Indices
S&P 500 1,427.09 +1.22%
DJIA 12,445.52 +1.12%
NASDAQ 2,457.20 +.81%
Russell 2000 792.71 +.02%
Wilshire 5000 14,314.37 +1.0%
S&P Barra Growth 659.53 +1.12%
S&P Barra Value 765.72 +1.32%
Morgan Stanley Consumer 691.83 +.79%
Morgan Stanley Cyclical 893.90 +.07%
Morgan Stanley Technology 576.45 +1.02%
Transports 4,701.04 -.40%
Utilities 460.25 +.95%
MSCI Emerging Markets 113.60 +1.52%
S&P 500 Cum A/D Line 11,609 +3.0%
Bloomberg Crude Oil % Bulls 33.0 -31.25%
CFTC Oil Large Speculative Longs 167,097 unch.
Put/Call .73 -6.4%
NYSE Arms .94 +11.9%
Volatility(VIX) 10.05 -16.7%
ISE Sentiment 136.0 -8.11%
AAII % Bulls 41.3 +6.1%
AAII % Bears 38.0 -8.6%
US Dollar 84.03 +.92%
CRB 313.3 +.31%
ECRI Weekly Leading Index 140.80 +1.4%
Futures Spot Prices
Crude Oil 63.35 +2.2%
Reformulated Gasoline 170.50 +5.5%
Natural Gas 7.41 -1.66%
Heating Oil 178.39 +1.36%
Gold 618.90 -1.62%
Base Metals 244.30 +.35%
Copper 301.0 -3.15%
10-year US Treasury Yield 4.59% +.9%
Average 30-year Mortgage Rate 6.12% +.16%
Leading Sectors
Papers +3.3%
Banks +2.57%
Software +2.43%
Telecom +2.07%
Networking +2.03%
Lagging Sectors
REITs -1.15%
Hospitals -1.46%
Biotech -1.49%
Coal -1.93%
Steel -2.39%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
Friday, December 15, 2006
DJIA Making Another Record High into Final Hour on Positive Economic Data
BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Telecom longs, Biotech longs, Retail longs and Commodity shorts. 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 heavy. Level 3 Communications (LVLT) is trading 2.2% higher today, near session highs on good volume, even as the major averages and breadth are near session lows. Level 3 is my favorite low-priced speculative stock for 2007 as it becomes increasingly obvious that it is one of the main beneficiaries of the explosion in video over the net. I expect the stock to rise at least 50% next year. The ECRI Weekly Leading Index (ECRWWLI Index on Bloomberg) broke out to a new cycle high this week. It has surged from 135.1 in August to 140.8 currently. It had been bouncing around 135 to 139 for 17 months. The growth rate of the weekly leading index is now 2.8%, up from -1.7% in mid-August. I continue to believe economic growth will come in around 2.5% for this quarter. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, more economic optimism, buyout speculation and portfolio manager performance anxiety.
Today's Headlines
Bloomberg:
- The euro will fall versus the dollar and the yen after reaching a record high in the first quarter of 2007, according to strategists at Lehman Brothers(LEH). They expect the euro to decline 10% against the dollar, and 21% against the yen, by 2008.
- The US dollar is rising to a three-week high against the euro after a report foreign investors boosted purchases of US securities in October.
- Facebook, the social-networking Web site courted by Yahoo!, isn’t for sale, board member Peter Thiel said.
- Natural gas extended this month’s decline in NY as mild weather covers the eastern half of the US, curbing demand from utilities for the furnace fuel with supplies near record levels.
- Gold fell the lowest in five weeks as a gain in the value of the dollar reduced the appeal of the precious metal as an alternative investment.
- Copper tumbled to the lowest price since June as rising inventories signal demand is slowing.
Wall Street Journal:
- General Motors(GM) CFO Henderson said it’s “feasible” for the US automaker to reach an agreement with Delphi Corp. over pension and benefits costs by the end of the first quarter next year.
- FAO Schwarz, a US toy retailer, is using glitz, exclusive toys and attention to detail to help spur sales and to distinguish itself from discount rivals.
- Penn National Gaming(PENN) made a mostly cash offer for Harrah’s Entertainment(HET), a bigger casino competitor.
- Tradebot Systems, JPMorgan Chase’s(JPM) Citadel Derivatives Group and other brokers are striving to shave fractions of a second from times taken to trade stocks.
NY Times:
- American military commanders are talking about asking for as many as 35,000 new troops to deploy to Iraq.
NY Sun:
- The New York Taxi and Limousine Commission on Dec. 18 will unveil cabs that allow passengers to pay with credit or debit cards, watch television and show electronic maps of their trips through the city.
Philadelphia Inquirer:
- Philadelphia’s City Council is considering legislation to ban trans fats in restaurants by September 2008, following similar action in New York.
LA Times:
- US and California officials are investigating a recent series of scams in Los Angeles that used homeless people to defraud government health-care and food-stamp programs.
Financial Times:
- Saudi Aramco, which is in charge of Saudi Arabia’s oil reserves, is the world’s biggest company, dwarfing Exxon Mobil(XOM), citing its own research, carried out together with McKinsey & Co.
- The euro will fall versus the dollar and the yen after reaching a record high in the first quarter of 2007, according to strategists at Lehman Brothers(LEH). They expect the euro to decline 10% against the dollar, and 21% against the yen, by 2008.
- The US dollar is rising to a three-week high against the euro after a report foreign investors boosted purchases of US securities in October.
- Facebook, the social-networking Web site courted by Yahoo!, isn’t for sale, board member Peter Thiel said.
- Natural gas extended this month’s decline in NY as mild weather covers the eastern half of the US, curbing demand from utilities for the furnace fuel with supplies near record levels.
- Gold fell the lowest in five weeks as a gain in the value of the dollar reduced the appeal of the precious metal as an alternative investment.
- Copper tumbled to the lowest price since June as rising inventories signal demand is slowing.
Wall Street Journal:
- General Motors(GM) CFO Henderson said it’s “feasible” for the US automaker to reach an agreement with Delphi Corp. over pension and benefits costs by the end of the first quarter next year.
- FAO Schwarz, a US toy retailer, is using glitz, exclusive toys and attention to detail to help spur sales and to distinguish itself from discount rivals.
- Penn National Gaming(PENN) made a mostly cash offer for Harrah’s Entertainment(HET), a bigger casino competitor.
- Tradebot Systems, JPMorgan Chase’s(JPM) Citadel Derivatives Group and other brokers are striving to shave fractions of a second from times taken to trade stocks.
NY Times:
- American military commanders are talking about asking for as many as 35,000 new troops to deploy to Iraq.
NY Sun:
- The New York Taxi and Limousine Commission on Dec. 18 will unveil cabs that allow passengers to pay with credit or debit cards, watch television and show electronic maps of their trips through the city.
Philadelphia Inquirer:
- Philadelphia’s City Council is considering legislation to ban trans fats in restaurants by September 2008, following similar action in New York.
LA Times:
- US and California officials are investigating a recent series of scams in Los Angeles that used homeless people to defraud government health-care and food-stamp programs.
Financial Times:
- Saudi Aramco, which is in charge of Saudi Arabia’s oil reserves, is the world’s biggest company, dwarfing Exxon Mobil(XOM), citing its own research, carried out together with McKinsey & Co.
Inflation Below Average Rates, Foreign Demand for US Securities Surges, Industrial Production Rises, Capacity Utilization Stable
- The Consumer Price Index for November was unch. versus estimates of a .2% gain and a -.5% decline in October.
- The CPI Ex Food & Energy for November was unch. versus estimates of a .2% gain and a .1% increase in October.
- Net Long-term TIC Flows rose to $82.3 billion versus estimates of $70.0 billion and an upwardly revised $70.2 billion.
- Industrial Production for November rose .2% versus estimates of unch. and a downwardly revised unch. in October.
- Capacity Utilization for November remained at 81.8% versus estimates of 82.1% and a downwardly revised 81.8% in October.
- The CPI Ex Food & Energy for November was unch. versus estimates of a .2% gain and a .1% increase in October.
- Net Long-term TIC Flows rose to $82.3 billion versus estimates of $70.0 billion and an upwardly revised $70.2 billion.
- Industrial Production for November rose .2% versus estimates of unch. and a downwardly revised unch. in October.
- Capacity Utilization for November remained at 81.8% versus estimates of 82.1% and a downwardly revised 81.8% in October.
BOTTOM LINE: US consumer prices held steady in November after falling for two months, reassuring Fed policy makers, Bloomberg reported. The CPI is now rising 2.0% year-over-year, well below the long-term average of 2.9%. Gasoline prices fell 1.6% in November. New vehicle costs declined .7% and clothing prices fell .3%. Airfares fell 4.8%, the largest decline since 1999. Food prices fell .1%. Inflation is clearly not a problem and the 10-year T-note, the best predictor of long-term inflation, agrees with the yield falling another 8 basis points. I continue to believe inflation has peaked for this cycle as commodities fall further and unit labor costs remain subdued.
International investment in US long-term securities rose in October as stocks climbed and demand for Treasury notes surged, Bloomberg reported. Official institutions, such as central banks, bought $18.5 billion of US Treasury Notes, the most in almost 2 years. Foreign purchases of US securities have averaged $73.8 billion over the last 12 months. The US trade deficit was $58.9 billion in October, which shows how easily the US can finance its external obligations. International purchases of US stocks rose to $21.0 billion in October versus $8.6 billion the previous month. I expect foreign demand for US assets to continue to remain strong over the intermediate-term as economic growth accelerates, the US dollar firms and the mania for emerging market securities reverses course.
Industrial Production in the US unexpectedly rose in November, reflecting a jump in auto manufacturing, Bloomberg reported. Auto output rebounded 3.7% versus a 3.4% decline in October. Production of business equipment rose 1.2% versus a .1% increase in October. The gain was spurred by a 2.4% increase in computer production and a 2.6% rise in semiconductors. I suspect auto production cutbacks are subsiding, but there are more to come. This will likely weigh on industrial production until the 2nd quarter of next year. As well, while I believe the housing market is stabilizing and the worst is over, home construction will not pick up until inventories decline further from current levels.
Thursday, December 14, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- Royal Dutch Shell Plc, BP Plc, ConocoPhillips(COP) and Marathon Oil(MRO) reached agreement with the US Minerals Management Service to pay oil and gas royalties under botched Gulf of Mexico leases from 1998 and 1999.
- Samsung Electronics of South Korea and liquid-crystal display makers in Taiwan and Japan my face the largest antitrust penalty ever after a probe of possible price-fixing in the $69 billion industry.
- Confidence among Japan’s largest manufacturers rose to a two-year high in December and companies said they plan to increase spending at the fastest pace in 15 years.
- Cosan SA Industria e Comercio, the world’s largest sugarcane processor, reported a record profit as ethanol and sugar sales rose, driven by higher demand in Brazil and the US.
- The Dept. of Homeland Security will propose requiring chemical makers such as DuPont(DD) and railroads such as CSX Corp.(CSX) to better secure shipments of dangerous chemicals, a department official said.
- OPEC shouldn’t target high oil prices by restricting output, Japan’s Trade Minister Akira Amari said. “Oil consuming nations should work on energy conservation and efficiency to reduce demand for oil,” Amari told reporters. The reduction in demand may equal the 500,000 barrel-a-day output cut decided by OPEC yesterday.
Late Buy/Sell Recommendations
Morgan Stanley:
- Reiterated Overweight on (ET), target $30.
Business Week:
- Fortune Brands’(FO) shares may rise 12% in the next year, citing Gregory Gieber of AG Edwards.
- Shanda Interactive(SNDA), China’s second-biggest provider of online games, will benefit from growth in Internet and broadband usage.
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated +.12%.
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
- (OHI)/.17
Upcoming Splits
- (AFG) 3-for-2
- (SPAR) 3-for-2
- (AEOS) 3-for-2
Economic Releases
8:30 am EST
- The Consumer Price Index for November is estimated to rise .2% versus a -.5% decline in October.
- The CPI Ex Food & Energy for November is estimated to rise .2% versus a .1% increase in October.
9:00 am EST
- Net Long-term TIC Flows for October are estimated to rise to $70.0 billion versus $65.1 billion in September.
9:15 pm EST
- Industrial Production for November is estimated to remain unch. versus a .2% gain in October.
- Capacity Utilization for November is estimated to rise to 82.1% versus a reading of 82.0% in October.
Bloomberg:
- Royal Dutch Shell Plc, BP Plc, ConocoPhillips(COP) and Marathon Oil(MRO) reached agreement with the US Minerals Management Service to pay oil and gas royalties under botched Gulf of Mexico leases from 1998 and 1999.
- Samsung Electronics of South Korea and liquid-crystal display makers in Taiwan and Japan my face the largest antitrust penalty ever after a probe of possible price-fixing in the $69 billion industry.
- Confidence among Japan’s largest manufacturers rose to a two-year high in December and companies said they plan to increase spending at the fastest pace in 15 years.
- Cosan SA Industria e Comercio, the world’s largest sugarcane processor, reported a record profit as ethanol and sugar sales rose, driven by higher demand in Brazil and the US.
- The Dept. of Homeland Security will propose requiring chemical makers such as DuPont(DD) and railroads such as CSX Corp.(CSX) to better secure shipments of dangerous chemicals, a department official said.
- OPEC shouldn’t target high oil prices by restricting output, Japan’s Trade Minister Akira Amari said. “Oil consuming nations should work on energy conservation and efficiency to reduce demand for oil,” Amari told reporters. The reduction in demand may equal the 500,000 barrel-a-day output cut decided by OPEC yesterday.
Late Buy/Sell Recommendations
Morgan Stanley:
- Reiterated Overweight on (ET), target $30.
Business Week:
- Fortune Brands’(FO) shares may rise 12% in the next year, citing Gregory Gieber of AG Edwards.
- Shanda Interactive(SNDA), China’s second-biggest provider of online games, will benefit from growth in Internet and broadband usage.
Night Trading
Asian Indices are +.50% to +1.0% on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated +.12%.
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
- (OHI)/.17
Upcoming Splits
- (AFG) 3-for-2
- (SPAR) 3-for-2
- (AEOS) 3-for-2
Economic Releases
8:30 am EST
- The Consumer Price Index for November is estimated to rise .2% versus a -.5% decline in October.
- The CPI Ex Food & Energy for November is estimated to rise .2% versus a .1% increase in October.
9:00 am EST
- Net Long-term TIC Flows for October are estimated to rise to $70.0 billion versus $65.1 billion in September.
9:15 pm EST
- Industrial Production for November is estimated to remain unch. versus a .2% gain in October.
- Capacity Utilization for November is estimated to rise to 82.1% versus a reading of 82.0% 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.
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