BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Retail longs, Internet longs and Semi longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, sector performance is mostly positive and volume is light. The latest data from the NYSE show short interest as a percentage of total share outstanding is 2.4%. This is back to an all-time record high and corresponds with other data showing excessive levels of pessimism. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and bargain hunting ahead of a number of important releases.
Monday, June 26, 2006
Stocks Modestly Higher into Final Hour, Led by Homebuilders
Today's Headlines
Bloomberg:
- The world is winning the war on drugs, according to a United Nations report that said opium production might soon be eradicated in Asia’s notorious “Golden Triangle” and coca cultivation in the Andean region of South American has decreased 25% since 2000.
- Shares of Inco Ltd.(N) and Falconbridge Ltd. rose after reports that Phelps Dodge(PD) will acquire the Canadian nickel miners for $40 billion in cash and stock.
- The US Supreme Court agreed to consider a bid by environmentalists and 12 states to force the Environmental Protection Agency to regulate car and truck emissions that may contribute to possible global warming.
- Shares of Zimmer Holdings(ZMH) and Biomet(BMET) fell after the two markers of artificial joints disclosed the US Dept. of Justice is investigating the $7 billion-a-year orthopedics industry.
Wall Street Journal:
- A report detailing the US Army’s recovery of at least 500 weapons of mass destruction in Iraq starting in 2003 should have been disclosed to the public earlier, Senator Rick Santorum and Representative Peter Hoekstra said. The National Group Intelligence Center agreed to declassify six “key points” of a report on the chemical weapons recovery in Iraq, information requested for nine weeks before getting a response.
- Germany’s DaimlerChrysler AG will introduce its small, two-door Smart car in the US next year, as it tries to make a profit on the brand.
- The SEC will this summer issue guidance on how to interpret a rule allowing investment managers to use client money to pay for brokerage and research services.
- A number of brokers at Piper Jaffray, which is selling its brokerage unit to concentrate on investment banking, have left for rival companies.
- Zale Corp.(ZLC), which started the mass-market jewelry business in the 1920s, has pulled back from a disastrous foray to attract upscale customers.
- US companies involved in veterinary care have done pretty well in good times and bad, since people are usually generous in looking after the health of their pets.
- Private equity firms Bain Capital is the lead contender to acquire Jones Apparel Group(JNY).
NY Post:
- Hedge fund traders are betting that the Fed will put additional rate increases on hold after adding two more of a quarter of a percentage point each on Thursday and on Aug. 8.
Washington Post:
- Iridium Satellite LLC, a provider of satellite telephone services, will provide emergency telecommunications equipment for hospital owner MedStar Health.
- Helio LLC, maker of a phone that can text message instantly to Korea, is targeting Korean-American customers.
NY Times:
- State tax revenue in Louisiana, which was battered by hurricanes Katrina and Rita last fall, is on track to set a record of $9.2 billion before the fiscal year ends June 30.
Women’s Wear Daily:
- Federated Dept. Stores(FD) is considering buyout offers for its bridal division, Saks Inc.(SKS) has received interest for its Parisian chain, and Foot Locker(FL) has been approached by private-equity firms.
Reuters:
- Sirius Satellite Radio(SIRI) CEO Karmazin said he would be interested in buying rival XM Satellite Radio Holdings(XMSR) if the price were right.
Moscow Times:
- The US and Russia will probably reach final agreement next month on Russia’s bid to join the World Trade Organization.
Panorama:
- Petroleos de Venezuela SA, South America’s largest oil company, is in talks with its partners in four heavy oil joint ventures to double output.
- The world is winning the war on drugs, according to a United Nations report that said opium production might soon be eradicated in Asia’s notorious “Golden Triangle” and coca cultivation in the Andean region of South American has decreased 25% since 2000.
- Shares of Inco Ltd.(N) and Falconbridge Ltd. rose after reports that Phelps Dodge(PD) will acquire the Canadian nickel miners for $40 billion in cash and stock.
- The US Supreme Court agreed to consider a bid by environmentalists and 12 states to force the Environmental Protection Agency to regulate car and truck emissions that may contribute to possible global warming.
- Shares of Zimmer Holdings(ZMH) and Biomet(BMET) fell after the two markers of artificial joints disclosed the US Dept. of Justice is investigating the $7 billion-a-year orthopedics industry.
Wall Street Journal:
- A report detailing the US Army’s recovery of at least 500 weapons of mass destruction in Iraq starting in 2003 should have been disclosed to the public earlier, Senator Rick Santorum and Representative Peter Hoekstra said. The National Group Intelligence Center agreed to declassify six “key points” of a report on the chemical weapons recovery in Iraq, information requested for nine weeks before getting a response.
- Germany’s DaimlerChrysler AG will introduce its small, two-door Smart car in the US next year, as it tries to make a profit on the brand.
- The SEC will this summer issue guidance on how to interpret a rule allowing investment managers to use client money to pay for brokerage and research services.
- A number of brokers at Piper Jaffray, which is selling its brokerage unit to concentrate on investment banking, have left for rival companies.
- Zale Corp.(ZLC), which started the mass-market jewelry business in the 1920s, has pulled back from a disastrous foray to attract upscale customers.
- US companies involved in veterinary care have done pretty well in good times and bad, since people are usually generous in looking after the health of their pets.
- Private equity firms Bain Capital is the lead contender to acquire Jones Apparel Group(JNY).
NY Post:
- Hedge fund traders are betting that the Fed will put additional rate increases on hold after adding two more of a quarter of a percentage point each on Thursday and on Aug. 8.
Washington Post:
- Iridium Satellite LLC, a provider of satellite telephone services, will provide emergency telecommunications equipment for hospital owner MedStar Health.
- Helio LLC, maker of a phone that can text message instantly to Korea, is targeting Korean-American customers.
NY Times:
- State tax revenue in Louisiana, which was battered by hurricanes Katrina and Rita last fall, is on track to set a record of $9.2 billion before the fiscal year ends June 30.
Women’s Wear Daily:
- Federated Dept. Stores(FD) is considering buyout offers for its bridal division, Saks Inc.(SKS) has received interest for its Parisian chain, and Foot Locker(FL) has been approached by private-equity firms.
Reuters:
- Sirius Satellite Radio(SIRI) CEO Karmazin said he would be interested in buying rival XM Satellite Radio Holdings(XMSR) if the price were right.
Moscow Times:
- The US and Russia will probably reach final agreement next month on Russia’s bid to join the World Trade Organization.
Panorama:
- Petroleos de Venezuela SA, South America’s largest oil company, is in talks with its partners in four heavy oil joint ventures to double output.
New Home Sales Much Better Than Estimates
- New Home Sales in May rose to 1234K versus estimates of 1145K and 1180K in April.
BOTTOM LINE: Sales of new homes in the US unexpectedly rose in May to the highest level this year, Bloomberg reported. The number of unsold new homes decreased to a 5.5-month supply at the current sales pace versus 5.8-months worth the prior month. The median price of a new home rose 3.1% over the last 12 months to $235,300. Sales increased 6% in the South, 5.3% in the West and 2.7% in the Midwest. Sales fell 7.9% in the Northeast. Sales of new home have slowed 10% during the first four months of this year. This report is more evidence that housing is just slowing to more healthy sustainable levels, rather than the “hard-land” that bears suggest.
Sunday, June 25, 2006
Monday Watch
Weekend Headlines
Bloomberg:
- Iraq’s Prime Minister Nuri al-Maliki today presented a national reconciliation plan to parliament aimed at stemming insurgent and sectarian violence in which he offered amnesty to rebels who haven’t been involved in “terrorist” acts.
- The world’s central bankers, meeting in Basel, Switzerland, said their economies are strong enough to withstand a slump in equity markets caused by concern about higher interest rates.
- Warren Buffett, with an estimated personal wealth of $44 billion, will give away 85% of his fortune starting in July, most of it to the Bill and Melinda Gates Foundation, Fortune magazine said.
- Currency traders and analysts are growing less bearish on the US dollar after it climbed to an eight-week high.
- Arcelor SA backed a new takeover bid of about $33.7 billion from Mittal Steel, ending five months of opposition to the steel industry’s biggest-ever transaction.
- Iran, the world’s fourth-largest oil producer, may use oil as a weapon if the Islamic Republic’s interests come under attack, Oil Minister Vaziri-Hamaneh said.
- China’s economy will expand faster this year than in 2005 as investment and exports continue to grow, the central bank’s research bureau said.
- Moscow and Seoul leapfrogged Tokyo to become the world’s most expensive cities, a survey by Mercer Human Resource Consulting showed. New York was the highest-placed US city, rising three places to 10th.
- Commodity index funds have become the dominant players in the global commodities markets, according to Malcolm Southwood of Goldman Sachs JBWere. More than $90 billion is invested in these funds, which have been responsible for the leap in commodity prices over the past year. 74.2% of the $90 billion is invested in energy.
c/net News.com:
- Nanosolar is only a few years old, but it has laid plans to take on multinational corporations, such as BP Plc and Sharp, in the solar industry.
NY Times:
- Verizon Communications’(VZ) Airfone unit will stop providing on-board phone services to airlines later this year to focus on Internet, mobile phone and television services.
- North Korea’s possible pursuit of a long-range missile test may be an example of the Asian nation taking a page from Iran’s diplomatic strategy to use threats to gain concessions from the US.
- NetJets Inc., an operator of private jets owned by Warren Buffett’s Berkshire Hathaway(BRK/A), has encountered difficulties, including increasing competition and pricing pressures.
- General George Casey Jr., the top US commander in Iraq, has put together a plan reducing the number of American troops in the country by the end of next year.
- Johnson & Johnson(JNJ), maker of Tylenol and Neutrogena, is close to an agreement to buy the consumer products-unit of Pfizer(PFE) for more than $16 billion.
- Iaqi school enrollment has grown each year since the US-led liberation, with 7.4% more students enrolled now than in 2002. Even in the war-torn Anbar province, high school enrollment has risen 37%.
Washington Post:
- Some Washington-area hospitals are expanding at record levels and adding amenities such as in-room Internet service, flat-screen TVs and plush furniture to attract patients in the quickly growing region.
Rocky Mountain News:
- Exxon Mobil(XOM) will use a new drilling method to increase natural-gas production at Colorado’s Piceance Development Project.
USA Today:
- US lottery-ticket sales are rising on the popularity of scratch tickets, including those that cost as much as $30 each.
Financial Times:
- Goldman Sachs(GS) has banned the use of “outperform” and “underperform” as part of its analysts’ stock recommendations. Goldman analysts must now use unambiguous “buy” and “sell” terms and set price targets for all the companies they cover.
- Wal-Mart Stores(WMT) is planning to start its own private label credit card in China, becoming the first overseas retailer to do so.
Telegraph:
- Blackwood Distillers, a UK spirits company, plans to team up with New York hedge fund managers to trade whiskey futures.
Asahi Television:
- Japanese Finance Minister Sadakazu Tanigaki said keeping interest rates near zero is important as mild deflation persists in the world’s second-largest economy.
Ghana News Agency:
- Ghana will receive $544 million under the US government’s Millennium Challenge Account, citing Paa Kwesi Nduom, the African nation’s public sector minister. The Millennium Challenge Account was established by President Bush to speed development in poorer countries.
Iran News:
- China plans to help build a $1 billion aluminum plant in Iran’s North Khorasan province, citing an Iranian official.
AFP:
- Vendanta Resources Plc plans to almost triple production at its Zambian unit, Konkola Copper Mines, to 6 million metric tons a year.
- Iraq is producing more than 2.5 million barrels of oil a day, the highest since the government of Saddam Hussein was toppled in April 2003, citing oil minister Hussain Shahrittani. Iraq may increase its production to as much as 2.7 million barrels a day by the end of this year and to 4.3 million barrels a day by 2010, citing Shahristani.
Weekend Recommendations
Barron's:
- Had positive comments on (FNF), (GOOG), (JBLU), (GRMN) and (PLA).
- Had negative comments on (SLE), (AAPL), (KBH), (PHM), (MDC) and (BYD).
Night Trading
Asian indices are -.50% to +.25% on average.
S&P 500 indicated +.01%
NASDAQ 100 indicated +.02%.
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
- (LEN)/1.86
- (PHH)/1.40
- (SCS)/.14
- (WAG)/.38
- (HWAY)/.21
Upcoming Splits
- (FTO) 2-for-1
Economic Releases
10:00 am EST
- New Home Sales for May are estimated to fall to 1150K versus 1198K in April.
Bloomberg:
- Iraq’s Prime Minister Nuri al-Maliki today presented a national reconciliation plan to parliament aimed at stemming insurgent and sectarian violence in which he offered amnesty to rebels who haven’t been involved in “terrorist” acts.
- The world’s central bankers, meeting in Basel, Switzerland, said their economies are strong enough to withstand a slump in equity markets caused by concern about higher interest rates.
- Warren Buffett, with an estimated personal wealth of $44 billion, will give away 85% of his fortune starting in July, most of it to the Bill and Melinda Gates Foundation, Fortune magazine said.
- Currency traders and analysts are growing less bearish on the US dollar after it climbed to an eight-week high.
- Arcelor SA backed a new takeover bid of about $33.7 billion from Mittal Steel, ending five months of opposition to the steel industry’s biggest-ever transaction.
- Iran, the world’s fourth-largest oil producer, may use oil as a weapon if the Islamic Republic’s interests come under attack, Oil Minister Vaziri-Hamaneh said.
- China’s economy will expand faster this year than in 2005 as investment and exports continue to grow, the central bank’s research bureau said.
- Moscow and Seoul leapfrogged Tokyo to become the world’s most expensive cities, a survey by Mercer Human Resource Consulting showed. New York was the highest-placed US city, rising three places to 10th.
- Commodity index funds have become the dominant players in the global commodities markets, according to Malcolm Southwood of Goldman Sachs JBWere. More than $90 billion is invested in these funds, which have been responsible for the leap in commodity prices over the past year. 74.2% of the $90 billion is invested in energy.
c/net News.com:
- Nanosolar is only a few years old, but it has laid plans to take on multinational corporations, such as BP Plc and Sharp, in the solar industry.
NY Times:
- Verizon Communications’(VZ) Airfone unit will stop providing on-board phone services to airlines later this year to focus on Internet, mobile phone and television services.
- North Korea’s possible pursuit of a long-range missile test may be an example of the Asian nation taking a page from Iran’s diplomatic strategy to use threats to gain concessions from the US.
- NetJets Inc., an operator of private jets owned by Warren Buffett’s Berkshire Hathaway(BRK/A), has encountered difficulties, including increasing competition and pricing pressures.
- General George Casey Jr., the top US commander in Iraq, has put together a plan reducing the number of American troops in the country by the end of next year.
- Johnson & Johnson(JNJ), maker of Tylenol and Neutrogena, is close to an agreement to buy the consumer products-unit of Pfizer(PFE) for more than $16 billion.
- Iaqi school enrollment has grown each year since the US-led liberation, with 7.4% more students enrolled now than in 2002. Even in the war-torn Anbar province, high school enrollment has risen 37%.
Washington Post:
- Some Washington-area hospitals are expanding at record levels and adding amenities such as in-room Internet service, flat-screen TVs and plush furniture to attract patients in the quickly growing region.
Rocky Mountain News:
- Exxon Mobil(XOM) will use a new drilling method to increase natural-gas production at Colorado’s Piceance Development Project.
USA Today:
- US lottery-ticket sales are rising on the popularity of scratch tickets, including those that cost as much as $30 each.
Financial Times:
- Goldman Sachs(GS) has banned the use of “outperform” and “underperform” as part of its analysts’ stock recommendations. Goldman analysts must now use unambiguous “buy” and “sell” terms and set price targets for all the companies they cover.
- Wal-Mart Stores(WMT) is planning to start its own private label credit card in China, becoming the first overseas retailer to do so.
Telegraph:
- Blackwood Distillers, a UK spirits company, plans to team up with New York hedge fund managers to trade whiskey futures.
Asahi Television:
- Japanese Finance Minister Sadakazu Tanigaki said keeping interest rates near zero is important as mild deflation persists in the world’s second-largest economy.
Ghana News Agency:
- Ghana will receive $544 million under the US government’s Millennium Challenge Account, citing Paa Kwesi Nduom, the African nation’s public sector minister. The Millennium Challenge Account was established by President Bush to speed development in poorer countries.
Iran News:
- China plans to help build a $1 billion aluminum plant in Iran’s North Khorasan province, citing an Iranian official.
AFP:
- Vendanta Resources Plc plans to almost triple production at its Zambian unit, Konkola Copper Mines, to 6 million metric tons a year.
- Iraq is producing more than 2.5 million barrels of oil a day, the highest since the government of Saddam Hussein was toppled in April 2003, citing oil minister Hussain Shahrittani. Iraq may increase its production to as much as 2.7 million barrels a day by the end of this year and to 4.3 million barrels a day by 2010, citing Shahristani.
Weekend Recommendations
Barron's:
- Had positive comments on (FNF), (GOOG), (JBLU), (GRMN) and (PLA).
- Had negative comments on (SLE), (AAPL), (KBH), (PHM), (MDC) and (BYD).
Night Trading
Asian indices are -.50% to +.25% on average.
S&P 500 indicated +.01%
NASDAQ 100 indicated +.02%.
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
- (LEN)/1.86
- (PHH)/1.40
- (SCS)/.14
- (WAG)/.38
- (HWAY)/.21
Upcoming Splits
- (FTO) 2-for-1
Economic Releases
10:00 am EST
- New Home Sales for May are estimated to fall to 1150K versus 1198K in April.
BOTTOM LINE: Asian Indices are mostly lower, weighed down by exporting shares in the region. I expect US stocks to open modestly lower and to rise into the afternoon, finishing mixed. The Portfolio is 75% 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. - New Home Sales
Tues. - Existing Home Sales, Consumer Confidence, Richmond Fed. Manufacturing Index
Wed. - None of note
Thur. - Final 1Q GDP, Final 1Q GDP Price Index, Final 1Q Personal Consumption, Final 1Q Core PCE, Initial Jobless Claims, Continuing Claims, FOMC Rate Decision
Fri. - Personal Income, Personal Spending, PCE Core, Univ. of Mich. Consumer Confidence, Chicago Purchasing Manager
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Lennar Corp.(LEN), Steelcase(SCS), Walgreen(WAG)
Tues. - Flowserve(FLS), Freddie Mac(FRE), HB Fuller(FUL), Nike(NKE)
Wed. - 3Com Corp.(COMS), Arrow International(ARRO), Biomet(BMET), ConAgra Foods(CAG), Herman Miller(MLHR), McCormick & Co.(MKC), Micron Technology(MU), Paychex Inc.(PAYX), Red Hat Inc.(RHAT)
Thur. - Accenture(ACN), American Greetings(AM), CA Inc.(CA), Constellation Brands(STZ), General Mills(GIS), Monsanto(MON), Palm Inc.(PALM), Worthington Industries(WOR)
Fri. - None of note
Other events that have market-moving potential this week include:
Mon. - Jeffries Life Sciences Conference
Tue. - Jeffries Life Sciences Conference, Banc of America Gaming Conference, William Blair Growth Stock Conference
Wed. - William Blair Growth Stock Conference, Banc of America Gaming Conference, Jeffries Life Sciences Conference
Thur. - Banc of America Gaming Conference, William Blair Growth Stock 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. - New Home Sales
Tues. - Existing Home Sales, Consumer Confidence, Richmond Fed. Manufacturing Index
Wed. - None of note
Thur. - Final 1Q GDP, Final 1Q GDP Price Index, Final 1Q Personal Consumption, Final 1Q Core PCE, Initial Jobless Claims, Continuing Claims, FOMC Rate Decision
Fri. - Personal Income, Personal Spending, PCE Core, Univ. of Mich. Consumer Confidence, Chicago Purchasing Manager
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Lennar Corp.(LEN), Steelcase(SCS), Walgreen(WAG)
Tues. - Flowserve(FLS), Freddie Mac(FRE), HB Fuller(FUL), Nike(NKE)
Wed. - 3Com Corp.(COMS), Arrow International(ARRO), Biomet(BMET), ConAgra Foods(CAG), Herman Miller(MLHR), McCormick & Co.(MKC), Micron Technology(MU), Paychex Inc.(PAYX), Red Hat Inc.(RHAT)
Thur. - Accenture(ACN), American Greetings(AM), CA Inc.(CA), Constellation Brands(STZ), General Mills(GIS), Monsanto(MON), Palm Inc.(PALM), Worthington Industries(WOR)
Fri. - None of note
Other events that have market-moving potential this week include:
Mon. - Jeffries Life Sciences Conference
Tue. - Jeffries Life Sciences Conference, Banc of America Gaming Conference, William Blair Growth Stock Conference
Wed. - William Blair Growth Stock Conference, Banc of America Gaming Conference, Jeffries Life Sciences Conference
Thur. - Banc of America Gaming Conference, William Blair Growth Stock Conference
Fri. - None of note
BOTTOM LINE: I expect US stocks to finish the week modestly higher on a lifting of uncertainty surrounding the FOMC policy statement, short-covering, bargain hunting and a decline in long-term rates. My trading indicators are still giving mostly bearish signals and the Portfolio is 75% net long heading into the week.
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