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In Play
BOTTOM LINE: Due to a scheduling conflict I am posting an abbreviated Evening Review. I finished the day 75% net long by covering existing shorts. I will post the Wednesday Watch later this evening.
Tuesday, August 09, 2005
Stocks Modestly Higher Mid-day as Oil Reverses Lower
Indices
S&P 500 1,230.60 +.61%
DJIA 10,607.07 +.67%
NASDAQ 2,174.69 +.47%
Russell 2000 660.74 +.17%
DJ Wilshire 5000 12,247.94 +.50%
S&P Barra Growth 591.02 +.64%
S&P Barra Value 635.18 +.58%
Morgan Stanley Consumer 587.91 +.60%
Morgan Stanley Cyclical 754.67 +.19%
Morgan Stanley Technology 505.61 +.81%
Transports 3,739.16 +.30%
Utilities 391.10 +.73%
Put/Call .95 +13.10%
NYSE Arms .59 -27.0%
Volatility(VIX) 12.32 -6.74%
ISE Sentiment 179.00 +20.95%
US Dollar 88.03 +.13%
CRB 315.32 -.92%
Futures Spot Prices
Crude Oil 63.55 -.53%
Unleaded Gasoline 183.60 -1.13%
Natural Gas 8.63 -.56%
Heating Oil 179.50 +.31%
Gold 439.60 -.16%
Base Metals 125.26 -1.55%
Copper 160.70 -2.40%
10-year US Treasury Yield 4.42% +.14%
Leading Sectors
Internet +2.40%
Semis +1.44%
Networking +1.06%
Lagging Sectors
Airlines -.72%
Oil Service -.93%
Oil Tankers -1.06%
S&P 500 1,230.60 +.61%
DJIA 10,607.07 +.67%
NASDAQ 2,174.69 +.47%
Russell 2000 660.74 +.17%
DJ Wilshire 5000 12,247.94 +.50%
S&P Barra Growth 591.02 +.64%
S&P Barra Value 635.18 +.58%
Morgan Stanley Consumer 587.91 +.60%
Morgan Stanley Cyclical 754.67 +.19%
Morgan Stanley Technology 505.61 +.81%
Transports 3,739.16 +.30%
Utilities 391.10 +.73%
Put/Call .95 +13.10%
NYSE Arms .59 -27.0%
Volatility(VIX) 12.32 -6.74%
ISE Sentiment 179.00 +20.95%
US Dollar 88.03 +.13%
CRB 315.32 -.92%
Futures Spot Prices
Crude Oil 63.55 -.53%
Unleaded Gasoline 183.60 -1.13%
Natural Gas 8.63 -.56%
Heating Oil 179.50 +.31%
Gold 439.60 -.16%
Base Metals 125.26 -1.55%
Copper 160.70 -2.40%
10-year US Treasury Yield 4.42% +.14%
Leading Sectors
Internet +2.40%
Semis +1.44%
Networking +1.06%
Lagging Sectors
Airlines -.72%
Oil Service -.93%
Oil Tankers -1.06%
BOTTOM LINE: The Portfolio is higher mid-day on gains in my Medical, Semiconductor and Biotech longs. I took profits in a few of my IWM and QQQQ shorts, thus leaving the Portfolio 50% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, most sectors are higher and volume is very light. Measures of investor anxiety are mostly lower. Today’s overall market action is neutral considering the lower-than-expected rise in Unit Labor Costs. The Johnson Redbook same-store sales index rose 4% year over year last week vs. a 4.4% rise the prior week. The last time weekly sales were 4.0% or greater for six consecutive weeks was May/June 2004. This week's gain is also up from a 1.5% increase in late April and the 14th week in a row the index has exceeded 3%. I expect US stocks to trade mixed into the close as higher rates offset lower energy prices.
Today's Headlines
Bloomberg:
- Shares of Elan rose as much as 37% after a review of multiple sclerosis patient data raised speculation that the withdrawn Tysabri medicine may be allowed back on the market.
- Discovery landed safely at Edwards Air Force Base in California, ending a troubled mission that marked the shuttle’s return to space since the destruction of Columbia in 2003.
Wall Street Journal:
- Oil refiners are putting airlines under pressure by increasing the margins they make from processing crude into jet fuel.
- Lenovo Group Ltd., the China-based group that bought IBM’s personal computer-manufacturing unit, will issue results tomorrow that will let investors see how the group is integrating the personal computer business.
- Verizon Communications plans to join an organization studying how to use coaxial wiring to connect televisions, computers and other appliances.
- Labor unions must convince workers that they are committed to their interests to attract new members, John Zogby, chief executive of polling company Zogby International wrote.
NY Times:
- GM has sold this year the most so-called very small vehicles, which aren’t available in the US, boosted by minivan sales in China.
- The SEC is studying whether doctors involved in clinical trials accept money to talk to analysts and investors about the confidential results.
- Boston Scientific has enjoyed huge success with its Taxus stent but the result is that the company derives more than half its profit from just one product.
Philadelphia Inquirer:
- Comcast Corp. is close to reaching a two-year agreement worth more than $100 million to broadcast NHL games this year.
LA Times:
- California workers’ compensation premiums fell 14.6% for policies written or renewed after July 1 because of increased competition among insurers.
Gulf News:
- Saudi Arabia denied there was a threat of a terrorist attack in the kingdom after the US government closed its embassy in the capital, Riyadh, and consulate in Jeddah because of security concerns.
- Shares of Elan rose as much as 37% after a review of multiple sclerosis patient data raised speculation that the withdrawn Tysabri medicine may be allowed back on the market.
- Discovery landed safely at Edwards Air Force Base in California, ending a troubled mission that marked the shuttle’s return to space since the destruction of Columbia in 2003.
Wall Street Journal:
- Oil refiners are putting airlines under pressure by increasing the margins they make from processing crude into jet fuel.
- Lenovo Group Ltd., the China-based group that bought IBM’s personal computer-manufacturing unit, will issue results tomorrow that will let investors see how the group is integrating the personal computer business.
- Verizon Communications plans to join an organization studying how to use coaxial wiring to connect televisions, computers and other appliances.
- Labor unions must convince workers that they are committed to their interests to attract new members, John Zogby, chief executive of polling company Zogby International wrote.
NY Times:
- GM has sold this year the most so-called very small vehicles, which aren’t available in the US, boosted by minivan sales in China.
- The SEC is studying whether doctors involved in clinical trials accept money to talk to analysts and investors about the confidential results.
- Boston Scientific has enjoyed huge success with its Taxus stent but the result is that the company derives more than half its profit from just one product.
Philadelphia Inquirer:
- Comcast Corp. is close to reaching a two-year agreement worth more than $100 million to broadcast NHL games this year.
LA Times:
- California workers’ compensation premiums fell 14.6% for policies written or renewed after July 1 because of increased competition among insurers.
Gulf News:
- Saudi Arabia denied there was a threat of a terrorist attack in the kingdom after the US government closed its embassy in the capital, Riyadh, and consulate in Jeddah because of security concerns.
Largest Component of Inflation Decelerates, Productivity Remains Healthy, Inventories Rise
- Preliminary 2Q Non-farm Productivity rose 2.2% versus estimates of a 2.0% gain and an upwardly revised 3.2% increase in 1Q.
- Preliminary 2Q Unit Labor Costs rose 1.3% versus estimates of a 2.9% increase and an upwardly revised 3.6% gain in 1Q.
- Wholesale Inventories for June rose .7% versus estimates of a .4% increase and a .3% gain in May.
- Preliminary 2Q Unit Labor Costs rose 1.3% versus estimates of a 2.9% increase and an upwardly revised 3.6% gain in 1Q.
- Wholesale Inventories for June rose .7% versus estimates of a .4% increase and a .3% gain in May.
BOTTOM LINE: Hours worked rose at a 2.1% rate in 2Q versus a 1.1% gain in 1Q. The smaller-than-expected rise in 2Q unit labor costs is a big positive as these costs comprise two-thirds of inflation.
Stockpiles at US wholesalers rose more-than-expected in June, a sign that companies are rebuilding inventories as the economy picks up speed, Bloomberg reported. The inventory-to-sales ratio held steady at 1.19 months. Inventory building subtracted 2.32 percentage points from economic growth in the second quarter, the most since 2000. I expect inventory rebuilding to add to economic growth through the remainder of the year.
Tuesday Watch
Late-Night Headlines
Bloomberg:
- Alexander Yakovlev, a UN procurement officer during the Iraq/UN oil-for-food program, pleaded guilty today to fraud and money laundering.
- The proposed combination of Adidas-Salomon AG and Reebok International will help the companies open more stores and compete against Nike for leadership in China, the world’s fastest-growing athletic gear market.
- Japan Prime Minister Koizumi plans a purge of his party, which may cause the biggest split in the ruling group in 12 years, to eliminate opposition to his planned sale of government-controlled savings bank Japan Post, the centerpiece of his economic overhaul.
- Crude oil futures traded above $64/bbl. In NY after Valero Energy, the third-largest US refiner, said a fire at its McKee plant in Texas will cut gasoline production for five days.
- US lawmakers are renewing their efforts to impose sanctions on Chinese imports, arguing that China’s currency revaluation last month – Its first in a decade – doesn’t go far enough.
- NASA’s Discovery will have opportunities to land at three locations across the US today, a day after cloudy, rainy weather in Florida forced a delay in the space shuttle’s homecoming.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on EBAY, COH, DELL and HNT.
- Reiterated Underperform on SMP.
Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.06%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
AIG/1.21
AES/.15
AQNT/.10
BBI/-.10
CVC/-.11
CSCO/.24
CCU/.40
DISH/.44
HANS/.90
MAY/.31
PNRA/.33
RL/.36
SNDA/.38
SLAB/.11
DIS/.38
Upcoming Splits
None of note
Economic Releases
8:30 am EST
- Preliminary 2Q Non-farm Productivity is estimated to rise 2.0% versus a 2.9% increase in 1Q.
- Preliminary 2Q Unit Labor Costs are estimated to rise 2.9% versus a 3.3% gain in 1Q.
10:00 am EST
- Wholesale Inventories for June are estimated to rise .4% versus a .1% increase in May.
2:15 pm EST
- The FOMC is expected to raise the benchmark rate 25 basis points to 3.50%.
Bloomberg:
- Alexander Yakovlev, a UN procurement officer during the Iraq/UN oil-for-food program, pleaded guilty today to fraud and money laundering.
- The proposed combination of Adidas-Salomon AG and Reebok International will help the companies open more stores and compete against Nike for leadership in China, the world’s fastest-growing athletic gear market.
- Japan Prime Minister Koizumi plans a purge of his party, which may cause the biggest split in the ruling group in 12 years, to eliminate opposition to his planned sale of government-controlled savings bank Japan Post, the centerpiece of his economic overhaul.
- Crude oil futures traded above $64/bbl. In NY after Valero Energy, the third-largest US refiner, said a fire at its McKee plant in Texas will cut gasoline production for five days.
- US lawmakers are renewing their efforts to impose sanctions on Chinese imports, arguing that China’s currency revaluation last month – Its first in a decade – doesn’t go far enough.
- NASA’s Discovery will have opportunities to land at three locations across the US today, a day after cloudy, rainy weather in Florida forced a delay in the space shuttle’s homecoming.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on EBAY, COH, DELL and HNT.
- Reiterated Underperform on SMP.
Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.06%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
AIG/1.21
AES/.15
AQNT/.10
BBI/-.10
CVC/-.11
CSCO/.24
CCU/.40
DISH/.44
HANS/.90
MAY/.31
PNRA/.33
RL/.36
SNDA/.38
SLAB/.11
DIS/.38
Upcoming Splits
None of note
Economic Releases
8:30 am EST
- Preliminary 2Q Non-farm Productivity is estimated to rise 2.0% versus a 2.9% increase in 1Q.
- Preliminary 2Q Unit Labor Costs are estimated to rise 2.9% versus a 3.3% gain in 1Q.
10:00 am EST
- Wholesale Inventories for June are estimated to rise .4% versus a .1% increase in May.
2:15 pm EST
- The FOMC is expected to raise the benchmark rate 25 basis points to 3.50%.
BOTTOM LINE: Asian indices are mostly higher on gains in energy shares in the region. I expect US equities to open modestly higher and to decline later in the afternoon after the FOMC announcement. I expect the Fed to raise rates 25 basis points, maintain the word “measured” with respect to the pace of future hikes and to make other more hawkish statements. The Portfolio is 25% net long heading into the day.
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