BETWEEN THE HEDGES

Monday, January 08, 2007

Tuesday Watch

Posted by Gary .....at 11:34 PM

Late-Night Headlines
Bloomberg:
- US investors last year put the least money into domestic stock funds in a rising market since 1989, according to industry statistics. Investors’ reticence to dive into equities implies there’s plenty of cash available to fuel gains, said Jeff Schappe of BB&T Asset Management.
- Crude oil fell for a second day in NY, dropping back below $56/bbl., on skepticism OPEC can maintain prices amid falling heating demand in the US.
- US gasoline at the pump fell 2.8 cents to a nationwide average of $2.31 a gallon the week ended today, the biggest decline in almost 3 months.
- Shares of Sony(SNE) posted their biggest gain in more than five months after the company met its PlayStation 3 shipment target in the US last year.
- China National Petroleum Corp., the country’s largest producer of oil and gas, will increase capital expenditures by 25% this year to $32 billion as it drills domestically and abroad.
- China National Offshore Oil Corp., the nation’s third-largest oil company, plans to partner with PT Sinar Mas Agro Resources & Technology, to invest $5.5 billion in biofuel projects.
- US and European regulators, turning a spotlight on one of Wall Street’s most profitable businesses, are conducting a joint probe into whether banks and securities firms set strict enough limits on loans to hedge funds.
- Kim Eng Tan, analyst at S&P Singapore, said there is a “very strong” chance that his company will reduce its outlook on Thailand’s credit rating.
- Toyota Motor(TM) and Honda Motor(HON), the two biggest Japanese automakers in the US, expect demand for fuel-efficient vehicles to add to their record US share this year.

Wall Street Journal:
- General Electric(GE) is auctioning its plastics unit after the US Dept. of Justice expressed concerns about lack of competition among bidders.
- Cingular Wireless LLC may provide mobile-phone service for a new device from Apple Computer(AAPL). The phone may be introduced as soon as tomorrow.

Economic Times:
- Global funds investing in Indian stocks may need to pay a capital-gains tax of 10% on income from sale of shares within a year of buying.

Late Buy/Sell Recommendations
Citigroup:
- Rated (AT) Buy, target $63.
- Rated (LTR) Buy, target $53.
- Favorite retail stocks for 2007 are (LOW) and (DG).

Night Trading
Asian Indices are -.25% to +1.0% on average.
S&P 500 indicated +.09%.
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
- (AA)/.65
- (VOXX)/.65
- (HELE)/.85
- (RI)/.28
- (VOL)/.62

Upcoming Splits
- None of note

Economic Releases
- None of note

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

Stocks Finish Slightly Higher on Another Decline in Oil and Rising Economic Optimism

Posted by Gary .....at 4:47 PM

Indices
S&P 500 1,412.84 +.22%
DJIA 12,423.49 +.21%
NASDAQ 2,438.20 +.16%
Russell 2000 776.99 +.14%
Wilshire 5000 14,149.91 +.22%
Russell 1000 Growth 556.13 +.28%
Russell 1000 Value 809.42 +.17%
Morgan Stanley Consumer 696.56 +.26%
Morgan Stanley Cyclical 888.93 +.27%
Morgan Stanley Technology 574.72 +.20%
Transports 4,624.18 +.26%
Utilities 447.10 -.12%
Put/Call .87 -1.14%
NYSE Arms 1.04 +6.96%
Volatility(VIX) 12.0 -1.15%
ISE Sentiment 143.0 -4.67%
US Dollar 84.58 -.07%
CRB 290.73 -.13%

Futures Spot Prices
Crude Oil 56.08 -.41%
Reformulated Gasoline 147.20 -1.41%
Natural Gas 6.41 +3.78%
Heating Oil 155.75 -.53%
Gold 610.90 +.66%
Base Metals 218.57 -2.64%
Copper 253.25 -.26%
10-year US Treasury Yield 4.65% +.21%

Leading Sectors
I-Banks +1.44%
Hospitals +1.38%
Gaming +1.03%

Lagging Sectors
Telecom -.38%
Drugs -.71%
Homebuilders -.97%

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
Citigroup:
- Downgraded (IIT) to Sell.

Afternoon/Evening Headlines
Bloomberg:
- Trading of American depository receipts of CA Nacional Telefonos de Venezuela(VNT) was halted after President Hugo Chavez said he plans to nationalize the company as part of his effort to turn the nation into a socialist state.
- University of Pennsylvania economics professor Rafael Robb was charged with murdering his wife, who was found bludgeoned to death last month.
- Borrowing by US households rose in November by the most in three months as Americans charged more to their credit cards to purchase gifts at the start of the holiday-shopping season.
- Shares of Gap Inc.(GPS) rose the most in more than two years after CNBC reported the company had hired Goldman Sachs(GS) to explore strategic alternatives.
- Tom Hartmann, a commodity broker for Altavest Worldwide Trading says oil could fall to $46/bbl. as OPEC further cuts production.
- Canadian Natural Resources, Canada’s third-largest natural gas producer, expects to spend $510 million to boost output from Alberta’s oil sands.
- OPEC crude oil-production in December dropped .8%, a Bloomberg News survey showed. Notwithstanding this cut, oil fell almost $3/bbl. during the month as record speculation by investment funds continued to subside.

BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Telecom longs, Retail longs and I-banking longs. 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 about even, sector performance was mostly positive and volume was above average. Measures of investor anxiety were mixed into the close. Today's overall market action was mildly bullish as the major average and breadth finished higher, near session highs, notwithstanding at least three separate reports of potential terrorism-related activity. Oil finished floor-trading slightly lower and is down -8.1% year to date, notwithstanding a number of potential upside catalysts that surfaced today. The 10-year yield was stable throughout the day. I like what I am seeing beneath the surface despite the many bears' attempts to suggest that any pause or slight pullback is the beginning of a major downturn.

Stocks Higher into Final Hour on Another Decline in Oil and More US Economic Optimism

Posted by Gary .....at 3:19 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Retail longs, I-banking longs and Telecom longs. I covered my (IWM) and (QQQQ) hedges, added to my (EEM) short and added to my (ISRG) and (UA) longs today, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is modestly higher, almost every sector is rising and volume is above average. Overall, I would classify the Fed’s Kohn’s comments today as mildly dovish. Recent economic data has been modestly below "Goldilocks," with below-average growth and inflation. I suspect the U.S. economy will accelerate modestly throughout the year back to around average rates of growth. However, inflation should continue to decelerate meaningfully and remain below average levels through year-end. Oil is now -$.22, to $56.09, falling -$1.49 from session highs, notwithstanding calls from some OPEC members for an emergency meeting and production disruption worries. So far, the major averages are just trending mildly higher on the decline. I suspect over the next couple of weeks, investors will once again view oil's demise as hugely positive for the broad U.S. stock market. I expect US stocks to trade modestly higher into the close from current levels on short-covering, more economic optimism, lower energy prices and bargain-hunting.

Today's Headlines

Posted by Gary .....at 3:03 PM

Bloomberg:
- Caremark Rx Inc.(CMX) rejected a $26 billion hostile bid from Express Scripts(ESRX) because it relies on too much debt and backed a lower offer from CVS Corp.(CVS).
- NYC officials are looking for the origin of a noxious smell that engulfed parts of Manhattan and New Jersey this morning, sickening at least 27. The Dept. of Homeland Security said there were no signs of terrorism.
- Federal Reserve Vice Chairman Kohn said conditions are in place for a “good year for the US economy.”
- General Motors(GM) promised to make a hybrid car that travels 40 miles on a battery before its gasoline engine kicks in. Ford Motor(F) introduced a redesigned Focus compact with a voice-activated music player to attract young buyers.
- Stem cells from amniotic fluid may open a third avenue of research for scientists seeking to regenerate human tissue that is less controversial than embryonic cells and more versatile than adult stem cells.
- Welsh Carson Anderson & Stowe, the buyout firm that helped create United Surgical Partners Intl. eight years ago, agreed to buy the company for $1.8 billion in cash.
- China’s central bank Governor Zhou Ziaochuan said he is considering more steps to cool the world’s fourth-biggest economy, after lifting bank reserve ratios four times in seven months.
- Copper prices in NY declined again as rising stockpiles of the metal continue to curb investment fund speculation.
- Crude oil is falling again on skepticism that OPEC will cut production as much as it pledged.
- Banks that helped finance the biggest increase in oil-tanker construction in 30 years may repossess ships as freight rates slump and operating costs rise, accountancy firm Moore Stephens LLP said.

Wall Street Journal:
- Nokia Oyj(NOK) will introduce a slim, folding mobile-phone handset at the Las Vegas consumer electronics show today.
- Procter & Gamble(PG) is starting two Internet sites designed to learn about customers and how to sell to them.
- News Corp.’s(NWS) MySpace.com social networking Internet site and the National Academy of Television Arts & Sciences will say today that amateur video makers can have their work considered for a “broadband Emmy.”
- Dolby Labs(DLB) said it has developed a way for television viewers to tone down noisy commercials.
- Vonage Holdings(VG), which provides a telephone service over the Internet, intends to supplement it by offering wireless high-speed Internet, or Wi-Fi, access.

USA Today:
- US states including California, Louisiana and Missouri plan to expand health-care coverage as they seek to broaden access to care for the 42.4 million uninsured Americans.

NY Times:
- A Chicago pilot program is telling 1,100 residents when are the most expensive times to use electricity in a bid to encourage conservation.
- Rick Rosner, the creator of the television programs “CHiPs” and “The New Hollywood Squares”, has joined with DirectTV Group(DTV) to create a mobile satellite and television system. The 25-pound system, called Sat-Go, will be introduced today at the CES in Las Vegas.
- Private equity firms are offering CEOs top pay to continue to run the once-public companies the firms bought out.

Financial Times:
- Blockbuster Inc.(BBI) may be helped by the latest products for online video downloads, rather than hurt.

El Nacional:
- Venezuelan President Hugo Chavez’s decision to shut down a private television station is part of a government plan to gain “communication hegemony,” citing Andres Izarra, president of state-run television station Telesur. “Socialist thought must predominate over capitalist values,” said Izarra.

Xinhua News:
- Chinese police destroyed a terrorist training camp in the northwestern province of Xinjiang on Jan. 5, killing 18 people in a gun battle.

Economic Releases

Posted by Gary .....at 11:22 AM

- None of note