BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Networking longs, Computer longs and Energy-related shorts. I added to my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 25% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is light. The NAHB Housing Market Index fell to 50 in April vs. estimates of 55 and a reading of 54 in March. This is the lowest level since November 2001. I continue to believe the slowdown in housing will result in consumer spending falling back to average rates from robust levels. U.S. economic growth has likely peaked for the year during the first quarter. This should also result in a peak in long-term rates and commodity prices. A continuation of recent market turbulence is likely in the near term as investors shift from more cyclical sectors into more growth oriented shares. I expect US stocks to trade mixed-to-lower into the close from current levels as worries over consumer spending more than offset bargain hunting and lower long-term rates.
Monday, April 17, 2006
Stocks Lower into Final Hour on Rising Energy Prices and Weaker Housing Data
Today's Headlines
Bloomberg:
- Avigdor Lieberman, who may become Israel’s next internal security minister, said the country must consider taking unspecified “unilateral” action to stop Iran from developing nuclear weapons.
- The Russian government should invest some of the windfall oil revenue held in its Stabilization Fund in foreign stocks to reduce the economy’s dependence on high oil prices, the World Bank said.
- Wal-Mart Stores(WMT) is roiling major suppliers with a plan to cut inventories.
- The US dollar declined the most since January versus the euro and posted its biggest loss in a month against the yen as traders pared bets that the Fed will raise its benchmark interest rate twice more this year.
- Joshua Bolten, the new White House chief of staff, indicated he’s preparing to make changes in the Bush administration, telling senior aides today to “refresh, re-engage or quit now.”
- The bidding contest for Aztar Corp.(AZR) intensified as Columbia Sussex Corp. offered $1.68 billion for the owner of the Tropicana casino in Las Vegas, topping three rival offers.
- Crude oil is rising, touching $70/bbl. in NY for the first time since Hurricane Katrina, on speculation the dispute over Iran’s nuclear program may disrupt shipments.
Wall Street Journal:
- Corning Inc.(GLW) has staged a spectacular recovery and now has a market capitalization of $42 billion and debt that’s rated investment-grade.
- General Electric’s USA Network unit and Major League Gaming Inc. have reached an agreement to provide video game tournaments over cable television.
- China Construction Bank is in early talks with Bear Stearns(BSC) that might result in the Chinese state-owned bank buying a minority stake in the securities firm.
- General Mills(GIS), Kraft Foods and other consumer-product companies are boosting Internet advertising as more people turn to online media.
- More US states are approving restrictions on using cell phones while driving to prevent distractions that can lead to accidents.
MoneyToday:
- Samsung and IBM(IBM) agreed to team up to sell printers.
NY Times:
- Many European governments, including some that have criticized US anti-terrorism measures, are now broadening their surveillance and prosecuting powers.
- Hasbro(HAS) expects to begin selling a toy line of six Pussycat Dolls, modeled after the rhythm-and-blues-influenced pop group.
- US Representative Steve Buyer, an Indiana Republican, is co-sponsoring a bill to limit anti-war demonstrations at military funerals.
AP:
- Time Warner’s(TWX) AOL has joined Shanghai Media & Entertainment Group’s broadband unit to broadcast more than three hours of daily Chinese programming.
Financial Times:
- A surge in hiring by investment banks as they report record profits is pushing up salary levels for bankers.
- Multi-strategy hedge funds, which offer the same diversification benefits, for lower fees, as funds of funds, are putting pressure on the latter to prove they add value.
- Avigdor Lieberman, who may become Israel’s next internal security minister, said the country must consider taking unspecified “unilateral” action to stop Iran from developing nuclear weapons.
- The Russian government should invest some of the windfall oil revenue held in its Stabilization Fund in foreign stocks to reduce the economy’s dependence on high oil prices, the World Bank said.
- Wal-Mart Stores(WMT) is roiling major suppliers with a plan to cut inventories.
- The US dollar declined the most since January versus the euro and posted its biggest loss in a month against the yen as traders pared bets that the Fed will raise its benchmark interest rate twice more this year.
- Joshua Bolten, the new White House chief of staff, indicated he’s preparing to make changes in the Bush administration, telling senior aides today to “refresh, re-engage or quit now.”
- The bidding contest for Aztar Corp.(AZR) intensified as Columbia Sussex Corp. offered $1.68 billion for the owner of the Tropicana casino in Las Vegas, topping three rival offers.
- Crude oil is rising, touching $70/bbl. in NY for the first time since Hurricane Katrina, on speculation the dispute over Iran’s nuclear program may disrupt shipments.
Wall Street Journal:
- Corning Inc.(GLW) has staged a spectacular recovery and now has a market capitalization of $42 billion and debt that’s rated investment-grade.
- General Electric’s USA Network unit and Major League Gaming Inc. have reached an agreement to provide video game tournaments over cable television.
- China Construction Bank is in early talks with Bear Stearns(BSC) that might result in the Chinese state-owned bank buying a minority stake in the securities firm.
- General Mills(GIS), Kraft Foods and other consumer-product companies are boosting Internet advertising as more people turn to online media.
- More US states are approving restrictions on using cell phones while driving to prevent distractions that can lead to accidents.
MoneyToday:
- Samsung and IBM(IBM) agreed to team up to sell printers.
NY Times:
- Many European governments, including some that have criticized US anti-terrorism measures, are now broadening their surveillance and prosecuting powers.
- Hasbro(HAS) expects to begin selling a toy line of six Pussycat Dolls, modeled after the rhythm-and-blues-influenced pop group.
- US Representative Steve Buyer, an Indiana Republican, is co-sponsoring a bill to limit anti-war demonstrations at military funerals.
AP:
- Time Warner’s(TWX) AOL has joined Shanghai Media & Entertainment Group’s broadband unit to broadcast more than three hours of daily Chinese programming.
Financial Times:
- A surge in hiring by investment banks as they report record profits is pushing up salary levels for bankers.
- Multi-strategy hedge funds, which offer the same diversification benefits, for lower fees, as funds of funds, are putting pressure on the latter to prove they add value.
NY Manufacturing Slows, Prices Paid Falls Again, Foreign Demand for US Assets Still Very Strong
- Empire Manufacturing for April fell to 15.8 versus estimates of 24.3 and a reading of 29.0 in March.
- Net Foreign Security Purchases for February rose to $86.9 billion versus estimates of $60.0 billion and an upwardly revised $69.1 billion in January.
- Net Foreign Security Purchases for February rose to $86.9 billion versus estimates of $60.0 billion and an upwardly revised $69.1 billion in January.
BOTTOM LINE: Manufacturing in New York State expanded at a slower pace in April as growth in sales and orders eased, Bloomberg reported. The component of the index measuring the outlook for the next six months rose to 42.7 versus 38.1 the prior month. The employment component of the index fell to 17.4 versus 20.1 in March. The New Orders component of the index fell to 14.1 versus 27.0 the prior month. The Index of Prices Paid fell to 37.9 versus 39.3 in March. The Prices Paid Index has now fallen 37.4% from November 2005 highs. Manufacturing will likely decelerate over the coming months, but continue to add to US economic growth.
International investors increased their net holdings of US assets by $86.9 billion in February amid strong demand for US bonds and faster economic growth, Bloomberg said. The UK, China and OPEC countries all increased their holdings of US Treasuries in February. Caribbean banking centers, which are considered a barometer of hedge fund activity, cut their Treasury holdings by $11 billion. Foreigners’ holdings of US stocks rose $16.5 billion. I expect foreign demand for US assets to remain very strong over the intermediate-term.
Sunday, April 16, 2006
Monday Watch
Weekend Headlines
Bloomberg:
- President Bush urged Congress to extend tax cuts enacted in his first term and asked lawmakers to address rising energy and health-care costs.
- China plans to let investors buy stocks using margin and sell shares short, seeking to channel more of the nation’s $4 trillion of bank deposits into the stock market and boost trading.
- The global takeover boom shows no sign of peaking. If anything, buyout firms are setting their sights on bigger targets, and corporations are stepping up the pace of purchases while financing remains cheap.
- Flextronics Intl.(FLEX) said it agreed to sell its software unit to a Kohlberg Kravis Roberts affiliate for about $900 million.
- BAA Plc, the target of a hostile takeover from Spain’s Grupo Ferrovial SA, said it rejected a bid led by Goldman Sachs Group(GS) that valued the world’s largest airports operator at $16.5 billion.
- China’s economic growth rose an estimated 10.2% in the first quarter, President Hu Jintao said, as manufacturing investment and exports surged.
Wall Street Journal:
- The Chicago Mercantile Exchange(CME) and the Chicago Board of Trade(BOT) are closing a loophole that had undermined the anonymity of electronic trading.
NY Times:
- LensCrafters will spend an estimated $312 million to upgrade its stores, aiming to distance itself from low-priced competitors.
- Toyota Motor(TM) is considering building its eighth North American assembly plant and is looking at four southern US states for the site.
- Three top Israeli generals warned in separate interviews this week that the army is ready to invade the Gaza Strip to put an end to Palestinian rocket attacks if ordered.
- The US baby boom generation has heeded the advice to stay physically active and is also experiencing more injuries requiring surgery.
- News Corp. (NWS) is introducing a poker show even as the Travel Channel’s “World Poker Tour” has lost 36% of its viewers since its debut and online-poker revenue increases may slow.
Washington Post:
- The administration of President Bush will award as much as $3 billion in contracts in coming weeks to develop new radiation monitors to detect nuclear weapons crossing the country’s borders.
LA Times:
- Sales of wristwatches to young US consumers are falling as trendier accessories including cellular phones and portable music players also indicate the time, citing marketing studies.
Crain’s Chicago Business:
- Sears Holdings(SHLD) is testing its Sears Auto Centers at Kmart stores in a move that could double the size of its car-repair business.
Financial Times:
- Nasdaq Stock Market’s(NDAQ) ability to pay for a takeover bid for London Stock Exchange Plc has been called into question, citing credit rating companies and the newspaper’s own analysis.
- Oracle Corp.(ORCL) is contemplating introducing its own version of the Linux operating system and it considered purchasing Linux distributor Novell Inc.(NOVL), citing CEO Ellison.
- The Nobel Foundation, which funds the Nobel Prizes, invested in Corbin Capital Partners, Rock Creek Potomac fund and the Carnegie Worldwide Long/Short fund in its first hedge fund investments.
AP:
- Television broadcasters are challenging a FCC ruling that found three shows “indecent” because of obscene language.
Sunday Times:
- The NYSE is expected to build a stake in the London Stock Exchange after the Nasdaq Stock Market(NDAQ) bought a holding this month.
Xinhua News Agency:
- Wal-Mart Stores(WMT) will build the company’s sixty-eighth store in China in the southern province of Hainan, citing the retailer’s Chinese partner.
Weekend Recommendations
Barron's:
- Had positive comments on (SEPR), (HPQ), (UNH) and (PDCO).
- Had negative comments on (HRB).
Night Trading
Asian indices are -.50% to unch. on average.
S&P 500 indicated +.17%.
NASDAQ 100 indicated -.03%.
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/Estimate
- (BRO)/.36
- (CBI)/.01
- (C)/1.02
- (ETN)/1.32
- (GPC)/.66
- (JBHT)/.31
- (KRI)/.59
- (MI)/.77
- (RF)/.62
- (STI)/1.43
- (WB)/1.12
Upcoming Splits
- (AVD) 4-for-3
- (NBR) 2-for-1
Economic Releases
8:30 am EST
- Empire Manufacturing for April is estimated to fall to 24.3 versus a reading of 31.2 in March.
9:00 am EST
- Net Foreign Security Purchases for February are estimated to fall to $60.0 billion versus $66.0 billion in January.
1:00 pm EST
- The NAHB Housing Market Index for April is estimated to come in at 55 versus a reading of 55 in March.
Bloomberg:
- President Bush urged Congress to extend tax cuts enacted in his first term and asked lawmakers to address rising energy and health-care costs.
- China plans to let investors buy stocks using margin and sell shares short, seeking to channel more of the nation’s $4 trillion of bank deposits into the stock market and boost trading.
- The global takeover boom shows no sign of peaking. If anything, buyout firms are setting their sights on bigger targets, and corporations are stepping up the pace of purchases while financing remains cheap.
- Flextronics Intl.(FLEX) said it agreed to sell its software unit to a Kohlberg Kravis Roberts affiliate for about $900 million.
- BAA Plc, the target of a hostile takeover from Spain’s Grupo Ferrovial SA, said it rejected a bid led by Goldman Sachs Group(GS) that valued the world’s largest airports operator at $16.5 billion.
- China’s economic growth rose an estimated 10.2% in the first quarter, President Hu Jintao said, as manufacturing investment and exports surged.
Wall Street Journal:
- The Chicago Mercantile Exchange(CME) and the Chicago Board of Trade(BOT) are closing a loophole that had undermined the anonymity of electronic trading.
NY Times:
- LensCrafters will spend an estimated $312 million to upgrade its stores, aiming to distance itself from low-priced competitors.
- Toyota Motor(TM) is considering building its eighth North American assembly plant and is looking at four southern US states for the site.
- Three top Israeli generals warned in separate interviews this week that the army is ready to invade the Gaza Strip to put an end to Palestinian rocket attacks if ordered.
- The US baby boom generation has heeded the advice to stay physically active and is also experiencing more injuries requiring surgery.
- News Corp. (NWS) is introducing a poker show even as the Travel Channel’s “World Poker Tour” has lost 36% of its viewers since its debut and online-poker revenue increases may slow.
Washington Post:
- The administration of President Bush will award as much as $3 billion in contracts in coming weeks to develop new radiation monitors to detect nuclear weapons crossing the country’s borders.
LA Times:
- Sales of wristwatches to young US consumers are falling as trendier accessories including cellular phones and portable music players also indicate the time, citing marketing studies.
Crain’s Chicago Business:
- Sears Holdings(SHLD) is testing its Sears Auto Centers at Kmart stores in a move that could double the size of its car-repair business.
Financial Times:
- Nasdaq Stock Market’s(NDAQ) ability to pay for a takeover bid for London Stock Exchange Plc has been called into question, citing credit rating companies and the newspaper’s own analysis.
- Oracle Corp.(ORCL) is contemplating introducing its own version of the Linux operating system and it considered purchasing Linux distributor Novell Inc.(NOVL), citing CEO Ellison.
- The Nobel Foundation, which funds the Nobel Prizes, invested in Corbin Capital Partners, Rock Creek Potomac fund and the Carnegie Worldwide Long/Short fund in its first hedge fund investments.
AP:
- Television broadcasters are challenging a FCC ruling that found three shows “indecent” because of obscene language.
Sunday Times:
- The NYSE is expected to build a stake in the London Stock Exchange after the Nasdaq Stock Market(NDAQ) bought a holding this month.
Xinhua News Agency:
- Wal-Mart Stores(WMT) will build the company’s sixty-eighth store in China in the southern province of Hainan, citing the retailer’s Chinese partner.
Weekend Recommendations
Barron's:
- Had positive comments on (SEPR), (HPQ), (UNH) and (PDCO).
- Had negative comments on (HRB).
Night Trading
Asian indices are -.50% to unch. on average.
S&P 500 indicated +.17%.
NASDAQ 100 indicated -.03%.
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/Estimate
- (BRO)/.36
- (CBI)/.01
- (C)/1.02
- (ETN)/1.32
- (GPC)/.66
- (JBHT)/.31
- (KRI)/.59
- (MI)/.77
- (RF)/.62
- (STI)/1.43
- (WB)/1.12
Upcoming Splits
- (AVD) 4-for-3
- (NBR) 2-for-1
Economic Releases
8:30 am EST
- Empire Manufacturing for April is estimated to fall to 24.3 versus a reading of 31.2 in March.
9:00 am EST
- Net Foreign Security Purchases for February are estimated to fall to $60.0 billion versus $66.0 billion in January.
1:00 pm EST
- The NAHB Housing Market Index for April is estimated to come in at 55 versus a reading of 55 in March.
BOTTOM LINE: Asian Indices are mostly lower, weighed down by exporting shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.
Weekly Outlook
Click here for The Week Ahead by Reuters
There are some economic reports of note and a number of significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Empire Manufacturing, Net Foreign Security Purchases, NAHB Housing Market Index
Tues. - Producer Price Index, Housing Starts, Building Permits, March 28 FOMC Minutes
Wed. - Consumer Price Index
Thur. - Initial Jobless Claims, Leading Indicators, Philly Fed
Fri. - None of note
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Brown & Brown(BRO), Citigroup(C), Eaton Corp.(ETN), Genuine Parts(GPC), JB Hunt(JBHT), Knight Ridder(KRI), Marshall & Ilsle(MI), SunTrust Banks(STI), Wachovia Corp.(WB)
Tues. - Adtran(ADTN), Allstate(ALL), Amgen Corp.(AMGN), AmSouth Bancorp(ASO), Boston Scientific(BSX), CR Bard(BCR), DR Horton(DHI), Everest Re(RE), Fifth Third(FITB), Freeport-McMoRan(FCX), Gilead Sciences(GILD), IBM(IBM), Johnson & Johnson(JNJ), Keycorp(KEY), Linear Tech(LLTC), Mattel(MAT), Merrill Lynch(MER), Motorola(MOT), Peabody Energy(BTU), Seagate Technology(STX), State Street(STT), Texas Instruments(TXN), UnitedHealth(UNH), Washington Mutual(WM), Wells Fargo(WFC), Yahoo!(YHOO)
Wed. - Abbott Labs(ABT), AMR Corp.(AMR), Apple Computer(AAPL), Comerica(CMA), CDW Corp.(CDWC), CIT Group(CIT), Coca-Cola(KO), Comerica(CMA), CSX Corp.(CSX), E*Trade(ET), eBay(EBAY), General Dynamics(GD), Intel Corp.(INTC), JPMorgan(JPM), Juniper Networks(JNPR), Kinder Morgan(KMI), Novellus Systems(NVLS), Pfizer Inc.(PFE), Qualcomm(QCOM), St Jude Medical(STJ), United Technologies(UTX)
Thur. - Altria Group(MO), Bank of America(BAC), Baxter Intl.(BAX), BellSouth(BLS), Broadcom Corp.(BRCM), Cerner Corp.(CERN), Eli Lilly(LLY), EMC Corp.(EMC), First Data(FDC), General Motors(GM), Google(GOOG), Hershey Co.(HSY), Linens ‘n Things(LIN), Merck(MRK), Newmont Mining(NEM), Outback Steakhouse(OSI), Ryland Group(RYL), Southwest Air(LUV), Sprint Nextel(S), United Parcel(UPS)
Fri. - 3M Co.(MMM), Ford Motor(F), Fortune Brands(FO), Genzyme(GENZ), Guidant Corp.(GDT), Halliburton(HAL), Ingersoll-Rand(IR), Maytag(MYG), McDonald’s(MCD), Royal Caribbean(RCL), Schlumberger(SLB), Wyeth(WYE)
Other events that have market-moving potential this week include:
Mon. - World Health Care Congress
Tue. - World Health Care Congress
Wed. - World Health Care Congress, Morgan Stanley Retail Conference
Thur. - Morgan Stanley Retail Conference
Fri. - Morgan Stanley Retail Conference
There are some economic reports of note and a number of significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Empire Manufacturing, Net Foreign Security Purchases, NAHB Housing Market Index
Tues. - Producer Price Index, Housing Starts, Building Permits, March 28 FOMC Minutes
Wed. - Consumer Price Index
Thur. - Initial Jobless Claims, Leading Indicators, Philly Fed
Fri. - None of note
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Brown & Brown(BRO), Citigroup(C), Eaton Corp.(ETN), Genuine Parts(GPC), JB Hunt(JBHT), Knight Ridder(KRI), Marshall & Ilsle(MI), SunTrust Banks(STI), Wachovia Corp.(WB)
Tues. - Adtran(ADTN), Allstate(ALL), Amgen Corp.(AMGN), AmSouth Bancorp(ASO), Boston Scientific(BSX), CR Bard(BCR), DR Horton(DHI), Everest Re(RE), Fifth Third(FITB), Freeport-McMoRan(FCX), Gilead Sciences(GILD), IBM(IBM), Johnson & Johnson(JNJ), Keycorp(KEY), Linear Tech(LLTC), Mattel(MAT), Merrill Lynch(MER), Motorola(MOT), Peabody Energy(BTU), Seagate Technology(STX), State Street(STT), Texas Instruments(TXN), UnitedHealth(UNH), Washington Mutual(WM), Wells Fargo(WFC), Yahoo!(YHOO)
Wed. - Abbott Labs(ABT), AMR Corp.(AMR), Apple Computer(AAPL), Comerica(CMA), CDW Corp.(CDWC), CIT Group(CIT), Coca-Cola(KO), Comerica(CMA), CSX Corp.(CSX), E*Trade(ET), eBay(EBAY), General Dynamics(GD), Intel Corp.(INTC), JPMorgan(JPM), Juniper Networks(JNPR), Kinder Morgan(KMI), Novellus Systems(NVLS), Pfizer Inc.(PFE), Qualcomm(QCOM), St Jude Medical(STJ), United Technologies(UTX)
Thur. - Altria Group(MO), Bank of America(BAC), Baxter Intl.(BAX), BellSouth(BLS), Broadcom Corp.(BRCM), Cerner Corp.(CERN), Eli Lilly(LLY), EMC Corp.(EMC), First Data(FDC), General Motors(GM), Google(GOOG), Hershey Co.(HSY), Linens ‘n Things(LIN), Merck(MRK), Newmont Mining(NEM), Outback Steakhouse(OSI), Ryland Group(RYL), Southwest Air(LUV), Sprint Nextel(S), United Parcel(UPS)
Fri. - 3M Co.(MMM), Ford Motor(F), Fortune Brands(FO), Genzyme(GENZ), Guidant Corp.(GDT), Halliburton(HAL), Ingersoll-Rand(IR), Maytag(MYG), McDonald’s(MCD), Royal Caribbean(RCL), Schlumberger(SLB), Wyeth(WYE)
Other events that have market-moving potential this week include:
Mon. - World Health Care Congress
Tue. - World Health Care Congress
Wed. - World Health Care Congress, Morgan Stanley Retail Conference
Thur. - Morgan Stanley Retail Conference
Fri. - Morgan Stanley Retail Conference
BOTTOM LINE: I expect US stocks to finish the week mixed as better-than-expected earnings reports offset conservative forward earnings guidance, higher long-term rates and mixed economic data. My trading indicators are giving mostly bullish signals and the Portfolio is 50% net long heading into the week.
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