BOTTOM LINE: The Portfolio is about even into the final hour as gains in my Internet longs and Medical longs are offsetting losses in my Retail longs and Computer longs. I added (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 75% net long. The tone of the market is modestly negative as the advance/decline line is lower, sector performance is mostly negative and volume is average. I expect the Fed to raise the benchmark fed funds rate 25 basis points tomorrow to 5.0%. I do not expect it to say it is ready to pause. I do, however, expect members to say they will pause on signs of a slowdown in economic growth from recent robust rates. This may disappoint equity investors. Specifically, the most cyclical stocks that have seen parabolic moves of late on the hopes that the Fed was done may come under pressure. I expect US stocks to trade mixed-to-lower into the close from current levels on higher energy prices and profit-taking ahead of Wednesday’s FOMC meeting.
Tuesday, May 09, 2006
Stocks Mostly Lower into Final Hour ahead of FOMC Meeting
Today's Headlines
Bloomberg:
- Citigroup(C) plans to almost double staff at its commodities-trading unit worldwide as higher prices increases demand to speculate on these markets.
- Crude oil rose above $70/bbl. even after the EIA reported that demand for oil in China remained flat from year-ago levels.
- Gold jumped to $700 an ounce in NY for the first time since 1980 after a report suggested China should buy gold to diversify its currency reserves.
- Thomas H. Lee Partners LP plans to raise $9 billion for its sixth and biggest buyout fund, 20% more than an initial target set about a year ago.
Wall Street Journal:
- Exxon’s(XOM) first quarter capital spending, to boost oil and gas resources, soared 41% to $4.8 billion.
- Owners of Teflon-coated pots and pans have sued DuPont Co.(DD), claiming the Wilmington, Delaware-based chemical company didn’t divulge the possible dangers of chemicals released when the cookware is heated.
- Alltel Corp.(AT) and Sprint Nextel(S) have reached a 10-year roaming-service deal that may expand coverage and reduce some rates.
- Lehman Brothers(LH) is second only to Citigroup(C) as an adviser on US financial mergers and acquisitions so far this year, citing Thomson Financial.
- Time Warner’s(TWX) Warner Bros. will probably announce that it will sell and rent movies and television shows online using BitTorrent’s so-called peer-to-peer technology.
AP:
- Rhode Island Democrats meeting at their state convention endorsed the re-election bid of US Congressman Patrick Kennedy, who last week said he was entering a drug-rehab program.
NY Times:
- Cuba plans to drill for oil in the portion of the Florida Straits it controls while laws prohibit US companies taking leases in Cuba-controlled waters or from drilling in US coastal zones due to environmental concerns.
- US buyers are slowly getting more control of the real estate market than sellers.
- US airlines are expected to add few planes to their fleets through 2007, citing a report from Bear Stearns.
Ma’ariv:
- M-Systems(FLSH) may announce a technological breakthrough that will allow it to increase by 30% the amount of data stored on a chip without raising costs of its flash memory devices.
El Moudjahid:
- Crude-oil prices may fall as producing countries increase output capacity, Algerian Energy Minister Chakib Khelil said.
Daily Telegraph:
- Vodafone Group Plc rejected an indicative off of $38 billion from Verizon Communications(VZ) for the UK company’s 45% stake in their Verizon Wireless joint venture.
- Citigroup(C) plans to almost double staff at its commodities-trading unit worldwide as higher prices increases demand to speculate on these markets.
- Crude oil rose above $70/bbl. even after the EIA reported that demand for oil in China remained flat from year-ago levels.
- Gold jumped to $700 an ounce in NY for the first time since 1980 after a report suggested China should buy gold to diversify its currency reserves.
- Thomas H. Lee Partners LP plans to raise $9 billion for its sixth and biggest buyout fund, 20% more than an initial target set about a year ago.
Wall Street Journal:
- Exxon’s(XOM) first quarter capital spending, to boost oil and gas resources, soared 41% to $4.8 billion.
- Owners of Teflon-coated pots and pans have sued DuPont Co.(DD), claiming the Wilmington, Delaware-based chemical company didn’t divulge the possible dangers of chemicals released when the cookware is heated.
- Alltel Corp.(AT) and Sprint Nextel(S) have reached a 10-year roaming-service deal that may expand coverage and reduce some rates.
- Lehman Brothers(LH) is second only to Citigroup(C) as an adviser on US financial mergers and acquisitions so far this year, citing Thomson Financial.
- Time Warner’s(TWX) Warner Bros. will probably announce that it will sell and rent movies and television shows online using BitTorrent’s so-called peer-to-peer technology.
AP:
- Rhode Island Democrats meeting at their state convention endorsed the re-election bid of US Congressman Patrick Kennedy, who last week said he was entering a drug-rehab program.
NY Times:
- Cuba plans to drill for oil in the portion of the Florida Straits it controls while laws prohibit US companies taking leases in Cuba-controlled waters or from drilling in US coastal zones due to environmental concerns.
- US buyers are slowly getting more control of the real estate market than sellers.
- US airlines are expected to add few planes to their fleets through 2007, citing a report from Bear Stearns.
Ma’ariv:
- M-Systems(FLSH) may announce a technological breakthrough that will allow it to increase by 30% the amount of data stored on a chip without raising costs of its flash memory devices.
El Moudjahid:
- Crude-oil prices may fall as producing countries increase output capacity, Algerian Energy Minister Chakib Khelil said.
Daily Telegraph:
- Vodafone Group Plc rejected an indicative off of $38 billion from Verizon Communications(VZ) for the UK company’s 45% stake in their Verizon Wireless joint venture.
Wholesale Inventories Rise Less Than Estimates as Demand Surges
- Wholesale Inventories for March rose .2% versus estimates of a .5% rise and a .9% gain in February.
BOTTOM LINE: Inventories at US wholesalers increased less than forecast in March as suppliers struggled to keep pace with surging demand, Bloomberg said. Sales surged .7%. Wholesalers had enough supply on hand to last 1.16 months at March’s sales pace versus 1.17 months worth the prior month. I expect inventory rebuilding to help keep US economic growth around average levels this quarter.
Tuesday Watch
Late-Night Headlines
Bloomberg:
- General Motors(GM) revised its first-quarter results to reflect a change in accounting, resulting in its first profit in six quarters.
- Samsung Electronics and Hynix Semiconductor, which make about 67% of the memory chips used in music players and mobile phones, said they raised prices for the first time this year as a glut of the chips eased.
- Sony Corp.(SNE) demonstrated the PlayStation 3 for the first time and pledged again to have the new console on store shelves by November. The new system will cost at least $100 more than Microsoft’s(MSFT) Xbox 360.
Wall Street Journal:
- Overseas banks may be required to incorporate their branches in China as the nation prepares to set up a deposit insurance system to protect investors.
- With six days left for American retirees to sign up for a federal prescription drug benefit, some 6 million have yet to enroll, and legislators may extend the deadline.
Financial Times:
- GlaxoSmithKline Plc(GSK) private investors have been sent a threatening letter from an animal rights group telling them to sell their shares within 14 days or face public exposure.
Digitimes:
- Quanta Computer Inc. won 60% of Dell’s(DELL) 2007 notebook-computer orders, becoming the US company’s biggest laptop supplier.
Maeil Business Newspaper:
- Three out of every 10 of South Korea’s non-financial listed companies didn’t earn enough to pay the interest on their debt last year, citing data from the Bank of Korea.
Late Buy/Sell Recommendations
Banc of America:
- Rated OMC Buy.
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.01%.
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
- (BIDU)/.12
- (CELL)/.18
- (CVC)/-.08
- (CRL)/.57
- (CHD)/.53
- (CSCO)/.26
- (DYN)/-.12
- (ENER)/-.16
- (HANS)/.71
- (HB)/.84
- (KCS)/.65
- (LAMR).03
- (MRX)/.20
- (MYL)/.24
- (PXD)/.48
- (SLE)/.25
- (SINA)/.15
- (SNHY)/.37
- (SYMC)/.25
- (ELOS)/.42
- (URI)/.18
- (DIS)/.31
- (WPI)/.32
- (WTW)/.55
- (WGR)/.74
Upcoming Splits
- (ANST) 2-for-1
Economic Releases
10:00 am EST
- Wholesale Inventories for March are estimated to rise .5% versus a .8% gain in February.
Bloomberg:
- General Motors(GM) revised its first-quarter results to reflect a change in accounting, resulting in its first profit in six quarters.
- Samsung Electronics and Hynix Semiconductor, which make about 67% of the memory chips used in music players and mobile phones, said they raised prices for the first time this year as a glut of the chips eased.
- Sony Corp.(SNE) demonstrated the PlayStation 3 for the first time and pledged again to have the new console on store shelves by November. The new system will cost at least $100 more than Microsoft’s(MSFT) Xbox 360.
Wall Street Journal:
- Overseas banks may be required to incorporate their branches in China as the nation prepares to set up a deposit insurance system to protect investors.
- With six days left for American retirees to sign up for a federal prescription drug benefit, some 6 million have yet to enroll, and legislators may extend the deadline.
Financial Times:
- GlaxoSmithKline Plc(GSK) private investors have been sent a threatening letter from an animal rights group telling them to sell their shares within 14 days or face public exposure.
Digitimes:
- Quanta Computer Inc. won 60% of Dell’s(DELL) 2007 notebook-computer orders, becoming the US company’s biggest laptop supplier.
Maeil Business Newspaper:
- Three out of every 10 of South Korea’s non-financial listed companies didn’t earn enough to pay the interest on their debt last year, citing data from the Bank of Korea.
Late Buy/Sell Recommendations
Banc of America:
- Rated OMC Buy.
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.01%.
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
- (BIDU)/.12
- (CELL)/.18
- (CVC)/-.08
- (CRL)/.57
- (CHD)/.53
- (CSCO)/.26
- (DYN)/-.12
- (ENER)/-.16
- (HANS)/.71
- (HB)/.84
- (KCS)/.65
- (LAMR).03
- (MRX)/.20
- (MYL)/.24
- (PXD)/.48
- (SLE)/.25
- (SINA)/.15
- (SNHY)/.37
- (SYMC)/.25
- (ELOS)/.42
- (URI)/.18
- (DIS)/.31
- (WPI)/.32
- (WTW)/.55
- (WGR)/.74
Upcoming Splits
- (ANST) 2-for-1
Economic Releases
10:00 am EST
- Wholesale Inventories for March are estimated to rise .5% versus a .8% gain in February.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology stocks in the region after Dell(DELL) lowered guidance. I expect US equities to open modestly lower and to trade modestly higher into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
Monday, May 08, 2006
Stocks Finished Mixed, Consolidating Recent Gains Ahead of FOMC Meeting
Indices
S&P 500 1,324.66 -.08%
DJIA 11,584.54 +.06%
NASDAQ 2,344.99 +.10%
Russell 2000 781.60 -.03%
Wilshire 5000 13,420.79 -.03%
S&P Barra Growth 612.77 -.04%
S&P Barra Value 710.11 -.12%
Morgan Stanley Consumer 616.98 +.02%
Morgan Stanley Cyclical 886.30 +.08%
Morgan Stanley Technology 549.30 -.31%
Transports 4,957.91 unch.
Utilities 407.90 -.77%
Put/Call .92 +16.46%
NYSE Arms .92 +22.36%
Volatility(VIX) 12.00 +3.27%
ISE Sentiment 206.00 +38.26%
US Dollar 85.18 +.05%
CRB 350.35 -.45%
Futures Spot Prices
Crude Oil 69.93 +.23%
Unleaded Gasoline 200.90 +.27%
Natural Gas 6.71 +.28%
Heating Oil 195.80 +.18%
Gold 680.80 +.13%
Base Metals 230.48 -.09%
Copper 350.85 +.20%
10-year US Treasury Yield 5.11% +.21%
Leading Sectors
Broadcasting +2.18%
HMOs +1.65%
Retail +.83%
Lagging Sectors
Gold & Silver -.90%
Homebuilders -1.12%
Defense -1.70%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- President Bush asked Sudan to back UN peacekeepers for Darfur and is sending Secretary of State Condoleezza Rice to the world body tomorrow to seek a resolution on speeding up their deployment.
- Saudi Prince Alwaleed bin Talal, Citigroup’s(C) biggest individual shareholder, said he and Goldman Sachs Group(GS) CEO Henry Paulson may consider investing together, and offered to help Goldman win business in the kingdom.
- Man Group’s US brokerage and seven of its employees were sued for fraud and racketeering by a court-appointed receiver seeking to recoup investor assets lost in the collapse of a Philadelphia hedge fund.
- A decline in US newspaper circulation accelerated in the six months through March, led by drops at the LA Times and San Francisco Chronicle, as more readers got their news from Web sites.
- Chipotle Mexican Grill(CMG) said first-quarter profit more than tripled as it opened new stores and margins rose.
- Dell Inc.(DELL) said price cuts caused first-quarter profit to miss its forecast and revenue to hit the bottom of a previously announced range.
Nikkei English News:
- Toyota Motor(TM) plans to develop an inexpensive compact car, the company’s cheapest yet, for sale in India and other emerging markets.
Financial Times Deutschland:
- Time Warner’s(TWX) AOL Germany Internet unit plans to stop charging users for content as it forecasts increased revenue from online advertising.
S&P 500 1,324.66 -.08%
DJIA 11,584.54 +.06%
NASDAQ 2,344.99 +.10%
Russell 2000 781.60 -.03%
Wilshire 5000 13,420.79 -.03%
S&P Barra Growth 612.77 -.04%
S&P Barra Value 710.11 -.12%
Morgan Stanley Consumer 616.98 +.02%
Morgan Stanley Cyclical 886.30 +.08%
Morgan Stanley Technology 549.30 -.31%
Transports 4,957.91 unch.
Utilities 407.90 -.77%
Put/Call .92 +16.46%
NYSE Arms .92 +22.36%
Volatility(VIX) 12.00 +3.27%
ISE Sentiment 206.00 +38.26%
US Dollar 85.18 +.05%
CRB 350.35 -.45%
Futures Spot Prices
Crude Oil 69.93 +.23%
Unleaded Gasoline 200.90 +.27%
Natural Gas 6.71 +.28%
Heating Oil 195.80 +.18%
Gold 680.80 +.13%
Base Metals 230.48 -.09%
Copper 350.85 +.20%
10-year US Treasury Yield 5.11% +.21%
Leading Sectors
Broadcasting +2.18%
HMOs +1.65%
Retail +.83%
Lagging Sectors
Gold & Silver -.90%
Homebuilders -1.12%
Defense -1.70%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- President Bush asked Sudan to back UN peacekeepers for Darfur and is sending Secretary of State Condoleezza Rice to the world body tomorrow to seek a resolution on speeding up their deployment.
- Saudi Prince Alwaleed bin Talal, Citigroup’s(C) biggest individual shareholder, said he and Goldman Sachs Group(GS) CEO Henry Paulson may consider investing together, and offered to help Goldman win business in the kingdom.
- Man Group’s US brokerage and seven of its employees were sued for fraud and racketeering by a court-appointed receiver seeking to recoup investor assets lost in the collapse of a Philadelphia hedge fund.
- A decline in US newspaper circulation accelerated in the six months through March, led by drops at the LA Times and San Francisco Chronicle, as more readers got their news from Web sites.
- Chipotle Mexican Grill(CMG) said first-quarter profit more than tripled as it opened new stores and margins rose.
- Dell Inc.(DELL) said price cuts caused first-quarter profit to miss its forecast and revenue to hit the bottom of a previously announced range.
Nikkei English News:
- Toyota Motor(TM) plans to develop an inexpensive compact car, the company’s cheapest yet, for sale in India and other emerging markets.
Financial Times Deutschland:
- Time Warner’s(TWX) AOL Germany Internet unit plans to stop charging users for content as it forecasts increased revenue from online advertising.
BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Networking longs and Software longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mixed and volume was about average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was neutral considering recent gains. The 10-year yield was stable ahead of Wednesday's FOMC meeting. I expect the yield to head lower later this week as shorts cover. I am still long (TLT).
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