BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Telecom longs and Semi 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 above average. Bloomberg is reporting that Apple Computer (AAPL) just filed for patent protection for a cell phone that also works as a media player. Theflyonthewall.com is saying that Attorney Michael Starkweather said, "I believe that, with this patent in hand, Apple will eventually be after every phone company, film maker, computer maker and video producer to pay royalties of every download of not just music but also movies and videos." He also said, "This is one of the most important patents in years." Apple rallied to session highs on the report. I continue to believe analysts are vastly underestimating the earnings potential of this company. It remains my second-largest long position behind Google (GOOG). 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.
Thursday, November 30, 2006
Stocks at Session Highs on Falling Long-Term Rates and Short-Covering
Today's Headlines
Bloomberg:
- Cardinal Health(CAH) plans to sell its manufacturing and packaging unit, the source of $1.8 billion in annual revenue, to focus on hospital and pharmacy customers.
- Attacks on eastern Chad last week were conducted by mercenaries with ties to al-Qaeda and support from Sudan’s government and people close to Saudi Arabia’s royal family, Chad’s ambassador to the UN said.
- The bankers, traders and residents of Lower Manhattan are about to find out what it’s like to be in the vortex of the most concentrated construction zone in NYC’s history as construction at Ground Zero takes hold.
- Intuit(INTU) agreed to buy Digital Insight(DGIN) for $1.35 billion, adding a provider of Internet services to banks and expanding beyond its TurboTax and QuickBooks accounting products.
- Shares of US homebuilders jumped after Banc of America Securities upgraded the stocks, citing signs that the outlook for the housing market is improving.
- US Treasuries are rising, pushing the 10-year yield to the lowest since January on growth worries and diminishing inflation concerns.
- Oil is rising .54 as a cold weather system moved into the US and large funds raised bets to try and help performance before year-end.
- The US dollar is falling and is poised for its biggest monthly loss against the euro since April.
- US retailers’ sales rose in November as consumers shopped at department stores and bought luxury goods at the start of the holiday gift-giving season. Federated Dept. Stores(FD), the second-biggest US dept. store company, said sales surged 8.5%.
- OPEC considers $50/bbl. a fair price for oil, Venezuelan President Chavez said.
- Global crude oil prices are “stable” and OPEC does not need to cut supplies in the first quarter of next year, Algerian Oil Minister Khelil said. Global oil demand will fall by 2 million barrels per day in the second quarter of next year, posing a risk of rising inventories and falling oil prices, he said.
Wall Street Journal:
- Vodafone Group Plc is working with Yahoo! Inc.(YHOO) to start a mobile-phone advertising service that it hopes will boost sales in Europe.
- Electronic Arts(ERTS) will gain between $4 million and $5 million from in-game ads in the company’s “Need for Speed: Carbon” game over the holiday quarter.
- US and Latin American law enforcement agencies are concerned about a possible spread in the use of submarines to smuggle drugs into the US.
- BMW AG plans to offer two new vehicles with interior room similar to that of a sport utility vehicle but with better fuel efficiency.
- Automakers presenting new models and concept cars at the Greater LA Auto Show are focusing on fuel efficiency and smaller yet roomier vehicles.
NY Times:
- More doctors are switching to cosmetic medicine or adding the specialty to their practices as a way to earn extra income and cut hours.
- A $150 laptop designed for children in Third World countries has sparked a debate among educators and philanthropists about the role of computers in education and economic development. The laptop, developed by the nonprofit One Laptop Per Child project, will enter production in Taiwan in 2007. Five countries—Argentina, Brazil, Libya, Nigeria and Thailand—have said they will put the laptop in the hands of millions of students. Microsoft chairman Bill Gates opposes the project.
AP:
- Toyota Motor’s(TM) North American president, Jim Press, asked the US Congress to enlarge tax credits for hybrid gas-electric automobiles to speed buying of the energy-saving vehicles.
NY Post:
- Citigroup(C) Chairman and CEO Prince should consider breaking up the company to help boost its stock price, CreditSights analyst David Hendler said.
Washington Post:
- Democratic leaders decided not to introduce plans to improve oversight and funding for intelligence agencies, a proposal they campaigned to implement, citing House and Senate aides.
LA Times:
- Billionaire philanthropist Eli Broad donated $10.5 million to a Los Angeles charter school organization to fund expansion and help efforts to lure students from traditional public schools.
Gulf News:
- Dubai Aluminum, known as Dubal, will add 60,000 tons of production capacity to its plant in Jebel Ali in Dubai, United Arab Emirates, to make the factory the largest in the world.
- Cardinal Health(CAH) plans to sell its manufacturing and packaging unit, the source of $1.8 billion in annual revenue, to focus on hospital and pharmacy customers.
- Attacks on eastern Chad last week were conducted by mercenaries with ties to al-Qaeda and support from Sudan’s government and people close to Saudi Arabia’s royal family, Chad’s ambassador to the UN said.
- The bankers, traders and residents of Lower Manhattan are about to find out what it’s like to be in the vortex of the most concentrated construction zone in NYC’s history as construction at Ground Zero takes hold.
- Intuit(INTU) agreed to buy Digital Insight(DGIN) for $1.35 billion, adding a provider of Internet services to banks and expanding beyond its TurboTax and QuickBooks accounting products.
- Shares of US homebuilders jumped after Banc of America Securities upgraded the stocks, citing signs that the outlook for the housing market is improving.
- US Treasuries are rising, pushing the 10-year yield to the lowest since January on growth worries and diminishing inflation concerns.
- Oil is rising .54 as a cold weather system moved into the US and large funds raised bets to try and help performance before year-end.
- The US dollar is falling and is poised for its biggest monthly loss against the euro since April.
- US retailers’ sales rose in November as consumers shopped at department stores and bought luxury goods at the start of the holiday gift-giving season. Federated Dept. Stores(FD), the second-biggest US dept. store company, said sales surged 8.5%.
- OPEC considers $50/bbl. a fair price for oil, Venezuelan President Chavez said.
- Global crude oil prices are “stable” and OPEC does not need to cut supplies in the first quarter of next year, Algerian Oil Minister Khelil said. Global oil demand will fall by 2 million barrels per day in the second quarter of next year, posing a risk of rising inventories and falling oil prices, he said.
Wall Street Journal:
- Vodafone Group Plc is working with Yahoo! Inc.(YHOO) to start a mobile-phone advertising service that it hopes will boost sales in Europe.
- Electronic Arts(ERTS) will gain between $4 million and $5 million from in-game ads in the company’s “Need for Speed: Carbon” game over the holiday quarter.
- US and Latin American law enforcement agencies are concerned about a possible spread in the use of submarines to smuggle drugs into the US.
- BMW AG plans to offer two new vehicles with interior room similar to that of a sport utility vehicle but with better fuel efficiency.
- Automakers presenting new models and concept cars at the Greater LA Auto Show are focusing on fuel efficiency and smaller yet roomier vehicles.
NY Times:
- More doctors are switching to cosmetic medicine or adding the specialty to their practices as a way to earn extra income and cut hours.
- A $150 laptop designed for children in Third World countries has sparked a debate among educators and philanthropists about the role of computers in education and economic development. The laptop, developed by the nonprofit One Laptop Per Child project, will enter production in Taiwan in 2007. Five countries—Argentina, Brazil, Libya, Nigeria and Thailand—have said they will put the laptop in the hands of millions of students. Microsoft chairman Bill Gates opposes the project.
AP:
- Toyota Motor’s(TM) North American president, Jim Press, asked the US Congress to enlarge tax credits for hybrid gas-electric automobiles to speed buying of the energy-saving vehicles.
NY Post:
- Citigroup(C) Chairman and CEO Prince should consider breaking up the company to help boost its stock price, CreditSights analyst David Hendler said.
Washington Post:
- Democratic leaders decided not to introduce plans to improve oversight and funding for intelligence agencies, a proposal they campaigned to implement, citing House and Senate aides.
LA Times:
- Billionaire philanthropist Eli Broad donated $10.5 million to a Los Angeles charter school organization to fund expansion and help efforts to lure students from traditional public schools.
Gulf News:
- Dubai Aluminum, known as Dubal, will add 60,000 tons of production capacity to its plant in Jebel Ali in Dubai, United Arab Emirates, to make the factory the largest in the world.
Personal Incomes Rise, Spending Bounces Back, Jobless Claims Rise, Chicago Manufacturing Falls, Prices Paid Declines
- Personal Income for October rose .4% versus estimates of a .5% gain and a .5% increase in September.
- Personal Spending for October rose .2% versus estimates of a .1% increase and a downwardly revised -.2% in September.
- The PCE Core for October rose .2% versus estimates of a .1% increase and a .2% gain in September.
- Initial Jobless Claims for last week rose to 357K versus estimates of 315K and 323K the prior week.
- Continuing Claims rose to 2480K versus estimates of 2440K and 2435K prior.
- The Chicago Purchasing Manager Index for November fell to 49.9 versus estimates of 54.4 and a reading of 53.5 in October.
- Personal Spending for October rose .2% versus estimates of a .1% increase and a downwardly revised -.2% in September.
- The PCE Core for October rose .2% versus estimates of a .1% increase and a .2% gain in September.
- Initial Jobless Claims for last week rose to 357K versus estimates of 315K and 323K the prior week.
- Continuing Claims rose to 2480K versus estimates of 2440K and 2435K prior.
- The Chicago Purchasing Manager Index for November fell to 49.9 versus estimates of 54.4 and a reading of 53.5 in October.
BOTTOM LINE: Incomes rose and personal spending rebounded in the US last month, suggesting consumers may prevent the economy from slowing too much, Bloomberg said. Adjusted for inflation, spending increased the most in three months. The PCE core, the Fed’s favorite inflation gauge, rose 2.4% year-over-year, the same increase as the prior month. Adjusted for inflation, disposable income rose .3% versus a .5% gain the prior month. I continue to expect a healthy labor market will continue to propel consumer spending, while inflation continues to decelerate over the intermediate-term.
The number of US workers filing first-time applications for state unemployment benefits unexpectedly rose last week to the highest in more than a year, Bloomberg reported. The four-week moving-average rose to 325,000 from 317,750 the prior week. Jobless claims were artificially magnified this week due to the Thanksgiving holiday last week. The unemployment rate for those eligible to collect benefits, which tracks the US jobless rate, held steady at 1.9%. I expect jobless claims to trend a bit higher over the coming weeks before rebounding as auto production and housing-related cutbacks subside over the intermediate-term.
A gauge of manufacturing activity in the Chicago region unexpectedly showed a contraction in November as production and orders slowed, Bloomberg reported. This conflicts with the Chicago Fed’s Beige book comments yesterday that “manufacturing expanded at a modest pace” last month. Manufacturing now accounts for only 12% of the US economy. The new orders component of the index fell to 52 versus 54.1 the prior month. The employment component dropped to 49.4 versus 57 the prior month. The prices paid component of the index fell to 60.2 from 62.5 the prior month. I expect manufacturing to improve over the intermediate-term as auto production cutbacks subside and housing stabilizes at relatively high levels.
Wednesday, November 29, 2006
Thursday Watch
Late-Night Headlines
Bloomberg:
- US lawmakers and regulators should reduce penalties on companies and their auditors to help American financial markets compete globally, a group of prominent executives and academics backed by Treasury Secretary Henry Paulson said.
- Tom Purves, CEO of BMW’s North America unit, expects to introduce a hydrogen-gasoline car in 2007.
Wall Street Journal:
- More US mothers take time off to raise their children during their first years even as their financial contribution to family income rises, citing a US Labor Statistics Bureau study to be released within a few weeks. In 2004, 51% of married mothers of infants worked, down from about 59% in 1997. Mothers with bachelor’s degrees or higher had the largest drop in work-force participation. Wives contributed 34.8% of families’ income, on average, in 2004, up from 32.7% in 1997.
Financial Times:
- The market for investing in the global infrastructure industry is overheated due to overvaluation and excessive leverage, citing Standard & Poor’s infrastructure director Michael Wilkins. Increased demand has resulted in the infrastructure industry becoming “an asset bubble similar to the dotcom era,” Wilkins said.
- Signet Group Plc, the world’s largest specialty jewelry retailer, will seek acquisitions in the US, citing CEO Burman.
China Daily:
- NYSE Group(NYX) plans to open an office in Beijing to convince more Chinese companies to list shares publicly on the NYSE, citing CEO Thain.
- China’s production of aluminum, used in car and plane parts, rose 17% in October from a year earlier, the National Bureau of Statistics said.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (DKS), raised target to $62.
Night Trading
Asian Indices are +.75% to +1.25% 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
- (CAKE)/.28
- (PLCE)/1.20
- (DLM)/.13
- (FNSR)/.03
- (HRB)/-.32
- (HNZ)/.60
- (OVTI)/.30
- (SFD)/.46
Upcoming Splits
- (EAT) 3-for-2
- (NT) 1-for-10
Economic Releases
8:30 am EST
- Personal Income for October is estimated to rise .5% versus a .5% gain in September.
- Personal Spending for October is estimated to rise .1% versus a .1% rise in September.
- PCE Core for October is estimated to rise .1% versus a .2% increase in September.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 321K the prior week.
- Continuing Claims are estimated to fall to 2440K versus 2454K prior.
10:00 am EST
- Chicago Purchasing Manager for November is estimated to rise to 54.4 versus a reading of 53.5 in October.
Bloomberg:
- US lawmakers and regulators should reduce penalties on companies and their auditors to help American financial markets compete globally, a group of prominent executives and academics backed by Treasury Secretary Henry Paulson said.
- Tom Purves, CEO of BMW’s North America unit, expects to introduce a hydrogen-gasoline car in 2007.
Wall Street Journal:
- More US mothers take time off to raise their children during their first years even as their financial contribution to family income rises, citing a US Labor Statistics Bureau study to be released within a few weeks. In 2004, 51% of married mothers of infants worked, down from about 59% in 1997. Mothers with bachelor’s degrees or higher had the largest drop in work-force participation. Wives contributed 34.8% of families’ income, on average, in 2004, up from 32.7% in 1997.
Financial Times:
- The market for investing in the global infrastructure industry is overheated due to overvaluation and excessive leverage, citing Standard & Poor’s infrastructure director Michael Wilkins. Increased demand has resulted in the infrastructure industry becoming “an asset bubble similar to the dotcom era,” Wilkins said.
- Signet Group Plc, the world’s largest specialty jewelry retailer, will seek acquisitions in the US, citing CEO Burman.
China Daily:
- NYSE Group(NYX) plans to open an office in Beijing to convince more Chinese companies to list shares publicly on the NYSE, citing CEO Thain.
- China’s production of aluminum, used in car and plane parts, rose 17% in October from a year earlier, the National Bureau of Statistics said.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (DKS), raised target to $62.
Night Trading
Asian Indices are +.75% to +1.25% 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
- (CAKE)/.28
- (PLCE)/1.20
- (DLM)/.13
- (FNSR)/.03
- (HRB)/-.32
- (HNZ)/.60
- (OVTI)/.30
- (SFD)/.46
Upcoming Splits
- (EAT) 3-for-2
- (NT) 1-for-10
Economic Releases
8:30 am EST
- Personal Income for October is estimated to rise .5% versus a .5% gain in September.
- Personal Spending for October is estimated to rise .1% versus a .1% rise in September.
- PCE Core for October is estimated to rise .1% versus a .2% increase in September.
- Initial Jobless Claims for last week are estimated to fall to 315K versus 321K the prior week.
- Continuing Claims are estimated to fall to 2440K versus 2454K prior.
10:00 am EST
- Chicago Purchasing Manager for November is estimated to rise to 54.4 versus a reading of 53.5 in October.
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 at Session Highs After Positive Beige Book Comments
Indices
S&P 500 1,399.48 +.92%
DJIA 12,226.73 +.74%
NASDAQ 2,432.23 +.81%
Russell 2000 784.16 +1.21%
Wilshire 5000 14,048.63 +.97%
S&P Barra Growth 650.41 +.86%
S&P Barra Value 746.78 +.98%
Morgan Stanley Consumer 674.37 +.59%
Morgan Stanley Cyclical 880.99 +1.0%
Morgan Stanley Technology 574.11 +.61%
Transports 4,737.82 -.33%
Utilities 454.58 +1.17%
Put/Call .67 -27.96%
NYSE Arms .82 -19.81%
Volatility(VIX) 10.83 -6.80%
ISE Sentiment 134.0 -.74%
US Dollar 83.51 +.46%
CRB 318.17 +1.02%
Futures Spot Prices
Crude Oil 62.39 +2.30%
Unleaded Gasoline 167.06 +2.71%
Natural Gas 8.87 +3.63%
Heating Oil 179.25 +3.71%
Gold 642.0 +.03%
Base Metals 237.32 -1.62%
Copper 315.50 -1.62%
10-year US Treasury Yield 4.52% +.39%
Leading Sectors
Oil Service +3.96%
Energy +2.97%
Steel +2.75%
Lagging Sectors
Semis -.43%
Oil Tankers -.43%
HMOs -.81%
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:
- NYC subway and bus riders will be spared previously contemplated fare increases and service cuts for the next two years because the Metropolitan Transportation Authority will have a surplus this year of $938 million.
- Pfizer Inc.(PFE) should get US approval to market its Celebrex arthritis-pain pill for use in children because the benefits outweigh the risks, a FDA advisory panel said.
- Corporate profits from current production soared 31% in the year through September, the largest 12-month gain in 22 years, according to the Commerce Dept.’s 3Q GDP update.
- Most Federal Reserve districts reported “moderate growth” in October and November as gains in consumer spending and “solid” expansion in service industries offset weakness in housing and auto production, the Fed’s Beige Book said.
- Microsoft(MSFT) reiterated plans to sell 10 million Xbox 360 video game consoles by the end of the year, maintaining forecasts after Sony Corp. and Nintendo introduced competing machines.
- US farmers will plant 11% more acres of corn next year after rising demand for ethanol sent prices higher, agricultural broker Risk Management Commodities said.
- Alcan(AL) said it has no plans to bid for a titanium company.
CNBC:
- Home Depot(HD) may be a potential takeover target for private-equity firms.
San Francisco Business Journal:
- Microsoft Corp.(MSFT) is in talks to lease a large block of space at the new $460 million Westfield San Francisco Centre, which opened in September.
S&P 500 1,399.48 +.92%
DJIA 12,226.73 +.74%
NASDAQ 2,432.23 +.81%
Russell 2000 784.16 +1.21%
Wilshire 5000 14,048.63 +.97%
S&P Barra Growth 650.41 +.86%
S&P Barra Value 746.78 +.98%
Morgan Stanley Consumer 674.37 +.59%
Morgan Stanley Cyclical 880.99 +1.0%
Morgan Stanley Technology 574.11 +.61%
Transports 4,737.82 -.33%
Utilities 454.58 +1.17%
Put/Call .67 -27.96%
NYSE Arms .82 -19.81%
Volatility(VIX) 10.83 -6.80%
ISE Sentiment 134.0 -.74%
US Dollar 83.51 +.46%
CRB 318.17 +1.02%
Futures Spot Prices
Crude Oil 62.39 +2.30%
Unleaded Gasoline 167.06 +2.71%
Natural Gas 8.87 +3.63%
Heating Oil 179.25 +3.71%
Gold 642.0 +.03%
Base Metals 237.32 -1.62%
Copper 315.50 -1.62%
10-year US Treasury Yield 4.52% +.39%
Leading Sectors
Oil Service +3.96%
Energy +2.97%
Steel +2.75%
Lagging Sectors
Semis -.43%
Oil Tankers -.43%
HMOs -.81%
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:
- NYC subway and bus riders will be spared previously contemplated fare increases and service cuts for the next two years because the Metropolitan Transportation Authority will have a surplus this year of $938 million.
- Pfizer Inc.(PFE) should get US approval to market its Celebrex arthritis-pain pill for use in children because the benefits outweigh the risks, a FDA advisory panel said.
- Corporate profits from current production soared 31% in the year through September, the largest 12-month gain in 22 years, according to the Commerce Dept.’s 3Q GDP update.
- Most Federal Reserve districts reported “moderate growth” in October and November as gains in consumer spending and “solid” expansion in service industries offset weakness in housing and auto production, the Fed’s Beige Book said.
- Microsoft(MSFT) reiterated plans to sell 10 million Xbox 360 video game consoles by the end of the year, maintaining forecasts after Sony Corp. and Nintendo introduced competing machines.
- US farmers will plant 11% more acres of corn next year after rising demand for ethanol sent prices higher, agricultural broker Risk Management Commodities said.
- Alcan(AL) said it has no plans to bid for a titanium company.
CNBC:
- Home Depot(HD) may be a potential takeover target for private-equity firms.
San Francisco Business Journal:
- Microsoft Corp.(MSFT) is in talks to lease a large block of space at the new $460 million Westfield San Francisco Centre, which opened in September.
BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Biotech longs and Telecom longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished substantially higher, almost every sector rose and volume was above average. Measures of investor anxiety were mostly lower into the close. Today's overall market action was very bullish as the major averages and breadth finished near session highs. Today's midday weakness likely further trapped the near-record shorts. I still expect new all-time highs in the Dow over the next few weeks. The main negative today was the hot money jumping from market-leading growth stocks back to commodities. It is no wonder that the overwhelming majority of funds are badly lagging the S&P 500. I expect this momentum fund rotation to last a couple more days. Last night, Citigroup said steel imports into the U.S. were 3.5M tons in October, the fifth largest increase on record. For the year, steel imports have soared 44%, sending service-center inventories to records. Supplies are now 2.5-3.0M tons above normal. Citi expects this to continue to pressure pricing despite mill curtailments. They also said the U.S. market is already consolidated and that major players are unlikely acquisition targets. The Steel Index (STQ) rose 2.75% today as the mania for most commodities continues.
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