BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semiconductor longs, Medical Information Systems longs, Computer longs and Software longs. I added (IWM) and (QQQQ) shorts this afternoon, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, most sectors are declining and volume is heavy. Measures of investor anxiety are higher. The market's inability to mount any sort of rally today is a negative. Strong retail data, lower energy prices, stable interest rates and no escalation in the Iran situation could not spur gains today. I expect US stocks to trade modestly higher into the close from current levels on lower energy prices, bargain hunting and short-covering.
Thursday, February 02, 2006
Stocks Sharply Lower into Final Hour, Notwithstanding Lower Energy Prices and Strong Retail Data
Today's Headlines
Bloomberg:
- Exchange-traded funds are among the fastest-growing investments today, attracting one of every four new dollars going into stock funds last year.
- Matsushita Electric Industrial Co., the world’s biggest plasma television maker, raised its profit forecast 18% after sales of larger, more expensive sets increased fiscal third-quarter net income.
- The US said it won’t seek to impose economic sanctions on Iran if the UN nuclear watchdog sends the Islamic Republic before the Security Council over its atomic plans.
- General Motors(GM) handed out technology contracts to six companies including Electronic Data Systems(EDS), Hewlett-Packard(HPQ) and Cap Gemini SA in the largest award ever offered by a company.
- US retailers including Wal-Mart Stores(WMT) reported strong sales gains in January as gift cards, warm weather and a rebound in consumer confidence bolstered spending.
- The NASD is expanding a probe of the world’s biggest brokerage firms for possible improper sales of hedge funds to individual investors.
- Crude oil is falling after the US said it won’t immediately seek UN sanctions against Iran, easing concern that the world’s fourth-biggest oil producer will retaliate with an export cut. As well, US natural gas supplies are now 28.2% above the 5-year average.
Wall Street Journal:
- Shopping cart races, a symbol of urban anarchy, are becoming more popular in US citites.
- IBM(IBM), Google(GOOG), Oracle(ORCL) and other technology companies are supporting an open-source project designed to promote Ajax, a Web-development technology.
- US power industry executives are backing President Bush’s goal for developing cleaner-coal technologies to use the country’s enormous domestic coal reserves.
AP:
- Wal-Mart Stores(WMT) was sued by three Massachusetts women who claim the company broke state law by not stocking the “morning-after” pill.
NY Times:
- US dependence on oil can be reduced by changing the way cars are made, citing the Rocky Mountain Institute, an energy researcher.
- NYC, the largest US school district, plans to stop serving whole milk, a part of school lunches since 1946, in a bid to reduce risks of obesity, diabetes and other health problems.
- Some US Internet companies are selling tickets to sporting events using futures-like contracts.
- The FCC may tighten rules that have allowed mobile phone companies large discounts when buying government licenses to operate so-called third-generation wireless phone services.
- The US hotel industry will spend a record $5 billion this year on upgrades and renovations, adding improvements such as wireless Internet operations.
- Amazon.com(AMZN) said it has started a new program called Amazon Connect that allows writers to communicate in blogs, or Web logs, on the Seattle-based Internet retailer’s site.
- Alternative fuels have become the latest hot investment craze at venture capital companies.
- Palm Inc.(PALM) investor Mark Nelson, who owns 6.6% of the Treo mobile phone and handheld computer maker, wrote to the board urging them to consider selling the company.
LA Times:
- Sirius Satellite Radio(SIRI) plans to prosecute anyone who attempts to pirate copies of Howard Stern’s radio show or any of its other programming.
- “Survivor” fans will be able to download tonight’s episode of the reality television show from broadcaster CBS Corp.(CBS) for $1.99, a bid to rival Apple Computer’s iTunes service.
San Francisco Chronicle:
- PG&E Corp.(PCG) predicts natural gas bills for heat and hot water will be lower this month than in January.
Capital:
- United Internet AG plans to introduce its own version of the BlackBerry e-mail service in cooperation with Vodafone Group Plc(VOD).
Boersen-Zeitung:
- DaimlerChrysler AG expects a new trend toward diesel sales in the US as the country tries to reduce its dependency on Middle Eastern oil imports, citing CEO Dieter Zetsche.
- Exchange-traded funds are among the fastest-growing investments today, attracting one of every four new dollars going into stock funds last year.
- Matsushita Electric Industrial Co., the world’s biggest plasma television maker, raised its profit forecast 18% after sales of larger, more expensive sets increased fiscal third-quarter net income.
- The US said it won’t seek to impose economic sanctions on Iran if the UN nuclear watchdog sends the Islamic Republic before the Security Council over its atomic plans.
- General Motors(GM) handed out technology contracts to six companies including Electronic Data Systems(EDS), Hewlett-Packard(HPQ) and Cap Gemini SA in the largest award ever offered by a company.
- US retailers including Wal-Mart Stores(WMT) reported strong sales gains in January as gift cards, warm weather and a rebound in consumer confidence bolstered spending.
- The NASD is expanding a probe of the world’s biggest brokerage firms for possible improper sales of hedge funds to individual investors.
- Crude oil is falling after the US said it won’t immediately seek UN sanctions against Iran, easing concern that the world’s fourth-biggest oil producer will retaliate with an export cut. As well, US natural gas supplies are now 28.2% above the 5-year average.
Wall Street Journal:
- Shopping cart races, a symbol of urban anarchy, are becoming more popular in US citites.
- IBM(IBM), Google(GOOG), Oracle(ORCL) and other technology companies are supporting an open-source project designed to promote Ajax, a Web-development technology.
- US power industry executives are backing President Bush’s goal for developing cleaner-coal technologies to use the country’s enormous domestic coal reserves.
AP:
- Wal-Mart Stores(WMT) was sued by three Massachusetts women who claim the company broke state law by not stocking the “morning-after” pill.
NY Times:
- US dependence on oil can be reduced by changing the way cars are made, citing the Rocky Mountain Institute, an energy researcher.
- NYC, the largest US school district, plans to stop serving whole milk, a part of school lunches since 1946, in a bid to reduce risks of obesity, diabetes and other health problems.
- Some US Internet companies are selling tickets to sporting events using futures-like contracts.
- The FCC may tighten rules that have allowed mobile phone companies large discounts when buying government licenses to operate so-called third-generation wireless phone services.
- The US hotel industry will spend a record $5 billion this year on upgrades and renovations, adding improvements such as wireless Internet operations.
- Amazon.com(AMZN) said it has started a new program called Amazon Connect that allows writers to communicate in blogs, or Web logs, on the Seattle-based Internet retailer’s site.
- Alternative fuels have become the latest hot investment craze at venture capital companies.
- Palm Inc.(PALM) investor Mark Nelson, who owns 6.6% of the Treo mobile phone and handheld computer maker, wrote to the board urging them to consider selling the company.
LA Times:
- Sirius Satellite Radio(SIRI) plans to prosecute anyone who attempts to pirate copies of Howard Stern’s radio show or any of its other programming.
- “Survivor” fans will be able to download tonight’s episode of the reality television show from broadcaster CBS Corp.(CBS) for $1.99, a bid to rival Apple Computer’s iTunes service.
San Francisco Chronicle:
- PG&E Corp.(PCG) predicts natural gas bills for heat and hot water will be lower this month than in January.
Capital:
- United Internet AG plans to introduce its own version of the BlackBerry e-mail service in cooperation with Vodafone Group Plc(VOD).
Boersen-Zeitung:
- DaimlerChrysler AG expects a new trend toward diesel sales in the US as the country tries to reduce its dependency on Middle Eastern oil imports, citing CEO Dieter Zetsche.
Productivity Disappoints, Labor Costs Rise, Job Market Healthy
- Preliminary 4Q Non-farm Productivity fell .6% versus estimates of unchanged and a 4.5% increase in 3Q.
- Preliminary 4Q Unit Labor Costs rose 3.5% versus estimates of a 3.5% increase and a .5% decline in 3Q.
- Initial Jobless Claims fell to 273K last week versus estimates of 295K and 284K the prior week.
- Continuing Claims fell to 2509K versus estimates of 2585K and 2573K prior.
- Preliminary 4Q Unit Labor Costs rose 3.5% versus estimates of a 3.5% increase and a .5% decline in 3Q.
- Initial Jobless Claims fell to 273K last week versus estimates of 295K and 284K the prior week.
- Continuing Claims fell to 2509K versus estimates of 2585K and 2573K prior.
BOTTOM LINE: The productivity of US workers during the fourth quarter declined by the most since the third quarter of 2000 and labor costs rose, Bloomberg reported. These disappointing numbers will likely be revised to more positive levels after an expected upward revision to 4Q GDP. Moreover, the average of the last 2 quarters was still pretty good. I continue to believe unit labor costs will remain muted over the intermediate-term.
Initial Jobless Claims unexpectedly declined last week and the number of Americans on unemployment benefit rolls dropped to the lowest level in almost five years, Bloomberg reported. According to a Bloomberg survey of economists, employers added a quarter of a million workers to payrolls last month. The four-week moving average of claims declined to 284,250 from 289,000 the prior week. The unemployment rate among those able to receive benefits, which tracks the US unemployment rate, fell to 1.9% from 2% the prior week. The US economy created 2 million jobs last year. During the last two and a half years, the US has added 4.6 million new jobs, more than the European Union and Japan combined. I continue to believe the labor market will remain healthy over the intermediate-term as corporations increasing spending and consumer spending remains relatively strong.
Thursday Watch
Late-Night Headlines
Bloomberg:
- The US House voted to extend the USA Patriot Act until March 10, giving lawmakers more time to negotiate revisions in the anti-terrorism law.
- The US House of Representatives approved legislation today cutting the growth of government programs by $39 billion.
- Honda Motor’s(HMC) new Civic small car helped raise Honda’s US sales 21% last month, leading Asian brands to a sixth consecutive month of higher market share.
- US researchers used a common cold virus to create a vaccine that protected mice form the deadly bird flu, an approach that may help pandemic preparations, according to a report published by the medical journal Lancet.
- Pulte Corp.(PHM), the second-largest US homebuilder by stock market value, said fiscal fourth-quarter profit jumped 45% because it sold more houses at higher prices.
Wall Street Journal:
- General Motors(GM) Chairman and CEO Wagoner said he agrees with suggestions made by Tracinda Corp. adviser Jerome York, who wants the automaker to reduce its dividend by half and cut executive salaries among other reorganization efforts.
- Three former top executives of a unit of Warren Buffett’s Berkshire Hathaway(BRK/A) and a former American International Group(AIG) official were indicted by a federal grand jury in Virginia in an accounting probe of the two companies.
Financial Times:
- Sasol Ltd., the world’s biggest producer of motor fuel from coal, will speed up talks to bring its coal-to-liquids technology to the US after President Bush’s call for greater energy independence, citing CEO Pat Davies.
- Merrill Lynch(MER) is “seriously” considering a bid valued at about $6 billion for LG Card Co., South Koreas’ No. 2 credit-card issuer.
AP:
- West Virginia Governor Joe Manchin ordered all state mines closed until officials can conduct safety checks.
- Saudi Arabia and Qatar pledged to give the Palestinian Authority financial aid after Israel delayed the transfer of tax funds following the victory of the Hamas terror group in elections.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (COF), (FORM) and (MUR).
- Reiterated Underperform on (BA), (OMI) and (BUD).
Night Trading
Asian Indices are -.25% to +1.0% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated -.15%.
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
(AGN)/.89
(AMZN)/.21
(APCC)/.25
(APA)/2.37
(AVP)/.43
(CERN)/.34
(CLX)/.47
(CMCSA)/.15
(CVS)/.40
(ERTS)/.90
(EOP)/.35
(SSP)/.49
(GR)/.50
(IP)/.07
(ISRG)/.49
(LIN)/.84
(MEDI)/.05
(MYL)/.24
(PNR)/.40
(PTEN)/.73
(RTN)/.60
(RCL)/-.25
(SLE)/.29
(JOE)/.53
(STA)/.94
(SPF)/1.93
(HOT)/.65
(TXU)/.85
(TYC)/.38
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Preliminary 4Q Non-farm Productivity is estimated to rise .5% versus a 4.7% gain in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to rise 3.5% versus a 1.0% decline in 3Q.
- Initial Jobless Claims are estimated to rise to 295K versus 283K the prior week.
- Continuing Claims are estimated to rise to 2585K versus 2581K prior.
Bloomberg:
- The US House voted to extend the USA Patriot Act until March 10, giving lawmakers more time to negotiate revisions in the anti-terrorism law.
- The US House of Representatives approved legislation today cutting the growth of government programs by $39 billion.
- Honda Motor’s(HMC) new Civic small car helped raise Honda’s US sales 21% last month, leading Asian brands to a sixth consecutive month of higher market share.
- US researchers used a common cold virus to create a vaccine that protected mice form the deadly bird flu, an approach that may help pandemic preparations, according to a report published by the medical journal Lancet.
- Pulte Corp.(PHM), the second-largest US homebuilder by stock market value, said fiscal fourth-quarter profit jumped 45% because it sold more houses at higher prices.
Wall Street Journal:
- General Motors(GM) Chairman and CEO Wagoner said he agrees with suggestions made by Tracinda Corp. adviser Jerome York, who wants the automaker to reduce its dividend by half and cut executive salaries among other reorganization efforts.
- Three former top executives of a unit of Warren Buffett’s Berkshire Hathaway(BRK/A) and a former American International Group(AIG) official were indicted by a federal grand jury in Virginia in an accounting probe of the two companies.
Financial Times:
- Sasol Ltd., the world’s biggest producer of motor fuel from coal, will speed up talks to bring its coal-to-liquids technology to the US after President Bush’s call for greater energy independence, citing CEO Pat Davies.
- Merrill Lynch(MER) is “seriously” considering a bid valued at about $6 billion for LG Card Co., South Koreas’ No. 2 credit-card issuer.
AP:
- West Virginia Governor Joe Manchin ordered all state mines closed until officials can conduct safety checks.
- Saudi Arabia and Qatar pledged to give the Palestinian Authority financial aid after Israel delayed the transfer of tax funds following the victory of the Hamas terror group in elections.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (COF), (FORM) and (MUR).
- Reiterated Underperform on (BA), (OMI) and (BUD).
Night Trading
Asian Indices are -.25% to +1.0% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated -.15%.
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
(AGN)/.89
(AMZN)/.21
(APCC)/.25
(APA)/2.37
(AVP)/.43
(CERN)/.34
(CLX)/.47
(CMCSA)/.15
(CVS)/.40
(ERTS)/.90
(EOP)/.35
(SSP)/.49
(GR)/.50
(IP)/.07
(ISRG)/.49
(LIN)/.84
(MEDI)/.05
(MYL)/.24
(PNR)/.40
(PTEN)/.73
(RTN)/.60
(RCL)/-.25
(SLE)/.29
(JOE)/.53
(STA)/.94
(SPF)/1.93
(HOT)/.65
(TXU)/.85
(TYC)/.38
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Preliminary 4Q Non-farm Productivity is estimated to rise .5% versus a 4.7% gain in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to rise 3.5% versus a 1.0% decline in 3Q.
- Initial Jobless Claims are estimated to rise to 295K versus 283K the prior week.
- Continuing Claims are estimated to rise to 2585K versus 2581K prior.
BOTTOM LINE: Asian indices are mostly higher, spurred by gains in exporters in the region after oil fell and the US dollar rose. I expect US equities to open mixed and to rally later in the afternoon, fishing modestly higher. The Portfolio is 100% net long heading into the day.
Wednesday, February 01, 2006
Stocks Finish at Session Highs as Energy Prices Reverse and Shorts Cover
Indices
S&P 500 1,282.46 +.19%
DJIA 10,953.95 +.82%
NASDAQ 2,310.56 +.21%
Russell 2000 735.48 +.31%
S&P Barra Growth 610.92 +.14%
S&P Barra Value 667.45 +.23%
Morgan Stanley Consumer 595.63 +.53%
Morgan Stanley Cyclical 795.32 +.29%
Morgan Stanley Technology 541.96 +.16%
Transports 4,321.70 -1.05%
Utilities 414.46 +.15%
Put/Call .84 +9.09%
NYSE Arms .85 -43.61%
Volatility(VIX) 12.36 -4.56%
ISE Sentiment 221.00 +49.32%
US Dollar 89.50 +.61%
CRB 344.59 -1.17%
Futures Spot Prices
Crude Oil 66.22 -.51%
Unleaded Gasoline 171.00 -1.09%
Natural Gas 8.80 +.88%
Heating Oil 181.10 -.71%
Gold 573.60 -.07%
Base Metals 172.35 +1.46%
Copper 225.00 +.04%
10-year US Treasury Yield 4.55% +.97%
Leading Sectors
HMOs +2.06%
Networking +1.78%
Biotech +1.31%
Lagging Sectors
Airlines -1.49%
Energy -2.17%
Oil Service -3.69%
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 (USB) and (MNST).
- Reiterated Underperform on (JBLU) and (BUD).
Afternoon/Evening Headlines
Bloomberg:
- The SEC said almost 800 hedge-fund advisers met today’s deadline to register with the agency under a controversial rule that subjects the industry to stricter regulation and random inspections for the first time.
- Starbucks(SBUX) said first-quarter profit rose 20% on demand for espresso drinks and seasonal offerings. The company also raised its first quarter forecast.
- Research in Motion(RIMM) won a provisional ruling against a patent at the center of a court fight over its BlackBerry e-mail device, as a judge prepares to decide whether to stop most service in the US.
- Crude oil fell more than $1 a barrel in NY and natural gas plunged 12% from session highs after an Energy Department report showed larger-than-expected gains in US oil and gas inventories.
Reuters:
- President Bush said the US will defend Israel against Iran if needed and criticized Iranian President Ahmadinejad for “menacing talk” against Israel.
Mediaweek Magazine:
- Jim Cramer, host of CNBC’s “Mad Money,” will move his one-hour daily radio show to CBS Radio from WOR Radio Network.
S&P 500 1,282.46 +.19%
DJIA 10,953.95 +.82%
NASDAQ 2,310.56 +.21%
Russell 2000 735.48 +.31%
S&P Barra Growth 610.92 +.14%
S&P Barra Value 667.45 +.23%
Morgan Stanley Consumer 595.63 +.53%
Morgan Stanley Cyclical 795.32 +.29%
Morgan Stanley Technology 541.96 +.16%
Transports 4,321.70 -1.05%
Utilities 414.46 +.15%
Put/Call .84 +9.09%
NYSE Arms .85 -43.61%
Volatility(VIX) 12.36 -4.56%
ISE Sentiment 221.00 +49.32%
US Dollar 89.50 +.61%
CRB 344.59 -1.17%
Futures Spot Prices
Crude Oil 66.22 -.51%
Unleaded Gasoline 171.00 -1.09%
Natural Gas 8.80 +.88%
Heating Oil 181.10 -.71%
Gold 573.60 -.07%
Base Metals 172.35 +1.46%
Copper 225.00 +.04%
10-year US Treasury Yield 4.55% +.97%
Leading Sectors
HMOs +2.06%
Networking +1.78%
Biotech +1.31%
Lagging Sectors
Airlines -1.49%
Energy -2.17%
Oil Service -3.69%
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 (USB) and (MNST).
- Reiterated Underperform on (JBLU) and (BUD).
Afternoon/Evening Headlines
Bloomberg:
- The SEC said almost 800 hedge-fund advisers met today’s deadline to register with the agency under a controversial rule that subjects the industry to stricter regulation and random inspections for the first time.
- Starbucks(SBUX) said first-quarter profit rose 20% on demand for espresso drinks and seasonal offerings. The company also raised its first quarter forecast.
- Research in Motion(RIMM) won a provisional ruling against a patent at the center of a court fight over its BlackBerry e-mail device, as a judge prepares to decide whether to stop most service in the US.
- Crude oil fell more than $1 a barrel in NY and natural gas plunged 12% from session highs after an Energy Department report showed larger-than-expected gains in US oil and gas inventories.
Reuters:
- President Bush said the US will defend Israel against Iran if needed and criticized Iranian President Ahmadinejad for “menacing talk” against Israel.
Mediaweek Magazine:
- Jim Cramer, host of CNBC’s “Mad Money,” will move his one-hour daily radio show to CBS Radio from WOR Radio Network.
BOTTOM LINE: The Portfolio finished higher today on gains in my Networking, Medical Information Systems longs, Biotech longs, Computer longs and Energy-related shorts. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished slightly higher, most sectors rose and volume was heavy. Measures of investor anxiety were mostly lower into the close. Overall, today was very good for the bulls as the major averages and breadth finished near session highs on heavy volume, notwithstanding considerable headwinds. Energy prices across the board cratered, with natural gas plunging 11.2% from session highs. Even substantial weakness in energy-related market leading stocks couldn't send the major averages lower. This is a huge positive.
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