BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Retail longs and Semi longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is above average. As I speculated yesterday, the Fed’s policy statement was more hawkish than most expected. This should calm fears that inflation will become a problem, thus helping to send the 10-year yield lower. I expect US stocks to trade modestly higher into the close from current levels on short-covering and stable long-term rates.
Wednesday, May 10, 2006
Stocks Mixed into Final Hour after Fed Hikes Another 25 Basis Points and Hints at More
Today's Headlines
Bloomberg:
- China will find gold bullion too expensive to buy at current 25-year highs, traders said.
- Mortgage applications in the US fell last week by the most since February as higher borrowing costs slowed purchases and pushed refinancing to its lowest level this year.
- The Bank of England lowered its forecast for economic growth next year to about 2.75%.
- Nasdaq Stock Market(NDAQ) bought $239.4 million of London Stock Exchange Plc shares, raising its stake to 22.7% and strengthening its hand against potential rival bidders.
- Almost half of US population growth last year was Hispanic, adding the equivalent of a city the size of Phoenix, US Census Bureau stats showed.
Wall Street Journal:
- Verizon Communications(VZ) is soliciting offers for two large sets of traditional telephone lines with a combined value of about $8 billion.
- Recent patent cases in which Eli Lilly(LLY) has been involved point up the difficulties pharmaceutical companies face in research work.
- Yahoo!’s(YHOO) Internet service and GE’s(GE) Telemundo broadcast network will merge their Spanish-language Web sites in the US as they try to zero in on a growing Hispanic market.
- The Internet Corp. for Assigned Names and Numbers may vote today to decide if “.xxx” will become a suffix for adult Web sites.
- TiVo Inc.(TIVO) has agreed with Brightcove Inc. on a system that will let TiVo viewers download and watch video from the Internet on their televisions.
- ImClone Systems(IMCL) and Bristol-Myers Squibb(BMY) are developing a price cap for the Erbitux cancer drug amid public concern about the price of caner medications.
Washington Post:
- The Republican Party is seeking to garner black votes, historically a Democratic constituency, by fielding black candidates in three significant races.
- VaxGen’s(VXGN) $877.5 million contract to supply the US government with 75 million doses of anthrax vaccine faces new delays that may push delivery to late 2008 or kill the program.
LA Times:
- California Governor Arnold Schwarzenegger plans to use a $5 billion surge in tax revenue to pay down the state’s debt and build a reserve fund.
HandelsZeitung:
- Microsoft(MSFT) may develop a hardware device that integrates media functions such as taking photos, making phone calls and listening to music, citing CEO Ballmer.
Sarmayeh:
- Iran is pushing ahead with plans to crack down on people who use satellite dishes to receive foreign television channels, saying the broadcasts are “threatening society’s psychological security,” citing Interior Minister Mostafa Pour Mohammadi.
AP:
- The US House of Representatives approved a bill that restricts anti-war demonstrations at military funerals.
CNBC:
- Electronic Data Systems(EDS) may boost its forecast for 2006 contracts at the end of this quarter, CEO Jordan said.
- China will find gold bullion too expensive to buy at current 25-year highs, traders said.
- Mortgage applications in the US fell last week by the most since February as higher borrowing costs slowed purchases and pushed refinancing to its lowest level this year.
- The Bank of England lowered its forecast for economic growth next year to about 2.75%.
- Nasdaq Stock Market(NDAQ) bought $239.4 million of London Stock Exchange Plc shares, raising its stake to 22.7% and strengthening its hand against potential rival bidders.
- Almost half of US population growth last year was Hispanic, adding the equivalent of a city the size of Phoenix, US Census Bureau stats showed.
Wall Street Journal:
- Verizon Communications(VZ) is soliciting offers for two large sets of traditional telephone lines with a combined value of about $8 billion.
- Recent patent cases in which Eli Lilly(LLY) has been involved point up the difficulties pharmaceutical companies face in research work.
- Yahoo!’s(YHOO) Internet service and GE’s(GE) Telemundo broadcast network will merge their Spanish-language Web sites in the US as they try to zero in on a growing Hispanic market.
- The Internet Corp. for Assigned Names and Numbers may vote today to decide if “.xxx” will become a suffix for adult Web sites.
- TiVo Inc.(TIVO) has agreed with Brightcove Inc. on a system that will let TiVo viewers download and watch video from the Internet on their televisions.
- ImClone Systems(IMCL) and Bristol-Myers Squibb(BMY) are developing a price cap for the Erbitux cancer drug amid public concern about the price of caner medications.
Washington Post:
- The Republican Party is seeking to garner black votes, historically a Democratic constituency, by fielding black candidates in three significant races.
- VaxGen’s(VXGN) $877.5 million contract to supply the US government with 75 million doses of anthrax vaccine faces new delays that may push delivery to late 2008 or kill the program.
LA Times:
- California Governor Arnold Schwarzenegger plans to use a $5 billion surge in tax revenue to pay down the state’s debt and build a reserve fund.
HandelsZeitung:
- Microsoft(MSFT) may develop a hardware device that integrates media functions such as taking photos, making phone calls and listening to music, citing CEO Ballmer.
Sarmayeh:
- Iran is pushing ahead with plans to crack down on people who use satellite dishes to receive foreign television channels, saying the broadcasts are “threatening society’s psychological security,” citing Interior Minister Mostafa Pour Mohammadi.
AP:
- The US House of Representatives approved a bill that restricts anti-war demonstrations at military funerals.
CNBC:
- Electronic Data Systems(EDS) may boost its forecast for 2006 contracts at the end of this quarter, CEO Jordan said.
Tuesday, May 09, 2006
Wednesday Watch
Late-Night Headlines
Bloomberg:
- Microsoft Corp.(MSFT) said it will sell 10 million Xbox 360s before Sony Corp.(SNE) releases its PlayStation 3 in November.
- The Bush administration may stop short of branding China a currency manipulator, while criticizing the country’s export-driven economic policy in a report to Congress today.
Financial Times:
- China has abandoned plans to measure its economic output by taking into account its impact on the environment.
Xinhua News Agency:
- Ctrip.com(CTRP), China’s largest online travel service, has signed an agreement with Google Inc.(GOOG) to upgrade the travel service’s search capability for hotels.
China Securities Journal:
- China’s consumer prices are likely to rise at a slower pace in the second quarter on lower food prices.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.29%.
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
- (AIG)/1.36
- (RMK)/.29
- (FD)/.02
- (FWLT)/.37
- (IPG)/-.30
- (LM)/1.25
- (NKTR)/-.39
- (NWS/A)/.20
- (RRI)/-.33
- (STE)/.41
Upcoming Splits
- None of note
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 575,000 barrels. Gasoline supplies are expected to rise 1,000,000 barrels. Distillate inventories are estimated to fall 300,000 barrels. Finally, refinery utilization is estimated to rise .75%.
2:00 pm EST
- The monthly budget surplus for April is estimated to rise to $115.0B versus $57.7B in March.
2:15 pm EST
- The FOMC is expected to raise the benchmark Fed Funds rate 25 basis points to 5.0%.
Bloomberg:
- Microsoft Corp.(MSFT) said it will sell 10 million Xbox 360s before Sony Corp.(SNE) releases its PlayStation 3 in November.
- The Bush administration may stop short of branding China a currency manipulator, while criticizing the country’s export-driven economic policy in a report to Congress today.
Financial Times:
- China has abandoned plans to measure its economic output by taking into account its impact on the environment.
Xinhua News Agency:
- Ctrip.com(CTRP), China’s largest online travel service, has signed an agreement with Google Inc.(GOOG) to upgrade the travel service’s search capability for hotels.
China Securities Journal:
- China’s consumer prices are likely to rise at a slower pace in the second quarter on lower food prices.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.08%.
NASDAQ 100 indicated -.29%.
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
- (AIG)/1.36
- (RMK)/.29
- (FD)/.02
- (FWLT)/.37
- (IPG)/-.30
- (LM)/1.25
- (NKTR)/-.39
- (NWS/A)/.20
- (RRI)/-.33
- (STE)/.41
Upcoming Splits
- None of note
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 575,000 barrels. Gasoline supplies are expected to rise 1,000,000 barrels. Distillate inventories are estimated to fall 300,000 barrels. Finally, refinery utilization is estimated to rise .75%.
2:00 pm EST
- The monthly budget surplus for April is estimated to rise to $115.0B versus $57.7B in March.
2:15 pm EST
- The FOMC is expected to raise the benchmark Fed Funds rate 25 basis points to 5.0%.
BOTTOM LINE: Asian indices are mostly lower, weighed down by exporting stocks in the region. I expect US equities to open mixed and to trade modestly lower into the afternoon. The Portfolio is 75% net long heading into the day.
Stocks Finish Mostly Lower on Weakness in Tech and Healthcare Shares
Indices
S&P 500 1,325.14 +.04%
DJIA 11,639.77 +.48%
NASDAQ 2,338.25 -.29%
Russell 2000 780.72 -.11%
Wilshire 5000 13,421.90 +.01%
S&P Barra Growth 612.30 -.08%
S&P Barra Value 711.15 +.15%
Morgan Stanley Consumer 618.35 +.22%
Morgan Stanley Cyclical 888.23 +.22%
Morgan Stanley Technology 545.02 -.78%
Transports 4,998.95 +.83%
Utilities 405.90 -.49%
Put/Call .83 -9.78%
NYSE Arms .87 -4.78%
Volatility(VIX) 11.99 -.08%
ISE Sentiment 208.00 +.97%
US Dollar 84.83 -.47%
CRB 354.93 +1.31%
Futures Spot Prices
Crude Oil 70.55 -.20%
Unleaded Gasoline 204.50 -.08%
Natural Gas 6.55 -.46%
Heating Oil 199.51 +2.08%
Gold 702.40 +.13%
Base Metals 236.45 +2.59%
Copper 360.70 +.31%
10-year US Treasury Yield 5.12% +.29%
Leading Sectors
Gold & Silver +4.38%
Airlines +1.43%
Oil Service +.78%
Lagging Sectors
Semis -1.02%
HMOs -1.13%
Hospital -2.0%
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
Banc of America:
- Rated (VTIV) Buy, target $37.
UBS:
- Upgraded (USB) to Buy, target $37.
Afternoon/Evening Headlines
Bloomberg:
- The US will give $10 million in medical supplies to the Palestinian people as Palestinian Authority President Abbas cautions that outside aid is needed to prevent the collapse of his administration.
- General Motors(GM) shares rose to their highest price this year after the automaker revised quarterly results to its first profit since 2004 and CEO Wagoner said talks to avoid a strike at Dephi Corp., its biggest supplier, are progressing.
- The UK, France and Germany might make a new offer to help Iran develop a peaceful nuclear program as a way to convince Iranian leaders to halt uranium enrichment, US Secretary of State Condoleezza Rice said at the UN.
- Republicans readied more than $80 billion in tax cuts for votes in both chambers of Congress, including extending low rates on dividends and most capital gains and preventing the alternative minimum tax from affecting 16 million households this year.
AP:
- New Jersey lawmakers will consider a bill that would legalize medical marijuana for people with certain medical conditions.
S&P 500 1,325.14 +.04%
DJIA 11,639.77 +.48%
NASDAQ 2,338.25 -.29%
Russell 2000 780.72 -.11%
Wilshire 5000 13,421.90 +.01%
S&P Barra Growth 612.30 -.08%
S&P Barra Value 711.15 +.15%
Morgan Stanley Consumer 618.35 +.22%
Morgan Stanley Cyclical 888.23 +.22%
Morgan Stanley Technology 545.02 -.78%
Transports 4,998.95 +.83%
Utilities 405.90 -.49%
Put/Call .83 -9.78%
NYSE Arms .87 -4.78%
Volatility(VIX) 11.99 -.08%
ISE Sentiment 208.00 +.97%
US Dollar 84.83 -.47%
CRB 354.93 +1.31%
Futures Spot Prices
Crude Oil 70.55 -.20%
Unleaded Gasoline 204.50 -.08%
Natural Gas 6.55 -.46%
Heating Oil 199.51 +2.08%
Gold 702.40 +.13%
Base Metals 236.45 +2.59%
Copper 360.70 +.31%
10-year US Treasury Yield 5.12% +.29%
Leading Sectors
Gold & Silver +4.38%
Airlines +1.43%
Oil Service +.78%
Lagging Sectors
Semis -1.02%
HMOs -1.13%
Hospital -2.0%
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
Banc of America:
- Rated (VTIV) Buy, target $37.
UBS:
- Upgraded (USB) to Buy, target $37.
Afternoon/Evening Headlines
Bloomberg:
- The US will give $10 million in medical supplies to the Palestinian people as Palestinian Authority President Abbas cautions that outside aid is needed to prevent the collapse of his administration.
- General Motors(GM) shares rose to their highest price this year after the automaker revised quarterly results to its first profit since 2004 and CEO Wagoner said talks to avoid a strike at Dephi Corp., its biggest supplier, are progressing.
- The UK, France and Germany might make a new offer to help Iran develop a peaceful nuclear program as a way to convince Iranian leaders to halt uranium enrichment, US Secretary of State Condoleezza Rice said at the UN.
- Republicans readied more than $80 billion in tax cuts for votes in both chambers of Congress, including extending low rates on dividends and most capital gains and preventing the alternative minimum tax from affecting 16 million households this year.
AP:
- New Jersey lawmakers will consider a bill that would legalize medical marijuana for people with certain medical conditions.
BOTTOM LINE: The Portfolio finished unchanged today as gains in my Internet longs and Medical longs offset losses in my Retail longs and Computer longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished lower, sector performance was mostly negative and volume was about average. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was slightly bearish. On the positive side, another rise in oil and long-term rates didn't do much damage to equities. Natural gas finished near session lows and looks poised to take another dive lower. Semis rebounded from session lows, notwithstanding Dell’s (DELL) disappointment. Google (GOOG) finished near session highs on good volume. I doubt Google (GOOG) will close below $400 again this year. Google remains my largest long position.
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