ECRI Weekly Leading Index 131.00 -.61%
The Import Price Index for September rose .2% versus estimates of a .5% increase and a 1.4% increase in August. The Trade Balance for August was -$54.0B versus estimates of -$51.4B and -$50.5B in July. The increase in the trade deficit came on higher spending for imported oil, relatively strong U.S. economic growth and a decline in goods purchased by foreign countries. Inflation may be less of a concern for Federal Reserve officials after economic reports suggested pressure from high oil prices is not filtering through to other costs, Bloomberg reported. "Once demand picks up, it's possible you'll see some price moves but there seems to be a lot of restraint by U.S. businesses," said Michael Gregory, a senior economist at BMO Nesbitt Burns. "Much of the movement in core import prices is behind us," said Joshua Shapiro, chief U.S. economist at MFR Inc. "The dollar hasn't had any really big movements recently. U.S. growth is clearly better than most places."
Initial Jobless Claims for last week were 352K versus estimates of 340K and 337K the prior week. Continuing Claims were 2845K versus estimates of 2859K and 2856K prior. "This level is still consistent with solid job creation," said Wesley Beal, an economist at IDEAglobal. "This election seems to be causing more angst about the economy among business leaders than previous ones," said Chris Rupkey, senior economist at Bank of Tokyo-Mitsubishi. "Managers are concerned and they may be waiting until the dust settles before they bring in new hires." "We continue to have a labor market recovery for job seekers," said Steve Pogorzelski, President of Monster.com North America, the operator of the world's largest job-posting Web site. "We are still seeing strong online posting demand."
The Monthly Budget Statement for September was $24.4B versus estimates of $22.0B and $23.4B in August. The U.S. budget deficit rose to $412.6 billion, below mid-year estimates of $445 billion, in the year ended Sept. 30, as government tax receipts rose more than expected on faster U.S. economic growth, Bloomberg said. The budget deficit is now 3.75% of U.S. GDP, 36.2% lower than the all-time record set in 1983, Bloomberg reported. "If the financial markets felt that the government as a major borrower was not going to be a responsible manager of the fiscal affairs of this country, the market would already exact a price," said Treasury Secretary Snow. "The fact that interest rates are as low as they are is a vote of confidence that we will deal with the deficit."
The Producer Price Index for September rose .1% versus estimates of a .1% increase and a .1% decline in August. PPI Ex Food & Energy rose .3% in September versus estimates of a .2% gain and a .1% decline in August. The PPI averaged a .4% gain from January through June. So far this year, producer prices are rising at a 3.4% annual rate compared with a 4.3% increase at the same time last year, Bloomberg said. "Increased competition is making it tougher for companies to pass through cost increases to consumers," said William Zadrozny, CEO of Siemens Financial Services.
Advanced Retail Sales for September rose 1.5%, the most in 6 months, versus estimates of a .7% gain and a .2% fall in August. Retail Sales Less Autos for September rose .6% versus estimates of a .3% rise and a .2% gain in August. The biggest rise in auto sales in 3 years paced the increase in all retail spending last month, Bloomberg reported. Sales of cars and light trucks jumped to 17.5 million vehicles at an annual rate in September, a 5.4% increase from August. The average retail price for all grades of gasoline, while high at $2.04/gallon, is still lower than six months ago, Bloomberg reported. As well, sales at general merchandise stores, which include department stores, rose 1.1% last month, the most in 8 months. Retail sales account for almost half of all consumer spending, which in turn accounts for about two-thirds of the U.S. economy, Bloomberg said.
Empire Manufacturing for October came in at 17.43 versus estimates of 25.0 and a reading of 27.26 in September. Readings above zero indicate expansion and the survey has now shown growth since April 2003. In February, it reached an all-time record of 42.1, Bloomberg reported. The survey is a "confidence" measure as participants are asked to score a variety of indicators as "better" or "worse" than the prior month. As a result, it is likely affected by the negative political environment and concerns over the direction of the U.S. government, Bloomberg said. Moreover, the survey's hiring index for the next six months rose to 33.7 in October from 27.2 the previous month.
Industrial Production for September rose .1% versus estimates of a .3% increase and a .1% decline in August. Capacity Utilization for September was 77.2% versus estimates of 77.5% and 77.2% in August. Four hurricanes that swept across the southeast U.S. over a six week period in August and September reduced industrial production by about .3 percentage points last month, the Fed said. "These numbers are not as weak as the headline number suggests and that's good news because there will be a bounce-back," said Ken Mayland, president of ClearView Economics. "Retail sales say consumer demand is there," which is good for factory production," Mayland said.
The preliminary University of Michigan Consumer Confidence reading for October was 87.5 versus estimates of 94.0 and a reading of 94.2 in September. "Whatever consumers are saying, household spending remains strong and pretty sustained," said Michael Englund, chief economist at Action Economics. Sales of homes and autos remain very high, Bloomberg reported. Apple Computer's sales of its iPod digital music players surged 500% in the three months ended Sept. 25, Bloomberg said. As well, McDonald's said U.S. sales rose 11% in September. Finally, Wal-Mart Stores CEO Scott said, "We expect a strong finish to the year." Historically bitter political rhetoric filling the airwaves is likely depressing sentiment temporarily, Bloomberg reported.
Bottom Line: Overall, last week's economic data were mixed. Measures continue to show that inflation is contained. While commodity prices remain elevated, their rate of increase has slowed substantially from earlier months. The CRB Index, a broad-based measure of commodity prices, is trading at the same level it was 8 months ago. Energy remains the main area of concern and I continue to believe prices will begin heading lower once the effects of the record-setting hurricanes diminish and more supply reaches U.S. shores. This should occur at the end of this month or the first part of November. The labor market will improve upon the conclusion of the election. Small-business owners, the main job creators in the U.S., are extremely concerned about the outcome of the election and are likely holding off on new hiring to an extent. The increase in GDP growth I foresee during this quarter will also spur hiring.
The budget deficit remains an over-hyped problem by the bears and the media. As a % of GDP, the deficit is much smaller than in 1983, at the very beginning of a multi-decade secular bull move in U.S. stocks. As well, tax receipts have risen 5.5% over the last 12 months, notwithstanding the tax cuts. The increase in the deficit is a result of government spending outpacing receipts. However, considering the massive overcapacity generated during the latter part of the 90's in most sectors, it is highly probably the U.S. needed the dramatic increase in government spending and tax cuts to boost demand and burn off some of the excess capacity. Instead of one of the mildest recessions on record, massive job losses and bankruptcies would have likely resulted in a multi-year deep recession.
The much-better-than-expected retail sales report is a big positive. While auto incentives did spur demand, an auto is still a very large purchase and shows the consumer has confidence in their financial condition. As well, home sales remain near very high levels. I expect this holiday shopping season to beat expectations, notwithstanding higher energy prices. Once again, the bears and media are painting a more negative picture of the U.S. consumer than is actually the case. I continue to believe that investors are underestimating the negative impact the current election is having on economic activity. It is highly unusual to turn on the news and hear anything positive. Negative stories on Iraq, oil or jobs dominate reporting, while very few positives are reported. This is definitely affecting psychology and will likely subside to an extent in November. Moreover, fears of domestic terrorism, higher taxes and more regulations are also affecting decision-makers.
Saturday, October 16, 2004
Friday, October 15, 2004
Weekly Scoreboard*
Indices
S&P 500 1,108.20 -1.24%
Dow 9,933.38 -1.21%
NASDAQ 1,911.50 -.44%
Russell 2000 569.42 -1.08%
S&P Equity Long/Short Index 970.91 -.98%
Put/Call .88 -12.0%
NYSE Arms 1.40 +17.65%
Volatility(VIX) 15.04 +3.72%
AAII % Bulls 44.71 -21.46%
US Dollar 87.09 -.41%
CRB 285.59 -.70%
Futures Spot Prices
Gold 420.10 -1.08%
Crude Oil 54.93 +2.88%
Unleaded Gasoline 140.94 -.11%
Natural Gas 6.71 -6.56%
Base Metals 114.53 -8.67%
10-year US Treasury Yield 4.05% -1.94%
Average 30-year Mortgage Rate 5.74% -1.37%
Leading Sectors
Restaurants +2.99%
Airlines +2.59%
Wireless +1.40%
Lagging Sectors
Iron/Steel -7.03%
Disk Drives -7.30%
Insurance -9.23%
*% Gain or loss for the week
S&P 500 1,108.20 -1.24%
Dow 9,933.38 -1.21%
NASDAQ 1,911.50 -.44%
Russell 2000 569.42 -1.08%
S&P Equity Long/Short Index 970.91 -.98%
Put/Call .88 -12.0%
NYSE Arms 1.40 +17.65%
Volatility(VIX) 15.04 +3.72%
AAII % Bulls 44.71 -21.46%
US Dollar 87.09 -.41%
CRB 285.59 -.70%
Futures Spot Prices
Gold 420.10 -1.08%
Crude Oil 54.93 +2.88%
Unleaded Gasoline 140.94 -.11%
Natural Gas 6.71 -6.56%
Base Metals 114.53 -8.67%
10-year US Treasury Yield 4.05% -1.94%
Average 30-year Mortgage Rate 5.74% -1.37%
Leading Sectors
Restaurants +2.99%
Airlines +2.59%
Wireless +1.40%
Lagging Sectors
Iron/Steel -7.03%
Disk Drives -7.30%
Insurance -9.23%
*% Gain or loss for the week
Mid-day Update
S&P 500 1,111.62 +.75%
NASDAQ 1,919.50 +.87%
Leading Sectors
I-Banks +1.82%
Banks +1.57%
Gaming +1.49%
Lagging Sectors
HMOs -.54%
Disk Drives -1.48%
Insurance -2.85%
Other
Crude Oil 54.56 -.37%
Natural Gas 6.70 -1.51%
Gold 420.20 +.17%
Base Metals 114.53 +1.45%
U.S. Dollar 87.18 -.42%
10-Yr. T-note Yield 4.07% +1.24%
VIX 14.98 -8.64%
Put/Call .93 -13.08%
NYSE Arms 1.39 -15.24%
Market Movers
MMC -14.4% on continuing worries over Spitzer probe and saying it will immediately suspend its practice of market services agreements with insurance carriers.
HIG -4.4% on continuing worries over Spitzer probe.
JNPR -6.3% on profit-taking after beating 3Q estimates and raising 4Q guidance.
PFE -4.2% after saying its Bextra painkiller can cause a fatal skin reaction and heart problems.
AIG -4.3% on continuing worries over Spitzer probe.
FARO +11.87% after boosting 3Q and 04 forecasts.
GPC +7.44% after meeting 3Q estimates and reiterating 04 guidance.
PENN +5.7% after agreeing to sell its Pocono Downs racetrack to the Mohegan Tribal Gaming Authority for $280 million.
FLYR -21.5% after cutting 3Q, 4Q and 04 forecasts and multiple downgrades.
GIVN -15.2% after missing 3Q estimates.
NFP -16.4% on continuing worries over Spitzer probe.
MGAM -13.7% after lowering 4Q and 04 guidance.
NFLX -38.2% after missing 3Q estimates substantially, saying AMZN will start competing video service and multiple downgrades.
POSS -33.3% after cutting 1Q and 05 forecast and Frist Albany downgrade to Underperform.
ACE -7.2% on continuing worries over Spitzer probe.
Economic Data
Producer Price Index for September rose .1% versus estimates of a .1% increase and a .1% decline in August.
PPI Ex Food & Energy for September rose .3% versus estimates of a .2% gain and a .1% decrease in August.
Advance Retail Sales for September rose 1.5% versus estimates of a .7% increase and a .2% decline in August.
Retail Sales Less Autos for September rose .6% versus estimates of a .3% increase and a .2% decline in August.
Empire Manufacturing for October fell to 17.43 versus estimates of 25.00 and a reading of 27.26 in September.
Industrial Production for September rose .1% versus estimates of a .3% increase and a .1% decline in August.
Capacity Utilization for September was 77.2% versus estimates of 77.5% and 77.2% in August.
Preliminary Univ. of Mich. Consumer Confidence for October fell to 87.5 versus estimates of 94.0 and a reading of 94.2 in September.
Business Inventories for August rose .7% versus estimates of a .6% rise and a 1.0% increase in July.
Recommendations
Goldman Sachs reiterated Outperform on RE, ENH, JNPR, STZ, PFE, IP, ALL and AIG. Goldman downgraded MMC to Underperform. Citi upgraded EIX to Buy, target $32. Citi downgraded MMC to Sell, target $31. Citi upgraded MPG to Buy, target $26. Citi reiterated Buy on MTG, target $90. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Buy on TCB, target $34. Lehman downgrade Auto and Auto Parts industries to Negative. APA raised to Buy at UBS, target $61. MRVL cut to Reduce at UBS. WERN raised to Buy at Legg Mason, target $23. AMMD cut to Underweight at JP Morgan. WMS rated Overweight at Morgan Stanley, target $33. NFLX downgraded to Underweight at JP Morgan. PHTN cut to Sector Underperform at CIBC.
Mid-day News
U.S. stocks are modestly higher mid-day on optimism over Greenspan's comments, strong retail sales and short-covering. The SEC's inquiry into Fannie Mae's accounting has become a formal probe, the Washington Post said. European election observers will monitor the U.S. presidential election Nov. 2 in closely contested states, the Washington Times said. The tax bill passed by Congress this week should spur U.S. companies to buy back shares which should boost earnings, the NY Times reported. Alcoa and Alcan may spend $1 billion to build a new alumina refinery in Guinea, Reuters said. The median price of a home in the San Francisco Bay area rose to $544,000 in September, up 17% from $465,000 the same month a year ago, the San Francisco Chronicle reported. A ban on snowmobiles in Yellowstone National Park and Grand Teton National Park was ruled invalid by a federal judge, the AP reported. Russia is ready to increase oil exports by 5.4%, the nation's pipeline monopoly said. Sales at U.S. retailers rose 1.5% in September, the most in six months, led by spending on automobiles and general merchandise, Bloomberg reported. U.S. consumer confidence fell more than forecast this month, as job growth slowed and negative political ads filled the airways, Bloomberg said. Antidepressants must carry the strictest black-box warning on increased suicidal behavior in children who take the medicines, U.S. regulators said. A Chicago Board of Trade sold for a record $1 million, at least the 14th membership to change hands this week as investors bet the futures market will sell shares to the public or be bought by the Chicago Mercantile Exchange, Bloomberg reported. Fidelity Investments, State Street and Barclays Plc may have suffered investment losses of as much as $5 billion from the plunge in insurance stocks over the past two days, Bloomberg said. Oil prices aren't high enough to trigger inflation and slow growth like the U.S. experienced in prior oil shocks, Fed Reserve Chairman Greenspan said. Billionaire hedge fund manager George Soros increased his donations to anti-Bush political groups to around $16 million, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged mid-day as gains in my steel and alternative energy longs are being offset by losses in my wireless and internet longs. I added a few new longs in various sectors this morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is BRCM and I am using a $28 stop-loss on this position. The tone of the market has improved significantly from this morning on positive comments by Greenspan, short-covering and strong retail sales. Interest rates are rising as investors are beginning to anticipate stronger economic growth. I continue to expect U.S. GDP growth for the 3rd quarter will come in above 4% and the 4th quarter near 5%. U.S. stocks should rise modestly into the close on more short-covering.
NASDAQ 1,919.50 +.87%
Leading Sectors
I-Banks +1.82%
Banks +1.57%
Gaming +1.49%
Lagging Sectors
HMOs -.54%
Disk Drives -1.48%
Insurance -2.85%
Other
Crude Oil 54.56 -.37%
Natural Gas 6.70 -1.51%
Gold 420.20 +.17%
Base Metals 114.53 +1.45%
U.S. Dollar 87.18 -.42%
10-Yr. T-note Yield 4.07% +1.24%
VIX 14.98 -8.64%
Put/Call .93 -13.08%
NYSE Arms 1.39 -15.24%
Market Movers
MMC -14.4% on continuing worries over Spitzer probe and saying it will immediately suspend its practice of market services agreements with insurance carriers.
HIG -4.4% on continuing worries over Spitzer probe.
JNPR -6.3% on profit-taking after beating 3Q estimates and raising 4Q guidance.
PFE -4.2% after saying its Bextra painkiller can cause a fatal skin reaction and heart problems.
AIG -4.3% on continuing worries over Spitzer probe.
FARO +11.87% after boosting 3Q and 04 forecasts.
GPC +7.44% after meeting 3Q estimates and reiterating 04 guidance.
PENN +5.7% after agreeing to sell its Pocono Downs racetrack to the Mohegan Tribal Gaming Authority for $280 million.
FLYR -21.5% after cutting 3Q, 4Q and 04 forecasts and multiple downgrades.
GIVN -15.2% after missing 3Q estimates.
NFP -16.4% on continuing worries over Spitzer probe.
MGAM -13.7% after lowering 4Q and 04 guidance.
NFLX -38.2% after missing 3Q estimates substantially, saying AMZN will start competing video service and multiple downgrades.
POSS -33.3% after cutting 1Q and 05 forecast and Frist Albany downgrade to Underperform.
ACE -7.2% on continuing worries over Spitzer probe.
Economic Data
Producer Price Index for September rose .1% versus estimates of a .1% increase and a .1% decline in August.
PPI Ex Food & Energy for September rose .3% versus estimates of a .2% gain and a .1% decrease in August.
Advance Retail Sales for September rose 1.5% versus estimates of a .7% increase and a .2% decline in August.
Retail Sales Less Autos for September rose .6% versus estimates of a .3% increase and a .2% decline in August.
Empire Manufacturing for October fell to 17.43 versus estimates of 25.00 and a reading of 27.26 in September.
Industrial Production for September rose .1% versus estimates of a .3% increase and a .1% decline in August.
Capacity Utilization for September was 77.2% versus estimates of 77.5% and 77.2% in August.
Preliminary Univ. of Mich. Consumer Confidence for October fell to 87.5 versus estimates of 94.0 and a reading of 94.2 in September.
Business Inventories for August rose .7% versus estimates of a .6% rise and a 1.0% increase in July.
Recommendations
Goldman Sachs reiterated Outperform on RE, ENH, JNPR, STZ, PFE, IP, ALL and AIG. Goldman downgraded MMC to Underperform. Citi upgraded EIX to Buy, target $32. Citi downgraded MMC to Sell, target $31. Citi upgraded MPG to Buy, target $26. Citi reiterated Buy on MTG, target $90. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Buy on TCB, target $34. Lehman downgrade Auto and Auto Parts industries to Negative. APA raised to Buy at UBS, target $61. MRVL cut to Reduce at UBS. WERN raised to Buy at Legg Mason, target $23. AMMD cut to Underweight at JP Morgan. WMS rated Overweight at Morgan Stanley, target $33. NFLX downgraded to Underweight at JP Morgan. PHTN cut to Sector Underperform at CIBC.
Mid-day News
U.S. stocks are modestly higher mid-day on optimism over Greenspan's comments, strong retail sales and short-covering. The SEC's inquiry into Fannie Mae's accounting has become a formal probe, the Washington Post said. European election observers will monitor the U.S. presidential election Nov. 2 in closely contested states, the Washington Times said. The tax bill passed by Congress this week should spur U.S. companies to buy back shares which should boost earnings, the NY Times reported. Alcoa and Alcan may spend $1 billion to build a new alumina refinery in Guinea, Reuters said. The median price of a home in the San Francisco Bay area rose to $544,000 in September, up 17% from $465,000 the same month a year ago, the San Francisco Chronicle reported. A ban on snowmobiles in Yellowstone National Park and Grand Teton National Park was ruled invalid by a federal judge, the AP reported. Russia is ready to increase oil exports by 5.4%, the nation's pipeline monopoly said. Sales at U.S. retailers rose 1.5% in September, the most in six months, led by spending on automobiles and general merchandise, Bloomberg reported. U.S. consumer confidence fell more than forecast this month, as job growth slowed and negative political ads filled the airways, Bloomberg said. Antidepressants must carry the strictest black-box warning on increased suicidal behavior in children who take the medicines, U.S. regulators said. A Chicago Board of Trade sold for a record $1 million, at least the 14th membership to change hands this week as investors bet the futures market will sell shares to the public or be bought by the Chicago Mercantile Exchange, Bloomberg reported. Fidelity Investments, State Street and Barclays Plc may have suffered investment losses of as much as $5 billion from the plunge in insurance stocks over the past two days, Bloomberg said. Oil prices aren't high enough to trigger inflation and slow growth like the U.S. experienced in prior oil shocks, Fed Reserve Chairman Greenspan said. Billionaire hedge fund manager George Soros increased his donations to anti-Bush political groups to around $16 million, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged mid-day as gains in my steel and alternative energy longs are being offset by losses in my wireless and internet longs. I added a few new longs in various sectors this morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is BRCM and I am using a $28 stop-loss on this position. The tone of the market has improved significantly from this morning on positive comments by Greenspan, short-covering and strong retail sales. Interest rates are rising as investors are beginning to anticipate stronger economic growth. I continue to expect U.S. GDP growth for the 3rd quarter will come in above 4% and the 4th quarter near 5%. U.S. stocks should rise modestly into the close on more short-covering.
Friday Watch
Earnings of Note
Company/Estimate
VOXX/.16
SCH/.08
CVTX/-1.16
FNM/1.88
WB/.99
WMAR/.32
Splits
None of note.
Economic Data
Producer Price Index for September estimated up .1% versus a .1% decline in August.
PPI Ex Food & Energy for September estimated up .2% versus a .1% decrease in August.
Advance Retail Sales for September estimated up .7% versus a .3% decline in August.
Retail Sales Less Autos for September estimated up .3% versus a .2% decrease in August.
Empire Manufacturing for October estimated at 25.0 versus 28.3 in September.
Industrial Production for September estimated up .3% versus a .1% increase in August.
Capacity Utilization for September estimated at 77.5% versus 77.3% in August.
Preliminary Univ. of Mich. Consumer Confidence reading for October estimated at 94.0 versus 94.2 in September.
Business Inventories for August estimated up .6% versus a .9% increase in July.
Recommendations
Goldman Sachs reiterated Outperform on IGT, STN, UNH and Underperform on AZR, DJ, KZL, UIS, CNET. Par Pharmaceutical(PPX), a generic drugmaker whose shares have dropped 47% this year, may see its stock recover as more of its drugs receive regulatory approval next year, Business Week said. Shares of OmniVision Technologies, which makes digital-camera chips, may rise as sales of mobile-phone cameras with OmniVision chips surge this year, Business Week reported. Blue Nile(NILE) has been "highly profitable at the early stages of growth," Business Week reported, citing analyst Anne-Marie Peterson of Thomas Weisel Partners.
Late-Night News
Asian indices are mostly lower, led by weakness in China. The Russian government may sell OAO Yukos Oil Co.'s largest unit for as little as $4 billion, the Financial Times reported. Starbucks will publish a children's book next month as part of a new publishing venture, Business Week said. Cisco Systems seized more than $20 million of counterfeit products in a raid in China, the South China Morning Post said. Global demand for thin-film transistor liquid crystal displays is expected to "explode" around the end of the year, the Commercial Times reported. Taiwan Semiconductor Manufacturing is using more than 96% of its factory capacity in the current quarter, exceeding analysts' estimates of 80%, the Economic Daily News reported. The company is receiving last-minute orders from customers such as Nvidia, ATI Technologies and Qualcomm, the Taipei-based paper said. Time Warner's Warner Bros. is setting up its first film production venture in China with China Film Group and Hengdian Group as partners, the South China Morning Post said. BHP Billiton, Jiangxi Copper and Wuhan Steel Processing said China's rising usage of copper, nickel and other metals may leave producers unable to meet demand, indicating prices may rebound from declines this week, Bloomberg said. Afghan President Karzai won almost 60% of the vote in early counting from the Oct. 9 presidential election, according to the election Web site.
Late-Night Trading
Asian Indices are -.75% to unch. on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated unch.
BOTTOM LINE: I expect U.S. equities to open modestly lower in the morning on energy, political and earnings' worries, however stocks should rise later in the day on better economic reports and short-covering. The Portfolio is 75% net long heading into tomorrow.
Company/Estimate
VOXX/.16
SCH/.08
CVTX/-1.16
FNM/1.88
WB/.99
WMAR/.32
Splits
None of note.
Economic Data
Producer Price Index for September estimated up .1% versus a .1% decline in August.
PPI Ex Food & Energy for September estimated up .2% versus a .1% decrease in August.
Advance Retail Sales for September estimated up .7% versus a .3% decline in August.
Retail Sales Less Autos for September estimated up .3% versus a .2% decrease in August.
Empire Manufacturing for October estimated at 25.0 versus 28.3 in September.
Industrial Production for September estimated up .3% versus a .1% increase in August.
Capacity Utilization for September estimated at 77.5% versus 77.3% in August.
Preliminary Univ. of Mich. Consumer Confidence reading for October estimated at 94.0 versus 94.2 in September.
Business Inventories for August estimated up .6% versus a .9% increase in July.
Recommendations
Goldman Sachs reiterated Outperform on IGT, STN, UNH and Underperform on AZR, DJ, KZL, UIS, CNET. Par Pharmaceutical(PPX), a generic drugmaker whose shares have dropped 47% this year, may see its stock recover as more of its drugs receive regulatory approval next year, Business Week said. Shares of OmniVision Technologies, which makes digital-camera chips, may rise as sales of mobile-phone cameras with OmniVision chips surge this year, Business Week reported. Blue Nile(NILE) has been "highly profitable at the early stages of growth," Business Week reported, citing analyst Anne-Marie Peterson of Thomas Weisel Partners.
Late-Night News
Asian indices are mostly lower, led by weakness in China. The Russian government may sell OAO Yukos Oil Co.'s largest unit for as little as $4 billion, the Financial Times reported. Starbucks will publish a children's book next month as part of a new publishing venture, Business Week said. Cisco Systems seized more than $20 million of counterfeit products in a raid in China, the South China Morning Post said. Global demand for thin-film transistor liquid crystal displays is expected to "explode" around the end of the year, the Commercial Times reported. Taiwan Semiconductor Manufacturing is using more than 96% of its factory capacity in the current quarter, exceeding analysts' estimates of 80%, the Economic Daily News reported. The company is receiving last-minute orders from customers such as Nvidia, ATI Technologies and Qualcomm, the Taipei-based paper said. Time Warner's Warner Bros. is setting up its first film production venture in China with China Film Group and Hengdian Group as partners, the South China Morning Post said. BHP Billiton, Jiangxi Copper and Wuhan Steel Processing said China's rising usage of copper, nickel and other metals may leave producers unable to meet demand, indicating prices may rebound from declines this week, Bloomberg said. Afghan President Karzai won almost 60% of the vote in early counting from the Oct. 9 presidential election, according to the election Web site.
Late-Night Trading
Asian Indices are -.75% to unch. on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated unch.
BOTTOM LINE: I expect U.S. equities to open modestly lower in the morning on energy, political and earnings' worries, however stocks should rise later in the day on better economic reports and short-covering. The Portfolio is 75% net long heading into tomorrow.
Thursday, October 14, 2004
Thursday Close
S&P 500 1,103.29 -.93%
NASDAQ 1,903.02 -.91%
Leading Sectors
Airlines +2.68%
Oil Service +1.82%
Energy +.95%
Lagging Sectors
Semis -3.22%
Disk Drives -4.75%
Insurance -6.50%
Other
Crude Oil 54.51 -.46%
Natural Gas 6.71 -1.34%
Gold 419.00 -.12%
Base Metals 112.89 -.48%
U.S. Dollar 87.62 -.30%
10-Yr. T-note Yield 4.02% -.90%
VIX 16.43 +6.55%
Put/Call 1.07 +.94%
NYSE Arms 1.64 +20.59%
After-hours Movers
JNPR -6.31% on profit-taking after beating 3Q estimates and raising 4Q guidance.
RMBS +4.62% after beating 3Q estimates.
MGAM -12.89% after cutting 4Q estimates.
PHTN -8.52% after cutting 4Q forecast.
SUNW +4.03% after beating 1Q estimates.
CVH +8.47% on rebound after sell-off related to FHCC acquisition.
CREE -4.02% after missing 1Q estimates and lowering 2Q guidance.
NFLX -34.14% after missing 3Q estimates substantially and saying AMZN will start video service.
CNET -11.99% after meeting 3Q estimates and lowering outlook.
Recommendations
Goldman reiterated Underperform on CNET and Outperform on SVU.
After-hours News
U.S. stocks finished lower today on concerns over lawsuits, energy prices and political worries. After the close, Todd Thomson, CFO of Citigroup, said he expects credit quality to stay strong, though he doesn't expect it to improve enough to warrant another large release of reserves, CNBC reported. President Bush and Senator Kerry's third tv debate last night drew 51.2 million viewers, Nielsen Media Research said. Google introduced software that lets users search for files from their own computers, as well as the Web, entering a new area of competition with Microsoft, Bloomberg reported. The U.S. budget deficit rose to $412.6 billion, below mid-year estimates of $445 billion, in the year ended Sept. 30 as tax receipts rose more than expected on faster U.S. economic growth, Bloomberg said. The budget deficit is now 3.75% of U.S. GDP, 36.2% lower than the all-time record set in 1983, Bloomberg reported. The U.S. Federal Communications Commission won't stop Sinclair Broadcasting from televising "Stolen Honor", a documentary critical of Senator Kerry's anti-war activities after returning home from the Vietnam War, Bloomberg reported. SunTrust Banks said the SEC started an informal inquiry into its recent announcement the bank would restate profit for this year's first two quarters, Bloomberg said.
BOTTOM LINE: The Portfolio finished slightly lower today as declines in my wireless and restaurant longs more than offset gains in my alternative energy and internet longs. I took profits in a few semiconductor longs in the afternoon as they hit stop-losses, leaving the Portfolio 75% net long. The tone of the market deteriorated further in the afternoon and the advance/decline line finished at its lows for the day. Investors appear to be worried over the mounting number of lawsuits plaguing corporate America, President Bush's recent decline in the Polls and continuing high energy prices. I still expect U.S. stocks to trade mixed-to-weaker over the near-term before embarking on a significant move higher in the latter part of the month.
NASDAQ 1,903.02 -.91%
Leading Sectors
Airlines +2.68%
Oil Service +1.82%
Energy +.95%
Lagging Sectors
Semis -3.22%
Disk Drives -4.75%
Insurance -6.50%
Other
Crude Oil 54.51 -.46%
Natural Gas 6.71 -1.34%
Gold 419.00 -.12%
Base Metals 112.89 -.48%
U.S. Dollar 87.62 -.30%
10-Yr. T-note Yield 4.02% -.90%
VIX 16.43 +6.55%
Put/Call 1.07 +.94%
NYSE Arms 1.64 +20.59%
After-hours Movers
JNPR -6.31% on profit-taking after beating 3Q estimates and raising 4Q guidance.
RMBS +4.62% after beating 3Q estimates.
MGAM -12.89% after cutting 4Q estimates.
PHTN -8.52% after cutting 4Q forecast.
SUNW +4.03% after beating 1Q estimates.
CVH +8.47% on rebound after sell-off related to FHCC acquisition.
CREE -4.02% after missing 1Q estimates and lowering 2Q guidance.
NFLX -34.14% after missing 3Q estimates substantially and saying AMZN will start video service.
CNET -11.99% after meeting 3Q estimates and lowering outlook.
Recommendations
Goldman reiterated Underperform on CNET and Outperform on SVU.
After-hours News
U.S. stocks finished lower today on concerns over lawsuits, energy prices and political worries. After the close, Todd Thomson, CFO of Citigroup, said he expects credit quality to stay strong, though he doesn't expect it to improve enough to warrant another large release of reserves, CNBC reported. President Bush and Senator Kerry's third tv debate last night drew 51.2 million viewers, Nielsen Media Research said. Google introduced software that lets users search for files from their own computers, as well as the Web, entering a new area of competition with Microsoft, Bloomberg reported. The U.S. budget deficit rose to $412.6 billion, below mid-year estimates of $445 billion, in the year ended Sept. 30 as tax receipts rose more than expected on faster U.S. economic growth, Bloomberg said. The budget deficit is now 3.75% of U.S. GDP, 36.2% lower than the all-time record set in 1983, Bloomberg reported. The U.S. Federal Communications Commission won't stop Sinclair Broadcasting from televising "Stolen Honor", a documentary critical of Senator Kerry's anti-war activities after returning home from the Vietnam War, Bloomberg reported. SunTrust Banks said the SEC started an informal inquiry into its recent announcement the bank would restate profit for this year's first two quarters, Bloomberg said.
BOTTOM LINE: The Portfolio finished slightly lower today as declines in my wireless and restaurant longs more than offset gains in my alternative energy and internet longs. I took profits in a few semiconductor longs in the afternoon as they hit stop-losses, leaving the Portfolio 75% net long. The tone of the market deteriorated further in the afternoon and the advance/decline line finished at its lows for the day. Investors appear to be worried over the mounting number of lawsuits plaguing corporate America, President Bush's recent decline in the Polls and continuing high energy prices. I still expect U.S. stocks to trade mixed-to-weaker over the near-term before embarking on a significant move higher in the latter part of the month.
MId-day Update
S&P 500 1,106.91 -.61%
NASDAQ 1,908.23 -.64%
Leading Sectors
Oil Service +2.46%
Airlines +1.72%
Energy +1.68%
Lagging Sectors
Semis -2.94%
Disk Drives -4.11%
Insurance -5.92%
Other
Crude Oil 54.40 +1.42%
Natural Gas 6.78 -1.04%
Gold 419.30 +1.13%
Base Metals 112.89 -.48%
U.S. Dollar 87.61 -.31%
10-Yr. T-note Yield 4.03% -.57%
VIX 15.94 +3.37%
Put/Call 1.19 +12.26%
NYSE Arms 1.47 +6.62%
Market Movers
SNDK -25.1% after missing estimates and lowering 4Q guidance and multiple downgrades.
AAPL +12.9% after substantially beating 4Q estimates, raising 1Q outlook and multiple upgrades.
GM -5.1% after missing 3Q estimates substantially, lowering 04 guidance, S&P credit downgrade and announcing 12,000 job cuts in Europe.
FHCC +15.2% after CVH agreed to buy it for about $1.8B. in cash and stock.
NVLS -9.6% after meeting 3Q estimates and lowering 4Q guidance substantially.
AIG -4.5% on news that Eliot Spitzer named it in a lawsuit for "steering and bid rigging."
CAAS +42.0% on continuing optimism over its addition into the Halter USX China Index.
EYET +13.4% on ACL news.
ADBL +15.8% on AAPL earnings report.
RNVS +18.3% after saying AstraZeneca will continue as planned with Phase III trials to determine Cerovive's effect on disability and neurological recovery in acute ischemic stroke patients.
PPDI +8.4% after beating 3Q estimates.
SYNA +8.6% on AAPL earnings report.
IMDC +4.7% on JP Morgan upgrade to Overweight.
PII +4.5% after beating 3Q estimates and raising 04 guidance.
MLI -12.0% after disappointing 3Q results and worries over slowing sales to China.
ACL -12.3% after saying its treatment for the leading cause of blindness among the elderly wasn't better than Novartis AG's drug.
CVH -9.7% on FHCC purchase.
MMC -11.3% on Spitzer lawsuit.
QLGC -7.5% after beating 2Q estimates, but Merrill downgrade to Neutral.
LIN -8.2% after lowering 3Q forecast and multiple downgrades.
*Alternative Energy stocks up across the board on high oil prices and positive commentary.
Economic Data
Trade Balance for August was -$54.0B versus estimates of -$51.4B and -$50.5B in July.
Import Price Index for September rose .2% versus estimates of a .5% increase and a 1.4% gain in August.
Initial Jobless Claims for last week were 352K versus estimates of 2859K and 2856K the prior week.
Continuing Claims were 2845K versus estimates of 2859K and 2856K prior.
Recommendations
Goldman Sachs reiterated Attractive view of Chemical industry. Goldman reiterated Outperform on ASN, AMGN, BIIB, DNA, GILD, AIG, DIS, DO, RIG and UNH. Goldman reiterated Underperform on CVH and FHCC. Citi SmithBarney rated VRSN Buy, target $26. Citi reiterated Buy on WMT, target $65. Citi sees modest earnings upside surprises at TYC, CBE, ROK, EMR, ITT. Citi reiterated Buy on LRCX, target $35. Citi reiterated Sell on SNDK, target $21. Citi reiterated Buy on ALL, target $55. Citi reiterated Buy on TLAB, target $11. Citi reiterated Buy on ARLP, target $67. Citi reiterated Buy on LLTC, target $44. IMDC and AAPL raised to Overweight at JP Morgan. PPG raised to Buy at Bank of America, target $68. LIN cut to Underperform at Bear Stearns. AAPL raised to Outperform at Bear Stearns. LSTR raised to Overweight at JP Morgan.
Mid-day News
U.S. stocks are modestly lower mid-day on continuing fears over high energy prices, lawsuits and earnings. Hennes & Mauritz's expansion to Italy and Eastern Europe comes as Europe's largest clothing retailer still seeks to meet financial goals in the U.S., the NY Times said. FedEx will open 150 branches in the Serbian sector of Bosnia, also known as Republika Srpska, under an agreement with the Bosnian postal services, the AP reported. Vietnam prisoners of war who appear in a documentary called "Stolen Honor" criticizing Senator Kerry have joined forces with the anti-Kerry Swift Boat Veterans for Truth to campaign against Kerry, the Washington Post reported. Citigroup, the world's largest bank, said third-quarter profit rose 13%, buoyed by revenue from consumer lending and share sales in Asia, Bloomberg said. Nokia said profit will probably drop for a second consecutive quarter as it cuts prices to win back market share, Bloomberg reported. UnitedHealth Group, the biggest U.S. health insurer, said third-quarter profit rose 47% after the company controlled costs and gained customers through the July purchase of Oxford Health Plans, Bloomberg reported. Bank of America said quarterly profit rose 29% as it boosted lending and earned more fees from consumer banking, Bloomberg said. Lehman Brothers retained first place as the top stock research firm for a second year in an annual money-manager survey by Institutional Investor magazine. Merck CEO Gilmartin said the drugmaker may accelerate new-drug development and cost-cutting after the withdrawal of its Vioxx painkiller because of a link to heart risks, Bloomberg reported. Crude oil is rising after an Energy Dept. report showed that U.S. supplies of distillate fuels, including heating oil and diesel, fell last week, Bloomberg reported. General Motors cut its 2004 profit forecast after posting its first loss on North American car manufacturing in six years, Bloomberg said. New York Attorney General Spitzer sued Marsh & McLennan and arrested two American International Group executives in his first prosecution of the insurance industry, Bloomberg said.
BOTTOM LINE: The Portfolio is unchanged mid-day as strength in my alternative energy and internet longs is offsetting weakness in my restaurant and wireless longs. I have not traded today and the Portfolio is still 100% net long. While the tone of the market is negative, declines are muted on light volume. Interest rates are falling again as investors continue to speculate high energy prices will slow world growth substantially. On the positive side, companies with good earnings reports are being rewarded substantially and measures of investor anxiety are rising again. I expect U.S. stocks to rise modestly from current levels into the close on short-covering.
NASDAQ 1,908.23 -.64%
Leading Sectors
Oil Service +2.46%
Airlines +1.72%
Energy +1.68%
Lagging Sectors
Semis -2.94%
Disk Drives -4.11%
Insurance -5.92%
Other
Crude Oil 54.40 +1.42%
Natural Gas 6.78 -1.04%
Gold 419.30 +1.13%
Base Metals 112.89 -.48%
U.S. Dollar 87.61 -.31%
10-Yr. T-note Yield 4.03% -.57%
VIX 15.94 +3.37%
Put/Call 1.19 +12.26%
NYSE Arms 1.47 +6.62%
Market Movers
SNDK -25.1% after missing estimates and lowering 4Q guidance and multiple downgrades.
AAPL +12.9% after substantially beating 4Q estimates, raising 1Q outlook and multiple upgrades.
GM -5.1% after missing 3Q estimates substantially, lowering 04 guidance, S&P credit downgrade and announcing 12,000 job cuts in Europe.
FHCC +15.2% after CVH agreed to buy it for about $1.8B. in cash and stock.
NVLS -9.6% after meeting 3Q estimates and lowering 4Q guidance substantially.
AIG -4.5% on news that Eliot Spitzer named it in a lawsuit for "steering and bid rigging."
CAAS +42.0% on continuing optimism over its addition into the Halter USX China Index.
EYET +13.4% on ACL news.
ADBL +15.8% on AAPL earnings report.
RNVS +18.3% after saying AstraZeneca will continue as planned with Phase III trials to determine Cerovive's effect on disability and neurological recovery in acute ischemic stroke patients.
PPDI +8.4% after beating 3Q estimates.
SYNA +8.6% on AAPL earnings report.
IMDC +4.7% on JP Morgan upgrade to Overweight.
PII +4.5% after beating 3Q estimates and raising 04 guidance.
MLI -12.0% after disappointing 3Q results and worries over slowing sales to China.
ACL -12.3% after saying its treatment for the leading cause of blindness among the elderly wasn't better than Novartis AG's drug.
CVH -9.7% on FHCC purchase.
MMC -11.3% on Spitzer lawsuit.
QLGC -7.5% after beating 2Q estimates, but Merrill downgrade to Neutral.
LIN -8.2% after lowering 3Q forecast and multiple downgrades.
*Alternative Energy stocks up across the board on high oil prices and positive commentary.
Economic Data
Trade Balance for August was -$54.0B versus estimates of -$51.4B and -$50.5B in July.
Import Price Index for September rose .2% versus estimates of a .5% increase and a 1.4% gain in August.
Initial Jobless Claims for last week were 352K versus estimates of 2859K and 2856K the prior week.
Continuing Claims were 2845K versus estimates of 2859K and 2856K prior.
Recommendations
Goldman Sachs reiterated Attractive view of Chemical industry. Goldman reiterated Outperform on ASN, AMGN, BIIB, DNA, GILD, AIG, DIS, DO, RIG and UNH. Goldman reiterated Underperform on CVH and FHCC. Citi SmithBarney rated VRSN Buy, target $26. Citi reiterated Buy on WMT, target $65. Citi sees modest earnings upside surprises at TYC, CBE, ROK, EMR, ITT. Citi reiterated Buy on LRCX, target $35. Citi reiterated Sell on SNDK, target $21. Citi reiterated Buy on ALL, target $55. Citi reiterated Buy on TLAB, target $11. Citi reiterated Buy on ARLP, target $67. Citi reiterated Buy on LLTC, target $44. IMDC and AAPL raised to Overweight at JP Morgan. PPG raised to Buy at Bank of America, target $68. LIN cut to Underperform at Bear Stearns. AAPL raised to Outperform at Bear Stearns. LSTR raised to Overweight at JP Morgan.
Mid-day News
U.S. stocks are modestly lower mid-day on continuing fears over high energy prices, lawsuits and earnings. Hennes & Mauritz's expansion to Italy and Eastern Europe comes as Europe's largest clothing retailer still seeks to meet financial goals in the U.S., the NY Times said. FedEx will open 150 branches in the Serbian sector of Bosnia, also known as Republika Srpska, under an agreement with the Bosnian postal services, the AP reported. Vietnam prisoners of war who appear in a documentary called "Stolen Honor" criticizing Senator Kerry have joined forces with the anti-Kerry Swift Boat Veterans for Truth to campaign against Kerry, the Washington Post reported. Citigroup, the world's largest bank, said third-quarter profit rose 13%, buoyed by revenue from consumer lending and share sales in Asia, Bloomberg said. Nokia said profit will probably drop for a second consecutive quarter as it cuts prices to win back market share, Bloomberg reported. UnitedHealth Group, the biggest U.S. health insurer, said third-quarter profit rose 47% after the company controlled costs and gained customers through the July purchase of Oxford Health Plans, Bloomberg reported. Bank of America said quarterly profit rose 29% as it boosted lending and earned more fees from consumer banking, Bloomberg said. Lehman Brothers retained first place as the top stock research firm for a second year in an annual money-manager survey by Institutional Investor magazine. Merck CEO Gilmartin said the drugmaker may accelerate new-drug development and cost-cutting after the withdrawal of its Vioxx painkiller because of a link to heart risks, Bloomberg reported. Crude oil is rising after an Energy Dept. report showed that U.S. supplies of distillate fuels, including heating oil and diesel, fell last week, Bloomberg reported. General Motors cut its 2004 profit forecast after posting its first loss on North American car manufacturing in six years, Bloomberg said. New York Attorney General Spitzer sued Marsh & McLennan and arrested two American International Group executives in his first prosecution of the insurance industry, Bloomberg said.
BOTTOM LINE: The Portfolio is unchanged mid-day as strength in my alternative energy and internet longs is offsetting weakness in my restaurant and wireless longs. I have not traded today and the Portfolio is still 100% net long. While the tone of the market is negative, declines are muted on light volume. Interest rates are falling again as investors continue to speculate high energy prices will slow world growth substantially. On the positive side, companies with good earnings reports are being rewarded substantially and measures of investor anxiety are rising again. I expect U.S. stocks to rise modestly from current levels into the close on short-covering.
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