BETWEEN THE HEDGES

Tuesday, January 17, 2006

Wednesday Watch

Posted by Gary .....at 11:45 PM

Late-Night Headlines
Bloomberg:
- Livedoor Co., the Japanese Internet company raided by prosecutors, plans to release a statement today about media reports that the company falsified earnings.
- Berkshire Hathaway(BRK/A) sold almost a third of its stake in H&R Block(HRB) in the second and third quarters of 2005, regulatory filings show.
- The Shanghai Stock Exchange plans to let companies convert foreign-currency B shares into yuan stock starting this year, marking an end to China’s 15-year experiment with different classes of domestic equity.
- Asian stocks are falling, wiping out gains for the year, after fourth-quarter earnings from Intel disappointed some investors.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (FCX), (YHOO), (DOX) and (USB).

Night Trading
Asian Indices are -3.50% to -1.25% on average.
S&P 500 indicated -.96%.
NASDAQ 100 indicated -1.74%.

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
(AMD).26
(AMTD).22
(APH).60
(AMR)-2.55
(AAPL).61
(BK).53
(SCHB).14
(CIT)1.04
(EBAY).22
(JPM).72
(KMP).56
(LRCX).39
(MEL).49
(QLGC).35
(STX).52
(LUV).13
(STT).73
(WM).90

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Consumer Price Index for December is estimated to rise .2% versus a -.6% fall in November.
- The CPI Ex Food & Energy for December is estimated to rise .2% versus a .2% increase in November.

9:00 am EST
- Net Foreign Security Purchases for November are estimated to fall to $85.0B versus $106.8B in October.

1:00 pm EST
- NAHB Housing Market Index for January is estimated to rise to 58 versus a reading of 57 in December.

2:00 pm EST
- The Fed’s Beige Book

BOTTOM LINE: Asian indices are sharply lower, weighed down by tech companies in the region. I expect US equities to open sharply lower and to rally later in the day, but still finish lower. The Portfolio is 75% net long heading into the day.

Stocks Finish Lower on Rising Energy Prices and Profit-taking

Posted by Gary .....at 5:28 PM

Indices
S&P 500 1,282.93 -.36%
DJIA 10,896.32 -.58%
NASDAQ 2,302.69 -.62%
Russell 2000 703.62 -.68%
S&P Barra Growth 614.22 -.34%
S&P Barra Value 664.22 -.39%
Morgan Stanley Consumer 598.28 -.37%
Morgan Stanley Cyclical 784.56 -1.14%
Morgan Stanley Technology 548.18 -.82%
Transports 4,090.95 -1.35%
Utilities 421.29 +1.31%
Put/Call .77 -1.28%
NYSE Arms 1.10 -14.71%
Volatility(VIX) 11.91 +6.06%
ISE Sentiment 188.00 -2.08%
US Dollar 89.24 +.13%
CRB 342.45 +1.67%

Futures Spot Prices
Crude Oil 66.72 +.62%
Unleaded Gasoline 183.40 +.59%
Natural Gas 9.29 +1.36%
Heating Oil 179.76 +.34%
Gold 555.40 +.20%
Base Metals 160.89 -.37%
Copper 211.10 unch.
10-year US Treasury Yield 4.32% -.68%

Leading Sectors
Energy +2.21%
Oil Service +1.58%
Utilities +1.31%

Lagging Sectors
Networking -1.42%
Semis -1.56%
Airlines -6.07%

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
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In Play

Afternoon Recommendations
Goldman Sachs:
- Reiterated Outperform on (COH), (WFC) and (CAL).
- Reiterated Underperform on (MU).
- Lowered (BUD) to Underperform.

Afternoon/Evening Headlines
Bloomberg:
- A California public school district agreed to cancel an intelligent design course and never offer it again to settle a lawsuit filed by parents who said their children were being taught religion.
- The ACLU and the Center for Constitutional Rights sued President Bush and the National Security Agency to stop them from conducting wiretaps on US citizens suspected of terrorism without court approval.
- Russia isn’t ready to support economic penalties on Iran for its nuclear program, Foreign Minister Lavrov said today, as his government weighed whether to send the issue to the UN Security Council.
- Crude oil in NY rose for a second day, nearing $67/bbl., on concern shipments may be disrupted from Iran, which accounts for almost 5% of world output.
- Yahoo!(YHOO) said fourth-quarter profit rose 83% on higher ad sales and a gain from the sale of a unit, missing analysts’ estimates.
- Intel Corp.(INTC) posted fourth-quarter profit and revenue that disappointed investors as sales of chips for desktop computers trailed the company’s forecasts.
- IBM(IBM) said profit rose 13% after the sale of its unprofitable pc unit.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Semi longs, Retail longs and Energy-related shorts. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors fell and volume was about average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was mildly negative considering the fall in long-term rates, positive economic data and rise in oil. Bear Stearns said today to buy Apple Computer(AAPL), one of my longs, ahead of its quarterly report tomorrow. I don't usually add to longs ahead of earning's releases, however I still don't think it is too late for longer-term investors to begin building a long position in AAPL now into after-hours weakness related to (INTC) and (YHOO).

Stocks Lower Heading into Final Hour on Energy Price Rise, Tech Downgrades and Profit-taking

Posted by Gary .....at 2:52 PM

BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my Retail longs and Energy shorts. I took profits in my COP short and a trading long, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is average. Measures of investor anxiety are mostly lower. Merrill Lynch put out a note this morning that said there are a "breathtaking" number of fund managers predicting the dollar will drop against the yen this year. I suspect just the opposite will occur as U.S. growth continues to outperform that of other developed nations, U.S. stocks rise further, the global mania for emerging market stocks wanes, the U.S. "twin deficits" come in better than estimates, inflation decelerates, energy prices continue to fall and foreign demand for U.S. assets remains high. I expect US stocks to trade mixed from current levels into the close as profit-taking and worries over Iran offsets lower long-term interest rates and short-covering.

Today's Headlines

Posted by Gary .....at 12:58 PM

Bloomberg:
- The SEC voted unanimously to propose new disclosure standards that would force companies to reveal, in “plain English,” more information about benefits and perks given to top executives.
- Crude oil rose above $65/bbl. in NY on fears that Iranian and Nigerian shipments may be disrupted as consumption grows.
- The US dollar rose against the euro and the yen as US manufacturing reports bolstered speculation the world’s largest economy is growing at a healthy rate.
- Warren Buffett’s Berkshire Hathaway(BRK/A) agreed to buy Business Wire, the world’s largest distributor of corporate press releases, as the European Union imposes new disclosure requirements.
- Boston Scientific(BSX) raised its bid for cardiac device maker Guidant(GDT) to $27 billion, topping the $24.2 billion offer that Guidant’s board accepted last week from Johnson & Johnson(JNJ).

Wall Street Journal:
- Cephalon(CEPH), Wyeth(WYE), Johnson & Johnson(JNJ) and other pharmaceutical companies have settled lawsuits over patent challenges from generic-drug companies, as a way of removing uncertainty and boosting their stock prospects.
- Rob Solomon, former vice president at Yahoo! Inc., has been named CEO at the travel search company SideStep Inc.
- Stephen King’s latest novel about an apocalyptic mayhem set off by cell phones is being marketed by his publisher, CBS Corp.’s(CBS) Scribner, with text messages to 100,000 phone subscribers.
- China’s steel industry is heading into a consolidation amid declining profit margins and increased pressure from government planners.
- Salesforce.com(CRM), which sells Internet-based customer-management software, said it has added to its system of offering online software to customers with partners including Adobe Systems(ADBE) and eBay’s(EBAY) Skype Technologies.

CNBC:
- Merrill Lynch(MER) may be looking to buy a medium-sized bank to get into commercial banking to sell small business loans.

NY Times:
- The FDA is close to reviewing weight-loss drugs developed by Sanofi-Aventis SA(SNY) and GlaxoSmithKline Plc(GSK).

USA Today:
- Texas Instruments(TXN), ChevronTexaco(CVX) and other US companies are starting to help children of employees prepare for college admission as part of the benefits they provide to retain valued workers.

RIA Novosti:
- Russia’s government will spend $5.8 billion buying and maintaining weapons and other military hardware this year, almost 50% more than last year, Defense Minister Ivanov said.

Manufacturing Healthy, Capacity Utilization Just Back to Average Levels

Posted by Gary .....at 10:49 AM

- The Empire Manufacturing Index for January fell to 20.1 versus estimates of 21.0 and a reading of 26.3 in December.
- Industrial Production for December rose .6% versus estimates of a .5% increase and a .8% rise in November.
- Capacity Utilization for December rose to 80.7% versus estimates of 80.5% and a reading of 80.3% in November.

BOTTOM LINE: Manufacturing growth in NY state slowed from the fastest pace in a year in January, Bloomberg reported. The optimism outlook component of the index rose to 47.6 from 44.1 the prior month. The employment component of the index increased to 11.3 from 5.0 in December. The prices paid component of the index fell to 46.6 from 46.7 the prior month. I continue to expect manufacturing to add to US growth over the intermediate-term as corporate spending accelerates and inventories are rebuilt.

US industrial production rose for a third straight month in December and factories ran at the fastest pace in more than five years, Bloomberg reported. During the bubble years, the US generated massive overcapacity. Capacity utilization is just now back to its long-term average of 80.7%. I do not expect capacity utilization to rise to an extent that would generate substantial inflationary pressures. Industrial production should remain relatively strong over the intermediate-term.