BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Biotech longs and Telecom longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. The Fed just released its Beige Book. It said consumer spending is increasing and that there is continued moderate growth in the economy. Most areas were cautiously optimistic on holiday sales. Housing and autos were weak areas of the report, however, manufacturing was positive and services were solid. It said that labor markets are tight, but wage growth is only moderate. Finally, most areas reported easing energy and construction costs. Overall, this report should be perceived as bullish for equities as it paints a picture of modest growth and inflation. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and bargain-hunting.
Wednesday, November 29, 2006
Stocks at Session Highs into Final Hour on Positive Beige Book Comments and Short-Covering
Today's Headlines
Bloomberg:
- General Motors(GM) will introduce new hybrid gasoline-electric autos next year in an attempt to win sales from Toyota Motor(TM), the world leader in the fuel-saving technology.
- Tiffany & Co.(TIF) reported a 23% rise in earnings on increased sales of $20,000 rings and necklaces and boosted its profit forecast for the year because of holiday demand.
- Crude oil is rising to the highest in two months as speculators increased bets after a government reported showed distillate supplies unexpectedly fell.
- The US dollar is rising the most in three weeks against the euro after a government report showed US economic growth last quarter was quicker than previously estimated.
- NATO leaders agreed that future missions require a “fair sharing of the burden” in terms of military contributions as alliance members said allies need to do more to fight the Taliban in Afghanistan.
- Copper is falling to a one-week low on signs that demand continues to wane from US homebuilders as inventories rise.
- Oil prices “are very comfortable” and it’s too soon to tell whether OPEC will cut output at its next meeting, Kuwaiti Oil Minister Sheikh Ali-Jarrah al-Sabah said.
Wall Street Journal:
- Intel(INTC), Wal-Mart(WMT), BP Plc(BP) and other companies plan to disclose next week a plan to provide digital health records for their employees.
- Home Depot(HD) is betting that a new line of products called Orange Works can help revive sales.
- Citigroup(C) is linking its Smith Barney and Citibank units more closely, so that it can act as both banker and broker for more customers.
- Hewlett-Packard(HPQ) is starting a business to cool computers using technology that the company says can cut energy expenses by 25% to 45%.
- Two US hedge funds that pushed out the CEO of Pep Boys – Manny, Moe & Jack(PBY), a car parts retailer, after building up stakes have continued to buy shares.
- Volkswagen AG and DaimlerChrysler AG are unveiling diesel engines at the LA Auto Show that are clean enough to meet California emission standards.
- Honda Motor’s cars topped the list of vehicle brands with the best resale value.
NY Times:
- Riverdeep Group Plc is close to buying textbook publisher Houghton Mifflin Holdings for about $3.5 billion including debt.
Detroit News:
- Ford Motor(F) persuaded more than 35,000 hourly workers in the US to take buyout or early retirement offers that will have them leave the company by September 2008.
AP:
- Data indicate that oil companies “slacked off” supplying oil and gasoline during the seven-year rally that saw prices reach a record in July. In 2003, for example, Royal Dutch Shell Plc proposed closing a profitable oil refinery at Bakersfield, California.
Financial Times:
- Microsoft Corp.(MSFT) shares could keep rising because its Windows Vista software may do better than some analysts expect.
Engineering News:
- De Beers Fuels Ltd. won South Africa’s first commercial license to produce bio-diesel.
- General Motors(GM) will introduce new hybrid gasoline-electric autos next year in an attempt to win sales from Toyota Motor(TM), the world leader in the fuel-saving technology.
- Tiffany & Co.(TIF) reported a 23% rise in earnings on increased sales of $20,000 rings and necklaces and boosted its profit forecast for the year because of holiday demand.
- Crude oil is rising to the highest in two months as speculators increased bets after a government reported showed distillate supplies unexpectedly fell.
- The US dollar is rising the most in three weeks against the euro after a government report showed US economic growth last quarter was quicker than previously estimated.
- NATO leaders agreed that future missions require a “fair sharing of the burden” in terms of military contributions as alliance members said allies need to do more to fight the Taliban in Afghanistan.
- Copper is falling to a one-week low on signs that demand continues to wane from US homebuilders as inventories rise.
- Oil prices “are very comfortable” and it’s too soon to tell whether OPEC will cut output at its next meeting, Kuwaiti Oil Minister Sheikh Ali-Jarrah al-Sabah said.
Wall Street Journal:
- Intel(INTC), Wal-Mart(WMT), BP Plc(BP) and other companies plan to disclose next week a plan to provide digital health records for their employees.
- Home Depot(HD) is betting that a new line of products called Orange Works can help revive sales.
- Citigroup(C) is linking its Smith Barney and Citibank units more closely, so that it can act as both banker and broker for more customers.
- Hewlett-Packard(HPQ) is starting a business to cool computers using technology that the company says can cut energy expenses by 25% to 45%.
- Two US hedge funds that pushed out the CEO of Pep Boys – Manny, Moe & Jack(PBY), a car parts retailer, after building up stakes have continued to buy shares.
- Volkswagen AG and DaimlerChrysler AG are unveiling diesel engines at the LA Auto Show that are clean enough to meet California emission standards.
- Honda Motor’s cars topped the list of vehicle brands with the best resale value.
NY Times:
- Riverdeep Group Plc is close to buying textbook publisher Houghton Mifflin Holdings for about $3.5 billion including debt.
Detroit News:
- Ford Motor(F) persuaded more than 35,000 hourly workers in the US to take buyout or early retirement offers that will have them leave the company by September 2008.
AP:
- Data indicate that oil companies “slacked off” supplying oil and gasoline during the seven-year rally that saw prices reach a record in July. In 2003, for example, Royal Dutch Shell Plc proposed closing a profitable oil refinery at Bakersfield, California.
Financial Times:
- Microsoft Corp.(MSFT) shares could keep rising because its Windows Vista software may do better than some analysts expect.
Engineering News:
- De Beers Fuels Ltd. won South Africa’s first commercial license to produce bio-diesel.
3Q GDP Revised Higher, Inflation Reading Revised Lower, New Home Sales Decline, New Home Prices Rise
- Preliminary 3Q GDP rose 2.2% versus estimates of a 1.8% gain and prior estimates of a 1.6% increase.
- Preliminary 3Q GDP Price Index rose 1.8% versus estimates of a 1.8% gain and prior estimates of a 1.8% increase.
- Preliminary 3Q Personal Consumption rose 2.9% versus estimates of a 2.8% increase and prior estimates of a 3.1% gain.
- Preliminary 3Q Core PCE rose 2.2% versus estimates of a 2.3% gain and prior estimates of a 2.3% increase.
- New Home Sales for October fell to 1004K versus estimates of 1049K and a downwardly revised 1037K in September.
- Preliminary 3Q GDP Price Index rose 1.8% versus estimates of a 1.8% gain and prior estimates of a 1.8% increase.
- Preliminary 3Q Personal Consumption rose 2.9% versus estimates of a 2.8% increase and prior estimates of a 3.1% gain.
- Preliminary 3Q Core PCE rose 2.2% versus estimates of a 2.3% gain and prior estimates of a 2.3% increase.
- New Home Sales for October fell to 1004K versus estimates of 1049K and a downwardly revised 1037K in September.
BOTTOM LINE: The economy expanded at a revised 2.2% annual rate from July through September, faster than forecast, Bloomberg said. The core PCE Index, the Fed’s favorite inflation gauge, rose 2.2% versus a 2.7% increase in the second quarter. Consumer spending, which provides about 70% of US economic growth, rose 2.9% versus a 2.6% increase in the second quarter. Residential construction fell 18% during 3Q. Business fixed investment, which includes commercial building and spending on equipment and software, rose at a 10% pace during 3Q. 3Q Nominal GDP rose 4.0%. I continue to believe 4Q GDP growth will exceed estimates of 2.5% as the deflator subtracts less than most expect.
Sales of new homes in the US fell more than forecast in October, Bloomberg reported. The supply of unsold homes at the current sales pace rose to 7 months’ worth. The median price of a new home rose 1.9% to $248,500 from 243,900 a year earlier. Sales fell 39% in the Northeast, 5.6% in the Mid-west and 1.7% in the South. They rose 3.2% in the West. I continue to expect housing to stabilize at relatively high levels over the coming months, which combined with subsiding auto production cutbacks, should help US economic growth accelerate back to around average levels over the intermediate-term.
Tuesday, November 28, 2006
Wednesday Watch
Late-Night Headlines
Bloomberg:
- Mack-Cali Realty(CLI) is joining billionaire investor Carl Icahn and real estate developer Harry Macklowe in their $4.6 billion bid for rival Reckson Associates Realty(RA).
- China, the biggest maker of copper and aluminum, may produce 2.95 million metric tons of copper this year, the National Development and Reform Commission said.
- Fuel oil prices in Asia fell to a 10-day low in relation to benchmark Dubai crude on concern supplies may exceed demand in December as imports increase and purchases from China slow.
- Iran’s 10-day war games this month were aimed at intimidating US allies in the region and dissuading them from cooperating.
- The US Treasury Department discriminates against blind people by issuing same-size paper currency whose value is indistinguishable to those unable to see, a federal judge ruled.
- Walt Disney(DIS) will boost its annual dividend by 15% to .31 cents/share, the biggest jump in eight years.
- Sony Corp.(SNE) said it is “possible” that it will exceed its target to ship 6 million liquid crystal display televisions this fiscal year ending March 2007.
- China’s yuan rose to the highest since the government ended a decade-old link to the dollar after US Treasury Henry Paulson said a stronger currency will help resolve the “tension” in trade ties between the two nations.
Wall Street Journal:
- Nokia Oyj(NOK) plans to sell Internet-related services in an effort to maintain growth, citing CEO Kallasvuo.
- Venture capitalists, betting on new battery technologies, are funding companies developing energy-storage products.
- Citigroup(C) and Charles Schwab(SCHW) are among financial services companies that help administer charitable foundations for wealthy families looking to teach philanthropy to their children.
Fortune:
- Apple Computer(AAPL) is close to a deal to sell the Beatles’ catalog on its iTunes online music store.
AP:
- A federal judge ruled President Bush’s authority to block assets of suspected terrorist groups is unconstitutional. US District Judge Audrey Collins, who said in July she would uphold Bush’s executive order, ruled the US government can’t block the assets of the Liberation Tigers and Partiya Karkeran Kurdistan.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.15%.
NASDAQ 100 indicated +.21%.
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
- (ARO)/.61
- (BEAS)/.13
- (DSW)/.27
- (JLG)/.33
- (PRGS)/.36
- (SNPS)/.19
- (TIF)/.16
- (TIVO)/-.14
- (VRNT)/.29
Upcoming Splits
- (EAT) 3-for-2
- (NT) 1-for-10
Economic Releases
8:30 am EST
- Preliminary 3Q GDP is estimated to rise 1.8% versus prior estimates of a 1.6% increase.
- Preliminary 3Q GDP Price Index is estimated to rise 1.8% versus prior estimates of a 1.8% increase.
- Preliminary 3Q Personal Consumption is estimated to rise 2.8% versus a 3.1% prior estimate.
- Preliminary 3Q Core PCE is estimated to rise 2.3% versus prior estimates of a 2.3% increase.
10:00 am EST
- New Home Sales for October are estimated to fall to 1049K versus 1075K in September.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 350,000 barrels versus a 5,161,000 build the prior week. Gasoline supplies are expected to rise by 450,000 barrels versus a 1,406,000 barrel build the prior week. Distillate supplies are expected to rise by 500,000 barrels versus a 1,198,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise .63% versus a .22% decline the prior week.
2:00 pm EST
- Fed’s Beige Book
Bloomberg:
- Mack-Cali Realty(CLI) is joining billionaire investor Carl Icahn and real estate developer Harry Macklowe in their $4.6 billion bid for rival Reckson Associates Realty(RA).
- China, the biggest maker of copper and aluminum, may produce 2.95 million metric tons of copper this year, the National Development and Reform Commission said.
- Fuel oil prices in Asia fell to a 10-day low in relation to benchmark Dubai crude on concern supplies may exceed demand in December as imports increase and purchases from China slow.
- Iran’s 10-day war games this month were aimed at intimidating US allies in the region and dissuading them from cooperating.
- The US Treasury Department discriminates against blind people by issuing same-size paper currency whose value is indistinguishable to those unable to see, a federal judge ruled.
- Walt Disney(DIS) will boost its annual dividend by 15% to .31 cents/share, the biggest jump in eight years.
- Sony Corp.(SNE) said it is “possible” that it will exceed its target to ship 6 million liquid crystal display televisions this fiscal year ending March 2007.
- China’s yuan rose to the highest since the government ended a decade-old link to the dollar after US Treasury Henry Paulson said a stronger currency will help resolve the “tension” in trade ties between the two nations.
Wall Street Journal:
- Nokia Oyj(NOK) plans to sell Internet-related services in an effort to maintain growth, citing CEO Kallasvuo.
- Venture capitalists, betting on new battery technologies, are funding companies developing energy-storage products.
- Citigroup(C) and Charles Schwab(SCHW) are among financial services companies that help administer charitable foundations for wealthy families looking to teach philanthropy to their children.
Fortune:
- Apple Computer(AAPL) is close to a deal to sell the Beatles’ catalog on its iTunes online music store.
AP:
- A federal judge ruled President Bush’s authority to block assets of suspected terrorist groups is unconstitutional. US District Judge Audrey Collins, who said in July she would uphold Bush’s executive order, ruled the US government can’t block the assets of the Liberation Tigers and Partiya Karkeran Kurdistan.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.15%.
NASDAQ 100 indicated +.21%.
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
- (ARO)/.61
- (BEAS)/.13
- (DSW)/.27
- (JLG)/.33
- (PRGS)/.36
- (SNPS)/.19
- (TIF)/.16
- (TIVO)/-.14
- (VRNT)/.29
Upcoming Splits
- (EAT) 3-for-2
- (NT) 1-for-10
Economic Releases
8:30 am EST
- Preliminary 3Q GDP is estimated to rise 1.8% versus prior estimates of a 1.6% increase.
- Preliminary 3Q GDP Price Index is estimated to rise 1.8% versus prior estimates of a 1.8% increase.
- Preliminary 3Q Personal Consumption is estimated to rise 2.8% versus a 3.1% prior estimate.
- Preliminary 3Q Core PCE is estimated to rise 2.3% versus prior estimates of a 2.3% increase.
10:00 am EST
- New Home Sales for October are estimated to fall to 1049K versus 1075K in September.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of 350,000 barrels versus a 5,161,000 build the prior week. Gasoline supplies are expected to rise by 450,000 barrels versus a 1,406,000 barrel build the prior week. Distillate supplies are expected to rise by 500,000 barrels versus a 1,198,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise .63% versus a .22% decline the prior week.
2:00 pm EST
- Fed’s Beige Book
BOTTOM LINE: Asian indices are higher, boosted by automaker and technology shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Near Session Highs on Surge After Positive Bernanke Comments
Indices
S&P 500 1,386.72 +.35%
DJIA 12,136.45 +.12%
NASDAQ 2,412.61 +.28%
Russell 2000 774.82 +.35%
Wilshire 5000 13,913.86 +.32%
S&P Barra Growth 644.89 +.46%
S&P Barra Value 739.51 +.24%
Morgan Stanley Consumer 670.41 +.48%
Morgan Stanley Cyclical 872.26 -.29%
Morgan Stanley Technology 570.61 +.55%
Transports 4,753.62 -.74%
Utilities 449.33 +.56%
Put/Call .93 -27.34%
NYSE Arms 1.06 -39.66%
Volatility(VIX) 11.62 -5.53%
ISE Sentiment 135.0 +13.45%
US Dollar 83.12 -.46%
CRB 314.97 +.63%
Futures Spot Prices
Crude Oil 60.90 +.96%
Unleaded Gasoline 161.40 +1.27%
Natural Gas 8.31 +4.0%
Heating Oil 172.75 +1.31%
Gold 645.80 +.33%
Base Metals 241.22 -.84%
Copper 317.0 unch.
10-year US Treasury Yield 4.50% -.61%
Leading Sectors
Energy +1.84%
Internet +1.23%
HMOs +1.12%
Lagging Sectors
Steel -.48%
Wireless -.50%
Oil Tankers -3.65%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- Shares of Apple Computer(AAPL) rose to a record after analysts said faster Macintosh computers and low-priced iPod players will spur holiday sales, and that a new music phone may buoy revenue next year.
- Shares of Louisiana-Pacific Corp.(LPX), a US producer of wood panels and boards, soared the most in seven months on speculation the company may be a takeover target.
- Bank of America(BAC), whose shares have climbed 18% this year, surpassed Citigroup(C) for the first time to become the biggest US bank by market value.
- Wheeling-Pittsburgh(WPSC), a US steel producer, said its financial results for the fourth quarter will miss forecasts because of prices and shipments were less than expected.
- Copper prices declined in NY as US inventories climbed. Supplies have risen 400% from this year’s low of 6,756 tons on July 28.
CNBC:
- Dollar General Corp.(DG) may be a target of leveraged-buyout firms Bain Capital LLC and Cerberus Capital Management.
Reuters:
- Time Warner Inc.(TWX) plans to offer a service next year to allow consumers to download films online and copy them onto DVDs, citing CEO Parsons.
S&P 500 1,386.72 +.35%
DJIA 12,136.45 +.12%
NASDAQ 2,412.61 +.28%
Russell 2000 774.82 +.35%
Wilshire 5000 13,913.86 +.32%
S&P Barra Growth 644.89 +.46%
S&P Barra Value 739.51 +.24%
Morgan Stanley Consumer 670.41 +.48%
Morgan Stanley Cyclical 872.26 -.29%
Morgan Stanley Technology 570.61 +.55%
Transports 4,753.62 -.74%
Utilities 449.33 +.56%
Put/Call .93 -27.34%
NYSE Arms 1.06 -39.66%
Volatility(VIX) 11.62 -5.53%
ISE Sentiment 135.0 +13.45%
US Dollar 83.12 -.46%
CRB 314.97 +.63%
Futures Spot Prices
Crude Oil 60.90 +.96%
Unleaded Gasoline 161.40 +1.27%
Natural Gas 8.31 +4.0%
Heating Oil 172.75 +1.31%
Gold 645.80 +.33%
Base Metals 241.22 -.84%
Copper 317.0 unch.
10-year US Treasury Yield 4.50% -.61%
Leading Sectors
Energy +1.84%
Internet +1.23%
HMOs +1.12%
Lagging Sectors
Steel -.48%
Wireless -.50%
Oil Tankers -3.65%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- Shares of Apple Computer(AAPL) rose to a record after analysts said faster Macintosh computers and low-priced iPod players will spur holiday sales, and that a new music phone may buoy revenue next year.
- Shares of Louisiana-Pacific Corp.(LPX), a US producer of wood panels and boards, soared the most in seven months on speculation the company may be a takeover target.
- Bank of America(BAC), whose shares have climbed 18% this year, surpassed Citigroup(C) for the first time to become the biggest US bank by market value.
- Wheeling-Pittsburgh(WPSC), a US steel producer, said its financial results for the fourth quarter will miss forecasts because of prices and shipments were less than expected.
- Copper prices declined in NY as US inventories climbed. Supplies have risen 400% from this year’s low of 6,756 tons on July 28.
CNBC:
- Dollar General Corp.(DG) may be a target of leveraged-buyout firms Bain Capital LLC and Cerberus Capital Management.
Reuters:
- Time Warner Inc.(TWX) plans to offer a service next year to allow consumers to download films online and copy them onto DVDs, citing CEO Parsons.
BOTTOM LINE: The Portfolio finished higher today on gains in my Medical longs, Retail longs, Telecom longs and Computer longs. I covered my (EEM), (IWM) and (QQQQ) hedges 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 slightly higher, sector performance was mixed and volume was above average. Measures of investor anxiety were lower into the close. Today's overall market action was bullish. Many market-leading stocks finished the day with nice gains. With short interest just off all-time highs, I suspect today's late surge was mainly the result of short-covering after the bears were unable to gain downside traction this morning, despite potential catalysts. Most bears continue to view every dip as the beginning of a major sell-off and remain stunningly complacent giving what has transpired since mid-year, in my opinion. The Association of American Railroads reported recently that intermodel volume of 250,512 trailers (RAILTOTL Index on Bloomberg) or containers rose 2% in the week ended November 18 vs. last year. Moreover, this is only down 3% from all-time highs set in late September of this year. As well, the Baltic Dry Index (BDIY Index on Bloomberg) has been trending higher for months. Finally, while truck tonnage (TRUKINDX Index on Bloomberg) has been falling modestly of late, it is mostly the result of record high rail use.
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