BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Semiconductor longs, Medical longs and Internet longs. I took profits in some existing longs and added to my (IWM) and (QQQQ) shorts this afternoon, thus leaving the Portfolio 75% net long. The tone of the market is mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is heavy. The ECRI Weekly Leading Index fell slightly to 138.20 this week from 138.30 the prior week. This is still near last week's cycle high and up from 132.00 during the last week of May 2005. This gauge of future economic activity is still forecasting healthy U.S. growth. Measures of investor anxiety are mostly lower. I expect US stocks to trade modestly higher into the close from current levels on lower long-term rates and short-covering.
Friday, February 03, 2006
Stocks Lower into Final Hour on Fed Rate Hike Worries
Today's Headlines
Bloomberg:
- The US Senate’s approval of a $70 billion tax-cutting measure opens the way for negotiations with the House on final legislation that may produce a two-year extension of the 15% rate on dividends and capital gains.
- The US dollar is rising to a high for the year against the yen and climbed versus the euro after a government report signaling a stronger US labor market will continue to propel US growth higher than that of other industrialized nations.
- Research In Motion’s chances of avoiding the US shutdown of its BlackBerry wireless e-mail service improved this week after decisions by two government agencies, legal analysts said.
- European news organizations, citing freedom of speech, showed cartoons that sparked outrage among Muslims, as protests spread across the Islamic world.
- The UN nuclear watchdog delayed voting on a resolution to send Iran to the UN Security Council over its atomic program because some countries want the measure to declare the Middle East a nuclear weapons-free zone.
Wall Street Journal:
- The US is likely to avoid a military confrontation with Iran because of concern over a backlash in the region and possible retaliation against the US and Israel.
- The SEC’s new registration requirements allow potential investors to review hedge fund managers’ registration forms, adding that since the rule was passed 934 hedge fund advisers have registered.
- Investors are betting on a wave of steel-industry mergers, whether or not Mittal Steel succeeds with its $23.7 billion hostile bid for Arcelor SA.
NY Times:
- US deaths of car drivers struck by a sport utility vehicle or pickup have dropped sharply after automakers reluctantly agreed in 2003 to adopt design changes.
CNet News.com:
- Google(GOOG), fighting a US Justice Dept. demand for records to help the government defend an anti-pornography law, will take its case to a federal court on March 13.
USA Today:
- Some US cities are displaying “wanted” posters on billboards in a bid to capture criminals.
- The US Senate’s approval of a $70 billion tax-cutting measure opens the way for negotiations with the House on final legislation that may produce a two-year extension of the 15% rate on dividends and capital gains.
- The US dollar is rising to a high for the year against the yen and climbed versus the euro after a government report signaling a stronger US labor market will continue to propel US growth higher than that of other industrialized nations.
- Research In Motion’s chances of avoiding the US shutdown of its BlackBerry wireless e-mail service improved this week after decisions by two government agencies, legal analysts said.
- European news organizations, citing freedom of speech, showed cartoons that sparked outrage among Muslims, as protests spread across the Islamic world.
- The UN nuclear watchdog delayed voting on a resolution to send Iran to the UN Security Council over its atomic program because some countries want the measure to declare the Middle East a nuclear weapons-free zone.
Wall Street Journal:
- The US is likely to avoid a military confrontation with Iran because of concern over a backlash in the region and possible retaliation against the US and Israel.
- The SEC’s new registration requirements allow potential investors to review hedge fund managers’ registration forms, adding that since the rule was passed 934 hedge fund advisers have registered.
- Investors are betting on a wave of steel-industry mergers, whether or not Mittal Steel succeeds with its $23.7 billion hostile bid for Arcelor SA.
NY Times:
- US deaths of car drivers struck by a sport utility vehicle or pickup have dropped sharply after automakers reluctantly agreed in 2003 to adopt design changes.
CNet News.com:
- Google(GOOG), fighting a US Justice Dept. demand for records to help the government defend an anti-pornography law, will take its case to a federal court on March 13.
USA Today:
- Some US cities are displaying “wanted” posters on billboards in a bid to capture criminals.
Unemployment Falls Again, Wages Rise More Than Estimates, Confidence Revised Slightly Lower, Factory Orders Climbing, ISM Non-Manufacturing Healthy
- The Change in Non-farm Payrolls for January was 193K versus estimates of 250K and an upwardly revised 140K in December.
- The Unemployment Rate for January fell to 4.7% versus estimates of 4.9% and 4.9% in December.
- The Change in Manufacturing Payrolls for January was 7K versus estimates of 7K and a downwardly revised -1K in December.
- Average Hourly Earnings for January rose .4% versus estimates of a .3% increase and a .4% gain in December.
- Final Univ. of Mich. Consumer Confidence for January fell to 91.2 versus estimates of 93.4 and a prior estimate of 93.4.
- Factory Orders for December rose 1.1% versus estimates of a 1.0% gain and an upwardly revised 3.3% increase in November.
- ISM Non-Manufacturing for January fell to 56.8 versus estimates of 60.0 and a reading of 61.0 in December.
- The Unemployment Rate for January fell to 4.7% versus estimates of 4.9% and 4.9% in December.
- The Change in Manufacturing Payrolls for January was 7K versus estimates of 7K and a downwardly revised -1K in December.
- Average Hourly Earnings for January rose .4% versus estimates of a .3% increase and a .4% gain in December.
- Final Univ. of Mich. Consumer Confidence for January fell to 91.2 versus estimates of 93.4 and a prior estimate of 93.4.
- Factory Orders for December rose 1.1% versus estimates of a 1.0% gain and an upwardly revised 3.3% increase in November.
- ISM Non-Manufacturing for January fell to 56.8 versus estimates of 60.0 and a reading of 61.0 in December.
BOTTOM LINE: American employers added 193,000 workers in January and the unemployment rate fell to 4.7%, the lowest since July 2001, as the US economy strengthened and builders took advantage of warm weather, Bloomberg said. The economy added a revised 1.98 million jobs last year. Warm weather contributed to the addition of 46,000 new construction jobs versus a gain of 5,000 in December. As well, average hourly earnings have increased .4% or more 8 other time since 2001. At this point, worries over rising unit labor costs are overdone.
Confidence among US consumers remained close to a five-month high in January as job growth boosted incomes and natural gas prices plunged, helping to cushion the effects of home-heating costs, Bloomberg reported. The current conditions component of the index which gauges American’s sentiment about whether or not it’s a good time to buy big-ticket items, such as autos, rose to 110.3 from 109.1 the prior month. Retail sales climbed a very strong 5.1% in January, the Intl. Council of Shopping Centers recently reported. I continue to expect consumer sentiment to make new cycle highs later this year as the job market improves modestly from current levels, energy prices continue to fall, stock prices rise, long-term rates remain historically low, corporate spending improves and inflation decelerates.
US factory orders rose for a third consecutive month in December as demand for new autos rebounded and businesses added equipment and inventories, Bloomberg said. Orders for computers increased 4.4% after rising 11% in November. Orders for capital goods excluding aircraft, a barometer of future corporate spending, rose 4.1% versus a .1% gain in November. The inventory-to-shipments ratio fell to 1.15 months from 1.17 months in November. I continue to believe manufacturing will add to US growth over the intermediate-term on hurricane rebuilding, increased corporate spending and inventory restocking.
Growth in the US services industry eased in January as new orders slowed after a very robust showing the month before, Bloomberg said. The employment component of the index fell to 51.1 from 56.9 in December. The prices paid component of the index remained at 67.2, the same as December. The service sector should remain healthy as consumer spending stays firm, consumer sentiment rises and energy prices fall further.
Friday Watch
Late-Night Headlines
Bloomberg:
- The US dollar is set for a third winning week against the yen on speculation a government report on US hiring will add to evidence economic strength.
- Rio Tinto Group(RIO) is studying new projects and expansion of mines that may cost as much as $9 billion.
- The US Senate voted to extend the USA Patriot Act until March 10, narrowly averting the expiration of the anti-terrorism law and giving lawmakers more time to negotiate revisions.
- Oil analysts were the least optimistic in five weeks about price gains after the US said it won’t immediately seek UN sanctions to pressure Iran to halt its nuclear program.
Wall Street Journal:
- Billionaire Lakshmi Mittal, whose Mittal Steel Co. has offered to buy Arcelor SA, will consider lending shares in Mittal Steel to hedge funds to facilitate the $23.6 billion hostile takeover bid.
Financial Times:
- Harvard University’s former money manager Jack Meyer raised over $5 billion to start his Convexity Capital Management LP hedge fund.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (LVS), (TYC), (MYL), (ALEX) and (WCC).
- Reiterated Underperform on (DRI), (CTL), (EW), (GTW) and (EOP).
Business Week:
- The shares of Document Security Systems(DMC), a maker of anti-counterfeiting gear, may benefit from rising sales, citing Otis Bradley of Gilford Securities.
- The shares of Renovis Inc.(RNVS), a biotech company that went public in 2004, will probably rise on positive results from clinical trials of the Cerovive stroke drug.
Night Trading
Asian Indices are -% to +% on average.
S&P 500 indicated -%.
NASDAQ 100 indicated -%.
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
(NLY)/-.91
(AES)/.20
(MYG)/-.13
(MRX)/.26
(MCO)/.46
(R)/.94
(SNDA)/.27
(THQI)/.65
(WFT)/.44
(WEN)/.47
(WY)/.74
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for January is estimated at 250K versus 108K in December.
- The Unemployment Rate for January is estimated to remain at 4.9% versus 4.9% in December.
- The Change in Manufacturing Payrolls for January is estimated at 7K versus 18K in December.
- Average Hourly Earnings for January are estimated to rise .3% versus a .3% increase in December.
9:45 am EST
- Final Univ. of Mich. Consumer Confidence for January is estimated to fall to 93.1 versus a prior estimate of 93.4.
10:00 am EST
- Factory Orders for December are estimated to rise 1.0% versus a 2.5% gain in November.
- ISM Non-Manufacturing for January is estimated to fall to 60.0 versus a reading of 61.0 in December.
Bloomberg:
- The US dollar is set for a third winning week against the yen on speculation a government report on US hiring will add to evidence economic strength.
- Rio Tinto Group(RIO) is studying new projects and expansion of mines that may cost as much as $9 billion.
- The US Senate voted to extend the USA Patriot Act until March 10, narrowly averting the expiration of the anti-terrorism law and giving lawmakers more time to negotiate revisions.
- Oil analysts were the least optimistic in five weeks about price gains after the US said it won’t immediately seek UN sanctions to pressure Iran to halt its nuclear program.
Wall Street Journal:
- Billionaire Lakshmi Mittal, whose Mittal Steel Co. has offered to buy Arcelor SA, will consider lending shares in Mittal Steel to hedge funds to facilitate the $23.6 billion hostile takeover bid.
Financial Times:
- Harvard University’s former money manager Jack Meyer raised over $5 billion to start his Convexity Capital Management LP hedge fund.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (LVS), (TYC), (MYL), (ALEX) and (WCC).
- Reiterated Underperform on (DRI), (CTL), (EW), (GTW) and (EOP).
Business Week:
- The shares of Document Security Systems(DMC), a maker of anti-counterfeiting gear, may benefit from rising sales, citing Otis Bradley of Gilford Securities.
- The shares of Renovis Inc.(RNVS), a biotech company that went public in 2004, will probably rise on positive results from clinical trials of the Cerovive stroke drug.
Night Trading
Asian Indices are -% to +% on average.
S&P 500 indicated -%.
NASDAQ 100 indicated -%.
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
(NLY)/-.91
(AES)/.20
(MYG)/-.13
(MRX)/.26
(MCO)/.46
(R)/.94
(SNDA)/.27
(THQI)/.65
(WFT)/.44
(WEN)/.47
(WY)/.74
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for January is estimated at 250K versus 108K in December.
- The Unemployment Rate for January is estimated to remain at 4.9% versus 4.9% in December.
- The Change in Manufacturing Payrolls for January is estimated at 7K versus 18K in December.
- Average Hourly Earnings for January are estimated to rise .3% versus a .3% increase in December.
9:45 am EST
- Final Univ. of Mich. Consumer Confidence for January is estimated to fall to 93.1 versus a prior estimate of 93.4.
10:00 am EST
- Factory Orders for December are estimated to rise 1.0% versus a 2.5% gain in November.
- ISM Non-Manufacturing for January is estimated to fall to 60.0 versus a reading of 61.0 in December.
BOTTOM LINE: Asian indices are mostly lower, weighed down by exporters in the region. I expect US equities to open lower and to rally later in the afternoon, fishing modestly higher. The Portfolio is 75% net long heading into the day.
Thursday, February 02, 2006
Stocks Close Near Session Lows on Weakness in Energy and Technology Shares
Indices
S&P 500 1,270.84 -.91%
DJIA 10,851.98 -.93%
NASDAQ 2,281.57 -1.25%
Russell 2000 726.25 -1.25%
S&P Barra Growth 606.07 -.79%
S&P Barra Value 660.62 -1.02%
Morgan Stanley Consumer 592.27 -.56%
Morgan Stanley Cyclical 785.78 -1.20%
Morgan Stanley Technology 532.56 -1.73%
Transports 4,281.19 -.94%
Utilities 408.27 -1.49%
Put/Call .97 +15.48%
NYSE Arms 1.39 +63.39%
Volatility(VIX) 13.23 +7.04%
ISE Sentiment 191.00 -12.79%
US Dollar 89.38 -.15%
CRB 343.14 -.42%
Futures Spot Prices
Crude Oil 64.90 +.34%
Unleaded Gasoline 167.50 +.56%
Natural Gas 8.40 +.73%
Heating Oil 178.20 +.63%
Gold 576.50 -.05%
Base Metals 175.17 +1.64%
Copper 230.70 -.09%
10-year US Treasury Yield 4.55% +.09%
Leading Sectors
Airlines +2.02%
Restaurants +1.42%
Retail +.45%
Lagging Sectors
Computer Hardware -1.74%
Homebuilders -2.05%
Tobacco -2.67%
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 (SSP), (RDEN) and (CSCO).
Afternoon/Evening Headlines
Bloomberg:
- Shares of Thomas Weisel Partners Group(TWPG), the third investment bank to go public in two years, surged as much as 33% in their trading debut.
- Amazon.com(AMZN) said fourth-quarter profit fell 43% as the company increased spending to lure shoppers during the holiday season.
- The Federal Reserve wants Wall Street securities firms to keep closer tabs on hedge funds to ensure that practices in the $1.1 trillion industry aren’t putting the banking system at risk.
- Electronic Arts(ERTS) said third-quarter profit fell 31%, the fifth decline in a row, as shortages of Xbox 360 consoles slowed sales.
S&P 500 1,270.84 -.91%
DJIA 10,851.98 -.93%
NASDAQ 2,281.57 -1.25%
Russell 2000 726.25 -1.25%
S&P Barra Growth 606.07 -.79%
S&P Barra Value 660.62 -1.02%
Morgan Stanley Consumer 592.27 -.56%
Morgan Stanley Cyclical 785.78 -1.20%
Morgan Stanley Technology 532.56 -1.73%
Transports 4,281.19 -.94%
Utilities 408.27 -1.49%
Put/Call .97 +15.48%
NYSE Arms 1.39 +63.39%
Volatility(VIX) 13.23 +7.04%
ISE Sentiment 191.00 -12.79%
US Dollar 89.38 -.15%
CRB 343.14 -.42%
Futures Spot Prices
Crude Oil 64.90 +.34%
Unleaded Gasoline 167.50 +.56%
Natural Gas 8.40 +.73%
Heating Oil 178.20 +.63%
Gold 576.50 -.05%
Base Metals 175.17 +1.64%
Copper 230.70 -.09%
10-year US Treasury Yield 4.55% +.09%
Leading Sectors
Airlines +2.02%
Restaurants +1.42%
Retail +.45%
Lagging Sectors
Computer Hardware -1.74%
Homebuilders -2.05%
Tobacco -2.67%
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 (SSP), (RDEN) and (CSCO).
Afternoon/Evening Headlines
Bloomberg:
- Shares of Thomas Weisel Partners Group(TWPG), the third investment bank to go public in two years, surged as much as 33% in their trading debut.
- Amazon.com(AMZN) said fourth-quarter profit fell 43% as the company increased spending to lure shoppers during the holiday season.
- The Federal Reserve wants Wall Street securities firms to keep closer tabs on hedge funds to ensure that practices in the $1.1 trillion industry aren’t putting the banking system at risk.
- Electronic Arts(ERTS) said third-quarter profit fell 31%, the fifth decline in a row, as shortages of Xbox 360 consoles slowed sales.
BOTTOM LINE: The Portfolio finished lower today on losses in my Semi longs, Medical Information Systems longs, Computer longs and Software longs. 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 heavy. Measures of investor anxiety were higher into the close. Overall, today's market action was bearish as the major averages finished near session lows with negative breadth. Investors chose to focus on the negatives throughout the day. I will wait to see the market's reaction to tomorrow's likely strong jobs report before shifting market exposure further.
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