BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my Semi longs and Internet longs more than offset gains in my Commodity shorts and Computer 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, most sectors are falling and volume is above average. The FOMC just released its June 29 minutes. The committee said it has "significant uncertainty" regarding future policy. It said inflation is "temporarily" boosted and sees it receding. One member said the June hike was a close call. These minutes are dovish and are meant to further prepare the markets for a "pause." I continue to believe the Fed is done hiking rates for this cycle. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting and lower long-term rates.
Thursday, July 20, 2006
Stocks Lower into Final Hour, Led by Commodities
Today's Headlines
Bloomberg:
- President Bush is standing firm in his backing of Israel’s military assault against Islamic radicals in Lebanon and Gaza in the face of rising calls for a cease-fire and a halt to bombing targets in civilian areas.
- Fed officials saw “significant uncertainty” in June over future interest-rate decisions and expressed concern about higher inflation while expecting it to decline, according to minutes of the session.
- Iran’s top security panel said the country will pursue the production of nuclear fuel, warning against confrontation as the UN Security Council drafts a binding resolution requiring suspension of the work.
USA Today:
- A bill in Congress that would create a nationwide database to track registered sex offenders who haven’t updated their locations has the support of some key legislators.
NY Times:
- US baby boomers are getting creative with their funeral arrangements, by adding personal touches reflecting aspects of their lives, personalities or careers.
- US Congressional negotiators yesterday reached a preliminary oral agreement on a set of legislative amendments that seek to keep more pension plans from failing and being taken over by the federal government, citing Republican Senator Michael Enzi.
- Federated Department Stores(FD) Macy’s will be the subject of a new reality television series on Women’s Entertainment cable network later this year.
LA Times:
- Mattel(MAT) plans to sell a “plug and play” video-game system that’s geared toward pre-teen boys.
Washington Post:
- Switzerland faces an increase in Islamic extremism and Swiss security officials say the neutral nation may become a target for violence.
- President Bush is standing firm in his backing of Israel’s military assault against Islamic radicals in Lebanon and Gaza in the face of rising calls for a cease-fire and a halt to bombing targets in civilian areas.
- Fed officials saw “significant uncertainty” in June over future interest-rate decisions and expressed concern about higher inflation while expecting it to decline, according to minutes of the session.
- Iran’s top security panel said the country will pursue the production of nuclear fuel, warning against confrontation as the UN Security Council drafts a binding resolution requiring suspension of the work.
USA Today:
- A bill in Congress that would create a nationwide database to track registered sex offenders who haven’t updated their locations has the support of some key legislators.
NY Times:
- US baby boomers are getting creative with their funeral arrangements, by adding personal touches reflecting aspects of their lives, personalities or careers.
- US Congressional negotiators yesterday reached a preliminary oral agreement on a set of legislative amendments that seek to keep more pension plans from failing and being taken over by the federal government, citing Republican Senator Michael Enzi.
- Federated Department Stores(FD) Macy’s will be the subject of a new reality television series on Women’s Entertainment cable network later this year.
LA Times:
- Mattel(MAT) plans to sell a “plug and play” video-game system that’s geared toward pre-teen boys.
Washington Post:
- Switzerland faces an increase in Islamic extremism and Swiss security officials say the neutral nation may become a target for violence.
Labor Market Still Healthy, Leading Indicators Rise Slightly, Philly Manufacturing Slows
- Initial Jobless Claims for last week fell to 304K versus 320K the prior week.
- Continuing Claims rose to 2505K versus estimates of 2425K and 2420K prior.
- Leading Indicators for June rose .1% versus estimates of a .2% increase and a .6% decline in May.
- The Philly Fed Index for July fell to 6.0 versus estimates of 12.0 and a reading of 13.1 in June.
- Continuing Claims rose to 2505K versus estimates of 2425K and 2420K prior.
- Leading Indicators for June rose .1% versus estimates of a .2% increase and a .6% decline in May.
- The Philly Fed Index for July fell to 6.0 versus estimates of 12.0 and a reading of 13.1 in June.
BOTTOM LINE: The number of US workers filing first-time applications for state jobless benefits fell last week as auto workers finished submitting claims following annual shutdowns at some plants, Bloomberg said. The insured unemployment rate, which tracks the US unemployment rate, remained at 1.9%. The four-week moving-average of claims rose to 316,750. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
An index of leading economic indicators rose less than expected in June, Bloomberg said. I continue to expect US economic growth to slow to around average levels through year-end. This will be viewed as a positive over the coming months.
Manufacturing growth in the Philly area decelerated this month, Bloomberg said. The employment component rose to 12.8 versus a reading of 6.8 in June. The outlook component of the index rose to 15.4 versus 6.8 the prior month. The prices paid component of the index rose to 50.3 versus 48.7 in June. I expect manufacturing is still in the process of slowing to more average levels. Low inventories should cushion the deceleration.
Thursday Watch
Late-Night Headlines
Bloomberg:
- China’s oil imports, a driving force behind record prices, have “stabilized” and may decline within three years, Cnooc Ltd. Chairman Fu Chengyu said. China aims to cut the amount of energy used to produce each unit of gross domestic product by 20% in five years, and 4% this year.
- Brazil’s central bank cut the benchmark lending rate to the lowest level in at least 20 years to help speed economic growth, underscoring President Luiz Inacio Lula da Silva’s success in curbing inflation.
- Hynix Semi, Asia’s second-largest maker of memory chips, said second-quarter profit rose 36% after the company increased production faster than industry leader Samsung Electronics.
- Crude oil traded below $73 a barrel in NY after falling for a third day yesterday when a US government report showed the nation’s gasoline supply unexpectedly rose as production increased and demand eased.
- Xstrata Plc increased its hostile bid for Canadian nickel miner Falconbridge Ltd. by 7.2% to $16.3 billion to thwart Phelps Dodge’s(PD) plans for the mining industry’s largest takeover.
- Steel Authority of India, the nation’s biggest steelmaker, may say first-quarter profit fell 12%, for a fourth straight decline, as coal costs rose and competition from China drove down metal prices.
- The House of Representatives failed to override President Bush’s veto of legislation that would have permitted federal funding of research on new embryonic stem cells, ending the issue in Congress this year.
- The US Army Corps of Engineers’ design of flood-control projects, which was criticized after Hurricane Katrina, would be subject to outside oversight under a measure passed by the US Senate today.
Financial Times:
- Citigroup(C), Motorola(MOT) and Altria Group’s(MO) Philip Morris are among US companies concerned over a German tax reform plan that would bar businesses from deducting interest, leasing and rent payments form taxable profits, citing the American Chamber of Commerce.
21st Century Business Herald:
- Best Buy(BBY) is in talks to buy China’s San Lian Commerce Co. for $100 million.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +1.25% to +2.25% on average.
S&P 500 indicated +.15%.
NASDAQ 100 indicated +.65%.
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
- (AMD)/.22
- (AMGN)/.94
- (AH)/.89
- (AVID)/.33
- (B)/.37
- (BAX)/.52
- (BRCM)/.35
- (COF)/2.06
- (CERN)/.32
- (CMA)/1.14
- (DPZ)/.37
- (DJ)/.35
- (DHI)/.95
- (FFIV)/.51
- (FCS)/.20
- (FITB)/.66
- (FDC)/.55
- (F)/.12
- (FSL)/.49
- (GILD)/.54
- (GDW)/1.29
- (GOOG)/2.21
- (HON)/.61
- (ITW)/.78
- (IMCL)/.38
- (IGT)/.31
- (JCI)/1.68
- (LEG)/.45
- (MDC)/2.15
- (MEDI)/-.24
- (MCHP)/.36
- (MSFT)/.30
- (NE)/1.31
- (BTU)/.56
- (PFE)/.48
- (SHW)/1.25
- (SLM)/.70
- (SYK)/.51
- (UNP)/1.33
- (UB)/1.27
- (VRSN)/.24
- (WB)/1.15
- (WYE)/.76
Upcoming Splits
- (CX) 2-for-1
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 320K versus 332K the prior week.
- Continuing Claims are estimated to fall to 2425K versus 2429K prior.
10:00 am EST
- Leading Indicators for June are estimated to rise .2% versus a .6% decline in May.
12:00 pm EST
- Philly Fed for July is estimated to fall to 12.0 versus a reading of 13.1 in June.
2:00 pm EST
- Minutes of June 29 FOMC Meeting.
Bloomberg:
- China’s oil imports, a driving force behind record prices, have “stabilized” and may decline within three years, Cnooc Ltd. Chairman Fu Chengyu said. China aims to cut the amount of energy used to produce each unit of gross domestic product by 20% in five years, and 4% this year.
- Brazil’s central bank cut the benchmark lending rate to the lowest level in at least 20 years to help speed economic growth, underscoring President Luiz Inacio Lula da Silva’s success in curbing inflation.
- Hynix Semi, Asia’s second-largest maker of memory chips, said second-quarter profit rose 36% after the company increased production faster than industry leader Samsung Electronics.
- Crude oil traded below $73 a barrel in NY after falling for a third day yesterday when a US government report showed the nation’s gasoline supply unexpectedly rose as production increased and demand eased.
- Xstrata Plc increased its hostile bid for Canadian nickel miner Falconbridge Ltd. by 7.2% to $16.3 billion to thwart Phelps Dodge’s(PD) plans for the mining industry’s largest takeover.
- Steel Authority of India, the nation’s biggest steelmaker, may say first-quarter profit fell 12%, for a fourth straight decline, as coal costs rose and competition from China drove down metal prices.
- The House of Representatives failed to override President Bush’s veto of legislation that would have permitted federal funding of research on new embryonic stem cells, ending the issue in Congress this year.
- The US Army Corps of Engineers’ design of flood-control projects, which was criticized after Hurricane Katrina, would be subject to outside oversight under a measure passed by the US Senate today.
Financial Times:
- Citigroup(C), Motorola(MOT) and Altria Group’s(MO) Philip Morris are among US companies concerned over a German tax reform plan that would bar businesses from deducting interest, leasing and rent payments form taxable profits, citing the American Chamber of Commerce.
21st Century Business Herald:
- Best Buy(BBY) is in talks to buy China’s San Lian Commerce Co. for $100 million.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +1.25% to +2.25% on average.
S&P 500 indicated +.15%.
NASDAQ 100 indicated +.65%.
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
- (AMD)/.22
- (AMGN)/.94
- (AH)/.89
- (AVID)/.33
- (B)/.37
- (BAX)/.52
- (BRCM)/.35
- (COF)/2.06
- (CERN)/.32
- (CMA)/1.14
- (DPZ)/.37
- (DJ)/.35
- (DHI)/.95
- (FFIV)/.51
- (FCS)/.20
- (FITB)/.66
- (FDC)/.55
- (F)/.12
- (FSL)/.49
- (GILD)/.54
- (GDW)/1.29
- (GOOG)/2.21
- (HON)/.61
- (ITW)/.78
- (IMCL)/.38
- (IGT)/.31
- (JCI)/1.68
- (LEG)/.45
- (MDC)/2.15
- (MEDI)/-.24
- (MCHP)/.36
- (MSFT)/.30
- (NE)/1.31
- (BTU)/.56
- (PFE)/.48
- (SHW)/1.25
- (SLM)/.70
- (SYK)/.51
- (UNP)/1.33
- (UB)/1.27
- (VRSN)/.24
- (WB)/1.15
- (WYE)/.76
Upcoming Splits
- (CX) 2-for-1
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 320K versus 332K the prior week.
- Continuing Claims are estimated to fall to 2425K versus 2429K prior.
10:00 am EST
- Leading Indicators for June are estimated to rise .2% versus a .6% decline in May.
12:00 pm EST
- Philly Fed for July is estimated to fall to 12.0 versus a reading of 13.1 in June.
2:00 pm EST
- Minutes of June 29 FOMC Meeting.
BOTTOM LINE: Asian indices are higher, boosted by technology and automaker stocks in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Wednesday, July 19, 2006
Stocks Finish Sharply Higher on Positive Earnings, Lower Energy Prices, Lower Rates and Bernanke Comments
Indices
S&P 500 1,259.81 +1.86%
DJIA 11,011.42 +1.96%
NASDAQ 2,080.71 +1.83%
Russell 2000 702.34 +3.04%
Wilshire 5000 12,642.82 +1.97%
S&P Barra Growth 580.52 +1.63%
S&P Barra Value 677.90 +2.07%
Morgan Stanley Consumer 611.55 +1.51%
Morgan Stanley Cyclical 788.02 +2.19%
Morgan Stanley Technology 467.81 +1.42%
Transports 4,695.09 +2.02%
Utilities 426.28 +1.43%
Put/Call .87 -20.18%
NYSE Arms .49 -54.59%
Volatility(VIX) 15.55 -12.34%
ISE Sentiment 119.00 +7.21%
US Dollar 86.45 -.64%
CRB 342.91 +.31%
Futures Spot Prices
Crude Oil 72.84 +.22%
Unleaded Gasoline 223.30 +.14%
Natural Gas 5.89 +.48%
Heating Oil 196.35 -.08%
Gold 643.10 +.05%
Base Metals 226.99 +.11%
Copper 360.10 +.21%
10-year US Treasury Yield 5.04% -1.59%
Leading Sectors
Airlines +5.41%
I-Banks +4.14%
Homebuilders +3.30%
Lagging Sectors
Energy +.85%
Foods +.64%
Internet -.94%
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
Oppenheimer:
- Rated (SUPX) Buy, target $50.
Afternoon/Evening Headlines
Bloomberg:
- Bill Gross, manager of the world’s biggest bond fund at PIMCO, told CNBC that the US Fed may begin lowering interest rates early next year.
- Apple Computer(AAPL) said third-quarter profit rose 48% after the company sold more Macs than analysts expected.
- Qualcomm(QCOM) said third-quarter profit rose 15% on demand for the latest handsets.
- EBay Inc.(EBAY) said second-quarter profit fell 14% as it expensed stock options. The company reiterated its full-year forecast and announced its first-ever stock buyback.
- Motorola(MOT) reported second-quarter profit that exceeded analyst estimates as demand surged for its new Razr and Q models.
- Intel(INTC) reported its biggest profit drop in more than four years and said it is unlikely to make its full-year forecast after losing sales to AMD.
- 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.
S&P 500 1,259.81 +1.86%
DJIA 11,011.42 +1.96%
NASDAQ 2,080.71 +1.83%
Russell 2000 702.34 +3.04%
Wilshire 5000 12,642.82 +1.97%
S&P Barra Growth 580.52 +1.63%
S&P Barra Value 677.90 +2.07%
Morgan Stanley Consumer 611.55 +1.51%
Morgan Stanley Cyclical 788.02 +2.19%
Morgan Stanley Technology 467.81 +1.42%
Transports 4,695.09 +2.02%
Utilities 426.28 +1.43%
Put/Call .87 -20.18%
NYSE Arms .49 -54.59%
Volatility(VIX) 15.55 -12.34%
ISE Sentiment 119.00 +7.21%
US Dollar 86.45 -.64%
CRB 342.91 +.31%
Futures Spot Prices
Crude Oil 72.84 +.22%
Unleaded Gasoline 223.30 +.14%
Natural Gas 5.89 +.48%
Heating Oil 196.35 -.08%
Gold 643.10 +.05%
Base Metals 226.99 +.11%
Copper 360.10 +.21%
10-year US Treasury Yield 5.04% -1.59%
Leading Sectors
Airlines +5.41%
I-Banks +4.14%
Homebuilders +3.30%
Lagging Sectors
Energy +.85%
Foods +.64%
Internet -.94%
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
Oppenheimer:
- Rated (SUPX) Buy, target $50.
Afternoon/Evening Headlines
Bloomberg:
- Bill Gross, manager of the world’s biggest bond fund at PIMCO, told CNBC that the US Fed may begin lowering interest rates early next year.
- Apple Computer(AAPL) said third-quarter profit rose 48% after the company sold more Macs than analysts expected.
- Qualcomm(QCOM) said third-quarter profit rose 15% on demand for the latest handsets.
- EBay Inc.(EBAY) said second-quarter profit fell 14% as it expensed stock options. The company reiterated its full-year forecast and announced its first-ever stock buyback.
- Motorola(MOT) reported second-quarter profit that exceeded analyst estimates as demand surged for its new Razr and Q models.
- Intel(INTC) reported its biggest profit drop in more than four years and said it is unlikely to make its full-year forecast after losing sales to AMD.
- 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.
BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Semi longs, Retail longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was above average. Measures of investor anxiety were lower into the close. Overall, today's market performance was very bullish. The overall picture that Bernanke painted in today's testimony was one of moderation. He expects U.S. growth to moderate only to around average levels and for inflation to decelerate going forward. I sense very few believe this is likely. While action in the bond market leads me to conclude that investors are beginning to believe the Fed has inflation under control, most believe the economy is slowing too much. I expect earnings over the next few weeks to reinforce Bernanke's Goldilocks(economy not too hot or cold) scenario.
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