BOTTOM LINE: The Portfolio is higher into the final hour of trading on gains in my Internet longs, Semi longs, Software longs, Biotech longs energy-related shorts. I added NBR short and added to a couple of existing longs today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, sector performance is mixed and volume is above average. Measures of investor anxiety are mostly higher. The AAII % Bulls fell to 29.35% this week from 37.30% the prior week. This reading is approaching depressed levels and has declined 29.25 percentage points in eight weeks. The AAII % Bears rose to 40.22% from 36.51% the prior week. This reading is now approaching elevated levels and has increased 24.21 percentage points in six weeks. I expect bullish sentiment to rise next week. As I said a few weeks ago, the fact that bullishness has declined to this extent with the market near a four-year high bodes very well for another meaningful push higher during this quarter. I expect US stocks to trade mixed from current levels into the close as weakness in the energy sector and apprehension ahead of the jobs report offsets lower energy prices and short-covering.
Thursday, January 05, 2006
Stocks Mixed in Final Hour as Natural Gas Continues to Plunge
Today's Headlines
Bloomberg:
- Fannie Mae(FNM) investigators haven’t found anything new about the mortgage finance company’ $10.8 billion in accounting errors that goes significantly beyond those already revealed, said Warren Rudman, who is heading the internal probe.
- US retailers posted December sales gains as department stores and luxury merchants beat analysts’ sales forecasts.
- Natural gas is plunging after a report showed inventories last week rose, the first time a January report showed an increase since the government began tracking fluctuations in storage in 1994.
- Israeli Prime Minister Sharon will be under deep sedation for at least 24 hours after all-night brain surgery for a second stroke that three Israeli politics into disarray.
- The US economy will add about 2.1 million new jobs this year and the unemployment rate will remain at 5.0%, a White House economist said.
- Boeing’s(BA) commercial-aircraft orders more than tripled to a record 1,002 last year on demand from Asian and Middle Eastern carriers, likely overtaking Airbus SAS for the first time in five years.
Wall Street Journal:
- BASF AG, the world’s largest chemical maker, might see its $4.9 billion bid for Englehard Corp.(EC) thwarted if the US company used a “poison-pill” defense, the BASF CEO said.
- Google(GOOG) plans to begin a service that will allow consumers to buy videos including television programs from content partners such as CBS Corp.
- Blackstone Group LP and Hewlett-Packard are considering making an offer for Computer Sciences(CSC).
- Palm’s(PALM) new version of its Treo mobile phone with Microsoft(MSFT) software isn’t as capable as its Treo 650 phone that uses Palm’s operating system, Walter Mossberg wrote.
- Wyeth(WYE) CEO Essner said the company plans to seek regulatory approval for as many as five drugs this year.
- Sony Corp.(SNE) and Sling Media plan today to announce technology that will let customers use wireless phones to watch cable or satellite television shows being delivered to their homes or stored on digital-video recorders.
- Nokia Oyj(NOK) plans to increase production of its 770 wireless Internet device to meet an unexpected surge in demand.
- Television makers including Sony(SNE) and Samsung Electronics are using light-emitting diodes in more expensive sets to provide brighter, more colorful pictures.
- AT&T Inc.(T) is offering television channels over the Internet in San Antonio, a first step in its plan to challenge cable TV this year.
- General Motors’(GM) China sales rose 35% to a record last year as discounts and a wider model range attracted buyers, putting the company on course to surpass Volkswagen AG in the market.
NY Times:
- Lawmakers in 30 US states plan to introduce legislation to make corporations such as Wal-Mart Stores(WMT) spend more on employee health insurance.
Washington Post:
- Washington D.C. Council gave final clearance yesterday to a ban on smoking in bars, restaurants and other public places.
Jornal de Negocios:
- Brisa-Auto Estradas de Portugal SA is considering investing in highways in the US, where more states plan concessions for private companies to build and operate toll roads.
Yonhap News:
- Samsung Electronics is targeting sales of digital TVs to climb to a record $10 billion in 2007, citing the head of the company’s consumer electronics division.
Optima:
- Copper prices will average just over $1 a pound over the next decade as supply from mines and scrap rises and Indian demand fails to match that of China, Richard Wilson, managing director of Brook Hunt said.
- Fannie Mae(FNM) investigators haven’t found anything new about the mortgage finance company’ $10.8 billion in accounting errors that goes significantly beyond those already revealed, said Warren Rudman, who is heading the internal probe.
- US retailers posted December sales gains as department stores and luxury merchants beat analysts’ sales forecasts.
- Natural gas is plunging after a report showed inventories last week rose, the first time a January report showed an increase since the government began tracking fluctuations in storage in 1994.
- Israeli Prime Minister Sharon will be under deep sedation for at least 24 hours after all-night brain surgery for a second stroke that three Israeli politics into disarray.
- The US economy will add about 2.1 million new jobs this year and the unemployment rate will remain at 5.0%, a White House economist said.
- Boeing’s(BA) commercial-aircraft orders more than tripled to a record 1,002 last year on demand from Asian and Middle Eastern carriers, likely overtaking Airbus SAS for the first time in five years.
Wall Street Journal:
- BASF AG, the world’s largest chemical maker, might see its $4.9 billion bid for Englehard Corp.(EC) thwarted if the US company used a “poison-pill” defense, the BASF CEO said.
- Google(GOOG) plans to begin a service that will allow consumers to buy videos including television programs from content partners such as CBS Corp.
- Blackstone Group LP and Hewlett-Packard are considering making an offer for Computer Sciences(CSC).
- Palm’s(PALM) new version of its Treo mobile phone with Microsoft(MSFT) software isn’t as capable as its Treo 650 phone that uses Palm’s operating system, Walter Mossberg wrote.
- Wyeth(WYE) CEO Essner said the company plans to seek regulatory approval for as many as five drugs this year.
- Sony Corp.(SNE) and Sling Media plan today to announce technology that will let customers use wireless phones to watch cable or satellite television shows being delivered to their homes or stored on digital-video recorders.
- Nokia Oyj(NOK) plans to increase production of its 770 wireless Internet device to meet an unexpected surge in demand.
- Television makers including Sony(SNE) and Samsung Electronics are using light-emitting diodes in more expensive sets to provide brighter, more colorful pictures.
- AT&T Inc.(T) is offering television channels over the Internet in San Antonio, a first step in its plan to challenge cable TV this year.
- General Motors’(GM) China sales rose 35% to a record last year as discounts and a wider model range attracted buyers, putting the company on course to surpass Volkswagen AG in the market.
NY Times:
- Lawmakers in 30 US states plan to introduce legislation to make corporations such as Wal-Mart Stores(WMT) spend more on employee health insurance.
Washington Post:
- Washington D.C. Council gave final clearance yesterday to a ban on smoking in bars, restaurants and other public places.
Jornal de Negocios:
- Brisa-Auto Estradas de Portugal SA is considering investing in highways in the US, where more states plan concessions for private companies to build and operate toll roads.
Yonhap News:
- Samsung Electronics is targeting sales of digital TVs to climb to a record $10 billion in 2007, citing the head of the company’s consumer electronics division.
Optima:
- Copper prices will average just over $1 a pound over the next decade as supply from mines and scrap rises and Indian demand fails to match that of China, Richard Wilson, managing director of Brook Hunt said.
Jobless Claims Plunge, Service Sector Strong, Pending Home Sales Fall, Natural Gas Supplies Rise
- Initial Jobless Claims fell to 291K versus estimates of 320K and 326K the prior week.
- Continuing Claims rose to 2718K versus estimates of 2675K and 2705K prior.
- ISM Non-Manufacturing for December rose to 59.8 versus estimates of 59.0 and a reading of 58.5 in November.
- Pending Home Sales for November fell 2.5% versus estimates of a 1.0% fall and a 3.3% decline in October.
- The EIA reported a crude drawdown of 1,013,000 barrels vs. estimates of a 1,250,000 barrel drawdown. Gasoline supplies rose 1,406,000 barrels vs. estimates of a 400,000 barrel rise. Distillate inventories rose 2,114,000 barrels vs. estimates of a 300,000 barrel increase. Refinery utilization increased 1.03% vs. estimates of a 0.4% increase. Natural gas storage increased 1 bcf versus estimates of a 51 bcf decline.
- Continuing Claims rose to 2718K versus estimates of 2675K and 2705K prior.
- ISM Non-Manufacturing for December rose to 59.8 versus estimates of 59.0 and a reading of 58.5 in November.
- Pending Home Sales for November fell 2.5% versus estimates of a 1.0% fall and a 3.3% decline in October.
- The EIA reported a crude drawdown of 1,013,000 barrels vs. estimates of a 1,250,000 barrel drawdown. Gasoline supplies rose 1,406,000 barrels vs. estimates of a 400,000 barrel rise. Distillate inventories rose 2,114,000 barrels vs. estimates of a 300,000 barrel increase. Refinery utilization increased 1.03% vs. estimates of a 0.4% increase. Natural gas storage increased 1 bcf versus estimates of a 51 bcf decline.
BOTTOM LINE: The number of Americans filing first-time claims for jobless benefits fell last week to the lowest level since September 2000, suggesting employers are adding more than enough positions to keep unemployment near a four-year low, Bloomberg reported. The four-week moving average fell to 316,750 from 326,000 the prior week. The jobless rate among those eligible for benefits, which tracks the US unemployment rate, remained at 2.1%. I still expect the labor market to remain healthy without generating substantial unit labor cost increases over the intermediate-term.
US service industries expanded at a faster pace last month as job growth and rising incomes gave Americans the means to increase their spending, Bloomberg said. The Prices Paid component of the index fell to 69.5 from 74.2 the prior month. The New Orders component of the index rose to 61.9 from 59.5 the prior month. I expect the service sector of the US economy to remain healthy as a good labor market, low interest rates, rising stock prices, better consumer confidence and falling energy prices more than offset a slowing housing market.
Contracts to buy previously owned US homes fell in November, a third straight decline that adds to evidence the US housing market is slowing heading into 2006, Bloomberg reported. I continue to believe the housing market is slowing to more healthy sustainable levels, which should benefit US stocks this year.
The EIA weekly energy inventory numbers were very bearish for the energy complex. I continue to believe energy prices are being driven by fear, not fundamentals. I still expect substantial declines energy prices over the course of the year.
Thursday Watch
Late-Night Headlines
Bloomberg:
- Sony Corp.(SNE) will begin selling Blu-ray disc players this “summer” in the US, about three months after Toshiba will unveil its own high-definition player.
- Microsoft(MSFT) Chairman Bill Gates will show for the first time the new consumer features in the next version of his Windows software, touting search and digital photo advancements in a bid to stem losses to Google(GOOG)
Dow Jones:
- An internal report into Fannie Mae’s(FNM) accounting errors may be delayed to February, citing Warren Rudman, who is leading the probe.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (SEPR), (SLB), (ARO) and (ZION).
Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated -.09%.
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
(ACN).34
(STZ).50
(ENTG).09
(BLUD).18
(RI).27
(TTWO).30
(TXI).14
Upcoming Splits
(JJSF) 2-for-1
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 320K versus 322K the prior week.
- Continuing Claims are estimated to fall to 2680K versus 2715K prior.
10:00 am EST
- ISM Non-Manufacturing for December is estimated to rise to 59.0 versus a reading of 58.5 in November.
- Pending Home Sales for November are estimated to fall 1.0% versus a 3.2% decline in October.
Bloomberg:
- Sony Corp.(SNE) will begin selling Blu-ray disc players this “summer” in the US, about three months after Toshiba will unveil its own high-definition player.
- Microsoft(MSFT) Chairman Bill Gates will show for the first time the new consumer features in the next version of his Windows software, touting search and digital photo advancements in a bid to stem losses to Google(GOOG)
Dow Jones:
- An internal report into Fannie Mae’s(FNM) accounting errors may be delayed to February, citing Warren Rudman, who is leading the probe.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (SEPR), (SLB), (ARO) and (ZION).
Night Trading
Asian Indices are -.25% to +.75% on average.
S&P 500 indicated -.09%.
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
(ACN).34
(STZ).50
(ENTG).09
(BLUD).18
(RI).27
(TTWO).30
(TXI).14
Upcoming Splits
(JJSF) 2-for-1
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 320K versus 322K the prior week.
- Continuing Claims are estimated to fall to 2680K versus 2715K prior.
10:00 am EST
- ISM Non-Manufacturing for December is estimated to rise to 59.0 versus a reading of 58.5 in November.
- Pending Home Sales for November are estimated to fall 1.0% versus a 3.2% decline in October.
BOTTOM LINE: Asian indices are mostly higher, led by technology shares in the region, after US tech shares rallied and XLNX raised guidance. I expect US equities to open modestly higher and to build on gains into the afternoon. The Portfolio is 100% net long heading into the day.
Wednesday, January 04, 2006
Stocks Close at Session Highs as Natural Gas and Long-term Rates Continue Lower
Indices
S&P 500 1,273.46 +.37%
DJIA 10,880.15 +.30%
NASDAQ 2,263.46 +.88%
Russell 2000 689.25 +.76%
DJ Wilshire 5000 n/a
S&P Barra Growth 609.34 +.44%
S&P Barra Value 659.71 +.29%
Morgan Stanley Consumer 597.85 +.33%
Morgan Stanley Cyclical 798.75 +.80%
Morgan Stanley Technology 536.70 +1.02%
Transports 4,246.94 +1.14%
Utilities 414.44 +.22%
Put/Call .75 +4.17%
NYSE Arms 1.04 +39.79%
Volatility(VIX) 11.37 +2.06%
ISE Sentiment 191.00 +17.18%
US Dollar 89.14 -.78%
CRB 338.49 +.63%
Futures Spot Prices
Crude Oil 63.72 +.74%
Unleaded Gasoline 178.75 +.17%
Natural Gas 10.20 +.11%
Heating Oil 182.10 +.18%
Gold 535.80 +.04%
Base Metals 155.94 +1.37%
Copper 209.40 -.17%
10-year US Treasury Yield 4.34% -.49%
Leading Sectors
Airlines +2.25%
Networking +1.87%
Wireless +1.76%
Lagging Sectors
Homebuilders -.01%
Banks -.26%
Gaming -1.29%
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 (FDC), (WAG) and (BSX).
- Reiterated Underperform on (TWMC).
Afternoon/Evening Headlines
Bloomberg:
- Google(GOOG) shares will jump 25% to $550 by year-end, Bear Stearns analysts say, a forecast that is third-highest among 22 securities firms.
- Hartsfield-Jackson Atlanta International Airport handled more flights than any other airport in the world last year, surpassing Chicago’s O’Hare International Airport for the first time in five years.
- General Motor’s(GM) Chevrolet beat out Ford Motor’s(F) namesake division for the US sales title last year for the first time since 1986.
- Christopher Davis and Kenneth Feinberg, who run the $32.5 billion Davis New York Venture Fund, were named the best US stock mutual-fund managers of 2005 by research firm Morningstar.
- The US government froze the assets of two Iranian companies that Treasury Dept. officials said are fronts for the Islamic country’s nuclear program.
- Israeli Prime Minister Ariel Sharon suffered a “significant” stroke, the head of the hospital where he is being treated said late today, and Vice Prime Minister Ehud Olmert took over as the country’s leader.
CNBC:
- Oracle(ORCL), the software maker that spent more than $18 billion on acquisitions in the past year, expects profit to increase 20% annually, with recent takeovers accounting for a fourth of the growth.
S&P 500 1,273.46 +.37%
DJIA 10,880.15 +.30%
NASDAQ 2,263.46 +.88%
Russell 2000 689.25 +.76%
DJ Wilshire 5000 n/a
S&P Barra Growth 609.34 +.44%
S&P Barra Value 659.71 +.29%
Morgan Stanley Consumer 597.85 +.33%
Morgan Stanley Cyclical 798.75 +.80%
Morgan Stanley Technology 536.70 +1.02%
Transports 4,246.94 +1.14%
Utilities 414.44 +.22%
Put/Call .75 +4.17%
NYSE Arms 1.04 +39.79%
Volatility(VIX) 11.37 +2.06%
ISE Sentiment 191.00 +17.18%
US Dollar 89.14 -.78%
CRB 338.49 +.63%
Futures Spot Prices
Crude Oil 63.72 +.74%
Unleaded Gasoline 178.75 +.17%
Natural Gas 10.20 +.11%
Heating Oil 182.10 +.18%
Gold 535.80 +.04%
Base Metals 155.94 +1.37%
Copper 209.40 -.17%
10-year US Treasury Yield 4.34% -.49%
Leading Sectors
Airlines +2.25%
Networking +1.87%
Wireless +1.76%
Lagging Sectors
Homebuilders -.01%
Banks -.26%
Gaming -1.29%
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 (FDC), (WAG) and (BSX).
- Reiterated Underperform on (TWMC).
Afternoon/Evening Headlines
Bloomberg:
- Google(GOOG) shares will jump 25% to $550 by year-end, Bear Stearns analysts say, a forecast that is third-highest among 22 securities firms.
- Hartsfield-Jackson Atlanta International Airport handled more flights than any other airport in the world last year, surpassing Chicago’s O’Hare International Airport for the first time in five years.
- General Motor’s(GM) Chevrolet beat out Ford Motor’s(F) namesake division for the US sales title last year for the first time since 1986.
- Christopher Davis and Kenneth Feinberg, who run the $32.5 billion Davis New York Venture Fund, were named the best US stock mutual-fund managers of 2005 by research firm Morningstar.
- The US government froze the assets of two Iranian companies that Treasury Dept. officials said are fronts for the Islamic country’s nuclear program.
- Israeli Prime Minister Ariel Sharon suffered a “significant” stroke, the head of the hospital where he is being treated said late today, and Vice Prime Minister Ehud Olmert took over as the country’s leader.
CNBC:
- Oracle(ORCL), the software maker that spent more than $18 billion on acquisitions in the past year, expects profit to increase 20% annually, with recent takeovers accounting for a fourth of the growth.
BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Internet longs, Biotech longs, Medical longs and Software longs. I added to my (VLO) and (OMM) shorts and to a few existing longs in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's action was bullish as the major averages built on yesterday's strong gains with good volume and breadth. The S&P 500 is now up about 2% for the year already. The market's reaction to the retail and employment reports over the next couple of days should provide better insight into the market's underlying strength.
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