BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs, Retail longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very negative as the advance/decline line is substantially lower, most sectors are falling and volume is above average. U.S. GDP growth came in at 1.1% and 0.7% during the first two quarters of 1995. The ISM Manufacturing Index fell below 50 during May 1995. It stayed below 50, reaching a low of 45.5, until August 1996. During that period, the S&P 500 soared 31% as the P/E multiple expanded from 16.0 to 17.2. This was well before the stock market bubble began to inflate. As well, manufacturing was more important to U.S. growth at this time. It only accounts for about 12% of growth now. Stocks can and will rise as P/E multiples expand, even with slowing growth and earnings. As I have said many times before, P/E multiple expansion is the near-record number of U.S. stock market shorts' worst nightmare. The S&P 500's forward P/E is still a very reasonable 15.8. I expect US stocks to trade higher into the close from current levels on short-covering, lower long-term rates and bargain-hunting.
Friday, December 01, 2006
Stocks Lower into Final Hour on Economic Growth Concerns
Today's Headlines
Bloomberg:
- Iraqi forces will be capable of taking over security in the country’s northern provinces in three to six months, the commander of the US-led division in the area said.
- Eastman Kodak(EK) expects higher-priced models to bolster sales this holiday season.
- Wal-Mart Stores(WMT) is out and Target Corp.(TGT) is in Goldman Sachs’(GS) Conviction Buy List.
- US Treasuries are rising for a second straight day after an industry report showed US manufacturing contracted for the first time in more than three years last month.
- The cost to lease a seat on the New York Mercantile Exchange, the world’s largest energy market, has plunged 75% as electronic trading overtakes the traditional open-outcry system.
- Copper prices are falling again in NY after another rise in inventories.
- Brazil, the world’s biggest ethanol exporter, increased shipments of the biofuel 33% last month on surging demand from the US.
- Global oil production is exceeding demand by 100 million barrels, Ali al-Naimi, the oil minister for Saudi Arabia said.
- Natural gas is falling in NY as record inventories of the fuel in underground storage tempered speculation that furnace use caused by cold weather will strain supplies.
Wall Street Journal:
- News Corp.’s(NWS) MySpace.com is in talks to bring the social-networking site to China with International Data Group’s Chinese venture arm and former China Netcom Group CEO Tian.
USA Today:
- The Transportation Security Administration plans to test the first airport X-ray screening system that can show images of nude bodies at Phoenix Sky Harbor International Airport.
NY Times:
- West Virginia’s Medicaid program has created a system that gives patients incentives to stay healthy, show up at appointments, take medicine as prescribed and avoid non-emergency trips to emergency rooms.
- US Senator Charles E. Grassley, chairman of the Senate Finance Committee, is questioning the NASD on how it monitors insider trading.
NY Post:
- Kohlberg Kravis Roberts & Co. and Texas Pacific Group are among buyout firms examining a takeover of Home Depot(HD).
- Iraqi forces will be capable of taking over security in the country’s northern provinces in three to six months, the commander of the US-led division in the area said.
- Eastman Kodak(EK) expects higher-priced models to bolster sales this holiday season.
- Wal-Mart Stores(WMT) is out and Target Corp.(TGT) is in Goldman Sachs’(GS) Conviction Buy List.
- US Treasuries are rising for a second straight day after an industry report showed US manufacturing contracted for the first time in more than three years last month.
- The cost to lease a seat on the New York Mercantile Exchange, the world’s largest energy market, has plunged 75% as electronic trading overtakes the traditional open-outcry system.
- Copper prices are falling again in NY after another rise in inventories.
- Brazil, the world’s biggest ethanol exporter, increased shipments of the biofuel 33% last month on surging demand from the US.
- Global oil production is exceeding demand by 100 million barrels, Ali al-Naimi, the oil minister for Saudi Arabia said.
- Natural gas is falling in NY as record inventories of the fuel in underground storage tempered speculation that furnace use caused by cold weather will strain supplies.
Wall Street Journal:
- News Corp.’s(NWS) MySpace.com is in talks to bring the social-networking site to China with International Data Group’s Chinese venture arm and former China Netcom Group CEO Tian.
USA Today:
- The Transportation Security Administration plans to test the first airport X-ray screening system that can show images of nude bodies at Phoenix Sky Harbor International Airport.
NY Times:
- West Virginia’s Medicaid program has created a system that gives patients incentives to stay healthy, show up at appointments, take medicine as prescribed and avoid non-emergency trips to emergency rooms.
- US Senator Charles E. Grassley, chairman of the Senate Finance Committee, is questioning the NASD on how it monitors insider trading.
NY Post:
- Kohlberg Kravis Roberts & Co. and Texas Pacific Group are among buyout firms examining a takeover of Home Depot(HD).
Construction Declines, ISM Manufacturing Falls
- Construction spending for October fell 1.0% versus estimates of a .4% decline and a downwardly revised .8% decline in September.
- ISM Manufacturing for November fell to 49.5 versus estimates of 51.5 and a reading of 51.2 in October.
- The ISM Prices Paid Index for November rose to 53.5 versus estimates of 49.8 and a reading of 47.0 in October.
- ISM Manufacturing for November fell to 49.5 versus estimates of 51.5 and a reading of 51.2 in October.
- The ISM Prices Paid Index for November rose to 53.5 versus estimates of 49.8 and a reading of 47.0 in October.
BOTTOM LINE: Construction spending in the US fell the most since 2001 in October, led by a drop in home building, Bloomberg reported. Private residential construction spending fell 1.9% versus a 1.4% decline in September. Commercial construction has held up much better, rising 16.4% from year-ago levels, as businesses build new plants and offices after posting the strongest profit growth in 22 years last quarter. I expect construction to only improve modestly over the intermediate-term even as the housing market stabilizes as builders continue to bring down inventories, while commercial building remains healthy.
Manufacturing in the US unexpectedly contracted last month, Bloomberg reported. The prices paid component of the index rose to 53.5 versus 47 the prior month. The employment component of the index fell to 49.2 from 50.8 the prior month. The new orders component fell to 48.7 versus 52.1 prior. The orders backlog component rose to 46.5 from 44.5 prior. I expect manufacturing to begin improving back to more average rates early next year as auto production cutbacks subside and housing stabilizing at relatively high levels.
Thursday, November 30, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- NYSE Group(NYX) plans to remove a monthly limit on fees it charges brokers to complete trades at the NYSE as it seeks to benefit from increased trading.
- Lazard Ltd. and a group of its current and former managing directors raised $590 million by selling 13 million shares, more than originally planned, to help pay off debt and fund expansion.
- Japanese inflation unexpectedly slowed in October as oil prices dropped, giving the central bank room to delay an increase in interest rates to support a recovery in the world’s second-largest economy.
- Crude oil fell from a two-month high in NY on speculation recent gains have reduced the risk that OPEC will cut output a second time later this month.
- Billionaire Kirk Kerkorian sold his remaining stake in GM(GM) almost two months after the automaker rejected his plan to ally with Renault SA and Nissan Motor, a person briefed on the matter said.
- China started operating its first biomass-fired power plant in the eastern province of Shandong as the world’s second-largest energy consumer looks to increase the use of cleaner fuels and cut reliance on coal and oil.
Wall Street Journal:
- China’s companies are importing more scrap copper as a cheaper source of the metal for cathode production as prices rise. China’s copper-cathode output in the first nine months this year reached 2.2 million metric tons, of which 27% was made from scrap. In the same period in 2005, 16% came from scrap. Refineries and makers of semi-fabricated cable and wire are also using more scrap. China’s imports of copper concentrate have plunged 46% over the last 12 months.
- AirTran Holdings CEO Leonard said he’s interested in buying airport gates sold by US Airways Group or Delta Air Lines if those two merge.
Reuters:
- Netflix(NFLX) has had discussions with Amazon.com(AMZN) about selling its online DVD rental subscriptions to Amazon customers.
- A US Homeland Security Dept. unit issued an advisory about a potential attack on US financial institutions’ computers.
- Sirius Satellite Radi(SIRI) plans to offer a live television service next year.
Financial Times:
- Providence Equity Partners, a US buy-out group, is raising a fund worth at least $8 billion for acquisitions.
Australian:
- BHP Billiton(BHP) and Royal Dutch Shell Plc may next week force Tigris Petroleum Corp. from their venture at Iraq’s Halfayah oil field following the findings of an inquiry into kickbacks paid to ousted dictator Saddam Hussein’s regime.
Late Buy/Sell Recommendations
Business Week:
- Liberty Global’s(LBTYA) stock will rise as investors are drawn to the “triple play services” offered by the company, citing John Maloney, president of M&R Capital Management.
- Duke Energy(DUK) may rise to $35 a share because of earnings growth and investment opportunities for both Duke and the spin-off of its natural gas unit.
- Allos Therapeutics(ALTH), an anti-cancer drug developer, may rise on trial results for two drugs to be announced at an American Society of Hematology meeting next month. The stock may advance to $9 within the next year because the company will publicize “encouraging” data on its brain-cancer and lymphoma treatments, citing Needham’s Mark Monane.
Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.20%.
NASDAQ 100 indicated +.06%.
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
- (ATW)/.80
- (KWD)/.64
- (WMG)/.00
Upcoming Splits
- (AMED) 4-for-3
- (FMD) 3-for-2
Economic Releases
10:00 am EST
- Construction spending for October is estimated to fall .4% versus a .3% decline in September.
- ISM Manufacturing for November is estimated to rise to 51.8 versus 51.2 in October.
- ISM Prices Paid for November is estimated to rise to 49.8 versus 47.0 in October.
Afternoon:
- Total Vehicle Sales for November are estimated to rise to 16.4M versus 16.2M in October.
- Domestic Vehicle Sales for November are estimated to rise to 12.5M versus 12.4M in October.
Bloomberg:
- NYSE Group(NYX) plans to remove a monthly limit on fees it charges brokers to complete trades at the NYSE as it seeks to benefit from increased trading.
- Lazard Ltd. and a group of its current and former managing directors raised $590 million by selling 13 million shares, more than originally planned, to help pay off debt and fund expansion.
- Japanese inflation unexpectedly slowed in October as oil prices dropped, giving the central bank room to delay an increase in interest rates to support a recovery in the world’s second-largest economy.
- Crude oil fell from a two-month high in NY on speculation recent gains have reduced the risk that OPEC will cut output a second time later this month.
- Billionaire Kirk Kerkorian sold his remaining stake in GM(GM) almost two months after the automaker rejected his plan to ally with Renault SA and Nissan Motor, a person briefed on the matter said.
- China started operating its first biomass-fired power plant in the eastern province of Shandong as the world’s second-largest energy consumer looks to increase the use of cleaner fuels and cut reliance on coal and oil.
Wall Street Journal:
- China’s companies are importing more scrap copper as a cheaper source of the metal for cathode production as prices rise. China’s copper-cathode output in the first nine months this year reached 2.2 million metric tons, of which 27% was made from scrap. In the same period in 2005, 16% came from scrap. Refineries and makers of semi-fabricated cable and wire are also using more scrap. China’s imports of copper concentrate have plunged 46% over the last 12 months.
- AirTran Holdings CEO Leonard said he’s interested in buying airport gates sold by US Airways Group or Delta Air Lines if those two merge.
Reuters:
- Netflix(NFLX) has had discussions with Amazon.com(AMZN) about selling its online DVD rental subscriptions to Amazon customers.
- A US Homeland Security Dept. unit issued an advisory about a potential attack on US financial institutions’ computers.
- Sirius Satellite Radi(SIRI) plans to offer a live television service next year.
Financial Times:
- Providence Equity Partners, a US buy-out group, is raising a fund worth at least $8 billion for acquisitions.
Australian:
- BHP Billiton(BHP) and Royal Dutch Shell Plc may next week force Tigris Petroleum Corp. from their venture at Iraq’s Halfayah oil field following the findings of an inquiry into kickbacks paid to ousted dictator Saddam Hussein’s regime.
Late Buy/Sell Recommendations
Business Week:
- Liberty Global’s(LBTYA) stock will rise as investors are drawn to the “triple play services” offered by the company, citing John Maloney, president of M&R Capital Management.
- Duke Energy(DUK) may rise to $35 a share because of earnings growth and investment opportunities for both Duke and the spin-off of its natural gas unit.
- Allos Therapeutics(ALTH), an anti-cancer drug developer, may rise on trial results for two drugs to be announced at an American Society of Hematology meeting next month. The stock may advance to $9 within the next year because the company will publicize “encouraging” data on its brain-cancer and lymphoma treatments, citing Needham’s Mark Monane.
Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.20%.
NASDAQ 100 indicated +.06%.
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
- (ATW)/.80
- (KWD)/.64
- (WMG)/.00
Upcoming Splits
- (AMED) 4-for-3
- (FMD) 3-for-2
Economic Releases
10:00 am EST
- Construction spending for October is estimated to fall .4% versus a .3% decline in September.
- ISM Manufacturing for November is estimated to rise to 51.8 versus 51.2 in October.
- ISM Prices Paid for November is estimated to rise to 49.8 versus 47.0 in October.
Afternoon:
- Total Vehicle Sales for November are estimated to rise to 16.4M versus 16.2M in October.
- Domestic Vehicle Sales for November are estimated to rise to 12.5M versus 12.4M in October.
BOTTOM LINE: Asian indices are higher, boosted by technology 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.
Subscribe to:
Posts (Atom)