BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Retail longs, Internet longs, Computer longs and Semi longs. I added to my (QQQQ), (IWM) and (EEM) today, thus leaving the Portfolio market neutral. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is heavy. Today's losses are a function of investors anticipating slower economic growth as a result of slowing housing, high energy prices and Fed rate hikes. The market will likely find an intermediate-term bottom after the most economically sensitive stocks see losses accelerate to the downside. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, higher energy prices and rising long-term rates.
Thursday, May 11, 2006
Stocks Sharply Lower into Final Hour on Rise in Oil and Rates
Today's Headlines
Bloomberg:
- Merrill Lynch(MER), preparing for its biggest expansion since the 1990s, plans to buy a mortgage lender, triple its corporate investments and increase trading bets to boost shareholder returns that trail those of rivals.
- Pfizer won US approval today for Chantix, a new prescription drug to help cut nicotine cravings in millions of Americans trying to quit smoking.
- Pope Benefict XVI denounced gay marriage, saying “only the foundation of complete and irrevocable love between man and woman is capable of forming the basis of a society that becomes the home of all men.”
- Crude oil rose over $73/bbl. on continuing record speculation as geopolitical concerns persist.
Wall Street Journal:
- Verizon Wireless(VZ), Sprint Nextel(S) and other carriers have begun restricting Internet access to customers who use large amounts of wireless transmission capacity.
- US computer companies, such as Affordable Internet Services Online, are developing power-efficient products as they seek to drive down their energy costs.
- US Republicans plan a series of votes in Congress on energy-related proposals including measures to address vehicle fuel efficiency and opening new areas to oil drilling.
- XM Satellite Radio(XMSR) and Sirius Satellite Radio(SIRI) both started broadcasting between four and five years ago, and XM has had more success in getting institutions such as mutual funds to buy its shares.
NY Times:
- Christian leaders, who say author Dan Brown’s “Da Vinci Code” is a slander of Jesus Christ, are preparing a variety of protests against the Sony Pictures movie to be released May 19.
Washington Post:
- Some established immigrants in the US want to restrict newcomers, saying they aren’t properly assimilating with US society.
Reuters:
- The German economy grew .4% in the first quarter from the fourth quarter last year.
MarketWatch:
- Novartis AG plans to build a US plant that will use advanced technology to produce avian-flu vaccine faster for the US market.
Estrategia:
- Grupo Mexico SA, the biggest copper producer in Mexico, plans to begin exploring for new deposits of the metal in northern Chile.
AFP:
- European Union regulators plan to issue a formal complaint against Microsoft(MSFT) regarding the company’s fees for licensing Windows software.
21st Century Business Herald:
- China’s central bank may ask lenders to increase down payments for homes to as much as 50% of their value from a minimum 20% to curb prices.
- Merrill Lynch(MER), preparing for its biggest expansion since the 1990s, plans to buy a mortgage lender, triple its corporate investments and increase trading bets to boost shareholder returns that trail those of rivals.
- Pfizer won US approval today for Chantix, a new prescription drug to help cut nicotine cravings in millions of Americans trying to quit smoking.
- Pope Benefict XVI denounced gay marriage, saying “only the foundation of complete and irrevocable love between man and woman is capable of forming the basis of a society that becomes the home of all men.”
- Crude oil rose over $73/bbl. on continuing record speculation as geopolitical concerns persist.
Wall Street Journal:
- Verizon Wireless(VZ), Sprint Nextel(S) and other carriers have begun restricting Internet access to customers who use large amounts of wireless transmission capacity.
- US computer companies, such as Affordable Internet Services Online, are developing power-efficient products as they seek to drive down their energy costs.
- US Republicans plan a series of votes in Congress on energy-related proposals including measures to address vehicle fuel efficiency and opening new areas to oil drilling.
- XM Satellite Radio(XMSR) and Sirius Satellite Radio(SIRI) both started broadcasting between four and five years ago, and XM has had more success in getting institutions such as mutual funds to buy its shares.
NY Times:
- Christian leaders, who say author Dan Brown’s “Da Vinci Code” is a slander of Jesus Christ, are preparing a variety of protests against the Sony Pictures movie to be released May 19.
Washington Post:
- Some established immigrants in the US want to restrict newcomers, saying they aren’t properly assimilating with US society.
Reuters:
- The German economy grew .4% in the first quarter from the fourth quarter last year.
MarketWatch:
- Novartis AG plans to build a US plant that will use advanced technology to produce avian-flu vaccine faster for the US market.
Estrategia:
- Grupo Mexico SA, the biggest copper producer in Mexico, plans to begin exploring for new deposits of the metal in northern Chile.
AFP:
- European Union regulators plan to issue a formal complaint against Microsoft(MSFT) regarding the company’s fees for licensing Windows software.
21st Century Business Herald:
- China’s central bank may ask lenders to increase down payments for homes to as much as 50% of their value from a minimum 20% to curb prices.
Retail Sales Healthy, Job Market Strong, Inventories Rise
- Advance Retail Sales for April rose .5% versus estimates of a .8% gain and a .6% increase in March.
- Retail Sales Less Autos for April rose .7% versus estimates of a .9% increase and a .5% gain in March.
- Initial Jobless Claims for last week rose to 324K versus estimates of 315K and 325K the prior week.
- Continuing Claims fell to 2392K versus estimates of 2450K and 2441K prior.
- Business Inventories for March rose .7% versus estimates of a .5% increase and a .1% gain in February.
- Retail Sales Less Autos for April rose .7% versus estimates of a .9% increase and a .5% gain in March.
- Initial Jobless Claims for last week rose to 324K versus estimates of 315K and 325K the prior week.
- Continuing Claims fell to 2392K versus estimates of 2450K and 2441K prior.
- Business Inventories for March rose .7% versus estimates of a .5% increase and a .1% gain in February.
BOTTOM LINE: Sales at US retailers rose less than forecast in April as near-record gasoline prices drained Americans’ wallets, raising the odds the economy will slow, Bloomberg said. Retail sales account for almost half of all consumer spending, which in turn accounts for about 70% of the economy. The largest declines in sales last month were at auto dealers and building materials stores. Job and wage gains are more than offsetting higher fuel prices so far. I continue to believe retail sales will slow to average levels from robust rates through year-end.
The number of Americans filing first-time claims for unemployment benefits fell last week, a sign the labor market remains firm, Bloomberg said. The four-week average of jobless claims rose to 317,250 from 314,750 the prior week. The unemployment rate for those eligible to collect benefits, which tracks the US unemployment rate, declined to 1.8% from 1.9% the prior week. I still believe the labor market will remain healthy, but slow from recent strong rates.
Businesses in the US added to inventories in March to ensure enough goods were on hand to meet stronger corporate and consumer demand, Bloomberg reported. At the March sales pace, companies had enough goods on hand to last 1.26 months, still near a record low. Inventories at building material retailers rose 1.9% in March. Inventory rebuilding will likely continue to add to economic growth over the intermediate-term
Wednesday, May 10, 2006
Thursday Watch
Late-Night Headlines
Bloomberg:
- Toyota Motor(TM) said growth in vehicle sales will slow to 6% this fiscal year, held back by smaller increases in the US and Asia.
Financial Times:
- The increase in price of gold and silver cannot be maintained, citing an interview with Heraeus Holding GmbH CEO Helmut Eschwey. Heraeus Holding is a closely held German processor of precious metals.
- Baidu.com(BIDU) launched an online encyclopedia similar to Wikipedia in China that omits information censored by the government.
Dow Jones Newswires:
- Lehman Brothers Holdings(LH) is in talks to hire George Walker from Goldman Sachs Group(GS) to run its asset-management division.
San Francisco Chronicle:
- California’s record $11.3 billion take in personal income taxes was aided by Google Inc.(GOOG) as employees profited from its share growth.
AFP:
- France has rejected military action to stop Iran’s nuclear program, citing Prime Minister Dominique de Villepin.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.05%.
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/EPS Estimate
- (ADI)/.40
- (DISH)/.46
- (GES)/.32
- (JCP)/.88
- (KSS)/.45
- (NVDA)/.28
- (PSUN)/.16
- (URBN)/.15
- (VIA)/.39
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Advance Retail Sales for April are estimated to rise .8% versus a .6% increase in March.
- Retail Sales Less Autos for April are estimated to rise .9% versus a .4% increase in March.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 322K the prior week.
- Continuing Claims are estimated to fall to 2450K versus 2462K prior.
10:00 am EST
- Business Inventories for March are estimated to rise .5% versus unchanged in February.
10:30 am EST
- Bloomberg consensus estimates call for a weekly natural gas build of 79 bcf versus a 53 bcf build the prior week.
Bloomberg:
- Toyota Motor(TM) said growth in vehicle sales will slow to 6% this fiscal year, held back by smaller increases in the US and Asia.
Financial Times:
- The increase in price of gold and silver cannot be maintained, citing an interview with Heraeus Holding GmbH CEO Helmut Eschwey. Heraeus Holding is a closely held German processor of precious metals.
- Baidu.com(BIDU) launched an online encyclopedia similar to Wikipedia in China that omits information censored by the government.
Dow Jones Newswires:
- Lehman Brothers Holdings(LH) is in talks to hire George Walker from Goldman Sachs Group(GS) to run its asset-management division.
San Francisco Chronicle:
- California’s record $11.3 billion take in personal income taxes was aided by Google Inc.(GOOG) as employees profited from its share growth.
AFP:
- France has rejected military action to stop Iran’s nuclear program, citing Prime Minister Dominique de Villepin.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated -.05%.
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/EPS Estimate
- (ADI)/.40
- (DISH)/.46
- (GES)/.32
- (JCP)/.88
- (KSS)/.45
- (NVDA)/.28
- (PSUN)/.16
- (URBN)/.15
- (VIA)/.39
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Advance Retail Sales for April are estimated to rise .8% versus a .6% increase in March.
- Retail Sales Less Autos for April are estimated to rise .9% versus a .4% increase in March.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 322K the prior week.
- Continuing Claims are estimated to fall to 2450K versus 2462K prior.
10:00 am EST
- Business Inventories for March are estimated to rise .5% versus unchanged in February.
10:30 am EST
- Bloomberg consensus estimates call for a weekly natural gas build of 79 bcf versus a 53 bcf build the prior week.
BOTTOM LINE: Asian indices are mostly lower, weighed down by exporting stocks in the region. I expect US equities to open modestly lower and to trade modestly higher into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Stocks Finish Near Session Lows as Fed Hikes Rates for 16th Time
Indices
S&P 500 1,322.85 -.17%
DJIA 11,642.65 +.02%
NASDAQ 2,320.74 -.75%
Russell 2000 775.94 -.61%
Wilshire 5000 13,394.86 -.20%
S&P Barra Growth 610.48 -.30%
S&P Barra Value 710.78 -.05%
Morgan Stanley Consumer 616.99 -.22%
Morgan Stanley Cyclical 889.37 +.13%
Morgan Stanley Technology 538.35 -1.22%
Transports 4,991.24 -.15%
Utilities 408.70 +.69%
Put/Call .82 -1.20%
NYSE Arms 1.04 +18.57%
Volatility(VIX) 11.80 -1.58%
ISE Sentiment 151.00 -26.34%
US Dollar 84.47 -.42%
CRB 360.21 +1.49%
Futures Spot Prices
Crude Oil 72.15 +.03%
Unleaded Gasoline 216.60 -.16%
Natural Gas 6.90 unch.
Heating Oil 206.26 -.10%
Gold 709.30 +.54%
Base Metals 244.96 +3.60%
Copper 371.00 +.53%
10-year US Treasury Yield 5.12% +.04%
Leading Sectors
HMOs +1.88%
Homebuilders +.79%
Gold & Silver +.69%
Lagging Sectors
Biotech -1.35%
Wireless -1.72%
Semis -2.49%
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
Morgan Keegan:
- Upgraded COGT to Outperform.
Afternoon/Evening Headlines
Bloomberg:
- The US government’s April budget surplus rose to $118.9 billion, the largest for any month since 2001, as the fastest economic growth in more than two years buoyed tax revenue. The US budget deficit in fiscal 2005 narrowed for the first time since the stock market bubble burst and tax receipts began plunging in 2000. It finished 2005 at 2.6% of GDP, around the long-term average. The budget deficit is projected to come in at 2.2% of US GDP this year.
- Morgan Stanley(MS) violated federal law by destroying e-mails, comprising probes into IPOs and analysts’ research, the SEC said.
- Federal Reserve policy makers raised the main US interest rate to 5% and suggested they may not be finished with the nearly two-year run of increases.
- Oil rose above $72/bbl. in NY after the EIA reported US gasoline consumption increased last week. However, gasoline demand has now declined .1% over the past 4 weeks.
- The US Treasury today declined to brand China a manipulator of its currency.
S&P 500 1,322.85 -.17%
DJIA 11,642.65 +.02%
NASDAQ 2,320.74 -.75%
Russell 2000 775.94 -.61%
Wilshire 5000 13,394.86 -.20%
S&P Barra Growth 610.48 -.30%
S&P Barra Value 710.78 -.05%
Morgan Stanley Consumer 616.99 -.22%
Morgan Stanley Cyclical 889.37 +.13%
Morgan Stanley Technology 538.35 -1.22%
Transports 4,991.24 -.15%
Utilities 408.70 +.69%
Put/Call .82 -1.20%
NYSE Arms 1.04 +18.57%
Volatility(VIX) 11.80 -1.58%
ISE Sentiment 151.00 -26.34%
US Dollar 84.47 -.42%
CRB 360.21 +1.49%
Futures Spot Prices
Crude Oil 72.15 +.03%
Unleaded Gasoline 216.60 -.16%
Natural Gas 6.90 unch.
Heating Oil 206.26 -.10%
Gold 709.30 +.54%
Base Metals 244.96 +3.60%
Copper 371.00 +.53%
10-year US Treasury Yield 5.12% +.04%
Leading Sectors
HMOs +1.88%
Homebuilders +.79%
Gold & Silver +.69%
Lagging Sectors
Biotech -1.35%
Wireless -1.72%
Semis -2.49%
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
Morgan Keegan:
- Upgraded COGT to Outperform.
Afternoon/Evening Headlines
Bloomberg:
- The US government’s April budget surplus rose to $118.9 billion, the largest for any month since 2001, as the fastest economic growth in more than two years buoyed tax revenue. The US budget deficit in fiscal 2005 narrowed for the first time since the stock market bubble burst and tax receipts began plunging in 2000. It finished 2005 at 2.6% of GDP, around the long-term average. The budget deficit is projected to come in at 2.2% of US GDP this year.
- Morgan Stanley(MS) violated federal law by destroying e-mails, comprising probes into IPOs and analysts’ research, the SEC said.
- Federal Reserve policy makers raised the main US interest rate to 5% and suggested they may not be finished with the nearly two-year run of increases.
- Oil rose above $72/bbl. in NY after the EIA reported US gasoline consumption increased last week. However, gasoline demand has now declined .1% over the past 4 weeks.
- The US Treasury today declined to brand China a manipulator of its currency.
BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Retail longs and Semi longs. I added to my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished lower, sector performance was mostly negative and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bearish. Stocks temporarily rallied after the 10-year yield reversed lower, but could not maintain gains, which is a negative. It is also a negative that the U.S. dollar did not rally on the FOMC policy statement. Finally, a number of market-leading stocks remained weak throughout the day.
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