BOTTOM LINE: The Portfolio is about unchanged into the final hour as losses in my Retail longs and Medical longs are offsetting gains in my Index ETF shorts, Energy-related shorts and Base Metal shorts. I took profits in my (QQQQ) and (IWM) shorts this morning and then added back to them, thus leaving the Portfolio 25% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is above average. I posted a few weeks ago that the outperformance by the Morgan Stanley Cyclical Index (CYC) over the Morgan Stanley Consumer Index (CMR) had never been greater. The spread between the two peaked eight days later. Since then, the CYC is down 8.3%, while the CMR is down 2.8%. I expect this trend to continue over the intermediate term. I expect US stocks to trade mixed into the close from current levels as short-covering and bargain hunting offset economic worries.
Tuesday, June 06, 2006
Stocks Sharply Lower into Final Hour on Fed Comments and Housing Worries
Today's Headlines
Bloomberg:
- Iran’s top nuclear negotiator said there are “positive steps” in US-backed incentives aimed at persuading the Islamic Republic to hold international talks about ending the production of nuclear fuel.
- China is stepping up efforts to keep the uncensored version of Google’s(GOOG) Internet search engine from users in the country, a journalism advocacy group said. Internet users in major Chinese cities had problems connecting to Google.com in the past week. The site was unavailable to the whole country on May 31.
- Copper led declines in metals on speculation that the US will raise interest rates to fend off inflation, boosting borrowing costs that may curb demand for raw materials.
- Emerging-market stocks fell to their lowest level in almost five months after Fed Chairman Bernanke signaled borrowing costs will rise again, reducing the attractiveness of riskier assets.
- Qwest Communications(Q) will offer Windows Live antivirus software to high-speed Internet access customers, switching from McAfee(MFE) as Microsoft introduces expanded online programs this year.
- The dollar gained the most in almost three weeks against the euro and yen as traders increased their bets that the Fed will raise interest rates.
- The Federal Reserve Bank of Philadelphia named economics professor Plosser as president, giving new Fed Chairman Bernanke a fellow career academic to help make interest-rate decisions.
Wall Street Journal:
- US providers of ETFs plan to move on from oil and precious metals and offer more diverse commodity-related products.
- Intel Corp.(INTC) may sell a major part of its communications businesses in an effort to strengthen the company against competition in its main markets.
- GE’s(GE) NBC television is considering partnerships with Bolt.com and other popular video Web sites in an effort to attract younger viewers.
- Time Warner’s(TWX) cable television unit plans to upgrade as many as four million set-top boxes with software from OpenTV Corp.(OPTV), to allow for more applications from third-party providers.
NY Times:
- Former US president Clinton is set to appear at more than two dozen fund-raisers for Democrats around the country, seeking to collect at least $20 million.
Dow Jones Newswires:
- Japan’s Finance Minister Tanigaki said deflation isn’t over and the central bank should use caution in setting monetary policy.
USA Today:
- Motorcycles sales are increasing as consumers look to save money on gas by switching to fuel-saving forms of transportation, citing Motorcycle Industry Council statistics.
Washington Post:
- Iraqis are confident that their newly formed government will help curb violence in the country.
- The Senate Select Committee on Intelligence wants the country’s imagery intelligence agency to provide US soldiers with laptop computers that display pictures and video of what may lie ahead.
NY Post:
- Fulcrum Global Partners LLC, which charged for its stock research while most Wall Street firms provided it free, has closed after five years.
- Iran’s top nuclear negotiator said there are “positive steps” in US-backed incentives aimed at persuading the Islamic Republic to hold international talks about ending the production of nuclear fuel.
- China is stepping up efforts to keep the uncensored version of Google’s(GOOG) Internet search engine from users in the country, a journalism advocacy group said. Internet users in major Chinese cities had problems connecting to Google.com in the past week. The site was unavailable to the whole country on May 31.
- Copper led declines in metals on speculation that the US will raise interest rates to fend off inflation, boosting borrowing costs that may curb demand for raw materials.
- Emerging-market stocks fell to their lowest level in almost five months after Fed Chairman Bernanke signaled borrowing costs will rise again, reducing the attractiveness of riskier assets.
- Qwest Communications(Q) will offer Windows Live antivirus software to high-speed Internet access customers, switching from McAfee(MFE) as Microsoft introduces expanded online programs this year.
- The dollar gained the most in almost three weeks against the euro and yen as traders increased their bets that the Fed will raise interest rates.
- The Federal Reserve Bank of Philadelphia named economics professor Plosser as president, giving new Fed Chairman Bernanke a fellow career academic to help make interest-rate decisions.
Wall Street Journal:
- US providers of ETFs plan to move on from oil and precious metals and offer more diverse commodity-related products.
- Intel Corp.(INTC) may sell a major part of its communications businesses in an effort to strengthen the company against competition in its main markets.
- GE’s(GE) NBC television is considering partnerships with Bolt.com and other popular video Web sites in an effort to attract younger viewers.
- Time Warner’s(TWX) cable television unit plans to upgrade as many as four million set-top boxes with software from OpenTV Corp.(OPTV), to allow for more applications from third-party providers.
NY Times:
- Former US president Clinton is set to appear at more than two dozen fund-raisers for Democrats around the country, seeking to collect at least $20 million.
Dow Jones Newswires:
- Japan’s Finance Minister Tanigaki said deflation isn’t over and the central bank should use caution in setting monetary policy.
USA Today:
- Motorcycles sales are increasing as consumers look to save money on gas by switching to fuel-saving forms of transportation, citing Motorcycle Industry Council statistics.
Washington Post:
- Iraqis are confident that their newly formed government will help curb violence in the country.
- The Senate Select Committee on Intelligence wants the country’s imagery intelligence agency to provide US soldiers with laptop computers that display pictures and video of what may lie ahead.
NY Post:
- Fulcrum Global Partners LLC, which charged for its stock research while most Wall Street firms provided it free, has closed after five years.
Monday, June 05, 2006
Tuesday Watch
Late-Night Headlines
Bloomberg:
- Brazilian, Mexican and Argentine stocks led a decline in Latin American markets as high oil prices raised concern that world economic growth will slow, cutting demand for the region’s commodities.
- Google(GOOG) will offer users a tool for creating and sharing spreadsheets on the Web, pressing the challenge to Microsoft(MSFT).
- Intel Corp.(INTC) will make a pitch for loyalty from its customers at the biggest gathering of chip buyers in Asia, after slumping to its lowest market share this decade.
Financial Times:
- General Motors(GM) said faster-than-expected voluntary redundancies by staff could enable it to lower prices or increase spending on technology, citing CEO Wagoner.
- SAP AG plans to remain independent and doesn’t expect any US industry players to aim to buy the world’s largest business-management software maker, citing CEO Kagermann.
AP:
- The Somalian capital of Mogadishu was seized by an Islamic military group that may be linked to the al-Qaeda terrorist group.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are -1.25% to -.75% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated +.14%.
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
- (ABM)/.19
- (COO)/.70
- (DSW)/.35
- (KFY)/.29
- (LZB)/.30
- (MATK)/.16
- (VTS)/.71
Upcoming Splits
- (CRI) 2-for-1
- (RIO) 2-for-1
- (HUBG) 2-for-1
Economic Releases
- None of note
Bloomberg:
- Brazilian, Mexican and Argentine stocks led a decline in Latin American markets as high oil prices raised concern that world economic growth will slow, cutting demand for the region’s commodities.
- Google(GOOG) will offer users a tool for creating and sharing spreadsheets on the Web, pressing the challenge to Microsoft(MSFT).
- Intel Corp.(INTC) will make a pitch for loyalty from its customers at the biggest gathering of chip buyers in Asia, after slumping to its lowest market share this decade.
Financial Times:
- General Motors(GM) said faster-than-expected voluntary redundancies by staff could enable it to lower prices or increase spending on technology, citing CEO Wagoner.
- SAP AG plans to remain independent and doesn’t expect any US industry players to aim to buy the world’s largest business-management software maker, citing CEO Kagermann.
AP:
- The Somalian capital of Mogadishu was seized by an Islamic military group that may be linked to the al-Qaeda terrorist group.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are -1.25% to -.75% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated +.14%.
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
- (ABM)/.19
- (COO)/.70
- (DSW)/.35
- (KFY)/.29
- (LZB)/.30
- (MATK)/.16
- (VTS)/.71
Upcoming Splits
- (CRI) 2-for-1
- (RIO) 2-for-1
- (HUBG) 2-for-1
Economic Releases
- None of note
BOTTOM LINE: Asian indices are lower, pressured by commodity and automaker stocks in the region. I expect US equities to open modestly lower and to rise into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.
Stocks Finish at Session Lows after Hawkish Fed Comments
Indices
S&P 500 1,265.29 -1.78%
DJIA 11,048.72 -1.77%
NASDAQ 2,169.62 -2.24%
Russell 2000 713.92 -3.19%
Wilshire 5000 12,754.91 -1.89%
S&P Barra Growth 584.56 -1.74%
S&P Barra Value 679.12 -1.82%
Morgan Stanley Consumer 600.97 -1.41%
Morgan Stanley Cyclical 826.75 -2.51%
Morgan Stanley Technology 498.93 -2.19%
Transports 4,619.53 -2.99%
Utilities 411.77 -.99%
Put/Call 1.21 unch.
NYSE Arms 2.75 +112.37%
Volatility(VIX) 16.65 +16.27%
ISE Sentiment 126.00 +15.60%
US Dollar 84.18 +.17%
CRB 348.78 -.36%
Futures Spot Prices
Crude Oil 72.42 -.25%
Unleaded Gasoline 216.00 -.19%
Natural Gas 6.43 -.51%
Heating Oil 203.50 -.38%
Gold 641.20 -1.17%
Base Metals 225.29 -1.26%
Copper 354.50 -1.56%
10-year US Treasury Yield 5.02% +.60%
Leading Sectors
REITs +.38%
Telecom -.93%
Utilities -.99%
Lagging Sectors
Oil Service -3.68%
Homebuilders -3.93%
Steel -5.82%
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
Piper Jaffray:
- Cut (ELN) to Underperform.
Afternoon/Evening Headlines
Bloomberg:
- Futures traders raised bets the Fed will lift its benchmark interest rate to 5.25% this month after Chairman Bernanke said signs of inflation “are unwelcome.” The increase signals traders see a 76% chance of a quarter-point increase from 5% a the next Fed policy meeting June 28-29.
S&P 500 1,265.29 -1.78%
DJIA 11,048.72 -1.77%
NASDAQ 2,169.62 -2.24%
Russell 2000 713.92 -3.19%
Wilshire 5000 12,754.91 -1.89%
S&P Barra Growth 584.56 -1.74%
S&P Barra Value 679.12 -1.82%
Morgan Stanley Consumer 600.97 -1.41%
Morgan Stanley Cyclical 826.75 -2.51%
Morgan Stanley Technology 498.93 -2.19%
Transports 4,619.53 -2.99%
Utilities 411.77 -.99%
Put/Call 1.21 unch.
NYSE Arms 2.75 +112.37%
Volatility(VIX) 16.65 +16.27%
ISE Sentiment 126.00 +15.60%
US Dollar 84.18 +.17%
CRB 348.78 -.36%
Futures Spot Prices
Crude Oil 72.42 -.25%
Unleaded Gasoline 216.00 -.19%
Natural Gas 6.43 -.51%
Heating Oil 203.50 -.38%
Gold 641.20 -1.17%
Base Metals 225.29 -1.26%
Copper 354.50 -1.56%
10-year US Treasury Yield 5.02% +.60%
Leading Sectors
REITs +.38%
Telecom -.93%
Utilities -.99%
Lagging Sectors
Oil Service -3.68%
Homebuilders -3.93%
Steel -5.82%
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
Piper Jaffray:
- Cut (ELN) to Underperform.
Afternoon/Evening Headlines
Bloomberg:
- Futures traders raised bets the Fed will lift its benchmark interest rate to 5.25% this month after Chairman Bernanke said signs of inflation “are unwelcome.” The increase signals traders see a 76% chance of a quarter-point increase from 5% a the next Fed policy meeting June 28-29.
BOTTOM LINE: The Portfolio finished lower today on losses in my Semi longs, Medical longs and Retail longs. I added to my (QQQQ) and (IWM) shorts in the final hour, thus leaving the Portfolio 25% net long. The tone of the market was very negative today as the advance/decline line finished lower, almost every sector fell and volume was below average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bearish. The fact that volume was light today is a negative, in my opinion. As well, the 10-year yield finished modestly higher despite the sell-off in equities. There were a few positives. Oil traded .19 lower, despite production disruption fears, and continues to act very toppy. The U.S. dollar index finished at session highs after Bernanke's unexpectedly hawkish commentary. Finally, the NYSE Arms finished at 2.81, an elevated level, and the VIX spiked 17%. I continue to believe the most economically sensitive companies have further to go on the downside and will underperform over the intermediate-term.
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