Indices
S&P 500 1,430.50 +.47%
DJIA 12,565.53 +.40%
NASDAQ 2,451.31 -1.35%
Russell 2000 785.16 -.42%
Wilshire 5000 14,348.14 +.40%
Russell 1000 Growth 565.17 -.05%
Russell 1000 Value +.97%
Morgan Stanley Consumer 711.69 +1.03%
Morgan Stanley Cyclical 921.96 +2.22%
Morgan Stanley Technology 563.29 -3.07%
Transports 4,859.30 +3.54%
Utilities 448.12 -.02%
MSCI Emerging Markets 112.39 +2.75%
S&P 500 Cumulative A/D Line 11,225 +3.0%
Bloomberg Crude Oil % Bulls 43.0 +42.3%
CFTC Oil Large Speculative Longs 176,223 +7.0%
Put/Call .82 +15.5%
NYSE Arms .95 +3.3%
Volatility(VIX) 10.40 -4.32%
ISE Sentiment 139.0 unch.
AAII % Bulls 57.58 +29.57%
AAII % Bears 27.27 -20.4%
US Dollar 84.88 -.46%
CRB 290.48 +1.54%
ECRI Weekly Leading Index 140.80 -.64%
Futures Spot Prices
Crude Oil 51.95 -.15%
Reformulated Gasoline 139.80 +.39%
Natural Gas 6.95 +10.53%
Heating Oil 151.59 +2.19%
Gold 635.80 +3.92%
Base Metals 220.82 -2.75%
Copper 253.40 -4.35%
10-year US Treasury Yield 4.77% unch.
Average 30-year Mortgage Rate 6.23% +.32%
Leading Sectors
Oil Service +5.1%
Homebuilders +3.3%
Drugs +2.9%
REITs +2.57%
Hospitals +2.15%
Lagging Sectors
Gaming -.51%
Tobacco -.72%
Alternative Energy -1.83%
Computer Networking -4.0%
Semis -5.3%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
Friday, January 19, 2007
Stocks Mostly Higher into Final Hour on Rising Economic Optimism
BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Telecom longs and Airline longs. I covered some of my (EEM) short and some of my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 75% 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. While holiday retail sales came in slightly above most forecasts, spending was still modestly below average levels. The Department of Energy is projecting nationwide average gas prices to fall to $1.95 per gallon over the coming weeks, with oil around current levels. Moreover, jobless claims have been trending lower of late, housing has improved, wages are rising, stocks are mostly higher, and inflation is below long-term average rates. Both main consumer confidence readings are very near cycle highs, and many consumers are chomping at the bit to buy new spring clothing after such a warm winter muted winter shopping. I expect retail sales to accelerate back to above-average levels over the coming months. I expect US stocks to trade mixed into the close from current levels as more economic optimism and short-covering offsets higher energy prices and long-term rates.
Today's Headlines
Bloomberg:
- US ethanol prices dropped to the lowest in almost three months, following a plunge in crude oil that’s led to cheaper costs for gasoline.
- Corn futures in Chicago are falling today on speculation that high prices will prompt a bigger jump in plantings than previously expected.
- The European Union’s mandatory targets for using renewable fuels will herald opportunities for “entrepreneurial” farmers, said European Commission President Jose Barroso.
- The 17% drop in oil this month has caused benchmark NY gasoline futures, which are based on wholesale prices, to tumble 14%. Gas station prices usually lag behind futures by four to eight weeks. A corresponding drop for retail gasoline would lower the nationwide average to about $1.95/gallon.
- Schlumberger Ltd., the world’s largest oilfield-services provider, said fourth-quarter profit soared 71% and forecast “significant growth” in 2007 as oil and gas producers work harder to find and tap new deposits.
- General Electric(GE) said fourth-quarter earnings rose 12% on commercial loans, sales of equipment for power plants and a rebound in the NBC Universal media unit.
- Fortress Investment Group LLC, a NY-based hedge fund and private-equity firm, may raise as much as $634.3 million in the first IPO by a US manager of alternative assets.
- Supplements of folic acid, a vitamin found in yeast, organ meats and green, leafy vegetables, improve memory and cognitive functions that decline in old age.
- Crude oil is bouncing $1/bbl. on short-covering, but is set for its fifth weekly decline, after US stockpiles surged and the IEA trimmed forecasts for global demand.
Wall Street Journal:
- Oil companies that have been among investors’ favorites lately, such as Canada’s Suncor Energy(SU), will be hurt if the oil-price slide continues.
- Some hedge-fund investors are worrying that worldwide commodity-trading funds have peaked after strong 2006 returns. The number of hedge funds trading commodities futures has risen 67% in just the last year, with assets growing 71% during that period, citing David Mooney, a fund manager with UK-based New Finance Capital.
NY Times:
- Iran’s supreme leader Ayatollah Ali Khamenei may no longer support President Mahmoud Ahmadinejad. Two newspapers, including the Khamenei-owned Jomhouri-Eslami, have called on the president to stay out of the country’s nuclear plan.
- General Electric Co., E.I. du Pont de Nemours and Co., Alcoa Inc. and Caterpillar are among 10 large US companies that will call on Jan. 22 for a cap on US emissions of carbon dioxide and reductions of 10% to 30% over 15 years.
- Wall Street investment firms control as much as half of US futures contracts for commodities such as cattle, corn, wheat and oil, stakes that are helping drive up prices at the supermarket and gas pump.
AP:
- Men face a 77% higher risk than women of dying in a road accident, according to Carnegie Mellon Univ. research.
al-Hayat:
- Iran is ready for talks with the US, Iraqi President Jalal Talabani said. Iranian officials told Talabani during a November visit to Tehran that they were ready to reach an understanding beneficial to both Iran and the US on issues ranging from Afghanistan to Lebanon.
JANA:
- Libya sold its crude oil this week at an average price of $49.63/bbl.
- US ethanol prices dropped to the lowest in almost three months, following a plunge in crude oil that’s led to cheaper costs for gasoline.
- Corn futures in Chicago are falling today on speculation that high prices will prompt a bigger jump in plantings than previously expected.
- The European Union’s mandatory targets for using renewable fuels will herald opportunities for “entrepreneurial” farmers, said European Commission President Jose Barroso.
- The 17% drop in oil this month has caused benchmark NY gasoline futures, which are based on wholesale prices, to tumble 14%. Gas station prices usually lag behind futures by four to eight weeks. A corresponding drop for retail gasoline would lower the nationwide average to about $1.95/gallon.
- Schlumberger Ltd., the world’s largest oilfield-services provider, said fourth-quarter profit soared 71% and forecast “significant growth” in 2007 as oil and gas producers work harder to find and tap new deposits.
- General Electric(GE) said fourth-quarter earnings rose 12% on commercial loans, sales of equipment for power plants and a rebound in the NBC Universal media unit.
- Fortress Investment Group LLC, a NY-based hedge fund and private-equity firm, may raise as much as $634.3 million in the first IPO by a US manager of alternative assets.
- Supplements of folic acid, a vitamin found in yeast, organ meats and green, leafy vegetables, improve memory and cognitive functions that decline in old age.
- Crude oil is bouncing $1/bbl. on short-covering, but is set for its fifth weekly decline, after US stockpiles surged and the IEA trimmed forecasts for global demand.
Wall Street Journal:
- Oil companies that have been among investors’ favorites lately, such as Canada’s Suncor Energy(SU), will be hurt if the oil-price slide continues.
- Some hedge-fund investors are worrying that worldwide commodity-trading funds have peaked after strong 2006 returns. The number of hedge funds trading commodities futures has risen 67% in just the last year, with assets growing 71% during that period, citing David Mooney, a fund manager with UK-based New Finance Capital.
NY Times:
- Iran’s supreme leader Ayatollah Ali Khamenei may no longer support President Mahmoud Ahmadinejad. Two newspapers, including the Khamenei-owned Jomhouri-Eslami, have called on the president to stay out of the country’s nuclear plan.
- General Electric Co., E.I. du Pont de Nemours and Co., Alcoa Inc. and Caterpillar are among 10 large US companies that will call on Jan. 22 for a cap on US emissions of carbon dioxide and reductions of 10% to 30% over 15 years.
- Wall Street investment firms control as much as half of US futures contracts for commodities such as cattle, corn, wheat and oil, stakes that are helping drive up prices at the supermarket and gas pump.
AP:
- Men face a 77% higher risk than women of dying in a road accident, according to Carnegie Mellon Univ. research.
al-Hayat:
- Iran is ready for talks with the US, Iraqi President Jalal Talabani said. Iranian officials told Talabani during a November visit to Tehran that they were ready to reach an understanding beneficial to both Iran and the US on issues ranging from Afghanistan to Lebanon.
JANA:
- Libya sold its crude oil this week at an average price of $49.63/bbl.
Consumer Confidence Surges to 36-month High
- Preliminary Univ. of Mich. Consumer Confidence for January rose to 98.0 versus estimates of 92.2 and a reading of 91.7 in December.
BOTTOM LINE: American consumers gained confidence in January, boosting sentiment to the highest level since January 2004, as falling energy prices and steady wage gains made them feel better, Bloomberg said. The Expectations component of the index rose to 88.7, the highest since December 2004, versus 81.2 the prior month. The Current Conditions component, which is a gauge of Americans’ perceptions of their financial situation and whether or not it’s a good time to buy big-ticket items, surged to 112.5 from 108.1 the prior month. The average price of a gallon of gas was $2.20 on Jan. 17, 13 cents lower than at the end of December. Gas is 28% lower than last year’s high of $3.04/gallon in August. I continue to believe every measure of consumer sentiment will make new cycle highs over the coming months as energy prices fall further, long-term rates remain low, inflation decelerates further, wages continue to outpace inflation, stocks rise more, housing stabilizes at high levels and the job market remains healthy.
Thursday, January 18, 2007
Friday Watch
Late-Night Headlines
Bloomberg:
- Hedge-fund inflows plunged 64% in the fourth quarter from the pace of the previous three months as returns trailed market indexes and investors reacted to the collapse of Amaranth Advisors LLC.
- Crude oil is falling for a second day in NY after plunging below $50 a barrel yesterday for the first time since May 2005 following a surge in US oil and fuel stockpiles.
- Australia and the US said they are concerned at China test firing a missile into space to destroy an obsolete weather satellite orbiting the Earth.
- Merck & Co.(MRK) was granted a mistrial after a Los Angeles jury couldn’t reach a verdict following six days of deliberations in a case over the heart attacks of two men who used the company’s Vioxx painkiller.
- Copper futures in Shanghai are falling to a nine-month low, after data showed supply of the metal outpacing demand, outweighing signs that the US housing sector may be recovering.
- Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures Ltd., says oil will fall to $40/bbl. on “huge” supplies.
- Venezuela seeks enforcement of oil production quotas among fellow members of OPEC, not a production cut, the country’s oil minister said.
- Madeleine Albright, the former US secretary of state during the Clinton administration, raised $329 million to invest in emerging markets.
- IBM(IBM) said fourth-quarter profit rose 11% on new contracts and acquisitions to bolster the company’s software unit. The shares fell 5% after-hours on disappointing hardware sales.
- Consumer Reports magazine retracted an article that said most infant car seats failed in crash tests, after US auto-safety regulators questioned the results.
- Capital One Financial(COF) said profit rose 39% as loan losses fell. The stock rose .90 in after-hours trading.
- By a margin of 68% to 31%, respondents in a new Bloomberg/LA Times poll said the economy is doing well – the highest percentage since 2001.
- Toyota Motor(TM) recalled more than half a million pickup trucks and sport-utility vehicles in the US due to a steering fault that may have led to 11 accidents.
- The yen’s decline may accelerate as the Bank of Japan damaged its credibility by leaving interest rates on hold, said Toru Umemoto, at Barclays Capital, the most accurate forecaster of the yen last year in Bloomberg surveys.
- China’s tax administrator is trying to downplay a rule that says duties will be based on market value instead of estimates, after its announcement four days ago roiled property stocks on the Shanghai and Shenzhen exchanges.
- The global crude oil market is “adequately supplied” and producers should avoid reducing output further to preserve consuming countries’ stocks, Intl. Energy Agency Executive Director Claude Mandil said.
- Asian gasoline prices may fall further as China, Asia’s largest refiner, fires up new oil-processing plants and increases exports.
Xinhua News Agency:
- Local governments are fabricating inflated data for a national agricultural census to meet preset targets, citing China’s chief statistician.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (KLAC), target $65.
- Maintain Buy on (WY), target $85.
Business Week:
- US Airways’(LCC) shares could rise 29% within a year even if the carrier’s $10.5 billion offer for Delta Air Lines is rejected. Credit Suisse’s Daniel McKenzie said the stock could rise to a range of $72 to $76 in 12 months.
- UCBH Holdings(UCBH) is looking to buy in China to fuel growth, citing company Executive VP Jonathan Downing.
Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.06%.
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
- (C)/1.00
- (FAST)/.31
- (GE)/.64
- (JCI)/.84
- (KEY)/.73
- (MOT)/.25
- (RF)/.72
- (SLB)/.85
- (STI)/1.46
Upcoming Splits
- (GROW) 2-for-1
Economic Releases
8:30 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for January is estimated at 92.0 versus a reading of 91.7 in December.
Bloomberg:
- Hedge-fund inflows plunged 64% in the fourth quarter from the pace of the previous three months as returns trailed market indexes and investors reacted to the collapse of Amaranth Advisors LLC.
- Crude oil is falling for a second day in NY after plunging below $50 a barrel yesterday for the first time since May 2005 following a surge in US oil and fuel stockpiles.
- Australia and the US said they are concerned at China test firing a missile into space to destroy an obsolete weather satellite orbiting the Earth.
- Merck & Co.(MRK) was granted a mistrial after a Los Angeles jury couldn’t reach a verdict following six days of deliberations in a case over the heart attacks of two men who used the company’s Vioxx painkiller.
- Copper futures in Shanghai are falling to a nine-month low, after data showed supply of the metal outpacing demand, outweighing signs that the US housing sector may be recovering.
- Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures Ltd., says oil will fall to $40/bbl. on “huge” supplies.
- Venezuela seeks enforcement of oil production quotas among fellow members of OPEC, not a production cut, the country’s oil minister said.
- Madeleine Albright, the former US secretary of state during the Clinton administration, raised $329 million to invest in emerging markets.
- IBM(IBM) said fourth-quarter profit rose 11% on new contracts and acquisitions to bolster the company’s software unit. The shares fell 5% after-hours on disappointing hardware sales.
- Consumer Reports magazine retracted an article that said most infant car seats failed in crash tests, after US auto-safety regulators questioned the results.
- Capital One Financial(COF) said profit rose 39% as loan losses fell. The stock rose .90 in after-hours trading.
- By a margin of 68% to 31%, respondents in a new Bloomberg/LA Times poll said the economy is doing well – the highest percentage since 2001.
- Toyota Motor(TM) recalled more than half a million pickup trucks and sport-utility vehicles in the US due to a steering fault that may have led to 11 accidents.
- The yen’s decline may accelerate as the Bank of Japan damaged its credibility by leaving interest rates on hold, said Toru Umemoto, at Barclays Capital, the most accurate forecaster of the yen last year in Bloomberg surveys.
- China’s tax administrator is trying to downplay a rule that says duties will be based on market value instead of estimates, after its announcement four days ago roiled property stocks on the Shanghai and Shenzhen exchanges.
- The global crude oil market is “adequately supplied” and producers should avoid reducing output further to preserve consuming countries’ stocks, Intl. Energy Agency Executive Director Claude Mandil said.
- Asian gasoline prices may fall further as China, Asia’s largest refiner, fires up new oil-processing plants and increases exports.
Xinhua News Agency:
- Local governments are fabricating inflated data for a national agricultural census to meet preset targets, citing China’s chief statistician.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (KLAC), target $65.
- Maintain Buy on (WY), target $85.
Business Week:
- US Airways’(LCC) shares could rise 29% within a year even if the carrier’s $10.5 billion offer for Delta Air Lines is rejected. Credit Suisse’s Daniel McKenzie said the stock could rise to a range of $72 to $76 in 12 months.
- UCBH Holdings(UCBH) is looking to buy in China to fuel growth, citing company Executive VP Jonathan Downing.
Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.06%.
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
- (C)/1.00
- (FAST)/.31
- (GE)/.64
- (JCI)/.84
- (KEY)/.73
- (MOT)/.25
- (RF)/.72
- (SLB)/.85
- (STI)/1.46
Upcoming Splits
- (GROW) 2-for-1
Economic Releases
8:30 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for January is estimated at 92.0 versus a reading of 91.7 in December.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
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