BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Computer longs, Semi longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is heavy. Considering how many times Bernanke has mentioned oil as the main source of inflationary fears and oil's extremely elevated state, it must be extremely disturbing for the bears to contemplate the distinct possibility of a sharp drop in oil that isn't accompanied by a substantial economic downturn. I continue to believe that the negative effects oil has had on many aspects of the economy are severely underestimated. The beginning of the mother of all short-covering rallies will likely coincide with a substantial downturn in oil prices. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, lower long-term rates and lower energy prices.
Wednesday, July 19, 2006
Stocks Sharply Higher into Final Hour on Bernanke Speech, Lower Rates and Declining Energy Prices
Today's Headlines
Bloomberg:
- Fed Chairman Bernanke, laying the groundwork for a pause in interest-rate increases, said policy makers must be wary of lifting borrowing costs too far.
- US 10-year note yields fell the most in six weeks after Fed Chairman Bernanke said “moderation” is under way in the economy, fueling speculation the bank will pause in lifting interest rates.
- American Airlines(AMR) reported its highest quarterly profit in six years and Southwest Airlines’ earnings more than doubled on increased fares and travel demand.
- Crude oil is falling to a three-week low in NY after a government report showed an unexpected increase in US oil and gas inventories.
- Israeli soldiers fought Hezbollah forces within southern Lebanon for the first time since the conflict began a week ago as the US and Israel resisted diplomatic efforts to halt the hostilities.
- Ethanol prices in the US have fallen 22% from an all-time high two weeks ago as rising production and improved distribution helped meet soaring demand for the gasoline additive.
Wall Street Journal:
- Oil production from Iraq’s southern fields has grown from 1.65 million barrels per day to 2 million bpd in recent months.
- China’s government is stressing the need to reduce water pollution while failing to sanction chemical and petrochemical factories that pollute.
- HCA Inc.(HCA) was in recent days negotiating a leveraged buyout that would have been among the largest in history until the transaction fell apart in the last few days.
- Southwest retailers and investors are focusing on the growing purchasing power of Hispanics.
- US tax-law changes that will raise taxes for many Americans living overseas is forcing companies to reconsider hiring policies and employees to consider returning home.
- Latham & Watkins and other US law firms are pulling in growing business as regulators widen their probe into the backdating of stock options.
- Fed Chairman Bernanke, laying the groundwork for a pause in interest-rate increases, said policy makers must be wary of lifting borrowing costs too far.
- US 10-year note yields fell the most in six weeks after Fed Chairman Bernanke said “moderation” is under way in the economy, fueling speculation the bank will pause in lifting interest rates.
- American Airlines(AMR) reported its highest quarterly profit in six years and Southwest Airlines’ earnings more than doubled on increased fares and travel demand.
- Crude oil is falling to a three-week low in NY after a government report showed an unexpected increase in US oil and gas inventories.
- Israeli soldiers fought Hezbollah forces within southern Lebanon for the first time since the conflict began a week ago as the US and Israel resisted diplomatic efforts to halt the hostilities.
- Ethanol prices in the US have fallen 22% from an all-time high two weeks ago as rising production and improved distribution helped meet soaring demand for the gasoline additive.
Wall Street Journal:
- Oil production from Iraq’s southern fields has grown from 1.65 million barrels per day to 2 million bpd in recent months.
- China’s government is stressing the need to reduce water pollution while failing to sanction chemical and petrochemical factories that pollute.
- HCA Inc.(HCA) was in recent days negotiating a leveraged buyout that would have been among the largest in history until the transaction fell apart in the last few days.
- Southwest retailers and investors are focusing on the growing purchasing power of Hispanics.
- US tax-law changes that will raise taxes for many Americans living overseas is forcing companies to reconsider hiring policies and employees to consider returning home.
- Latham & Watkins and other US law firms are pulling in growing business as regulators widen their probe into the backdating of stock options.
CPI Decelerates, Housing Starts Slow Further
- The Consumer Price Index for June rose .2% versus estimates of a .2% increase and a .4% gain in May.
- The CPI Ex Food & Energy for June rose .3% versus estimates of a .2% gain and a .3% rise in May.
- Housing Starts for June fell to 1850K versus estimates of 1900K and 1953K prior.
- Building Permits for June fell to 1862K versus estimates of 1920K and 1946K prior.
- The CPI Ex Food & Energy for June rose .3% versus estimates of a .2% gain and a .3% rise in May.
- Housing Starts for June fell to 1850K versus estimates of 1900K and 1953K prior.
- Building Permits for June fell to 1862K versus estimates of 1920K and 1946K prior.
BOTTOM LINE: Consumer prices in the US increased for a sixth straight month, Bloomberg reported. Energy prices declined .9% in June versus a 2.4% gain in May. The 10-year yield is falling substantially from morning highs. I continue to believe inflation worries have peaked for the year.
US homebuilders started work on fewer homes in June as higher mortgage rates discouraged buyers, reinforcing expectations of slowing growth, Bloomberg said. Starts fell 12% in the Northeast, 4% in the South and 10% in the West. Starts rose 3% in the Midwest. I continue to believe mortgage rates have peaked for the year and that housing is still in the process of slowing to more healthy sustainable levels.
Tuesday, July 18, 2006
Wednesday Watch
Late-Night Headlines
Bloomberg:
- Intl. Business Machines(IBM) said second-quarter profit rose 11% after the company reduced expenses by cutting jobs in Europe and shifting work to India.
- Charles Schwab(SCHW) said second-quarter profit rose 35% after price cuts lured new clients. TD Ameritrade’s(AMTD) third-quarter net income increased 67%.
- Yahoo!(YHOO) said second-quarter profit fell after a year-earlier gain. Sales rose 26% as the company’s Web pages drew more users and advertisers.
- Toyota Motor(TM), the largest seller of hybrid autos, may produce gasoline-electric models that can be recharged at any outlet to reduce the use of gasoline.
- The Senate approved 63-37 legislation to overturn a ban on federal funding for research on new embryonic stem cells.
- Crude oil traded below $74/bbl. in NY after falling to a one-week low yesterday on speculation Middle East oil supplies won’t be disrupted by the military conflict in Lebanon.
- Asian stocks trading in the US posted their worst losing streak in two months.
- Copper prices fell in Shanghai, London, and NY amid concern that consumption in China may drop as the country adopts more measures to slow economic growth.
Financial Times:
- Wal-Mart Stores(WMT) is developing a new generation of hybrid truck engines and other fuel saving technology to improve the efficiency of its truck feet.
- General Motors(GM) will ensure every car and light truck it produces meets or beats the best fuel economy of its rivals, and is willing to sacrifice performance and cost, citing an interview with Vice-Chairman Bob Lutz.
London-based Times:
- Google(GOOG) will introduce click-to-play video ads in the UK, allowing users to select which ad messages they wish to view.
Commerical Times:
- Asustek Computer this month started shipping Playstation 3 units it manufactured to Sony Corp.(SNE) for the rollout of the game console in November.
AP:
- State-licensed casinos in Louisiana won a best-ever $2.38 billion from gamblers in the year ended June 30 even after the devastation from hurricanes Katrina and Rita.
- Israel sent a unit of soldiers into Southern Lebanon to search for weapons and tunnels used by Hezbollah.
JoongAng Ilbo:
- North Korean leader Kim Jong Il ordered the country’s soldiers and civilians to go on a state of military alert, citing an unidentified South Korean government official.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated -.39%.
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
- (ABT)/.57
- (ALL)/1.61
- (DOX)/.46
- (ASD)/.93
- (AMR)/1.14
- (AAPL)/.44
- (BK)/.56
- (BAC)/1.10
- (CDWC)/.79
- (CAKE)/.28
- (CIT)/1.16
- (ET)/.35
- (EBAY)/.24
- (GD)/1.00
- (GPC)/.69
- (INTC)/.13
- (JPM)/.87
- (JNPR)/.19
- (KMI)/1.02
- (LRCX)/.83
- (MEL)/.52
- (MOT)/.31
- (NVLS)/.38
- (QCOM)/.41
- (RMBS)/.07
- (RYL)/1.93
- (STX)/.41
- (LUV)/.26
- (STJ)/.38
- (STI)/1.48
- (UNH)/.68
- (WM)/.93
Upcoming Splits
- (RS) 2-for-1
Economic Releases
8:30 am EST
- The Consumer Price Index for June is estimated to rise .2% versus a .4% gain in May.
- The CPI Ex Food & Energy for June is estimated to rise .2% versus a .3% gain in May.
- Housing Starts for June are estimated to fall to 1900K versus 1957K in May.
- Building Permits for June are estimated to fall to 1920K versus 1946K in May.
10:00 am EST
- Bernanke Report on Economy & Fed Policy
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 650,000 barrels. Gasoline supplies are expected to fall 875,000 barrels, while distillate inventories are estimated to rise 1,750,000 barrels. Finally, Refinery Utilization is expected to rise 1.0%.
Bloomberg:
- Intl. Business Machines(IBM) said second-quarter profit rose 11% after the company reduced expenses by cutting jobs in Europe and shifting work to India.
- Charles Schwab(SCHW) said second-quarter profit rose 35% after price cuts lured new clients. TD Ameritrade’s(AMTD) third-quarter net income increased 67%.
- Yahoo!(YHOO) said second-quarter profit fell after a year-earlier gain. Sales rose 26% as the company’s Web pages drew more users and advertisers.
- Toyota Motor(TM), the largest seller of hybrid autos, may produce gasoline-electric models that can be recharged at any outlet to reduce the use of gasoline.
- The Senate approved 63-37 legislation to overturn a ban on federal funding for research on new embryonic stem cells.
- Crude oil traded below $74/bbl. in NY after falling to a one-week low yesterday on speculation Middle East oil supplies won’t be disrupted by the military conflict in Lebanon.
- Asian stocks trading in the US posted their worst losing streak in two months.
- Copper prices fell in Shanghai, London, and NY amid concern that consumption in China may drop as the country adopts more measures to slow economic growth.
Financial Times:
- Wal-Mart Stores(WMT) is developing a new generation of hybrid truck engines and other fuel saving technology to improve the efficiency of its truck feet.
- General Motors(GM) will ensure every car and light truck it produces meets or beats the best fuel economy of its rivals, and is willing to sacrifice performance and cost, citing an interview with Vice-Chairman Bob Lutz.
London-based Times:
- Google(GOOG) will introduce click-to-play video ads in the UK, allowing users to select which ad messages they wish to view.
Commerical Times:
- Asustek Computer this month started shipping Playstation 3 units it manufactured to Sony Corp.(SNE) for the rollout of the game console in November.
AP:
- State-licensed casinos in Louisiana won a best-ever $2.38 billion from gamblers in the year ended June 30 even after the devastation from hurricanes Katrina and Rita.
- Israel sent a unit of soldiers into Southern Lebanon to search for weapons and tunnels used by Hezbollah.
JoongAng Ilbo:
- North Korean leader Kim Jong Il ordered the country’s soldiers and civilians to go on a state of military alert, citing an unidentified South Korean government official.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated -.39%.
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
- (ABT)/.57
- (ALL)/1.61
- (DOX)/.46
- (ASD)/.93
- (AMR)/1.14
- (AAPL)/.44
- (BK)/.56
- (BAC)/1.10
- (CDWC)/.79
- (CAKE)/.28
- (CIT)/1.16
- (ET)/.35
- (EBAY)/.24
- (GD)/1.00
- (GPC)/.69
- (INTC)/.13
- (JPM)/.87
- (JNPR)/.19
- (KMI)/1.02
- (LRCX)/.83
- (MEL)/.52
- (MOT)/.31
- (NVLS)/.38
- (QCOM)/.41
- (RMBS)/.07
- (RYL)/1.93
- (STX)/.41
- (LUV)/.26
- (STJ)/.38
- (STI)/1.48
- (UNH)/.68
- (WM)/.93
Upcoming Splits
- (RS) 2-for-1
Economic Releases
8:30 am EST
- The Consumer Price Index for June is estimated to rise .2% versus a .4% gain in May.
- The CPI Ex Food & Energy for June is estimated to rise .2% versus a .3% gain in May.
- Housing Starts for June are estimated to fall to 1900K versus 1957K in May.
- Building Permits for June are estimated to fall to 1920K versus 1946K in May.
10:00 am EST
- Bernanke Report on Economy & Fed Policy
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 650,000 barrels. Gasoline supplies are expected to fall 875,000 barrels, while distillate inventories are estimated to rise 1,750,000 barrels. Finally, Refinery Utilization is expected to rise 1.0%.
BOTTOM LINE: Asian indices are higher, boosted by technology and automaker stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing higher. The Portfolio is 100% net long heading into the day.
***Alert***
I am unable to post the Tuesday Close due to a scheduling conflict. I will post the Wednesday Watch Later this evening.
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