in the oil shipping business, the company's CEO told CNBC. David Pottruck, former president and CEO of Charles Schwab, has started a buyout firm to invest his own money, Business Week reported. U.S. lawmakers have formally rejected a $23 billion deal to buy refueling tankers from Boeing, the Wall Street Journal reported. MetLife may acquire Taiwan's financial institutions in order to expand its business on the island, the Commercial Times reported. IBM and Sun Micro are among the companies forming a partnership this month specifically for grid computing, which uses the Internet to link computers, Business Week reported. Semiconductor Manufacturing Intl., China's biggest supplier of made-to-order chips, will expand production to meet an order from Texas Instruments, Reuters reported. Saddam Hussein transferred money through HSBC Holdings Plc, Europe's largest bank, as part of a financial web his bankers built to skirt sanctions imposed by the United Nations, a CIA report said. JP Morgan Chase will combine its capital markets businesses in North and South America as part of a reorganization of its investment bank, Bloomberg reported.
Late-Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.10%
BOTTOM LINE: I expect U.S. equities to open modestly lower in the morning on a weaker-than-expected jobs report as a result of the record-setting hurricanes. However, stocks should attempt a rally later in the day on a solid earnings report from GE, a substantial upward revision to prior employment reports, declining energy prices and short-covering. The Portfolio is 50% net long heading into tomorrow.
Thursday, October 07, 2004
Thursday Close
S&P 500 1,130.65 -1.0%
NASDAQ 1,948.52 -1.14%
Leading Sectors
Hospitals +16%
Retail +.01%
Banks -.18%
Lagging Sectors
Biotech -2.82%
Homebuilders -3.60%
Airlines -4.16%
Other
Crude Oil 52.42 -.47%
Natural Gas 7.19 -.83%
Gold 419.00 -.12%
Base Metals 123.13 +.19%
U.S. Dollar 88.-.16%
10-Yr. T-note Yield 4.24% +.51%
VIX 14.50 +9.19%
Put/Call .85 +10.39%
NYSE Arms 1.19 +63.01%
After-hours Movers
DGII +5.3% after boosting 4Q/04 forecast.
BCSI -6.9% after announcing its CFO will resign to pursue other opportunities.
Recommendations
Goldman Sachs reiterated Outperform on DIS and ATYT. Goldman says RBOCs are optimistic for the first time in years as business has improved and regulatory relief has allowed them to regain control of their own destinies, main beneficiaries are CSCO, JNPR and SONS. Goldman reiterated Attractive view of Lodging sector.
After-hours News
U.S. stocks finished lower today on rising energy prices and jitters over tomorrow's labor report. After the close, Johnson & Johnson will change the label on its Remicade drug to include that the treatment for rheumatoid arthritis and Crohn's disease has been linked to higher rates of malignancies than the normal population, Dow Jones reported. U.S. consumers cut their borrowing by $2.4 billion in August, the biggest drop in almost 14 years, as they continue to shore up their balance sheets, Bloomberg reported. AT&T said it will cut its workforce by 20% this year and will write down assets by $11.4 billion, Bloomberg reported. Alcoa said third-quarter profit rose 1.1% as costs related to the hurricanes, a plant fire and striking workers in Canada reduced earnings, Bloomberg said.
BOTTOM LINE: The Portfolio finished lower today on weakness in my semiconductor, software and Chinese ADR longs. I took profits in a number of longs in the afternoon as they hit stop-losses, leaving the Portfolio 50% net long. The Portfolio is up substantially for the year and near its highs, thus I wanted to reduce market exposure ahead of tomorrow's jobs report. The tone of the market worsened throughout the day, however volume was relatively light. Most measures of investor anxiety spiked today, but the weekly AAII % Bulls reading soared 38.6% to 56.9% bulls. I expect the monthly employment report to come in a bit weaker-than-expected due to the hurricanes, however upward revisions from prior reports will be around 250,000 more jobs. A better-than-expected report may lead to a reversal of today's negative action in stocks.
NASDAQ 1,948.52 -1.14%
Leading Sectors
Hospitals +16%
Retail +.01%
Banks -.18%
Lagging Sectors
Biotech -2.82%
Homebuilders -3.60%
Airlines -4.16%
Other
Crude Oil 52.42 -.47%
Natural Gas 7.19 -.83%
Gold 419.00 -.12%
Base Metals 123.13 +.19%
U.S. Dollar 88.-.16%
10-Yr. T-note Yield 4.24% +.51%
VIX 14.50 +9.19%
Put/Call .85 +10.39%
NYSE Arms 1.19 +63.01%
After-hours Movers
DGII +5.3% after boosting 4Q/04 forecast.
BCSI -6.9% after announcing its CFO will resign to pursue other opportunities.
Recommendations
Goldman Sachs reiterated Outperform on DIS and ATYT. Goldman says RBOCs are optimistic for the first time in years as business has improved and regulatory relief has allowed them to regain control of their own destinies, main beneficiaries are CSCO, JNPR and SONS. Goldman reiterated Attractive view of Lodging sector.
After-hours News
U.S. stocks finished lower today on rising energy prices and jitters over tomorrow's labor report. After the close, Johnson & Johnson will change the label on its Remicade drug to include that the treatment for rheumatoid arthritis and Crohn's disease has been linked to higher rates of malignancies than the normal population, Dow Jones reported. U.S. consumers cut their borrowing by $2.4 billion in August, the biggest drop in almost 14 years, as they continue to shore up their balance sheets, Bloomberg reported. AT&T said it will cut its workforce by 20% this year and will write down assets by $11.4 billion, Bloomberg reported. Alcoa said third-quarter profit rose 1.1% as costs related to the hurricanes, a plant fire and striking workers in Canada reduced earnings, Bloomberg said.
BOTTOM LINE: The Portfolio finished lower today on weakness in my semiconductor, software and Chinese ADR longs. I took profits in a number of longs in the afternoon as they hit stop-losses, leaving the Portfolio 50% net long. The Portfolio is up substantially for the year and near its highs, thus I wanted to reduce market exposure ahead of tomorrow's jobs report. The tone of the market worsened throughout the day, however volume was relatively light. Most measures of investor anxiety spiked today, but the weekly AAII % Bulls reading soared 38.6% to 56.9% bulls. I expect the monthly employment report to come in a bit weaker-than-expected due to the hurricanes, however upward revisions from prior reports will be around 250,000 more jobs. A better-than-expected report may lead to a reversal of today's negative action in stocks.
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