BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs, Retail longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mixed as the advance/decline line is slightly higher, sector performance is mixed and volume is about average. There are reports that OPEC is cutting production 5% with oil at $64 per barrel. If this report is true, it is incredibly short-sighted. Global demand for oil has been flat since December 2003 during a time of booming economic growth. Demand destruction is already pervasive. Most Americans feel as though they are funding terrorism by filling up their tanks. I do not believe we will ever again see the demand for gas-guzzling vehicles that we saw in recent years, even if gas prices continue to plunge. An OPEC cut with oil at $64 per barrel amid weakening global growth would only further deepen resentment and result in even greater long-term demand destruction. Oil is now .21 cents lower on the day despite the report. I will look to add to my energy-related shorts on any substantial increase in oil prices from current levels. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and .
Thursday, September 28, 2006
Stocks Slightly Higher into Final Hour on Short-covering and Reversal Lower in Oil
Today's Headlines
Bloomberg:
- Natural gas is falling another 5% on record inventories and mild weather.
- Billionaire Kirk Kerkorian, stepping up pressure on General Motors(GM) CEO Wagoner to consider an alliance, said his Tracinda Corp. may buy 12 million more shares.
- Billionaire investor Carl Icahn, seeking to oust half the board and take control of ImClone Systems, said he wants a new chief executive with biotech experience who can lead a more aggressive push to sell the cancer treatment Erbitux.
- Intel Corp.(INTC) shares are heading for their biggest weekly gain in three years after the company introduced new semiconductors designed to win back market shares from Advanced Micro Devices(AMD).
- Talks in Berlin between Iranian and European Union officials aimed at breaking the deadlock over Iran’s atomic program produced some progress.
Wall Street Journal:
- Steel inventories are growing in the US, partly due to a slowdown in auto manufacturing, and the trend is spawning worries of an oversupply and lower prices. Service centers, which purchase steel for resale to manufacturers, say that supplies in August were 3.1 months’ worth, up from 2.7 months from the same time a year ago. Steel imports so far this year are 40% higher and poised to beat the 98 record.
- Major League Soccer will allow advertising on the front of players’ jerseys next year.
NY Times:
- Rural US states are lagging more populous states in high-speed Internet service as companies focus on larger cities to more easily recoup their investments.
- Several prominent scientists have founded a group to work toward electing politicians “who respect evidence and understand the importance of using scientific advice in making public policy.” Members of Scientists and Engineers for America said that while the organization would be non-partisan, the Bush administration’s policies on climate change and stem cell research motivated them to act. Organizers include John Gibbons and Neal Lane, both science advisers during the Clinton administration.
USA Today:
- US officials are concerned about ensuring that the votes of about 3.7 million Americans living abroad and more than 400,000 military personal stationed overseas will be counted.
Scotsman:
- The maker of video game “Grand Theft Auto: Vice City”, Take-Two Interactive(TTWO) is being sued for $600 million by the family of three people killed by a teenage related in 2004. The action alleges the killer, who was 14, played the game “obsessively” for several months before he shot his father, stepmother and stepsister at a New Mexico ranch.
Globe and Mail:
- Statoil ASA, Norway’s largest oil and gas producer, is seeking to buy an oil sands development in Alberta for more than $900 million to add to production.
- Natural gas is falling another 5% on record inventories and mild weather.
- Billionaire Kirk Kerkorian, stepping up pressure on General Motors(GM) CEO Wagoner to consider an alliance, said his Tracinda Corp. may buy 12 million more shares.
- Billionaire investor Carl Icahn, seeking to oust half the board and take control of ImClone Systems, said he wants a new chief executive with biotech experience who can lead a more aggressive push to sell the cancer treatment Erbitux.
- Intel Corp.(INTC) shares are heading for their biggest weekly gain in three years after the company introduced new semiconductors designed to win back market shares from Advanced Micro Devices(AMD).
- Talks in Berlin between Iranian and European Union officials aimed at breaking the deadlock over Iran’s atomic program produced some progress.
Wall Street Journal:
- Steel inventories are growing in the US, partly due to a slowdown in auto manufacturing, and the trend is spawning worries of an oversupply and lower prices. Service centers, which purchase steel for resale to manufacturers, say that supplies in August were 3.1 months’ worth, up from 2.7 months from the same time a year ago. Steel imports so far this year are 40% higher and poised to beat the 98 record.
- Major League Soccer will allow advertising on the front of players’ jerseys next year.
NY Times:
- Rural US states are lagging more populous states in high-speed Internet service as companies focus on larger cities to more easily recoup their investments.
- Several prominent scientists have founded a group to work toward electing politicians “who respect evidence and understand the importance of using scientific advice in making public policy.” Members of Scientists and Engineers for America said that while the organization would be non-partisan, the Bush administration’s policies on climate change and stem cell research motivated them to act. Organizers include John Gibbons and Neal Lane, both science advisers during the Clinton administration.
USA Today:
- US officials are concerned about ensuring that the votes of about 3.7 million Americans living abroad and more than 400,000 military personal stationed overseas will be counted.
Scotsman:
- The maker of video game “Grand Theft Auto: Vice City”, Take-Two Interactive(TTWO) is being sued for $600 million by the family of three people killed by a teenage related in 2004. The action alleges the killer, who was 14, played the game “obsessively” for several months before he shot his father, stepmother and stepsister at a New Mexico ranch.
Globe and Mail:
- Statoil ASA, Norway’s largest oil and gas producer, is seeking to buy an oil sands development in Alberta for more than $900 million to add to production.
2Q Growth and Inflation Moderate, Job Market Healthy
BOTTOM LINE: US economic growth slowed to 2.6% in the second quarter, Bloomberg reported. Residential construction fell the most since 1995 during the second quarter, offsetting a 20.3% surge in commercial construction. Consumer spending rose at a 2.6% annual rate in the second quarter and is expected to accelerate to 3% next quarter. The PCE core, the Fed’s favorite inflation gauge, rose 2.7% versus a prior estimate of a 2.8% rise. Corporate profits soared 17.4% during the second-quarter from a year earlier. A gallon of regular gasoline at the pump cost $2.38 this week down from $2.85 during the second quarter. A recent Bloomberg/LA Times survey showed that 33% of Americans said lower gas prices were allowing them to spending more on other goods. As a result, the Intl. Council of Shopping Centers this week raised its September forecast for same-store-sales to 4% from a prior forecast of 3.5%. I expect 3Q GDP growth to dip to around 2.0-2.5% before rebounding back above 3% during the fourth quarter.
Fewer Americans filed for unemployment benefits last week, signaling the labor market remains healthy, Bloomberg reported. The four-week moving-average of claims fell to 315,500. The unemployment rate for those eligible for benefits, which tracks the US unemployment rate, held steady at 1.9%. The unemployment rate last month fell to a historically low 4.7%. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
Thursday Watch
Late-Night Headlines
Bloomberg:
- STMicroelectronics NV(STM), Europe’s largest maker of computer chips, may be targeted for a takeover, according to traders betting on the creditworthiness of companies in the credit-default swap market.
- Congress moved closer to passing legislation creating military tribunals to try terrorist suspects before it recesses at week’s end for the Nov. 7 election.
- Toyota Motor, Honda Motor and Nissan Motor, Japan’s three largest carmakers, will highlight diesel models at the Paris Motor Show today as they aim to grab a greater share of a segment that accounts for half of all car sales in Europe.
- Chevron(CVX), the second-largest US oil company, said third-quarter oil and natural gas output rose 6% as some wells damaged by hurricanes in the Gulf of Mexico last year resumed production.
- The US House of Representatives passed legislation requiring regulators to investigate the $1.2 trillion hedge-fund industry and made recommendations as to whether it needs more oversight.
- The yuan rose to the highest since July last year after US Treasury Secretary Henry Paulson said trade-sanction threats aren’t the right way to deal with China.
China Daily:
- China is promoting the use of ethanol-enriched gasoline for motor vehicles in nine provinces, citing an official with the National Development Reform Commission.
Late Buy/Sell Recommendations
Smith Barney:
- Reiterated Buy on (WEN), target $75.
- Reiterated Buy on (AZO), target $124.
CSFB:
- Reiterated Buy on (EMR).
Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated -.03%.
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
- (AM)/-.16
- (FDO)/.23
- (TXI)/1.07
Upcoming Splits
- (ATE) 1-for-2
- (GEO) 3-for2
Economic Releases
8:30 am EST
- Final 2Q GDP is estimated to rise 2.9% versus prior estimates of a 2.9% gain.
- Final 2Q GDP Price Index is estimated to rise 3.3% versus prior estimates of a 3.3% gain.
- Final 2Q Personal Consumption is estimated to rise 2.6% versus prior estimates of a 2.6% increase.
- Final 2Q Core PCE is estimated to rise 2.8% versus prior estimates of a 2.8% gain.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 318K the prior week.
- Continuing Claims are estimated to rise to 2473K versus 2461K prior.
Bloomberg:
- STMicroelectronics NV(STM), Europe’s largest maker of computer chips, may be targeted for a takeover, according to traders betting on the creditworthiness of companies in the credit-default swap market.
- Congress moved closer to passing legislation creating military tribunals to try terrorist suspects before it recesses at week’s end for the Nov. 7 election.
- Toyota Motor, Honda Motor and Nissan Motor, Japan’s three largest carmakers, will highlight diesel models at the Paris Motor Show today as they aim to grab a greater share of a segment that accounts for half of all car sales in Europe.
- Chevron(CVX), the second-largest US oil company, said third-quarter oil and natural gas output rose 6% as some wells damaged by hurricanes in the Gulf of Mexico last year resumed production.
- The US House of Representatives passed legislation requiring regulators to investigate the $1.2 trillion hedge-fund industry and made recommendations as to whether it needs more oversight.
- The yuan rose to the highest since July last year after US Treasury Secretary Henry Paulson said trade-sanction threats aren’t the right way to deal with China.
China Daily:
- China is promoting the use of ethanol-enriched gasoline for motor vehicles in nine provinces, citing an official with the National Development Reform Commission.
Late Buy/Sell Recommendations
Smith Barney:
- Reiterated Buy on (WEN), target $75.
- Reiterated Buy on (AZO), target $124.
CSFB:
- Reiterated Buy on (EMR).
Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated -.03%.
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
- (AM)/-.16
- (FDO)/.23
- (TXI)/1.07
Upcoming Splits
- (ATE) 1-for-2
- (GEO) 3-for2
Economic Releases
8:30 am EST
- Final 2Q GDP is estimated to rise 2.9% versus prior estimates of a 2.9% gain.
- Final 2Q GDP Price Index is estimated to rise 3.3% versus prior estimates of a 3.3% gain.
- Final 2Q Personal Consumption is estimated to rise 2.6% versus prior estimates of a 2.6% increase.
- Final 2Q Core PCE is estimated to rise 2.8% versus prior estimates of a 2.8% gain.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 318K the prior week.
- Continuing Claims are estimated to rise to 2473K versus 2461K prior.
BOTTOM LINE: Asian indices are slightly higher, boosted by automaker, commodity and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
Wednesday, September 27, 2006
Dow Jones Industrial Average Finishes 61 Points from All-time High
Indices
S&P 500 1,336.59 +.02%
DJIA 11,689.24 +.17%
NASDAQ 2,263.39 +.09%
Russell 2000 732.54 +.40%
Wilshire 5000 13,339.18 +.10%
S&P Barra Growth 620.89 +.13%
S&P Barra Value 713.55 -.09%
Morgan Stanley Consumer 655.21 +.27%
Morgan Stanley Cyclical 821.31 -.16%
Morgan Stanley Technology 530.80 -.18%
Transports 4,480.38 +.62%
Utilities 434.82 +1.17%
Put/Call .84 -6.67%
NYSE Arms 1.11 +57.47%
Volatility(VIX) 11.58 +.43%
ISE Sentiment 115.0 -1.71%
US Dollar 85.67 +.05%
CRB 304.32 +1.20%
Futures Spot Prices
Crude Oil 62.99 +3.25%
Unleaded Gasoline 153.55 +2.93%
Natural Gas 5.66 -2.50%
Heating Oil 171.50 +3.45%
Gold 607.80 +.75%
Base Metals 233.22 +1.40%
Copper 347.85 -.24%
10-year US Treasury Yield 4.59% +.25%
Leading Sectors
Oil Service +1.90%
Disk Drives +1.63%
Biotech +1.47%
Lagging Sectors
Homebuilders -1.23%
Airlines -1.76%
Telecom -2.25%
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
CSFB:
- Rated (GILD) Outperform.
- Rated (AMGN) Underperform.
Afternoon/Evening Headlines
Bloomberg:
- Pennsylvania approved the first slot-machine licensees in the state, allowing five horse-racing facilities to add the devices.
- Texas Pacific Group, the leveraged buyout firm run by David Bonderman and James Coulter, raised about $15 billion, the second-biggest fund ever for takeovers.
- Hewlett-Packard(HPQ) Chairman and CEO Mark Hurd has the unanimous support of the board as he attempts to contain the scandal over a probe into the source of board leaks, director Robert Ryan said.
- A gunman, possibly armed with a bomb, took hostages at a high school outside Denver today and shots were reported fired, authorities said.
- President Bush will be confronting a growing rift between two crucial allies in the war against terrorism when he brings the presidents of Afghanistan and Pakistan to the White House for a dinner meeting tonight.
- Verizon Communications(VZ) said it plans to spend $22.9 billion expanding its fiber-optic Internet and television network through 2010, placing a price tag on the project for the first time.
- The US needs to add 40% more doctors who practice general medicine by 2020 to help care for an aging population, a medical group says.
- Crude oil rose 3.2% as speculators covered bets that the commodity would fall.
- Chesapeake Energy(CHK), the second-biggest independent natural-gas producer in the US, said it will idle about 6% of its output because of excess supply and a plunge in prices for the commodity.
- Natural-gas futures in NY plunged to their lowest in almost four years as mild weather cut demand and brimming inventories pared the need for fresh purchases.
S&P 500 1,336.59 +.02%
DJIA 11,689.24 +.17%
NASDAQ 2,263.39 +.09%
Russell 2000 732.54 +.40%
Wilshire 5000 13,339.18 +.10%
S&P Barra Growth 620.89 +.13%
S&P Barra Value 713.55 -.09%
Morgan Stanley Consumer 655.21 +.27%
Morgan Stanley Cyclical 821.31 -.16%
Morgan Stanley Technology 530.80 -.18%
Transports 4,480.38 +.62%
Utilities 434.82 +1.17%
Put/Call .84 -6.67%
NYSE Arms 1.11 +57.47%
Volatility(VIX) 11.58 +.43%
ISE Sentiment 115.0 -1.71%
US Dollar 85.67 +.05%
CRB 304.32 +1.20%
Futures Spot Prices
Crude Oil 62.99 +3.25%
Unleaded Gasoline 153.55 +2.93%
Natural Gas 5.66 -2.50%
Heating Oil 171.50 +3.45%
Gold 607.80 +.75%
Base Metals 233.22 +1.40%
Copper 347.85 -.24%
10-year US Treasury Yield 4.59% +.25%
Leading Sectors
Oil Service +1.90%
Disk Drives +1.63%
Biotech +1.47%
Lagging Sectors
Homebuilders -1.23%
Airlines -1.76%
Telecom -2.25%
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
CSFB:
- Rated (GILD) Outperform.
- Rated (AMGN) Underperform.
Afternoon/Evening Headlines
Bloomberg:
- Pennsylvania approved the first slot-machine licensees in the state, allowing five horse-racing facilities to add the devices.
- Texas Pacific Group, the leveraged buyout firm run by David Bonderman and James Coulter, raised about $15 billion, the second-biggest fund ever for takeovers.
- Hewlett-Packard(HPQ) Chairman and CEO Mark Hurd has the unanimous support of the board as he attempts to contain the scandal over a probe into the source of board leaks, director Robert Ryan said.
- A gunman, possibly armed with a bomb, took hostages at a high school outside Denver today and shots were reported fired, authorities said.
- President Bush will be confronting a growing rift between two crucial allies in the war against terrorism when he brings the presidents of Afghanistan and Pakistan to the White House for a dinner meeting tonight.
- Verizon Communications(VZ) said it plans to spend $22.9 billion expanding its fiber-optic Internet and television network through 2010, placing a price tag on the project for the first time.
- The US needs to add 40% more doctors who practice general medicine by 2020 to help care for an aging population, a medical group says.
- Crude oil rose 3.2% as speculators covered bets that the commodity would fall.
- Chesapeake Energy(CHK), the second-biggest independent natural-gas producer in the US, said it will idle about 6% of its output because of excess supply and a plunge in prices for the commodity.
- Natural-gas futures in NY plunged to their lowest in almost four years as mild weather cut demand and brimming inventories pared the need for fresh purchases.
BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Medical longs, Biotech longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished higher, sector performance was mixed and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was modestly bullish. U.S. gasoline supplies are now at the highest level since 1991 for this time of the year. Implied gasoline demand rose 0.6% for the week vs. a 20-year average of 1.7% demand growth. Moreover, distillate stocks are 18% above the five-year average for this time of the year as we head into the winter. Oil traded up on short-covering today. This bounce could last a few days as oil was getting very oversold technically. The 10-year was only slightly lower today despite the better housing data and recent gains. While the DJIA failed to close at a new high, I like the set-up for new highs by next week. A number of growth stock leaders are finally exhibiting significant upside momentum.
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