BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet and Semi longs. I added to my Google(GOOG) long and took profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is negative today as the advance/decline line is lower, most sectors are lower and volume is above average. The Johnson Redbook same-store sales index rose 3.9% year over year last week vs. a 3.8% rise the prior week. The long-term average is a gain of around 2.8%. This is just more evidence that the anticipated collapse in consumer spending won't materialize anytime soon, even as investors continue to price this into stocks. A healthy labor market, falling energy prices, lower long-term interest rates, decelerating inflation, a rising stock market and less irrational pessimism will continue to more than offset housing over the intermediate term. The Morgan Stanley Retail Index (MVRX) has surged 14.1% in less than two months. I expect continued outperformance by the sector during the fourth quarter. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, declining interest rates and bargain hunting.
Tuesday, September 19, 2006
Stocks Lower into Final Hour on Yahoo! Forecast and Thailand Worries
Today's Headlines
Bloomberg:
- Crude oil is falling below $62/bbl. and gasoline plunged after President Bush said he will give diplomacy a change to end a dispute with Iran over the country’s nuclear ambitions.
- The Thai baht fell the most in four years after the military seized control of Bangkok and Prime Minister Shinawatra declared a state of emergency.
- Yahoo!(YHOO) said profit and sales this quarter will be at the low end of its forecast on slower ad demand from automakers and financial services providers.
- According to comScore, Google(GOOG) gained .4 share points in August to capture 44.1% of US search engine market.
- Treasuries rose the most in a month after government reports showed producer prices increased less than forecast in August and housing construction fell, boosting expectations the Fed is done raising rates.
- Microsoft(MSFT) will begin testing a service that lets users share videos in a bid to compete with YouTube Inc.
Wall Street Journal:
- More oil firms will be drilling in deep waters for oil, following the production of oil from the 4.8 mile-deep Jack well this month in the Gulf of Mexico. Chevron(CVX), Devon Energy(DVN) and Statoil ASA said they had coaxed oil out of a rock formation about 280 kilometers south of Louisiana. New finds have been discovered in deep water off Brazil, Nigeria and Angola. Finally, companies are seeking oil in deep waters in the South China Sea, and off India, Pakistan, Mauritania, Egypt, Malaysia and Mexico.
- The US Senate and House of Representatives are close to an agreement on a domestic security budget that includes $1.82 billion in emergency funds.
- Walt Disney(DIS) plans to start marketing a portable video and audio player for children age 9 to 13, citing Chris Heatherly, global vp of Disney global electronics.
- Hedge-fund manager Edward Lampert, the chairman of Sears Holdings(SHLD), may be looking for acquisitions now that Sears is in better shape.
- Brian Hunter, a 32-year-old Canadian energy trader, lost $5 billion in a week for a Greenwich, Connecticut, hedge fund as he made the wrong best on natural gas prices.
- DaimlerChrysler’s(DCX) Chrysler Group will make “significant” production cuts in the rest of its fiscal year because of heavy inventories.
NY Times:
- US antiwar protesters who criticized Washington Democrat Senator Maria Cantwell for voting in favor of the war in Iraq are dampening their vitriol rather than undermine her re-election bid.
- American International Group(AIG) may have skirted NY state law that bars companies from contributing more than $5,000 annually to candidates for state office by using dozens of subsidiaries to donate money. The donations included $50,000 to Democratic Attorney General Eliot Spitzer.
- Virgin Group founder Richard Branson has extended his company’s charity in the US to combine social outreach with philanthropy.
LA Times:
- The Los Angeles Airport Commission awarded a contract valued at $503 million for repairs on the Tom Bradley International Terminal, the largest single city contract ever.
Financial Times:
- Greenhill & Co., an independent NYC-based investment bank, has parlayed its job as lead adviser for German truckmaker MAN AG to become one of Germany’s biggest mergers and acquisitions advisors so far this year.
- TIAA-CREF, a US retirement fund manager, will invest $100 million in micro-lending projects, including small loans to mostly women entrepreneurs in developing countries.
Londond-based Times:
- Amaranth Advisors LLC, a hedge-fund manager that said its main funds fell about 50% this month, is selling European syndicated loan investments, including some made to Manchester United Plc, to raise cash.
Gulf News:
- About 9 million people in Arab countries used the Internet for the first time last year as penetration rates more than doubled in some nations, citing a report from Madar Research.
Interfax:
- Russia producers will ship 11 million tons of oil to China this year, less than the forecast of 15 million tons, citing Alexei Vorotilkin, the head of an OAO Russian Railway division in Irkutsk.
AFP:
- The genocide trial of Saddam Hussein began its ninth session today with a Kurdish witness describing a chemical weapons attack on his village and the stillbirth of this child in a detention cell. Prosecutors say 182,000 Kurds were murdered after their villages were bombed or burned down by Saddam’s forces during the Anfal campaign.
- Crude oil is falling below $62/bbl. and gasoline plunged after President Bush said he will give diplomacy a change to end a dispute with Iran over the country’s nuclear ambitions.
- The Thai baht fell the most in four years after the military seized control of Bangkok and Prime Minister Shinawatra declared a state of emergency.
- Yahoo!(YHOO) said profit and sales this quarter will be at the low end of its forecast on slower ad demand from automakers and financial services providers.
- According to comScore, Google(GOOG) gained .4 share points in August to capture 44.1% of US search engine market.
- Treasuries rose the most in a month after government reports showed producer prices increased less than forecast in August and housing construction fell, boosting expectations the Fed is done raising rates.
- Microsoft(MSFT) will begin testing a service that lets users share videos in a bid to compete with YouTube Inc.
Wall Street Journal:
- More oil firms will be drilling in deep waters for oil, following the production of oil from the 4.8 mile-deep Jack well this month in the Gulf of Mexico. Chevron(CVX), Devon Energy(DVN) and Statoil ASA said they had coaxed oil out of a rock formation about 280 kilometers south of Louisiana. New finds have been discovered in deep water off Brazil, Nigeria and Angola. Finally, companies are seeking oil in deep waters in the South China Sea, and off India, Pakistan, Mauritania, Egypt, Malaysia and Mexico.
- The US Senate and House of Representatives are close to an agreement on a domestic security budget that includes $1.82 billion in emergency funds.
- Walt Disney(DIS) plans to start marketing a portable video and audio player for children age 9 to 13, citing Chris Heatherly, global vp of Disney global electronics.
- Hedge-fund manager Edward Lampert, the chairman of Sears Holdings(SHLD), may be looking for acquisitions now that Sears is in better shape.
- Brian Hunter, a 32-year-old Canadian energy trader, lost $5 billion in a week for a Greenwich, Connecticut, hedge fund as he made the wrong best on natural gas prices.
- DaimlerChrysler’s(DCX) Chrysler Group will make “significant” production cuts in the rest of its fiscal year because of heavy inventories.
NY Times:
- US antiwar protesters who criticized Washington Democrat Senator Maria Cantwell for voting in favor of the war in Iraq are dampening their vitriol rather than undermine her re-election bid.
- American International Group(AIG) may have skirted NY state law that bars companies from contributing more than $5,000 annually to candidates for state office by using dozens of subsidiaries to donate money. The donations included $50,000 to Democratic Attorney General Eliot Spitzer.
- Virgin Group founder Richard Branson has extended his company’s charity in the US to combine social outreach with philanthropy.
LA Times:
- The Los Angeles Airport Commission awarded a contract valued at $503 million for repairs on the Tom Bradley International Terminal, the largest single city contract ever.
Financial Times:
- Greenhill & Co., an independent NYC-based investment bank, has parlayed its job as lead adviser for German truckmaker MAN AG to become one of Germany’s biggest mergers and acquisitions advisors so far this year.
- TIAA-CREF, a US retirement fund manager, will invest $100 million in micro-lending projects, including small loans to mostly women entrepreneurs in developing countries.
Londond-based Times:
- Amaranth Advisors LLC, a hedge-fund manager that said its main funds fell about 50% this month, is selling European syndicated loan investments, including some made to Manchester United Plc, to raise cash.
Gulf News:
- About 9 million people in Arab countries used the Internet for the first time last year as penetration rates more than doubled in some nations, citing a report from Madar Research.
Interfax:
- Russia producers will ship 11 million tons of oil to China this year, less than the forecast of 15 million tons, citing Alexei Vorotilkin, the head of an OAO Russian Railway division in Irkutsk.
AFP:
- The genocide trial of Saddam Hussein began its ninth session today with a Kurdish witness describing a chemical weapons attack on his village and the stillbirth of this child in a detention cell. Prosecutors say 182,000 Kurds were murdered after their villages were bombed or burned down by Saddam’s forces during the Anfal campaign.
Inflation Falls, Housing Starts Slow Further
- The Producer Price Index for August rose .1% versus estimates of a .3% increase and a .1% gain in July.
- The PPI Ex Food & Energy for August fell .4% versus estimates of a .2% increase and a .3% decline in July.
- Housing Starts for August fell to 1665K versus estimates of 1746K and 1772K in July.
- Building Permits for August fell to 17223K versus estimates of 1739K and 1763K in July.
- The PPI Ex Food & Energy for August fell .4% versus estimates of a .2% increase and a .3% decline in July.
- Housing Starts for August fell to 1665K versus estimates of 1746K and 1772K in July.
- Building Permits for August fell to 17223K versus estimates of 1739K and 1763K in July.
BOTTOM LINE: Prices paid to US producers rose less than forecast in August, and costs excluding food and energy fell by the most in three years, adding to evidence of receding inflationary pressures, Bloomberg reported. Energy prices rose .3% in August versus a 1.3% gain in July. The core ppi fell by the most since April 2003. It has risen only .9% over the last 12 months. Plunging energy prices will likely lead to a decline in the ppi next month. As I predicted several months ago, inflation is decelerating as commodities fall and growth moderates. Inflation has likely peaked for this cycle.
Housing construction in the US declined more than forecast last month to the lowest level in three years. Housing starts fell 12% in the Midwest, 6.1% in the South and 5.5% in the West. Starts rose 5.4% in the Northeast. Declining housing starts are a positive at this point as it will eventually lead to lower inventories and stabilizing prices. The Case-Shiller housing futures ticked up recently and are now forecasting a 4.9% decline in the average home price over the next 9 months. Considering the 50% rise in the average home price over the last few years, this would be considered a “soft-landing.” I continue to believe the overall negative effects housing has on the US economy are being exaggerated.
Tuesday Watch
Late-Night Headlines
Bloomberg:
- The US and European Union are considering a package of economic incentives to offer Sudan’s government in exchange for its cooperation in ending the humanitarian crisis in Darfur, diplomats said, as the US was set to name a special envoy to the region.
- China and India are accelerating development of wind power, luring companies including turbine maker Vestas Wind Systems A/S.
- The yuan rose after the daily fixing rate was set at the highest since a decade-long dollar peg ended last year, on speculation US Treasury Secretary Henry Paulson, arriving in Beijing today, will press China for faster gains.
- International Monetary fund Managing Director Rodrigo de Rato said global economic growth may be peaking, prodding policy makers to reach agreement on a new trade deal or risk a deeper slowdown.
Financial Times:
- Demand for solar cells is creating a shortage of silicon, the raw material also used to make semiconductors, the price of which has more than doubled in three years.
AFP:
- An unsuccessful attempt to assassinate Somali President Abdullahi Yousuf Ahmed was the work of the al-Qaeda terrorist network.
China Daily:
- Sales of air conditioners in China fell 16.7% over the past 12 months, the first decline since 1991.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (NFLX), target $30.
- Reiterated Buy on (HEW), target $28.
Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated unch.
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
- (AZO)/2.79
- (CBRL)/.78
- (CHAP)/1.04
- (CBK)/.20
- (DRI)/.58
- (FDS)/.42
- (ORCL)/.16
- (PRGS)/.36
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Producer Price for August is estimated to rise .3% versus a .1% gain in July.
- The PPI Ex Food & Energy for August is estimated to rise .2% versus a .3% decline in July.
- Housing Starts for August are estimated to fall to 1746K versus 1795K in July.
- Building Permits for August are estimated to fall to 1740K versus 1763K in July.
Bloomberg:
- The US and European Union are considering a package of economic incentives to offer Sudan’s government in exchange for its cooperation in ending the humanitarian crisis in Darfur, diplomats said, as the US was set to name a special envoy to the region.
- China and India are accelerating development of wind power, luring companies including turbine maker Vestas Wind Systems A/S.
- The yuan rose after the daily fixing rate was set at the highest since a decade-long dollar peg ended last year, on speculation US Treasury Secretary Henry Paulson, arriving in Beijing today, will press China for faster gains.
- International Monetary fund Managing Director Rodrigo de Rato said global economic growth may be peaking, prodding policy makers to reach agreement on a new trade deal or risk a deeper slowdown.
Financial Times:
- Demand for solar cells is creating a shortage of silicon, the raw material also used to make semiconductors, the price of which has more than doubled in three years.
AFP:
- An unsuccessful attempt to assassinate Somali President Abdullahi Yousuf Ahmed was the work of the al-Qaeda terrorist network.
China Daily:
- Sales of air conditioners in China fell 16.7% over the past 12 months, the first decline since 1991.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (NFLX), target $30.
- Reiterated Buy on (HEW), target $28.
Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated unch.
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
- (AZO)/2.79
- (CBRL)/.78
- (CHAP)/1.04
- (CBK)/.20
- (DRI)/.58
- (FDS)/.42
- (ORCL)/.16
- (PRGS)/.36
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Producer Price for August is estimated to rise .3% versus a .1% gain in July.
- The PPI Ex Food & Energy for August is estimated to rise .2% versus a .3% decline in July.
- Housing Starts for August are estimated to fall to 1746K versus 1795K in July.
- Building Permits for August are estimated to fall to 1740K versus 1763K in July.
BOTTOM LINE: Asian indices are higher, boosted by commodity and automaker shares in the region. I expect US equities to open modestly higher and to fade into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
Monday, September 18, 2006
Stocks Finish Mixed, Consolidating Recent Gains
Indices
S&P 1,321.18 +.10%
DJIA 11,550.00 -.05%
NASDAQ 2,235.75 +.01%
Russell 2000 728.84 -.07%
Wilshire 5000 13,204.28 +.08%
S&P Barra Growth 614.53 +.07%
S&P Barra Value 704.30 +.13%
Morgan Stanley Consumer 648.07 -.42%
Morgan Stanley Cyclical 818.59 +.34%
Morgan Stanley Technology 522.25 +.05%
Transports 4,430.86 +.62%
Utilities 425.20 -.17%
Put/Call .98 +20.99%
NYSE Arms .75 -35.10%
Volatility(VIX) 11.78 +.17%
ISE Sentiment 80.00 +14.29%
US Dollar 85.78 -.23%
CRB 308.15 +.36%
Futures Spot Prices
Crude Oil 63.84 +.81%
Unleaded Gasoline 158.00 +.32%
Natural Gas 4.98 -.02%
Heating Oil 172.75 +1.48%
Gold 592.30 -.08%
Base Metals 220.39 -1.06%
Copper 341.00 -.13%
10-year US Treasury Yield 4.80% +.33%
Leading Sectors
Oil Service +3.24%
Gold & Silver +3.08%
Energy +2.60%
Lagging Sectors
Gaming -1.17%
Hospitals -1.23%
HMOs -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
Deutsche Bank:
- Rated (MVSN) Buy, target $30.
Citigroup:
- Rated (BNI) Buy, target $85.
- Rated (CNI) Buy, target $85.
- Rated (CSX) Buy, target $39.
- Rated (NSC) Buy, target $52.
Afternoon/Evening Headlines
Bloomberg:
- US gasoline at the pump fell for a sixth straight week, dropping 12.1 cents to a nationwide average of $2.49/gallon., a government report showed.
- Target Corp.(TGT) said September sales will rise around 5% versus prior estimates of a gain of 3-5%.
- Natural gas fell for the fourth day in five in NY with inventories of the furnace and power-plant fuel at a record high for this time of year.
- T-Mobile USA, Verizon Wireless and a partnership of cable companies were the highest bidders in a US government sale of airwaves that raised $13.9 billion.
- Mining companies including BHP Billiton(BHP) and Rio Tinto(RTP) may increase spending on exploration by 45% to $7.1 billion this year, a study by Metals Economics Group shows.
Washington Times:
- A Chinese spy ring in Los Angeles that was gathering intelligence about US submarines went undetected for 20 years. When the FBI finally cracked down last October, squabbling between prosecutors and investigators undercut the case.
S&P 1,321.18 +.10%
DJIA 11,550.00 -.05%
NASDAQ 2,235.75 +.01%
Russell 2000 728.84 -.07%
Wilshire 5000 13,204.28 +.08%
S&P Barra Growth 614.53 +.07%
S&P Barra Value 704.30 +.13%
Morgan Stanley Consumer 648.07 -.42%
Morgan Stanley Cyclical 818.59 +.34%
Morgan Stanley Technology 522.25 +.05%
Transports 4,430.86 +.62%
Utilities 425.20 -.17%
Put/Call .98 +20.99%
NYSE Arms .75 -35.10%
Volatility(VIX) 11.78 +.17%
ISE Sentiment 80.00 +14.29%
US Dollar 85.78 -.23%
CRB 308.15 +.36%
Futures Spot Prices
Crude Oil 63.84 +.81%
Unleaded Gasoline 158.00 +.32%
Natural Gas 4.98 -.02%
Heating Oil 172.75 +1.48%
Gold 592.30 -.08%
Base Metals 220.39 -1.06%
Copper 341.00 -.13%
10-year US Treasury Yield 4.80% +.33%
Leading Sectors
Oil Service +3.24%
Gold & Silver +3.08%
Energy +2.60%
Lagging Sectors
Gaming -1.17%
Hospitals -1.23%
HMOs -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
Deutsche Bank:
- Rated (MVSN) Buy, target $30.
Citigroup:
- Rated (BNI) Buy, target $85.
- Rated (CNI) Buy, target $85.
- Rated (CSX) Buy, target $39.
- Rated (NSC) Buy, target $52.
Afternoon/Evening Headlines
Bloomberg:
- US gasoline at the pump fell for a sixth straight week, dropping 12.1 cents to a nationwide average of $2.49/gallon., a government report showed.
- Target Corp.(TGT) said September sales will rise around 5% versus prior estimates of a gain of 3-5%.
- Natural gas fell for the fourth day in five in NY with inventories of the furnace and power-plant fuel at a record high for this time of year.
- T-Mobile USA, Verizon Wireless and a partnership of cable companies were the highest bidders in a US government sale of airwaves that raised $13.9 billion.
- Mining companies including BHP Billiton(BHP) and Rio Tinto(RTP) may increase spending on exploration by 45% to $7.1 billion this year, a study by Metals Economics Group shows.
Washington Times:
- A Chinese spy ring in Los Angeles that was gathering intelligence about US submarines went undetected for 20 years. When the FBI finally cracked down last October, squabbling between prosecutors and investigators undercut the case.
BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Medical longs and Semi longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was neutral today as the advance/decline line finished slightly lower, sector performance was mixed and volume was above average. Measures of investor anxiety were mostly lower into the close. Overall, today's market performance was neutral. Today's trading had the post-expiration day feel to it. Volume was only around average levels. Commodity stocks and Semis were the best performers. The 10-year yield finished only slightly higher after an afternoon rally in bonds. Tomorrow's PPI should rise less than estimates of a 0.3% increase.
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