BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Medical Information Systems longs, Internet longs, Biotech longs and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is above average. Measures of investor anxiety are higher. The Johnson Redbook same-store sales index rose 3.5% year-over-year last week vs. a 3.3% rise the prior week. This week's gain is up from a 1.5% increase in late April 2005, and it's the 39th week in a row that the index has risen 3% or more. The long-term average is a gain of around 2.5%. Retail sales remain healthy, despite higher oil prices. I continue to believe a healthy labor market, low long-term interest rates, falling energy prices, improving sentiment and rising stock prices will cushion any weakness this year related to a slowing housing market. My two favorite retailers remain Abercrombie & Fitch (ANF) and Best Buy (BBY). I expect US stocks to trade higher into the close from current levels on lower energy prices, positive economic data, more dovish Fed comments and stable long-term rates.
Tuesday, January 31, 2006
Stocks Modestly Lower into Final Hour after Fed Hikes Rates 25 Basis Points
Today's Headlines
Bloomberg:
- Coretta Scott King, the widow of civil rights leader the Reverend Martin Luther King Jr. who took up his fight for racial equality after his assassination, has died at the age of 78.
- Iran won’t halt oil exports because of the dispute over its nuclear program, which may be referred to the UN for sanctions, the country’s oil minister said.
- “Brokeback Mountain” led Academy Award nominations with eight nods, including best picture and best director.
Wall Street Journal:
- Huntsman Corp.(HUN), the fourth largest US chemical maker, is in talks to be acquired by an unidentified buyer.
- American Electric Power(AEP) will build a $3 billion electricity line from West Virginia to New Jersey, the first big venture to use a new US law that promotes the building of projects needed to alleviate a congested power grid.
- Liberty Media(L) and EchoStar Communications(DIS) are investing in a company with a product that lets people watch television on their computers while away from home.
- Shares of Diebold(DBD) have dropped 30% in 12 months, a period that’s seen the departure of the CEO, the finance chief and the COO, but investors who stick with the company could reap rewards.
- General Motors(GM), Anheuser-Busch(AB) and Nintendo are developing ways to attach ads to video files downloaded from the Internet.
NY Times:
- Many US states have passed laws that inch toward regulation of the drug industry.
- The number of US and other foreign troops in Iraq probably will drop to below 100,000 by the end of the year and a majority could be out in two years.
USA Today:
- Indian tribes, which can make unlimited political contributions, get that status through treaties negotiated with the US in the 1700s.
- FEMA may provide displaced New Orleans residents free apartments for as long as 18 months while they recover from last year’s hurricane.
NY Post:
- Pier 1 Imports may be looking for a successor to Chairman and CEO Girouard, and has hired an executive search firm to seek candidates.
- NY’s Metropolitan Transportation Authority plans to run a six-month program to test “smart cards” on the 4, 5 and 6 subway lines in Manhattan to speed up passenger entry.
Atlanta Business Chronicle:
- Coca-Cola has been looking into ways, over the past two years, to offer hot coffee, espresso and tea quickly in individual servings, citing patent and trademark applications.
Nihon Keizai:
- Sanyo Electric and Volkswagen AG will jointly develop rechargeable batteries for gasoline-electric hybrid vehicles.
Arab News:
- Saudi Arabia urged western countries to respect the decision of the Palestinian people to elect Hamas, classified by many as a terrorist organization.
Tehran Times:
- Iran plans to invest $14 billion to expand its refining capacity by more than 50%.
Reuters:
- Google(GOOG) denied a report in today’s NY Post that the company is in talks with Napster(NAPS) to form an alliance that may lead to Google acquiring the Internet music service.
- Coretta Scott King, the widow of civil rights leader the Reverend Martin Luther King Jr. who took up his fight for racial equality after his assassination, has died at the age of 78.
- Iran won’t halt oil exports because of the dispute over its nuclear program, which may be referred to the UN for sanctions, the country’s oil minister said.
- “Brokeback Mountain” led Academy Award nominations with eight nods, including best picture and best director.
Wall Street Journal:
- Huntsman Corp.(HUN), the fourth largest US chemical maker, is in talks to be acquired by an unidentified buyer.
- American Electric Power(AEP) will build a $3 billion electricity line from West Virginia to New Jersey, the first big venture to use a new US law that promotes the building of projects needed to alleviate a congested power grid.
- Liberty Media(L) and EchoStar Communications(DIS) are investing in a company with a product that lets people watch television on their computers while away from home.
- Shares of Diebold(DBD) have dropped 30% in 12 months, a period that’s seen the departure of the CEO, the finance chief and the COO, but investors who stick with the company could reap rewards.
- General Motors(GM), Anheuser-Busch(AB) and Nintendo are developing ways to attach ads to video files downloaded from the Internet.
NY Times:
- Many US states have passed laws that inch toward regulation of the drug industry.
- The number of US and other foreign troops in Iraq probably will drop to below 100,000 by the end of the year and a majority could be out in two years.
USA Today:
- Indian tribes, which can make unlimited political contributions, get that status through treaties negotiated with the US in the 1700s.
- FEMA may provide displaced New Orleans residents free apartments for as long as 18 months while they recover from last year’s hurricane.
NY Post:
- Pier 1 Imports may be looking for a successor to Chairman and CEO Girouard, and has hired an executive search firm to seek candidates.
- NY’s Metropolitan Transportation Authority plans to run a six-month program to test “smart cards” on the 4, 5 and 6 subway lines in Manhattan to speed up passenger entry.
Atlanta Business Chronicle:
- Coca-Cola has been looking into ways, over the past two years, to offer hot coffee, espresso and tea quickly in individual servings, citing patent and trademark applications.
Nihon Keizai:
- Sanyo Electric and Volkswagen AG will jointly develop rechargeable batteries for gasoline-electric hybrid vehicles.
Arab News:
- Saudi Arabia urged western countries to respect the decision of the Palestinian people to elect Hamas, classified by many as a terrorist organization.
Tehran Times:
- Iran plans to invest $14 billion to expand its refining capacity by more than 50%.
Reuters:
- Google(GOOG) denied a report in today’s NY Post that the company is in talks with Napster(NAPS) to form an alliance that may lead to Google acquiring the Internet music service.
Inflation Measures Decelerate, Consumer Confidence Rises, Chicago Manufacturing Decelerates
- The 4Q Employment Cost Index rose .8% versus estimates of a .9% increase and a .8% gain in 3Q.
- Consumer Confidence rose to 106.3 in January versus estimates of 105.0 and a reading of 103.8 in December.
- The Chicago Purchasing Manager Index for January fell to 58.5 versus estimates of 59.9 and a reading of 60.8 in December.
- Consumer Confidence rose to 106.3 in January versus estimates of 105.0 and a reading of 103.8 in December.
- The Chicago Purchasing Manager Index for January fell to 58.5 versus estimates of 59.9 and a reading of 60.8 in December.
BOTTOM LINE: US labor costs rose less than expected in the fourth quarter, suggesting tame inflation, Bloomberg reported. Employment costs rose 3.1% for all of 2005, slowing for a second straight year. Unit labor costs account for two-thirds of inflation. Core US consumer prices gained 2.2% last year, right at the average of the last decade. I continue to believe employment costs will remain relatively low over the intermediate-term, thus helping to keep inflation in check.
US consumer confidence rose more than expected in January to the highest since June 2002 as employers accelerated hiring, Bloomberg reported. Employers added 2 million new jobs in 2005, the second best number since before the stock market bubble burst in 1999. The component of the index measuring optimism about consumer’s present situation surged to 128.4, the highest since 2001, versus 120.7 the prior month. The percentage of consumers that saw jobs as plentiful rose to 26.9%, the highest since September 2001. I expect consumer confidence readings to make new cycle highs later this year as stocks rise further, the job market remains healthy, housing stabilizes at relatively high levels, long-term interest rates remain low, inflation decelerates and energy prices fall.
Chicago-area manufacturing expanded at a slower pace this month as automakers cut capacity to reduce costs and restore profits, Bloomberg said. The prices paid component of the index fell to 75.3 from 81.1 the prior month. The new orders component of the index fell to 63.7 versus 65.7 in December. I continue to believe manufacturing nationwide will add to economic growth this quarter as inventories are rebuilt, confidence improves and hurricane rebuilding takes hold.
Tuesday Watch
Late-Night Headlines
Bloomberg:
- International donors are meeting in London today to agree to a five-year plan to develop Afghanistan’s security, government and rule of law, cementing its moves toward democracy since the Taliban regime was ousted in 2001.
- Billionaire investor Carl Icahn recruited former Viacom(VIA) CEO Frank Biondi to lead a fight for control of Time Warner(TWX).
- Merck(MRK) won a lawsuit over its Vioxx painkiller, after a state judge in New Jersey said a Texas man failed to prove the drug caused his stomach pain and internal bleeding.
- The US, European Union, United Nations and Russia put Hamas on notice that once it forms a new Palestinian government there will be financial consequences unless the Islamic movement abandons violence, accepts Israel’s existence and abides by existing peace agreements.
- US Supreme Court nominee Samuel A. Alito Jr. moved closer to confirmation as the Senate agreed to end four days of debate on his selection to replace retiring Justice Sandra Day O’Connor.
- Russia and China agreed to back the referral of Iran’s nuclear program to the UN Security Council at a Feb.2 meeting of the International Atomic Energy Agency, joining the US, UK, France and Germany.
- Google(GOOG) expects “high growth” in Brazil as more people in Latin America’s largest economy gain access to computers, the company’s co-founder Sergey Brin said.
Financial Times:
- OAO Lukoil, Russia’s largest oil company, will restart talks with Iraq’s government to develop oil fields in the country, citing Lukoil Vice President Leonid Fedun.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (EBAY), (BXP), (X), (XOM), (HEP) and (MYL).
- Reiterated Underperform on (GBL) and (UHS).
Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated +.03%.
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
(MDRX)/.09
(ALL)/1.52
(MO)/1.17
(ADM)/.42
(ASD)/.46
(AX)/.24
(AH)/1.00
(ATYT)/.04
(CME)/2.10
(CHIR)/.51
(CB)/2.14
(CIN)/.69
(CEG)/1.00
(CAM)/.45
(CFC)/1.05
(DBD)/.64
(ETR)/.54
(FLEX)/.19
(GOOG)/1.76
(HLT)/.19
(ITW)/1.39
(JBLU)/-.14
(K)/.46
(KRI)/1.22
(LLL)/1.21
(MRK).62
(MSTR)/1.34
(NAV)/3.06
(PD)/3.96
(SYMC)/.25
(VLO)/1.94
(VMC)/.82
(WYE)/.60
Upcoming Splits
(FIF) 3-for-2
Economic Releases
8:30 am EST
- 4Q Employment Cost Index is estimated to rise .9% versus a .8% gain in 3Q.
10:00 am EST
- Consumer Confidence for January is estimated to rise to 105.0 versus a reading of 103.6 in December.
- Chicago Purchasing Manager for January is estimated to fall to 59.8 versus a reading of 60.8 in December.
2:15 pm EST
- The Fed is expected to raise the benchmark interest rate by 25 basis points to 4.5%.
Bloomberg:
- International donors are meeting in London today to agree to a five-year plan to develop Afghanistan’s security, government and rule of law, cementing its moves toward democracy since the Taliban regime was ousted in 2001.
- Billionaire investor Carl Icahn recruited former Viacom(VIA) CEO Frank Biondi to lead a fight for control of Time Warner(TWX).
- Merck(MRK) won a lawsuit over its Vioxx painkiller, after a state judge in New Jersey said a Texas man failed to prove the drug caused his stomach pain and internal bleeding.
- The US, European Union, United Nations and Russia put Hamas on notice that once it forms a new Palestinian government there will be financial consequences unless the Islamic movement abandons violence, accepts Israel’s existence and abides by existing peace agreements.
- US Supreme Court nominee Samuel A. Alito Jr. moved closer to confirmation as the Senate agreed to end four days of debate on his selection to replace retiring Justice Sandra Day O’Connor.
- Russia and China agreed to back the referral of Iran’s nuclear program to the UN Security Council at a Feb.2 meeting of the International Atomic Energy Agency, joining the US, UK, France and Germany.
- Google(GOOG) expects “high growth” in Brazil as more people in Latin America’s largest economy gain access to computers, the company’s co-founder Sergey Brin said.
Financial Times:
- OAO Lukoil, Russia’s largest oil company, will restart talks with Iraq’s government to develop oil fields in the country, citing Lukoil Vice President Leonid Fedun.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (EBAY), (BXP), (X), (XOM), (HEP) and (MYL).
- Reiterated Underperform on (GBL) and (UHS).
Night Trading
Asian Indices are unch. to +1.0% on average.
S&P 500 indicated +.03%.
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
(MDRX)/.09
(ALL)/1.52
(MO)/1.17
(ADM)/.42
(ASD)/.46
(AX)/.24
(AH)/1.00
(ATYT)/.04
(CME)/2.10
(CHIR)/.51
(CB)/2.14
(CIN)/.69
(CEG)/1.00
(CAM)/.45
(CFC)/1.05
(DBD)/.64
(ETR)/.54
(FLEX)/.19
(GOOG)/1.76
(HLT)/.19
(ITW)/1.39
(JBLU)/-.14
(K)/.46
(KRI)/1.22
(LLL)/1.21
(MRK).62
(MSTR)/1.34
(NAV)/3.06
(PD)/3.96
(SYMC)/.25
(VLO)/1.94
(VMC)/.82
(WYE)/.60
Upcoming Splits
(FIF) 3-for-2
Economic Releases
8:30 am EST
- 4Q Employment Cost Index is estimated to rise .9% versus a .8% gain in 3Q.
10:00 am EST
- Consumer Confidence for January is estimated to rise to 105.0 versus a reading of 103.6 in December.
- Chicago Purchasing Manager for January is estimated to fall to 59.8 versus a reading of 60.8 in December.
2:15 pm EST
- The Fed is expected to raise the benchmark interest rate by 25 basis points to 4.5%.
BOTTOM LINE: Asian indices are higher, led by technology companies and automakers in the region. The Fed will likely raise the benchmark interest rate 25 basis points, remove the word "measured" from the policy statement describing the future pace of rate hikes and make more dovish comments than most expect. I expect US equities to open modestly lower and to rally later in the afternoon, fishing modestly higher. The Portfolio is 100% net long heading into the day.
Monday, January 30, 2006
Stocks Close Mixed as Rising Energy Prices Offset Positive Economic Data Ahead of Fed Meeting
Indices
S&P 500 1,285.20 +.12%
DJIA 10,899.92 -.07%
NASDAQ 2,306.78 +.11%
Russell 2000 730.87 -.18%
S&P Barra Growth 612.77 +.15%
S&P Barra Value 668.26 +.08%
Morgan Stanley Consumer 597.19 -.30%
Morgan Stanley Cyclical 798.87 +.02%
Morgan Stanley Technology 544.38 +.28%
Transports 4,354.49 +1.04%
Utilities 413.71 -.57%
Put/Call .65 -16.67%
NYSE Arms .78 -14.00%
Volatility(VIX) 12.39 +3.51%
ISE Sentiment 238.00 +20.20%
US Dollar 89.43 +.12%
CRB 350.06 +.89%
Futures Spot Prices
Crude Oil 68.54 +.28%
Unleaded Gasoline 177.49 +.01%
Natural Gas 9.38 -.10%
Heating Oil 183.38 +1.49%
Gold 568.10 +.41%
Base Metals 169.61 +.45%
Copper 222.80 -.07%
10-year US Treasury Yield 4.53% +.49%
Leading Sectors
Oil Service +2.93%
Energy +2.30%
Airlines +2.94%
Lagging Sectors
Semis -.71%
Tobacco -.90%
Hospitals -1.53%
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 Underperform on (SGP).
Afternoon/Evening Headlines
Bloomberg:
- President Bush will nominate Stanford University economist Ed Lazear to be chairman of his Council of Economic Advisers.
- OPEC agreed to keep production near a 26-year high in the second quarter after most members said prices were too high to warrant an output cut, Saudi Arabia’s oil minister said.
San Francisco Chronicle:
- California builders plan to construct tens of thousands of homes on flood-prone delta lands to meet demand for housing from Sacramento to the Bay Area.
S&P 500 1,285.20 +.12%
DJIA 10,899.92 -.07%
NASDAQ 2,306.78 +.11%
Russell 2000 730.87 -.18%
S&P Barra Growth 612.77 +.15%
S&P Barra Value 668.26 +.08%
Morgan Stanley Consumer 597.19 -.30%
Morgan Stanley Cyclical 798.87 +.02%
Morgan Stanley Technology 544.38 +.28%
Transports 4,354.49 +1.04%
Utilities 413.71 -.57%
Put/Call .65 -16.67%
NYSE Arms .78 -14.00%
Volatility(VIX) 12.39 +3.51%
ISE Sentiment 238.00 +20.20%
US Dollar 89.43 +.12%
CRB 350.06 +.89%
Futures Spot Prices
Crude Oil 68.54 +.28%
Unleaded Gasoline 177.49 +.01%
Natural Gas 9.38 -.10%
Heating Oil 183.38 +1.49%
Gold 568.10 +.41%
Base Metals 169.61 +.45%
Copper 222.80 -.07%
10-year US Treasury Yield 4.53% +.49%
Leading Sectors
Oil Service +2.93%
Energy +2.30%
Airlines +2.94%
Lagging Sectors
Semis -.71%
Tobacco -.90%
Hospitals -1.53%
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 Underperform on (SGP).
Afternoon/Evening Headlines
Bloomberg:
- President Bush will nominate Stanford University economist Ed Lazear to be chairman of his Council of Economic Advisers.
- OPEC agreed to keep production near a 26-year high in the second quarter after most members said prices were too high to warrant an output cut, Saudi Arabia’s oil minister said.
San Francisco Chronicle:
- California builders plan to construct tens of thousands of homes on flood-prone delta lands to meet demand for housing from Sacramento to the Bay Area.
BOTTOM LINE: The Portfolio finished higher today on gains in my Medical Information Systems longs, Semi longs and Computer longs. I exited my VLO short and took profits in a few longs in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was about average. Measures of investor anxiety were mostly lower into the close. Overall, today’s performance was neutral ahead of a number of market-moving catalysts. The Airline Index (XAL) was up almost 3% today, even as oil remains near $70/bbl. The recent correction in the group looks like it has run its course. (AMR) and (SKYW) are my two favorites in this despised group.
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