BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Computer longs, Medical longs and Retail longs. I covered my (IWM) and (QQQQ) hedges 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 about average. NYSE short interest as a percentage of total shares outstanding hit 2.5% last month. This is an all-time record high. This is also up from a low of 1.0% in Sept. 1999. The negativity bubble further inflates. I suspect today’s move is the confirmation the few remaining bulls have been waiting for. My intermediate-term broad market technical models are improving rapidly. The 10-year yield is near session lows of 4.92% despite today's sharp stock market advance. Even a bad CPI report tomorrow will not likely boost the yield meaningfully above 5%. The ISE Sentiment Index is still a depressed 93, which is a positive. Homebuilders are up 2.4% to session highs despite today's bad housing data. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, lower long-term rates and declining energy prices.
Tuesday, August 15, 2006
Stocks Sharply Higher into Final Hour on Falling Inflation Worries, Short-covering and Bargain-hunting
Today's Headlines
Bloomberg:
- Israeli and Lebanese politicians are acting together in an effort to defeat Hezbollah, Syrian President Bashar al-Assad said.
- Indian Prime Minister Manmohan Singh said terrorism threatens economic prosperity in South Asia and urged neighboring Pakistan to clamp down on extremists.
- Heathrow Airport plans to cancel 20% of departing flights today, down from about a third yesterday, as schedules slowly return to normal six days after UK police said they foiled a plot to bomb planes en route to the US.
- Home Depot(HD) said second-quarter profit rose 5.3% on higher sales to professional builders.
- Goldman Sachs(GS) extended its lead over securities firms reporting second-quarter equities and fixed-income trading revenue.
- The Chinese yuan fell the most since China ended a peg to the dollar last year, tracking Asian currencies lower as traders bet the central bank is reducing its control over the exchange rate.
- Deere(DE) said third-quarter profit rose 13%, helped by sales of construction products. The company lowered its 06 forecast.
- Wal-Mart Stores(WMT) reported the first decline in profit in more than a decade on costs to sell its German unit.
- Bill Miller bought more shares of computer maker Dell(DELL) and media company Time Warner(TWX) in the second quarter.
- Iranian President Ahmadinejad said his country won’t give in to force over a UN Security Council resolution calling for an end to Iran’s uranium enrichment program by Aug. 31.
- Monsanto(MON) agreed to buy cotton-seek maker Delta & Pine Land(DLP) for $1.5 billion.
- US Treasury 10-year notes rose the most in a month after a report showing wholesale price inflation slowed prompted traders to increase bets the Fed is finished raising interest rates.
Wall Street Journal:
- Sirius Satellite Radio(SIRI) will lose customers as several car-based free-trials end in coming months.
- San Francisco Intl. Airport has started a bomb-detection program that will allow it to screen almost every air cargo for possible explosives.
- Deere & Co.(DE) is offering starting salaries of $55,500 a year and $2,500 signing bonuses to attract increasingly scarce welders.
- Google(GOOG) plans to start today a free service that allows businesses to offer printable coupons using Google Maps.
- Fannie Mae(FNM) and Freddie Mac(FRE), the biggest buyers of US home mortgages, face unprecedented demand for their longer-term callable debt as some investors expect interest rates will remain flat or fall.
NY Times:
- Yahoo!(YHOO) and other companies are building increasingly sophisticated systems that track online consumer behavior as they try to capture more of the $14 billion market.
- US Attorney General Alberto Gonzales yesterday ordered a comparison of US and UK counterterrorism laws.
Lupa Internet:
- Google(GOOG) has purchased the google.cz domain name, easing the company’s entrance to the Czech market.
- Israeli and Lebanese politicians are acting together in an effort to defeat Hezbollah, Syrian President Bashar al-Assad said.
- Indian Prime Minister Manmohan Singh said terrorism threatens economic prosperity in South Asia and urged neighboring Pakistan to clamp down on extremists.
- Heathrow Airport plans to cancel 20% of departing flights today, down from about a third yesterday, as schedules slowly return to normal six days after UK police said they foiled a plot to bomb planes en route to the US.
- Home Depot(HD) said second-quarter profit rose 5.3% on higher sales to professional builders.
- Goldman Sachs(GS) extended its lead over securities firms reporting second-quarter equities and fixed-income trading revenue.
- The Chinese yuan fell the most since China ended a peg to the dollar last year, tracking Asian currencies lower as traders bet the central bank is reducing its control over the exchange rate.
- Deere(DE) said third-quarter profit rose 13%, helped by sales of construction products. The company lowered its 06 forecast.
- Wal-Mart Stores(WMT) reported the first decline in profit in more than a decade on costs to sell its German unit.
- Bill Miller bought more shares of computer maker Dell(DELL) and media company Time Warner(TWX) in the second quarter.
- Iranian President Ahmadinejad said his country won’t give in to force over a UN Security Council resolution calling for an end to Iran’s uranium enrichment program by Aug. 31.
- Monsanto(MON) agreed to buy cotton-seek maker Delta & Pine Land(DLP) for $1.5 billion.
- US Treasury 10-year notes rose the most in a month after a report showing wholesale price inflation slowed prompted traders to increase bets the Fed is finished raising interest rates.
Wall Street Journal:
- Sirius Satellite Radio(SIRI) will lose customers as several car-based free-trials end in coming months.
- San Francisco Intl. Airport has started a bomb-detection program that will allow it to screen almost every air cargo for possible explosives.
- Deere & Co.(DE) is offering starting salaries of $55,500 a year and $2,500 signing bonuses to attract increasingly scarce welders.
- Google(GOOG) plans to start today a free service that allows businesses to offer printable coupons using Google Maps.
- Fannie Mae(FNM) and Freddie Mac(FRE), the biggest buyers of US home mortgages, face unprecedented demand for their longer-term callable debt as some investors expect interest rates will remain flat or fall.
NY Times:
- Yahoo!(YHOO) and other companies are building increasingly sophisticated systems that track online consumer behavior as they try to capture more of the $14 billion market.
- US Attorney General Alberto Gonzales yesterday ordered a comparison of US and UK counterterrorism laws.
Lupa Internet:
- Google(GOOG) has purchased the google.cz domain name, easing the company’s entrance to the Czech market.
Core Producer Prices Unexpectedly Fall, NY Manufacturing Slows, Foreign Demand for US Assets Strong
- The Producer Price Index for July rose .1% versus estimates of a .4% gain and a .5% increase in June.
- The PPI Ex Food & Energy for July fell .3% versus estimates of a .2% gain and a .2% increase in June.
- Empire Manufacturing for August fell to 10.3 versus estimates of 15.0 and a reading of 16.6 in July.
- Net Foreign Security Purchases for June rose to $75.1 billion versus estimates of $65.0 billion and $63.6 billion in May.
- The PPI Ex Food & Energy for July fell .3% versus estimates of a .2% gain and a .2% increase in June.
- Empire Manufacturing for August fell to 10.3 versus estimates of 15.0 and a reading of 16.6 in July.
- Net Foreign Security Purchases for June rose to $75.1 billion versus estimates of $65.0 billion and $63.6 billion in May.
BOTTOM LINE: Prices paid to US producers increased less than forecast in July, pointing to an easing of inflationary pressures anticipated by the Fed, Bloomberg said. Computer prices dropped 1.8% last month. Food prices fell .3%. Men’s clothing and new vehicle prices also declined last month. I continue to believe inflation fears have peaked for this cycle. During the next significant global downturn, I suspect deflation and overcapacity will be the new worries.
Manufacturing in NY state expanded at a slower pace in August as companies pared inventories, Bloomberg reported. The prices paid component of the index fell to 44.6 versus a reading of 50.5 in July. The outlook component of the index fell to 35.2 versus 45 the prior month. The new orders component rose to 19.1 from 11.3 the prior month. I expect manufacturing to slow to more average levels over the intermediate-term, but continue adding to US growth as inventories are rebuilt.
International investors increased purchases of US financial assets more than expected in June, Bloomberg said. The UK and China increased their holdings of US Treasury securities. I continue to believe we are in the initial stages of a chain reaction of events that will greatly increase the demand for US assets over the intermediate-term.
Tuesday Watch
Late-Night Headlines
Bloomberg:
- Microsoft(MSFT) grabbed 15% of the retail market for computer anti-virus software in June, taking sales from Symantec(SYMC) and McAfee(MFE) after releasing its own product in April.
- Dell Inc.(DELL) is recalling 4.1 million notebook PC batteries that may burst into flames.
- Japanese Prime Minister Koizumi visited the Yasukuni Shrine on the anniversary of Japan’s surrender in WWII, drawing a protest from China.
- Japan’s service economy slowed for the first month in three, as construction companies had fewer orders and rising fuel prices curbed consumer spending.
- China’s industrial production rose last month at the slowest pace since April as increasing fuel costs crimped demand for cars.
Wall Street Journal:
- Direct foreign investment in China fell 1.2% in the first seven months of this year.
- BP Plc(BP) may link the closed eastern part of its Prudhoe Bay oil field, in Alaska, to a nearby pipeline so as to get production going again in October, citing Craig Wiggs, a field manager for BP Alaska.
ABC News:
- Charitable funds intended to help victims of earthquake recovery efforts in Pakistan may have been diverted to help fund the alleged plot to explode aircraft over the Atlantic Ocean.
Xinhua News:
- China’s chemical emissions rose in the first six months this year amid a drive to reduce pollution, which may force the government to suspend approvals for some new power projects.
Australian:
- Microsoft(MSFT) will allow business customers to pay by installments for its Windows Vista and Office 2007 products.
Late Buy/Sell Recommendations
CSFB:
- Rated (GLW) Outperform, target $24.
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.15%.
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
- (ANF)/.71
- (AEOS)/.46
- (AMAT)/.30
- (BRL)/.73
- (BJ)/.38
- (DE)/1.81
- (DKS)/.44
- (FOSL)/.12
- (HAR)/1.07
- (HD)/.92
- (PETM)/.28
- (SKS)/-.19
- (SNDA)/.06
- (SPLS)/.22
- (TJX)/.27
- (WMT)/.72
Upcoming Splits
- (CSX) 2-for-1
- (GRMN) 2-for-1
- (GISX) 2-for-1
- (OXY) 2-for-1
Economic Releases
8:30 am EST
- The Producer Price Index for July is estimated to rise .4% versus a .5% increase in June.
- The PPI Ex Food & Energy for July is estimated to rise .2% versus a .2% gain in June.
- Empire Manufacturing for August is estimated to fall to 14.9 versus a reading of 15.6 in July.
9:00 am EST
- Net Foreign Security Purchases for June are estimated to fall to $67.5 billion versus $69.6 billion in May.
1:00 pm EST
- The NAHB Housing Market Index for August is estimated to fall to 38 versus a reading of 39 in July.
Bloomberg:
- Microsoft(MSFT) grabbed 15% of the retail market for computer anti-virus software in June, taking sales from Symantec(SYMC) and McAfee(MFE) after releasing its own product in April.
- Dell Inc.(DELL) is recalling 4.1 million notebook PC batteries that may burst into flames.
- Japanese Prime Minister Koizumi visited the Yasukuni Shrine on the anniversary of Japan’s surrender in WWII, drawing a protest from China.
- Japan’s service economy slowed for the first month in three, as construction companies had fewer orders and rising fuel prices curbed consumer spending.
- China’s industrial production rose last month at the slowest pace since April as increasing fuel costs crimped demand for cars.
Wall Street Journal:
- Direct foreign investment in China fell 1.2% in the first seven months of this year.
- BP Plc(BP) may link the closed eastern part of its Prudhoe Bay oil field, in Alaska, to a nearby pipeline so as to get production going again in October, citing Craig Wiggs, a field manager for BP Alaska.
ABC News:
- Charitable funds intended to help victims of earthquake recovery efforts in Pakistan may have been diverted to help fund the alleged plot to explode aircraft over the Atlantic Ocean.
Xinhua News:
- China’s chemical emissions rose in the first six months this year amid a drive to reduce pollution, which may force the government to suspend approvals for some new power projects.
Australian:
- Microsoft(MSFT) will allow business customers to pay by installments for its Windows Vista and Office 2007 products.
Late Buy/Sell Recommendations
CSFB:
- Rated (GLW) Outperform, target $24.
Night Trading
Asian Indices are -.25% to +.25% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.15%.
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
- (ANF)/.71
- (AEOS)/.46
- (AMAT)/.30
- (BRL)/.73
- (BJ)/.38
- (DE)/1.81
- (DKS)/.44
- (FOSL)/.12
- (HAR)/1.07
- (HD)/.92
- (PETM)/.28
- (SKS)/-.19
- (SNDA)/.06
- (SPLS)/.22
- (TJX)/.27
- (WMT)/.72
Upcoming Splits
- (CSX) 2-for-1
- (GRMN) 2-for-1
- (GISX) 2-for-1
- (OXY) 2-for-1
Economic Releases
8:30 am EST
- The Producer Price Index for July is estimated to rise .4% versus a .5% increase in June.
- The PPI Ex Food & Energy for July is estimated to rise .2% versus a .2% gain in June.
- Empire Manufacturing for August is estimated to fall to 14.9 versus a reading of 15.6 in July.
9:00 am EST
- Net Foreign Security Purchases for June are estimated to fall to $67.5 billion versus $69.6 billion in May.
1:00 pm EST
- The NAHB Housing Market Index for August is estimated to fall to 38 versus a reading of 39 in July.
BOTTOM LINE: Asian indices are mixed as gains in technology shares are offsetting losses in commodity stocks in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
Monday, August 14, 2006
Stocks Finish Modestly Higher after Oil Falls
Indices
S&P 500 1,268.21 +.12%
DJIA 11,097.87 +.09%
NASDAQ 2,069.04 +.55%
Russell 2000 681.73 +.40%
Wilshire 5000 12,649.79 +.12%
S&P Barra Growth 586.49 +.19%
S&P Barra Value 680.04 +.05%
Morgan Stanley Consumer 621.45 +.24%
Morgan Stanley Cyclical 773.48 +.20%
Morgan Stanley Technology 469.17 +.99%
Transports 4,161.99 +.49%
Utilities 434.69 +.40%
Put/Call .80 -13.04%
NYSE Arms 1.07 -8.24%
Volatility(VIX) 14.26 -.28%
ISE Sentiment 112.00 +4.67%
US Dollar 85.61 +.14%
CRB 338.82 -1.66%
Futures Spot Prices
Crude Oil 73.19 -1.56%
Unleaded Gasoline 198.50 -3.84%
Natural Gas 6.92 -4.80%
Heating Oil 201.00 -1.50%
Gold 636.70 -.41%
Base Metals 225.15 +.13%
Copper 349.30 -.20%
10-year US Treasury Yield 4.99% +.61%
Leading Sectors
Airlines +1.63%
Networking +1.19%
Semis +1.11%
Lagging Sectors
Energy -1.84%
Coal -2.11%
Oil Service -2.24%
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
Bank of America:
- Rated (AL) and (X) Buy.
Afternoon/Evening Headlines
Bloomberg:
- Crude oil is likely to fall substantially because investments in the commodity by hedge funds and pension managers have pushed prices too high, said Ben Dell, an analyst at Sanford C. Bernstein.
- Two Michigan birds found to be infected with avian influenza don’t have the lethal form that is spreading elsewhere in the world, US officials said.
- Agilent Technologies(A), the world’s largest maker of scientific-testing equipment, said third-quarter profit more than doubled to $227 million as sales increased.
- US Treasury 10-year note yields rose to a more than two-week high on speculation government inflation data the next two days will boost the odds that the Fed will resume raising interest rates.
- Billionaire investor Icahn bought stakes in Take-Two Interactive(TTWO) and Symantec(SYMC) in the second quarter.
S&P 500 1,268.21 +.12%
DJIA 11,097.87 +.09%
NASDAQ 2,069.04 +.55%
Russell 2000 681.73 +.40%
Wilshire 5000 12,649.79 +.12%
S&P Barra Growth 586.49 +.19%
S&P Barra Value 680.04 +.05%
Morgan Stanley Consumer 621.45 +.24%
Morgan Stanley Cyclical 773.48 +.20%
Morgan Stanley Technology 469.17 +.99%
Transports 4,161.99 +.49%
Utilities 434.69 +.40%
Put/Call .80 -13.04%
NYSE Arms 1.07 -8.24%
Volatility(VIX) 14.26 -.28%
ISE Sentiment 112.00 +4.67%
US Dollar 85.61 +.14%
CRB 338.82 -1.66%
Futures Spot Prices
Crude Oil 73.19 -1.56%
Unleaded Gasoline 198.50 -3.84%
Natural Gas 6.92 -4.80%
Heating Oil 201.00 -1.50%
Gold 636.70 -.41%
Base Metals 225.15 +.13%
Copper 349.30 -.20%
10-year US Treasury Yield 4.99% +.61%
Leading Sectors
Airlines +1.63%
Networking +1.19%
Semis +1.11%
Lagging Sectors
Energy -1.84%
Coal -2.11%
Oil Service -2.24%
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
Bank of America:
- Rated (AL) and (X) Buy.
Afternoon/Evening Headlines
Bloomberg:
- Crude oil is likely to fall substantially because investments in the commodity by hedge funds and pension managers have pushed prices too high, said Ben Dell, an analyst at Sanford C. Bernstein.
- Two Michigan birds found to be infected with avian influenza don’t have the lethal form that is spreading elsewhere in the world, US officials said.
- Agilent Technologies(A), the world’s largest maker of scientific-testing equipment, said third-quarter profit more than doubled to $227 million as sales increased.
- US Treasury 10-year note yields rose to a more than two-week high on speculation government inflation data the next two days will boost the odds that the Fed will resume raising interest rates.
- Billionaire investor Icahn bought stakes in Take-Two Interactive(TTWO) and Symantec(SYMC) in the second quarter.
BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Computer longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was modestly positive today as the advance/decline line finished slightly higher, sector performance was mostly positive and volume was below average. Measures of investor anxiety were lower into the close. Overall, today's market performance was neutral as the major averages and breadth finished higher, but well off session highs. Despite the bounce in oil prices from session lows, most energy-related stocks finished down around 2%. As well, ethanol-related shares such as (ADM), (PEIX), (ANDE) and (MGPI) continued their recent plunge despite oil above $70/bbl. The U.S. dollar continues to strengthen despite last week's Fed pause and more calls for its imminent demise. I want to see the market’s reaction to upcoming inflation data before further shifting market exposure.
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