BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Biotech longs, Networking longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is light. The Johnson Redbook same-store sales index rose 3.3% year over year last week vs. a 3.2% rise the prior week. The long-term average is a gain of around 2.8%. I still see little evidence that a significant decline in consumer spending is beginning, even as investors continue to price this into stocks. I still expect the back-to-school selling season to exceed lowered expectations. Weekly retail sales have averaged a healthy 3.2% during the month of August. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower long-term rates and declining energy prices.
Tuesday, August 29, 2006
Stocks Mostly Higher into Final Hour on Falling Energy Prices and Long-term Rates
Today's Headlines
Bloomberg:
- Crude oil dropped below $70 a barrel and natural gas fell as oil companies prepared to send workers back into the Gulf of Mexico and Tropical Storm Ernesto moved away from the region’s oil fields.
- Iranian President Ahmadinejad said it’s “unlikely” the UN Security Council will take action over his country’s nuclear program.
- Germans who left their country last year amid record postwar unemployment pushed emigration to its highest level since 1954, Federal stats show.
- Oil tanker earnings may almost halve by 2008 as a “phenomenal” increase in the delivery of new vessels leads to an oversupply of capacity, Drewry Shipping Consultants Ltd. said.
Wall Street Journal:
- BP Plc(BP) is the subject of investigations by US authorities for possible manipulation of the crude-oil and unleaded gasoline markets.
- Sony Corp.(SNE) and Apple Computer(AAPL) may increase demand for NAND flash-memory chips as they both plan product launches later this year, citing iSuppli.
- L-3 Communications(LLL) may expand faster than its peers.
- Plans to build more doctor-owned specialty hospitals are under review in Texas, California, Pennsylvania and Indiana after the US Centers for Medicare and Medicaid Services decided on Aug. 8 to resume certifying the facilities.
- Hundreds of thousands of seniors are paying monthly premiums to sign up for private Medicare plans.
NY Times:
- Former US President Bill Clinton said he was sorry his administration failed to intervene during the Rwandan genocide in 1994 and the US “blew” its chance to stop the bloodshed.
Washington Post:
- Privacy concerns in the European Union have made collecting intelligence on terrorists before they appear on watch lists harder for the US, Secretary of Homeland Security Chertoff wrote.
NY Daily News:
- Viacom’s(VIA) Paramount Pictures will donate $2.6 million from early ticket sales for its film “World Trade Center” to charities supporting Sept. 11 victims’ families and memorials.
Financial Times:
- EBay Inc.(EBAY) will likely make more money choosing Google(GOOG) over Yahoo!(YHOO) to run advertising outside the US.
Reuters:
- Alcatel SA(ALA) investors were urged by French advisory firm Proxinvest to reject the network equipment maker’s proposed purchase of Lucent Technologies(LU).
- Venezuela’s President Hugo Chavez plans to travel to Syria today.
Gazeta Wyborcza:
- Russia has given up opposition to the construction of a missile defense shield the US may build in Poland or the Czech Republic.
- Crude oil dropped below $70 a barrel and natural gas fell as oil companies prepared to send workers back into the Gulf of Mexico and Tropical Storm Ernesto moved away from the region’s oil fields.
- Iranian President Ahmadinejad said it’s “unlikely” the UN Security Council will take action over his country’s nuclear program.
- Germans who left their country last year amid record postwar unemployment pushed emigration to its highest level since 1954, Federal stats show.
- Oil tanker earnings may almost halve by 2008 as a “phenomenal” increase in the delivery of new vessels leads to an oversupply of capacity, Drewry Shipping Consultants Ltd. said.
Wall Street Journal:
- BP Plc(BP) is the subject of investigations by US authorities for possible manipulation of the crude-oil and unleaded gasoline markets.
- Sony Corp.(SNE) and Apple Computer(AAPL) may increase demand for NAND flash-memory chips as they both plan product launches later this year, citing iSuppli.
- L-3 Communications(LLL) may expand faster than its peers.
- Plans to build more doctor-owned specialty hospitals are under review in Texas, California, Pennsylvania and Indiana after the US Centers for Medicare and Medicaid Services decided on Aug. 8 to resume certifying the facilities.
- Hundreds of thousands of seniors are paying monthly premiums to sign up for private Medicare plans.
NY Times:
- Former US President Bill Clinton said he was sorry his administration failed to intervene during the Rwandan genocide in 1994 and the US “blew” its chance to stop the bloodshed.
Washington Post:
- Privacy concerns in the European Union have made collecting intelligence on terrorists before they appear on watch lists harder for the US, Secretary of Homeland Security Chertoff wrote.
NY Daily News:
- Viacom’s(VIA) Paramount Pictures will donate $2.6 million from early ticket sales for its film “World Trade Center” to charities supporting Sept. 11 victims’ families and memorials.
Financial Times:
- EBay Inc.(EBAY) will likely make more money choosing Google(GOOG) over Yahoo!(YHOO) to run advertising outside the US.
Reuters:
- Alcatel SA(ALA) investors were urged by French advisory firm Proxinvest to reject the network equipment maker’s proposed purchase of Lucent Technologies(LU).
- Venezuela’s President Hugo Chavez plans to travel to Syria today.
Gazeta Wyborcza:
- Russia has given up opposition to the construction of a missile defense shield the US may build in Poland or the Czech Republic.
Consumer Confidence Dips, Expect Rebound Next Month
- Consumer Confidence for August fell to 99.6 versus estimates of 102.7 and an upwardly revised reading of 107.0 in July.
BOTTOM LINE: Confidence among US consumers fell in August on worries over a slowing housing market and job prospects, Bloomberg reported. The Conference Board surveys 5,000 households by the middle of the month. The survey was completed prior to the recent fall in oil and gas prices. Optimism about consumers’ present situation fell to 123.4 versus 134.2. The share of people expecting better employment opportunities in the next six months fell to 14% versus 14.3% the prior month. Since the middle of August, the average national gas price has declined .16 to $2.81/gallon, the Nasdaq is up 4% and the average 30-year mortgage rate has fallen another 7 basis points. Finally, the Middle East cease-fire didn't go into effect until the 14th of August, which has taken war off the front pages. I expect confidence to rebound next month.
Monday, August 28, 2006
Tuesday Watch
Late-Night Headlines
Bloomberg:
- 3M Co.(MMM), the maker of products from Post-it notes to electronic road signs, aims to raise consumer sales in the Greater China region to maintain 20% annual revenue growth as competition to sell industrial goods increases.
- Baoshan Iron & Steel Co., China’s largest steelmaker, had a 27% fall in second-quarter profit as prices dropped due to rising output in the country.
Financial Times:
- The number of rival private equity firms uniting for takeover deals is concerning US public pension funds, who say the trend is increasing risk to investors.
London-based Times:
- Internet retailers in the UK had a 35.4% increase in like-for-like sales in July, citing research by IMRG, the industry body that tracks Internet spending.
Shanghai Securities News:
- China’s pharmaceutical industry profits grew at a slower pace in the first half after almost 30% of companies had losses, citing a National Development and Reform Commission report.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MNST), target $48.
Morgan Stanley:
- For the past several months, excess end demand inventory for NAND, particularly from the flash cards and MP-3 producers, drove prices down rapidly. We believe the current inventory correction is nearing completion and look for a seasonal demand up-tick to either stabilize or increase NAND prices during the next couple of months.
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.16%.
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
- (ADCT)/.26
- (DY)/.20
- (FCEL)/-.36
- (MCRS)/.51
- (NOVL).03
- (SAFM)/-.04
- (SMTC)/.20
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Consumer Confidence for August is estimated to fall to 102.5 versus a reading of 106.5 in July.
2:00 pm EST
- Minutes of Aug. 8 FOMC Meeting
Bloomberg:
- 3M Co.(MMM), the maker of products from Post-it notes to electronic road signs, aims to raise consumer sales in the Greater China region to maintain 20% annual revenue growth as competition to sell industrial goods increases.
- Baoshan Iron & Steel Co., China’s largest steelmaker, had a 27% fall in second-quarter profit as prices dropped due to rising output in the country.
Financial Times:
- The number of rival private equity firms uniting for takeover deals is concerning US public pension funds, who say the trend is increasing risk to investors.
London-based Times:
- Internet retailers in the UK had a 35.4% increase in like-for-like sales in July, citing research by IMRG, the industry body that tracks Internet spending.
Shanghai Securities News:
- China’s pharmaceutical industry profits grew at a slower pace in the first half after almost 30% of companies had losses, citing a National Development and Reform Commission report.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MNST), target $48.
Morgan Stanley:
- For the past several months, excess end demand inventory for NAND, particularly from the flash cards and MP-3 producers, drove prices down rapidly. We believe the current inventory correction is nearing completion and look for a seasonal demand up-tick to either stabilize or increase NAND prices during the next couple of months.
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.16%.
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
- (ADCT)/.26
- (DY)/.20
- (FCEL)/-.36
- (MCRS)/.51
- (NOVL).03
- (SAFM)/-.04
- (SMTC)/.20
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Consumer Confidence for August is estimated to fall to 102.5 versus a reading of 106.5 in July.
2:00 pm EST
- Minutes of Aug. 8 FOMC Meeting
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 modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Higher as Energy Prices Continue to Fall
Indices
S&P 1,301.78 +.52%
DJIA 11,352.01 +.60%
NASDAQ 2,160.70 +.95%
Russell 2000 706.65 +1.06%
Wilshire 5000 12,994.16 +.57%
S&P Barra Growth 603.78 +.55%
S&P Barra Value 696.04 +.48%
Morgan Stanley Consumer 636.74 +.81%
Morgan Stanley Cyclical 793.15 +.63%
Morgan Stanley Technology 500.27 +1.05%
Transports 4,293.38 +1.27%
Utilities 442.03 +.63%
Put/Call .98 +20.99%
NYSE Arms .95 -17.94%
Volatility(VIX) 12.18 -1.06%
ISE Sentiment 104.00 -31.13%
US Dollar 85.23 -.18%
CRB 329.69 -1.95%
Futures Spot Prices
Crude Oil 70.45 -2.84%
Unleaded Gasoline 177.75 -6.21%
Natural Gas 6.38 -10.86%
Heating Oil 196.30 -3.29%
Gold 621.70 -.35%
Base Metals 230.58 -1.24%
Copper 345.05 unch.
10-year US Treasury Yield 4.79% +.25%
Leading Sectors
Airlines +2.68%
Restaurants +1.50%
Homebuilders +1.44%
Lagging Sectors
Energy -1.54%
Gold & Silver -1.97%
Oil Service -2.85%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- The euro climbed to a record against the yen on speculation the European Central Bank will raise interest rates at a faster pace than the Bank of Japan.
- US Steel(X), the biggest US-based steelmaker, was downgraded by Prudential Equity Group amid oversupply concerns.
- Gasoline futures plunged to a five-month low and natural gas dropped 10% after Tropical Storm Ernesto took a course that will keep it away from oil producing and refining regions of the Gulf of Mexico.
S&P 1,301.78 +.52%
DJIA 11,352.01 +.60%
NASDAQ 2,160.70 +.95%
Russell 2000 706.65 +1.06%
Wilshire 5000 12,994.16 +.57%
S&P Barra Growth 603.78 +.55%
S&P Barra Value 696.04 +.48%
Morgan Stanley Consumer 636.74 +.81%
Morgan Stanley Cyclical 793.15 +.63%
Morgan Stanley Technology 500.27 +1.05%
Transports 4,293.38 +1.27%
Utilities 442.03 +.63%
Put/Call .98 +20.99%
NYSE Arms .95 -17.94%
Volatility(VIX) 12.18 -1.06%
ISE Sentiment 104.00 -31.13%
US Dollar 85.23 -.18%
CRB 329.69 -1.95%
Futures Spot Prices
Crude Oil 70.45 -2.84%
Unleaded Gasoline 177.75 -6.21%
Natural Gas 6.38 -10.86%
Heating Oil 196.30 -3.29%
Gold 621.70 -.35%
Base Metals 230.58 -1.24%
Copper 345.05 unch.
10-year US Treasury Yield 4.79% +.25%
Leading Sectors
Airlines +2.68%
Restaurants +1.50%
Homebuilders +1.44%
Lagging Sectors
Energy -1.54%
Gold & Silver -1.97%
Oil Service -2.85%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- The euro climbed to a record against the yen on speculation the European Central Bank will raise interest rates at a faster pace than the Bank of Japan.
- US Steel(X), the biggest US-based steelmaker, was downgraded by Prudential Equity Group amid oversupply concerns.
- Gasoline futures plunged to a five-month low and natural gas dropped 10% after Tropical Storm Ernesto took a course that will keep it away from oil producing and refining regions of the Gulf of Mexico.
BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Internet longs, Biotech longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was light. Measures of investor anxiety were mixed into the close. Overall, today's market performance was bullish. Although volume was light, I view that as a positive considering the fact that most are underexposed to U.S. stocks. We are very close to the point in which significant performance anxiety will set in on many market bears and weak bulls. The S&P 500 is only 2.8% off its highs. This is the best performance of any index in the world that I follow since the global correction began. Even so, the mania for international stocks continues while demand for U.S. stocks languishes. I expect this trend to reverse as commodity prices continue to weaken, slowing the growth of many international economies.
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