BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Telecom longs, Medical longs, Retail longs, Biotech longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is heavy. Oil Movements is saying that OPEC shipments of crude are rising 1.5% this month from December. This is likely the reason for oil's $3 per barrel decline in the last few hours. The commodity continues to trade very poorly. OPEC tried to defend it at $60, then at $58 and then at $55. OPEC has never had much success stopping a substantial decline in the past. As I have said many times before, the longer oil stays anywhere near current levels, the greater the long-term demand destruction, which is already pervasive globally. A CNBC commentator just asked why natural gas is plunging 6%. Natural gas inventories are at all-time high levels and 18% above the five-year average for this time of the year. The long-term average price for natural gas is $4.63. Prices anywhere near current levels are absurd, in my opinion. The same thing that has been driving the mania for most commodities -- namely, historic speculation by investment funds -- has been keeping natural gas levitating at sky-high prices. The CRB Index is now in a bear market, falling 21.4% from May 2006 record highs. Natural gas is falling because the mania for commodities is ending. Forced liquidations and redemptions are likely just beginning for the hordes of newly minted commodity funds, and downside speculation has just begun. 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.
Thursday, January 11, 2007
Stocks Sharply Higher into Final Hour on Another Plunge in Oil and Rising Economic Optimism
Today's Headlines
Bloomberg:
- US stocks are rallying, pushing the DJIA to another record, as a four-day slide in oil prices bolstered earnings prospects for technology companies, retailers and banks.
- Crude oil is dropping below $52/bbl. for the first time in 19 months, falling to $51.90/bbl.
- Will $1 trillion become a curse for the four-year rally in emerging-market stocks, as it was for the Internet bubble of the 1990s? The question arises because the value of China’s stock market exceeded this threshold yesterday and Russia’s did so last month. Before then, no emerging market had ever been so large.
- Federal Reserve Bank of Boston President Cathy Minehan, who never dissented in interest-rate decisions since taking office in 1994, will retire this year.
- General Motors(GM) said it expects to improve automotive earnings and cash flow this year and will increase the amount of money it spends on developing new models.
- Toyota Motor Corp.(TM) may build as many as five North American assembly plants in the next 10 years.
- The Bank of England unexpectedly raised its benchmark interest rate by a quarter-point, the third increase since August.
- OPEC’s president said crude oil’s plunge to $53 a barrel is “unacceptable” and urged members to comply with pledged production cuts.
- Natural gas is plunging over 6% as inventories at record highs and 18% above the five-year average for this time of year cuts record speculation by investment funds for the commodity.
- The CRB Index is in bear market territory, falling 21.3% from
Wall Street Journal:
- A group of four big US banks met with Bush administration officials on Jan. 4 to voice their concerns about impending international capital standards known as Basel II.
- Primax Electronics Ltd., Entery Industrial and other Taiwanese companies could benefit if Apple Inc.’s(AAPL) new iPhone multimedia mobile phone becomes successful.
- General Motors(GM), Ford Motor(F) and Toyota Motor(TM) are trying to attract younger buyers for models such as the Buick, Lincoln, and Lexus that usually appeal more to older drivers.
- IBM(IBM) was awarded more patents last year by the US Patent and Trademark Office than any other company for the 14th year in a row.
- Apple’s(AAPL) iPhone is worth waiting for if you can afford its initial $499 price, Walt Mossberg wrote.
- Top US brokerage firms are garnering handsome profits after making changes to the way in which investors’ idle cash balances are treated.
NY Times:
- US states that provided $500 million of the $3.3 billion spent on insulin in the US in 2005 want the FDA to set standards for a generic version of the drug.
AP:
- US airport security trays may carry advertising for laptops, luxury cars and other products, as part of a program that lets companies give supplies to airports in exchange for marketing rights.
Reuters:
- Pfizer Inc.(PFE) may seek to offer an over-the-counter version of its Viagra anti-impotence drug.
Washington Post:
- The US government shouldn’t be forced to negotiate prescription drug prices for Medicare because the private market is already doing the job well, wrote Michael Leavitt, secretary of health and human services. The typical monthly premium for the drug benefit has dropped from $22 from $38, showing that competition in private industry can control prices, Leavitt said. The Veterans Affairs health system, often cited as an example of successful government price negotiations, doesn’t cover numerous newer drugs that Medicare does, such as Pfizer’s(PFE) Lipitor, the best-selling anti-cholesterol pill.
Financial Times:
- Hedge-fund investors are finding it harder to find managers who can meet their expectations, citing a Deutsche Bank AG survey.
Les Echos:
- French drug sales barely grew last year and may be just as lackluster this year, pharmaceutical industry body LEEM estimated. French people cut their consumption of drugs as doctors, under pressure from the government, prescribed fewer antibiotics, antidepressants and cholesterol medicines. They also bought more generics. The government last year also cut reimbursements on a list of drugs that it says didn’t show enough medical benefits.
Le Parisien:
- France’s Socialist Party will raise income taxes for the country’s highest earners if elected, citing party leader Francois Hollande. The higher taxes would be for those who earn $77,832 annually. That would cancel out tax cuts implemented by the current government.
Gestion:
- Peru’s currency will fall against the US dollar this year as a decline in commodity prices slows US dollar inflows, citing central bank President Julio Velarde.
- US stocks are rallying, pushing the DJIA to another record, as a four-day slide in oil prices bolstered earnings prospects for technology companies, retailers and banks.
- Crude oil is dropping below $52/bbl. for the first time in 19 months, falling to $51.90/bbl.
- Will $1 trillion become a curse for the four-year rally in emerging-market stocks, as it was for the Internet bubble of the 1990s? The question arises because the value of China’s stock market exceeded this threshold yesterday and Russia’s did so last month. Before then, no emerging market had ever been so large.
- Federal Reserve Bank of Boston President Cathy Minehan, who never dissented in interest-rate decisions since taking office in 1994, will retire this year.
- General Motors(GM) said it expects to improve automotive earnings and cash flow this year and will increase the amount of money it spends on developing new models.
- Toyota Motor Corp.(TM) may build as many as five North American assembly plants in the next 10 years.
- The Bank of England unexpectedly raised its benchmark interest rate by a quarter-point, the third increase since August.
- OPEC’s president said crude oil’s plunge to $53 a barrel is “unacceptable” and urged members to comply with pledged production cuts.
- Natural gas is plunging over 6% as inventories at record highs and 18% above the five-year average for this time of year cuts record speculation by investment funds for the commodity.
- The CRB Index is in bear market territory, falling 21.3% from
Wall Street Journal:
- A group of four big US banks met with Bush administration officials on Jan. 4 to voice their concerns about impending international capital standards known as Basel II.
- Primax Electronics Ltd., Entery Industrial and other Taiwanese companies could benefit if Apple Inc.’s(AAPL) new iPhone multimedia mobile phone becomes successful.
- General Motors(GM), Ford Motor(F) and Toyota Motor(TM) are trying to attract younger buyers for models such as the Buick, Lincoln, and Lexus that usually appeal more to older drivers.
- IBM(IBM) was awarded more patents last year by the US Patent and Trademark Office than any other company for the 14th year in a row.
- Apple’s(AAPL) iPhone is worth waiting for if you can afford its initial $499 price, Walt Mossberg wrote.
- Top US brokerage firms are garnering handsome profits after making changes to the way in which investors’ idle cash balances are treated.
NY Times:
- US states that provided $500 million of the $3.3 billion spent on insulin in the US in 2005 want the FDA to set standards for a generic version of the drug.
AP:
- US airport security trays may carry advertising for laptops, luxury cars and other products, as part of a program that lets companies give supplies to airports in exchange for marketing rights.
Reuters:
- Pfizer Inc.(PFE) may seek to offer an over-the-counter version of its Viagra anti-impotence drug.
Washington Post:
- The US government shouldn’t be forced to negotiate prescription drug prices for Medicare because the private market is already doing the job well, wrote Michael Leavitt, secretary of health and human services. The typical monthly premium for the drug benefit has dropped from $22 from $38, showing that competition in private industry can control prices, Leavitt said. The Veterans Affairs health system, often cited as an example of successful government price negotiations, doesn’t cover numerous newer drugs that Medicare does, such as Pfizer’s(PFE) Lipitor, the best-selling anti-cholesterol pill.
Financial Times:
- Hedge-fund investors are finding it harder to find managers who can meet their expectations, citing a Deutsche Bank AG survey.
Les Echos:
- French drug sales barely grew last year and may be just as lackluster this year, pharmaceutical industry body LEEM estimated. French people cut their consumption of drugs as doctors, under pressure from the government, prescribed fewer antibiotics, antidepressants and cholesterol medicines. They also bought more generics. The government last year also cut reimbursements on a list of drugs that it says didn’t show enough medical benefits.
Le Parisien:
- France’s Socialist Party will raise income taxes for the country’s highest earners if elected, citing party leader Francois Hollande. The higher taxes would be for those who earn $77,832 annually. That would cancel out tax cuts implemented by the current government.
Gestion:
- Peru’s currency will fall against the US dollar this year as a decline in commodity prices slows US dollar inflows, citing central bank President Julio Velarde.
Job Market Still Healthy
- Initial Jobless Claims for last week were 299K versus estimates of 320K and 325K the prior week.
- Continuing Claims fell to 2428K versus estimates of 2450K and 2431K prior.
- Continuing Claims fell to 2428K versus estimates of 2450K and 2431K prior.
BOTTOM LINE: First-time claims for state unemployment benefits in the US fell more than expected last week, reflecting a firm labor market and distortions to government figures caused by the holidays, Bloomberg said. The four-week moving-average of claims declined to 314,750, the lowest since Nov. 11. The unemployment rate among those eligible for jobless benefits, which tracks the US unemployment rate, remained steady at 1.9%. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
Wednesday, January 10, 2007
Thursday Watch
Late-Night Headlines
Bloomberg:
- Crude oil is falling to $52.94/bbl. in NY after a US government report showed demand plunged to its lowest in more than two years. “There’s really no one who is going to buy this thing. It’s catch a falling knife syndrome,” said Randy Simpson, vp of supply and trading at New West Petroleum Inc. in Sacramento, California. “The market seems very well supplied.” Oil has now plunged 32% from July 14, 2006 highs.
- President Bush announced that he’s sending more than 20,000 additional troops to Iraq, and said the US erred by not deploying more forces when sectarian violence began spiraling out of control last year.
- Cisco Systems(CSCO) sued Apple Inc.(AAPL) for trademark infringement over Apple’s use of the iPhone name. Apple called the lawsuit "silly," according to Dow Jones.
- Obesity surgeries for older Americans soared almost 21-fold to more than 15,000 procedures a year from 1998 to 2004, said a US government report.
- The Tokyo Stock Exchange is close to announcing an agreement with NYSE Group(NYX) that will strengthen ties between the world’s two largest equity markets, said Japan’s Minister for Financial Services.
- The European Central Bank will probably leave its benchmark interest rate unchanged as President Jean-Claude Trichet waits for more evidence of accelerating inflation before raising borrowing costs.
- Cerberus Capital Management LP, the NY-based buyout firm, is considering a bid for Equity Office Properties Trust(EOP) that may top Blackstone Group LP’s $36 billion offer.
- Goldman Sachs JBWere Pty, the Australian affiliate of the world’s most profitable investment bank, cut its price forecast for copper and zinc this half after investment funds sold the metals.
- The US must embrace “bold” energy policies to reduce its reliance on foreign sources of oil, Robert Hormats, vice chairman of Goldman Sachs Intl., told a Senate panel.
- Oil Search Ltd., Papua New Guinea’s biggest oil and gas producer, said it found oil at an exploration well in Egypt.
Financial Times:
- Wal-Mart Stores(WMT), Tesco Plc, Carrefour SA and Metro AG have agreed a set of workplace guidelines aimed at abolishing sweatshop issues, such as child labor and unpaid wages, from their supply chains.
London-based Times:
- Telefonica SA’s O2 Plc unit has held preliminary talks to gain some rights in Europe and the UK to Apple Computer’s iPhone.
Late Buy/Sell Recommendations
Morgan Stanley:
- Reiterated Overweight on (GILD), raised target to $81.
CSFB:
- Reiterated Outperform on (T), raised target to $39.
Night Trading
Asian Indices are -.50% to +.75% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.10%.
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
- (IHS)/.35
- (MTB)/1.88
- (MTG)/1.53
- (SRR)/.02
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 320K versus 329K the prior week.
- Continuing Claims are estimated to rise to 2450K versus 2446K prior.
Bloomberg:
- Crude oil is falling to $52.94/bbl. in NY after a US government report showed demand plunged to its lowest in more than two years. “There’s really no one who is going to buy this thing. It’s catch a falling knife syndrome,” said Randy Simpson, vp of supply and trading at New West Petroleum Inc. in Sacramento, California. “The market seems very well supplied.” Oil has now plunged 32% from July 14, 2006 highs.
- President Bush announced that he’s sending more than 20,000 additional troops to Iraq, and said the US erred by not deploying more forces when sectarian violence began spiraling out of control last year.
- Cisco Systems(CSCO) sued Apple Inc.(AAPL) for trademark infringement over Apple’s use of the iPhone name. Apple called the lawsuit "silly," according to Dow Jones.
- Obesity surgeries for older Americans soared almost 21-fold to more than 15,000 procedures a year from 1998 to 2004, said a US government report.
- The Tokyo Stock Exchange is close to announcing an agreement with NYSE Group(NYX) that will strengthen ties between the world’s two largest equity markets, said Japan’s Minister for Financial Services.
- The European Central Bank will probably leave its benchmark interest rate unchanged as President Jean-Claude Trichet waits for more evidence of accelerating inflation before raising borrowing costs.
- Cerberus Capital Management LP, the NY-based buyout firm, is considering a bid for Equity Office Properties Trust(EOP) that may top Blackstone Group LP’s $36 billion offer.
- Goldman Sachs JBWere Pty, the Australian affiliate of the world’s most profitable investment bank, cut its price forecast for copper and zinc this half after investment funds sold the metals.
- The US must embrace “bold” energy policies to reduce its reliance on foreign sources of oil, Robert Hormats, vice chairman of Goldman Sachs Intl., told a Senate panel.
- Oil Search Ltd., Papua New Guinea’s biggest oil and gas producer, said it found oil at an exploration well in Egypt.
Financial Times:
- Wal-Mart Stores(WMT), Tesco Plc, Carrefour SA and Metro AG have agreed a set of workplace guidelines aimed at abolishing sweatshop issues, such as child labor and unpaid wages, from their supply chains.
London-based Times:
- Telefonica SA’s O2 Plc unit has held preliminary talks to gain some rights in Europe and the UK to Apple Computer’s iPhone.
Late Buy/Sell Recommendations
Morgan Stanley:
- Reiterated Overweight on (GILD), raised target to $81.
CSFB:
- Reiterated Outperform on (T), raised target to $39.
Night Trading
Asian Indices are -.50% to +.75% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.10%.
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
- (IHS)/.35
- (MTB)/1.88
- (MTG)/1.53
- (SRR)/.02
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 320K versus 329K the prior week.
- Continuing Claims are estimated to rise to 2450K versus 2446K prior.
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 rise into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Near Session Highs as Oil Falls Through Another Key Technical Level and Technology Shares Rise
Indices
S&P 500 1,414.85 +.19%
DJIA 12,442.16 +.21%
NASDAQ 2,459.33 +.63%
Russell 2000 778.87 +.07%
Wilshire 5000 14,186.96 +.24%
Russell 1000 Growth 560.12 +.49%
Russell 1000 Value 807.88 +.03%
Morgan Stanley Consumer 700.24 +.28%
Morgan Stanley Cyclical 894.0 +.33%
Morgan Stanley Technology 580.09 +.62%
Transports 4,641.47 +.19%
Utilities 448.90 +.14%
Put/Call .81 +3.85%
NYSE Arms .75 -52.36%
Volatility(VIX) 11.47 -3.69%
ISE Sentiment 103.0 -35.63%
US Dollar 85.08 +.39%
CRB 289.33 -.06%
Futures Spot Prices
Crude Oil 53.58 -3.70%
Reformulated Gasoline 142.40 -3.10%
Natural Gas 6.7 +1.42%
Heating Oil 151.90 -2.41%
Gold 612.20 -.46%
Base Metals 218.40 +1.69%
Copper 266.45 +4.24%
10-year US Treasury Yield 4.68% +.65%
Leading Sectors
Airlines +2.69%
Gaming +2.43%
Semis +1.76%
Lagging Sectors
Gold & Silver -1.16%
Oil Service -1.33%
Energy -1.58%
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:
- US holiday retail sale surged 5.1% as consumers hunted for last-minute items and spent their gift cards, ShopperTrak RCT Corp. said. The increase in November and December sales beat the high end of ShopperTrak’s forecast for a gain of as much as 5% despite record warm temperatures that damped clothing demand.
- Shares of XM Satellite Radio(XMSR) and Sirius Satellite Radio(SIRI) jumped after comments by executives fueled speculation about a possible combination.
- Genentech(DNA) said fourth quarter profit soared 75%, helping by surging sales of a new treatment for age-related vision loss and expanded use of the Avastin cancer drug.
- Shares of Las Vegas Sands(LVS) hit a record after Jeffries said the company was granted the rights to build a hotel complex on China’s Hengqin Island.
- Crude oil plunged to a 19-month low, closing below another key technical level, after the EIA showed US fuel inventories surged for a fourth week and record investment fund speculation for the commodity continued to subside.
- Federal Reserve Bank of Dallas President Richard Fisher said that recent inflation figures were encouraging and that he’s “very comfortable” with the current level of interest rates.
- Russia said it would soon resume oil shipments via Belarus to Europe.
Wall Street Journal:
- Northwest Airlines Corp. has been in talks with Delta Air over a potential merger.
San Francisco Chronicle:
- Members of the Yale University Baker’s Dozen singing group were attacked in San Francisco after singing “The Star-Spangled Banner” at a party. Three students from the New Haven, Connecticut, institution were injured, including one who had a broken jaw.
S&P 500 1,414.85 +.19%
DJIA 12,442.16 +.21%
NASDAQ 2,459.33 +.63%
Russell 2000 778.87 +.07%
Wilshire 5000 14,186.96 +.24%
Russell 1000 Growth 560.12 +.49%
Russell 1000 Value 807.88 +.03%
Morgan Stanley Consumer 700.24 +.28%
Morgan Stanley Cyclical 894.0 +.33%
Morgan Stanley Technology 580.09 +.62%
Transports 4,641.47 +.19%
Utilities 448.90 +.14%
Put/Call .81 +3.85%
NYSE Arms .75 -52.36%
Volatility(VIX) 11.47 -3.69%
ISE Sentiment 103.0 -35.63%
US Dollar 85.08 +.39%
CRB 289.33 -.06%
Futures Spot Prices
Crude Oil 53.58 -3.70%
Reformulated Gasoline 142.40 -3.10%
Natural Gas 6.7 +1.42%
Heating Oil 151.90 -2.41%
Gold 612.20 -.46%
Base Metals 218.40 +1.69%
Copper 266.45 +4.24%
10-year US Treasury Yield 4.68% +.65%
Leading Sectors
Airlines +2.69%
Gaming +2.43%
Semis +1.76%
Lagging Sectors
Gold & Silver -1.16%
Oil Service -1.33%
Energy -1.58%
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:
- US holiday retail sale surged 5.1% as consumers hunted for last-minute items and spent their gift cards, ShopperTrak RCT Corp. said. The increase in November and December sales beat the high end of ShopperTrak’s forecast for a gain of as much as 5% despite record warm temperatures that damped clothing demand.
- Shares of XM Satellite Radio(XMSR) and Sirius Satellite Radio(SIRI) jumped after comments by executives fueled speculation about a possible combination.
- Genentech(DNA) said fourth quarter profit soared 75%, helping by surging sales of a new treatment for age-related vision loss and expanded use of the Avastin cancer drug.
- Shares of Las Vegas Sands(LVS) hit a record after Jeffries said the company was granted the rights to build a hotel complex on China’s Hengqin Island.
- Crude oil plunged to a 19-month low, closing below another key technical level, after the EIA showed US fuel inventories surged for a fourth week and record investment fund speculation for the commodity continued to subside.
- Federal Reserve Bank of Dallas President Richard Fisher said that recent inflation figures were encouraging and that he’s “very comfortable” with the current level of interest rates.
- Russia said it would soon resume oil shipments via Belarus to Europe.
Wall Street Journal:
- Northwest Airlines Corp. has been in talks with Delta Air over a potential merger.
San Francisco Chronicle:
- Members of the Yale University Baker’s Dozen singing group were attacked in San Francisco after singing “The Star-Spangled Banner” at a party. Three students from the New Haven, Connecticut, institution were injured, including one who had a broken jaw.
BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, I-Banking longs, Computer longs, Internet longs and Energy-related 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 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 bullish. The 10-year yield finished 3 basis points higher, but remains stable. Oil closed floor-trading below the $55/bbl. level and continues to trade very poorly in the face of numerous potential upside catalysts. I still believe the commodity will fall much further than most expect as the record speculation that drove it to insane levels ends and many speculators jump on the downside bandwagon. More positive U.S. economic data, technology stock strength, the stabilization of base metal prices, the refusal of U.S. stocks to break down despite potential catalysts and some stabilization in Latin American stocks (Brazil and Mexico closed at daily highs) should lead to a rally in Asian markets tonight. This should, in turn, propel U.S. equities broadly higher tomorrow.
Subscribe to:
Posts (Atom)