BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi 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 about average. Steel inventories at US service centers have been increasing, even as commercial construction has been booming at the strongest rate in 12 years. With slower global growth on the horizon, declining U.S. auto production and a winding down of the massive Olympic build out in China, I suspect steel prices have made an important top. The Philadelphia Stock Exchange SIG Steel Producers Index (STQ) will likely break down through its 200-day moving average imminently. My favorite shorts are U.S. Steel (X), Oregon Steel Mills (OS), AK Steel Holding (AKS), Schnitzer Steel Industries (SCHN) and Chaparral Steel (CHAP). I am currently short (SCHN). I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and lower long-term rates.
Wednesday, August 30, 2006
Stocks Modestly Higher into Final Hour as Long-term Rates Continue Decline
Today's Headlines
Bloomberg:
- Crude oil fell to a two-month low of $68.65 a barrel after an Energy Department report showed a surge in imports led to an unexpected increase in US inventories.
- China ordered lenders to increase the amount of foreign currency they hold at the central bank for the first time since 2004, limiting cash available for investment and easing pressure on the yuan to strengthen.
- US 10-year Treasuries gained, driving the yield on the benchmark 10-year note to the lowest since March.
- General Motors(GM) is cutting 25% from the renewal price of OnStar’s premium package, which will now include a real-time audio routing service, for 2007 models to retain more subscribers.
- The Federal Reserve signaled it’s in no rush to resume raising interest rates, and may even be done tightening as the slowing economy eases inflation.
Wall Street Journal:
- A dozen major Hollywood film studios such as Walt Disney(DIS) and Twentieth Century Fox are to release 75 films on Blu-ray discs in Japan in the so-called format war with HD DVD technology.
- President Bush plans a series of speeches to highlight the issues and progress of the war in Iraq.
- Dell Inc.(DELL) faces a crisis after it focused on sales of desktop computers to corporations and didn’t build enough capacity to supply demand for laptops.
NY Times:
- The percentage of NYC residents living in poverty is little changed since 2001, when the city was struck by terrorist attacks and had a recession, citing US Census stats.
Washington Post:
- More than 659 million records from more than 50 FBI and other government agencies have been amassed in one database designed to help law enforcement analyze data.
- A computer game company gave its training simulator software free of charge to municipal emergency departments yesterday so employees can train in managing crisis situations.
NY Daily News:
- Nokia Oyj(NOK) is set to open a 1,300-square-foot retail store on East 57th Street off Fifth Avenue in a posh NYC shopping district.
DigiTimes:
- Sony Corp.(SNE) may cut its target shipment of new PlayStation 3 video-game consoles in half by the end of the year to 2 million units because volume production isn’t set yet.
AP:
- An emeritus professor of marketing at the prestigious Wharton School at the University of Pennsylvania has been arrested for the third time in 11 years on child sex charges.
Reuters:
- Ford Motor(F) expects to double its sales of cars in Russia to about 120,000 this year, citing Henrik Nenzen, head of Ford’s Russian unit.
Iran News:
- Iran exports 60% of its crude oil to Asian markets, 32% to Europe and 8% to Africa.
- Crude oil fell to a two-month low of $68.65 a barrel after an Energy Department report showed a surge in imports led to an unexpected increase in US inventories.
- China ordered lenders to increase the amount of foreign currency they hold at the central bank for the first time since 2004, limiting cash available for investment and easing pressure on the yuan to strengthen.
- US 10-year Treasuries gained, driving the yield on the benchmark 10-year note to the lowest since March.
- General Motors(GM) is cutting 25% from the renewal price of OnStar’s premium package, which will now include a real-time audio routing service, for 2007 models to retain more subscribers.
- The Federal Reserve signaled it’s in no rush to resume raising interest rates, and may even be done tightening as the slowing economy eases inflation.
Wall Street Journal:
- A dozen major Hollywood film studios such as Walt Disney(DIS) and Twentieth Century Fox are to release 75 films on Blu-ray discs in Japan in the so-called format war with HD DVD technology.
- President Bush plans a series of speeches to highlight the issues and progress of the war in Iraq.
- Dell Inc.(DELL) faces a crisis after it focused on sales of desktop computers to corporations and didn’t build enough capacity to supply demand for laptops.
NY Times:
- The percentage of NYC residents living in poverty is little changed since 2001, when the city was struck by terrorist attacks and had a recession, citing US Census stats.
Washington Post:
- More than 659 million records from more than 50 FBI and other government agencies have been amassed in one database designed to help law enforcement analyze data.
- A computer game company gave its training simulator software free of charge to municipal emergency departments yesterday so employees can train in managing crisis situations.
NY Daily News:
- Nokia Oyj(NOK) is set to open a 1,300-square-foot retail store on East 57th Street off Fifth Avenue in a posh NYC shopping district.
DigiTimes:
- Sony Corp.(SNE) may cut its target shipment of new PlayStation 3 video-game consoles in half by the end of the year to 2 million units because volume production isn’t set yet.
AP:
- An emeritus professor of marketing at the prestigious Wharton School at the University of Pennsylvania has been arrested for the third time in 11 years on child sex charges.
Reuters:
- Ford Motor(F) expects to double its sales of cars in Russia to about 120,000 this year, citing Henrik Nenzen, head of Ford’s Russian unit.
Iran News:
- Iran exports 60% of its crude oil to Asian markets, 32% to Europe and 8% to Africa.
2Q GDP Revised Higher, Salaries and Wages Rise a Strong 7.6%
- Preliminary 2Q GDP rose 2.9% versus estimates of a 3.0% increase and a prior estimate of a 2.5% increase.
- Preliminary 2Q GDP Price Index rose 3.3% versus estimates of a 3.3% gain and a prior estimate of a 3.3% gain.
- Preliminary 2Q Personal Consumption rose 2.6% versus estimates of a 2.5% gain and a prior estimate of a 2.5% gain.
- Preliminary 2Q PCE rose 2.8% versus estimates of a 2.9% increase and a prior estimate of a 2.9% gain.
- Preliminary 2Q GDP Price Index rose 3.3% versus estimates of a 3.3% gain and a prior estimate of a 3.3% gain.
- Preliminary 2Q Personal Consumption rose 2.6% versus estimates of a 2.5% gain and a prior estimate of a 2.5% gain.
- Preliminary 2Q PCE rose 2.8% versus estimates of a 2.9% increase and a prior estimate of a 2.9% gain.
BOTTOM LINE: The US economy slowed to around long-term average levels in the second quarter, Bloomberg reported. Home construction fell at an annual rate of 9.8% last quarter, the largest drop since 1995. Americans’ salaries and wages rose 7.6%, more than twice the inflation rate and were $100 billion greater than expected. Commercial building investment rose 22.2%, the largest increase since 1994. 2Q GDP grew 6.3% before adjusting for inflation. I still expect US growth to stay around long-term average levels through year-end. There is a 90% correlation between the 10-year yield and core inflation 6 months outs. Moderate US growth and inflation provide the best backdrop for stocks.
Wednesday Watch
Late-Night Headlines
Bloomberg:
- National Aluminum Co., India’s biggest producer of alumina, expects second-half profit to decline because of falling prices of the raw material used to make the lightweight metal.
- Crude oil traded near a two-month low in NY on signs slowing US demand may take pressure off fuel stockpiles and as energy companies prepare to return workers to the Gulf of Mexico.
Financial Times:
- Private equity companies are attracting senior executives away from public companies, making it more difficult for publicly traded firms to acquire and retain management talent.
Shanghai Securities News:
- China should suspend approvals for development of new coal mines to curb a rise in inventories of the material used to make steel and fuel power plants.
China Securities Journal:
- China may widen the yuan’s trading band to help curb economic growth and damp speculation on the currency after an interest-rate increase this month.
Hindu Business Line:
- Indian steel companies may lower prices of hot-rolled coil starting Sept. 1.
Late Buy/Sell Recommendations
CSFB:
- Downgraded (ROK) to Underperform, target $58.
- Each of the key industry indicators we look to for the future direction of US steel prices continue to suggest there is more downside risk than upside potential in US steel prices in late 2006/early 2007.
Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated +.05%.
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
- (BSG)/.15
- (DSW)/.30
- (JDSU)/.00
- (TIVO)/-.14
- (UNFI)/.30
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Preliminary 2Q GDP is estimated to rise 3.0% versus a prior estimate of a 2.5% gain.
- Preliminary 2Q GDP Price Index is estimated to rise 3.3% versus a prior estimate of a 3.3% gain.
- Preliminary 2Q Personal Consumption is estimated to rise 2.5% versus a prior estimate of a 2.5% gain.
- Preliminary 2Q Core PCE is estimated to rise 2.9% versus a prior estimate of a 2.9% gain.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 1,500,000 barrels. Gasoline supplies are expected to fall by 600,000 barrels. Distillate inventories are estimated to rise by 1,300,000 barrels. Finally, Refinery Utilization is expected to rise .2%.
Bloomberg:
- National Aluminum Co., India’s biggest producer of alumina, expects second-half profit to decline because of falling prices of the raw material used to make the lightweight metal.
- Crude oil traded near a two-month low in NY on signs slowing US demand may take pressure off fuel stockpiles and as energy companies prepare to return workers to the Gulf of Mexico.
Financial Times:
- Private equity companies are attracting senior executives away from public companies, making it more difficult for publicly traded firms to acquire and retain management talent.
Shanghai Securities News:
- China should suspend approvals for development of new coal mines to curb a rise in inventories of the material used to make steel and fuel power plants.
China Securities Journal:
- China may widen the yuan’s trading band to help curb economic growth and damp speculation on the currency after an interest-rate increase this month.
Hindu Business Line:
- Indian steel companies may lower prices of hot-rolled coil starting Sept. 1.
Late Buy/Sell Recommendations
CSFB:
- Downgraded (ROK) to Underperform, target $58.
- Each of the key industry indicators we look to for the future direction of US steel prices continue to suggest there is more downside risk than upside potential in US steel prices in late 2006/early 2007.
Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated +.05%.
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
- (BSG)/.15
- (DSW)/.30
- (JDSU)/.00
- (TIVO)/-.14
- (UNFI)/.30
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Preliminary 2Q GDP is estimated to rise 3.0% versus a prior estimate of a 2.5% gain.
- Preliminary 2Q GDP Price Index is estimated to rise 3.3% versus a prior estimate of a 3.3% gain.
- Preliminary 2Q Personal Consumption is estimated to rise 2.5% versus a prior estimate of a 2.5% gain.
- Preliminary 2Q Core PCE is estimated to rise 2.9% versus a prior estimate of a 2.9% gain.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 1,500,000 barrels. Gasoline supplies are expected to fall by 600,000 barrels. Distillate inventories are estimated to rise by 1,300,000 barrels. Finally, Refinery Utilization is expected to rise .2%.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial 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.
Tuesday, August 29, 2006
Stocks Finish at Session Highs as Oil Closes Below $70/bbl. and Long-term Rates Fall Again
Indices
S&P 1,304.28 +.19%
DJIA 11,369.94 +.16%
NASDAQ 2,172.30 +.54%
Russell 2000 714.85 +1.16%
Wilshire 5000 13,032.94 +.30%
S&P Barra Growth 605.65 +.31%
S&P Barra Value 696.57 +.08%
Morgan Stanley Consumer 640.56 +.60%
Morgan Stanley Cyclical 796.56 +.43%
Morgan Stanley Technology 505.40 +1.03%
Transports 4,288.73 -.11%
Utilities 442.16 +.03%
Put/Call .97 -1.02%
NYSE Arms .96 -1.10%
Volatility(VIX) 12.28 +.82%
ISE Sentiment 134.00 +20.72%
US Dollar 84.95 -.36%
CRB 327.73 -.59%
Futures Spot Prices
Crude Oil 69.78 -1.18%
Unleaded Gasoline 178.54 +.13%
Natural Gas 6.81 +5.32%
Heating Oil 194.65 -.99%
Gold 622.80 -.18%
Base Metals 228.19 -1.04%
Copper 338.50 -1.90%
10-year US Treasury Yield 4.77% -.29%
Leading Sectors
Networking +1.84%
Semis +1.67%
Disk Drives +1.62%
Lagging Sectors
Energy -.51%
I-Banks -1.22%
Oil Tankers -1.51%
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:
- Crude oil closed below $70/bbl. for the first time in two months as energy speculators trimmed bets as the summer driving season winds down with only mild production disruptions.
- Apple(AAPL) today announced that Dr. Eric Schmidt, CEO of Google(GOOG), was elected to Apple’s board of directors at their meeting today.
- Inco Ltd.(N) urged investors to accept a $17.4 billion takeover by Phelps Dodge(PD) to merge their nickel and copper mines, rejecting a higher hostile bid from Brazil’s Cia. Vale do Rio Doce.
- Microsoft(MSFT) is selling its new Windows Vista operating system for $100 to $399 and will make the program available on Jan. 30, according to Amazon.com’s Web site.
- Federal Reserve officials saw their decision to suspend a two-year run of interest rate increases as a “close call” and were unsure whether they would further raise borrowing costs, the minutes showed.
- US 10-year notes gained, pushing yields to the lowest since March, as traders said the minutes of the Fed’s Aug. 8 meeting showed more support than expected for the decision to leave interest rates unchanged.
AP:
- Lawyers for customers of AT&T(T), Verizon Communications(VZ) and BellSouth(BLS) who are suing the companies for violating privacy laws by turning over phone records for terrorism surveillance plan to subpoena the Bush administration.
LA Times:
- Rapid commercial growth and new jobs in Orange County, south of Los Angeles, have attracted workers to the area, which is leading to a reversal in the region’s usual commuting routes.
S&P 1,304.28 +.19%
DJIA 11,369.94 +.16%
NASDAQ 2,172.30 +.54%
Russell 2000 714.85 +1.16%
Wilshire 5000 13,032.94 +.30%
S&P Barra Growth 605.65 +.31%
S&P Barra Value 696.57 +.08%
Morgan Stanley Consumer 640.56 +.60%
Morgan Stanley Cyclical 796.56 +.43%
Morgan Stanley Technology 505.40 +1.03%
Transports 4,288.73 -.11%
Utilities 442.16 +.03%
Put/Call .97 -1.02%
NYSE Arms .96 -1.10%
Volatility(VIX) 12.28 +.82%
ISE Sentiment 134.00 +20.72%
US Dollar 84.95 -.36%
CRB 327.73 -.59%
Futures Spot Prices
Crude Oil 69.78 -1.18%
Unleaded Gasoline 178.54 +.13%
Natural Gas 6.81 +5.32%
Heating Oil 194.65 -.99%
Gold 622.80 -.18%
Base Metals 228.19 -1.04%
Copper 338.50 -1.90%
10-year US Treasury Yield 4.77% -.29%
Leading Sectors
Networking +1.84%
Semis +1.67%
Disk Drives +1.62%
Lagging Sectors
Energy -.51%
I-Banks -1.22%
Oil Tankers -1.51%
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:
- Crude oil closed below $70/bbl. for the first time in two months as energy speculators trimmed bets as the summer driving season winds down with only mild production disruptions.
- Apple(AAPL) today announced that Dr. Eric Schmidt, CEO of Google(GOOG), was elected to Apple’s board of directors at their meeting today.
- Inco Ltd.(N) urged investors to accept a $17.4 billion takeover by Phelps Dodge(PD) to merge their nickel and copper mines, rejecting a higher hostile bid from Brazil’s Cia. Vale do Rio Doce.
- Microsoft(MSFT) is selling its new Windows Vista operating system for $100 to $399 and will make the program available on Jan. 30, according to Amazon.com’s Web site.
- Federal Reserve officials saw their decision to suspend a two-year run of interest rate increases as a “close call” and were unsure whether they would further raise borrowing costs, the minutes showed.
- US 10-year notes gained, pushing yields to the lowest since March, as traders said the minutes of the Fed’s Aug. 8 meeting showed more support than expected for the decision to leave interest rates unchanged.
AP:
- Lawyers for customers of AT&T(T), Verizon Communications(VZ) and BellSouth(BLS) who are suing the companies for violating privacy laws by turning over phone records for terrorism surveillance plan to subpoena the Bush administration.
LA Times:
- Rapid commercial growth and new jobs in Orange County, south of Los Angeles, have attracted workers to the area, which is leading to a reversal in the region’s usual commuting routes.
BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Semi longs and Biotech longs. 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. The statements from the Fed Minutes were mixed. There was something for the doves and hawks. I still believe there is almost zero chance of a rate hike at the Sept. meeting and very little chance of another hike this year. The Fed almost never hikes the Fed Funds rate above the 10-year T-note yield. Currently, there is a 45-basis-point spread between the two. With most market participants bearish and continuing to look for more significant market weakness, these types of reversal days are usually followed by more strength.
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