BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Retail longs, Biotech longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, most sectors are rising and volume is above average. The action in P.F. Chang's (PFCB) stock today bodes well for further gains in consumer cyclicals. Chang's had rallied 14% from July lows before today. The company pre-announced a slightly below expectations third quarter, yet the stock is surging another 8.3% today on huge volume. The collapse in energy prices and lower long-term rates are trumping near-term concerns. I also suspect that when oil does finally temporarily stabilize it will help the major averages, not hurt them, as commodity stocks have been a major drag. Prices are down so much that even a bounce higher shouldn't hurt the broad market. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower long-term rates and bargain-hunting.
Wednesday, October 04, 2006
DJIA Surges to Another All-time High as Interest Rates Fall Further and Optimism Increases
Today's Headlines
Bloomberg:
- OPEC should hold an emergency meeting ahead of its December summit to consider cutting production if oil prices, down almost 25% over the last 2 months, continues to “fall further,” Kuwait’s oil minister said.
- Shares of oil-tanker companies, which fell the most in more than five months yesterday, may extend their decline after the cost of hiring vessels fell due to crude-oil production cuts.
- US Treasuries gained, pushing 10-year yields toward a seven-month low, as Federal Reserve Chairman Ben S. Bernanke said housing is slowing and inflation will recede.
- General Motors(GM) ended talks aimed at forming an alliance with Carlos Ghosn’s Renault SA and Nissan Motor.
- Mortgage applications in the US surged to the most in 15 months as borrowing costs close to an eight-month low spurred home sales and refinancing.
- US researcher Roger Kornberg won the Nobel Prize in chemistry for showing how genes are copied at the molecular level, enabling the human body to make use of information stored in DNA.
- The Australian dollar dropped to the lowest in almost 11 weeks as prices of commodities the nation sells abroad such as copper slumped.
Wall Street Journal:
- Rick Wagoner, the CEO of GM(GM), was expected to tell the board that the company is recovering and wouldn’t gain much from a partnership with Renault SA and Nissan Motor.
- Israeli entrepreneurs, the children of the Holocaust in WWII Romania, are helping modernize Romania.
- Yahoo!(YHOO), seeking to expand its mobile-advertising outside Japan, will start testing keyword-based advertisements on mobile phones in the US and UK.
- Sales of office buildings in Chicago may set a record this year, spurred by low prices and attractive properties.
- US stock mutual funds had a strong third quarter, led by large-company stocks, as worries about interest rates and inflation lessoned.
- The hedge-fund business may be heading for its first significant consolidation, citing Jamie Dimon, the CEO of JPMorgan Chase(JPM). A total of 2,622 hedge funds have been started since the start of last year but 1,071 have closed in the same period as returns have been squeezed by intensifying competition, citing Hedge Fund Research. The latest hedge-fund firm to stumble is Madrid-based Vega Asset Management, which has been hurt by an unfortunate bet against US bonds and now has $3 billion of assets, down from $12 billion two years ago.
NY Times:
- DaimlerChrysler AG(DCX) and China’s Chery Automobile have reached a broad understanding in their venture to export subcompact cars to the US.
Washington Times:
- UN Secretary General Kofi Annan won’t publicly release the financial disclosure form he filed last month, citing UN officials. Annan began requiring that all UN senior officials file such forms 10 months ago in an effort to reform the world body following the $64 billion Saddam/UN oil-for-food program scandal. Officials questioned the involvement of Annan’s son, Kojo, in the program as he had worked for a company that received an oil-for-food contract.
NY Daily News:
- The average price of an apartment in Manhattan fell 7% to $1.29 million in the third quarter, citing the appraisal firm Miller Samuel. Prices are still 12% above year ago levels and the report suggests a soft landing for the housing market in the area, citing the CEO of Miller Samuel.
AP:
- Venezuelan President Hugo Chavez ordered a cut in the country’s oil production to help keep oil prices above $60 a barrel, which he said is a “fair price.”
Financial Times:
- Google(GOOG) CEO Schmidt said that voters will one day be able to use “truth predictor” software to judge the probability that statements by politicians are true.
Bahrain Tribune:
- BlackBerry, the portable communications device from Research In Motion(RIMM), was introduced yesterday into Bahrain, its first Gulf market.
Argumenty I Fakty:
- Russia is investigating 2,500 officials from different levels of government for corruption, citing the director of the Federal Security Service.
Facts:
- A merger of General Motors(GM) and Ford Motor(F) would bring “phenomenally large” savings and create the world’s largest carmaker, GM Vice Chairman Bob Lutz said.
- OPEC should hold an emergency meeting ahead of its December summit to consider cutting production if oil prices, down almost 25% over the last 2 months, continues to “fall further,” Kuwait’s oil minister said.
- Shares of oil-tanker companies, which fell the most in more than five months yesterday, may extend their decline after the cost of hiring vessels fell due to crude-oil production cuts.
- US Treasuries gained, pushing 10-year yields toward a seven-month low, as Federal Reserve Chairman Ben S. Bernanke said housing is slowing and inflation will recede.
- General Motors(GM) ended talks aimed at forming an alliance with Carlos Ghosn’s Renault SA and Nissan Motor.
- Mortgage applications in the US surged to the most in 15 months as borrowing costs close to an eight-month low spurred home sales and refinancing.
- US researcher Roger Kornberg won the Nobel Prize in chemistry for showing how genes are copied at the molecular level, enabling the human body to make use of information stored in DNA.
- The Australian dollar dropped to the lowest in almost 11 weeks as prices of commodities the nation sells abroad such as copper slumped.
Wall Street Journal:
- Rick Wagoner, the CEO of GM(GM), was expected to tell the board that the company is recovering and wouldn’t gain much from a partnership with Renault SA and Nissan Motor.
- Israeli entrepreneurs, the children of the Holocaust in WWII Romania, are helping modernize Romania.
- Yahoo!(YHOO), seeking to expand its mobile-advertising outside Japan, will start testing keyword-based advertisements on mobile phones in the US and UK.
- Sales of office buildings in Chicago may set a record this year, spurred by low prices and attractive properties.
- US stock mutual funds had a strong third quarter, led by large-company stocks, as worries about interest rates and inflation lessoned.
- The hedge-fund business may be heading for its first significant consolidation, citing Jamie Dimon, the CEO of JPMorgan Chase(JPM). A total of 2,622 hedge funds have been started since the start of last year but 1,071 have closed in the same period as returns have been squeezed by intensifying competition, citing Hedge Fund Research. The latest hedge-fund firm to stumble is Madrid-based Vega Asset Management, which has been hurt by an unfortunate bet against US bonds and now has $3 billion of assets, down from $12 billion two years ago.
NY Times:
- DaimlerChrysler AG(DCX) and China’s Chery Automobile have reached a broad understanding in their venture to export subcompact cars to the US.
Washington Times:
- UN Secretary General Kofi Annan won’t publicly release the financial disclosure form he filed last month, citing UN officials. Annan began requiring that all UN senior officials file such forms 10 months ago in an effort to reform the world body following the $64 billion Saddam/UN oil-for-food program scandal. Officials questioned the involvement of Annan’s son, Kojo, in the program as he had worked for a company that received an oil-for-food contract.
NY Daily News:
- The average price of an apartment in Manhattan fell 7% to $1.29 million in the third quarter, citing the appraisal firm Miller Samuel. Prices are still 12% above year ago levels and the report suggests a soft landing for the housing market in the area, citing the CEO of Miller Samuel.
AP:
- Venezuelan President Hugo Chavez ordered a cut in the country’s oil production to help keep oil prices above $60 a barrel, which he said is a “fair price.”
Financial Times:
- Google(GOOG) CEO Schmidt said that voters will one day be able to use “truth predictor” software to judge the probability that statements by politicians are true.
Bahrain Tribune:
- BlackBerry, the portable communications device from Research In Motion(RIMM), was introduced yesterday into Bahrain, its first Gulf market.
Argumenty I Fakty:
- Russia is investigating 2,500 officials from different levels of government for corruption, citing the director of the Federal Security Service.
Facts:
- A merger of General Motors(GM) and Ford Motor(F) would bring “phenomenally large” savings and create the world’s largest carmaker, GM Vice Chairman Bob Lutz said.
Factory Orders Above Estimates, ISM Non-Manufacturing Below Estimates, Prices Paid Plunges
- Factory Orders for August were unchanged versus estimates of a .2% decline and a 1.0% decline in July.
- ISM Non-Manufacturing for September fell to 52.9 versus estimates of 56.0 and a reading of 57.0 in August.
- ISM Non-Manufacturing for September fell to 52.9 versus estimates of 56.0 and a reading of 57.0 in August.
BOTTOM LINE: Orders placed with US manufacturers were unchanged in August, Bloomberg reported. Volatile civilian aircraft orders fell 22%, while orders for automobile rose .7%. US automakers are cutting production through year-end and adding incentives to further clear out inventories. Orders for capital goods excluding aircraft and defense, a gauge of future business investment, rose .4% versus a .6% gain the prior month. The inventory-to-shipments ratio is 1.17 months, slightly above all-time lows of 1.15 months in May. I continue to expect near-term pressure on manufacturing related to auto production cutbacks before more strength near year-end.
Service industries in the US expanded at a slower pace in September, Bloomberg reported. The new orders component of the index rose to 57.2 from 52.1 in August. The prices paid component of the index plunged to 56.7 versus a reading of 72.4 the prior month. The employment component of the index rose to 53.6 versus a reading of 51.4 the prior month. The average price of gas fell to $2.33 at the end of September versus $2.84 on Aug. 28. I expect the ISM Non-manufacturing Index to bounce-back strongly next month on falling gas prices, more optimism, lower interest rates, a healthy job market and surging stock market.
Tuesday, October 03, 2006
Wednesday Watch
Late-Night Headlines
Bloomberg:
- Crude oil is trading below $59/bbl. in NY after yesterday dropping the most in almost 14 months on expectations that a US government report will show a jump in fuel stockpiles.
- The Chinese government may relax rules concerning foreign ownership of its steel companies in order to help the industry to consolidate.
- Shares of Nintendo gained after the company raised its full-year profit forecast by 20%, citing sales of its DS model.
- South Korea expressed its “deeply serious concern and regret” over North Korea’s announcement it will conduct a nuclear test and told Kim Jong Il’s regime to withdraw plans.
- Australia’s central bank kept its benchmark interest rate unchanged at a 5 ½ year high today as economic growth slows and global inflation cools.
- China’s government will speed up the closure of small-scale steel plants as the country’s economy slows, Xie Qihua, chairwoman of China’s largest steelmaker Baosteel Group, said.
Commercial Times:
- Asustek Computer may ship more than 2 million notebook computers this quarter, up by more than 25% from the previous three months.
Late Buy/Sell Recommendations
Citigroup:
- According to our US Enterprise contacts, business picked up in a major way in Sept., enough to make up for a slower than expected summer, resulting in what looks to be an in-line September quarter. More importantly, 4Q optimism is very high with many of our contacts raising their expectations for 4Q, 2006 on the whole, and 2007.
- Reiterated Buy on (SWKS), target $9.30.
- Reiterated Buy on (DKS), raised target to $54.
- Reiterated Buy on (URBN), target lowered to $23.
Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.08%.
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
- (ARRO)/.38
- (CPRT)/.29
- (SSI)/.18
- (VTS)/.42
Upcoming Splits
- (DRQ) 2-for-1
Economic Releases
8:15 am EST:
- The ADP employment change for September is estimated at 115K versus 107K.
10:00 am EST:
- The ISM Non-Manufacturing Index for September is estimated to fall to 56.0 versus a reading of 57.0 in August.
- Factory Orders for August are estimated to fall .2% versus a .6% decline in July.
10:30 am EST:
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 1,100,000 barrels versus a 109,000 barrel decline the prior week. Gasoline supplies are expected to rise by 1,200,000 barrels versus a 6,345,000 barrel build the prior week. Distillate inventories are estimated to rise by 1,500,000 barrels versus a 2,618,000 barrel increase the prior week. Finally, refinery utilization is estimated to fall .83% versus a .99% decline the prior week.
Bloomberg:
- Crude oil is trading below $59/bbl. in NY after yesterday dropping the most in almost 14 months on expectations that a US government report will show a jump in fuel stockpiles.
- The Chinese government may relax rules concerning foreign ownership of its steel companies in order to help the industry to consolidate.
- Shares of Nintendo gained after the company raised its full-year profit forecast by 20%, citing sales of its DS model.
- South Korea expressed its “deeply serious concern and regret” over North Korea’s announcement it will conduct a nuclear test and told Kim Jong Il’s regime to withdraw plans.
- Australia’s central bank kept its benchmark interest rate unchanged at a 5 ½ year high today as economic growth slows and global inflation cools.
- China’s government will speed up the closure of small-scale steel plants as the country’s economy slows, Xie Qihua, chairwoman of China’s largest steelmaker Baosteel Group, said.
Commercial Times:
- Asustek Computer may ship more than 2 million notebook computers this quarter, up by more than 25% from the previous three months.
Late Buy/Sell Recommendations
Citigroup:
- According to our US Enterprise contacts, business picked up in a major way in Sept., enough to make up for a slower than expected summer, resulting in what looks to be an in-line September quarter. More importantly, 4Q optimism is very high with many of our contacts raising their expectations for 4Q, 2006 on the whole, and 2007.
- Reiterated Buy on (SWKS), target $9.30.
- Reiterated Buy on (DKS), raised target to $54.
- Reiterated Buy on (URBN), target lowered to $23.
Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.08%.
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
- (ARRO)/.38
- (CPRT)/.29
- (SSI)/.18
- (VTS)/.42
Upcoming Splits
- (DRQ) 2-for-1
Economic Releases
8:15 am EST:
- The ADP employment change for September is estimated at 115K versus 107K.
10:00 am EST:
- The ISM Non-Manufacturing Index for September is estimated to fall to 56.0 versus a reading of 57.0 in August.
- Factory Orders for August are estimated to fall .2% versus a .6% decline in July.
10:30 am EST:
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 1,100,000 barrels versus a 109,000 barrel decline the prior week. Gasoline supplies are expected to rise by 1,200,000 barrels versus a 6,345,000 barrel build the prior week. Distillate inventories are estimated to rise by 1,500,000 barrels versus a 2,618,000 barrel increase the prior week. Finally, refinery utilization is estimated to fall .83% versus a .99% decline the prior week.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Dow Jones Industrial Average Hits All-time High, Surpassing January 14, 2000 Record on Plunging Oil Prices
Indices
S&P 500 1,334.11 +.21%
DJIA 11,727.34 +.49%
NASDAQ 2,243.65 +.27%
Russell 2000 718.35 -.06%
Wilshire 5000 13,282.11 +.11%
S&P Barra Growth 617.75 +.12%
S&P Barra Value 714.47 +.29%
Morgan Stanley Consumer 653.63 +.46%
Morgan Stanley Cyclical 818.49 -.26%
Morgan Stanley Technology 528.53 +.28%
Transports 4,469.96 +.82%
Utilities 431.29 +.17%
Put/Call 1.17 +4.46%
NYSE Arms 1.15 -13.77%
Volatility(VIX) 12.24 -2.63%
ISE Sentiment 124.0 +.81%
US Dollar 85.71 +.13%
CRB 295.13 -2.07%
Futures Spot Prices
Crude Oil 58.45 -4.23%
Unleaded Gasoline 145.75 -3.39%
Natural Gas 5.75 +2.06%
Heating Oil 165.10 -2.99%
Gold 579.70 -.31%
Base Metals 229.14 -1.72%
Copper 328.50 +.08%
10-year US Treasury Yield 4.61% +.25%
Leading Sectors
Airlines +3.07%
Retail +1.63%
I-Banks +1.15%
Lagging Sectors
Oil Tankers -3.90%
Oil Service -4.41%
Gold & Silver -6.63%
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
Bank of America:
- Upgraded (TM) to Buy.
Afternoon/Evening Headlines
Bloomberg:
- The Dow Jones Industrial Average eclipsed its 2000 high as a two-month plunge in oil prices accelerated, improving the outlook for consumer spending.
- Crude oil in NY dropped the most in almost 14 months as investment funds continued paring speculative bets on a rise in the commodity.
- Valero Energy(VLO), the largest US oil refiner, said it expects to report third-quarter profit of $2.25 to $2.35 a share, less than analysts expected.
- Billionaire investor Carl Icahn refused to support a $36-a-share bid for ImClone Systems(IMCL), the biotechnology company said in a filing today.
- Porsche AG said vehicle sales rose 3% in September on demand for the Boxster and 911 sports cars.
- Venezuela’s benchmark bond fell the most in almost a year after crude oil declined to a seven-month low, raising concern that the country’s oil-dependent economy may falter.
- Construction spending in NYC will rise to a record $20.8 billion this year and exceed $21 billion in each of the next two years, fueled by a surge in public spending, said the NY Building Congress.
- Toyota Motor’s(TM) US sales jumped 25% in September, led by smaller, more fuel-efficient cars, while General Motors(GM) posted a 3.1% sales decline and cut its fourth-quarter production forecast.
- Private-equity funds have gathered $300 billion this year, led by 13 buyout funds that account for about a third of the total, according to a report by Private Equity Intelligence.
Wall Street Journal:
- Intel(INTC) could face European Union antitrust charges as part of a five-year probe.
El Universal:
- Venezuela may be headed “down the road of Cuba” on free speech issues as a “kill-the-messenger” attitude gains strength in the law and among the populace, said Inter American Press Assoc. President Diana Daniels.
S&P 500 1,334.11 +.21%
DJIA 11,727.34 +.49%
NASDAQ 2,243.65 +.27%
Russell 2000 718.35 -.06%
Wilshire 5000 13,282.11 +.11%
S&P Barra Growth 617.75 +.12%
S&P Barra Value 714.47 +.29%
Morgan Stanley Consumer 653.63 +.46%
Morgan Stanley Cyclical 818.49 -.26%
Morgan Stanley Technology 528.53 +.28%
Transports 4,469.96 +.82%
Utilities 431.29 +.17%
Put/Call 1.17 +4.46%
NYSE Arms 1.15 -13.77%
Volatility(VIX) 12.24 -2.63%
ISE Sentiment 124.0 +.81%
US Dollar 85.71 +.13%
CRB 295.13 -2.07%
Futures Spot Prices
Crude Oil 58.45 -4.23%
Unleaded Gasoline 145.75 -3.39%
Natural Gas 5.75 +2.06%
Heating Oil 165.10 -2.99%
Gold 579.70 -.31%
Base Metals 229.14 -1.72%
Copper 328.50 +.08%
10-year US Treasury Yield 4.61% +.25%
Leading Sectors
Airlines +3.07%
Retail +1.63%
I-Banks +1.15%
Lagging Sectors
Oil Tankers -3.90%
Oil Service -4.41%
Gold & Silver -6.63%
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
Bank of America:
- Upgraded (TM) to Buy.
Afternoon/Evening Headlines
Bloomberg:
- The Dow Jones Industrial Average eclipsed its 2000 high as a two-month plunge in oil prices accelerated, improving the outlook for consumer spending.
- Crude oil in NY dropped the most in almost 14 months as investment funds continued paring speculative bets on a rise in the commodity.
- Valero Energy(VLO), the largest US oil refiner, said it expects to report third-quarter profit of $2.25 to $2.35 a share, less than analysts expected.
- Billionaire investor Carl Icahn refused to support a $36-a-share bid for ImClone Systems(IMCL), the biotechnology company said in a filing today.
- Porsche AG said vehicle sales rose 3% in September on demand for the Boxster and 911 sports cars.
- Venezuela’s benchmark bond fell the most in almost a year after crude oil declined to a seven-month low, raising concern that the country’s oil-dependent economy may falter.
- Construction spending in NYC will rise to a record $20.8 billion this year and exceed $21 billion in each of the next two years, fueled by a surge in public spending, said the NY Building Congress.
- Toyota Motor’s(TM) US sales jumped 25% in September, led by smaller, more fuel-efficient cars, while General Motors(GM) posted a 3.1% sales decline and cut its fourth-quarter production forecast.
- Private-equity funds have gathered $300 billion this year, led by 13 buyout funds that account for about a third of the total, according to a report by Private Equity Intelligence.
Wall Street Journal:
- Intel(INTC) could face European Union antitrust charges as part of a five-year probe.
El Universal:
- Venezuela may be headed “down the road of Cuba” on free speech issues as a “kill-the-messenger” attitude gains strength in the law and among the populace, said Inter American Press Assoc. President Diana Daniels.
BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Internet 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 neutral today as the advance/decline line finished slightly lower, sector performance was mostly positive and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was mildly bullish. I sense the serious declines in many commodities are resulting in another round of margin selling by investment funds in high beta stocks. I think the fact that the DJIA made a new all-time high is a huge deal due to the psychological ramifications. I think most Americans will be stunned when they see this headline. However, I'm sure that it won't be a headline most places or will be downplayed due to the current “negativity bubble.” I expect stocks to break convincingly higher on better breadth over the coming weeks.
Subscribe to:
Posts (Atom)