BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Retail longs, Networking longs and Semi longs. I added to my (EEM), (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 50% 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 about average. The 10-year yield is down 5 basis points, near session lows, to 5.13%. The yield is now back below where it was prior to ADP's overly optimistic forecast for today's employment report. I still believe data over the coming weeks will prompt the Fed to pause. I don't believe they will hike at the August meeting, notwithstanding the market's current expectations. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and lower long-term rates.
Friday, July 07, 2006
Stocks Sharply Lower into Final Hour on Worries Over Slowing Economic Growth
Today's Headlines
Bloomberg:
- Bill Miller, whose $19 billion Legg Mason Value Trust has beaten the S&P 500 for 15 straight years, said the biggest US companies are ripe for investment because they have slumped over five years.
- US authorities uncovered a plot by a group possibly linked to slain al-Qaeda in Iraq leader Abu Musab al-Zarqawi to bomb NY’s Holland Tunnel and flood the city’s financial district.
- Regal Entertainment Group, AMC Entertainment and Cinemark USA may borrow $1 billion to transform 13,000 US theater screens to digital film from reel-to-reel.
- 3M(MMM) said second-quarter profit missed its forecast on costs to start an optical film unit and slack demand from flat-panel TV makers.
- US Treasuries rose for a second day after a government report showed the economy created fewer jobs last month than analysts forecast, damping speculation the Fed will lift interest rates next month.
- Crude oil fell after Iran’s nuclear negotiator said he had constructive talks with a top EU official over the country’s proposed uranium enrichment program.
Wall Street Journal:
- Verizon Communications(VZ) is close to spinning off its directories business in a transaction that could be worth as much as $13 billion.
- The SEC asked the accounting regulator to delay guidance related to backdating stock options.
Street.com:
- HBK Investments, a Dallas-based hedge fund, is under investigation by the SEC for possible involvement in stock shorting before its acquisition of private shares in Plug Power(PLUG).
NY Post:
- The Children’s Place(PLCE) Retail Stores has boosted sales and pared operating losses at its Disney Store unit by bringing in new merchandise lines and setting everyday prices lower.
USA Today:
- Recent college graduates are applying at record levels to volunteer service organizations such as Teach for America, AmeriCorps and the Peace Corps.
CNBC:
- ImClone Systems’(IMCL) planned sale was postponed until mid-July from late June.
Kydo News:
- North Korea said Japan must lift sanctions imposed in response to the communist country’s missile tests or face “strong measures.”
Die Welt:
- The number of Germans leaving the country rose to he highest since 1950 last year as young and highly qualified Germans sought better prospects abroad.
- Bill Miller, whose $19 billion Legg Mason Value Trust has beaten the S&P 500 for 15 straight years, said the biggest US companies are ripe for investment because they have slumped over five years.
- US authorities uncovered a plot by a group possibly linked to slain al-Qaeda in Iraq leader Abu Musab al-Zarqawi to bomb NY’s Holland Tunnel and flood the city’s financial district.
- Regal Entertainment Group, AMC Entertainment and Cinemark USA may borrow $1 billion to transform 13,000 US theater screens to digital film from reel-to-reel.
- 3M(MMM) said second-quarter profit missed its forecast on costs to start an optical film unit and slack demand from flat-panel TV makers.
- US Treasuries rose for a second day after a government report showed the economy created fewer jobs last month than analysts forecast, damping speculation the Fed will lift interest rates next month.
- Crude oil fell after Iran’s nuclear negotiator said he had constructive talks with a top EU official over the country’s proposed uranium enrichment program.
Wall Street Journal:
- Verizon Communications(VZ) is close to spinning off its directories business in a transaction that could be worth as much as $13 billion.
- The SEC asked the accounting regulator to delay guidance related to backdating stock options.
Street.com:
- HBK Investments, a Dallas-based hedge fund, is under investigation by the SEC for possible involvement in stock shorting before its acquisition of private shares in Plug Power(PLUG).
NY Post:
- The Children’s Place(PLCE) Retail Stores has boosted sales and pared operating losses at its Disney Store unit by bringing in new merchandise lines and setting everyday prices lower.
USA Today:
- Recent college graduates are applying at record levels to volunteer service organizations such as Teach for America, AmeriCorps and the Peace Corps.
CNBC:
- ImClone Systems’(IMCL) planned sale was postponed until mid-July from late June.
Kydo News:
- North Korea said Japan must lift sanctions imposed in response to the communist country’s missile tests or face “strong measures.”
Die Welt:
- The number of Germans leaving the country rose to he highest since 1950 last year as young and highly qualified Germans sought better prospects abroad.
Thursday, July 06, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- Carlyle Group and Riverstone Holdings LLC are among potential bidders in talks to acquire the Lyondell-Citgo refinery in Houston for more than $4 billion.
- Companies that build in a profit for executives on stock options by making grants ahead of good news aren’t guilty of insider trading, said Paul Atkins, a commissioner at the SEC.
- Advanced Micro Devices(AMD) reported preliminary second-quarter sales that missed the company’s forecast after its larger rival Intel Corp.(INTC) offered a price cut to win back orders.
Financial Times:
- Plans for a Europe-wide missile defense system that could protect the continent from threats from Iran and North Korea are winning backing from NATO.
Chosun Ilbo:
- A South Korean passenger aircraft was flying over the East Sea about 20 minutes before North Korea test-fired its first missile early on July 5.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.08%.
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
- (HANS) 4-for-1
- (HP) 2-for-1
- (UBS) 2-for-1
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for June is estimated at 175K versus 75K in May.
- The Change in Manufacturing Payrolls for June is estimated at 1K versus -14K in May.
- The Unemployment Rate for June is estimated at 4.6% versus 4.6% in May.
- Average Hourly Earnings for June are estimated to rise .3% versus a .1% gain in May.
Bloomberg:
- Carlyle Group and Riverstone Holdings LLC are among potential bidders in talks to acquire the Lyondell-Citgo refinery in Houston for more than $4 billion.
- Companies that build in a profit for executives on stock options by making grants ahead of good news aren’t guilty of insider trading, said Paul Atkins, a commissioner at the SEC.
- Advanced Micro Devices(AMD) reported preliminary second-quarter sales that missed the company’s forecast after its larger rival Intel Corp.(INTC) offered a price cut to win back orders.
Financial Times:
- Plans for a Europe-wide missile defense system that could protect the continent from threats from Iran and North Korea are winning backing from NATO.
Chosun Ilbo:
- A South Korean passenger aircraft was flying over the East Sea about 20 minutes before North Korea test-fired its first missile early on July 5.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.08%.
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
- (HANS) 4-for-1
- (HP) 2-for-1
- (UBS) 2-for-1
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for June is estimated at 175K versus 75K in May.
- The Change in Manufacturing Payrolls for June is estimated at 1K versus -14K in May.
- The Unemployment Rate for June is estimated at 4.6% versus 4.6% in May.
- Average Hourly Earnings for June are estimated to rise .3% versus a .1% gain in May.
BOTTOM LINE: Asian indices are mostly higher, boosted by exporting stocks in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.
Stocks Finish Mostly Higher ahead of June Jobs Report
Indices
S&P 500 1,274.08 +.25%
DJIA 11,225.30 +.66%
NASDAQ 2,155.09 +.08%
Russell 2000 720.64 +.11%
Wilshire 5000 12,827.78 +.22%
S&P Barra Growth 588.32 +.33%
S&P Barra Value 684.19 +.17%
Morgan Stanley Consumer 612.39 +.36%
Morgan Stanley Cyclical 824.10 -.08%
Morgan Stanley Technology 489.08 -.03%
Transports 4,885.37 -.73%
Utilities 413.84 -.45%
Put/Call .80 -39.85%
NYSE Arms 1.13 -5.33%
Volatility(VIX) 13.65 -3.53%
ISE Sentiment 181.00 +12.42%
US Dollar 85.35 -.29%
CRB 352.86 +.86%
Futures Spot Prices
Crude Oil 74.90 -.32%
Unleaded Gasoline 224.90 -.44%
Natural Gas 5.68 +.26%
Heating Oil 205.40 -.37%
Gold 635.20 -.17%
Base Metals 228.23 +5.23%
Copper 355.80 -1.63%
10-year US Treasury Yield 5.18% -.71%
Leading Sectors
Tobacco +1.82%
Gold & Silver +1.17%
HMOs +1.10%
Lagging Sectors
Utilities -.45%
Software -.91%
Oil Service -1.75%
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:
- Home Depot(HD) may resume reporting same-store sales after dropping the figure during last quarter’s earnings report, CEO Nardelli said on CNBC.
- Altria Group(MO) will probably spin off its Kraft Foods unit within months after a Florida court handed down a ruling favoring the tobacco industry.
- “Google(GOOG),” a term synonymous with searching the Internet, will be included in the next edition of the Merriam-Webster dictionary.
- Mexico’s former Energy Minister Felipe Calderon won a recount of votes in a presidential race that may not be decided for weeks because of a likely court challenge by rival Andres Manuel Lopez Obrador.
Financial Times:
- Burberry Group Plc plans to open new stores in the US states of Kansas, Indiana and Ohio as part of an overseas expansion.
S&P 500 1,274.08 +.25%
DJIA 11,225.30 +.66%
NASDAQ 2,155.09 +.08%
Russell 2000 720.64 +.11%
Wilshire 5000 12,827.78 +.22%
S&P Barra Growth 588.32 +.33%
S&P Barra Value 684.19 +.17%
Morgan Stanley Consumer 612.39 +.36%
Morgan Stanley Cyclical 824.10 -.08%
Morgan Stanley Technology 489.08 -.03%
Transports 4,885.37 -.73%
Utilities 413.84 -.45%
Put/Call .80 -39.85%
NYSE Arms 1.13 -5.33%
Volatility(VIX) 13.65 -3.53%
ISE Sentiment 181.00 +12.42%
US Dollar 85.35 -.29%
CRB 352.86 +.86%
Futures Spot Prices
Crude Oil 74.90 -.32%
Unleaded Gasoline 224.90 -.44%
Natural Gas 5.68 +.26%
Heating Oil 205.40 -.37%
Gold 635.20 -.17%
Base Metals 228.23 +5.23%
Copper 355.80 -1.63%
10-year US Treasury Yield 5.18% -.71%
Leading Sectors
Tobacco +1.82%
Gold & Silver +1.17%
HMOs +1.10%
Lagging Sectors
Utilities -.45%
Software -.91%
Oil Service -1.75%
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:
- Home Depot(HD) may resume reporting same-store sales after dropping the figure during last quarter’s earnings report, CEO Nardelli said on CNBC.
- Altria Group(MO) will probably spin off its Kraft Foods unit within months after a Florida court handed down a ruling favoring the tobacco industry.
- “Google(GOOG),” a term synonymous with searching the Internet, will be included in the next edition of the Merriam-Webster dictionary.
- Mexico’s former Energy Minister Felipe Calderon won a recount of votes in a presidential race that may not be decided for weeks because of a likely court challenge by rival Andres Manuel Lopez Obrador.
Financial Times:
- Burberry Group Plc plans to open new stores in the US states of Kansas, Indiana and Ohio as part of an overseas expansion.
BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Biotech longs, Internet longs and Energy-related shorts. I added to an existing short and long in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly positive today as the advance/decline line finished modestly higher, most sectors rose and volume was below average. Measures of investor anxiety were lower into the close. Overall, today's market performance was mildly bullish ahead of tomorrow’s jobs report. I expect job creation for June to come in modestly above estimates of 170,000. I would be very surprised to see job creation above 300,000. The 10-year yield should fall slightly on this report, which will likely boost stocks.
Stocks Mixed Heading into Final Hour ahead of Employment Report
BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Biotech 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 slightly negative as the advance/decline line is modestly lower, sector performance is mostly positive and volume is about average. The AAII percentage of Bulls fell to 37.70% this week from 38.60% the prior week. This reading is still below average levels. The AAII percentage of Bears rose to 42.62% this week from 39.77% the prior week. This reading is still above average levels. I expect bullish sentiment to rise next week. I continue to believe overall investor sentiment toward U.S. stocks remains at levels associated with meaningful market bottoms. The fact that bearishness rose again despite recent market gains provides more evidence that many are skeptical that a bottom is in place. I expect US stocks to trade mixed-to-lower into the close from current levels on rising apprehension ahead of tomorrow’s employment report.
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