BETWEEN THE HEDGES

Wednesday, September 28, 2005

Thursday Watch

Posted by Gary .....at 11:38 PM

Late-Night Headlines
Bloomberg:
- Japan’s retail sales rose almost twice as much as expected in August as consumers spent their higher wages and bonuses, adding to signs that the world’s second-largest economy will expand for a fourth quarter.
- GE will buy a 7% stake in China’s Shenzhen Development Bank valued at $100 million.
- Police in London are investigating a number of new potential terrorist suspects who may be planning further attacks.
- Samsung Electronics plans to invest $33 billion in the next seven years on factories to triple chip sales.

China Business News:
- Shanghai’s home supply jumped 50% this month, while prices dropped 17%, citing Shanghai Property Exchange Center.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on MWV, HMA, DNA and MWV.
- Reiterated Underperform on EK.

Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.09%.

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
FDO/.17
MU/-.08

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Final 2Q GDP is estimated to rise 3.3% versus a prior estimate of a 3.3% increase.
- Final 2Q GDP Price Index is estimated to rise 2.4% versus a prior estimate of a 2.4% increase.
- Final 2Q Personal Consumption is estimated to rise 3.0% versus a prior estimate of a 3.0% gain.
- Initial Jobless Claims for last week are estimated to fall to 418K versus 432K the prior week.
- Continuing Claims are estimated to rise to 2708K versus 2666K prior.

BOTTOM LINE: Asian indices are higher, boosted by cyclical companies in the region on strong economic reports from the US and Japan. I expect US equities to open modestly higher on gains in Asia and quarter-end window dressing. The Portfolio is 50% net long heading into the day.

Stocks Finished Mixed in Another Show of Resiliency

Posted by Gary .....at 6:53 PM

Indices
S&P 500 1,216.89 +.10%
DJIA 10,473.09 +.16%
NASDAQ 2,115.40 -.05%
Russell 2000 656.04 -.47%
DJ Wilshire 5000 12,143.63 +.03%
S&P Barra Growth 581.89 +.06%
S&P Barra Value 630.79 +.14%
Morgan Stanley Consumer 580.36 +.22%
Morgan Stanley Cyclical 721.82 +.01%
Morgan Stanley Technology 496.78 +.39%
Transports 3,656.23 +1.07%
Utilities 429.04 +1.03%
Put/Call .73 -7.59%
NYSE Arms .79 -16.27%
Volatility(VIX) 12.63 -1.02%
ISE Sentiment 143.00 -28.50%
US Dollar 89.47 -.15%
CRB 333.33 +1.93%

Futures Spot Prices
Crude Oil 66.28 -.11%
Unleaded Gasoline 230.00 -1.92%
Natural Gas 14.04 -.43%
Heating Oil 212.92 -.56%
Gold 472.50 -.13%
Base Metals 130.42 -.19%
Copper 174.50 -.17%
10-year US Treasury Yield 4.25% -.55%

Leading Sectors
Networking +2.18%
Gold & Silver +2.17%
Computer Services +1.43%

Lagging Sectors
Alternative Energy -.95%
REITs -.96%
Retail -1.32%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on EL.
- Reiterated Underperform on DE.

Afternoon/Evening Headlines
Bloomberg:
- Landry’s Restaurants, which yesterday completed the acquisition of two Golden Nugget Casino and Hotels in Nevada, may expand the operation to Gulf coast states such as Mississippi, CEO Fertitta said.
- A probe of Fannie Mae, the largest source of money for US home loans, turned up “new and pervasive accounting violations,” Dow Jones reported.
- Governor George Pataki said today he will direct development officials to drop plans for a museum of freedom at the World Trade Center site as officials said the center could be used for anti-US messages.
- A tropical storm system is developing in the Caribbean Sea and has the potential to develop into another hurricane.
- Television and radio indecency complaints to US regulators plummeted 98% in the second quarter after networks flagged racier programs.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Energy-related shorts and Internet longs. I covered some of my IWM and QQQQ shorts in the afternoon, thus leaving the Portfolio 50% net long. The tone of the market was slightly negative today as the advance/decline line finished lower, sector performance was mixed and volume was about average. Measures of investor anxiety were mostly lower into the close. Overall, today’s market action was slightly positive given a 10% jump in natural gas prices and a 10% decline in Fannie Mae (FNM). Breadth, however, remained modestly negative throughout the day. I expect stocks to continue to trade mixed-to-lower over the next few weeks before a meaningful rally propels the major averages higher through year-end.

Stocks Slightly Higher Mid-day Even as Energy Prices Rise Again

Posted by Gary .....at 3:16 PM

Indices
S&P 500 1,218.73 +.25%
DJIA 10,482.36 +.25%
NASDAQ 2,120.98 +.17%
Russell 2000 656.44 -.41%
DJ Wilshire 5000 12,161.39 +.18%
S&P Barra Growth 582.81 +.21%
S&P Barra Value 631.99 +.33%
Morgan Stanley Consumer 581.55 +.43%
Morgan Stanley Cyclical 722.96 +.17%
Morgan Stanley Technology 497.68 +.56%
Transports 3,661.93 +1.22%
Utilities 428.90 +1.01%
Put/Call .74 -6.33%
NYSE Arms .73 -22.64%
Volatility(VIX) 12.50 -2.04%
ISE Sentiment 140.00 -30.0%
US Dollar 89.47 -.15%
CRB 333.45 +1.96%

Futures Spot Prices
Crude Oil 66.40 +2.04%
Unleaded Gasoline 232.50 +7.32%
Natural Gas 14.60 +15.36%
Heating Oil 215.00 +3.94%
Gold 472.90 +1.44%
Base Metals 130.42 -.19%
Copper 174.50 +.98%
10-year US Treasury Yield 4.25% -.64%

Leading Sectors %
Gold & Silver +2.18%
Networking +1.89%
Computer Services +1.54%

Lagging Sectors
Homebuilders -.98%
Retail -1.13%
REITs -1.15%

BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my Internet longs and Energy-related shorts. I added back QQQQ/IWM shorts this morning and added back to my TLT long, thus leaving the Portfolio 25% net long. The tone of the market is neutral as the advance/decline line is lower, most sectors are higher and volume is average. Measures of investor anxiety are mostly lower. Today’s overall market action is slightly positive given the rise in energy prices and better-than-expected economic data. Given the spike in energy prices, measures of investor angst are relatively low. The 10-year T-note continues to rally. I expect US stocks to trade mixed-to-lower from current levels into the close on worries over higher energy prices.

Today's Headlines

Posted by Gary .....at 1:53 PM

Bloomberg:
- US Representative Tom Delay was indicted by a Texas grand jury on a single count of conspiracy.
- Gasoline and crude oil rose on speculation that supplies will fall because Hurricane Rita shut refineries and platforms.
- US Treasury Bonds are rallying as high energy prices increase speculation of an economic slowdown.

Wall Street Journal:
- Celgene Corp. may face concerns over the safety of its experimental blood cancer drug Revlimid after a clinical trail was suspended, citing the principal investigator of the study.
- Valero Energy, Tesoro Corp. and other US gasoline refiners are finding it increasingly difficult to decide whether to keep pumping gas or halt operations for scheduled maintenance.
- Dell is expected to announce a new line of desktop and notebook personal computers with prices between $1,100 to more than $6,000 aimed at more affluent customers.
- Morningstar, Reuters Group Plc, and a small New Jersey company, Sky Fund, are trying to fill a gap in the market by developing dependable ratings of hedge funds.
- New Orleans public schools will need massive repairs and reorganization after Hurricane Katrina set back efforts to turn around the corruption-plagued system.
- UPS may be hurt by a Dell decision to ship many computers to US post offices for customer pick-up rather than to buyers’ homes.

NY Times:
- NRG Energy Inc., the owner of power plants in 14 US states, is in advanced talks to acquire Texas Genco Holdings for at least $5 billion.

Financial Times Deutschland:
- Royal Philips Electronics NV, Europe’s biggest maker of televisions, expects the price decline for flat-panel televisions to end because of higher demand.

Durable Goods Orders Rebound Sharply

Posted by Gary .....at 11:59 AM

- Durable Goods Orders for August rose 3.3% versus estimates of a .7% gain and a 5.3% decline in July.
- Durables Ex Transportation for August rose 4.2% versus estimates of a 1.0% gain and a 3.7% decline in July.

BOTTOM LINE: US orders for durable goods rose a greater-than-expected 3.3% in August, rebounding as businesses sought to rebuild stocks depleted by surging sales, Bloomberg reported. Total shipments, a gauge of future sales, rose 1.7%, the most since December. As well, bookings for non-defense capital goods excluding aircraft, an indication of future business spending, rose 3.6% last month. Moreover, unfilled orders, a measure of future production, rose 1.7%. Durables will likely take a tumble for September on Katrina, however another push higher is likely thereafter through year-end.