BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Retail longs, Computer longs, Telecom longs, Biotech longs and Commodity shorts. I added to my (AAPL) long and took profits in another long 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 mostly positive and volume is heavy. I suspect that Apple Inc.(AAPL) has bottomed after its recent correction. I still expect a 50% gain for the year in the stock. Apple is still my second-largest long position, behind Google (GOOG). A number of pundits and analysts have commented recently that investor complacency is high. Only in a "negativity bubble" could current sentiment be construed as complacent, in my opinion. Short interest is near all-time highs, the general public completely shuns U.S. stocks, commodities are loved by all, herd sentiment gauges are mostly showing more bearishness than bullishness, investors seek negatively-spun information regardless of its accuracy and every move higher is seen as a major top or just another short-selling opportunity. All this pessimism with the DJIA at all-time highs and the S&P 500 approaching a triple-digit gain from the major bear market lows. I would argue that the fact that multiples have contracted relentlessly for three consecutive years is evidence that investors are overly focused on potential risks and surprises and not focused on the most likely outcomes. Since 1905, multiples have contracted for four consecutive years only twice. I still expect the herd to finally begin embracing this bull market this year as the S&P 500 breaks out to an all-time high to join the DJIA and Russell 2000. I expect US stocks to trade modestly higher into the close from current levels on lower long-term rates, lower energy prices, more economic optimism and short-covering.
Wednesday, February 07, 2007
Stocks Mostly Higher into Final Hour on More Positive Economic Data, Falling Energy Prices, Lower Long-term Rates
Today's Headlines
Bloomberg:
- Crude oil plunged over $2/bbl. after a government report showing gasoline supplies surged more than estimates curbed historic investment fund speculation.
- New US hedge fund raised less money in 2006 for the second year in a row because of a rout in emerging markets and the collapse of Amaranth Advisors LLC.
- Blackstone Group LP won the biggest leveraged buyout in history as Equity Office Properties Trust shareholders approved the $39 billion takeover of the real estate investment trust built by billionaire Sam Zell.
- Michael Fitzgerald, vp for energy risk management at Fimat USA, said for traders to sell oil at $60/bbl.
- Copper prices fell in NY, resuming a slump that began in May, as an increase in global stockpiles signaled demand is slowing.
Wall Street Journal:
- The US Senate Energy Committee is probing whether futures traders are influencing markets that establish natural-gas prices, citing letters sent by panel chairman Jeff Bingaman.
- A New Jersey jeweler has become the first to sell branded, natural emeralds to guarantee quality in a business where flaws in the stones often are disguised.
- San Francisco’s historic State Armory and Arsenal building has been turned into a pornography production plant, one of the few ways to preserve the building’s architectural integrity without violating zoning laws. The 200,000-square-foot building, listed on the National Register of Historic Places, was bought for $14.5 million by the Internet porn company Kink.com, which last week started shooting bondage films on location.
- Delta Air is likely to move closer to the end of insolvency protection at a US Bankruptcy Court hearing in NY today.
NY Times:
- Rural colleges and universities in the US are trying to build miniature cities to attract students who want the amenities of urban areas.
- General Electric(GE) is moving closer to business in clinical diagnoses as it continues to diversify by adding security, energy services and “green” products, among other areas.
Washington Post:
- General David Petraeus, the recently confirmed head of US forces in Iraq, spent time on Capitol Hill last week trying to convince senators to support President Bush’s plan to increase the number of troops.
- The 2008 US presidential election may become the first billion-dollar presidential campaign.
- A stuffed animal introduced by a family-owned wholesale gift company in Ontario, Canada is thought to be the first to marry a physical toy with a related social-networking virtual world. The Webkinz stuffed animal, created by Ganz, comes with an identification number that gives children access to the Webkinz Web site, where they can use virtual money to buy clothes for their pet’s online persona and invite other pets to come hang out.
Folha de S. Paulo:
- The US government is seeking a partnership with Brazil to increase the market for ethanol and reduce dependence on crude oil, citing Nicholas Burns of the US State Department. The research and development of biofuel such as ethanol may be a pillar for a new and stronger partnership between the US and Brazil, Burns said. A partnership between the US and Brazil on biofuel could be ready in less than 12 months.
MehrNews:
- The Islamic Development Bank, a Saudi Arabia-based lender owned by 56 mainly Muslim nations, agreed to lend $1.3 billion to Iran.
- Crude oil plunged over $2/bbl. after a government report showing gasoline supplies surged more than estimates curbed historic investment fund speculation.
- New US hedge fund raised less money in 2006 for the second year in a row because of a rout in emerging markets and the collapse of Amaranth Advisors LLC.
- Blackstone Group LP won the biggest leveraged buyout in history as Equity Office Properties Trust shareholders approved the $39 billion takeover of the real estate investment trust built by billionaire Sam Zell.
- Michael Fitzgerald, vp for energy risk management at Fimat USA, said for traders to sell oil at $60/bbl.
- Copper prices fell in NY, resuming a slump that began in May, as an increase in global stockpiles signaled demand is slowing.
Wall Street Journal:
- The US Senate Energy Committee is probing whether futures traders are influencing markets that establish natural-gas prices, citing letters sent by panel chairman Jeff Bingaman.
- A New Jersey jeweler has become the first to sell branded, natural emeralds to guarantee quality in a business where flaws in the stones often are disguised.
- San Francisco’s historic State Armory and Arsenal building has been turned into a pornography production plant, one of the few ways to preserve the building’s architectural integrity without violating zoning laws. The 200,000-square-foot building, listed on the National Register of Historic Places, was bought for $14.5 million by the Internet porn company Kink.com, which last week started shooting bondage films on location.
- Delta Air is likely to move closer to the end of insolvency protection at a US Bankruptcy Court hearing in NY today.
NY Times:
- Rural colleges and universities in the US are trying to build miniature cities to attract students who want the amenities of urban areas.
- General Electric(GE) is moving closer to business in clinical diagnoses as it continues to diversify by adding security, energy services and “green” products, among other areas.
Washington Post:
- General David Petraeus, the recently confirmed head of US forces in Iraq, spent time on Capitol Hill last week trying to convince senators to support President Bush’s plan to increase the number of troops.
- The 2008 US presidential election may become the first billion-dollar presidential campaign.
- A stuffed animal introduced by a family-owned wholesale gift company in Ontario, Canada is thought to be the first to marry a physical toy with a related social-networking virtual world. The Webkinz stuffed animal, created by Ganz, comes with an identification number that gives children access to the Webkinz Web site, where they can use virtual money to buy clothes for their pet’s online persona and invite other pets to come hang out.
Folha de S. Paulo:
- The US government is seeking a partnership with Brazil to increase the market for ethanol and reduce dependence on crude oil, citing Nicholas Burns of the US State Department. The research and development of biofuel such as ethanol may be a pillar for a new and stronger partnership between the US and Brazil, Burns said. A partnership between the US and Brazil on biofuel could be ready in less than 12 months.
MehrNews:
- The Islamic Development Bank, a Saudi Arabia-based lender owned by 56 mainly Muslim nations, agreed to lend $1.3 billion to Iran.
Productivity Surges, Unit Labor Costs Decelerate
- Preliminary 4Q Non-farm Productivity rose 3.0% versus estimates of a 2.0% gain and a -.1% decline in 3Q.
- Preliminary 4Q Unit Labor Costs rose 1.7% versus estimates of a 2.1% gain and an upwardly revised 3.2% increase in 3Q.
- Preliminary 4Q Unit Labor Costs rose 1.7% versus estimates of a 2.1% gain and an upwardly revised 3.2% increase in 3Q.
BOTTOM LINE: US worker productivity grew at the fastest rate in almost a year last quarter and labor costs rose at a slower pace, suggesting less of an inflation threat. Productivity is now above long-term average levels, while unit labor costs are rising around average rates. Output rose at a 4.2% rate in 4Q versus a 1.9% increase during 3Q. Compensation for each hour worked rose an annual rate of 4.8% in the fourth quarter versus a 3.1% gain in 3Q. Productivity at non-financial corporations, a gauge closely monitored by the Fed, rose at a 5.7% rate in the third quarter versus a 4.3% decline the prior three months. Non-financial productivity has averaged a 4.2% gain over the last 3 quarters, substantially above the 20-year average of 2.4%. I continue to believe the job market will remain healthy without generating substantial unit labor cost increases over the intermediate-term.
Tuesday, February 06, 2007
Wednesday Watch
Late-Night Headlines
Bloomberg:
- Saudi Arabia’s King Abdullah, hosting talks between Fatah and Hamas, told leaders of the movements to resolve disagreements over forming a unity government, saying their dispute threatens to destroy all Palestinian achievements.
- Natural rubber prices, which surged to records last year, may fall later this year as car production growth slows in China, the world’s biggest consumer of the commodity, Jingyi Futures Co. said. A government clampdown on vehicle production capacity and exports will slow rubber consumption growth. “The explosive growth in China’s appetite for rubber is over, and we will be in a period when supply slightly outstrips demand,” said Feng Zhengyu, rubber analyst at the firm.
- Jim Rogers, author of “Hot Commodities”, said he sees China’s water problem as a major risk to growth in the country.
AP:
- House Ways and Means Committee Chairman Charles Rangel said he would be willing to add some Senate-passed tax cuts for small business to legislation increasing the minimum wage.
Financial Times:
- The US may consider starting the process to remove North Korea from the list of sponsors of terrorism and ease restrictions on American companies dealing with the communist country should North Korea show progress on a broad agreement to dismantle its nuclear weapons program.
Independent:
- Las Vegas Sands(LVS) plans to bid for the license to run Britain’s first super-casino in Manchester.
Financial News:
- China needs to step up monetary policy measures to curb inflation and ease imbalances in international payments, citing Xiang Junbo, vice governor of the People’s Bank of China.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (URBN), target $29.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated +.26%.
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
- (APKT)/.09
- (AFFX)/.04
- (AKAM)/.26
- (ACL)/1.03
- (ALKS)/.00
- (AN)/.34
- (CENT)/-.13
- (CI)/2.27
- (CGX)/1.02
- (DF)/.61
- (DVN)/1.36
- (EDS)/.36
- (ICE)/.74
- (MANH)/.30
- (MXIM)/.31
- (MEDI)/.53
- (MCO)/.59
- (NWS/A)/.25
- (RL)/.92
- (PRU)/1.52
- (RVBD)/.01
- (ROL)/.14
- (SLE)/.16
- (SKYW)/.46
- (SINA)/.22
- (DIS)/.39
- (WHR)/1.44
Upcoming Splits
- (LMC) 3-for-1
- (MDCI) 3-for-2
Economic Releases
8:30:
- Preliminary 4Q Non-farm Productivity is estimated to rise 2.0% versus a .2% increase in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to rise 2.1% versus a 2.3% gain in 3Q.
10:30:
- Bloomberg consensus estimates call for a weekly crude oil build of 2,000,000 barrels versus a 2,684,000 barrel increase the prior week. Gasoline supplies are estimated to rise by 1,750,000 barrels versus a 3,819,000 barrel increase the prior week. Distillate Inventories are expected to fall by -3,000,000 barrels versus a -2,648,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to remain unch. versus a -.32% decline the prior week.
3:00 pm EST:
- Consumer Credit for December is estimated to fall to $6.0 billion versus $12.3 billion in November.
Bloomberg:
- Saudi Arabia’s King Abdullah, hosting talks between Fatah and Hamas, told leaders of the movements to resolve disagreements over forming a unity government, saying their dispute threatens to destroy all Palestinian achievements.
- Natural rubber prices, which surged to records last year, may fall later this year as car production growth slows in China, the world’s biggest consumer of the commodity, Jingyi Futures Co. said. A government clampdown on vehicle production capacity and exports will slow rubber consumption growth. “The explosive growth in China’s appetite for rubber is over, and we will be in a period when supply slightly outstrips demand,” said Feng Zhengyu, rubber analyst at the firm.
- Jim Rogers, author of “Hot Commodities”, said he sees China’s water problem as a major risk to growth in the country.
AP:
- House Ways and Means Committee Chairman Charles Rangel said he would be willing to add some Senate-passed tax cuts for small business to legislation increasing the minimum wage.
Financial Times:
- The US may consider starting the process to remove North Korea from the list of sponsors of terrorism and ease restrictions on American companies dealing with the communist country should North Korea show progress on a broad agreement to dismantle its nuclear weapons program.
Independent:
- Las Vegas Sands(LVS) plans to bid for the license to run Britain’s first super-casino in Manchester.
Financial News:
- China needs to step up monetary policy measures to curb inflation and ease imbalances in international payments, citing Xiang Junbo, vice governor of the People’s Bank of China.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (URBN), target $29.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.01%.
NASDAQ 100 indicated +.26%.
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
- (APKT)/.09
- (AFFX)/.04
- (AKAM)/.26
- (ACL)/1.03
- (ALKS)/.00
- (AN)/.34
- (CENT)/-.13
- (CI)/2.27
- (CGX)/1.02
- (DF)/.61
- (DVN)/1.36
- (EDS)/.36
- (ICE)/.74
- (MANH)/.30
- (MXIM)/.31
- (MEDI)/.53
- (MCO)/.59
- (NWS/A)/.25
- (RL)/.92
- (PRU)/1.52
- (RVBD)/.01
- (ROL)/.14
- (SLE)/.16
- (SKYW)/.46
- (SINA)/.22
- (DIS)/.39
- (WHR)/1.44
Upcoming Splits
- (LMC) 3-for-1
- (MDCI) 3-for-2
Economic Releases
8:30:
- Preliminary 4Q Non-farm Productivity is estimated to rise 2.0% versus a .2% increase in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to rise 2.1% versus a 2.3% gain in 3Q.
10:30:
- Bloomberg consensus estimates call for a weekly crude oil build of 2,000,000 barrels versus a 2,684,000 barrel increase the prior week. Gasoline supplies are estimated to rise by 1,750,000 barrels versus a 3,819,000 barrel increase the prior week. Distillate Inventories are expected to fall by -3,000,000 barrels versus a -2,648,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to remain unch. versus a -.32% decline the prior week.
3:00 pm EST:
- Consumer Credit for December is estimated to fall to $6.0 billion versus $12.3 billion in November.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US equities to open modestly higher and to maintain gains into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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