Indices
S&P 500 1,288.22 +1.21%
DJIA 11,247.87 +.33%
NASDAQ 2,219.41 +.96%
Russell 2000 737.45 +1.64%
Wilshire 5000 13,000.38 +1.42%
S&P Equity Long/Short Index 1,152.42 -.10%
S&P Barra Growth 594.91 +.64%
S&P Barra Value 691.71 +1.76%
Morgan Stanley Consumer 609.56 +.43%
Morgan Stanley Cyclical 848.00 +1.65%
Morgan Stanley Technology 510.12 +.58%
Transports 4,762.08 +2.47%
Utilities 415.90 +4.14%
S&P 500 Cum A/D Line 7,729.0 +2.0%
Bloomberg Crude Oil % Bulls 25.0 -36.11%
Put/Call 1.21 +42.35%
NYSE Arms 1.28 +118.97%
Volatility(VIX) 14.32 -7.61%
ISE Sentiment 109.00 -32.12%
AAII % Bulls 30.77 -6.87%
AAII % Bears 50.0 +9.79%
US Dollar 84.04 -.81%
CRB 350.05 +1.07%
ECRI Weekly Leading Index 136.40 -.44%
Futures Spot Prices
Crude Oil 72.75 +1.75%
Unleaded Gasoline 220.45 +4.51%
Natural Gas 6.69 +8.40%
Heating Oil 203.20 +1.45%
Gold 643.00 -2.37%
Base Metals 228.18 -5.40%
Copper 358.50 -6.38%
10-year US Treasury Yield 4.99% -1.19%
Average 30-year Mortgage Rate 6.67% +.76%
Leading Sectors
HMOs +4.16%
Utilities +4.14%
Steel +3.92%
Biotech +3.62%
Oil Service +3.60%
Lagging Sectors
Restaurants -.02%
Disk Drives -.97%
Software -1.11%
Homebuilders -1.27%
Internet -1.59%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
Friday, June 02, 2006
Stocks Slightly Lower into Final Hour on Rise in Oil and Economic Worries
BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Retail longs, Internet longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is mixed as the advance/decline line is about even, sector performance is mixed and volume is above average. The yield on the 10-year Treasury note is at session lows, falling 11 basis points to 4.98%. I expect lower long-term rates will eventually result in P/E multiple expansion for the broad market, especially those companies that can generate above-average growth in a slower economy. I expect US stocks to trade modestly higher into the close from current levels on short-covering and lower long-term rates.
Today's Headlines
Bloomberg:
- NYSE Group(NYX) wants to increase the cost of trading on the floor of the NYSE as part of an effort to drive more transactions to its electronic market.
- Hedge fund managers gave up about half of this year’s gains in May as prices for stocks, oil and metals fell, investors said.
- Pulte Homes(PHM) cut its forecast for 2006 earnings after orders for April and May fell 29% from a year earlier.
- US Treasuries surged after a government report showed employers added fewer workers than forecast for a second month, prompting traders to pare bets the Federal Reserve will raise interest rates at its next meeting.
- Federal Reserve Bank of Chicago President Michael Moskow said interest rate decisions won’t be a “mechanical reaction” to inflation or job figures and that smaller employment gains can support sustained economic growth.
- Crude oil is rising more than a $1/bbl. because of an attack on a Nigerian oil rig and doubts that Iran will embrace new US-backed efforts to rein in the country’s nuclear research.
Wall Street Journal:
- Microsoft(MSFT) and Adobe Systems(ADBE) may confront each other over software used for creating electronic documents.
- Experimental gene-based drugs nearing sales approval may offer strong competition to existing cancer treatments that have been among the fastest-growing medications on the market.
- CVS Corp.(CVS) CEO Tom Ryan said he isn’t worried by credit-rating companies’ recent downgrades of CVS debt, and the drugstore company is planning more acquisitions.
- Experimental gene-based drugs nearing sales approval may offer strong competition to existing cancer treatments that have been among the fastest-growing medications on the market.
NY Times:
- School performance in NYC’s Harlem neighborhood has improved during the past seven years as more privately operated charter schools are opened.
NY Post:
- NY’s Metropolitan Transportation Authority plans to start testing next month a program sponsored by MasterCard and Citigroup(C) that uses smart cards to pay for subway rides.
Boston Herald:
- Fidelity Investments may create as many as 4,000 jobs in North Carolina as part of a plan for a new office complex in the Raleigh area.
Telegraph:
- India’s government, faced with the prospect of accelerating inflation, may allow interest rates to rise and curb prices.
Globe and Mail:
- Newfoundland has increased by 40% its estimate of the amount of oil and gas at two offshore fields.
- NYSE Group(NYX) wants to increase the cost of trading on the floor of the NYSE as part of an effort to drive more transactions to its electronic market.
- Hedge fund managers gave up about half of this year’s gains in May as prices for stocks, oil and metals fell, investors said.
- Pulte Homes(PHM) cut its forecast for 2006 earnings after orders for April and May fell 29% from a year earlier.
- US Treasuries surged after a government report showed employers added fewer workers than forecast for a second month, prompting traders to pare bets the Federal Reserve will raise interest rates at its next meeting.
- Federal Reserve Bank of Chicago President Michael Moskow said interest rate decisions won’t be a “mechanical reaction” to inflation or job figures and that smaller employment gains can support sustained economic growth.
- Crude oil is rising more than a $1/bbl. because of an attack on a Nigerian oil rig and doubts that Iran will embrace new US-backed efforts to rein in the country’s nuclear research.
Wall Street Journal:
- Microsoft(MSFT) and Adobe Systems(ADBE) may confront each other over software used for creating electronic documents.
- Experimental gene-based drugs nearing sales approval may offer strong competition to existing cancer treatments that have been among the fastest-growing medications on the market.
- CVS Corp.(CVS) CEO Tom Ryan said he isn’t worried by credit-rating companies’ recent downgrades of CVS debt, and the drugstore company is planning more acquisitions.
- Experimental gene-based drugs nearing sales approval may offer strong competition to existing cancer treatments that have been among the fastest-growing medications on the market.
NY Times:
- School performance in NYC’s Harlem neighborhood has improved during the past seven years as more privately operated charter schools are opened.
NY Post:
- NY’s Metropolitan Transportation Authority plans to start testing next month a program sponsored by MasterCard and Citigroup(C) that uses smart cards to pay for subway rides.
Boston Herald:
- Fidelity Investments may create as many as 4,000 jobs in North Carolina as part of a plan for a new office complex in the Raleigh area.
Telegraph:
- India’s government, faced with the prospect of accelerating inflation, may allow interest rates to rise and curb prices.
Globe and Mail:
- Newfoundland has increased by 40% its estimate of the amount of oil and gas at two offshore fields.
Job Growth Slows, Manufacturing Pulls Back after Surge
- The Change in Non-farm Payrolls for May was 75K versus estimates of 170K and 126K in April.
- The Change in Manufacturing Payrolls for May fell 14K versus estimates of 5K and 19K in April.
- The Unemployment Rate for May fell to 4.6% versus estimates of 4.7% and 4.7% in April.
- Average Hourly Earnings for May rose .1% versus estimates of a .3% increase and a .6% gain in April.
- Factory Orders for April fell 1.8% versus estimates of a 2.1% decline and a 4.0% gain in March.
- The Change in Manufacturing Payrolls for May fell 14K versus estimates of 5K and 19K in April.
- The Unemployment Rate for May fell to 4.6% versus estimates of 4.7% and 4.7% in April.
- Average Hourly Earnings for May rose .1% versus estimates of a .3% increase and a .6% gain in April.
- Factory Orders for April fell 1.8% versus estimates of a 2.1% decline and a 4.0% gain in March.
BOTTOM LINE: The US economy added fewer jobs than expected for a second month in May and wage growth slowed, Bloomberg reported. Smaller wage gains increase the probability of a Fed “pause” as unit labor costs make up two-thirds of inflation. The labor force participation rate remained at 66.1% for the fourth consecutive month. I continue to believe the labor market is slowing, but will remain relatively healthy without generating substantial unit labor cost increases.
Orders placed with US factories fell 1.8% in April, led by aircraft and computers, Bloomberg reported. Excluding transportation equipment, orders rose .2%. Orders for capital goods excluding aircraft, a gauge of future business activity, fell 1.7% versus a 3.4% gain the prior month. The inventory-to-shipments ratio rose to 1.17 months, the highest since July 2005. I continue to believe manufacturing is slowing to more average rates.
Thursday, June 01, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- The US, China, Russia and three European powers have agreed on “far-reaching proposals” in an attempt to persuade Iran to curtail its nuclear program.
- NYSE Group(NYX) agreed to buy Euronext NV for $9.96 billion, forming the first transatlantic stock exchange and edging out a rival bid by Deutsche Boerse AG.
- Japanese shares declined after Nikkei English News said prosecutors in Tokyo are examining whether an investment fund overseen by shareholder activist Yoshiaki Murakami violated Japanese securities law.
- Vonage Holdings(VG) customers who want to back out of last week’s IPO by the Internet phone company may have a legal basis for doing so.
- Copper futures in Shanghai fell for a third day on concern a Chinese government agency may sell as much as 100,000 metric tons of the metal from its stockpiles.
- Crude oil may decline for a second week on signs that rising inventories and higher refinery output will meet gasoline demand during the US summer driving season, a Bloomberg survey showed.
Financial Times:
- GlaxoSmithKline Plc(GSK), Europe’s largest drugmaker, plans to bid over $15 billion for Pfizer’s(PFE) consumer health care unit.
Late Buy/Sell Recommendations
ThinkEquity Partners:
- Rated (AIRN) Buy, target $8.
- Rated (MTLK) Buy, target $9.
Merrill Lynch:
- Raised (AUO) to Buy.
Business Week:
- IPass Inc.(IPAS) shares may climb as shareholders urge the software maker to improve corporate governance, citing Eric Appell, an analyst at Merriman Curhan Ford & Co.
- Forest Labs(FRX), maker of drugs for depression, pain and cardiovascular and respiratory disorders, is poised to grow after declining 8.7% this year, citing Kavita Thomas of First Global Markets.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated -.16%.
NASDAQ 100 indicated -.12%.
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
- None of note
Upcoming Splits
- (BRY) 2-for-1
- (MFC) 2-for-1
- (SCSC) 2-for-1
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for May is estimated at 170K versus 138K in April.
- The Change in Manufacturing Payrolls for May is estimated at 5K versus 19K in April.
- The Unemployment Rate for May is estimated at 4.7% versus 4.7% in April.
- Average Hourly Earnings for May are estimated to rise .3% versus a .5% gain in April.
10:00 am EST
- Factory Orders for April are estimated to fall 2.1% versus a 4.1% gain in March.
Bloomberg:
- The US, China, Russia and three European powers have agreed on “far-reaching proposals” in an attempt to persuade Iran to curtail its nuclear program.
- NYSE Group(NYX) agreed to buy Euronext NV for $9.96 billion, forming the first transatlantic stock exchange and edging out a rival bid by Deutsche Boerse AG.
- Japanese shares declined after Nikkei English News said prosecutors in Tokyo are examining whether an investment fund overseen by shareholder activist Yoshiaki Murakami violated Japanese securities law.
- Vonage Holdings(VG) customers who want to back out of last week’s IPO by the Internet phone company may have a legal basis for doing so.
- Copper futures in Shanghai fell for a third day on concern a Chinese government agency may sell as much as 100,000 metric tons of the metal from its stockpiles.
- Crude oil may decline for a second week on signs that rising inventories and higher refinery output will meet gasoline demand during the US summer driving season, a Bloomberg survey showed.
Financial Times:
- GlaxoSmithKline Plc(GSK), Europe’s largest drugmaker, plans to bid over $15 billion for Pfizer’s(PFE) consumer health care unit.
Late Buy/Sell Recommendations
ThinkEquity Partners:
- Rated (AIRN) Buy, target $8.
- Rated (MTLK) Buy, target $9.
Merrill Lynch:
- Raised (AUO) to Buy.
Business Week:
- IPass Inc.(IPAS) shares may climb as shareholders urge the software maker to improve corporate governance, citing Eric Appell, an analyst at Merriman Curhan Ford & Co.
- Forest Labs(FRX), maker of drugs for depression, pain and cardiovascular and respiratory disorders, is poised to grow after declining 8.7% this year, citing Kavita Thomas of First Global Markets.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated -.16%.
NASDAQ 100 indicated -.12%.
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
- None of note
Upcoming Splits
- (BRY) 2-for-1
- (MFC) 2-for-1
- (SCSC) 2-for-1
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for May is estimated at 170K versus 138K in April.
- The Change in Manufacturing Payrolls for May is estimated at 5K versus 19K in April.
- The Unemployment Rate for May is estimated at 4.7% versus 4.7% in April.
- Average Hourly Earnings for May are estimated to rise .3% versus a .5% gain in April.
10:00 am EST
- Factory Orders for April are estimated to fall 2.1% versus a 4.1% gain in March.
BOTTOM LINE: Asian indices are mixed as losses in commodity stocks are being offset by gains in exporters in the region. I expect US equities to open modestly lower and to rise into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
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