BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech, Retail, Semi, Medical and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is slightly higher, most sectors are rising and volume is above average. Bloomberg is reporting that the CRB Index is poised to post its worst three-week decline in almost 26 years. 1980 also happened to be the year the Consumer Price Index(CPI) peaked at 14.8% and began a secular move lower. It is no coincidence that another secular bull market in U.S. stocks began around this time. The major indices have given up some of this mornings' gains. The "sell every rally" mentality is still firmly in place. I suspect the viability of this widely used tactic will fade over the coming months. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering.
Friday, September 15, 2006
Stocks Modestly Higher into Final Hour on More Positive Economic Data
Today's Headlines
Bloomberg:
- Commodity prices are falling again, capping the biggest three-week plunge in almost 26 years.
- Crude oil fell below $63 bbl. in NY for the first time since March on rising US fuel inventories and signs that consumption will ease.
- US ethanol prices slumped to the lowest in almost eight months, extending a five-week slide, on expanding domestic suppliers of the grain-based gasoline additive and slower demand after the summer driving season.
- President Bush said CIA intelligence-gathering that has already thwarted al-Qaeda attacks on the US would stop unless Congress passes his proposed rules for treating suspected terrorists.
- Treasuries were little changed, paring earlier gains, after Fed Bank of Kansas president Thomas Hoenig suggested lower energy prices may support consumer spending and sustain economic growth.
- Financial regulators need to pay more attention to whether margin requirements placed on investors such as hedge funds are adequate, said NY Fed President Geithner.
Wall Street Journal:
- General Motors(GM) expects to make a profit selling compact cars after slashing costs, citing Chairman Bob Lutz.
- KSL Capital Partners LLC, a US buyout firm, is in exclusive talks to acquire ClubCorp USA Inc., which owns and operates golf clubs.
- Chinese local authorities are funding a “frenzy of construction,” defying Beijing’s attempts to rein in excessive investment and threatening the global economy.
- Fisher-Price is planning to recreate the craze of the first Tickle Me Elmo doll when it releases the 10th anniversary edition of the toy next week by keeping details secret.
NY Times:
- Hedge fund Fortress Investment Group LLC is planning an IPO that would value the company between $5 billion and $7 billion.
- A wealthy high school in Long Island, NY, helped a poorer rival raise money to fund its interscholastic sports program.
- Radio companies including Clear Channel Communications(CCU) and CBS Corp.(CBS) are considering selling some of its stations in smaller markets as they compete with satellite and Internet broadcasts.
- US mutual funds focusing on energy and natural resources, among the best performers in the past year, have lost 6.7% of their value in a month, citing Morningstar.
USA Today:
- Some newly formed cities are outsourcing tasks to private companies, saying these firms can operate more efficiently than government.
AP:
- Morgan Stanley decided to join an agreement among brokerages that makes it easier for brokers to change firms without being sued, citing a Morgan Stanley spokesman.
- Philadelphia Mayor John Street signed a bill yesterday that bans smoking in all restaurants and many bars.
Star-Ledger:
- Schering-Plough(SGP) has been considering for several months a merger with Bristol-Myers Squibb(BMY) and has yet to approach the company.
Globe and Mail:
- Western Oil Sands may face a proxy battle from shareholders who are unhappy with the Canadian oil-sands company’s decision to invest in Iraq.
Xinhua:
- Foreign direct investment in China fell 2.1% in the first eight months from a year earlier. For August alone, foreign direct investment declined 8.5%.
- China closed more than 320 Web sites and deleted 15,000 items of “hazardous” information from the Internet from Sept. 6-8.
- Commodity prices are falling again, capping the biggest three-week plunge in almost 26 years.
- Crude oil fell below $63 bbl. in NY for the first time since March on rising US fuel inventories and signs that consumption will ease.
- US ethanol prices slumped to the lowest in almost eight months, extending a five-week slide, on expanding domestic suppliers of the grain-based gasoline additive and slower demand after the summer driving season.
- President Bush said CIA intelligence-gathering that has already thwarted al-Qaeda attacks on the US would stop unless Congress passes his proposed rules for treating suspected terrorists.
- Treasuries were little changed, paring earlier gains, after Fed Bank of Kansas president Thomas Hoenig suggested lower energy prices may support consumer spending and sustain economic growth.
- Financial regulators need to pay more attention to whether margin requirements placed on investors such as hedge funds are adequate, said NY Fed President Geithner.
Wall Street Journal:
- General Motors(GM) expects to make a profit selling compact cars after slashing costs, citing Chairman Bob Lutz.
- KSL Capital Partners LLC, a US buyout firm, is in exclusive talks to acquire ClubCorp USA Inc., which owns and operates golf clubs.
- Chinese local authorities are funding a “frenzy of construction,” defying Beijing’s attempts to rein in excessive investment and threatening the global economy.
- Fisher-Price is planning to recreate the craze of the first Tickle Me Elmo doll when it releases the 10th anniversary edition of the toy next week by keeping details secret.
NY Times:
- Hedge fund Fortress Investment Group LLC is planning an IPO that would value the company between $5 billion and $7 billion.
- A wealthy high school in Long Island, NY, helped a poorer rival raise money to fund its interscholastic sports program.
- Radio companies including Clear Channel Communications(CCU) and CBS Corp.(CBS) are considering selling some of its stations in smaller markets as they compete with satellite and Internet broadcasts.
- US mutual funds focusing on energy and natural resources, among the best performers in the past year, have lost 6.7% of their value in a month, citing Morningstar.
USA Today:
- Some newly formed cities are outsourcing tasks to private companies, saying these firms can operate more efficiently than government.
AP:
- Morgan Stanley decided to join an agreement among brokerages that makes it easier for brokers to change firms without being sued, citing a Morgan Stanley spokesman.
- Philadelphia Mayor John Street signed a bill yesterday that bans smoking in all restaurants and many bars.
Star-Ledger:
- Schering-Plough(SGP) has been considering for several months a merger with Bristol-Myers Squibb(BMY) and has yet to approach the company.
Globe and Mail:
- Western Oil Sands may face a proxy battle from shareholders who are unhappy with the Canadian oil-sands company’s decision to invest in Iraq.
Xinhua:
- Foreign direct investment in China fell 2.1% in the first eight months from a year earlier. For August alone, foreign direct investment declined 8.5%.
- China closed more than 320 Web sites and deleted 15,000 items of “hazardous” information from the Internet from Sept. 6-8.
Inflation Decelerates, NY Manufacturing Bounces, Industrial Production Falls, Capacity Utilization Lower, Confidence Improves
- The Consumer Price Index for August rose .2% versus estimates of a .2% increase and a .4% gain in July.
- The CPI Ex Food & Energy for August rose .2% versus estimates of a .2% gain and a .2% increase in July.
- Empire Manufacturing for September rose to 13.8 versus estimates of 13.5 and a reading of 11.0 in August.
- Industrial Production for August fell .1% versus estimates of a .2% decline and a .4% rise in July.
- Capacity Utilization for August declined to 82.4% versus estimates of 82.5% and a reading of 82.7% in July.
- Univ. of Mich. Consumer Confidence for September rose to 84.4 versus estimates of 84.0 and a reading of 82.0 in August.
- The CPI Ex Food & Energy for August rose .2% versus estimates of a .2% gain and a .2% increase in July.
- Empire Manufacturing for September rose to 13.8 versus estimates of 13.5 and a reading of 11.0 in August.
- Industrial Production for August fell .1% versus estimates of a .2% decline and a .4% rise in July.
- Capacity Utilization for August declined to 82.4% versus estimates of 82.5% and a reading of 82.7% in July.
- Univ. of Mich. Consumer Confidence for September rose to 84.4 versus estimates of 84.0 and a reading of 82.0 in August.
BOTTOM LINE: Prices paid by US consumers rose in August at half the pace of the previous month, pointing to slower inflation as predicted by Fed Chairman Bernanke. Energy prices rose .3% in August versus a 2.9% increase in July. Gasoline prices increased .2% versus a 5.3% gain in July. Airline fares fell 1.9%, the largest decline since December. The recent substantial decline in energy prices should lead to an even better CPI next month. I continue to believe inflation fears have peaked for this cycle as the mania for commodities continues to reverse course and unit labor cost increases remain subdued.
Manufacturing in NY state expanded at a faster pace this morning as shipments rose and order backlogs increased, Bloomberg reported. The prices paid component of the index fell to 41 versus a reading of 44.3 in August. The employment component of the index rose to 12.5 versus a reading of 6.5 the prior month. A plunge in energy prices may cut manufacturing costs further and keeping factories humming. The average price of a gallon of regular grade gasoline has fallen from $2.95 in August to $2.67 this month. I continue to believe manufacturing will remain relatively healthy over the intermediate-term as companies rebuild depleted inventories as they gain confidence in the sustainability of the current expansion.
Industrial production in the US unexpectedly fell in August, led by a decline in utility use and mining, Bloomberg said. A return to more normal temperatures after July’s heat wave, helped curtail utility production. Mine production, which includes oil, gas and minerals fell last month versus a .6% gain in July. Business equipment production surged 13.5% from year ago levels. Industrial Production should continue to decelerate modestly over the intermediate-term. Capacity Utilization will likely trend around average levels.
Confidence among US consumers this month rose for the fist time since June, helped by declining gasoline prices and strength in the labor market, Bloomberg reported. The expectations component of the index surged to 77.1, the best since January, versus a reading of 68 the prior month. Consumers said they expect inflation to rise 3.1% over the next 12 months versus expectations of a 3.8% increase the prior month. Consumer confidence should continue to improve meaningfully over the intermediate-term as energy prices continue to fall, inflation decelerates, interest rates remain low, stocks rise, housing stabilizes, the job market remains healthy and irrational pessimism lifts.
Thursday, September 14, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- Adobe Systems(ADBE), the world’s biggest maker of graphic-design software, said third-quarter profit fell 35% as customers waited for updated products. The shares surged 7% after-hours on raised guidance.
- Mexican President Fox canceled plans to kick off Independence Day celebrations in Mexico City tomorrow to avoid potentially violent clashes with election officials.
- The Senate approved legislation today to tighten security at US ports as Republicans overcame Democratic efforts to add provisions related to the Iraq war and intelligence operations.
- The US warned citizens to “exercise caution” in Mexico amid a wave of increasing drug-related violence and kidnapping.
- A Senate committee dealt a rebuff to President Bush by approving military tribunal legislation that would give more legal protection to suspected terrorists.
- Crude oil was little changed below $64 a barrel in NY after rising US fuel supplies prompted renewed selling.
- Copper prices in Shanghai fell on concern that domestic supplies of the metal will rise after the government reduced export tariff rebates on non-ferrous minerals and other products.
- Intercontinental Exchange(ICE), an electronic energy market whose shares have risen 78% this year, agreed to acquire the New York Board of Trade for about $1 billion in cash and stock.
Business Week:
- The health-care industry is buoying the US economy. Since 2001, the industry has added 1.7 million jobs.
Financial Times:
- Internet sites promoting user-generated content, such as YouTube and News Corp.’s MySpace, have become the fastest-growing online brands in the UK, citing Nielsen/NetRatings.
The Guardian:
- Former US Treasury Secretary in the Clinton administration, Larry Summers, will write a monthly column for the Financial Times starting later this month. Summers left Harvard after triggering controversy last year when he told a conference that “innate differences” may explain why there were few female scientists in high-ranking academic positions.
Crain’s NY Business:
- The unemployment rate in NYC fell to 5.1% in August from 5.7% in July. NY state’s unemployment rate dropped to 4.7% in August from 5.1% a month earlier.
AFP:
- Cuba, a net oil importer, is finding oil at rapid rates and may join OPEC in coming years.
Seoul Economic Daily:
- South Korean companies are seeking to build factories, petrochemical and construction operations in Iraq, citing the Federation of Korean Industries.
International Oil Daily:
- China plans to triple its ethanol production to more than 3 million metric tons a year by 2010. The increase would cut China’s dependence on imported oil and boost the income of hundreds of millions of farmers, Liu Qun of the National Development and Reform Commission said at a biofuel conference.
Late Buy/Sell Recommendations
Business Week:
- Omnicare(OCR), a pharmacy services company for health-care providers, may see its stock gain 36% in a year, citing John Maloney, President of M&R Capital Management.
- The shares of Walgreen Co.(WAG) may rise as much as 86% in four years, citing ValueSearch Capital Management President Schwartzman.
- The Knot Inc., owner of a Web site with 4 million unique visitors each month, could rise on online advertising.
Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated +.02%.
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
- None of note
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Consumer Price Index for August is estimated to rise .2% versus a .4% gain in July.
- The CPI Ex Food & Energy for August is estimated to rise .2% versus a .2% increase in July.
- Empire Manufacturing for September is estimated to rise to 13.5 versus a reading of 10.5 in August.
9:15 am EST
- Industrial Production for August is estimated to rise .2% versus a .4% gain in July.
- Capacity Utilization for August is estimated to rise to 82.5% versus 82.4% in July.
9:45 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for September is estimated to rise to 84.0 versus a reading of 82.0 in August.
Bloomberg:
- Adobe Systems(ADBE), the world’s biggest maker of graphic-design software, said third-quarter profit fell 35% as customers waited for updated products. The shares surged 7% after-hours on raised guidance.
- Mexican President Fox canceled plans to kick off Independence Day celebrations in Mexico City tomorrow to avoid potentially violent clashes with election officials.
- The Senate approved legislation today to tighten security at US ports as Republicans overcame Democratic efforts to add provisions related to the Iraq war and intelligence operations.
- The US warned citizens to “exercise caution” in Mexico amid a wave of increasing drug-related violence and kidnapping.
- A Senate committee dealt a rebuff to President Bush by approving military tribunal legislation that would give more legal protection to suspected terrorists.
- Crude oil was little changed below $64 a barrel in NY after rising US fuel supplies prompted renewed selling.
- Copper prices in Shanghai fell on concern that domestic supplies of the metal will rise after the government reduced export tariff rebates on non-ferrous minerals and other products.
- Intercontinental Exchange(ICE), an electronic energy market whose shares have risen 78% this year, agreed to acquire the New York Board of Trade for about $1 billion in cash and stock.
Business Week:
- The health-care industry is buoying the US economy. Since 2001, the industry has added 1.7 million jobs.
Financial Times:
- Internet sites promoting user-generated content, such as YouTube and News Corp.’s MySpace, have become the fastest-growing online brands in the UK, citing Nielsen/NetRatings.
The Guardian:
- Former US Treasury Secretary in the Clinton administration, Larry Summers, will write a monthly column for the Financial Times starting later this month. Summers left Harvard after triggering controversy last year when he told a conference that “innate differences” may explain why there were few female scientists in high-ranking academic positions.
Crain’s NY Business:
- The unemployment rate in NYC fell to 5.1% in August from 5.7% in July. NY state’s unemployment rate dropped to 4.7% in August from 5.1% a month earlier.
AFP:
- Cuba, a net oil importer, is finding oil at rapid rates and may join OPEC in coming years.
Seoul Economic Daily:
- South Korean companies are seeking to build factories, petrochemical and construction operations in Iraq, citing the Federation of Korean Industries.
International Oil Daily:
- China plans to triple its ethanol production to more than 3 million metric tons a year by 2010. The increase would cut China’s dependence on imported oil and boost the income of hundreds of millions of farmers, Liu Qun of the National Development and Reform Commission said at a biofuel conference.
Late Buy/Sell Recommendations
Business Week:
- Omnicare(OCR), a pharmacy services company for health-care providers, may see its stock gain 36% in a year, citing John Maloney, President of M&R Capital Management.
- The shares of Walgreen Co.(WAG) may rise as much as 86% in four years, citing ValueSearch Capital Management President Schwartzman.
- The Knot Inc., owner of a Web site with 4 million unique visitors each month, could rise on online advertising.
Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated +.02%.
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
- None of note
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Consumer Price Index for August is estimated to rise .2% versus a .4% gain in July.
- The CPI Ex Food & Energy for August is estimated to rise .2% versus a .2% increase in July.
- Empire Manufacturing for September is estimated to rise to 13.5 versus a reading of 10.5 in August.
9:15 am EST
- Industrial Production for August is estimated to rise .2% versus a .4% gain in July.
- Capacity Utilization for August is estimated to rise to 82.5% versus 82.4% in July.
9:45 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for September is estimated to rise to 84.0 versus a reading of 82.0 in August.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity shares in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the day.
***Alert***
I am unable to post the Thursday Close due to a scheduling conflict. I will post the Friday Watch later this evening.
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