BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Computer longs and Semi longs. I covered some of my IWM and QQQQ shorts, thus leaving the Portfolio 75% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, most sectors are gaining and volume is about average. Measures of investor anxiety are lower. Overall, today’s performance is mixed as the bears could not follow-through on Friday’s panic, but the bulls are unable to mount a meaningful rally. I expect US stocks to trade modestly higher from current levels into the close on short-covering.
Monday, January 23, 2006
Stocks Slightly Higher into Final Hour as Bears Fail to Capitalize on Friday's Losses
Today's Headlines
Bloomberg:
- William Poole, who developed a reputation as one of the Fed’s most forceful inflation fighters, said he’s less concerned about prices than six months earlier and suggested the central bank may soon stop raising interest rates.
- Falling demand for gold jewelry in India, the world’s largest consumer, and the Middle East may cause the precious metal to drop.
- Albertson’s(ABS) agreed to be sold for $17.4 billion to a group led by Supervalu(SVU) and CVS Corp.(CVS).
- Natural gas is plunging another 8.0%, pushed lower by mild US weather that’s expected to leave supplies near all-time record high levels at the end of winter even as a substantial amount of Gulf of Mexico production remains shut-in.
- The US Supreme Court rejected an appeal by Research In Motion(RIMM), leaving intact a patent-infringement ruling that threatens to shut down BlackBerry e-mail service to as many as 3 million of the company’s US customers.
- Ford Motor Co.(F) will close 14 manufacturing facilities over the next six years on CEO William Clay Ford’s plan to end North American losses in 2008.
- The US dollar is falling to a four-month low against the euro after ECB officials suggesting higher interest rates are needed to prevent a surge in oil prices from spurring faster inflation.
Wall Street Journal:
- Oil prices are unlikely to rise as much this year as they did in 2005, so it will be hard for oil companies to maintain the rapid profit growth that will be seen this week, when they report fourth-quarter earnings.
- Newly started hedge funds may have a tough time raising capital this year as industry returns slow, and investors growth more selective, citing market participants including Jack Inglis, Morgan Stanley’s co-head of European prime brokerage.
- William Perez may step down today as CEO and president of Nike Inc.(NKE).
- Stanford University’s endowment rose 23%, faster than any other of the top-10 wealthiest US universities, as the educational institution benefited from its investments in private venture-capital funds.
- Hedge funds are getting bigger and more complex and many investment managers are finding they need more than one “prime” broker for their trading, borrowing and portfolio-monitoring.
- Applied Materials(AMAT) is going against the trend at other corporations and bringing a standalone venture capital fund back under its own management at the semiconductor-equipment marker.
NY Times:
- Some online stores have found that personalized recommendations for shoppers can significantly boost sales.
- The supply of crystal methamphetamine has increased in the US, as officials have clamped down on a home-made powdered variety of the drug.
- Walt Disney(DIS) will begin publishing a parenting magazine next month about how children learn from birth to age 6.
- Walk Disney(DIS) may reach an agreement in the next two weeks to sell its ABC broadcasting unit to Citadel Broadcasting for almost $3 billion.
Reuters:
- China, the world’s biggest steelmaker, became a net exporter of the metal for the first time last year.
NY Post:
- Sirius Satellite Radio(SIRI) executives are writing internal guidelines for what shock jocks such as Howard Stern can broadcast.
Nikkei English News:
- Hitachi Ltd., Matsushita Electric Industrial Co., and Toshiba Corp. will start joint production of liquid crystal displays ahead of schedule in May.
7 Days:
- Persian Gulf stock markets are overvalued by at least $300 billion as earnings growth among companies in the region slows, citing Nomura Holdings.
- William Poole, who developed a reputation as one of the Fed’s most forceful inflation fighters, said he’s less concerned about prices than six months earlier and suggested the central bank may soon stop raising interest rates.
- Falling demand for gold jewelry in India, the world’s largest consumer, and the Middle East may cause the precious metal to drop.
- Albertson’s(ABS) agreed to be sold for $17.4 billion to a group led by Supervalu(SVU) and CVS Corp.(CVS).
- Natural gas is plunging another 8.0%, pushed lower by mild US weather that’s expected to leave supplies near all-time record high levels at the end of winter even as a substantial amount of Gulf of Mexico production remains shut-in.
- The US Supreme Court rejected an appeal by Research In Motion(RIMM), leaving intact a patent-infringement ruling that threatens to shut down BlackBerry e-mail service to as many as 3 million of the company’s US customers.
- Ford Motor Co.(F) will close 14 manufacturing facilities over the next six years on CEO William Clay Ford’s plan to end North American losses in 2008.
- The US dollar is falling to a four-month low against the euro after ECB officials suggesting higher interest rates are needed to prevent a surge in oil prices from spurring faster inflation.
Wall Street Journal:
- Oil prices are unlikely to rise as much this year as they did in 2005, so it will be hard for oil companies to maintain the rapid profit growth that will be seen this week, when they report fourth-quarter earnings.
- Newly started hedge funds may have a tough time raising capital this year as industry returns slow, and investors growth more selective, citing market participants including Jack Inglis, Morgan Stanley’s co-head of European prime brokerage.
- William Perez may step down today as CEO and president of Nike Inc.(NKE).
- Stanford University’s endowment rose 23%, faster than any other of the top-10 wealthiest US universities, as the educational institution benefited from its investments in private venture-capital funds.
- Hedge funds are getting bigger and more complex and many investment managers are finding they need more than one “prime” broker for their trading, borrowing and portfolio-monitoring.
- Applied Materials(AMAT) is going against the trend at other corporations and bringing a standalone venture capital fund back under its own management at the semiconductor-equipment marker.
NY Times:
- Some online stores have found that personalized recommendations for shoppers can significantly boost sales.
- The supply of crystal methamphetamine has increased in the US, as officials have clamped down on a home-made powdered variety of the drug.
- Walt Disney(DIS) will begin publishing a parenting magazine next month about how children learn from birth to age 6.
- Walk Disney(DIS) may reach an agreement in the next two weeks to sell its ABC broadcasting unit to Citadel Broadcasting for almost $3 billion.
Reuters:
- China, the world’s biggest steelmaker, became a net exporter of the metal for the first time last year.
NY Post:
- Sirius Satellite Radio(SIRI) executives are writing internal guidelines for what shock jocks such as Howard Stern can broadcast.
Nikkei English News:
- Hitachi Ltd., Matsushita Electric Industrial Co., and Toshiba Corp. will start joint production of liquid crystal displays ahead of schedule in May.
7 Days:
- Persian Gulf stock markets are overvalued by at least $300 billion as earnings growth among companies in the region slows, citing Nomura Holdings.
Leading Indicators Rise Slightly
- Leading Indicators for December rose .1% versus estimates of a .2% increase and an upwardly revised .9% gain in November.
BOTTOM LINE: An index of US leading indicators released today pointed to a slower pace of economic growth in the next three to six months. Rising consumer sentiment and money supply contributed the most to the index. The risks of a significant economic slowdown or unacceptable inflation are “quite small” at this point, the Fed’s Poole said this morning. According to a poll released today by the National Association of Business Economics, executives expect US economic growth to rise between 3-4% during the first half of this year. I continue to believe US growth is slowing to around long-term average levels of 3%, which should allow the Fed to stop raising rates this quarter and be a positive for stocks.
Sunday, January 22, 2006
Monday Watch
Weekend Headlines
Bloomberg:
- Iran expects OPEC to reject its proposal to cut oil output at the Jan. 31 meeting in Vienna, an oil official said.
- Morgan Stanley, eager to expand its asset-management unit, may buy or form a new company with bond investor BlackRock Inc. to become the largest money manager among US securities firms.
- Music sales through mobile phones, maturing to full songs from tinny ring tones, are forming a growing part of the digital downloads that industry executives are counting on to make up for flagging sales of compact discs.
- President Bush said tax cuts passed in his first term have helped create a strong US economy and called on Congress to make them permanent and address rising health costs that crimp small businesses.
- The Palestinian Authority’s ruling Fatah party may have a narrow lead over Hamas ahead of Jan. 25 legislative elections that could be critical for Israeli-Palestinian relations and the prospect of achieving peace.
- Starbucks Corp.(SBUX), seeking to expand its entertainment business at a time of music industry “chaos,” plans to move beyond compact disc sales and CD burning to allow customers to transfer songs onto MP3 portable music players.
- Tens of thousands of opponents of Venezuelan President Hugo Chavez protested in the streets of Caracas, demanding fair elections and a rolling back of policies they said are intended to turn the South American country into a communist state.
- China probably overtook France as the world’s fifth-largest economy in 2005 as a record trade surplus and surging investment drove the fourth straight year of more than 9% growth.
Wall Street Journal:
- The FDA criticized the way safety concerns about approved medical devices are handled and is proposing changes to the system.
NY Times:
- Microsoft Corp.(MSFT) co-founder Paul G. Allen, who made billions on personal computer software, is creating jobs and housing in Seattle, aiming to turn his hometown into an urban center.
- The bidding war for medical-device maker Guidant Corp.(GDT) is a sign that companies are focusing on a market that’s expected to “grow by double digits for years to come.”
- The Pakistani army’s campaign against al-Qaeda and other terrorist groups in the country’s border areas adjacent to Afghanistan is faltering, citing unidentified Pakistani officials.
- The US Congress is weighing a budget bill that would provide $3.75 billion in new college aid over five years, as well as increase federal oversight of high-school education.
- Shifting habits in the way youngsters read the news, watch television and shop are forcing advertising companies to find new ways to reach them, as people born after 1980 make tailor-made media choices.
Financial Times:
- 2929 Entertainment, a Dallas based company founded by Internet entrepreneurs Todd Wagner and Mark Cuban, will release the first film to be distributed simultaneously in cinemas and by video-on-demand this weekend.
- Carl Icahn may submit a full list of alternative directors including a CEO for Time Warner(TWX) as part of the billionaire shareholder’s fight for control of the company.
- A United Nations internal review of its peacekeeping activities found “substantial evidence of abuse” in procurement operations that led to “financial losses,” citing a copy of the document seen by the newspaper.
- Toshiba Corp. will acquire British Nuclear Fuels Plc’s Westinghouse Electric power-plant unit for almost $5 billion.
- The value of worldwide hotel property sales reached $44.5 billion last year, an increase of 63% on the previous year.
Sunday Telegraph:
- Pixar(PIXR), maker of animated films “Finding Nemo” and “Toy Story”, may approve a $7 billion buyout by Walt Disney(DIS) tomorrow.
Sunday Times:
- Vodafone Group Plc(VOD) investors may have asked the world’s largest mobile-phone operator to sell US unit Verizon Wireless(VZ), to raise as much as $44 billion, citing unidentified shareholders.
Economic Daily News:
- AU Optronics(AUO) has obtained orders to produce television panel displays for Japanese makers such as Toshiba Corp. and Matsushita Electric Industrial.
NDTV:
- King Abdullah of Saudi Arabia said the price of oil is too high and is damaging developing countries, citing an interview with the monarch of the world’s largest oil exporter.
Asharq al-Awsat:
- Kuwait Real Estate Company and state-owned Kurdistan Development Corp. plan to develop property in the northern part of Iraq this year.
Weekend Recommendations
Barron's:
- Had positive comments on (SNE), (XMSR) and (MOSY).
Goldman Sachs:
- Reiterated Outperform on (SLB), (DIS) and (GE).
Night Trading
Asian indices are -1.50% to -1.0% on average.
S&P 500 indicated +.09%.
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/Estimate
(AXP).59
(ACF).46
(AV).12
(BAC)1.02
(ET).29
(ETN)1.36
(ENR)1.61
(F).01
(PPC).39
(SEBL).11
(TXN).42
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Leading Indicators for December are estimated to rise .2% versus a .5% increase in November.
Bloomberg:
- Iran expects OPEC to reject its proposal to cut oil output at the Jan. 31 meeting in Vienna, an oil official said.
- Morgan Stanley, eager to expand its asset-management unit, may buy or form a new company with bond investor BlackRock Inc. to become the largest money manager among US securities firms.
- Music sales through mobile phones, maturing to full songs from tinny ring tones, are forming a growing part of the digital downloads that industry executives are counting on to make up for flagging sales of compact discs.
- President Bush said tax cuts passed in his first term have helped create a strong US economy and called on Congress to make them permanent and address rising health costs that crimp small businesses.
- The Palestinian Authority’s ruling Fatah party may have a narrow lead over Hamas ahead of Jan. 25 legislative elections that could be critical for Israeli-Palestinian relations and the prospect of achieving peace.
- Starbucks Corp.(SBUX), seeking to expand its entertainment business at a time of music industry “chaos,” plans to move beyond compact disc sales and CD burning to allow customers to transfer songs onto MP3 portable music players.
- Tens of thousands of opponents of Venezuelan President Hugo Chavez protested in the streets of Caracas, demanding fair elections and a rolling back of policies they said are intended to turn the South American country into a communist state.
- China probably overtook France as the world’s fifth-largest economy in 2005 as a record trade surplus and surging investment drove the fourth straight year of more than 9% growth.
Wall Street Journal:
- The FDA criticized the way safety concerns about approved medical devices are handled and is proposing changes to the system.
NY Times:
- Microsoft Corp.(MSFT) co-founder Paul G. Allen, who made billions on personal computer software, is creating jobs and housing in Seattle, aiming to turn his hometown into an urban center.
- The bidding war for medical-device maker Guidant Corp.(GDT) is a sign that companies are focusing on a market that’s expected to “grow by double digits for years to come.”
- The Pakistani army’s campaign against al-Qaeda and other terrorist groups in the country’s border areas adjacent to Afghanistan is faltering, citing unidentified Pakistani officials.
- The US Congress is weighing a budget bill that would provide $3.75 billion in new college aid over five years, as well as increase federal oversight of high-school education.
- Shifting habits in the way youngsters read the news, watch television and shop are forcing advertising companies to find new ways to reach them, as people born after 1980 make tailor-made media choices.
Financial Times:
- 2929 Entertainment, a Dallas based company founded by Internet entrepreneurs Todd Wagner and Mark Cuban, will release the first film to be distributed simultaneously in cinemas and by video-on-demand this weekend.
- Carl Icahn may submit a full list of alternative directors including a CEO for Time Warner(TWX) as part of the billionaire shareholder’s fight for control of the company.
- A United Nations internal review of its peacekeeping activities found “substantial evidence of abuse” in procurement operations that led to “financial losses,” citing a copy of the document seen by the newspaper.
- Toshiba Corp. will acquire British Nuclear Fuels Plc’s Westinghouse Electric power-plant unit for almost $5 billion.
- The value of worldwide hotel property sales reached $44.5 billion last year, an increase of 63% on the previous year.
Sunday Telegraph:
- Pixar(PIXR), maker of animated films “Finding Nemo” and “Toy Story”, may approve a $7 billion buyout by Walt Disney(DIS) tomorrow.
Sunday Times:
- Vodafone Group Plc(VOD) investors may have asked the world’s largest mobile-phone operator to sell US unit Verizon Wireless(VZ), to raise as much as $44 billion, citing unidentified shareholders.
Economic Daily News:
- AU Optronics(AUO) has obtained orders to produce television panel displays for Japanese makers such as Toshiba Corp. and Matsushita Electric Industrial.
NDTV:
- King Abdullah of Saudi Arabia said the price of oil is too high and is damaging developing countries, citing an interview with the monarch of the world’s largest oil exporter.
Asharq al-Awsat:
- Kuwait Real Estate Company and state-owned Kurdistan Development Corp. plan to develop property in the northern part of Iraq this year.
Weekend Recommendations
Barron's:
- Had positive comments on (SNE), (XMSR) and (MOSY).
Goldman Sachs:
- Reiterated Outperform on (SLB), (DIS) and (GE).
Night Trading
Asian indices are -1.50% to -1.0% on average.
S&P 500 indicated +.09%.
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/Estimate
(AXP).59
(ACF).46
(AV).12
(BAC)1.02
(ET).29
(ETN)1.36
(ENR)1.61
(F).01
(PPC).39
(SEBL).11
(TXN).42
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Leading Indicators for December are estimated to rise .2% versus a .5% increase in November.
BOTTOM LINE: Asian Indices are lower, weighed down by exporting companies in the region after oil rose to a four-month high. I expect US stocks to open lower and to rise into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the week.
Weekly Outlook
Click here for The Week Ahead by Reuters
There are some important economic reports and a number of significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Leading Indicators
Tues. - Richmond Fed Index
Wed. - Existing Home Sales
Thur. - Durable Goods Orders, Initial Jobless Claims
Fri. - GDP, Personal Consumption, GDP Price Index, New Home Sales
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - American Express(AXP), Avaya(AV), Bank of America(BAC), E*Trade(ET), Ford Motor(F), Pilgrim’s Pride(PPC), Texas Instruments(TXN)
Tues. - 3M(MMM), Brinker Intl.(EAT), BJ Services(BJS), Centex Corp.(CTX), CNF Inc.(CNF), Coach Inc.(COH), Computer Assoc.(CA), Corning Inc.(GLW), CSX Corp.(CSX), EMC Corp.(EMC), Golden West Financial(GDW), Imclone Systems(IMCL), Johnson & Johnson(JNJ), Kimberly-Clark(KMB), Legg Mason(LM), Lexmark Intl.(LXK), McDonald’s(MCD), Northrop Grumman(NOC), Ryland Group(RYL), Tidewater Inc.(TDW)
Wed. - Abott Labs(ABT), Altera Corp.(ALTR), Amerada Hess Corp.(AHC), AmerisourceBergen(ABC), Ameritrade Holding(AMTD), Bellsouth Corp.(BLS), Bristol-Myers(BMY), Burlington Resources(BR), Colgate-Palmolive(CL), ConocoPhillips(COP), General Dynamics(GD), HCA Inc.(HCA), Hershey(HSY), Juniper Networks(JNPR), Maxim Integrated(MXIM), Novellus Systems(NVLS), Qualcomm Inc.(QCOM), St Jude Medical(STJ), Varian Medical(VAR)
Thur. - Amgen(AMGN), AT&T(T), Baxter Intl.(BAX), Becton Dickinson(BDX), Broadcom(BRCM), Cardinal Health(CAH), Caterpillar Inc.(CAT), Consolidated Edison(ED), Diebold(DBD), Dow Chemical(DOW), Eli Lilly(LLY), Estee Lauder(EL), General Motors(GM), Honeywell Intl.(HON), Ingersoll-Rand(IR), JDS Uniphase(JDSU), Kla-Tencor(KLAC), Lockheed Martin(LMT), McKesson Corp.(MCK), Microsoft Corp.(MSFT), Peabody Energy(BTU), SanDisk Corp.(SNDK), Sirius Satellite(SIRI), Stryker Corp.(SYK), United Parcel Service(UPS), Verizon Communications(VZ), Western Digital(WDC)
Fri. - Bausch & Lomb(BOL), Chevron Corp.(CVX), Gannett Corp.(GCI), Guidant Corp.(GDT), Halliburton(HAL), ITT Industries(ITT), Massey Energy(MEE), Nucor Corp.(NUE), Procter & Gamble(PG)
Other events that have market-moving potential this week include:
Mon. - None of note
Tue. - AG Edwards Retailing Conference
Wed. - None of note
Thur. - Raymond James Growth Airline Conference
Fri. - None of note
There are some important economic reports and a number of significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Leading Indicators
Tues. - Richmond Fed Index
Wed. - Existing Home Sales
Thur. - Durable Goods Orders, Initial Jobless Claims
Fri. - GDP, Personal Consumption, GDP Price Index, New Home Sales
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - American Express(AXP), Avaya(AV), Bank of America(BAC), E*Trade(ET), Ford Motor(F), Pilgrim’s Pride(PPC), Texas Instruments(TXN)
Tues. - 3M(MMM), Brinker Intl.(EAT), BJ Services(BJS), Centex Corp.(CTX), CNF Inc.(CNF), Coach Inc.(COH), Computer Assoc.(CA), Corning Inc.(GLW), CSX Corp.(CSX), EMC Corp.(EMC), Golden West Financial(GDW), Imclone Systems(IMCL), Johnson & Johnson(JNJ), Kimberly-Clark(KMB), Legg Mason(LM), Lexmark Intl.(LXK), McDonald’s(MCD), Northrop Grumman(NOC), Ryland Group(RYL), Tidewater Inc.(TDW)
Wed. - Abott Labs(ABT), Altera Corp.(ALTR), Amerada Hess Corp.(AHC), AmerisourceBergen(ABC), Ameritrade Holding(AMTD), Bellsouth Corp.(BLS), Bristol-Myers(BMY), Burlington Resources(BR), Colgate-Palmolive(CL), ConocoPhillips(COP), General Dynamics(GD), HCA Inc.(HCA), Hershey(HSY), Juniper Networks(JNPR), Maxim Integrated(MXIM), Novellus Systems(NVLS), Qualcomm Inc.(QCOM), St Jude Medical(STJ), Varian Medical(VAR)
Thur. - Amgen(AMGN), AT&T(T), Baxter Intl.(BAX), Becton Dickinson(BDX), Broadcom(BRCM), Cardinal Health(CAH), Caterpillar Inc.(CAT), Consolidated Edison(ED), Diebold(DBD), Dow Chemical(DOW), Eli Lilly(LLY), Estee Lauder(EL), General Motors(GM), Honeywell Intl.(HON), Ingersoll-Rand(IR), JDS Uniphase(JDSU), Kla-Tencor(KLAC), Lockheed Martin(LMT), McKesson Corp.(MCK), Microsoft Corp.(MSFT), Peabody Energy(BTU), SanDisk Corp.(SNDK), Sirius Satellite(SIRI), Stryker Corp.(SYK), United Parcel Service(UPS), Verizon Communications(VZ), Western Digital(WDC)
Fri. - Bausch & Lomb(BOL), Chevron Corp.(CVX), Gannett Corp.(GCI), Guidant Corp.(GDT), Halliburton(HAL), ITT Industries(ITT), Massey Energy(MEE), Nucor Corp.(NUE), Procter & Gamble(PG)
Other events that have market-moving potential this week include:
Mon. - None of note
Tue. - AG Edwards Retailing Conference
Wed. - None of note
Thur. - Raymond James Growth Airline Conference
Fri. - None of note
BOTTOM LINE: I expect US stocks to finish the week modestly lower on weaker housing data, worries over Iran’s nuclear ambitions and some disappointment with forward earnings guidance. My trading indicators are now giving mostly bearish signals and the Portfolio is 50% net long heading into the week.
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