BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Computer longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is below average. It is interesting to note that over the last two days, the ISE Sentiment Index declined 52% to an all-time low of 65.0 this morning. This is a positive, especially considering the magnitude of yesterday's advance. Copper reversed morning gains and looks like it may have put in another top. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain hunting and lower long-term rates.
Friday, June 30, 2006
Stocks Higher into Final Hour as Long-term Rates Fall and Shorts Cover
Today's Headlines
Bloomberg:
- Cholesterol-lowering drugs used to prevent heart attacks and stroke may also help fight a pandemic sparked by bird flu, and should be tested, said a physician who has studied immunization for decades.
- Barr Pharmaceuticals(BRL) raised its offer for the Croatian generic-drug maker Pliva d.d. to $2.3 billion in cash, topping a rival bid for eastern Europe’s largest drugmaker.
- Cendant Corp.(CD) agreed to sell Travelport, the travel subsidiary that includes the Orbitz Web site, to the Blackstone Group for $4.3 billion in cash as part of a plan to break the company into four pieces.
- Kirk Kerkorian’s Tracinda asked GM’s CEO Wagoner to explore a three-way partnership with Nissan Motor and Renault SA.
- US Treasuries rallied for a second day on optimism the Fed is close to done raising the benchmark interest rate and has kept inflation contained.
Wall Street Journal:
- DaimlerChrysler’s(DCX) Chrysler Group will announce tomorrow its new V8-powered Dodge Challenger coupe, designed to evoke a 1970s so-called muscle car.
- Standard & Poor’s said it will stop publishing its four-year-old Hedge Fund Index, highlighting the fallout from the collapse of commodity broker Refco Inc., citing court filings.
- Vic Gundotra, who spent 15 years at Microsoft Corp.(MSFT) helping market the company’s software, will leave to join rival Google(GOOG) net year, citing Google spokesman Steve Langdon.
- Gap Inc.(GPS) plans to put higher-priced merchandise in the apparel chain’s Old Navy outlets to test if customers will spend more and help the company boost sluggish sales.
- Iridium Satellite LLC is providing the US National Oceanic and Atmospheric Administration with satellite data links for a new tsunami warning system.
Boston Globe:
- Members of the Massachusetts House unanimously passed a bill that would raise the minimum wage to $8 an hour by October 2008, and rejected a plan to link future increases to the cost of living.
AP:
- Warren Buffett’s pledge of most of his fortune to the Bill and Melinda Gates Foundation has drawn criticism from pro-life abortion opponents. Activists including Thomas Euteneuer, a Roman Catholic priest who is president of Human Life International, criticized Gates and Buffett for their support of Planned Parenthood and international birth-control programs.
NY Times:
- New York City’s on-time high-school graduation rate last year was 58.2%, the highest in two decades, citing Schools Chancellor Joel Klein.
Financial Times:
- UK hedge funds should support disclosure of large short-selling positions, in order to avoid being imposed with more severe regulations, the Assoc. of British Insurers said.
Les Echos:
- Dell Inc.(DELL) will suffer reduced profitability in the next three or four quarters as its seeks growth in emerging markets such as China, Brazil and India, CEO Rollins said.
Beijing Antaike Information Development:
- China produced 68.3 metric tons of gold in the first four months of this year, up 13% form last year, citing the China Gold Assoc.
- China may consumer less copper than forecast this year as soaring prices damp use of the metal by cable and electric wire producers, which favor cheaper aluminum.
- Cholesterol-lowering drugs used to prevent heart attacks and stroke may also help fight a pandemic sparked by bird flu, and should be tested, said a physician who has studied immunization for decades.
- Barr Pharmaceuticals(BRL) raised its offer for the Croatian generic-drug maker Pliva d.d. to $2.3 billion in cash, topping a rival bid for eastern Europe’s largest drugmaker.
- Cendant Corp.(CD) agreed to sell Travelport, the travel subsidiary that includes the Orbitz Web site, to the Blackstone Group for $4.3 billion in cash as part of a plan to break the company into four pieces.
- Kirk Kerkorian’s Tracinda asked GM’s CEO Wagoner to explore a three-way partnership with Nissan Motor and Renault SA.
- US Treasuries rallied for a second day on optimism the Fed is close to done raising the benchmark interest rate and has kept inflation contained.
Wall Street Journal:
- DaimlerChrysler’s(DCX) Chrysler Group will announce tomorrow its new V8-powered Dodge Challenger coupe, designed to evoke a 1970s so-called muscle car.
- Standard & Poor’s said it will stop publishing its four-year-old Hedge Fund Index, highlighting the fallout from the collapse of commodity broker Refco Inc., citing court filings.
- Vic Gundotra, who spent 15 years at Microsoft Corp.(MSFT) helping market the company’s software, will leave to join rival Google(GOOG) net year, citing Google spokesman Steve Langdon.
- Gap Inc.(GPS) plans to put higher-priced merchandise in the apparel chain’s Old Navy outlets to test if customers will spend more and help the company boost sluggish sales.
- Iridium Satellite LLC is providing the US National Oceanic and Atmospheric Administration with satellite data links for a new tsunami warning system.
Boston Globe:
- Members of the Massachusetts House unanimously passed a bill that would raise the minimum wage to $8 an hour by October 2008, and rejected a plan to link future increases to the cost of living.
AP:
- Warren Buffett’s pledge of most of his fortune to the Bill and Melinda Gates Foundation has drawn criticism from pro-life abortion opponents. Activists including Thomas Euteneuer, a Roman Catholic priest who is president of Human Life International, criticized Gates and Buffett for their support of Planned Parenthood and international birth-control programs.
NY Times:
- New York City’s on-time high-school graduation rate last year was 58.2%, the highest in two decades, citing Schools Chancellor Joel Klein.
Financial Times:
- UK hedge funds should support disclosure of large short-selling positions, in order to avoid being imposed with more severe regulations, the Assoc. of British Insurers said.
Les Echos:
- Dell Inc.(DELL) will suffer reduced profitability in the next three or four quarters as its seeks growth in emerging markets such as China, Brazil and India, CEO Rollins said.
Beijing Antaike Information Development:
- China produced 68.3 metric tons of gold in the first four months of this year, up 13% form last year, citing the China Gold Assoc.
- China may consumer less copper than forecast this year as soaring prices damp use of the metal by cable and electric wire producers, which favor cheaper aluminum.
Income Rises More Than Inflation, Spending Decelerates, Confidence Improves, Chicago Manufacturing Slows
- Personal Income for May rose .4% versus estimates of a .2% gain and an upwardly revised .7% increase in April.
- Personal Spending for May rose .4% versus estimates of a .4% increase and an upwardly revised .7% gain in April.
- The PCE core for May rose .2% versus estimates of a .2% increase and a .2% gain in April.
- Final Univ. of Mich. Consumer Sentiment for June rose to 84.9 versus estimates of 82.5 and a prior estimate of 82.4.
- The Chicago Purchasing Manager Index for June fell to 56.5 versus estimates of 59.0 and a reading of 61.5 in May.
- Personal Spending for May rose .4% versus estimates of a .4% increase and an upwardly revised .7% gain in April.
- The PCE core for May rose .2% versus estimates of a .2% increase and a .2% gain in April.
- Final Univ. of Mich. Consumer Sentiment for June rose to 84.9 versus estimates of 82.5 and a prior estimate of 82.4.
- The Chicago Purchasing Manager Index for June fell to 56.5 versus estimates of 59.0 and a reading of 61.5 in May.
BOTTOM LINE: US consumer spending in May rose the least in three months and a measure of inflation watched by the Fed remained steady, Bloomberg said. Disposable income, or the money left over after taxes, rose 4.7% over the last 12 months. The PCE core, the Fed’s favorite inflation gauge, rose 2.1% over the last 12 months. Spending on services, which comprise almost 60% of all spending, gained .3% versus a .1% rise the prior month. Consumer spending rose 5.1% last quarter, the most in over two years. I expect income growth to remain steady around current levels and spending to slow to more average rates over the intermediate-term. I continue to believe inflation fears have peaked for the year.
Americans were more confident in June for the first time in three months as a decline in gas prices left them more to spend on other goods, Bloomberg said. The expectations component of the index rose to 72.0 versus 68.2 the prior month. Americans’ perceptions of their financial health and whether it’s a good time to buy big-ticket items surged to 105.0 versus 96.1 the prior moth, the largest gain this year. The expected inflation component of the index fell. Consumers see inflation decelerating to 3.3% over the next 12 months versus expectations of a 4% rise the prior month. I expect consumer sentiment to rise from irrationally low levels next month.
Growth at businesses in the Chicago area slowed in June, and a measure of prices paid for raw materials gained, Bloomberg reported. The prices paid index rose to 89 versus a reading of 76.9 the prior month. The new orders component of the index fell to 57.2 versus 69.6 the prior month. The employment component of the index decreased to 50.4 this month from 52.8 in May. I continue to believe manufacturing is slowing to average levels.
Thursday, June 29, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- EMC Corp.(EMC) agreed to buy RSA Security(RSAS) for about $2.1 billion to expand its security software business.
- Atlanta’s $32 million purchase of Martin Luther King Jr.’s papers, made just days before they were to be auctioned by Sotheby’s Holdings, will be a catalyst for getting a new civil rights museum built in the city, Mayor Shirley Franklin said.
- The US House of Representatives passed a resolution condemning the news media for reports last week that exposed a government program that tracks terrorism financing. The resolution, which passed 227-183, condemns the disclosure of classified programs and says they “may endanger the lives of Americans.”
- Japan’s consumer prices rose .6% in May from a year earlier, adding to evidence that deflation in the world’s second-largest economy may be over and supporting the Bank of Japan’s case for raising interest rates from near zero.
- A long-range missile test by North Korea would call into question commitments by the US and other countries to give security guarantees and aid in return for North Korea ending its nuclear program, a US government official said.
Wall Street Journal:
- Goldman Sachs Group(GS) was the top-earning investment bank in Asia excluding Japan in the first half, with estimated revenue exceeding $205 million, citing Dealogic Plc.
AP:
- The family of a man who disappeared from a Royal Caribbean Cruises Ltd.(RCL) ship last year is suing the company in Florida state court for unspecified monetary damages.
Xinhua News Agency:
- China will step up development of technology for monitoring Internet sites accessed within the country, citing the country’s top information gatekeeper.
China Securities Journal:
- China’s economy is growing too quickly and the government will take measures to slow growth, citing Zhu Zhixin, a deputy director with the National Development and Reform Commission.
Late Buy/Sell Recommendations
Business Week:
- Southern Copper(PCU) is benefiting from the mergers of other mining companies and may become a takeover target, citing Carl Birkelbach, CEO of Birkelbach Investment Securities.
- Acusphere Inc.(ACUS), which is developing drugs using microparticle technology, is undervalued at a time when it is expected to produce more favorable results, citing analyst Deborah Knobelman of Piper Jaffray.
- Devon Energy(DVN) may rise 55% on acquisition interest from Exxon Mobil(XOM) and Chevron Corp.(CHV), citing Oppenheimer’s Fadel Gheit.
Night Trading
Asian Indices are +.75% to +2.0% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.22%.
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
- (CLF) 2-for-1
- (LOW) 2-for-1
Economic Releases
8:30 am EST
- Personal Income for May is estimated to rise .2% versus a .5% increase in April.
- Personal Spending for May is estimated to rise .4% versus a .6% gain in April.
- The PCE core for May is estimated to rise .2% versus a .2% gain in April.
9:45 am EST
- The Final Univ. of Mich. Consumer Confidence reading for June is estimated to rise to 82.5 versus a prior estimate of 82.4.
10:00 am EST
- The Chicago Purchasing Index for June is estimated to fall to 59.0 versus a reading of 61.5 in May.
Bloomberg:
- EMC Corp.(EMC) agreed to buy RSA Security(RSAS) for about $2.1 billion to expand its security software business.
- Atlanta’s $32 million purchase of Martin Luther King Jr.’s papers, made just days before they were to be auctioned by Sotheby’s Holdings, will be a catalyst for getting a new civil rights museum built in the city, Mayor Shirley Franklin said.
- The US House of Representatives passed a resolution condemning the news media for reports last week that exposed a government program that tracks terrorism financing. The resolution, which passed 227-183, condemns the disclosure of classified programs and says they “may endanger the lives of Americans.”
- Japan’s consumer prices rose .6% in May from a year earlier, adding to evidence that deflation in the world’s second-largest economy may be over and supporting the Bank of Japan’s case for raising interest rates from near zero.
- A long-range missile test by North Korea would call into question commitments by the US and other countries to give security guarantees and aid in return for North Korea ending its nuclear program, a US government official said.
Wall Street Journal:
- Goldman Sachs Group(GS) was the top-earning investment bank in Asia excluding Japan in the first half, with estimated revenue exceeding $205 million, citing Dealogic Plc.
AP:
- The family of a man who disappeared from a Royal Caribbean Cruises Ltd.(RCL) ship last year is suing the company in Florida state court for unspecified monetary damages.
Xinhua News Agency:
- China will step up development of technology for monitoring Internet sites accessed within the country, citing the country’s top information gatekeeper.
China Securities Journal:
- China’s economy is growing too quickly and the government will take measures to slow growth, citing Zhu Zhixin, a deputy director with the National Development and Reform Commission.
Late Buy/Sell Recommendations
Business Week:
- Southern Copper(PCU) is benefiting from the mergers of other mining companies and may become a takeover target, citing Carl Birkelbach, CEO of Birkelbach Investment Securities.
- Acusphere Inc.(ACUS), which is developing drugs using microparticle technology, is undervalued at a time when it is expected to produce more favorable results, citing analyst Deborah Knobelman of Piper Jaffray.
- Devon Energy(DVN) may rise 55% on acquisition interest from Exxon Mobil(XOM) and Chevron Corp.(CHV), citing Oppenheimer’s Fadel Gheit.
Night Trading
Asian Indices are +.75% to +2.0% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.22%.
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
- (CLF) 2-for-1
- (LOW) 2-for-1
Economic Releases
8:30 am EST
- Personal Income for May is estimated to rise .2% versus a .5% increase in April.
- Personal Spending for May is estimated to rise .4% versus a .6% gain in April.
- The PCE core for May is estimated to rise .2% versus a .2% gain in April.
9:45 am EST
- The Final Univ. of Mich. Consumer Confidence reading for June is estimated to rise to 82.5 versus a prior estimate of 82.4.
10:00 am EST
- The Chicago Purchasing Index for June is estimated to fall to 59.0 versus a reading of 61.5 in May.
BOTTOM LINE: Asian indices are sharply higher, boosted by commodity, automaking and technology stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Sharply Higher on Bargain-Hunting and Short-Covering
Indices
S&P 500 1,272.87 +2.16%
DJIA 11,190.80 +1.98%
NASDAQ 2,174.38 +2.96%
Russell 2000 714.32 +3.82%
Wilshire 5000 12,808.90 +2.32%
S&P Barra Growth 588.56 +2.11%
S&P Barra Value 682.62 +2.20%
Morgan Stanley Consumer 609.99 +1.68%
Morgan Stanley Cyclical 824.80 +2.83%
Morgan Stanley Technology 496.30 +3.14%
Transports 4,890.23 +3.37%
Utilities 412.85 +1.03%
Put/Call .66 -20.48%
NYSE Arms .44 -43.94%
Volatility(VIX) 13.03 -17.48%
ISE Sentiment 105.00 -27.59%
US Dollar 86.00 -.73%
CRB 342.30 +1.22%
Futures Spot Prices
Crude Oil 73.64 +.15%
Unleaded Gasoline 229.10 -.17%
Natural Gas 6.11 -.33%
Heating Oil 198.76 +2.59%
Gold 600.10 +1.90%
Base Metals 214.04 +4.37%
Copper 333.65 +.47%
10-year US Treasury Yield 5.19% -.94%
Leading Sectors
Gold & Silver +6.97%
Restaurants +4.52%
Networking +4.30%
Lagging Sectors
Foods +1.05%
Utilities +1.03%
Hospitals +.97%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- Microsoft(MSFT) delayed the release of its new Office word processing, e-mail and spreadsheet program to make improvements to its performance and design.
- Futures traders trimmed bets that the Fed will continue lifting its target rate for overnight loans to 62% from 83% yesterday after policy makers increased the rate a quarter of a point for the 17th straight time.
- Apple Computer(AAPL) announced they were launching an internal probe into the backdating of stock options.
- Palm Inc.(PALM) maker of the Treo e-mail phones, said fourth-quarter profit rose 53% as demand for devices with full keyboards and business features increases.
- US Treasuries climbed as the Fed raised the benchmark interest rate as investors speculated inflation would remain contained.
S&P 500 1,272.87 +2.16%
DJIA 11,190.80 +1.98%
NASDAQ 2,174.38 +2.96%
Russell 2000 714.32 +3.82%
Wilshire 5000 12,808.90 +2.32%
S&P Barra Growth 588.56 +2.11%
S&P Barra Value 682.62 +2.20%
Morgan Stanley Consumer 609.99 +1.68%
Morgan Stanley Cyclical 824.80 +2.83%
Morgan Stanley Technology 496.30 +3.14%
Transports 4,890.23 +3.37%
Utilities 412.85 +1.03%
Put/Call .66 -20.48%
NYSE Arms .44 -43.94%
Volatility(VIX) 13.03 -17.48%
ISE Sentiment 105.00 -27.59%
US Dollar 86.00 -.73%
CRB 342.30 +1.22%
Futures Spot Prices
Crude Oil 73.64 +.15%
Unleaded Gasoline 229.10 -.17%
Natural Gas 6.11 -.33%
Heating Oil 198.76 +2.59%
Gold 600.10 +1.90%
Base Metals 214.04 +4.37%
Copper 333.65 +.47%
10-year US Treasury Yield 5.19% -.94%
Leading Sectors
Gold & Silver +6.97%
Restaurants +4.52%
Networking +4.30%
Lagging Sectors
Foods +1.05%
Utilities +1.03%
Hospitals +.97%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- Microsoft(MSFT) delayed the release of its new Office word processing, e-mail and spreadsheet program to make improvements to its performance and design.
- Futures traders trimmed bets that the Fed will continue lifting its target rate for overnight loans to 62% from 83% yesterday after policy makers increased the rate a quarter of a point for the 17th straight time.
- Apple Computer(AAPL) announced they were launching an internal probe into the backdating of stock options.
- Palm Inc.(PALM) maker of the Treo e-mail phones, said fourth-quarter profit rose 53% as demand for devices with full keyboards and business features increases.
- US Treasuries climbed as the Fed raised the benchmark interest rate as investors speculated inflation would remain contained.
BOTTOM LINE: The Portfolio finished substantially higher today on gains in my Internet longs, Semi longs, Networking longs, Retail longs and Biotech longs. I covered some of my (EEM) shorts and all of my (IWM) and (QQQQ) shorts earlier in the day, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, every sector rose and volume was heavy. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was very bullish. The ISE Sentiment Index plunged 28% to 105.0, a depressed level, which is a big positive. Moreover, the 10-year yield finished near session lows. I sense many bears are trapped and bulls are underinvested, which should lead to more buying tomorrow as they scramble to stay ahead of benchmarks. The S&P 500 chart looks very similar to the pattern during the bottom last October. Subsequently, the index rose about 14% in less than seven months. Many of the exact same bear arguments were espoused during that October bottom. While I do expect another period of weakness over the coming months as the U.S. economy decelerates to average rates, I continue to believe most stocks have bottomed for the year and the major averages have put in place a meaningful bottom.
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