BETWEEN THE HEDGES

Wednesday, December 06, 2006

Thursday Watch

Posted by Gary .....at 11:56 PM

Late-Night Headlines
Bloomberg:
- East Asia’s economic growth may slow next year as exports cool, and the resulting moderation in inflation will reduce pressure on central banks in the region to raise interest rates, the Asian Development Bank said.

Wall Street Journal:
- News Corp.(NWS) is coming close to buying back Liberty Media’s(LINTA) $11 billion stake in its company, in exchange for a stake in DirectTV Group(DTV).
- Iraq’s draft hydrocarbons law recommends foreign companies be involved in developing the country’s deposits using production sharing contracts and buyback contracts.

Financial Times:
- Al-Qaeda is establishing its headquarters in Pakistan from where it trains recruits and directs terror attacks on other nations, citing the findings of Britain’s security services.
- Hershey Co.(HSY) lowered its profit forecast for 2006 because of a recall of Canadian candy last month and sales that were less than the company expected.
- Dell Inc.(DELL) hired a new vice president to oversee online sales and support in a push to increase Internet sales.
- International Securities Exchange(ISE) filed a patent infringement lawsuit against the Chicago Board Options Exchange, opening a new front in the rivalry between the two largest US options markets.
- Weyerhaeuser Co.(WY), North America’s largest lumber producer, said it may close some plants and curtail operations at others because of “challenging” market conditions.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (RVBD), target $39.
- Upgraded (AAP) to Buy, target $44.
- Reiterated Buys on (CVH), (UNH), (WLP), (HUM) and (HNT).
- Rated (SNPS) Buy, target $34.

Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated unch.

Morning Preview
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Global Commentary
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Earnings of Note
Company/EPS Estimate
- (ATW)/.80
- (CHP)/-.25
- (CENT)/.48
- (ESL)/.66
- (FLE)/-.32
- (IDT)/-.21
- (JJZ)/.14
- (JOSB)/.29
- (MOV)/.61
- (NSM)/.27
- (PTMK)/-.20
- (SWHC)/.08
- (TTC)/.08
- (UTIW)/.31
- (PAY)/.29

Upcoming Splits
- (CRVL) 3-for-2
- (GRC) 5-for-4

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 325K versus 357K the prior week.
- Continuing Claims are estimated to fall to 2460K versus 2480K prior.

3:00 pm EST
- Consumer Credit for October is estimated to rise to $4.0 billion versus -$1.2 billion in September.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker 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 Slightly Lower on Healthy Profit-taking

Posted by Gary .....at 5:50 PM

Indices
S&P 500 1,412.90 -.13%
DJIA 12,309.25 -.18%
NASDAQ 2,445.86 -.27%
Russell 2000 795.94 -.19%
Wilshire 5000 14,209.25 -.10%
S&P Barra Growth 654.46 -.20%
S&P Barra Value 756.42 -.06%
Morgan Stanley Consumer 685.53 -.17%
Morgan Stanley Cyclical 891.63 -.10%
Morgan Stanley Technology 573.27 -.73%
Transports 4,753.52 -.80%
Utilities 458.82 -.73%
Put/Call .84 +12.0%
NYSE Arms .98 +9.03%
Volatility(VIX) 11.33 +.53%
ISE Sentiment 173.0 +12.34%
US Dollar 82.74 +.28%
CRB 313.06 -1.07%

Futures Spot Prices
Crude Oil 62.31 -.19%
Reformulated Gasoline 162.66 -1.05%
Natural Gas 7.81 +1.68%
Heating Oil 179.85 +.01%
Gold 636.40 -1.77%
Base Metals 245.13 -1.70%
Copper 315.05 -2.97%
10-year US Treasury Yield 4.48% +.96%

Leading Sectors
Tobacco +2.90
Homebuilders +1.59%
HMOs +1.01%

Lagging Sectors
Utilities -.73%
Software -1.30%
Gold & Silver -1.75%

Evening Review
Detailed Market Summary
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In Play

Afternoon Recommendations
Oppenheimer:
- Rated (ATVI) Buy, target $21.
- Rated (THQI) Buy, target $38.

Afternoon/Evening Headlines
Bloomberg:
- Home Depot(HD) said it “routinely” backdated option grants to benefit employees for 19 years and had unrecorded expenses of about $200 million related to its grants practices.
- Fannie Mae(FNM) completed a $7.9 billion restatement of earnings from 2001 through 2004, giving investors the first accurate picture of the company’s performance.
- General Motors(GM) said it will cut production in January at three plants that build large SUVs because of slowing demand for the gas guzzlers.
- The US dollar had its biggest gain in three weeks against the yen.
- Duke Energy(DUK) plans to expand its Gulf Coast salt-cavern storage facilities by more than 35 billion cubic feet over the next six years to meet demand for natural gas services.

BOTTOM LINE: The Portfolio finished higher today on gains in my Telecom longs, Semi longs, Medical longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was only slightly negative today as the advance/decline line finished slightly lower, sector performance was mostly positive and volume was above average. Measures of investor anxiety were mostly higher into the close. I would classify today's overall market action as a healthy consolidation of recent gains. First we have to guard the old copper pipes under our house, now our waistlines. Bloomberg is reporting that a business man in Miami intends to buy human fat from liposuction operations at the Jackson Memorial Hospital to convert into biodiesel. This sounds funny and absurd, but it is just another example of the lengths to which people are currently going in the current energy mania. Alternative energy projects are pervasive globally and will have a devastating impact on future demand for crude.

Stocks Slightly Lower into Final Hour on Healthy Profit-taking

Posted by Gary .....at 3:15 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Telecom longs, Retail longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is about even, most sectors are rising and volume is above average. Today's mild weakness comes despite another surge in mortgage applications and a 4-month high in the ADP Employment Change report. The 10-week moving average of mortgage applications continues to trend higher. The Case-Schiller Housing futures are now projecting just a 2.9% decline in the average home price over the next six months, up from projections of a 5.2% decline a couple of months ago. I am seeing many market-leading stocks breaking out despite the slightly negative performance in the major averages. The major averages will likely close near session highs. I suspect that the Dow and Nasdaq will join the Russell 2000 and S&P 500 and make new highs by week's end. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower commodity prices, positive economic data and portfolio manager performance anxiety.

Today's Headlines

Posted by Gary .....at 2:03 PM

Bloomberg:
- US homebuilder shares are rising again, led by Standard Pacific(SPF), DR Horton(DHI) and Ryland Group(RYL), the largest seller of new homes for first-time buyers, as a 10-month low in mortgage rates sparked hopes of a housing rebound. The Housing Index(HGX) is up 27% in less than five months.
- There’s no housing slump in Manhattan, according to a survey from the Real Estate Board of NY. The median price of an apartment in Manhattan, the most expensive urban real estate market in the US, rose 6% in the third quarter to $767,000. Median prices for East Side condos soared 45% to $1.35 million. First-time buyers seeking a toe-hold in the surging NY market pushed the median price in northern Manhattan neighborhoods to $558,000, a 60% spike, the board said.
- Yahoo!(YHOO) CEO Terry Semel promoted CFO Decker to a new job overseeing advertising sales as part of a broader shake-up designed to catch up to competitors such as Google(GOOG).
- The dollar rose for a second day against the euro after a report showed US companies in November added the most workers since June.
- German factory orders unexpectedly dropped for a second month in October, led by a slump in domestic demand for cars and trucks.
- Factory production in the UK unexpectedly dell the most in a year in October, crimped by a stronger currency.
- Crude oil prices in NY may tumble to $40 a barrel next year as demand for biofuel made from crops spurs investors to switch from energy to agricultural commodities, said Tetsu Emori, chief commodities strategist at Japan’s Mitsui Bussan Futures Ltd.
- Gold is falling another $7/oz. in NY as the dollar’s recent gains reduce demand for the metal.
- Starbucks(SBUX) confirmed its forecast for earnings per share of 87 cents to 89 cents in fiscal 2007 and said it expects to operate nearly 15,000 cafes by next October.
- Copper is falling in NY the most in three weeks on reduced speculation by investment funds amid surging inventories.

Wall Street Journal:
- Financier Carl Icahn is dropping his $4.6 billion bid for Reckson Assoc. Realty(RA) after the target approved another offer.
- Comcast Corp.’s(CMCSA) founders, the Roberts family, will donate $15 million to a cancer-treatment center being developed by the Univ. of Pennsylvania Health System.
- Wheeling-Pittsburgh Corp.(WPSC), a West Virginia steelmaker, said it’s reviewing stock sales by three executives shortly before the company said its results would fall short of expectations.

USA Today:
- US Airways CEO Parker said he will stop pursuing Delta Air if Delta’s management doesn’t support the merger.

NY Times:
- Worldwide volumes of spam e-mail messages have doubled from last year and now accounts for 90% of all e-mails sent, citing spam-filterer Ironport Systems.
- The US has offered a package of economic and energy assistance to North Korea if that country will give up its nuclear weapons and related technology.

Fort Worth Star-Telegram:
- A US Transportation Security Administration test program lets guests at the Grand Hyatt hotel at Dallas-Fort Worth International Airport go through security without a boarding pass.

Tehran Times:
- Iran has started substituting euros for dollars in its crude oil trading.

Dagens Naeringsliv:
- A Miami-based business man is in talks with the Jackson Memorial Hospital about buying human fat from liposuction operations for use in biodiesel production.

Economic Releases

Posted by Gary .....at 10:25 AM

- None of note