Bloomberg:
- Emerging-market stocks had their worst week in almost six months on falling commodity prices.
- Google Inc.(GOOG) invested in a Chinese company that helps users download online videos and software to take market share from local competitor Baidu.com(BIDU).
- Treasury benchmark 10-year notes fell by the most in two weeks after the US added more jobs in December than economists forecast and incomes increased by the largest amount in eight months.
- The US dollar surged to a six-week high against the euro after a government report showed US job growth unexpectedly quickened last month.
- CBS Corp.(CBS) and Walt Disney(DIS) will use next week’s Consumer Electronics Show to expand efforts to get more of their movies and television shows onto the Web and mobile devices.
- Best Buy(BBY) and Circuit City Stores(CC) reported December sales that exceeded analysts’ estimates during the holiday shopping season.
- China told banks to set aside more money reserves for the fourth time in seven months to prevent a rebound in lending and investment.
- Crude oil may fall further next week, extending its biggest decline since April 2005, as mild weather reduces heating-fuel demand in the world’s biggest economy.
- Copper is headed for its biggest weekly loss in more than a decade as expanding stockpiles added to speculation that supplies will outpace demand this year for the first time since 2003.
- The cost of transporting oil on supertankers may fall for a third consecutive year as crude shipments ease and new vessels are launched, prompting owners to sell ships as scrap metal or adapt them for other uses.
Wall Street Journal:
- World regulators and central banks are scrutinizing hedge funds, but regulatory proposals are unlikely to get far because approaches differ from country to country.
- Nick Maounis, founder of Amaranth Advisors LLC, the hedge fund that lose $6.4 billion in a few days last year, is seeking to start a new firm.
- Foreign hedge funds operating in the US, which portray themselves as tax shelters to non-US investors, may have to pay taxes because of their growing business in bank loans.
- Andrew Grossman, executive director of Wal-Mart Watch, plans to leave the organization this month to set up a political consulting firm.
- Microsoft’s(MSFT) Robbie Bach, president of the Entertainment and Devices division, is driving a strategic shift at the company toward “connected entertainment” and equipment linked to online services.
- Seagate Technology(STX) plans to sell external hard drives under the FreeAgent brand name to appeal to computer users who want to store digital photographs, movies and songs.
USA Today:
- US cities and counties are using laws that fine adults who supervise house parties where minors drink or possess alcohol by as much as $2,500 to crack down on underage drinking.
NY Times:
- A 30-second commercial on the telecast of this year’s Super Bowl will cost a record $2.6 million.
Jordan Times:
- Jordan has copper reserves of between $1.5 billion and $2 billion that can be mined because of higher metal prices, citing the president of the Jordan Geologists Assoc.
Xinhua News:
- Chinese President Hu Jintao urged Iran to “make a serious response” to a United Nations Security Council resolution on its nuclear program.
Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets
Friday, January 05, 2007
Job Creation Above Expectations, Unemployment Rate Still Historically Low, Hourly Earnings Rising More Than Twice Inflation Rate
- The Change in Non-farm Payrolls for December was 167K versus estimates of 100K and an upwardly revised 154K in November.
- The Change in Manufacturing Payrolls for December was -12K versus estimates of -15K and a downwardly revised -20K in November.
- The Unemployment Rate for December was 4.5% versus estimates of 4.5% and 4.5% in November.
- Average Hourly Earnings for December rose .5% versus estimates of .3% and an upwardly revised .3% in November.
- The Change in Manufacturing Payrolls for December was -12K versus estimates of -15K and a downwardly revised -20K in November.
- The Unemployment Rate for December was 4.5% versus estimates of 4.5% and 4.5% in November.
- Average Hourly Earnings for December rose .5% versus estimates of .3% and an upwardly revised .3% in November.
BOTTOM LINE: Employers in the US added a greater-than-forecast 167,000 workers to payrolls in December and incomes grew by the most in eight months, adding to evidence that the US economy is poised to accelerate modestly as housing stabilizes and auto production cutbacks subside, Bloomberg reported. Average Hourly Earnings rose 4.2% from year-ago levels, more than twice the inflation rate as measure by the Consumer Price Index. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
Thursday, January 04, 2007
Friday Watch
Late-Night Headlines
Bloomberg:
- US Treasury Secretary Henry Paulson said compensation for CEOs is a matter to be resolved by shareholders and corporate directors.
- Commercial airlines suffered 27 fatal accidents worldwide last year, equaling the lowest total in 10 years, Flight International said.
- Motorola(MOT) said fourth-quarter profit and sales missed forecasts because of lower-than-projected handset revenue.
- Crude oil is falling for a third day, trading near an 18-month low in New York, as mild US weather curbed near-record speculation by investment funds.
- South Korea’s Foreign Ministry said there is “no particular indication” North Korea plans to detonate a second nuclear bomb, after ABC News reported that the communist nation may be preparing a follow-up to its Oct. 9 test.
- Tohrun Sasaki, chief strategist at JPMorgan Chase and a former chief currency trader at the Bank of Japan, sees “strong” trend for US dollar.
- Peter Beutel, president of energy consultant Cameron Hanover, expects oil to fall below $20/bbl. in the next 4-8 years.
- Frank McGhee, head metals trader at Integrated Brokerage Services, sees further selling of copper.
- Copper futures in Shanghai fell the maximum daily limit of 5% to a nine-month low as rising global inventories fueled concern that demand for the metal will lag behind demand.
Apple Daily:
- Quanta Computer and Asustek Computer will ship 4.5 million MacBook laptop computers for Apple Computer(AAPL) this year, citing estimates by UBS AG. The two Taiwan companies shipped 2.8 million laptops to Apple last year.
Financial Times:
- A probe has found evidence of collusion in the European energy industry, citing a report by the EU’s Competition Commissioner Neelie Kroes.
Commercial Times:
- Powerchip Semiconductor plans to spend as much as $28 billion within five years to build memory chip factories in Taiwan, citing VP Eric Tang.
The Star:
- Pioneer Bio Industries, a Malaysian company that produces mangrove palm-based ethanol, plans to spend $398 million to build a biofuel plant.
China Daily:
- Shanda Interactive(SNDA) may form a venture with Sun Media Investment Holdings to sell games to mobile-phone users.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (GILD), raised target to $81.
- Reiterated Buy on (NWS), raised target to $26.
Morgan Stanley:
- Reiterated Overweight on (FORM), target $48.
Business Week:
- AngioDynamics(ANGO), which makes devices used to diagnose and treat vascular disease, will benefit from equipment it’s developing to treat cancers, citing Jeff Jonas of GAMCO Medical Opportunity Fund.
- Federal Realty Investment Trust(FRT), a developer of condominiums and shopping centers, will increase earnings as it redevelops properties, citing Merrill Lynch analyst Steve Sakwa.
- MedImmune, the seventh-largest US biotech company, is likely to get more calls from investors to sell itself, citing David Katz, president of Matrix Asset Advisors.
Night Trading
Asian Indices are -1.50% to -.50% on average.
S&P 500 indicated -.16%.
NASDAQ 100 indicated -.18%.
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
- (GPN)/.44
- (SGR)/.19
Upcoming Splits
- (RG) 2-for-1
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for December is estimated at 100K versus 132K in November.
- The Change in Manufacturing Payrolls for December is estimated at -15K versus -15K in November.
- The Unemployment Rate for December is estimated at 4.5% versus 4.5% in November.
- Average Hourly Earnings for December are estimated to rise .3% versus a .2% gain in November.
Bloomberg:
- US Treasury Secretary Henry Paulson said compensation for CEOs is a matter to be resolved by shareholders and corporate directors.
- Commercial airlines suffered 27 fatal accidents worldwide last year, equaling the lowest total in 10 years, Flight International said.
- Motorola(MOT) said fourth-quarter profit and sales missed forecasts because of lower-than-projected handset revenue.
- Crude oil is falling for a third day, trading near an 18-month low in New York, as mild US weather curbed near-record speculation by investment funds.
- South Korea’s Foreign Ministry said there is “no particular indication” North Korea plans to detonate a second nuclear bomb, after ABC News reported that the communist nation may be preparing a follow-up to its Oct. 9 test.
- Tohrun Sasaki, chief strategist at JPMorgan Chase and a former chief currency trader at the Bank of Japan, sees “strong” trend for US dollar.
- Peter Beutel, president of energy consultant Cameron Hanover, expects oil to fall below $20/bbl. in the next 4-8 years.
- Frank McGhee, head metals trader at Integrated Brokerage Services, sees further selling of copper.
- Copper futures in Shanghai fell the maximum daily limit of 5% to a nine-month low as rising global inventories fueled concern that demand for the metal will lag behind demand.
Apple Daily:
- Quanta Computer and Asustek Computer will ship 4.5 million MacBook laptop computers for Apple Computer(AAPL) this year, citing estimates by UBS AG. The two Taiwan companies shipped 2.8 million laptops to Apple last year.
Financial Times:
- A probe has found evidence of collusion in the European energy industry, citing a report by the EU’s Competition Commissioner Neelie Kroes.
Commercial Times:
- Powerchip Semiconductor plans to spend as much as $28 billion within five years to build memory chip factories in Taiwan, citing VP Eric Tang.
The Star:
- Pioneer Bio Industries, a Malaysian company that produces mangrove palm-based ethanol, plans to spend $398 million to build a biofuel plant.
China Daily:
- Shanda Interactive(SNDA) may form a venture with Sun Media Investment Holdings to sell games to mobile-phone users.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (GILD), raised target to $81.
- Reiterated Buy on (NWS), raised target to $26.
Morgan Stanley:
- Reiterated Overweight on (FORM), target $48.
Business Week:
- AngioDynamics(ANGO), which makes devices used to diagnose and treat vascular disease, will benefit from equipment it’s developing to treat cancers, citing Jeff Jonas of GAMCO Medical Opportunity Fund.
- Federal Realty Investment Trust(FRT), a developer of condominiums and shopping centers, will increase earnings as it redevelops properties, citing Merrill Lynch analyst Steve Sakwa.
- MedImmune, the seventh-largest US biotech company, is likely to get more calls from investors to sell itself, citing David Katz, president of Matrix Asset Advisors.
Night Trading
Asian Indices are -1.50% to -.50% on average.
S&P 500 indicated -.16%.
NASDAQ 100 indicated -.18%.
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
- (GPN)/.44
- (SGR)/.19
Upcoming Splits
- (RG) 2-for-1
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for December is estimated at 100K versus 132K in November.
- The Change in Manufacturing Payrolls for December is estimated at -15K versus -15K in November.
- The Unemployment Rate for December is estimated at 4.5% versus 4.5% in November.
- Average Hourly Earnings for December are estimated to rise .3% versus a .2% gain in November.
BOTTOM LINE: Asian indices are lower, weighed down by commodity-related shares in the region. I expect US equities to open modestly lower and to rise into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Near Session Highs, Led by Strong Gains in Tech and Biotech Shares as Commodities Fall Again
Indices
S&P 500 1,418.34 +.12%
DJIA 12,480.69 +.05%
NASDAQ 2,453.43 +1.25%
Russell 2000 789.95 +.32%
Wilshire 5000 14,222.54 +.16%
S&P Barra Growth 653.26 +.31%
S&P Barra Value 763.50 -.06%
Morgan Stanley Consumer 699.12 +.32%
Morgan Stanley Cyclical 893.36 -.22%
Morgan Stanley Technology 579.06 +1.81%
Transports 4,673.07 +.48%
Utilities 455.56 -.46%
Put/Call .82 -3.53%
NYSE Arms 1.19 -.36%
Volatility(VIX) 11.51 -4.40%
ISE Sentiment 132.0 +6.45%
US Dollar 84.35 +.51%
CRB 292.61 -1.97%
Futures Spot Prices
Crude Oil 55.78 -4.36%
Reformulated Gasoline 148.70 -4.0%
Natural Gas 6.13 -.54%
Heating Oil 154.60 -2.65%
Gold 623.80 -.95%
Base Metals 221.84 -.19%
Copper 261.0 -1.47%
10-year US Treasury Yield 4.60% -1.15%
Leading Sectors
Wireless +2.33%
Internet +2.32%
Semis +2.01%
Lagging Sectors
Gold & Silver -1.85%
Coal -2.13%
Oil Service -2.90%
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:
- UnitedHealth Group(UNH) said former CEO McGuire along with other current and former executives entered into an options re-pricing agreement with the company on Dec. 29.
- US Treasuries rose the most in five weeks after falling commodity prices diminished inflation concerns.
- New York Times(NYT) agreed to sell its nine US television stations to Oak Hill Capital Partners for $575 million to focus on its newspapers and Web sites.
- Bill Gross, manager of the world’s biggest bond fund, says the Fed will lower its benchmark interest rate by 100 basis points this year.
- Canadian stocks had their steepest two-day decline in six months, led by commodity producers including Suncor Energy and First Quantum Minerals.
- The CRB Commodities Index fell to a 20-month low as near-record speculation continues to reverse course. The CRB Index is now down 19.9% since May of last year.
- Maple Resources, the second-largest natural gas producer in Peru, plans to invest $100 million to produce ethanol in the country to meet growing demand for alternative fuels in the US.
S&P 500 1,418.34 +.12%
DJIA 12,480.69 +.05%
NASDAQ 2,453.43 +1.25%
Russell 2000 789.95 +.32%
Wilshire 5000 14,222.54 +.16%
S&P Barra Growth 653.26 +.31%
S&P Barra Value 763.50 -.06%
Morgan Stanley Consumer 699.12 +.32%
Morgan Stanley Cyclical 893.36 -.22%
Morgan Stanley Technology 579.06 +1.81%
Transports 4,673.07 +.48%
Utilities 455.56 -.46%
Put/Call .82 -3.53%
NYSE Arms 1.19 -.36%
Volatility(VIX) 11.51 -4.40%
ISE Sentiment 132.0 +6.45%
US Dollar 84.35 +.51%
CRB 292.61 -1.97%
Futures Spot Prices
Crude Oil 55.78 -4.36%
Reformulated Gasoline 148.70 -4.0%
Natural Gas 6.13 -.54%
Heating Oil 154.60 -2.65%
Gold 623.80 -.95%
Base Metals 221.84 -.19%
Copper 261.0 -1.47%
10-year US Treasury Yield 4.60% -1.15%
Leading Sectors
Wireless +2.33%
Internet +2.32%
Semis +2.01%
Lagging Sectors
Gold & Silver -1.85%
Coal -2.13%
Oil Service -2.90%
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:
- UnitedHealth Group(UNH) said former CEO McGuire along with other current and former executives entered into an options re-pricing agreement with the company on Dec. 29.
- US Treasuries rose the most in five weeks after falling commodity prices diminished inflation concerns.
- New York Times(NYT) agreed to sell its nine US television stations to Oak Hill Capital Partners for $575 million to focus on its newspapers and Web sites.
- Bill Gross, manager of the world’s biggest bond fund, says the Fed will lower its benchmark interest rate by 100 basis points this year.
- Canadian stocks had their steepest two-day decline in six months, led by commodity producers including Suncor Energy and First Quantum Minerals.
- The CRB Commodities Index fell to a 20-month low as near-record speculation continues to reverse course. The CRB Index is now down 19.9% since May of last year.
- Maple Resources, the second-largest natural gas producer in Peru, plans to invest $100 million to produce ethanol in the country to meet growing demand for alternative fuels in the US.
BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Semi longs, Computer longs, Biotech longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished higher, sector performance was mixed and volume was above average. Measures of investor anxiety were mostly lower into the close. Today's overall market action was bullish. I believe today's type of action will repeatedly occur throughout the year as true growth stocks outperform, while the most cyclical over-owned stocks underperform substantially. The Oil Service sector, which was the most loved heading into the new year, is already 8.4% lower year-to-date. Moreover, the Gold & Silver sector is down 5.4%, Energy is down 6.3%, Coal is 6.7% lower and steel is 3.8% lower for the year. Conversely, Airlines are up 4.1%, Networkers are up 3.1%, Wireless is up 2.8% and Internets are up 2.6% already this year. I suspect performance anxiety is beginning to resurface and the year has just begun. I expect today's rally to strengthen over the next few days and would use any early weakness related to a weaker-than-expected employment report tomorrow to add to favorite growth-oriented long positions. I continue to believe January will be a very good month for most U.S. stocks, especially growth stocks, as economic concerns continue to diminish, inflation decelerates further, long-term rates remain low and the mania for commodities continues to reverse course. The herd, which is currently very bearish given recent gains, will likely not begin to jump on the bull bandwagon until the second half of the year.
Stocks Higher into Final Hour, Led by Sharp Gains in Technology and Biotech Shares
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Semi longs and Commodity shorts. I covered my (EEM), (IWM) and (QQQQ) hedges today, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is higher, sector performance is mixed and volume is above average. Bloomberg is reporting that Pimco's Bill Gross is predicting the Fed will cut rates within six months and that the Fed Funds Rate will finish the year 100 basis points lower at 4.25%. He is also predicting the 10-year yield will fall to about 4.5%. I do not believe the Fed will cut that much this year, however one or two cuts are likely as inflation concerns fall off a cliff with commodity prices. I expect US stocks to trade modestly higher into the close from current levels on short-covering, declining long-term rates, bargain-hunting and lower energy prices.
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