Indices
S&P 500 1,278.55 +3.09%
DJIA 11,219.70 +3.23%
NASDAQ 2,094.14 +3.65%
Russell 2000 700.03 +4.18%
Wilshire 5000 12,789.01 +3.22%
S&P Barra Growth 588.87 +2.92%
S&P Barra Value 688.30 +3.25%
Morgan Stanley Consumer 621.43 +2.07%
Morgan Stanley Cyclical 779.46 +2.51%
Morgan Stanley Technology 468.53 +3.85%
Transports 4,414.90 -.93%
Utilities 435.02 +1.63%
S&P Emerging Markets 804.05 +2.81%
S&P 500 Cum A/D Line 6,587.0 +13.0%
Bloomberg Oil % Bulls 45.0 -10.0%
CFTC Oil Large Speculative Longs 185,092 -4.0%
Put/Call .88 -29.60%
NYSE Arms .93 -48.62%
Volatility(VIX) 14.33 -17.64%
ISE Sentiment 96.0 -23.20%
AAII % Bulls 34.88 +46.25%
AAII % Bears 43.02 -25.57%
US Dollar 85.38 -.64%
CRB 343.83 +1.24%
ECRI Weekly Leading Index 136.30 -.44%
Futures Spot Prices
Crude Oil 73.36 -2.38%
Unleaded Gasoline 222.40 -3.93%
Natural Gas 7.24 +7.58%
Heating Oil 194.65 -1.19%
Gold 646.40 +3.42%
Base Metals 224.18 +5.53%
Copper 355.40 +5.15%
10-year US Treasury Yield 4.98% -1.19%
Average 30-year Mortgage Rate 6.72% -1.18%
Leading Sectors
Oil Service +8.36%
Telecom +7.75%
Semis +7.10%
Steel +6.74%
Computer Hardware +6.25%
Lagging Sectors
Broadcasting +.81%
Foods +.29%
Hospitals -1.46%
Gaming -2.35%
HMOs -5.22%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
Friday, July 28, 2006
Stocks Sharply Higher into Final Hour as Long-term Rates Fall
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Internet longs, Retail longs and Biotech longs. I added to my (PWR) long and covered my remaining (IWM) and (QQQQ) hedges today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Many are suggesting that recent stock gains are just a function of increased speculation that the Fed is done. The Fed is only done if inflation fears have peaked, which I believe to be the case. The 10-year yield, the best predictor of future inflation, would not be falling if inflation fears were rising. Other Fed pause speculation periods were accompanied by higher long-term rates as investors anticipated a pickup in growth and inflation. This is an "inflation has peaked" rally, which has meaningful longer-term consequences that are overwhelmingly positive for U.S. stocks. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, mostly positive earnings reports, lower long-term rates, lower energy prices and bargain-hunting.
Today's Headlines
Bloomberg:
- Crude oil is falling after a government report showed that US economic growth slowed and China said it planned to implement new energy pricing measures to increase efficiency.
- General Motors(GM), the best performing stock in the Dow Jones Industrial Average, would tie a 22-year record for consecutive daily gains with an increase today.
- Treasuries are rising, pushing yields on 10-year notes below 5% on declining inflation worries and increased speculation for a Fed “pause.”
- Bank of America(BAC) is on the brink of overtaking Citigroup as the world’s.
Wall Street Journal:
- Israeli and Lebanese bloggers are providing live updates, comment and links to each other across the firing lines. The dialogue marks a breakthrough in communications between residents of the two countries, who until now had no phone connections and little ability to talk to each other.
- General Motors’(GM) rising share price has caused hedge funds to lose money, as traders incorrectly bet against the carmaker turning around its losses.
- US conservatives trying to hold down taxes are expanding a campaign to impose spending limits on state legislatures.
- Hedge funds could receive more money from pension funds if the US Congress passes the pension bill currently before it. A little-noticed provision in the bill would change existing law, which states that if hedge funds obtain more than 25% of their total assets from pension funds they become fiduciaries, with resulting restrictions and increased scrutiny. It the bill is passed in its present form, public-employee or foreign pension plans would no longer be counted in the capped amount, thus allowing funds to accept unlimited amounts from them.
NY Times:
- About 60% of likely car buyers now say fuel economy is a priority, compared with 22% of prospective buyers in 2002.
Central People’s Radio:
- China will change how it prices energy products to reflect the resource scarcity in the country. Officials hope a reformed pricing mechanism for energy will raise efficiency.
- Crude oil is falling after a government report showed that US economic growth slowed and China said it planned to implement new energy pricing measures to increase efficiency.
- General Motors(GM), the best performing stock in the Dow Jones Industrial Average, would tie a 22-year record for consecutive daily gains with an increase today.
- Treasuries are rising, pushing yields on 10-year notes below 5% on declining inflation worries and increased speculation for a Fed “pause.”
- Bank of America(BAC) is on the brink of overtaking Citigroup as the world’s.
Wall Street Journal:
- Israeli and Lebanese bloggers are providing live updates, comment and links to each other across the firing lines. The dialogue marks a breakthrough in communications between residents of the two countries, who until now had no phone connections and little ability to talk to each other.
- General Motors’(GM) rising share price has caused hedge funds to lose money, as traders incorrectly bet against the carmaker turning around its losses.
- US conservatives trying to hold down taxes are expanding a campaign to impose spending limits on state legislatures.
- Hedge funds could receive more money from pension funds if the US Congress passes the pension bill currently before it. A little-noticed provision in the bill would change existing law, which states that if hedge funds obtain more than 25% of their total assets from pension funds they become fiduciaries, with resulting restrictions and increased scrutiny. It the bill is passed in its present form, public-employee or foreign pension plans would no longer be counted in the capped amount, thus allowing funds to accept unlimited amounts from them.
NY Times:
- About 60% of likely car buyers now say fuel economy is a priority, compared with 22% of prospective buyers in 2002.
Central People’s Radio:
- China will change how it prices energy products to reflect the resource scarcity in the country. Officials hope a reformed pricing mechanism for energy will raise efficiency.
Growoth Slows, Wages Rise, Consumer Confidence Beats Estimates
- Advance 2Q GDP rose 2.5% versus estimates of 3.0% and a 5.6% gain in 1Q.
- Advance 2Q Personal Consumption rose 2.5% versus estimates of a 2.1% increase and a 4.8% gain in 1Q.
- Advance 2Q GDP Price Index rose 3.3% versus estimates of a 3.5% increase and a 3.3% gain in 1Q.
- Advance 2Q Core PCE rose 2.9% versus estimates of a 2.9% gain and a 2.1% increase in 1Q.
- The 2Q Employment Cost Index rose .9% versus estimates of a .8% increase and a .6% gain in 1Q.
- The Final Univ. of Mich. Consumer Confidence Index rose to 84.7 versus estimates of 83.0 and prior estimates of 83.0.
- Advance 2Q Personal Consumption rose 2.5% versus estimates of a 2.1% increase and a 4.8% gain in 1Q.
- Advance 2Q GDP Price Index rose 3.3% versus estimates of a 3.5% increase and a 3.3% gain in 1Q.
- Advance 2Q Core PCE rose 2.9% versus estimates of a 2.9% gain and a 2.1% increase in 1Q.
- The 2Q Employment Cost Index rose .9% versus estimates of a .8% increase and a .6% gain in 1Q.
- The Final Univ. of Mich. Consumer Confidence Index rose to 84.7 versus estimates of 83.0 and prior estimates of 83.0.
BOTTOM LINE: The US economy grew at a 2.5% annual rate last quarter, less than half the pace of the previous three months, as companies and consumers reined in spending, Bloomberg said. A separate report from the Labor Dept. showed wages rose by the most in three years. Business Fixed Investment, which includes spending on commercial construction as well as equipment and software, increased at a 2.7% annual rate in the second quarter after a 13.7% gain in the first quarter. I continue to believe the Fed is done hiking rates for this cycle and that inflation fears have peaked. The 10-year T-note, the best predictor of future inflation, is rallying on this report.
Confidence among US consumers came in above estimates this month despite higher gas prices, a stock market correction and increased violence in the Middle East, Bloomberg reported. I expect Consumer Confidence to make new cycle highs over the intermediate-term as gas prices fall, stocks rise, inflation decelerates, mortgage rates fall, housing stabilizes and the job market remains healthy.
Thursday, July 27, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- Shares of Sony Corp.(SNE) rose after the company posted profit that exceeded analyst estimates, helped by higher sales of Bravia televisions and Cyber-shot digital cameras.
- Shares of Sohu.com(SOHU), China’s third-biggest Internet portal, plunged 8.4% after the company forecast third-quarter sales that may miss analysts’ estimates.
- Japan’s consumer prices climbed for an eighth month and the prospect of finding a job rose to a 14-year high, supporting economists’ expectations that the central bank may increase interest rates for a second straight time this year.
Financial Times:
- The US government is to step up its prosecution of cartels, with executives involved at increased risk of extradition, citing an interview with Thomas Barnett, who heads the US Department of Justice’s antitrust division.
Colorado Gazette:
- A Colorado man serving a life sentence for murdering a teenage girl has told authorities he is responsible for 48 deaths across the US and overseas, a claim which, if true, would make him one of the more prolific serial killers in history.
AP:
- Left-wing anti-war protester Cindy Sheehan bought five acres of land in Crawford, Texas, near President Bush’s ranch. Sheehan purchased the property with some of the insurance money she received from the death of her son, Specialist Casey Sheehan.
Guardian:
- Google Inc.(GOOG) is the fastest growing brand in the world, citing an annual survey by brand consultants Interbrand.
Late Buy/Sell Recommendations
Goldman Sachs:
- Cut (ACH) to Underperform.
- Cut (WBMD) to Underperform, target $40.
Business Week:
- Shares of Bally Technologies(BYI), the second-largest maker of slot and lottery machines, may climb, and the company may be bought after it completes late securities filings, citing David Bain of Merriman Curhan Ford.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated -.03%.
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
- (ALEX)/.49
- (AMT)/.02
- (AXL)/.35
- (ANDE)/.71
- (ADRX)/.18
- (ATW)/.72
- (BHI)/.98
- (BDX)/.79
- (CRDN)/1.05
- (CVX)/2.21
- (CEG)/.46
- (CVH)/.82
- (DLB)/.13
- (FPL)/.74
- (GPN)/.38
- (IDXX)/.63
- (IR)/.95
- (ITT)/.77
- (MSTR)/1.19
- (MGAM)/.02
- (ODP)/.40
- (OSTK)/.86
- (WMI)/.43
Upcoming Splits
- (MON) 2-for-1
Economic Releases
8:30 am EST
- Advance 2Q GDP is estimated to rise 3.0% versus a 5.6% gain in 1Q.
- Advance 2Q GDP Price Index is estimated to rise 3.5% versus a 3.1% gain in 1Q.
- Advance 2Q Personal Consumption is estimated to rise 2.1% versus a 5.1% gain in 1Q.
- Advance 2Q PCE Core is estimated to rise 2.9% versus a 2.0% increase in 1Q.
- 2Q Employment Cost Index is estimated to rise .8% versus a .6% gain in 1Q.
9:45 am EST
- Final Univ. of Mich. Consumer Confidence for July is estimated at 83.0 versus a prior estimated of 83.0
Bloomberg:
- Shares of Sony Corp.(SNE) rose after the company posted profit that exceeded analyst estimates, helped by higher sales of Bravia televisions and Cyber-shot digital cameras.
- Shares of Sohu.com(SOHU), China’s third-biggest Internet portal, plunged 8.4% after the company forecast third-quarter sales that may miss analysts’ estimates.
- Japan’s consumer prices climbed for an eighth month and the prospect of finding a job rose to a 14-year high, supporting economists’ expectations that the central bank may increase interest rates for a second straight time this year.
Financial Times:
- The US government is to step up its prosecution of cartels, with executives involved at increased risk of extradition, citing an interview with Thomas Barnett, who heads the US Department of Justice’s antitrust division.
Colorado Gazette:
- A Colorado man serving a life sentence for murdering a teenage girl has told authorities he is responsible for 48 deaths across the US and overseas, a claim which, if true, would make him one of the more prolific serial killers in history.
AP:
- Left-wing anti-war protester Cindy Sheehan bought five acres of land in Crawford, Texas, near President Bush’s ranch. Sheehan purchased the property with some of the insurance money she received from the death of her son, Specialist Casey Sheehan.
Guardian:
- Google Inc.(GOOG) is the fastest growing brand in the world, citing an annual survey by brand consultants Interbrand.
Late Buy/Sell Recommendations
Goldman Sachs:
- Cut (ACH) to Underperform.
- Cut (WBMD) to Underperform, target $40.
Business Week:
- Shares of Bally Technologies(BYI), the second-largest maker of slot and lottery machines, may climb, and the company may be bought after it completes late securities filings, citing David Bain of Merriman Curhan Ford.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated -.03%.
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
- (ALEX)/.49
- (AMT)/.02
- (AXL)/.35
- (ANDE)/.71
- (ADRX)/.18
- (ATW)/.72
- (BHI)/.98
- (BDX)/.79
- (CRDN)/1.05
- (CVX)/2.21
- (CEG)/.46
- (CVH)/.82
- (DLB)/.13
- (FPL)/.74
- (GPN)/.38
- (IDXX)/.63
- (IR)/.95
- (ITT)/.77
- (MSTR)/1.19
- (MGAM)/.02
- (ODP)/.40
- (OSTK)/.86
- (WMI)/.43
Upcoming Splits
- (MON) 2-for-1
Economic Releases
8:30 am EST
- Advance 2Q GDP is estimated to rise 3.0% versus a 5.6% gain in 1Q.
- Advance 2Q GDP Price Index is estimated to rise 3.5% versus a 3.1% gain in 1Q.
- Advance 2Q Personal Consumption is estimated to rise 2.1% versus a 5.1% gain in 1Q.
- Advance 2Q PCE Core is estimated to rise 2.9% versus a 2.0% increase in 1Q.
- 2Q Employment Cost Index is estimated to rise .8% versus a .6% gain in 1Q.
9:45 am EST
- Final Univ. of Mich. Consumer Confidence for July is estimated at 83.0 versus a prior estimated of 83.0
BOTTOM LINE: Asian indices are mixed, as gains by technology stocks are being offset by losses in real estate stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
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