BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Telecom longs, Medical longs, Retail longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is about even, sector performance is mixed and volume is above average. The latest data from the NYSE shows short interest fell only .7% from mid-October through mid-November, after reaching an all-time high the prior month, despite recent gains and bears' suggestions that they are a dying breed. To put that into perspective, NYSE short interest has risen 6.2% from June and 21% from January of this year. Moreover, since the stock market bubble burst in early 2000 and the negativity bubble began to fill with air, NYSE short interest has rocketed 148.2%. I suspect many shorts will be quick to cover on any signs of market stabilization. More record highs for the DJIA are likely before year-end. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower long-term rates and bargain-hunting.
Tuesday, November 28, 2006
Stocks Slightly Higher into Final Hour on Positive Bernanke Comments
Today's Headlines
Bloomberg:
- Fed Reserve Chairman Bernanke said the US economy will expand toward its full capacity in the coming year and that inflation should continue to slow.
- Currency options traders are the most bullish on the euro in three years, which could signal the currencies strength is near a peak.
- NYSE Group(NYX) and the NASD agreed to form a single regulator for the securities industry, ending a turf war in order to cut compliance costs for Wall Street firms and better police ever-more complex financial markets.
- Citadel Investment Group LLC plans to sell as much as $2 billion in notes in what may be the first-ever bond sale by a hedge fund, Fitch Ratings said.
- Vornado Realty Trust(VNO), the second-largest US real estate investment trust, agreed to buy the Manhattan Mall on Sixth Ave. for about $689 million, expanding in a neighborhood where it owns eight properties.
- Crude oil is rising to a two-week high on forecasts that most of the US will be colder than normal next week.
Wall Street Journal:
- Nokia Oyj(NOK) is under pressure to introduce slimmer handsets to match those of rivals Motorola(MOT) and Samsung Electronics.
- Morgan Stanley(MS), Merrill Lynch(MER), Bear Stearns(BSC) and other investment banks are buying US subprime-mortgage lenders as that industry is troubled with defaulted payments.
- Intel Corp.(INTC) will invest more than $1 billion in venture capital projects for the first time since 2000.
- Microsoft’s(MSFT) 30-gigabyte Zune digital player failed to make Amazon.com’s Top 10 selling list for electronics yesterday.
- Telephone-equipment makers that have for years dominated the Chinese market may be in for a disappointment. China is likely to begin supporting its own equipment makers, Huawei technologies and ZTE Corp., by starting its 3G networks with its own technology standard, called TD-SCDMA.
Market News Intl.:
- Fed Reserve Bank of St. Louis President William Poole said US inflation is still too high yet may decline further if expectations keep falling.
NY Times:
- The US Agriculture Dept. is trying to decide how to label fish as organic.
- Boeing Co.(BA) is trying to avoid mistakes it made almost a decade ago by not over-producing planes and keeping demand high.
- Members of the Mahdi Army, an Iraqi Shiite militia, are being trained by the Iranian-backed group Hezbollah.
- Latinos are moving in and blacks are leaving the once predominately black neighborhoods of Los Angeles.
AP:
- Alaska plans to take away ExxonMobil Corp.’s(XOM) leases at the Point Thomson oil and gas field in the North Slope after the company failed to develop the site, citing Governor Frank Murkowski.
Handelsblatt:
- Federal Reserve Bank of Dallas President Richard Fisher said he’s “content” with the level of interest rates in the US, adding that the key lending rate of 5.25% is “just about right.”
Sueddeutsche Zeitung:
- German families’ net average income has declined 2% since 1991 dented by accords between unions and employers, as well as rising costs for pensions, health and unemployment insurance.
- Fed Reserve Chairman Bernanke said the US economy will expand toward its full capacity in the coming year and that inflation should continue to slow.
- Currency options traders are the most bullish on the euro in three years, which could signal the currencies strength is near a peak.
- NYSE Group(NYX) and the NASD agreed to form a single regulator for the securities industry, ending a turf war in order to cut compliance costs for Wall Street firms and better police ever-more complex financial markets.
- Citadel Investment Group LLC plans to sell as much as $2 billion in notes in what may be the first-ever bond sale by a hedge fund, Fitch Ratings said.
- Vornado Realty Trust(VNO), the second-largest US real estate investment trust, agreed to buy the Manhattan Mall on Sixth Ave. for about $689 million, expanding in a neighborhood where it owns eight properties.
- Crude oil is rising to a two-week high on forecasts that most of the US will be colder than normal next week.
Wall Street Journal:
- Nokia Oyj(NOK) is under pressure to introduce slimmer handsets to match those of rivals Motorola(MOT) and Samsung Electronics.
- Morgan Stanley(MS), Merrill Lynch(MER), Bear Stearns(BSC) and other investment banks are buying US subprime-mortgage lenders as that industry is troubled with defaulted payments.
- Intel Corp.(INTC) will invest more than $1 billion in venture capital projects for the first time since 2000.
- Microsoft’s(MSFT) 30-gigabyte Zune digital player failed to make Amazon.com’s Top 10 selling list for electronics yesterday.
- Telephone-equipment makers that have for years dominated the Chinese market may be in for a disappointment. China is likely to begin supporting its own equipment makers, Huawei technologies and ZTE Corp., by starting its 3G networks with its own technology standard, called TD-SCDMA.
Market News Intl.:
- Fed Reserve Bank of St. Louis President William Poole said US inflation is still too high yet may decline further if expectations keep falling.
NY Times:
- The US Agriculture Dept. is trying to decide how to label fish as organic.
- Boeing Co.(BA) is trying to avoid mistakes it made almost a decade ago by not over-producing planes and keeping demand high.
- Members of the Mahdi Army, an Iraqi Shiite militia, are being trained by the Iranian-backed group Hezbollah.
- Latinos are moving in and blacks are leaving the once predominately black neighborhoods of Los Angeles.
AP:
- Alaska plans to take away ExxonMobil Corp.’s(XOM) leases at the Point Thomson oil and gas field in the North Slope after the company failed to develop the site, citing Governor Frank Murkowski.
Handelsblatt:
- Federal Reserve Bank of Dallas President Richard Fisher said he’s “content” with the level of interest rates in the US, adding that the key lending rate of 5.25% is “just about right.”
Sueddeutsche Zeitung:
- German families’ net average income has declined 2% since 1991 dented by accords between unions and employers, as well as rising costs for pensions, health and unemployment insurance.
Durable Goods Orders Fall, Consumer Confidence Declines, Existing Home Sales Rise
- Durable Goods Orders for October fell 8.3% versus estimates of a 5.0% decline and an upwardly revised 8.7% increase in September.
- Durables Ex Transports for October fell 1.7% versus estimates of a .2% increase and an upwardly revised .5% gain in September.
- Consumer Confidence for November fell to 102.9 versus estimates of 106.0 and 105.1 in October.
- Existing Home Sales for October rose to 6.24M versus estimates of 6.14M and 6.21M in September.
- Durables Ex Transports for October fell 1.7% versus estimates of a .2% increase and an upwardly revised .5% gain in September.
- Consumer Confidence for November fell to 102.9 versus estimates of 106.0 and 105.1 in October.
- Existing Home Sales for October rose to 6.24M versus estimates of 6.14M and 6.21M in September.
BOTTOM LINE: Orders for durable goods fell last month after a surge the prior month, Bloomberg reported. Bookings for non-defense capital goods excluding aircraft, a gauge of future corporate spending, fell 5.1%. However, a survey released earlier in the month from Blue Chip Economic Indicators said business spending will rise 7.8% this year, up from 6.8% last year. Orders for commercial aircraft declined 45% after soaring 198% the prior month. I expect durable goods to bounce back sharply next month.
Confidence among US consumers unexpectedly fell this month, Bloomberg reported. The present situation component of the index declined to 123.6 versus 125.1 in October. The expectations component fell to 89.2 versus a reading of 91.9 in October. The percentage that said jobs are plentiful rose to 25.8% from 25.6% the prior month. I continue to expect consumer sentiment to make new cycle highs over the intermediate-term as housing stabilizes at relatively high levels, energy prices fall further, inflation decelerates, the job market remains healthy and the stock market rises further.
US previously owned home sales unexpectedly rose in October as lower prices and borrowing costs brought more buyers into the market. The median selling price fell 3.5% from a year earlier to $221,000. The number of homes for sale at the existing pace rose to 7.4 months’ worth from 7.3 months in September. Purchases rose 6.4% in the West and were unch. in the Mid-west. They fell 2.9% in the Northeast and 1.2% in the South. I continue to expect the housing market to stabilize at a relatively high level. I expect US economic growth to bounce back to more average levels over the intermediate-term as auto production cutbacks subside and housing subtracts less.
Monday, November 27, 2006
Tuesday Watch
Late-Night Headlines
Bloomberg:
- Berkshire Hathaway Inc.(BRK/A), the insurance and investment firm run by billionaire Warren Buffett, will disclose more in financial reports in response to a government request, according to regulatory filings.
- A unit of hedge-fund manager Man Group Plc shut down because of losses from US hedge fund Amaranth Advisors LLC’s collapse. Man Alternative Investments Ltd., which owns about 13% of Amaranth’s shares, lost about 20% of this year’s gains because of Amaranth’s collapse in September.
- The SEC will propose raising asset requirements for investing in hedge funds at a Dec. 4 public meeting. The agency will also consider new anti-fraud rules that would prohibit hedge fund managers from making false or misleading statements to individuals who invest in funds.
- Billionaire investor Carl Icahn and Harry Macklowe disclosed that they own an 8% stake in Reckson Associates Realty Corp.(RA), the real estate investment trust they are seeking to buy for $4.26 billion.
- Iran will stand by its neighbor Iraq to help the country boost security and achieve peace, President Mahmoud Ahmadinejad said during a visit to Tehran by his Iraqi counterpart Jalal Talabani.
- Nintendo sold more than 600,000 Wii video-game consoles in the Americas during the product’s first eight days on the market as the company battled to take sales from Sony Corp.’s(SNE) PlayStation 3.
- Japan’s retail sales unexpectedly fell for a second month, undermining the central bank’s case that the economy is strong enough to withstand another interest rate increase.
Financial Times:
- French President Jacques Chirac wants Iran to contribute to the group of countries and multinational institutions co-coordinating NATO’s peace-keeping mission in Afghanistan.
Reuters:
- IAC/InterActiveCorp(IACI) will merge its Ask.com, CitySearch and functions from other sites to provide local search services.
Yonhap News:
- North Korea’s nuclear negotiator Kim Kye Gwan said his country is ready to rejoin six-nation talks on its nuclear weapons “at any time.”
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (HLT), target $39.
- Downgraded (NYT) to Sell, target $17.
- Boosted estimates for (GS) and (MS).
Night Trading
Asian Indices are -1.25% to -.50% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated -.01%.
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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (AMWD)/.58
- (CHS)/.23
- (DG)/.15
- (DBRN)/.36
- (JTX)/-.38
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Durable Goods Orders for October are estimated to fall 5.0% versus a 8.3% rise in September.
- Durables Ex Transportation for October are estimated to rise .2% versus a .5% gain in September.
10:00 am EST
- Consumer Confidence for November is estimated to rise to 106.0 versus a reading of 105.4 in October.
- Existing Home Sales for October are estimated to fall to 6.14M versus 6.18M in September.
Bloomberg:
- Berkshire Hathaway Inc.(BRK/A), the insurance and investment firm run by billionaire Warren Buffett, will disclose more in financial reports in response to a government request, according to regulatory filings.
- A unit of hedge-fund manager Man Group Plc shut down because of losses from US hedge fund Amaranth Advisors LLC’s collapse. Man Alternative Investments Ltd., which owns about 13% of Amaranth’s shares, lost about 20% of this year’s gains because of Amaranth’s collapse in September.
- The SEC will propose raising asset requirements for investing in hedge funds at a Dec. 4 public meeting. The agency will also consider new anti-fraud rules that would prohibit hedge fund managers from making false or misleading statements to individuals who invest in funds.
- Billionaire investor Carl Icahn and Harry Macklowe disclosed that they own an 8% stake in Reckson Associates Realty Corp.(RA), the real estate investment trust they are seeking to buy for $4.26 billion.
- Iran will stand by its neighbor Iraq to help the country boost security and achieve peace, President Mahmoud Ahmadinejad said during a visit to Tehran by his Iraqi counterpart Jalal Talabani.
- Nintendo sold more than 600,000 Wii video-game consoles in the Americas during the product’s first eight days on the market as the company battled to take sales from Sony Corp.’s(SNE) PlayStation 3.
- Japan’s retail sales unexpectedly fell for a second month, undermining the central bank’s case that the economy is strong enough to withstand another interest rate increase.
Financial Times:
- French President Jacques Chirac wants Iran to contribute to the group of countries and multinational institutions co-coordinating NATO’s peace-keeping mission in Afghanistan.
Reuters:
- IAC/InterActiveCorp(IACI) will merge its Ask.com, CitySearch and functions from other sites to provide local search services.
Yonhap News:
- North Korea’s nuclear negotiator Kim Kye Gwan said his country is ready to rejoin six-nation talks on its nuclear weapons “at any time.”
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (HLT), target $39.
- Downgraded (NYT) to Sell, target $17.
- Boosted estimates for (GS) and (MS).
Night Trading
Asian Indices are -1.25% to -.50% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated -.01%.
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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (AMWD)/.58
- (CHS)/.23
- (DG)/.15
- (DBRN)/.36
- (JTX)/-.38
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Durable Goods Orders for October are estimated to fall 5.0% versus a 8.3% rise in September.
- Durables Ex Transportation for October are estimated to rise .2% versus a .5% gain in September.
10:00 am EST
- Consumer Confidence for November is estimated to rise to 106.0 versus a reading of 105.4 in October.
- Existing Home Sales for October are estimated to fall to 6.14M versus 6.18M in September.
BOTTOM LINE: Asian indices are lower, weighed down by automaker and technology shares in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
Stocks Finish Near Session Lows on Profit-taking and Higher Energy Prices
Indices
S&P 500 1,381.91 -1.36%
DJIA 12,121.71 -1.29%
NASDAQ 2,405.92 -2.21%
Russell 2000 772.10 -2.55%
Wilshire 5000 13,868.82 -1.51%
S&P Barra Growth 641.92 -1.38%
S&P Barra Value 737.77 -1.34%
Morgan Stanley Consumer 667.23 -1.26%
Morgan Stanley Cyclical 874.79 -1.82%
Morgan Stanley Technology 567.50 -2.74%
Transports 4,789.15 -1.16%
Utilities 446.84 -.83%
Put/Call 1.28 +26.73%
NYSE Arms 1.73 +13.83%
Volatility(VIX) 12.30 +14.63%
ISE Sentiment 119.0 +12.26%
US Dollar 83.51 -.18%
CRB 313.01 +1.31%
Futures Spot Prices
Crude Oil 60.36 +1.89%
Unleaded Gasoline 159.0 +.08%
Natural Gas 7.99 +3.63%
Heating Oil 170.55 +2.34%
Gold 647.40 +.05%
Base Metals 243.27 +.10%
Copper 321.0 -.17%
10-year US Treasury Yield 4.53% -.43%
Leading Sectors
Gold & Silver +.57%
Energy -.40%
Drugs -.51%
Lagging Sectors
I-Banks -3.57%
Disk Drives -4.04%
Airlines -4.62%
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 (DE) Outperform.
Afternoon/Evening Headlines
Bloomberg:
- Cholesterol-lowering drugs such as Pfizer’s(PFE) Lipitor, taken by millions of Americans in danger of heart attacks and strokes, also slash the risk of those afflictions among the healthy.
- Palm Inc.(PALM) cut its second-quarter forecast, saying it is taking longer than anticipated to make its latest Treo device compatible with US wireless networks. The shares fell 7.3% after-hours.
- The US Supreme Court refused to block federal prosecutors from reviewing the phone records of two NY Times(NYT) reporters who allegedly tipped off the targets of a terrorist fundraising probe.
- NYSE short interest fell .7% to 9.65 billion shares as of mid-November, just off all-time highs set in October.
- US crude-oil inventories probably rose as higher imports helped meet demand from refineries returning to service after being shut for maintenance, a Bloomberg survey showed.
- ConocoPhillips(COP) and Anadarko Petroleum announced the start up of a second Alpine satellite oil field on Alaska’s North Slope.
Gainesville Sun:
- The presidents of the University of Florida and Florida State are working together on a college football playoff system to replace the Bowl Championship Series.
S&P 500 1,381.91 -1.36%
DJIA 12,121.71 -1.29%
NASDAQ 2,405.92 -2.21%
Russell 2000 772.10 -2.55%
Wilshire 5000 13,868.82 -1.51%
S&P Barra Growth 641.92 -1.38%
S&P Barra Value 737.77 -1.34%
Morgan Stanley Consumer 667.23 -1.26%
Morgan Stanley Cyclical 874.79 -1.82%
Morgan Stanley Technology 567.50 -2.74%
Transports 4,789.15 -1.16%
Utilities 446.84 -.83%
Put/Call 1.28 +26.73%
NYSE Arms 1.73 +13.83%
Volatility(VIX) 12.30 +14.63%
ISE Sentiment 119.0 +12.26%
US Dollar 83.51 -.18%
CRB 313.01 +1.31%
Futures Spot Prices
Crude Oil 60.36 +1.89%
Unleaded Gasoline 159.0 +.08%
Natural Gas 7.99 +3.63%
Heating Oil 170.55 +2.34%
Gold 647.40 +.05%
Base Metals 243.27 +.10%
Copper 321.0 -.17%
10-year US Treasury Yield 4.53% -.43%
Leading Sectors
Gold & Silver +.57%
Energy -.40%
Drugs -.51%
Lagging Sectors
I-Banks -3.57%
Disk Drives -4.04%
Airlines -4.62%
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 (DE) Outperform.
Afternoon/Evening Headlines
Bloomberg:
- Cholesterol-lowering drugs such as Pfizer’s(PFE) Lipitor, taken by millions of Americans in danger of heart attacks and strokes, also slash the risk of those afflictions among the healthy.
- Palm Inc.(PALM) cut its second-quarter forecast, saying it is taking longer than anticipated to make its latest Treo device compatible with US wireless networks. The shares fell 7.3% after-hours.
- The US Supreme Court refused to block federal prosecutors from reviewing the phone records of two NY Times(NYT) reporters who allegedly tipped off the targets of a terrorist fundraising probe.
- NYSE short interest fell .7% to 9.65 billion shares as of mid-November, just off all-time highs set in October.
- US crude-oil inventories probably rose as higher imports helped meet demand from refineries returning to service after being shut for maintenance, a Bloomberg survey showed.
- ConocoPhillips(COP) and Anadarko Petroleum announced the start up of a second Alpine satellite oil field on Alaska’s North Slope.
Gainesville Sun:
- The presidents of the University of Florida and Florida State are working together on a college football playoff system to replace the Bowl Championship Series.
BOTTOM LINE: The Portfolio finished lower today on losses in my Semi longs, Internet longs and Computer longs. I added (EEM), (IWM) and (QQQQ) hedges in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was very negative today as the advance/decline line finished substantially lower, almost every sector fell and volume was about average. Measures of investor anxiety were higher into the close. Today's overall market action was bearish. The market's inability to bounce in any meaningful way, as I had expected, is not a good sign. However, volume was only average. Investor anxiety was elevated throughout the day. The last time the NYSE Arms closed this high was in July. Sellers seemed to lack conviction today even as buyers stepped away. I suspect losses in overseas markets tonight could lead to some more weakness tomorrow morning here. Overall, I view today’s sell-off as a healthy pullback after extraordinary gains.
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