BETWEEN THE HEDGES

Wednesday, August 02, 2006

Thursday Watch

Posted by Gary .....at 11:24 PM

Late-Night Headlines
Bloomberg:
- If insider selling is any guide, the stock-market rally for energy companies may be waning.
- The euro declined against the dollar and yen on bets European Central Bank President Jean-Claude Trichet won’t trigger speculation of a faster pace of increases after an expected interest-rate rise today.
- Morgan Stanley(MS) CEO Mack told the SEC that he had no advance knowledge of an acquisition in 2001 that’s now under scrutiny for possible insider trading, a persona familiar with his testimony said.
- Shares of Sina Corp.(SINA), owner of China’s biggest Internet portal, surged after the company forecast third-quarter sales that beat analyst estimates, allaying fears new mobile service rules would lower revenue.

Wall Street Journal:
- Labor unions at the major US and Japanese automakers last week agreed to start studying common issues.

Reuters:
- Aluminum Corp. of China Ltd.(ACH), the world’s second-biggest producer of alumina, has cut the price of alumina for some smelters by 20% from Aug. 1, citing officials.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated -.12%.
NASDAQ 100 indicated -.07%.

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Earnings of Note
Company/EPS Estimate
- (ATVI)/-.10
- (ATK)/1.06
- (ALTR)/.22
- (AOC)/.60
- (CAH)/.87
- (CECO)/.49
- (CBS/A)/.50
- (CEPH)/1.01
- (CCI)/-.07
- (CVS)/.37
- (D)/.79
- (DUK)/.38
- (IRF)/.46
- (ITG)/.55
- (IVGN)/.85
- (KMG)/1.11
- (FLSH)/.22
- (CLI)/.30
- (MMC)/.43
- (MGM)/.53
- (NBL)/1.16
- (OMX)/.14
- (PTEN)/.95
- (PMI)/1.12
- (PPL)/.48
- (QSII)/.24
- (TSG)/.41
- (SRE)/.63
- (SKYW)/.60
- (S)/.33
- (SFY)/1.13
- (RIG)/.44
- (TYC)/.48
- (UVN)/.31
- (WMB)/.22

Upcoming Splits
- (FUL) 2-for-1

Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 308K versus 298K the prior week.
- Continuing Claims are estimated to fall to 2460K versus 2575K prior.

10:00 am EST
- Factory Orders for June are estimated to rise 1.8% versus a .7% gain in May.
- ISM Non-Manufacturing for July is estimated to fall to 56.8 versus a reading of 57.0 in June.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Higher as Long-term Rates Continue Drop

Posted by Gary .....at 5:11 PM

Indices
S&P 500 1,278.55 +.60%
DJIA 11,199.93 +.67%
NASDAQ 2,078.81 +.82%
Russell 2000 696.81 +1.0%
Wilshire 5000 12,788.39 +.63%
S&P Barra Growth 588.32 +.61%
S&P Barra Value 688.93 +.59%
Morgan Stanley Consumer 618.57 +.63%
Morgan Stanley Cyclical 783.11 +1.30%
Morgan Stanley Technology 465.17 +1.32%
Transports 4,327.59 +.75%
Utilities 438.05 -.04%
Put/Call .80 -12.09%
NYSE Arms 1.01 -5.68%
Volatility(VIX) 14.34 -4.72%
ISE Sentiment 127.00 +11.40%
US Dollar 85.15 +.18%
CRB 353.69 +1.18%

Futures Spot Prices
Crude Oil 76.09 +.37%
Unleaded Gasoline 234.85 +.46%
Natural Gas 7.92 +1.55%
Heating Oil 214.00 +.50%
Gold 662.50 -.24%
Base Metals 229.72 +.53%
Copper 358.45 -.18%
10-year US Treasury Yield 4.95% -.37%

Leading Sectors
HMOs +3.69%
Software +2.88%
Gaming +2.82%

Lagging Sectors
Insurance -.22%
Broadcasting -.25%
Drugs -.33%

Evening Review
Detailed Market Summary
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In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- Comerica(CMA) may sell its Munder asset-management unit to Crestview Partners LLC, a private-equity firm founded by two former partners of Goldman Sachs(GS).
- Wall Street companies dimmed their lights, cut back on air-conditioning and shut down their signs and advertising displays to do their part to reduce energy use during a punishing heat wave in NY.
- Shares of Starbucks(SBUX) dropped 7.5% after the company said July sales at stores open more than a year rose 4%, missing analysts’ estimates.

BOTTOM LINE: The Portfolio finished higher today on gains in my Medical longs, Computer longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was positive today as the advance/decline line finished higher, sector performance was mostly positive and volume was about average. Measures of investor anxiety were lower into the close. Overall, today's market performance was mildly bullish. The averages and most stocks are slowly mending technically. Google's (GOOG) recent weakness is disappointing considering the overwhelmingly strong fundamentals and reasonable valuation. I expect it is caught in the same type of technical selling that recently engulfed Apple Computer (AAPL). I will be very surprised if Google isn't substantially higher by year-end. I remain long the stock. Tomorrow's retail sales could be disappointing to some as I suspect a few shoppers just chose to stay out of the heat all together. I still expect the back-to-school selling season to exceed lowered expectations.

Stocks Higher into Final Hour, Led by Tech Shares

Posted by Gary .....at 3:42 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Biotech longs and Computer longs. I covered my (QQQQ) and (IWM) hedges this morning and then added them back today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is average. Given the large percentage of market participants that are bears and weak bulls, I suspect this is the beginning of another push higher in the major averages. While the employment report Friday could result in a "pause" in the rally, I expect investors to react most positively to the Fed's announcement next week. I expect US stocks to trade mixed into the close from current levels as short-covering, lower long-term rates and bargain-hunting offsets worries over tomorrow’s retail sales reports.

Today's Headlines

Posted by Gary .....at 2:09 PM

Bloomberg:
- GM(GM), Delphi and the UAW are at odds over wages and proposed Delphi plant closings as they try to reach a labor agreement before a critical court hearing Aug. 11, a union official said.
- Natural Gas prices soared, nearing a six-month high, on concern Tropical Storm Chris will disrupt Gulf of Mexico production.
- Israel sent troops into Lebanon and raided an eastern town with special forces as Hezbollah fired 190 rockets, the most since the conflict began three weeks ago.
- Time Warner(TWX) said it will give away its AOL service to high-speed Internet users, sacrificing subscriber revenue in a bet that online advertising will compensate for the loss.
- Companies in the US added 99,000 jobs in July, the fewest this year, a private report based on payroll data showed today.

Wall Street Journal:
- Christopher Cox, the chairman of the SEC, said he intends to concentrate on protecting the assets of people in their forties and fifties.
- Phelps Dodge(PD) may increase the cash portion of its bid for Inco Ltd.(N) by more than $5.98 billion.
- Automatic Data Processing(ADP) is likely to announce today that it plans to spin off its brokerage-services arm.
- Ford Motor(F) may consider selling underperforming units such as Jaguar or pursuing alliances with other automakers.
- Shares in Sprint Nextel(S) may be set to rise over the next few years as the company’s costs have been dropping faster than its customers prices.
- Firsthand Funds, Legg Mason and T. Rowe Price Group are among mutual funds that are engaging in private-equity investments, as they seek higher return at the expense of higher risk.
- The dissolution of Dynasty Asset Management, once one of the largest China-focused hedge funds, highlights the risk to hedge funds in Asia.
- Democratic Representative John Murtha is accused in a lawsuit being filed today of defaming a US Marine Corps staff sergeant.
NY Times:
- US Postal Service revenue from online business is helping make up for a drop in first-class mail such as cards and letters.
- Goldman Sachs(GS) plans to double the number of money managers it has internationally to attract rich clients for its private banking services.

LA Times:
- Google Inc.(GOOG) is in talks with the Univ. of Cal., home of the world’s largest academic research library, about scanning its 34 million volumes on 10 campuses.

Washington Post:
- US Democrats are diverting campaign money to fund voter-turnout programs, concerned they will lose the mid-term elections in November because of a lack of organization at the local level.

AFP:
- France may boycott a UN meeting of contributors to a Lebanon peacekeeping force, part of a plan to end the Israel-Hezbollah war, citing a French official. France considers that the deployment of a buffer force in Lebanon is premature.
- Israel’s offensive against Hezbollah in Lebanon will last until the end of next week, citing Israeli Justice Minister Ramon.

CCTV:
- China should take “comprehensive” measures to prevent money supply and loans from growing too fast so as to ensure sustainable development of the economy, citing the central bank.

Economic Releases

Posted by Gary .....at 10:08 AM

- None of note