Wednesday, December 28, 2005

Stocks Finish Slightly Higher on Better Consumer Confidence and Rebounding Energy Shares

Indices
S&P 500 1,258.17 +.13%
DJIA 10,796.26 +.17%
NASDAQ 2,228.94 +.09%
Russell 2000 680.08 +.52%
DJ Wilshire 5000 12,591.17 +.20%
S&P Barra Growth 602.07 +.19%
S&P Barra Value 651.75 +.06%
Morgan Stanley Consumer 597.18 +.29%
Morgan Stanley Cyclical 790.24 +.43%
Morgan Stanley Technology 529.18 +.14%
Transports 4,223.93 +.18%
Utilities 407.05 -.48%
Put/Call .84 -4.55%
NYSE Arms 1.12 -32.49%
Volatility(VIX) 11.35 -1.90%
ISE Sentiment 198.00 +.51%
US Dollar 91.20 +.01%
CRB 329.32 +1.46%

Futures Spot Prices
Crude Oil 60.00 +.30%
Unleaded Gasoline 159.20 +.06%
Natural Gas 11.65 +.11%
Heating Oil 168.96 +.42%
Gold 518.50 +.43%
Base Metals 153.77 +.17%
Copper 206.60 -.14%
10-year US Treasury Yield 4.37% +.76%

Leading Sectors
Gold & Silver +2.47%
Oil Service +1.86%
Steel +1.56%

Lagging Sectors
Utilities -.48%
Disk Drives -.83%
Airlines -2.237%

Evening Review
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Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on STZ.

Afternoon/Evening Headlines
Bloomberg:
- Guidant Corp. recommended that shareholders approve a $21.5 billion takeover offer by Johnson & Johnson and scheduled a Jan. 31 vote while it continues to review a higher offer from Boston Scientific.
- The US Defense Department is contemplating cutting about 24,500 Army and National Guard personnel as part of a plan to save $11.1 billion in Army spending over the next five years, according to Pentagon documents.

Financial Times:
- Hilton Group Plc is near to completing its $6.2 billion sale of its hotels business to US-based Hilton Hotels.
BOTTOM LINE: The Portfolio finished unchanged today as gains in my Retail longs and Internet longs offset losses in my Energy-related shorts. I covered my IWM and QQQQ shorts, thus leaving the Portfolio 100% net long. The tone of the market was mildly positive today as the advance/decline line finished modestly higher, sector performance was mixed and volume was very light. Measures of investor anxiety were lower into the close. Overall, today's action was slightly bullish considering the jump in energy prices. However, I expect better action to end the week.

Stocks Higher Mid-day as Energy Shares Rebound

Indices
S&P 500 1,260.36 +.30%
DJIA 10,815.08 +.35%
NASDAQ 2,231.63 +.21%
Russell 2000 679.73 +.47%
DJ Wilshire 5000 12,609.44 +.34%
S&P Barra Growth 603.39 +.41%
S&P Barra Value 652.82 +.23%
Morgan Stanley Consumer 598.27 +.48%
Morgan Stanley Cyclical 791.38 +.57%
Morgan Stanley Technology 530.19 +.33%
Transports 4,229.13 +.31%
Utilities 406.22 -.69%
Put/Call .83 -5.68%
NYSE Arms .90 -45.72%
Volatility(VIX) 11.30 -2.33%
ISE Sentiment 217.00 +10.15%
US Dollar 91.31 +.13%
CRB 329.54 +1.55%

Futures Spot Prices
Crude Oil 60.10 +3.34%
Unleaded Gasoline 159.50 +5.39%
Natural Gas 11.15 +1.16%
Heating Oil 168.40 +2.87%
Gold 517.40 +.21%
Base Metals 153.77 +.17%
Copper 206.55 -.17%
10-year US Treasury Yield 4.37% +.85%

Leading Sectors
Oil Service +2.08%
Energy +1.85%
Gold & Silver +1.69%

Lagging Sectors
Utilities -.70%
Disk Drives -.77%
Airlines -2.51%
BOTTOM LINE: The Portfolio is unchanged mid-day as losses in my Energy-related shorts are offsetting gains in my Retail longs and Internet longs. I added IWM and QQQQ shorts this morning, thus leaving the Portfolio 50% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, most sectors are higher and volume is light. Measures of investor anxiety are lower. Overall, today’s market action is positive considering the rise in energy prices and bears inability to gain traction. The Johnson Redbook same-store sales index rose 3.7% year-over-year last week vs. a 3.4% rise the prior week. This week's gain is up from a 1.5% increase in late April, and it's the 34th week in a row that the index has risen 3% or more. The Morgan Stanley Retail Index (MVRX) has returned 15.3% since late October vs. a 7.2% gain for the S&P 500. While these stocks are due for a breather, I expect this sector to continue to outperform over the intermediate term. I expect US stocks to trade mixed-to-higher into the close on short-covering, more optimism and seasonal strength.

Today's Headlines

Bloomberg:
- Nissan Motor plans to unveil a concept car equipped with an Xbox 360 system from Microsoft that allows drivers to play video games.
- The move to online advertising is happening faster than analysts anticipated as companies devote more of their budgets to the Internet than traditional media.
- Crude oil, heating oil and gasoline rose after Iran’s deputy oil minister said OPEC should cut output next month to “keep prices stable.”
- Donald Trump’s casino company and partners today said they pan to spend $350 million to develop the TrumpStreet Casino and Entertainment Complex in Philadelphia.
- Celgene’s shares rose as much as 7.8% today after US regulators approved the company’s Revlimid capsule for a rare blood cancer.

Wall Street Journal:
- The US administration has applied sanctions against nine foreign companies for selling missile components and chemical weapons materials to Iran.
- The US government plans to spend $1 billion or more in the next ten years to construct high-security labs to study exotic and potentially lethal illnesses.

NY Times:
- More US food marketers are selling products that promise health benefits such as cholesterol reduction and improved digestion.
- Many US police departments, which are shot on staff, are seeking to boost recruitment by offering signing bonuses and other perks.

NY Post:
- New York Democratic Attorney General Eliot Spitzer should be impeached if it’s found that he personally threatened the former chairman of Goldman Sachs, John Whitehead, a Republican Assemblymen said.

CNBC:
- ShopperTrak CEO Bill Martin said unadjusted average weekly retail sales rose 7.4% in December from a year ago.

Independent:
- A daily dose of Vitamin D may cut cancers of the breast, colon and ovary by as much as half, citing a review of research published in the American Journal of Public Health.

Consumer Confidence Continues Rebound after Hurricanes

- Consumer Confidence for December rose to 103.6 versus estimates of 103.0 and a reading of 98.3 in November.
BOTTOM LINE: US consumer confidence rose in December to the highest level in four months, helped by falling gas prices and an improving labor market, Bloomberg said. The present situation component of the index jumped to 121.5 from 113.2 last month. The future outlook component rose to 91.6 versus 88.4 in November. Those consumers that said jobs are plentiful rose to 23.6% from 21.1% the prior month. I expect consumer confidence to make new cycle highs next year.

Links of Interest

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Real-time Intraday Chart/Quote

Tuesday, December 27, 2005

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Sharp Corp., the world’s top maker of liquid-crystal display televisions, will raise panel output by at least 10% to meet demand driven by soccer’s World Cup and the Winter Olympics, according to executives.
- Growth in Australia’s economy will accelerate to 3.3% next year as exports and business investment surge, economists said.
- The board of NY’s main transit union voted tonight in favor of a contract offer to end a dispute that sparked a three-day subway and bus strike last week, the union said.

Late Buy/Sell Recommendations
Goldman Sachs:
- None of note

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.06%.

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Earnings of Note
Company/EPS Estimate
- None of note

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Economic Releases
10:00 am EST
- Consumer Confidence for December is estimated to rise to 102.5 versus a reading of 98.9 in November.

BOTTOM LINE: Asian indices are mostly lower, dragged down by financial shares in the region. I expect US equities to open modestly lower and to rally modestly into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.