BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Medical longs and Semi longs. I added to my (IWM)/(QQQQ) shorts and trimmed some existing longs this morning, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is substantially lower, almost every sector is lower and volume is heavy. I am hearing some commodity bulls say today's drops are just another buying opportunity and that nothing has changed. I would argue that much has changed over the last year in the supply/demand equation and that perception has been the main thing propping up most commodity prices at extremely inflated levels. Is perception now changing? As I have stated before, I believe decelerating global growth, production near record high levels and a firm dollar will spur much larger declines in the CRB Index than most expect. This may temporarily pressure the broad market. However, falling commodity prices are one of the keys to my expectations for a 15% gain in U.S. stocks this year. I expect US stocks to trade mixed-to-higher into the close from current levels as falling commodity stocks are mostly offset by gains in most other sectors.
Tuesday, February 07, 2006
Stocks Lower into Final Hour as Commodity Shares Plunge
Today's Headlines
Bloomberg:
- Google(GOOG) today will introduce a new version of its GMail e-mail service that lets Web users see whether their contacts are online and exchange instant messages.
- Two pharmaceutical companies are testing the first promising class of AIDS medicines in almost three years, treatments that may provide a new weapon against the drug-resistant strains of the deadly virus.
- Libya, holder of Africa’s largest oil reserves, is preparing to hire foreign companies to develop more than 300 untapped fields after an increase in energy prices made it an economically viable way of raising output.
- Gold is falling $18, the most in more than a year, after a drop in the cost of oil eased speculation that inflation will accelerate and erode the value of assets.
- Crude oil is falling to a three-week low on expectations that an Energy Dept. report tomorrow will show US inventories of oil and gas jumped last week.
Wall Street Journal:
- AstraZeneca Plc.(AZN), Johnson & Johnson(JNJ), Novartis AG(NVS), Bristol-Myers Squibb(BMY) and other drugmakers are developing a plan to offer discounts of as much as 50% to low-income seniors when Medicare stops paying.
- Lockheed Martin(LMT) is moving into the rapidly developing market for unmanned spacecraft, or drones, that have become an essential weapon in modern warfare.
- Hewlett-Packard(HPQ), Dell Inc.(DELL) and other personal computer makers have joined with Google(GOOG) to offer users software other than from Microsoft(MSFT).
- Cisco Systems(CSCO) bought Scientific-Atlanta(SFA) using debt in a transaction that signals a change in the way many technology companies are financing acquisitions.
- JC Penney(JCP) plans to begin a marketing campaign on March 2 to attract customers to updated brands carried by the chain.
- Texas Instruments(TXN) and Intel Corp.(INTC) are announcing developments in their technology that reduce the power consumption of their microchips, while IBM(IBM) is eking out performance by boosting the frequency of its chips.
- US corporations paid a record $9.6 billion last year to shareholders to settle class-action securities suits.
- Amazon.com(AMZN) said it’s testing an advertising technique that enables Web site owners to get sponsored by a third-party provider.
NY Times:
- US sleeping-pill prescriptions last year totaled 42 million, 60% more than in 2000, citing IMS Health Inc.
- CSL Ltd., an Australian producer of flu vaccine, plans to begin sales in the US, pending approval by the FDA, in time for the 2007-2008 season.
Washington Post:
- John Thorne, a Verizon Communications(VZ) senior vice president, said Google(GOOG) and other companies that benefit from Internet access to homes should pay for that capability.
AP:
- Tennessee lawmakers passed a broad ethics bill that would restrict lobbyists and limit cash political donations at $50.
- One of Iran’s largest newspapers today said it plans to hold a contest for cartoons about the Holocaust to see whether Western nations extend the principle of free speech to the Nazi genocide.
Star-Ledger of Newark:
- A committee of the New Jersey Senate approved a proposal that would allow police to pull over and ticket drivers for using hand-held wireless phones.
El Financiero:
- Mexico’s government spent $705 million to hedge revenue against a drop in oil prices this year, citing Finance Ministry officials it didn’t name.
IRNA:
- Iran cut trade relations with Denmark following the publication of cartoons showing Islam’s prophet Mohammed as a militant.
- Google(GOOG) today will introduce a new version of its GMail e-mail service that lets Web users see whether their contacts are online and exchange instant messages.
- Two pharmaceutical companies are testing the first promising class of AIDS medicines in almost three years, treatments that may provide a new weapon against the drug-resistant strains of the deadly virus.
- Libya, holder of Africa’s largest oil reserves, is preparing to hire foreign companies to develop more than 300 untapped fields after an increase in energy prices made it an economically viable way of raising output.
- Gold is falling $18, the most in more than a year, after a drop in the cost of oil eased speculation that inflation will accelerate and erode the value of assets.
- Crude oil is falling to a three-week low on expectations that an Energy Dept. report tomorrow will show US inventories of oil and gas jumped last week.
Wall Street Journal:
- AstraZeneca Plc.(AZN), Johnson & Johnson(JNJ), Novartis AG(NVS), Bristol-Myers Squibb(BMY) and other drugmakers are developing a plan to offer discounts of as much as 50% to low-income seniors when Medicare stops paying.
- Lockheed Martin(LMT) is moving into the rapidly developing market for unmanned spacecraft, or drones, that have become an essential weapon in modern warfare.
- Hewlett-Packard(HPQ), Dell Inc.(DELL) and other personal computer makers have joined with Google(GOOG) to offer users software other than from Microsoft(MSFT).
- Cisco Systems(CSCO) bought Scientific-Atlanta(SFA) using debt in a transaction that signals a change in the way many technology companies are financing acquisitions.
- JC Penney(JCP) plans to begin a marketing campaign on March 2 to attract customers to updated brands carried by the chain.
- Texas Instruments(TXN) and Intel Corp.(INTC) are announcing developments in their technology that reduce the power consumption of their microchips, while IBM(IBM) is eking out performance by boosting the frequency of its chips.
- US corporations paid a record $9.6 billion last year to shareholders to settle class-action securities suits.
- Amazon.com(AMZN) said it’s testing an advertising technique that enables Web site owners to get sponsored by a third-party provider.
NY Times:
- US sleeping-pill prescriptions last year totaled 42 million, 60% more than in 2000, citing IMS Health Inc.
- CSL Ltd., an Australian producer of flu vaccine, plans to begin sales in the US, pending approval by the FDA, in time for the 2007-2008 season.
Washington Post:
- John Thorne, a Verizon Communications(VZ) senior vice president, said Google(GOOG) and other companies that benefit from Internet access to homes should pay for that capability.
AP:
- Tennessee lawmakers passed a broad ethics bill that would restrict lobbyists and limit cash political donations at $50.
- One of Iran’s largest newspapers today said it plans to hold a contest for cartoons about the Holocaust to see whether Western nations extend the principle of free speech to the Nazi genocide.
Star-Ledger of Newark:
- A committee of the New Jersey Senate approved a proposal that would allow police to pull over and ticket drivers for using hand-held wireless phones.
El Financiero:
- Mexico’s government spent $705 million to hedge revenue against a drop in oil prices this year, citing Finance Ministry officials it didn’t name.
IRNA:
- Iran cut trade relations with Denmark following the publication of cartoons showing Islam’s prophet Mohammed as a militant.
Monday, February 06, 2006
Tuesday Watch
Late-Night Headlines
Bloomberg:
- Crude oil is falling a second day in NY on speculation rising US oil inventories will be sufficient to meet demand should shipments from Iran be disrupted.
USA Today:
- Iran is ready to talk directly with the US regarding the resumption of its nuclear plan, citing an interview with Ali Larijani, Iran’s national security adviser.
Commercial Times:
- Acer Inc. forecasts its notebook computer sales will increase as much as 90% in the first quarter from a year earlier to 1.9 million units.
Automotive News:
- GM’s(GM) board agreed to cut the automaker’s $1.1 billion annual dividend by half, citing unnamed people close to the directors.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (AET), (EBAY), (TIN) and (UHCO).
- Reiterated Underperform on (PPS).
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated +.09%.
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
(ALKS)/-.08
(BRL)/.78
(BMC)/.27
(BSX)/.42
(CELL)/.22
(CD)/.23
(CAKE)/.29
(CSCO)/.25
(KO)/.45
(CSC)/.85
(EMR)/.83
(FEIC)/.02
(FSH)/.93
(FO)/1.20
(LVLT)/-.29
(LNCR)/.53
(MANH)/.22
(MGAM)/.08
(OXY)/.76
(OSTK)/-.05
(RL)/.75
(VSH)/.16
(WWY)/.54
Upcoming Splits
- None of note
Economic Releases
3:00 pm EST
- Consumer Credit for December is estimated to rise to $5.0 billion versus -$.6 billion in November.
Bloomberg:
- Crude oil is falling a second day in NY on speculation rising US oil inventories will be sufficient to meet demand should shipments from Iran be disrupted.
USA Today:
- Iran is ready to talk directly with the US regarding the resumption of its nuclear plan, citing an interview with Ali Larijani, Iran’s national security adviser.
Commercial Times:
- Acer Inc. forecasts its notebook computer sales will increase as much as 90% in the first quarter from a year earlier to 1.9 million units.
Automotive News:
- GM’s(GM) board agreed to cut the automaker’s $1.1 billion annual dividend by half, citing unnamed people close to the directors.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (AET), (EBAY), (TIN) and (UHCO).
- Reiterated Underperform on (PPS).
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated +.09%.
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
(ALKS)/-.08
(BRL)/.78
(BMC)/.27
(BSX)/.42
(CELL)/.22
(CD)/.23
(CAKE)/.29
(CSCO)/.25
(KO)/.45
(CSC)/.85
(EMR)/.83
(FEIC)/.02
(FSH)/.93
(FO)/1.20
(LVLT)/-.29
(LNCR)/.53
(MANH)/.22
(MGAM)/.08
(OXY)/.76
(OSTK)/-.05
(RL)/.75
(VSH)/.16
(WWY)/.54
Upcoming Splits
- None of note
Economic Releases
3:00 pm EST
- Consumer Credit for December is estimated to rise to $5.0 billion versus -$.6 billion in November.
BOTTOM LINE: Asian indices are mixed as strength in basic materials stocks is offsetting weakness in pharma companies in the region. I expect US equities to open modestly lower and to rally later in the afternoon, fishing mixed. The Portfolio is 75% net long heading into the day.
Stocks Close Mixed on Average Volume
Indices
S&P 500 1,265.02 +.08%
DJIA 10,798.27 +.04%
NASDAQ 2,258.80 -.17%
Russell 2000 727.89 +.51%
S&P Barra Growth 601.45 -.13%
S&P Barra Value 659.69 +.29%
Morgan Stanley Consumer 588.50 -.13%
Morgan Stanley Cyclical 783.44 +.46%
Morgan Stanley Technology 526.77 +.06%
Transports 4,290.49 +.63%
Utilities 407.58 +.55%
Put/Call .84 -20.75%
NYSE Arms .96 -20.30%
Volatility(VIX) 13.04 +.62%
ISE Sentiment 163.00 +2.52%
US Dollar 90.31 +.47%
CRB 343.25 -.77%
Futures Spot Prices
Crude Oil 64.94 -.31%
Unleaded Gasoline 163.90 -.32%
Natural Gas 7.88 -1.50%
Heating Oil 176.08 -.11%
Gold 573.80 -.09%
Base Metals 176.72 +.51%
Copper 232.85 -.06%
10-year US Treasury Yield 4.54% +.44%
Leading Sectors
Steel +3.21%
Oil Service +2.85%
Gold & Silver +2.74%
Lagging Sectors
Airlines -1.13%
HMOs -1.46%
Broadcasting -1.68%
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 (GNW).
- Reiterated Underperform on (HEW).
Afternoon/Evening Headlines
Bloomberg:
- Occidental Petroleum(OXY) is getting better results than predicted from its return to Libya, where is the first US company to pump oil in almost two decades.
- Royal Caribbean Cruises(RCL) commissioned the world’s largest cruise ship, agreeing to pay a record $1.1 billion for a vessel that will carry 5,400 passengers.
- General Motors(GM) will appoint an aide to Kirk Kerkorian, the automaker’s fourth-largest investor, to its board of directors as the company tries to recover from recent losses.
CNBC:
- Electricity producer Dynegy Inc.(DYN) is in talks with potential buyers after three years of paring assets, consulting editor for Mergermarket said.
Frankfurter Allgemeine Zeitung:
- Arcelor SA is considering a takeover of US Steel Corp.(X) to counter a $22.3 billion hostile bid by larger Mittal Steel, citing unidentified bankers.
AP:
- Iran told the UN’s nuclear watchdog its has until mid-February to remove surveillance cameras and nuclear equipment seals meant to ensure that the country complies with treaty commitments.
S&P 500 1,265.02 +.08%
DJIA 10,798.27 +.04%
NASDAQ 2,258.80 -.17%
Russell 2000 727.89 +.51%
S&P Barra Growth 601.45 -.13%
S&P Barra Value 659.69 +.29%
Morgan Stanley Consumer 588.50 -.13%
Morgan Stanley Cyclical 783.44 +.46%
Morgan Stanley Technology 526.77 +.06%
Transports 4,290.49 +.63%
Utilities 407.58 +.55%
Put/Call .84 -20.75%
NYSE Arms .96 -20.30%
Volatility(VIX) 13.04 +.62%
ISE Sentiment 163.00 +2.52%
US Dollar 90.31 +.47%
CRB 343.25 -.77%
Futures Spot Prices
Crude Oil 64.94 -.31%
Unleaded Gasoline 163.90 -.32%
Natural Gas 7.88 -1.50%
Heating Oil 176.08 -.11%
Gold 573.80 -.09%
Base Metals 176.72 +.51%
Copper 232.85 -.06%
10-year US Treasury Yield 4.54% +.44%
Leading Sectors
Steel +3.21%
Oil Service +2.85%
Gold & Silver +2.74%
Lagging Sectors
Airlines -1.13%
HMOs -1.46%
Broadcasting -1.68%
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 (GNW).
- Reiterated Underperform on (HEW).
Afternoon/Evening Headlines
Bloomberg:
- Occidental Petroleum(OXY) is getting better results than predicted from its return to Libya, where is the first US company to pump oil in almost two decades.
- Royal Caribbean Cruises(RCL) commissioned the world’s largest cruise ship, agreeing to pay a record $1.1 billion for a vessel that will carry 5,400 passengers.
- General Motors(GM) will appoint an aide to Kirk Kerkorian, the automaker’s fourth-largest investor, to its board of directors as the company tries to recover from recent losses.
CNBC:
- Electricity producer Dynegy Inc.(DYN) is in talks with potential buyers after three years of paring assets, consulting editor for Mergermarket said.
Frankfurter Allgemeine Zeitung:
- Arcelor SA is considering a takeover of US Steel Corp.(X) to counter a $22.3 billion hostile bid by larger Mittal Steel, citing unidentified bankers.
AP:
- Iran told the UN’s nuclear watchdog its has until mid-February to remove surveillance cameras and nuclear equipment seals meant to ensure that the country complies with treaty commitments.
BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Medical longs, Computer longs and Biotech longs. I took profits is some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was mixed today as the advance/decline line finished slightly higher, sector performance was mixed and volume was average. Measures of investor anxiety were lower into the close. Overall, today's market action was mixed. The bears' inability to capitalize on losses in some market leaders, semiconductor gains and energy price reversals were positives.
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