BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Telecom longs, I-banking longs and Medical longs. I covered a bit of my (EEM) short and all of my (IWM) and (QQQQ) hedges today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, sector performance is mostly positive and volume is above average. I keep hearing pundits and analysts talk in disbelief about the decline in oil prices. Many speculate that global growth must be plunging. Just take a look at commodity charts, gauges of sentiment and inflows into commodity-related funds over the last couple of years. There has been a mania for commodities. Commodities have provided air for the current “negativity bubble.” That is why it is so easy for most to believe that housing was in a bubble, but then act shocked when commodities plunge. Housing didn't drop because of slowing U.S. growth, it dropped because rampant speculation droves prices too high. The same is happening with commodities. I anticipate the same outcome for global growth. The end of the commodity mania will mean more average global growth rather than the booming levels of the last few years as heavily commodity-dependent emerging market economies slow. The hugely positive effects of the ending of the mania will help boost most developed economies back to average growth from recent below-average rates. I expect US stocks to trade modestly higher into the close from current levels on short-covering, more economic optimism and bargain-hunting.
Friday, January 12, 2007
Stocks Higher into Final Hour on More Positive Economic Data
Today's Headlines
Bloomberg:
- AT&T(T) is extending its brand to incorporate Cingular Wireless and BellSouth in an effort to save $2.8 billion in advertising costs.
- A rocket attack on the US embassy in Athens, Greece this morning left no injuries and little damage, an official said.
- OAO Lukoil, Russia’s biggest oil producer, reported a 10% increase in third-quarter profit as output climbed at overseas projects.
- The Dolan family raised Cablevision Systems(CVC) to $30 a share from $27 previously.
- US Treasuries are falling, pushing yields to the highest since October, after a stronger-than-expected retail sales report.
- Credit Suisse Group CEO Oswald Gruebel said he’s confident about business in 2007 and “very optimistic” for investment banking.
- Quality Systems(QSII) and other health-care information companies are drawing interest from investors and potential buyers who want a piece of the market for electronic medical records in the US.
- Delphi Corp. won court approval of a $3.4 billion investment by five financial firms led by Cerberus Capital Management, paving the way for a plan to exit court protection.
- Democratic Representative John Murtha, chairman of a House subcommittee on defense spending, said he will try to block the increase of US forces in Iraq and force the closing of a military prison in Guantanamo Bay by withholding funds for those operations.
- Senators Joe Lieberman, a Connecticut Independent, and John McCain, an Arizona Republican, introduced climate legislation that calls for a national cap on the pollution that some scientists claim is leading to higher temperatures.
- Copper prices in NY are falling another 2% as inventories rose and demand for the metal used in cars, appliances and construction eased.
- BP Plc(BP), Europe’s second-largest oil company, said CEO John Browne will retire more than a year ahead of plan after missteps including a fatal refinery explosion and pipeline leaks eroded investor confidence.
- Rates to ship oil in the Caribbean basin fell for the third straight week as lower demand for crude reduced the need for ships.
- Roger Nightingale, a global strategist at Millennium Global Investments, expects oil to fall to $45-50/bbl. this year.
- OPEC is unaware of any plan to hold a meeting during Jan. 19-21, the public relations department at OPEC’s Vienna-based Secretariat said in an e-mail.
- Crude oil is bouncing .90 higher today as shorts cover after the recent decline sent oil 14% lower for the year so far.
Wall Street Journal:
- NYSE Group’s(NYX) NYSE plans a test program this year that may bring stock price information to Web users with almost no delay.
- British newspapers such as Telegraph Group’s Daily Telegraph and News Corp.’s(NWS) Times are buying search words on Google Inc.(GOOG), so connections to their Internet site appear first when Web users carry out a search.
- US stocks are worth at least 20% more, even though market indexes are at or near records, according to Bill Miller, who manages the Legg Mason Value Trust fund. The market is being driven by strong corporate earnings, steady interest rates, acquisitions and the decline of commodity prices from overheated levels, Miller said.
- US banks and saving institutions are hiring officers tasked with increasing the number of customers who sign up for savings, checking and other accounts.
- Nissan Motor may borrow design ideas from it partner, Renault SA, in developing economical vehicles for sale in emerging markets.
- PepsiCo(PEP) will start changing its cola cans every three or four weeks as it seeks to gain the attention of young people.
Le Figaro:
- French Internet sales jumped about 40% to $15.5 billion last year, citing industry group Fevad.
Bernama:
- Malaysia plans to increase the generation of hydroelectric and cut reliance on natural gas, citing Energy, Water and Communications Minister Lim KengYaik.
- AT&T(T) is extending its brand to incorporate Cingular Wireless and BellSouth in an effort to save $2.8 billion in advertising costs.
- A rocket attack on the US embassy in Athens, Greece this morning left no injuries and little damage, an official said.
- OAO Lukoil, Russia’s biggest oil producer, reported a 10% increase in third-quarter profit as output climbed at overseas projects.
- The Dolan family raised Cablevision Systems(CVC) to $30 a share from $27 previously.
- US Treasuries are falling, pushing yields to the highest since October, after a stronger-than-expected retail sales report.
- Credit Suisse Group CEO Oswald Gruebel said he’s confident about business in 2007 and “very optimistic” for investment banking.
- Quality Systems(QSII) and other health-care information companies are drawing interest from investors and potential buyers who want a piece of the market for electronic medical records in the US.
- Delphi Corp. won court approval of a $3.4 billion investment by five financial firms led by Cerberus Capital Management, paving the way for a plan to exit court protection.
- Democratic Representative John Murtha, chairman of a House subcommittee on defense spending, said he will try to block the increase of US forces in Iraq and force the closing of a military prison in Guantanamo Bay by withholding funds for those operations.
- Senators Joe Lieberman, a Connecticut Independent, and John McCain, an Arizona Republican, introduced climate legislation that calls for a national cap on the pollution that some scientists claim is leading to higher temperatures.
- Copper prices in NY are falling another 2% as inventories rose and demand for the metal used in cars, appliances and construction eased.
- BP Plc(BP), Europe’s second-largest oil company, said CEO John Browne will retire more than a year ahead of plan after missteps including a fatal refinery explosion and pipeline leaks eroded investor confidence.
- Rates to ship oil in the Caribbean basin fell for the third straight week as lower demand for crude reduced the need for ships.
- Roger Nightingale, a global strategist at Millennium Global Investments, expects oil to fall to $45-50/bbl. this year.
- OPEC is unaware of any plan to hold a meeting during Jan. 19-21, the public relations department at OPEC’s Vienna-based Secretariat said in an e-mail.
- Crude oil is bouncing .90 higher today as shorts cover after the recent decline sent oil 14% lower for the year so far.
Wall Street Journal:
- NYSE Group’s(NYX) NYSE plans a test program this year that may bring stock price information to Web users with almost no delay.
- British newspapers such as Telegraph Group’s Daily Telegraph and News Corp.’s(NWS) Times are buying search words on Google Inc.(GOOG), so connections to their Internet site appear first when Web users carry out a search.
- US stocks are worth at least 20% more, even though market indexes are at or near records, according to Bill Miller, who manages the Legg Mason Value Trust fund. The market is being driven by strong corporate earnings, steady interest rates, acquisitions and the decline of commodity prices from overheated levels, Miller said.
- US banks and saving institutions are hiring officers tasked with increasing the number of customers who sign up for savings, checking and other accounts.
- Nissan Motor may borrow design ideas from it partner, Renault SA, in developing economical vehicles for sale in emerging markets.
- PepsiCo(PEP) will start changing its cola cans every three or four weeks as it seeks to gain the attention of young people.
Le Figaro:
- French Internet sales jumped about 40% to $15.5 billion last year, citing industry group Fevad.
Bernama:
- Malaysia plans to increase the generation of hydroelectric and cut reliance on natural gas, citing Energy, Water and Communications Minister Lim KengYaik.
Import Prices Bounce, Retail Sales Healthy
- Import Price Index for December rose 1.1% versus estimates of a .6% gain and an upwardly revised .5% increase in November.
- Advance Retail Sales for December rose .9% versus estimates of a .7% gain and a downwardly revised .6% increase in November.
- Retail Sales Less Autos for December rose 1.0% versus estimates of a .5% increase and a downwardly revised .7% gain in November.
- Advance Retail Sales for December rose .9% versus estimates of a .7% gain and a downwardly revised .6% increase in November.
- Retail Sales Less Autos for December rose 1.0% versus estimates of a .5% increase and a downwardly revised .7% gain in November.
BOTTOM LINE: Prices of goods imported into the US rose in December by the most in seven months, reflecting higher crude oil and natural gas costs, Bloomberg reported. Both commodities have since declined substantially. Import prices excluding petroleum rose 1.7% in 2006 versus a 2.4% gain in 2005. The back-to-back modest gains in import prices for November and December followed a 2.6% decline in October and a 2.2% drop in September, which were the greatest declines since record-keeping began in 1989. With the recent plunge in commodity prices, inflation readings a couple of months from now should show another substantial deceleration. I continue to believe inflation concerns have peaked for this cycle and will remain at below-average levels over the intermediate-term.
Retail sales in the US rose more than forecast in December, capping the strongest back-to-back gains in almost a year, as growing incomes kept Americans shopping, Bloomberg reported. Brisk sales at restaurants, electronics and department stores led last month’s gains. Sales at electronic and appliance retailers rose 3% after surging 5.8% in November. Restaurants sold 2.3% more meals. Gasoline prices are down 25% from August highs and poised to go lower on the recent plunge in oil. Workers’ average hourly earnings rose 4.2% year-over-year last month, more than twice the current rate of inflation as measured by the CPI. I expect retail sales to accelerate modestly to above-average levels over the coming months into the spring shopping season as sentiment makes new cycle highs, gas prices fall further, interest rates remain low, housing stabilizes at relatively high levels, auto production cutbacks subside and stocks rise further.
Thursday, January 11, 2007
Friday Watch
Late-Night Headlines
Bloomberg:
- Fourteen advisers to former US President Jimmy Carter’s center for human rights resigned today, citing his stance on the Israeli-Palestinian conflict. They quit in reaction to Carter’s book, “Palestine: Peace Not Apartheid,” as well as his statements since its publication. Carter portrays the Palestinian-Israeli conflict as a “purely one-sided affair,” with Israel holding all of the responsibility for resolving it. “You have clearly abandoned your historic role of broker in favor of becoming an advocate for one side,” the group wrote in a letter, a copy of which was obtained by Bloomberg. “Your book has confused opinion with fact, subjectivity with objectivity and force for change with partisan advocacy.”
- Crude oil may fall toward $50 a barrel as plunging US fuel consumption bolsters stockpiles in the world’s biggest energy consumer, a Bloomberg survey of 47 analysts, traders and brokers showed.
- The US dollar rose to the highest in 13 months against the yen before a US government report today that will probably show retailers had the strongest back-to-back sales in almost a year at the end of 2006.
- Advanced Micro Devices’(AMD) fourth-quarter profit tumbled because of falling semiconductor prices sparked by Intel’s(INTC) push to regain market share.
- Starbucks(SBUX) will enter India by tying up with Kishore Biyani, head of the country’s biggest publicly traded retailer, and VP Sharma, president of the US company’s Indonesian franchise.
- Sales of Sony’s(SNE) PlayStation 3 video-game console lagged behind Nintendo’s Wii and Microsoft’s(MSFT) Xbox 360 during the US holiday season after production glitches limited supplies.
- Copper futures in Shanghai are falling, erasing some of this week’s advance from a nine-month low as rising global stockpiles renewed concern that demand for the metal may be slowing.
- Australia warned “imminent” terror attacks in southern Philippines may occur “anytime” during a meeting of Asian leaders in the central part of the country.
- Global steel prices led by the US may fall this year driven down by increasing output from Asian mills, Wachovia Corp. said.
- China Petrochemical Corp., the nation’s second-biggest oil company, said overseas crude oil output more than doubled in 2006 after it acquired oilfields in Russia and Ecuador.
Financial Times:
- China’s government has halted the start of new domestic equity funds amid concerns the nation’s stock market risk over-heating.
Late Buy/Sell Recommendations
Citigroup:
- Positive trends in wage growth and unemployment, along with continued energy price declines and the current steady interest rate environment, point to solid macroeconomic footing and a healthy consumer for 2007.
Business Week:
- Sempra Energy(SRE), owner of San Diego Gas & Electric and Southern California Gas, is driving its stock higher by acquiring and developing energy assets, citing Paul Justice of Morningstar.
- Thermage Inc.(THRM), which makes medical devices for the non-invasive treatment of wrinkles, is expected to climb when the company releases a new product, citing Katherine Owen, an analyst at Merrill Lynch.
- Lockheed Martin(LMT) will benefit from threats to US security and the replacement of aging defense equipment, citing S&P analyst Richard Tortoriello.
CSFB:
- Reiterated Outperform on (LVLT) and raised 07 estimates, target $7.50.
Night Trading
Asian Indices are +1.0% to +1.50% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.04%.
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
- (CACB)/.36
- (WFSL)/.40
Upcoming Splits
- (BKE) 3-for-2
Economic Releases
8:30 am EST
- The Import Price Index for December is estimated to rise .6% versus a .2% rise in November.
- Advance Retail Sales for December are estimated to rise .7% versus a 1.0% gain in November.
- Retail Sales Less Autos for December are estimated to rise .5% versus a 1.1% increase in November.
10:00 am EST
- Business Inventories for November are estimated to rise .4% versus a .4% increase in October.
2:00 pm EST
- The Monthly Budget Surplus for December is estimated to rise to $25.6 billion versus $11.0 billion in November.
Bloomberg:
- Fourteen advisers to former US President Jimmy Carter’s center for human rights resigned today, citing his stance on the Israeli-Palestinian conflict. They quit in reaction to Carter’s book, “Palestine: Peace Not Apartheid,” as well as his statements since its publication. Carter portrays the Palestinian-Israeli conflict as a “purely one-sided affair,” with Israel holding all of the responsibility for resolving it. “You have clearly abandoned your historic role of broker in favor of becoming an advocate for one side,” the group wrote in a letter, a copy of which was obtained by Bloomberg. “Your book has confused opinion with fact, subjectivity with objectivity and force for change with partisan advocacy.”
- Crude oil may fall toward $50 a barrel as plunging US fuel consumption bolsters stockpiles in the world’s biggest energy consumer, a Bloomberg survey of 47 analysts, traders and brokers showed.
- The US dollar rose to the highest in 13 months against the yen before a US government report today that will probably show retailers had the strongest back-to-back sales in almost a year at the end of 2006.
- Advanced Micro Devices’(AMD) fourth-quarter profit tumbled because of falling semiconductor prices sparked by Intel’s(INTC) push to regain market share.
- Starbucks(SBUX) will enter India by tying up with Kishore Biyani, head of the country’s biggest publicly traded retailer, and VP Sharma, president of the US company’s Indonesian franchise.
- Sales of Sony’s(SNE) PlayStation 3 video-game console lagged behind Nintendo’s Wii and Microsoft’s(MSFT) Xbox 360 during the US holiday season after production glitches limited supplies.
- Copper futures in Shanghai are falling, erasing some of this week’s advance from a nine-month low as rising global stockpiles renewed concern that demand for the metal may be slowing.
- Australia warned “imminent” terror attacks in southern Philippines may occur “anytime” during a meeting of Asian leaders in the central part of the country.
- Global steel prices led by the US may fall this year driven down by increasing output from Asian mills, Wachovia Corp. said.
- China Petrochemical Corp., the nation’s second-biggest oil company, said overseas crude oil output more than doubled in 2006 after it acquired oilfields in Russia and Ecuador.
Financial Times:
- China’s government has halted the start of new domestic equity funds amid concerns the nation’s stock market risk over-heating.
Late Buy/Sell Recommendations
Citigroup:
- Positive trends in wage growth and unemployment, along with continued energy price declines and the current steady interest rate environment, point to solid macroeconomic footing and a healthy consumer for 2007.
Business Week:
- Sempra Energy(SRE), owner of San Diego Gas & Electric and Southern California Gas, is driving its stock higher by acquiring and developing energy assets, citing Paul Justice of Morningstar.
- Thermage Inc.(THRM), which makes medical devices for the non-invasive treatment of wrinkles, is expected to climb when the company releases a new product, citing Katherine Owen, an analyst at Merrill Lynch.
- Lockheed Martin(LMT) will benefit from threats to US security and the replacement of aging defense equipment, citing S&P analyst Richard Tortoriello.
CSFB:
- Reiterated Outperform on (LVLT) and raised 07 estimates, target $7.50.
Night Trading
Asian Indices are +1.0% to +1.50% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.04%.
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
- (CACB)/.36
- (WFSL)/.40
Upcoming Splits
- (BKE) 3-for-2
Economic Releases
8:30 am EST
- The Import Price Index for December is estimated to rise .6% versus a .2% rise in November.
- Advance Retail Sales for December are estimated to rise .7% versus a 1.0% gain in November.
- Retail Sales Less Autos for December are estimated to rise .5% versus a 1.1% increase in November.
10:00 am EST
- Business Inventories for November are estimated to rise .4% versus a .4% increase in October.
2:00 pm EST
- The Monthly Budget Surplus for December is estimated to rise to $25.6 billion versus $11.0 billion in November.
BOTTOM LINE: Asian indices are sharply higher, boosted by technology and automaker shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
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