BETWEEN THE HEDGES

Thursday, December 28, 2006

Friday Watch

Posted by Gary .....at 9:47 PM

Late-Night Headlines
Bloomberg:
- President George W. Bush declared Jan. 2 to be a national day of mourning after this week’s death of former President Gerald R. Ford.
- The Nasdaq Stock Market said it will close Jan. 2 in honor of former President Gerald Ford. The NYSE may shut down as well.
- Broadway Real Estate Partners LLC, a property-investment and management firm, said it bought Boston’s John Hancock Tower and nine other US buildings today from Beacon Capital Partners LLC for more than $3.3 billion.
- The People’s Liberation Army, the world’s largest regular fighting force, spent 14.7% more this year, according to a Chinese government report. Military spending accelerated after a decade of 9% average increases.
- The Securities Industry and Financial Markets Assoc. recommended US bond markets close early on Jan.2 in honor of former President Gerald Ford.
- Crude oil is falling in NY, heading for a second weekly decline, as mild weather is reducing near-record speculation by investment funds on the commodity.
- Ipsco Inc.(IPS), which makes steel pipe for oil and natural gas explorers, cut its fourth-quarter profit forecast to $3-$3.10/share, citing lower demand for steel plate and tube and higher industry inventories. Ipsco had forecast profit of $3.30-$3.50/share.
- AT&T(T) agreed to new concessions including some price controls to win regulatory approval for its $86 billion purchase of BellSouth Corp.

AP:
- The North Carolina State Bar filed ethics charges against District Attorney Mike Nifong, the prosecutor in the Duke University lacrosse case.

Seoul Economic Daily:
- Samsung Group, Hyundai Motor Group, LG Group and SK Group plan to invest a total of $52 billion next year, 5.3% more than this year, the groups’ chairman told President Roh Moo Hyun yesterday.

Xinhua News Agency:
- China’s Internet users reached 132 million at the end of 2006, the second largest after the US, citing government data.
- China added 66.6 million cell-phone users and 19.6 million fixed-line telephone subscribers during 2006.

Late Buy/Sell Recommendations
Business Week:
- Green Mountain Coffee Roasters(GMCR), which sells coffee products to offices, supermarkets and restaurants, will see its shares climb as it adds customers, citing Richard Driehaus.
- Shares of EMC Corp.(EMC), a data storage company, may rise in 2007 as a result of higher revenue, successful acquisitions and buybacks, citing Jerome Heppelmann, CEO of Liberty Ridge Capital.
- Linear Technology(LLTC) may grow faster than the rest of the semiconductor industry, citing Christiana Bank & Trust fund manager Scott Armiger.

Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 indicated +.03%.
NASDAQ 100 indicated +.08%.

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
- None of note

Upcoming Splits
- (SIAL) 2-for-1
- (SWS) 3-for-2

Economic Releases
- None of note

BOTTOM LINE: Asian indices are higher, boosted by technology shares in the region. I expect US equities to open mixed and to rise into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Slightly Lower as Long-term Rates Bounce on Economic Optimism

Posted by Gary .....at 4:09 PM

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

Stocks Slightly Higher into Final Hour on Rising Economic Optimism

Posted by Gary .....at 3:08 PM

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Computer longs and Telecom longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is about even, most sectors are rising and volume is slightly below average. Short interest on the NYSE rose from mid November through mid December and remains near all-time highs despite recent market gains and almost weekly DJIA record highs. Days to cover rose to 6.3 from 6.0 the prior month. Bears remain stunningly complacent, in my opinion, as every rally is viewed as just another shorting/selling opportunity and every pullback is viewed as evidence of a major top. I continue to believe overall investor sentiment towards U.S. stocks has never before in history been this poor with the DJIA making all-time highs. The "mother of all short-covering rallies" will occur. It is just a matter of time. I expect US stocks to trade modestly higher into the close from current levels on more economic optimism, short-covering and portfolio manager performance anxiety.

Today's Headlines

Posted by Gary .....at 2:38 PM

Bloomberg:
- President Bush said today he is “making good progress” toward deciding on changes to US plans in Iraq after meeting at his Texas ranch with top national-security officials.
- OAO Lukoil, Russia’s largest oil producer, and state oil and gas companies from China, South Korea and Malaysia will start exploring oil and natural gas fields in Uzbekistan’s sector of the Aral Sea in March.
- Downtown Chicago office building sales surged to a record $5 billion this year as vacancy rates fell and some investors found returns there as attractive as those in New York and Los Angles.
- US Treasury yields are rising to seven week highs, after industry reports on consumer confidence, existing home sales and manufacturing were stronger than economists expected.
- Meat and milk from cloned pigs, cows and goats may soon be cleared for sale in the US after regulators determined that eating genetically duplicated farm animals doesn’t post safety risks for consumers.
- Copper prices are falling again in NY as inventories continue to rise.

USA Today:
- The number of companies selling stock to the public for the first time, and the amount of money they’ve been able to raise, failed to keep pace with a record-setting DJIA this year.

NY Times:
- Some Wall Street analysts expect a decline in US sales of drug-coated coronary stents to end next year.

AP:
- UAL Corp.’s United Airlines has cut fare prices to capture business in the traditionally slow post holiday period.

MTI:
- Karpat Energo, a Hungarian power plant company, plans to build a $261 million bioethanol plant in northeastern Hungary.

Job Market Healthy, Consumer Confidence Surges Near Cycle Highs, Chicago Purchasing Manager Improves, Existing Home Sales Rise Again

Posted by Gary .....at 12:50 PM

- Initial Jobless Claims for last week rose to 317K versus estimates of 320K and 316K the prior week.
- Continuing Claims rose to 2530K versus estimates of 2500K and 2514K prior.
- Consumer Confidence for December rose to 109.0 versus estimates of 102.0 and a reading of 105.3 in November.
- Chicago Purchasing Manager for December rose to 52.4 versus estimates of 50.0 and a reading of 49.9 in November.
- Existing Home Sales for November rose to 6.28M versus estimates of 6.19M and 6.24M in October.

BOTTOM LINE: US initial jobless claims and continuing claims edged up last week, Bloomberg reported. The four-week moving average of claims fell to 315,750, the lowest in six weeks. The unemployment rate among those eligible for jobless benefits, which tracks the US jobless rate, held steady at a low 1.9%. Despite housing and auto production-related job cutbacks, the US job market remains very healthy as other areas are picking up the slack. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Confidence among US consumers unexpectedly surged this month to the highest level since April, reflecting recent job and stock gains, Bloomberg reported. The Present Situation Component of the index rose to 129.9, the highest since July, versus 125.4 the prior month. The Expectations Component for the next six months increased to 95.1, the highest since June, versus 91.9 the prior month. The Jobs Are Plentiful component rose to 26.9% versus 25.7% the prior month. The percentage of people who expect their incomes to decrease fell to 7% from 9.1% the prior month and to the lowest since 2001. The overall surge in the index was mainly due to a 15.6% jump in Central Northeast sentiment. Overall, Consumer Confidence has only been higher one other month this cycle. In April it hit 109.8. I continue to believe new cycle highs in confidence will occur over the coming months as energy prices fall further, interest rates remain low, inflation decelerates more, the job market remains healthy, stocks rise further, housing stabilizes at relatively high levels and irrational pessimism lifts.

A gauge of US business activity rebounded from the first contraction in more than three years as orders and production increased, Bloomberg said. The production component rose to 56.2 versus 54.4 the prior month. The new orders component rose to 57.8 versus 52.0 the prior month. The prices paid index was unch. at 60.2. Manufacturing will likely remain muted until the second half of next year.

Sales of previously owned homes unexpectedly rose in November, adding to evidence the housing slowdown is ending, Bloomberg reported. The supply of previously owned homes for sale at the current pace fell to 7.3 months’ from 7.4 months supply in October. The median price of an existing home fell 3.1% to $218,000. I continue to believe the US housing market is stabilizing at relatively high levels.