BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Networking longs, Medical Information Systems longs, Biotech longs, Computer longs and Energy-related shorts. I added (COP) short and added to a few existing longs this afternoon, thus leaving the Portfolio 100% 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 heavy. Measures of investor anxiety are mostly lower. Earlier today we had a 40-point decline in market leader Google (GOOG), higher oil prices, higher long-term rates, more rhetoric from Iran and mixed economic data. However, the major averages are higher with slightly positive breadth this afternoon. This market is very resilient, which bodes well for further gains in stocks over the coming weeks. I expect US stocks to trade modestly higher into the close from current levels on lower energy prices and short-covering.
Wednesday, February 01, 2006
Stocks Higher into Final Hour on Short-covering and Oil Price Reversal
Today's Headlines
Bloomberg:
- General Motors(GM) and Ford Motor(F) led junk bonds to their biggest monthly gain since June on optimism that job cuts, new models and the sale of a GM unit will restore profitability.
- Burger King plans to sell shares to the public for the first time, allowing its private equity owners to cash out three years after buying the company for $1.5 billion.
- United Airlines will exit three years of bankruptcy today with 35 new international routes, a fleet that’s about a fifth smaller, and one-third fewer workers.
- Yale, Columbia, Brown and the Univ. of Penn. Received a record number of applicants for the Class of 2010 because of increased efforts to recruit low-income students with improved financial aid packages.
- US Treasury notes fell after an industry report showed the manufacturing sector may be growing fast enough to spur the Fed to raise interest rates at least one more time.
- General Motors(GM), Ford Motor(F) and DaimlerChrysler AG(DCX) reported unexpected increases in US sales in January, while Japanese rivals Toyota Motor(TM) and Honda Motor(HMC) continued to post gains.
- The US dollar is rising against the euro and reached a high versus the yen for the year as a manufacturing report added to evidence the US economy is growing more rapidly than other industrialized nations.
Wall Street Journal:
- Jobs created by Nissan Motor, Toyota Motor and other Asian and European carmakers in the US South have helped stabilize employment in the industry after the big three cut back in older US industrial strongholds.
- Investors in mutual funds that focus on Japanese stocks withdrew $360.7 million between Jan. 18 and Jan. 25, citing Emerging Portfolio Fund Research.
- Boeing(BA) is likely to win this year only about half of 2005’s 1,002 aircraft orders, but investors shouldn’t necessarily bail out of the stock.
- The SEC wants to require companies to disclose the amount of stock cited as collateral for any loans take by a firm’s directors and its five highest-paid executives.
- US television stations are demanding that affiliated networks include them as partners in online media ventures.
- Angiotech Pharmaceuticals(ANPI) may announce today that it will acquire American Medical Instruments Holdings, a Lake Forest, Illinois-based maker of medical devices, for $785 million.
- Deloitte & Touche is developing an employee-profiling service that companies can use to screen for wrongdoers.
- US auto-safety regulators may propose as early as this summer a rule that would require every new vehicle to have equipment to reduce rollover accidents.
CNBC:
- Morgan Stanley’s(MWD) talks to buy all or part of money manager BlackRock Inc.(BLK) have broken down because the transaction would be too costly.
Washington Post:
- General Motors(GM) CEO Wagoner may announce plans today to invest in a transmission plant in White Marsh, Maryland, so the facility can produce parts for hybrid vehicles.
AP:
- Egyptian officials today called on Hamas to recognize Israel, renounce violence, and honor past peace deals.
NY Times:
- Persian Gulf countries are joining the US and its allies in criticizing Iran’s nuclear program after years of hesitating to do so.
- General Motors(GM) and Ford Motor(F) led junk bonds to their biggest monthly gain since June on optimism that job cuts, new models and the sale of a GM unit will restore profitability.
- Burger King plans to sell shares to the public for the first time, allowing its private equity owners to cash out three years after buying the company for $1.5 billion.
- United Airlines will exit three years of bankruptcy today with 35 new international routes, a fleet that’s about a fifth smaller, and one-third fewer workers.
- Yale, Columbia, Brown and the Univ. of Penn. Received a record number of applicants for the Class of 2010 because of increased efforts to recruit low-income students with improved financial aid packages.
- US Treasury notes fell after an industry report showed the manufacturing sector may be growing fast enough to spur the Fed to raise interest rates at least one more time.
- General Motors(GM), Ford Motor(F) and DaimlerChrysler AG(DCX) reported unexpected increases in US sales in January, while Japanese rivals Toyota Motor(TM) and Honda Motor(HMC) continued to post gains.
- The US dollar is rising against the euro and reached a high versus the yen for the year as a manufacturing report added to evidence the US economy is growing more rapidly than other industrialized nations.
Wall Street Journal:
- Jobs created by Nissan Motor, Toyota Motor and other Asian and European carmakers in the US South have helped stabilize employment in the industry after the big three cut back in older US industrial strongholds.
- Investors in mutual funds that focus on Japanese stocks withdrew $360.7 million between Jan. 18 and Jan. 25, citing Emerging Portfolio Fund Research.
- Boeing(BA) is likely to win this year only about half of 2005’s 1,002 aircraft orders, but investors shouldn’t necessarily bail out of the stock.
- The SEC wants to require companies to disclose the amount of stock cited as collateral for any loans take by a firm’s directors and its five highest-paid executives.
- US television stations are demanding that affiliated networks include them as partners in online media ventures.
- Angiotech Pharmaceuticals(ANPI) may announce today that it will acquire American Medical Instruments Holdings, a Lake Forest, Illinois-based maker of medical devices, for $785 million.
- Deloitte & Touche is developing an employee-profiling service that companies can use to screen for wrongdoers.
- US auto-safety regulators may propose as early as this summer a rule that would require every new vehicle to have equipment to reduce rollover accidents.
CNBC:
- Morgan Stanley’s(MWD) talks to buy all or part of money manager BlackRock Inc.(BLK) have broken down because the transaction would be too costly.
Washington Post:
- General Motors(GM) CEO Wagoner may announce plans today to invest in a transmission plant in White Marsh, Maryland, so the facility can produce parts for hybrid vehicles.
AP:
- Egyptian officials today called on Hamas to recognize Israel, renounce violence, and honor past peace deals.
NY Times:
- Persian Gulf countries are joining the US and its allies in criticizing Iran’s nuclear program after years of hesitating to do so.
Construction Spending Strong, Home Sales Slowing, Manufacturing Healthy, Prices Paid Stable
- Construction Spending for December rose 1.0% versus estimates of a .2% increase and an upwardly revised .5% gain in November.
- Pending Home Sales for December fell 3.0% versus estimates of a .5% decline and a 3.0% fall in November.
- ISM Manufacturing for January fell to 54.8 versus estimates of 55.5 and a reading of 55.6 in December.
- ISM Prices Paid for January rose to 65.0 versus estimates of 64.0 and a reading of 63.0 in December.
- Pending Home Sales for December fell 3.0% versus estimates of a .5% decline and a 3.0% fall in November.
- ISM Manufacturing for January fell to 54.8 versus estimates of 55.5 and a reading of 55.6 in December.
- ISM Prices Paid for January rose to 65.0 versus estimates of 64.0 and a reading of 63.0 in December.
BOTTOM LINE: US construction spending rose more than forecast in December as homebuilding rebounded and office3 and commercial investment increased, Bloomberg reported. Construction spending rose 8.9% for all of 2005 to an all-time record. Construction Spending should remain healthy as hurricane rebuilding continues and commercial construction rises.
Contracts to buy previously owned US homes declined for a fourth consecutive month in December as high home prices proved too rich for some buyers, Bloomberg reported. The pending re-sales index rose 2.3% in the South and 1.5% in the Northeast. Signing fell 8.1% in the West and 9.3% in the Midwest. I continue to believe home sales are slowing to more healthy and sustainable levels.
US manufacturing expanded in January at about the same pace as a month earlier, propelled by orders for business equipment that will drive the economy, Bloomberg said. The order backlogs component of the index rose to 53.5 from 49.5 in December. As well, the new exporter orders component of the index rose to 58.5 from 54.3 in December. According to Chief Executive magazine, a recent monthly survey showed the most confidence by CEOs in the US economy since the survey was started in 2002. This likely means increased corporate spending and hiring. I continue to believe manufacturing will add to US economic growth over the intermediate-term.
Tuesday, January 31, 2006
Wednesday Watch
Late-Night Headlines
Bloomberg:
- President Bush, in his State of the Union address, asked Americans to support the war on terrorism abroad and his plans at home for improving health care and breaking an “addiction” to foreign sources of energy.
- Federal appeals courts in California and New York said today a federal law banning “partial birth” abortions is illegal.
- Oil is falling for a second day after Iran said it won’t halt exports because of a dispute over its nuclear program, reducing concerns about possible supply shortages.
- Left-wing antiwar protester Cindy Sheehan, who was invited by Democrats to the Capitol to attend President Bush’s State of the Union address this evening, was arrested after she unfurled an anti-war banner in the gallery.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (ALL), (VLO) and (X).
- Reiterated Underperform on (ISE) and (SIE).
Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.35%.
NASDAQ 100 indicated -1.05%.
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
(ADS)/.61
(AEP)/.25
(BUD)/.27
(BA)/.44
(BOBJ)/.31
(CBG)/1.11
(DVN)/2.29
(DUK)/.36
(HCA)/.69
(JDSU).00
(LM)/1.03
(MBI)/1.38
(MGM)/.32
(MNST)/.28
(MUR)/.79
(OI)/.11
(PBI)/.74
(PHM)/1.97
(SBUX)/.20
(SUN)/2.15
(TWX)/.22
(TRB)/.56
(XEL)/.25
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Construction Spending for December is estimated to rise .2% versus a .2% increase in November.
- Pending Home Sales for December are estimated to fall .5% versus a 3.2% decline in November.
- ISM Manufacturing for January is estimated to rise to 55.8 versus a reading of 55.6 in December.
- ISM Prices Paid for January is estimated to rise to 64.0 versus a reading of 63.0 in December.
Afternoon
- Total Vehicle Sales for January are estimated to fall to 16.4M versus 17.2M in December.
- Domestic Vehicle Sales for January are estimated to fall to 13.1M versus 13.5M in December.
Bloomberg:
- President Bush, in his State of the Union address, asked Americans to support the war on terrorism abroad and his plans at home for improving health care and breaking an “addiction” to foreign sources of energy.
- Federal appeals courts in California and New York said today a federal law banning “partial birth” abortions is illegal.
- Oil is falling for a second day after Iran said it won’t halt exports because of a dispute over its nuclear program, reducing concerns about possible supply shortages.
- Left-wing antiwar protester Cindy Sheehan, who was invited by Democrats to the Capitol to attend President Bush’s State of the Union address this evening, was arrested after she unfurled an anti-war banner in the gallery.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (ALL), (VLO) and (X).
- Reiterated Underperform on (ISE) and (SIE).
Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.35%.
NASDAQ 100 indicated -1.05%.
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
(ADS)/.61
(AEP)/.25
(BUD)/.27
(BA)/.44
(BOBJ)/.31
(CBG)/1.11
(DVN)/2.29
(DUK)/.36
(HCA)/.69
(JDSU).00
(LM)/1.03
(MBI)/1.38
(MGM)/.32
(MNST)/.28
(MUR)/.79
(OI)/.11
(PBI)/.74
(PHM)/1.97
(SBUX)/.20
(SUN)/2.15
(TWX)/.22
(TRB)/.56
(XEL)/.25
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Construction Spending for December is estimated to rise .2% versus a .2% increase in November.
- Pending Home Sales for December are estimated to fall .5% versus a 3.2% decline in November.
- ISM Manufacturing for January is estimated to rise to 55.8 versus a reading of 55.6 in December.
- ISM Prices Paid for January is estimated to rise to 64.0 versus a reading of 63.0 in December.
Afternoon
- Total Vehicle Sales for January are estimated to fall to 16.4M versus 17.2M in December.
- Domestic Vehicle Sales for January are estimated to fall to 13.1M versus 13.5M in December.
BOTTOM LINE: Asian indices are mostly lower, weighed down by telecom and financial shares in the region. I expect US equities to open lower and to rally later in the afternoon, fishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Modestly Lower after Fed Rate Hike
Indices
S&P 500 1,280.08 -.40%
DJIA 10,864.86 -.32%
NASDAQ 2,305.82 -.04%
Russell 2000 733.20 +.32%
S&P Barra Growth 610.08 -.44%
S&P Barra Value 665.89 -.35%
Morgan Stanley Consumer 592.50 -.79%
Morgan Stanley Cyclical 793.05 -.73%
Morgan Stanley Technology 541.11 -.60%
Transports 4,367.54 +.30%
Utilities 413.84 +.03%
Put/Call .77 +18.46%
NYSE Arms 1.51 +79.77%
Volatility(VIX) 12.95 +4.52%
ISE Sentiment 148.00 -36.21%
US Dollar 88.92 -.56%
CRB 348.66 -.40%
Futures Spot Prices
Crude Oil 67.68 -.35%
Unleaded Gasoline 179.50 -.56%
Natural Gas 9.34 +.27%
Heating Oil 183.90 -.48%
Gold 573.10 -.42%
Base Metals 169.87 +.15%
Copper 222.20 -.29%
10-year US Treasury Yield 4.51% -.22%
Leading Sectors
Gold & Silver +3.01%
Airlines +1.95%
HMOs +1.92%
Lagging Sectors
Homebuilders -.94%
Insurance -1.0%
Semis -1.44%
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 (GOOG), expects tax rate that caused shortfall to go back to 30% for 06, 06/07 EPS estimates and $500 implied value in tact.
- Reiterated Outperform on (STN), (SEPR), (SYMC) and (BXP).
- Reiterated Underperform on (KFT), (MRK) and (PFGC).
Afternoon/Evening Headlines
Bloomberg:
- Federal Reserve policy makers, meeting for the final time under Chairman Alan Greenspan, raised the main US interest rate to 4.5% and suggested the run of increases is still not finished.
- Robert McTeer, the former president of the Federal Reserve Bank of Dallas, told CNBC that Federal Reserve policy makers should “stop right now and hold” to give the economy a chance to catch up with recent rate increases.
- Google(GOOG) posted fourth-quarter net income growth of 82% and revenue growth of 86%, but missed profit estimates due to a higher-than-expected tax rate.
S&P 500 1,280.08 -.40%
DJIA 10,864.86 -.32%
NASDAQ 2,305.82 -.04%
Russell 2000 733.20 +.32%
S&P Barra Growth 610.08 -.44%
S&P Barra Value 665.89 -.35%
Morgan Stanley Consumer 592.50 -.79%
Morgan Stanley Cyclical 793.05 -.73%
Morgan Stanley Technology 541.11 -.60%
Transports 4,367.54 +.30%
Utilities 413.84 +.03%
Put/Call .77 +18.46%
NYSE Arms 1.51 +79.77%
Volatility(VIX) 12.95 +4.52%
ISE Sentiment 148.00 -36.21%
US Dollar 88.92 -.56%
CRB 348.66 -.40%
Futures Spot Prices
Crude Oil 67.68 -.35%
Unleaded Gasoline 179.50 -.56%
Natural Gas 9.34 +.27%
Heating Oil 183.90 -.48%
Gold 573.10 -.42%
Base Metals 169.87 +.15%
Copper 222.20 -.29%
10-year US Treasury Yield 4.51% -.22%
Leading Sectors
Gold & Silver +3.01%
Airlines +1.95%
HMOs +1.92%
Lagging Sectors
Homebuilders -.94%
Insurance -1.0%
Semis -1.44%
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 (GOOG), expects tax rate that caused shortfall to go back to 30% for 06, 06/07 EPS estimates and $500 implied value in tact.
- Reiterated Outperform on (STN), (SEPR), (SYMC) and (BXP).
- Reiterated Underperform on (KFT), (MRK) and (PFGC).
Afternoon/Evening Headlines
Bloomberg:
- Federal Reserve policy makers, meeting for the final time under Chairman Alan Greenspan, raised the main US interest rate to 4.5% and suggested the run of increases is still not finished.
- Robert McTeer, the former president of the Federal Reserve Bank of Dallas, told CNBC that Federal Reserve policy makers should “stop right now and hold” to give the economy a chance to catch up with recent rate increases.
- Google(GOOG) posted fourth-quarter net income growth of 82% and revenue growth of 86%, but missed profit estimates due to a higher-than-expected tax rate.
BOTTOM LINE: The Portfolio finished higher today on gains in my Medical Information Systems longs, Retail longs, Internet longs, Biotech longs and Computer longs. I added to my Google(GOOG) long down 70 after-hours and took profits in an existing long, thus leaving the Portfolio 100% net long. The tone of the market was mixed today as the advance/decline line finished neutral, sector performance was mixed and volume was above average. Measures of investor anxiety were higher into the close. Overall, today’s performance was mixed. After recouping all its earlier morning losses, Gilead Sciences (GILD), one of my biotech longs, traded 5.1% higher to an all-time high. Gilead remains my favorite biotech stock.
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