Thursday, December 15, 2005
***Alert***
I am unable to post the Mid-day Scoreboard due to a scheduling conflict. I will post the Thursday Close later this afternoon.
Today's Headlines
Bloomberg:
- UN Secretary General Kofi Annan said the voting in Iraq today has “gone very well so far” and that voter turnout will be “high.”
- Crude oil is falling for a second day after a government report showed that US stockpiles last week were 11% higher than the five-year average.
- Robert Hagstrom, manager of the Legg Mason Growth Trust, increased his investments in Amazon.com and EBay after the companies’ shares tumbled because he expects more shoppers to buy gifts online.
- The US dollar is rising the most in more than a week against the euro after a Treasury Department report showed foreigners increased purchases of US securities in October at a historic pace.
- The union representing 32,000 NY subway and bus workers hardened its public stance on contract negotiations ahead of a midnight deadline, saying the likelihood of a strike was increasing.
Wall Street Journal:
- US net purchases of foreign stocks in the first 10 months of this year are likely to have exceeded the 2003 record of $86.6 billion.
- Quizno’s Corp., which operates the Quizno’s Classic Subs restaurants chain, is to be sold at auction and may fetch as much as $2 billion.
- Walt Disney may buy partner Pixar, citing research reports by CSFB.
- Microsoft is reorganizing its consumer units, citing an internal memorandum that it’s reviewed.
- BMW is set to pass DaimlerChrysler’s Mercedes-Benz cars in worldwide sales for the first time since 1993.
- Ford Motor will run new ads in US gay and lesbian magazines such as the Advocate and Out, after the automaker appeared two weeks ago to have pulled some Jaguar and Land Rover ads from such magazines, citing a Ford letter to gay groups.
- Comcast, Time Warner and other companies with cable systems are experimenting with offering local-content, on-demand services such as video dating or high-school football games.
- Wal-Mart Stores has teamed up with Hewlett-Packard to boost holiday sales of technology products at its stores.
- Time Warner’s HBO unit may announce an agreement today to offer two channels of programming on Cingular Wireless’s phones.
- Google will provide links to musicians’ songs, lyrics and related material at the top of its results pages, starting today.
Washington Post:
- The US House of Representatives yesterday passed legislation that grants local law enforcement agencies funds to investigate and prosecute brothel owners, pimps, and customers of prostitutes.
Arab News:
- Saudi Arabia plans to increase by 61% the number of new oil wells its drills next year to boost production, citing a statement from state-owned Saudi Arabian Oil Co.
NY Times:
- Google, Microsoft and Sun Microsystems will underwrite a $7.5 million lab for computer research at the Univ. of Cal. in Berkeley.
- UN Secretary General Kofi Annan said the voting in Iraq today has “gone very well so far” and that voter turnout will be “high.”
- Crude oil is falling for a second day after a government report showed that US stockpiles last week were 11% higher than the five-year average.
- Robert Hagstrom, manager of the Legg Mason Growth Trust, increased his investments in Amazon.com and EBay after the companies’ shares tumbled because he expects more shoppers to buy gifts online.
- The US dollar is rising the most in more than a week against the euro after a Treasury Department report showed foreigners increased purchases of US securities in October at a historic pace.
- The union representing 32,000 NY subway and bus workers hardened its public stance on contract negotiations ahead of a midnight deadline, saying the likelihood of a strike was increasing.
Wall Street Journal:
- US net purchases of foreign stocks in the first 10 months of this year are likely to have exceeded the 2003 record of $86.6 billion.
- Quizno’s Corp., which operates the Quizno’s Classic Subs restaurants chain, is to be sold at auction and may fetch as much as $2 billion.
- Walt Disney may buy partner Pixar, citing research reports by CSFB.
- Microsoft is reorganizing its consumer units, citing an internal memorandum that it’s reviewed.
- BMW is set to pass DaimlerChrysler’s Mercedes-Benz cars in worldwide sales for the first time since 1993.
- Ford Motor will run new ads in US gay and lesbian magazines such as the Advocate and Out, after the automaker appeared two weeks ago to have pulled some Jaguar and Land Rover ads from such magazines, citing a Ford letter to gay groups.
- Comcast, Time Warner and other companies with cable systems are experimenting with offering local-content, on-demand services such as video dating or high-school football games.
- Wal-Mart Stores has teamed up with Hewlett-Packard to boost holiday sales of technology products at its stores.
- Time Warner’s HBO unit may announce an agreement today to offer two channels of programming on Cingular Wireless’s phones.
- Google will provide links to musicians’ songs, lyrics and related material at the top of its results pages, starting today.
Washington Post:
- The US House of Representatives yesterday passed legislation that grants local law enforcement agencies funds to investigate and prosecute brothel owners, pimps, and customers of prostitutes.
Arab News:
- Saudi Arabia plans to increase by 61% the number of new oil wells its drills next year to boost production, citing a statement from state-owned Saudi Arabian Oil Co.
NY Times:
- Google, Microsoft and Sun Microsystems will underwrite a $7.5 million lab for computer research at the Univ. of Cal. in Berkeley.
Consumer Prices Fall Most in 50 Years, Manufacturing Remains Healthy, Labor Market Still Strong, Foreign Demand for US Assets Hits Another Record
- The Consumer Price Index for November fell .6% versus estimates of a .4% decline and a .2% increase in October.
- The CPI Ex Food & Energy for November rose .2% versus estimates of a .2% increase and a .2% gain in October.
- Empire Manufacturing for December rose to 28.7 versus estimates of 18.2 and a reading of 22.8 in November.
- Initial Jobless Claims for last week rose to 329K versus estimates of 320K and 328K the prior week.
- Continuing Claims fell to 2606K versus estimates of 2626K and 2585K prior.
- Net Foreign Security Purchases for October rose to $106.8 billion versus estimates of $75.0 billion and $101.7 billion in September.
- Industrial Production for November rose .7% versus estimates of a .5% gain and an upwardly revised 1.3% gain in October.
- Capacity Utilization for November rose to 80.2% versus estimates of 79.8% and a reading of 79.8% in October.
- The Philly Fed for December fell to 12.6 versus estimates of 15.0 and a reading of 11.5 in November.
- The CPI Ex Food & Energy for November rose .2% versus estimates of a .2% increase and a .2% gain in October.
- Empire Manufacturing for December rose to 28.7 versus estimates of 18.2 and a reading of 22.8 in November.
- Initial Jobless Claims for last week rose to 329K versus estimates of 320K and 328K the prior week.
- Continuing Claims fell to 2606K versus estimates of 2626K and 2585K prior.
- Net Foreign Security Purchases for October rose to $106.8 billion versus estimates of $75.0 billion and $101.7 billion in September.
- Industrial Production for November rose .7% versus estimates of a .5% gain and an upwardly revised 1.3% gain in October.
- Capacity Utilization for November rose to 80.2% versus estimates of 79.8% and a reading of 79.8% in October.
- The Philly Fed for December fell to 12.6 versus estimates of 15.0 and a reading of 11.5 in November.
BOTTOM LINE: A record decline in energy costs last month drove the US consumer price index down .6%, the biggest drop in more than 50 years, Bloomberg said. Gasoline prices declined 16% in November, the most in US history. The average price of gas has continued falling in December, dropping from $2.30/gallon to $2.21/gallon. The cost of all goods including cars, apparel and food fell 2.2% last month versus a .5% decline the prior month. I continue to believe measures of inflation will decelerate most of next year as commodity prices weaken and unit labor costs remain subdued.
Manufacturing in New York state expanded at the fastest pace in 17 months in December as costs declined and demand rose, Bloomberg reported. The new orders component of the index rose to 30.2 from 25.9 in November. I continue to believe manufacturing will add to US economic growth over the intermediate-term as companies rebuild inventories from depleted levels and confidence improves.
The number of Americans filing first-time unemployment benefit claims rose by 1,000 last week, remaining at a level that shows companies are holding on to workers to meet strong demand, Bloomberg reported. The four-week moving-average of claims increased to 328,750 from 322,750 the prior week. The unemployment rate among those able to receive benefits, which follows the US unemployment rate, held steady at 2.0%. I continue to expect the US labor market to remain healthy. However, it is unlikely that enough tightness will occur as to generate a substantial increase in unit labor costs, the largest component of inflation.
International investors increased their net holdings of US assets in October at a historic pace as strong growth lured funds to the world’s largest economy. The US economy grew at more than twice the pace of Europe last quarter. I continue to expect foreign demand for US assets to remain near record levels as US growth outpaces that of other developed nations, the dollar remains firm and commodity prices fall.
US industrial production rose in November for a second month, as companies increased inventories and manufacturing and energy production recovered from the Gulf Coast hurricanes. At 80.2, capacity utilization is well below average levels for this point in the economic cycle. This is a result of the massive overcapacity generated during the late 90s.
Manufacturing in the Philadelphia area expanded more quickly this month, adding to evidence of strength in US industry as companies rebuild inventories and invest in new equipment, Bloomberg reported. The prices paid component of the index fell to 49.0 from 56.8 in November. This large drop in the prices paid component is a big positive and should provide the Fed with another reason to “pause” over the coming months.
Thursday Watch
Late-Night Headlines
Bloomberg:
- Iraq’s general elections started early today as 10-15 million eligible voters headed to polling stations to elect the country’s first full-term government since the US-led liberation in 2003.
- A threatened strike by New York’s bus and subway workers would cost the city’s economy $400 million a day, Mayor Michael Bloomberg said.
- Iran provided support to Hezbollah terrorists who staged the 1983 bombing of the US embassy in Beirut, Lebanon, and must pay $126 million to 19 victims, a US judge ruled.
- Amgen said it agreed to buy Abgenix for $2.2 billion in cash, acquiring full ownership of a colon cancer drug they have been developing jointly.
- Microsoft said it boosted its quarterly dividend by 1 cent to 9 cents a share.
China Securities Journal:
- China has suspended approval of further foreign investment in domestic brokerages.
USA Today:
- New Orleans will get stronger levees to withstand a storm with the same magnitude as Hurricane Katrina, citing Donald Powell, the federal coordinator for Gulf Coast rebuilding.
- Cyber crime rings are recruiting methamphetamine addicts to perform tasks that are well suited to people who don’t need much sleep and who are mesmerized by repetitive tasks.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on EBAY, BC, PFE, GILD and SEPR.
- Reiterated Underperform on UST and EOP.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated -.04%.
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
ADBE/.29
APOL/.70
BSC/2.62
DRI/.31
GS/3.35
KBH/3.34
LEN/3.33
ORCL/.19
PIR/-.09
RAD/-.01
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Consumer Price Index for November is estimated to decline .4% versus a .2% increase in October.
- The CPI Ex Food & Energy for November is estimated to rise .2% versus a .2% increase in October.
- Empire Manufacturing for December is estimated to fall to 18.2 versus a reading of 22.8 in November.
- Initial Jobless Claims for last week are estimated to fall to 320K versus 327K the prior week.
- Continuing Claims are estimated to rise to 2626K versus 2603K prior.
9:00 am EST
- Net Foreign Security Purchases for October are estimated to fall to $75.0 billion versus $101.9 billion in September.
9:15 am EST
- Industrial Production for November is estimated to rise .5% versus a .9% gain in October.
- Capacity Utilization for November is estimated to rise to 79.8% versus 79.5% in October.
12:00 am EST
- Philly Fed for December is estimated to rise to 15.0 versus 11.5 in November.
Bloomberg:
- Iraq’s general elections started early today as 10-15 million eligible voters headed to polling stations to elect the country’s first full-term government since the US-led liberation in 2003.
- A threatened strike by New York’s bus and subway workers would cost the city’s economy $400 million a day, Mayor Michael Bloomberg said.
- Iran provided support to Hezbollah terrorists who staged the 1983 bombing of the US embassy in Beirut, Lebanon, and must pay $126 million to 19 victims, a US judge ruled.
- Amgen said it agreed to buy Abgenix for $2.2 billion in cash, acquiring full ownership of a colon cancer drug they have been developing jointly.
- Microsoft said it boosted its quarterly dividend by 1 cent to 9 cents a share.
China Securities Journal:
- China has suspended approval of further foreign investment in domestic brokerages.
USA Today:
- New Orleans will get stronger levees to withstand a storm with the same magnitude as Hurricane Katrina, citing Donald Powell, the federal coordinator for Gulf Coast rebuilding.
- Cyber crime rings are recruiting methamphetamine addicts to perform tasks that are well suited to people who don’t need much sleep and who are mesmerized by repetitive tasks.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on EBAY, BC, PFE, GILD and SEPR.
- Reiterated Underperform on UST and EOP.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated -.04%.
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
ADBE/.29
APOL/.70
BSC/2.62
DRI/.31
GS/3.35
KBH/3.34
LEN/3.33
ORCL/.19
PIR/-.09
RAD/-.01
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Consumer Price Index for November is estimated to decline .4% versus a .2% increase in October.
- The CPI Ex Food & Energy for November is estimated to rise .2% versus a .2% increase in October.
- Empire Manufacturing for December is estimated to fall to 18.2 versus a reading of 22.8 in November.
- Initial Jobless Claims for last week are estimated to fall to 320K versus 327K the prior week.
- Continuing Claims are estimated to rise to 2626K versus 2603K prior.
9:00 am EST
- Net Foreign Security Purchases for October are estimated to fall to $75.0 billion versus $101.9 billion in September.
9:15 am EST
- Industrial Production for November is estimated to rise .5% versus a .9% gain in October.
- Capacity Utilization for November is estimated to rise to 79.8% versus 79.5% in October.
12:00 am EST
- Philly Fed for December is estimated to rise to 15.0 versus 11.5 in November.
BOTTOM LINE: Asian indices are mostly higher after the S&P 500 reached the highest close in 4 years. I expect US equities to open modestly higher and to build on gains into the afternoon. The Portfolio is 75% net long heading into the day.
Wednesday, December 14, 2005
***Alert***
I will be unable to post the Wednesday Close due to a scheduling conflict. I plan to finish the day 75% net long. I will post the Thursday Watch later this evening.
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