BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Networking longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is lower and volume is below average. The Fed's Fisher just finished speaking on CNBC. He said he doesn't see any signs of stagflation. Stagflation is defined as negative or stagnate growth, accompanied by high unemployment and high prices. Growth in the first quarter was a booming 5.6%. Unemployment is 4.6%, low by historic standards. Inflation is modestly above long-term average levels, not high. As I said last week, the U.S .economy is nowhere near a stagflationary state. The fact that we are seriously discussing stagflation at this point is a direct by-product of the negativity bubble and the record number of market participants who perceive that they benefit from a declining or stagnate U.S. stock market. I expect US stocks to trade modestly higher into the close from current levels on lower energy prices, short-covering and bargain hunting.
Monday, June 19, 2006
Stocks Lower into Final Hour on Housing Worries
Today's Headlines
Bloomberg:
- Vonage Holding(VON), a pioneer of Internet phone service, was sued by Verizon Communications(VZ) for infringing seven patents related to its VoIP technology.
- Copper is falling, leading a slump in metal prices, on speculation that rising global interest rates will slow demand for commodities used in cars, appliances and homes.
- Confidence among US homebuilders fell this month to the lowest since 1995.
- Crude oil is falling on speculation that tensions between the US and Iran may ease as the Islamic republic shows signs of curbing its nuclear program.
- The US dollar rose to an eight-week high against the yen and climbed versus the euro on growing speculation that the Fed will raise rates at least twice more this year.
Wall Street Journal:
- US charitable donations rose about 6% last year to $260.3 billion, the biggest increase since 2000. Donations to humanitarian services rose 32% to $25.4 billion, marking the single biggest increase in any one category. Donations by corporations soared 22.5% to $13.8 billion.
- AT&T and EchoStar Communications(DISH) plan to start an Internet-based television service next month.
- US companies that have changed 401k retirement program providers in the past two years are more often choosing mutual-fund companies over banks and financial-planning firms.
NY Times:
- Nestle SA plans to announce today that it agreed to buy weight-loss company Jenny Craig(JCGI) for $600 million.
- Hasbro(HAS) plans to extend its Playskool toy brand into infant-care products as sales of action figures and board games fell.
NY Post:
- Revenue at the top 10 cable networks tripled in the last decade to an average of slightly less than $1.5 billion last year.
Albany Times:
- NY State my offer a $1.2 billion package of incentives to Advanced Micro Devices(AMD) to attract a computer chip plant.
Financial Times:
- AstraZeneca’s(AZN) Crestor cholesterol treatment is not as effective as Vytorin, produced by Merck(MRK) and Schering-Plough(SGP), citing a study presented yesterday at the Intl. Symposium on Atherosclerosis in Rome.
- Iran is ready to limit uranium enrichment provided a suspension of the work isn’t a condition for talks on a US-backed plan to resolve the dispute over the nuclear program.
- Vonage Holding(VON), a pioneer of Internet phone service, was sued by Verizon Communications(VZ) for infringing seven patents related to its VoIP technology.
- Copper is falling, leading a slump in metal prices, on speculation that rising global interest rates will slow demand for commodities used in cars, appliances and homes.
- Confidence among US homebuilders fell this month to the lowest since 1995.
- Crude oil is falling on speculation that tensions between the US and Iran may ease as the Islamic republic shows signs of curbing its nuclear program.
- The US dollar rose to an eight-week high against the yen and climbed versus the euro on growing speculation that the Fed will raise rates at least twice more this year.
Wall Street Journal:
- US charitable donations rose about 6% last year to $260.3 billion, the biggest increase since 2000. Donations to humanitarian services rose 32% to $25.4 billion, marking the single biggest increase in any one category. Donations by corporations soared 22.5% to $13.8 billion.
- AT&T and EchoStar Communications(DISH) plan to start an Internet-based television service next month.
- US companies that have changed 401k retirement program providers in the past two years are more often choosing mutual-fund companies over banks and financial-planning firms.
NY Times:
- Nestle SA plans to announce today that it agreed to buy weight-loss company Jenny Craig(JCGI) for $600 million.
- Hasbro(HAS) plans to extend its Playskool toy brand into infant-care products as sales of action figures and board games fell.
NY Post:
- Revenue at the top 10 cable networks tripled in the last decade to an average of slightly less than $1.5 billion last year.
Albany Times:
- NY State my offer a $1.2 billion package of incentives to Advanced Micro Devices(AMD) to attract a computer chip plant.
Financial Times:
- AstraZeneca’s(AZN) Crestor cholesterol treatment is not as effective as Vytorin, produced by Merck(MRK) and Schering-Plough(SGP), citing a study presented yesterday at the Intl. Symposium on Atherosclerosis in Rome.
- Iran is ready to limit uranium enrichment provided a suspension of the work isn’t a condition for talks on a US-backed plan to resolve the dispute over the nuclear program.
Sunday, June 18, 2006
Monday Watch
Weekend Headlines
Bloomberg:
- Lord Browne, CEO of oil giant BP Plc, believes that despite claims to the contrary, the world is not running out of oil, and argues that the price of oil is being pushed higher by such “unfounded” claims. Browne forecasts that oil prices could fall as low as $25-$30/bbl. in the long-term, while falling to around $40 in the near-term.
- Global spare oil production capacity may double within 3 years, helping reduce the “fear premium” that is helping boost oil prices, according to BP Plc, Europe’s largest oil company.
- Indian stocks may be too expensive even after plunging from records set last month, and many of the region’s analysts say the market will fail to extend the biggest two-day rally in two years.
- Australian Prime Minister John Howard will not withdraw troops when Iraqi soldiers take over security in southern Iraq, as they are needed for backup.
- Eni SpA and Union Fenosa SA, partners in a liquefied natural gas plan on Egypt’s Mediterranean coast, will spend $1.5 billion to add a second production line and increase sales of the fuel to the US and Europe.
- Asian companies sold a record amount of new stock in the first five months of this year and paid the lowest fees ever as investment banks including Goldman Sachs(GS), Citigroup(C) and UBS AG(UBS) fought for new clients.
- Most Americans would regard an immediate pullout of US troops form Iraq as an “unmitigated disaster,” White House spokesman Tony Snow said, rejecting calls from Democrats for the Bush administration to set a timetable for withdrawal. According to a recent USA Today/Gallup poll, only 17% of Americans want an immediate US withdrawal.
- Bank of China Ltd., the nation’s second-biggest lender by assets, plans to sell as much as $3.9 billion of stock in the nation’s biggest domestic share sale.
- China’s stocks and bonds may fall after the government ordered banks to increase reserves to help curb an investment boom in real estate and factories in the country.
- Goldman Sachs(GS) named Gary Cohn and Jon Winkelried its new co-presidents and chief operating officers, giving Lloyd Blankfein deputies with experience in both trading and investment banking.
- The US dollar rose to an eight-week high against the yen and climbed versus the euro on speculation Federal Reserve Bank of Atlanta President Jack Guynn in a speech today will be upbeat about US economic growth.
- The yen fell to a record agasint the euro on concern lawmakers will put pressure on Bank of Japan Governor Fukui to resign over his investment in a fund founded by Yoshiaki Murakami, who was jailed for insider trading.
Wall Street Journal:
- Nokia Oyj(NOK) and Siemens AG agreed to combine their equipment units in a deal worth about $31.6 billion.
NY Times:
- General Electric(GE) is investing in its domestic appliance business to win customers who have traditionally gone after more stylish, high-end brands.
- Mississippi has benefited from an increase in oilfield activity as companies seek to take advantage of higher oil prices by drilling for new wells or restarting abandoned wells.
- Mexico’s deportations and detentions rose 74% to 240,000 in the past four years, almost half from illegal entries across its southern border with Guatemala.
- US National Guard troops are beginning to arrive in the four states bordering Mexico to help bolster security as the Border Patrol seeks to hire more agents to prevent illegal border crossings.
- Board members of the ACLU are discussing proposals aimed at prohibiting members from criticizing the organization’s policies and operations.
- Altria Group(MO) Senior VP Parrish said the company may push one more time next year for US FDA regulation of tobacco.
San Francisco Chronicle:
- Gap Inc.(GPS) is poised to introduce a new line of clothing at its flagship Gap division next month as the company strives to revive quality and sales.
Newsweek:
- A team of al-Qaeda terrorists planned a 2003 cyanide attack on the New York subway system that was called off by the terrorist group’s No. 2 leader, citing government officials and a new book by author Ron Suskind.
Barron’s:
- NetRatings(NTRT), a company that measures audiences on the Internet, may be taken private, possibly at a premium to its current share price.
Reuters:
- Investors ignore warnings in volatile markets.
Sunday Times:
- NYSE Group’s(NYX) merger with Euronext NV, the Paris-based European stock exchange, may fall apart amid European political opposition and declining stock markets.
London-based Times:
- London may become the focal point of Google’s(GOOG) next growth phase as the Internet search engine expands its mobile division, citing senior executives at the company.
Daily Graphic:
- Golden Star Resources Ltd. expects to boost gold production by 50% to 300,000 ounces this year, citing company spokesman Magnus Adjah-Kodjoe.
Xinhua News Agency:
- China plans to increase its use of solar power, biomass power and other forms of renewable energy to 16% of its total supply in the next 15 years.
Tehran Times:
- Iran is likely to sign oil development contracts with China in the “coming days."
Weekend Recommendations
Barron's:
- Had positive comments on (COF), (RIO) and (RTP).
- Had negative comments on (LTRE).
Night Trading
Asian indices are -.75% to -.25% on average.
S&P 500 indicated +.04%
NASDAQ 100 indicated +.16%.
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/Estimate
- (KMX)/.38
- (CC)/.00
Upcoming Splits
- (IFO) 2-for-1
Economic Releases
1:00 pm EST
- The NAHB Housing Market Index for June is estimated at 45 versus a reading of 45 in May.
Bloomberg:
- Lord Browne, CEO of oil giant BP Plc, believes that despite claims to the contrary, the world is not running out of oil, and argues that the price of oil is being pushed higher by such “unfounded” claims. Browne forecasts that oil prices could fall as low as $25-$30/bbl. in the long-term, while falling to around $40 in the near-term.
- Global spare oil production capacity may double within 3 years, helping reduce the “fear premium” that is helping boost oil prices, according to BP Plc, Europe’s largest oil company.
- Indian stocks may be too expensive even after plunging from records set last month, and many of the region’s analysts say the market will fail to extend the biggest two-day rally in two years.
- Australian Prime Minister John Howard will not withdraw troops when Iraqi soldiers take over security in southern Iraq, as they are needed for backup.
- Eni SpA and Union Fenosa SA, partners in a liquefied natural gas plan on Egypt’s Mediterranean coast, will spend $1.5 billion to add a second production line and increase sales of the fuel to the US and Europe.
- Asian companies sold a record amount of new stock in the first five months of this year and paid the lowest fees ever as investment banks including Goldman Sachs(GS), Citigroup(C) and UBS AG(UBS) fought for new clients.
- Most Americans would regard an immediate pullout of US troops form Iraq as an “unmitigated disaster,” White House spokesman Tony Snow said, rejecting calls from Democrats for the Bush administration to set a timetable for withdrawal. According to a recent USA Today/Gallup poll, only 17% of Americans want an immediate US withdrawal.
- Bank of China Ltd., the nation’s second-biggest lender by assets, plans to sell as much as $3.9 billion of stock in the nation’s biggest domestic share sale.
- China’s stocks and bonds may fall after the government ordered banks to increase reserves to help curb an investment boom in real estate and factories in the country.
- Goldman Sachs(GS) named Gary Cohn and Jon Winkelried its new co-presidents and chief operating officers, giving Lloyd Blankfein deputies with experience in both trading and investment banking.
- The US dollar rose to an eight-week high against the yen and climbed versus the euro on speculation Federal Reserve Bank of Atlanta President Jack Guynn in a speech today will be upbeat about US economic growth.
- The yen fell to a record agasint the euro on concern lawmakers will put pressure on Bank of Japan Governor Fukui to resign over his investment in a fund founded by Yoshiaki Murakami, who was jailed for insider trading.
Wall Street Journal:
- Nokia Oyj(NOK) and Siemens AG agreed to combine their equipment units in a deal worth about $31.6 billion.
NY Times:
- General Electric(GE) is investing in its domestic appliance business to win customers who have traditionally gone after more stylish, high-end brands.
- Mississippi has benefited from an increase in oilfield activity as companies seek to take advantage of higher oil prices by drilling for new wells or restarting abandoned wells.
- Mexico’s deportations and detentions rose 74% to 240,000 in the past four years, almost half from illegal entries across its southern border with Guatemala.
- US National Guard troops are beginning to arrive in the four states bordering Mexico to help bolster security as the Border Patrol seeks to hire more agents to prevent illegal border crossings.
- Board members of the ACLU are discussing proposals aimed at prohibiting members from criticizing the organization’s policies and operations.
- Altria Group(MO) Senior VP Parrish said the company may push one more time next year for US FDA regulation of tobacco.
San Francisco Chronicle:
- Gap Inc.(GPS) is poised to introduce a new line of clothing at its flagship Gap division next month as the company strives to revive quality and sales.
Newsweek:
- A team of al-Qaeda terrorists planned a 2003 cyanide attack on the New York subway system that was called off by the terrorist group’s No. 2 leader, citing government officials and a new book by author Ron Suskind.
Barron’s:
- NetRatings(NTRT), a company that measures audiences on the Internet, may be taken private, possibly at a premium to its current share price.
Reuters:
- Investors ignore warnings in volatile markets.
Sunday Times:
- NYSE Group’s(NYX) merger with Euronext NV, the Paris-based European stock exchange, may fall apart amid European political opposition and declining stock markets.
London-based Times:
- London may become the focal point of Google’s(GOOG) next growth phase as the Internet search engine expands its mobile division, citing senior executives at the company.
Daily Graphic:
- Golden Star Resources Ltd. expects to boost gold production by 50% to 300,000 ounces this year, citing company spokesman Magnus Adjah-Kodjoe.
Xinhua News Agency:
- China plans to increase its use of solar power, biomass power and other forms of renewable energy to 16% of its total supply in the next 15 years.
Tehran Times:
- Iran is likely to sign oil development contracts with China in the “coming days."
Weekend Recommendations
Barron's:
- Had positive comments on (COF), (RIO) and (RTP).
- Had negative comments on (LTRE).
Night Trading
Asian indices are -.75% to -.25% on average.
S&P 500 indicated +.04%
NASDAQ 100 indicated +.16%.
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/Estimate
- (KMX)/.38
- (CC)/.00
Upcoming Splits
- (IFO) 2-for-1
Economic Releases
1:00 pm EST
- The NAHB Housing Market Index for June is estimated at 45 versus a reading of 45 in May.
BOTTOM LINE: Asian Indices are lower, weighed down by commodity shares in the region. I expect US stocks to open modestly lower and to rise into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.
Weekly Outlook
Click here for The Week Ahead by Reuters
There are a few economic reports of note and some significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - NAHB Housing Market Index
Tues. - Housing Starts, Building Permits
Wed. - None of note
Thur. - Initial Jobless Claims, Leading Indicators
Fri. - Durable Goods Orders
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Carmax(KMX), Circuit City Stores(CC)
Tues. - Actuant(ATU), Apollo Group(APOL), Arrow Intl.(ARRO), Factset Research(FDS), JM Smucker(SJM)
Wed. - Bed Bath & Beyond(BBBY), FedEx Corp.(FDX), Jabil Circuit(JBL), Morgan Stanley(MS), Sonic Corp.(SONC)
Thur. - Comverse Technology(CMVT), Del Monte Foods(DLM), Family Dollar(FDO), GTECH Holdings(GTK), Oracle(ORCL), Rite Aid(RAD), Solectron(SLR), Tektronix(TEK)
Fri. - AG Edwards(AGE), Micron Technology(MU)
Other events that have market-moving potential this week include:
Mon. - Prudential Biotech Meetings
Tue. - Piper Jaffray Retail & Financial Services Symposium
Wed. - Morgan Stanley Business and Professional Services Conference
Thur. - Morgan Stanley Business and Professional Services Conference
Fri. - None of note
There are a few economic reports of note and some significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - NAHB Housing Market Index
Tues. - Housing Starts, Building Permits
Wed. - None of note
Thur. - Initial Jobless Claims, Leading Indicators
Fri. - Durable Goods Orders
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Carmax(KMX), Circuit City Stores(CC)
Tues. - Actuant(ATU), Apollo Group(APOL), Arrow Intl.(ARRO), Factset Research(FDS), JM Smucker(SJM)
Wed. - Bed Bath & Beyond(BBBY), FedEx Corp.(FDX), Jabil Circuit(JBL), Morgan Stanley(MS), Sonic Corp.(SONC)
Thur. - Comverse Technology(CMVT), Del Monte Foods(DLM), Family Dollar(FDO), GTECH Holdings(GTK), Oracle(ORCL), Rite Aid(RAD), Solectron(SLR), Tektronix(TEK)
Fri. - AG Edwards(AGE), Micron Technology(MU)
Other events that have market-moving potential this week include:
Mon. - Prudential Biotech Meetings
Tue. - Piper Jaffray Retail & Financial Services Symposium
Wed. - Morgan Stanley Business and Professional Services Conference
Thur. - Morgan Stanley Business and Professional Services Conference
Fri. - None of note
BOTTOM LINE: I expect US stocks to finish the week modestly higher on short-covering, bargain hunting, less irrational pessimism and declining long-term rates. My trading indicators are still giving mostly bearish signals and the Portfolio is 100% net long heading into the week.
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