BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Telecom longs, Biotech longs and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is about average. Corn is up 127% in about 13 months, recently going parabolic. As you can see from this corn chart, the gap between net commercial and net large speculator positions has never been wider. This is not a healthy development if you are long corn. Corn is in the grips of the same investment fund-driven speculative mania that has engulfed many other commodities over the last few years. I sense the frenzy is nearing a crescendo. While the mania looks to continue in the short run, I suspect a major top in corn will occur this year. The 10-year yield is just 2 basis points higher today, to 4.69%, despite the above-expectations CPI report, more hawkish Fed commentary and jump in commodities. The yield was 4.89% just three weeks ago. I continue to believe that the 10-year yield will average about 4.75% this year and the Fed will remain on hold. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and stable long-term rates.
Wednesday, February 21, 2007
Stocks Mixed into Final Hour as Stable Long-term Rates Offset Jump in Commodities
Today's Headlines
Bloomberg:
- J&S Energy SA, a Polish importer of Russian crude oil and distributor of fuel products, wants to expand by opening two biofuel plants in Poland and buying other companies.
- Crude oil rose about $60 a barrel in NY on speculation that an Energy Dept. report tomorrow will show that US fuel supplies fell and that unexpected refinery shutdowns will curb stockpiles in the weeks ahead.
- Ascom Holdings AG, the Swiss maker of emergency radio systems that fired its CEO last week, may buy US-based technology companies SpectraLink(SLNK) and Comarco Solutions(CMRO).
- The yen dropped to a record low versus the euro and approached the weakest in four years against the dollar after the Bank of Japan raised interest rates and said further increases would be gradual.
- British Airways Plc placed an order worth as much as $1.6 billion for Boeing Co.(BA) planes over a rival model from Airbus SAS in the first stage of a plan to expand its fleet and replace older aircraft.
- BP Plc, Europe’s second-largest oil company, said its Northstar oil field in Alaska may resume production next week after a pipe that leaked gas is fixed.
- XTO Energy Inc.(XTO), a US oil and natural gas producer, said its proven reserves rose 12% last year to a record.
- Gold is rising in NY after the CPI came in slightly above estimates and oil gained, resulting in more record speculation by investment funds on the metal.
Wall Street Journal:
- Mylan Labs(MYL), a US maker of generic drugs, seems to have found its way again after the failure of a 2005 bid to acquire King Pharmaceuticals knocked it off course.
- Nexstar Broadcasting(NXTR), Young Broadcasting(YBTVA), Sinclair Broadcasting(SBGI) and other local-TV companies have seen their shares soar as they get more money from cable companies to carry local stations.
- Roundy’s Supermarket Inc., one of the US Midwest’s largest flood retailers, is considering selling itself in a deal that could be valued at as much as $2 billion or more.
NY Times:
- After years of increasing costs to employees, some US employers are reversing course and offering free prescription drugs.
- US efforts along the Mexican border are beginning to stem the flow of illegal immigrants.
Washington Post:
- Some liberal activists are launching attack campaigns against Democratic incumbents they believe are too moderate.
NY Post:
- Getty Images(GYI), the world’s largest supplier of photographs to advertisers and publishers, is in talks about acquiring Jupitermedia Corp.(JUPM) for a price that may be about $450 million including debt.
Financial Times:
- Wal-Mart Stores(WMT) is asking its biggest suppliers to put more women and minorities on the teams that handle its accounts.
Tagesspiegel:
- United Nations Secretary General Ban Ki-moon would welcome more German involvement in conflict situations.
- J&S Energy SA, a Polish importer of Russian crude oil and distributor of fuel products, wants to expand by opening two biofuel plants in Poland and buying other companies.
- Crude oil rose about $60 a barrel in NY on speculation that an Energy Dept. report tomorrow will show that US fuel supplies fell and that unexpected refinery shutdowns will curb stockpiles in the weeks ahead.
- Ascom Holdings AG, the Swiss maker of emergency radio systems that fired its CEO last week, may buy US-based technology companies SpectraLink(SLNK) and Comarco Solutions(CMRO).
- The yen dropped to a record low versus the euro and approached the weakest in four years against the dollar after the Bank of Japan raised interest rates and said further increases would be gradual.
- British Airways Plc placed an order worth as much as $1.6 billion for Boeing Co.(BA) planes over a rival model from Airbus SAS in the first stage of a plan to expand its fleet and replace older aircraft.
- BP Plc, Europe’s second-largest oil company, said its Northstar oil field in Alaska may resume production next week after a pipe that leaked gas is fixed.
- XTO Energy Inc.(XTO), a US oil and natural gas producer, said its proven reserves rose 12% last year to a record.
- Gold is rising in NY after the CPI came in slightly above estimates and oil gained, resulting in more record speculation by investment funds on the metal.
Wall Street Journal:
- Mylan Labs(MYL), a US maker of generic drugs, seems to have found its way again after the failure of a 2005 bid to acquire King Pharmaceuticals knocked it off course.
- Nexstar Broadcasting(NXTR), Young Broadcasting(YBTVA), Sinclair Broadcasting(SBGI) and other local-TV companies have seen their shares soar as they get more money from cable companies to carry local stations.
- Roundy’s Supermarket Inc., one of the US Midwest’s largest flood retailers, is considering selling itself in a deal that could be valued at as much as $2 billion or more.
NY Times:
- After years of increasing costs to employees, some US employers are reversing course and offering free prescription drugs.
- US efforts along the Mexican border are beginning to stem the flow of illegal immigrants.
Washington Post:
- Some liberal activists are launching attack campaigns against Democratic incumbents they believe are too moderate.
NY Post:
- Getty Images(GYI), the world’s largest supplier of photographs to advertisers and publishers, is in talks about acquiring Jupitermedia Corp.(JUPM) for a price that may be about $450 million including debt.
Financial Times:
- Wal-Mart Stores(WMT) is asking its biggest suppliers to put more women and minorities on the teams that handle its accounts.
Tagesspiegel:
- United Nations Secretary General Ban Ki-moon would welcome more German involvement in conflict situations.
Consumer Inflation Decelerates, Leading Indicators Rise Again
- The Consumer Price Index for January rose .2% versus estimates of a .1% gain and a downwardly revised .4% increase in December.
- The CPI Ex Food & Energy for January rose .3% versus estimates of a .2% gain and a downwardly revised .1% increase in December.
- Leading Indicators for January rose .1% versus estimates of a .2% increase and an upwardly revised .6% gain in December.
- The CPI Ex Food & Energy for January rose .3% versus estimates of a .2% gain and a downwardly revised .1% increase in December.
- Leading Indicators for January rose .1% versus estimates of a .2% increase and an upwardly revised .6% gain in December.
BOTTOM LINE: Consumer prices in the US rose slightly more than estimates last month, Bloomberg reported. The cost of medical care rose .8% versus a .2% increase in December. The cost of tobacco products increased 3.1%, the most since June 2002. Gasoline prices fell 3%, fuel oil costs declined 5.6% and natural gas prices fell 3%. New vehicle prices were unch. and food prices rose .7%. The CPI year-over-year rose 2.1%, down from 4.7% in September 2005 and well below the 20-year average of 3.1%. The 10-year yield is only 2 basis points higher on the report. I continue to believe inflation worries have peaked for this cycle and inflation will rise below average rates for the entire year.
A gauge of the future direction of the US economy rose for a second month in January, the first back-to-back gain in a year, lifted by an increase in a measure of consumer sentiment, Bloomberg said. Money supply growth, low initial jobless claims and a rising stock market also propelled the index. An expanding job market and higher stock prices are boosting consumer spending. I suspect US economic growth will come in below average levels this quarter as inventory de-stocking has been extensive. However, this should help boost economic growth back to around average levels of 3% the remainder of the year.
Tuesday, February 20, 2007
Wednesday Watch
Late-Night Headlines
Bloomberg:
- The yen strengthened against the dollar after NHK Television reported that Bank of Japan Governor Toshihiko Fukui proposed raising the central bank’s benchmark interest rate.
- Delphi Corp., the biggest auto-parts supplier to General Motors(GM), intends to sell its interiors business to billionaire industrialist Ira Rennert as part of an effort to exit bankruptcy.
- Australia’s central bank is “more confident” inflation pressures are easting in the Asia-Pacific region’s fifth-largest economy, Governor Glenn Stevens said.
- Archer Daniels Midland(ADM) expects biodegradable plastics to be the next growth market for corn byproducts. Archer Daniels, together with partner Metabolix, will open its first plant to produce 50,000 tons of biodegradable plastics next year in Clinton, Iowa. Archer Daniels also plans to increase ethanol capacity by 50% to 1.6 billion gallons a year by next year.
- NovaStar Financial(NFI), the 16th largest sub-prime mortgage lender in the US, had a $14.4 million loss for the fourth quarter. Shares plunged 33% in after-hours trading.
AP:
- An Austin, Texas, judge blocked Governor Rick Perry’s approval of TXU Corp.’s plan to build six coal-fired plants in the state. Plaintiffs, who included environmental groups, said the order was unconstitutional.
Xinhua News Agency:
- China plans to boost gold production to 260 tons this year after record output of 240 tons in 2006, citing the State Development and Reform Commission.
Late Buy/Sell Recommendations
Citigroup:
- Lobbyists and politicians noted at the Renewable Fuels Conference that they expect the next Renewable Fuel Standard to be finalized next month with enactment starting July 1st of this year. The current RFS standard mandates 7.5 billion gallons of renewable fuel use by 2012 though we are already above 5 billion gallons of use. The US consumes approximately 140 billion gallons of gasoline annually so obviously E10 adoption(10% of a fuel gallon being ethanol, 90% gas) across the country gets us to 14 billion renewable gallons with E20 getting us to 28 billion gallons. It was noted the government targets 76% of all US gasoline will be E10 blended by 2010, implying the new RFS likely has to be at least 11-12 billion gallons.
- Residential consumption of natural gas has not grown after reaching an early peak in 1973. Conservation drove consumption down to a low in 1983 from the peak in 1973. Since then, despite a 33% pickup in the housing stock, residential demand has only risen by 20%, just enough to return consumption to the 1973 level. Between climate change trends, conservation, migration to the South and West, residential consumption may not be a significant source of growth for natural gas consumption in the US.
- Reiterated Buy on (GILD), target raised to $86.
Night Trading
Asian Indices are -.50% to +.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
- (ANF)/2.14
- (APCC)/.22
- (ADI)/.39
- (BRCD)/.12
- (CLF)/1.52
- (GMR)/.79
- (GGC)/-.20
- (GRT)/.26
- (HSIC)/.67
- (JBX)/.78
- (MHS)/.79
- (MRX)/.21
- (OII)/.56
- (OSIP)/-.14
- (PWR)/.16
- (ROG)/.55
- (RUTH)/.36
- (CRM)/.07
- (SNPS)/.20
- (TK)/1.11
- (TJX)/.51
- (TCC)/1.29
- (TRI)/.55
- (VCLK)/.18
- (WBMD)/.16
- (WFMI)/.41
- (ZLC)/1.87
Upcoming Splits
- (CMCSA) 3-for-2
- (TRMB) 2-for-1
Economic Releases
8:30 am EST
- The Consumer Price Index for January is estimated to rise .1% versus a .4% gain in December.
- The CPI Ex Food & Energy for January is estimated to rise .2% versus a .1% gain in December.
10:00 am EST
- Leading Indicators for January are estimated to rise .2% versus a .3% gain in December.
2:00 pm EST
- Minutes from Jan. 31 FOMC Meeting
Bloomberg:
- The yen strengthened against the dollar after NHK Television reported that Bank of Japan Governor Toshihiko Fukui proposed raising the central bank’s benchmark interest rate.
- Delphi Corp., the biggest auto-parts supplier to General Motors(GM), intends to sell its interiors business to billionaire industrialist Ira Rennert as part of an effort to exit bankruptcy.
- Australia’s central bank is “more confident” inflation pressures are easting in the Asia-Pacific region’s fifth-largest economy, Governor Glenn Stevens said.
- Archer Daniels Midland(ADM) expects biodegradable plastics to be the next growth market for corn byproducts. Archer Daniels, together with partner Metabolix, will open its first plant to produce 50,000 tons of biodegradable plastics next year in Clinton, Iowa. Archer Daniels also plans to increase ethanol capacity by 50% to 1.6 billion gallons a year by next year.
- NovaStar Financial(NFI), the 16th largest sub-prime mortgage lender in the US, had a $14.4 million loss for the fourth quarter. Shares plunged 33% in after-hours trading.
AP:
- An Austin, Texas, judge blocked Governor Rick Perry’s approval of TXU Corp.’s plan to build six coal-fired plants in the state. Plaintiffs, who included environmental groups, said the order was unconstitutional.
Xinhua News Agency:
- China plans to boost gold production to 260 tons this year after record output of 240 tons in 2006, citing the State Development and Reform Commission.
Late Buy/Sell Recommendations
Citigroup:
- Lobbyists and politicians noted at the Renewable Fuels Conference that they expect the next Renewable Fuel Standard to be finalized next month with enactment starting July 1st of this year. The current RFS standard mandates 7.5 billion gallons of renewable fuel use by 2012 though we are already above 5 billion gallons of use. The US consumes approximately 140 billion gallons of gasoline annually so obviously E10 adoption(10% of a fuel gallon being ethanol, 90% gas) across the country gets us to 14 billion renewable gallons with E20 getting us to 28 billion gallons. It was noted the government targets 76% of all US gasoline will be E10 blended by 2010, implying the new RFS likely has to be at least 11-12 billion gallons.
- Residential consumption of natural gas has not grown after reaching an early peak in 1973. Conservation drove consumption down to a low in 1983 from the peak in 1973. Since then, despite a 33% pickup in the housing stock, residential demand has only risen by 20%, just enough to return consumption to the 1973 level. Between climate change trends, conservation, migration to the South and West, residential consumption may not be a significant source of growth for natural gas consumption in the US.
- Reiterated Buy on (GILD), target raised to $86.
Night Trading
Asian Indices are -.50% to +.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
- (ANF)/2.14
- (APCC)/.22
- (ADI)/.39
- (BRCD)/.12
- (CLF)/1.52
- (GMR)/.79
- (GGC)/-.20
- (GRT)/.26
- (HSIC)/.67
- (JBX)/.78
- (MHS)/.79
- (MRX)/.21
- (OII)/.56
- (OSIP)/-.14
- (PWR)/.16
- (ROG)/.55
- (RUTH)/.36
- (CRM)/.07
- (SNPS)/.20
- (TK)/1.11
- (TJX)/.51
- (TCC)/1.29
- (TRI)/.55
- (VCLK)/.18
- (WBMD)/.16
- (WFMI)/.41
- (ZLC)/1.87
Upcoming Splits
- (CMCSA) 3-for-2
- (TRMB) 2-for-1
Economic Releases
8:30 am EST
- The Consumer Price Index for January is estimated to rise .1% versus a .4% gain in December.
- The CPI Ex Food & Energy for January is estimated to rise .2% versus a .1% gain in December.
10:00 am EST
- Leading Indicators for January are estimated to rise .2% versus a .3% gain in December.
2:00 pm EST
- Minutes from Jan. 31 FOMC Meeting
BOTTOM LINE: Asian indices are mixed as gains in technology and steel shares are offsetting losses in energy stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
DJIA Hits Another All-Time High, Led by Technology and Retail Shares, as Energy Prices Fall
Indices
S&P 500 1,459.68 +.28%
DJIA 12,786.64 +.15%
NASDAQ 2,513.04 +.67%
Russell 2000 826.12 +.97%
Wilshire 5000 14,734.23 +.39%
Russell 1000 Growth 576.95 +.49%
Russell 1000 Value 841.75 +.21%
Morgan Stanley Consumer 719.01 +.61%
Morgan Stanley Cyclical 971.44 +.31%
Morgan Stanley Technology 588.16 +.38%
Transports 5,145.81 +.78%
Utilities 477.26 +.49%
MSCI Emerging Markets 118.02 +.25%
Sentiment/Internals
Total Put/Call .95 +25.0%
NYSE Arms 1.04 +4.89%
Volatility(VIX) 10.24 +2.20%
ISE Sentiment 127.0 -18.6%
Futures Spot Prices
Crude Oil 58.07 -2.22%
Reformulated Gasoline 164.30 -.14%
Natural Gas 7.63 +1.69%
Heating Oil 164.40 -1.76%
Gold 662.10 -1.59%
Base Metals 230.20%
Copper 260.25 -2.07%
Economy
10-year US Treasury Yield 4.68% -1 basis point
US Dollar 84.18 +.19%
CRB Index 303.46 -1.03%
Leading Sectors
Gaming +1.12%
Software +1.11%
Retail +1.06%
Lagging Sectors
Energy -.75%
Oil Service -.98%
Gold & Silver -1.77%
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
UBS:
- Rated (GILD), (CELG) Buy. (GILD) top pick.
Afternoon/Evening Headlines
Bloomberg:
- Crude oil fell $1.32/bbl. today on forecasts for milder weather and comments from Russia that oil prices would fall this year and next year.
- Consol Energy(CNX), the second-biggest US coal producer, said it formed an alliance with coal processor Headwaters(HW) to develop refineries that will make liquid fuel from Consol’s reserves.
- BlackRock Inc.(BLK) reported a 7.1% stake in FuelCell Energy(FCEL), a maker of industrial power plants that generate electricity by converting hydrogen and oxygen into water.
- Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago, says he sees a technical failure in the price of gold.
- Hewlett-Packard(HPQ) said first-quarter profit rose 26% after the company won consumer sales away from Dell Inc.(DELL). (HPQ) is falling .26 after-hours.
- Sam Zell, the Chicago billionaire who sold Equity Office Properties Trust for $39 billion in the biggest leveraged buyout ever, said office rents will continue to rise and he didn’t sell at the top of the market. “The office market at least for the next 24 months looks extremely strong and extremely good,” Zell said.
- Copper prices in NY fell the most in two weeks on renewed speculation that global mine output will exceed demand for the metal.
- Crocs Inc.(CROX) said fourth-quarter earnings jumped almost 500% as demand for the company colorful line of casual shoes pushed sales to a record. (CROX) rose .50 after-hours.
AP:
- OJ Simpson will have to pay royalties and other earnings from his past projects to the family of Ron Goldman following a judge’s ruling.
- The last floats of the 2007 Mardi Gras season rolled through New Orleans today as officials and businesses said attendance was likely to exceed last year.
Interfax:
- OAO VSMPO-Avisma, the world’s largest producer of titanium, increased production 15% to 23,900 tons last year.
S&P 500 1,459.68 +.28%
DJIA 12,786.64 +.15%
NASDAQ 2,513.04 +.67%
Russell 2000 826.12 +.97%
Wilshire 5000 14,734.23 +.39%
Russell 1000 Growth 576.95 +.49%
Russell 1000 Value 841.75 +.21%
Morgan Stanley Consumer 719.01 +.61%
Morgan Stanley Cyclical 971.44 +.31%
Morgan Stanley Technology 588.16 +.38%
Transports 5,145.81 +.78%
Utilities 477.26 +.49%
MSCI Emerging Markets 118.02 +.25%
Sentiment/Internals
Total Put/Call .95 +25.0%
NYSE Arms 1.04 +4.89%
Volatility(VIX) 10.24 +2.20%
ISE Sentiment 127.0 -18.6%
Futures Spot Prices
Crude Oil 58.07 -2.22%
Reformulated Gasoline 164.30 -.14%
Natural Gas 7.63 +1.69%
Heating Oil 164.40 -1.76%
Gold 662.10 -1.59%
Base Metals 230.20%
Copper 260.25 -2.07%
Economy
10-year US Treasury Yield 4.68% -1 basis point
US Dollar 84.18 +.19%
CRB Index 303.46 -1.03%
Leading Sectors
Gaming +1.12%
Software +1.11%
Retail +1.06%
Lagging Sectors
Energy -.75%
Oil Service -.98%
Gold & Silver -1.77%
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
UBS:
- Rated (GILD), (CELG) Buy. (GILD) top pick.
Afternoon/Evening Headlines
Bloomberg:
- Crude oil fell $1.32/bbl. today on forecasts for milder weather and comments from Russia that oil prices would fall this year and next year.
- Consol Energy(CNX), the second-biggest US coal producer, said it formed an alliance with coal processor Headwaters(HW) to develop refineries that will make liquid fuel from Consol’s reserves.
- BlackRock Inc.(BLK) reported a 7.1% stake in FuelCell Energy(FCEL), a maker of industrial power plants that generate electricity by converting hydrogen and oxygen into water.
- Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago, says he sees a technical failure in the price of gold.
- Hewlett-Packard(HPQ) said first-quarter profit rose 26% after the company won consumer sales away from Dell Inc.(DELL). (HPQ) is falling .26 after-hours.
- Sam Zell, the Chicago billionaire who sold Equity Office Properties Trust for $39 billion in the biggest leveraged buyout ever, said office rents will continue to rise and he didn’t sell at the top of the market. “The office market at least for the next 24 months looks extremely strong and extremely good,” Zell said.
- Copper prices in NY fell the most in two weeks on renewed speculation that global mine output will exceed demand for the metal.
- Crocs Inc.(CROX) said fourth-quarter earnings jumped almost 500% as demand for the company colorful line of casual shoes pushed sales to a record. (CROX) rose .50 after-hours.
AP:
- OJ Simpson will have to pay royalties and other earnings from his past projects to the family of Ron Goldman following a judge’s ruling.
- The last floats of the 2007 Mardi Gras season rolled through New Orleans today as officials and businesses said attendance was likely to exceed last year.
Interfax:
- OAO VSMPO-Avisma, the world’s largest producer of titanium, increased production 15% to 23,900 tons last year.
BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Telecom longs, Computer longs, Biotech longs and Commodity shorts. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector gained and volume was heavy. Measures of investor anxiety were higher into the close. Today's overall market action was bullish as the major averages and breadth finished at session highs. Small caps led the way once again. The Russell 2000 is already 4.8% higher year-to-date with the Naz a close second, up 4.0%. Most commodities were under pressure throughout the day and the 10-year yield is finishing near session lows, dropping another basis point to 4.68%. "Growth" stock outperformance over "value" has recently picked up steam. My intraday gauge of investor angst was at above-average levels throughout the day, notwithstanding the rally from morning lows. I expect stocks to build on today's gains later this week.
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