BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Energy-related shorts. 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, most sectors are declining and volume is about average. Many pundits and analysts have said that Sam Zell is "the smartest guy in the room" and that he was selling Equity Office Properties Trust (EOP) at the top of the market. He is likely "the smartest guy in the room." However, he said recently that he didn't sell at the top and that office rents will continue to rise. Moreover, Zell told Bloomberg that "What I can tell you is that the office market at least for the next 24 months looks extremely strong and extremely good." The S&P REIT Index, which has soared 36% over the last year, is only 2% off all-time highs despite much hand-wringing. I believe CNBC's "Closing Bell" has Zell as a guest later this afternoon. Maybe Zell did sell at the top, but he doesn't seem to see it that way. I expect US stocks to trade modestly higher into the close from current levels on short-covering and more optimism in the technology sector.
Thursday, February 22, 2007
Stocks Slightly Lower into Final Hour on Iran Worries and Profit-taking
Today's Headlines
Bloomberg:
- Hedge-fund investors are best protected by market discipline rather than added regulation, the US Treasury Dept. said in releasing guidelines for the industry form the President’s Working Group on Financial Markets.
- Google Inc.(GOOG), seeking to challenge Microsoft Corp.’s(MSFT) dominance in business software, will today start selling e-mail, calendar and personalized home pages to businesses over the Web.
- Iran expanded its capacity to enrich uranium, defying a UN Security Council demand to halt its atomic work and prompting the US to consider seeking further international sanctions against the Islamic Republic.
- Crude oil is rising above $61/bbl. as a government report showed gasoline supplies fell as refineries shut units and Iran defied another UN mandate.
- Oil prices will be less than anticipated this year because a warm winter in the Northern Hemisphere and the absence of supply disruptions caused fuel stockpiles to gain, according to National Australia Bank Ltd.
- Prince Harry, third in line to the British throne, will serve alongside his military regiment in Iraq later this year, the UK Ministry of Defense said.
Wall Street Journal:
- BHP Billiton Ltd.(BHP), Rio Tinto Plc(RTP) and other world mining companies are boosting their investment and planning to open more mines, even though some commodity prices have dropped and their spending is likely to bring down prices in the future. The companies together have plans to spend tens of billions of dollars expanding production of iron ore, coal, nickel and other materials. The projects may show that mining executives are setting aside concerns that the industry may over-expand in good times and find a glut of metal in a slowdown.
- Costs incurred by North American corporations in order to comply with the 2003 Sarbanes-Oxley financial and accounting disclosure law are leveling off, as costs to meet environmental guidelines are increasing, citing a study to be published today by AMR, a Boston-based research firm.
- US crude-oil imports from Africa exceeded purchases from the Middle East in 2006 for the first time in 21 years.
NY Times:
- Executives at DaimlerChrysler AG(DCX) would prefer to sell the Chrysler unit as a whole, instead of breaking off assets.
- The campaigns of Democratic Senators Hillary Clinton and Barack Obama engaged in a series of sharply worded exchanges, changing the tone of the presidential race. Hollywood producer David Geffen’s remarks yesterday in a commentary in the Times prompted the exchange. Geffen wrote that the Clintons lie “with such ease, it’s troubling” and the NY senator’s politics are “going to be very unpleasant, unattractive and ineffective.”
- Advocates for medical marijuana sued the Dept. of Health and Human Services and the FDA over the agencies’ claims that smoking the drug isn’t medically beneficial.
Washington Post:
- China is undertaking a nationwide effort to keep teenagers from becoming addicted to the Internet.
National Post:
- Magna Intl.(MGA), Canada’s largest auto-parts maker, may make a bid for DaimlerChrysler AG’s(DCX) Chrysler unit, citing British researcher SupplierBusiness.
Arab News:
- Saudi Arabia reported a capital outflow of $800 billion, citing a member of the Riyadh Chamber of Commerce and Industry. The money is leaving the kingdom as a result of corruption, citing Majed Garoub, chairman of the lawyers committee at the Riyadh Chamber of Commerce and Industry.
- Hedge-fund investors are best protected by market discipline rather than added regulation, the US Treasury Dept. said in releasing guidelines for the industry form the President’s Working Group on Financial Markets.
- Google Inc.(GOOG), seeking to challenge Microsoft Corp.’s(MSFT) dominance in business software, will today start selling e-mail, calendar and personalized home pages to businesses over the Web.
- Iran expanded its capacity to enrich uranium, defying a UN Security Council demand to halt its atomic work and prompting the US to consider seeking further international sanctions against the Islamic Republic.
- Crude oil is rising above $61/bbl. as a government report showed gasoline supplies fell as refineries shut units and Iran defied another UN mandate.
- Oil prices will be less than anticipated this year because a warm winter in the Northern Hemisphere and the absence of supply disruptions caused fuel stockpiles to gain, according to National Australia Bank Ltd.
- Prince Harry, third in line to the British throne, will serve alongside his military regiment in Iraq later this year, the UK Ministry of Defense said.
Wall Street Journal:
- BHP Billiton Ltd.(BHP), Rio Tinto Plc(RTP) and other world mining companies are boosting their investment and planning to open more mines, even though some commodity prices have dropped and their spending is likely to bring down prices in the future. The companies together have plans to spend tens of billions of dollars expanding production of iron ore, coal, nickel and other materials. The projects may show that mining executives are setting aside concerns that the industry may over-expand in good times and find a glut of metal in a slowdown.
- Costs incurred by North American corporations in order to comply with the 2003 Sarbanes-Oxley financial and accounting disclosure law are leveling off, as costs to meet environmental guidelines are increasing, citing a study to be published today by AMR, a Boston-based research firm.
- US crude-oil imports from Africa exceeded purchases from the Middle East in 2006 for the first time in 21 years.
NY Times:
- Executives at DaimlerChrysler AG(DCX) would prefer to sell the Chrysler unit as a whole, instead of breaking off assets.
- The campaigns of Democratic Senators Hillary Clinton and Barack Obama engaged in a series of sharply worded exchanges, changing the tone of the presidential race. Hollywood producer David Geffen’s remarks yesterday in a commentary in the Times prompted the exchange. Geffen wrote that the Clintons lie “with such ease, it’s troubling” and the NY senator’s politics are “going to be very unpleasant, unattractive and ineffective.”
- Advocates for medical marijuana sued the Dept. of Health and Human Services and the FDA over the agencies’ claims that smoking the drug isn’t medically beneficial.
Washington Post:
- China is undertaking a nationwide effort to keep teenagers from becoming addicted to the Internet.
National Post:
- Magna Intl.(MGA), Canada’s largest auto-parts maker, may make a bid for DaimlerChrysler AG’s(DCX) Chrysler unit, citing British researcher SupplierBusiness.
Arab News:
- Saudi Arabia reported a capital outflow of $800 billion, citing a member of the Riyadh Chamber of Commerce and Industry. The money is leaving the kingdom as a result of corruption, citing Majed Garoub, chairman of the lawyers committee at the Riyadh Chamber of Commerce and Industry.
Job Market Still Healthy
- Initial Jobless Claims fell to 332K versus estimates of 325K and 359K the prior week.
- Continuing Claims fell to 2509K versus estimates of 2519K and 2554K prior.
- Continuing Claims fell to 2509K versus estimates of 2519K and 2554K prior.
BOTTOM LINE: Fewer Americans applied for first-time state unemployment benefits last week, suggesting the labor market remains resilient, Bloomberg said. The rise the previous week was mostly related to winter storms in many areas. The four-week moving-average rose to 328,000 versus 326,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, remained at 1.9%. 43% of the executives polled by the Washington-based Business Council said they are having trouble finding workers, up from 25% 12 months ago. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
Wednesday, February 21, 2007
Thursday Watch
Late-Night Headlines
Bloomberg:
- Crude oil imports by Japan, the world’s largest consumer of the fuel after the US and China, fell for a night consecutive month in January, dropping 4.8% from a year earlier. Imports of liquefied natural gas grew 14% to 5.94 million metric tons.
- The yen will weaken another 3% against the dollar by June as a Bank of Japan interest-rate increase won’t stop investors borrowing the currency to buy higher-yielding assets, said Nomura Securities.
- Tom Daschle, former US Senate majority leader, will endorse fellow Democrat Barack Obama for president.
- The IRS said the tax status of 8,500 residents of the US Virgin Islands who earn more than $75,000, including employees of hedge funds, would face renewed scrutiny as the agency steps up efforts to root out tax evaders.
- Cisco Systems(CSCO) and Apple Inc.(AAPL) agreed to share the iPhone brand, dismissing Cisco’s lawsuit for trademark infringement.
London-based Times:
- Warner Music Group(WMG) is planning a cash bid of over $3.9 billion for EMI Group.
CNBC TV-18:
- Indian tax sleuths today raided stockbrokers, property developers and top doctors, citing tax officials. Raids are being conducted in Mumbai. Mumbai is India’s financial capital, home to the country’s two biggest stock exchanges, the central bank and several companies.
Investor Daily Indonesia:
- Indonesia plans to spend $551 million to finance alternative energy projects in villages nationwide.
Xinhua News Agency:
- China’s steelmakers used 8.8% less energy in 2006 than the previous year, citing the nation’s top economic planning agency.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BBY), target $63.
Night Trading
Asian Indices are +.75% to +1.0% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.05%.
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
- (ARW)/.73
- (BEAS)/.14
- (BDN)/.65
- (CHK)/.77
- (CQB)/-.47
- (DNR)/.30
- (DCI)/.37
- (EME)/.72
- (ESV)/1.30
- (FSS)/.26
- (GSF)/1.22
- (HRB)/1.11
- (HMA)/.29
- (INTU)/.42
- (JCP)/1.96
- (JLG)/.31
- (LAMR)/.09
- (KSE)/.71
- (CLI)/.28
- (MORN)/.28
- (NEM)/.37
- (NBL)/1.05
- (OMX)/.40
- (PDCO)/.43
- (PTEN)/1.03
- (PCG)/.45
- (PWR)/.16
- (SWY)/.60
- (SRE)/1.27
- (TOL)/.28
- (WMB)/.26
Upcoming Splits
- (TRMB) 2-for-1
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated at 325K versus 357K the prior week.
- Continuing Claims are estimated at 2510K versus 2560K prior.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,050,000 barrels versus a -589,000 barrel decline the prior week. Gasoline supplies are expected to fall -50,000 barrels versus a -2,058,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,875,000 barrels versus a -3,018,000 barrel decline the prior week. Refinery utilization is expected to rise .25% versus a -.70% decline the prior week. Finally, natural gas supplies are expected to fall by -226 bcf versus a -259 bcf withdrawal the prior week.
Bloomberg:
- Crude oil imports by Japan, the world’s largest consumer of the fuel after the US and China, fell for a night consecutive month in January, dropping 4.8% from a year earlier. Imports of liquefied natural gas grew 14% to 5.94 million metric tons.
- The yen will weaken another 3% against the dollar by June as a Bank of Japan interest-rate increase won’t stop investors borrowing the currency to buy higher-yielding assets, said Nomura Securities.
- Tom Daschle, former US Senate majority leader, will endorse fellow Democrat Barack Obama for president.
- The IRS said the tax status of 8,500 residents of the US Virgin Islands who earn more than $75,000, including employees of hedge funds, would face renewed scrutiny as the agency steps up efforts to root out tax evaders.
- Cisco Systems(CSCO) and Apple Inc.(AAPL) agreed to share the iPhone brand, dismissing Cisco’s lawsuit for trademark infringement.
London-based Times:
- Warner Music Group(WMG) is planning a cash bid of over $3.9 billion for EMI Group.
CNBC TV-18:
- Indian tax sleuths today raided stockbrokers, property developers and top doctors, citing tax officials. Raids are being conducted in Mumbai. Mumbai is India’s financial capital, home to the country’s two biggest stock exchanges, the central bank and several companies.
Investor Daily Indonesia:
- Indonesia plans to spend $551 million to finance alternative energy projects in villages nationwide.
Xinhua News Agency:
- China’s steelmakers used 8.8% less energy in 2006 than the previous year, citing the nation’s top economic planning agency.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BBY), target $63.
Night Trading
Asian Indices are +.75% to +1.0% on average.
S&P 500 indicated +.02%.
NASDAQ 100 indicated +.05%.
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
- (ARW)/.73
- (BEAS)/.14
- (BDN)/.65
- (CHK)/.77
- (CQB)/-.47
- (DNR)/.30
- (DCI)/.37
- (EME)/.72
- (ESV)/1.30
- (FSS)/.26
- (GSF)/1.22
- (HRB)/1.11
- (HMA)/.29
- (INTU)/.42
- (JCP)/1.96
- (JLG)/.31
- (LAMR)/.09
- (KSE)/.71
- (CLI)/.28
- (MORN)/.28
- (NEM)/.37
- (NBL)/1.05
- (OMX)/.40
- (PDCO)/.43
- (PTEN)/1.03
- (PCG)/.45
- (PWR)/.16
- (SWY)/.60
- (SRE)/1.27
- (TOL)/.28
- (WMB)/.26
Upcoming Splits
- (TRMB) 2-for-1
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated at 325K versus 357K the prior week.
- Continuing Claims are estimated at 2510K versus 2560K prior.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,050,000 barrels versus a -589,000 barrel decline the prior week. Gasoline supplies are expected to fall -50,000 barrels versus a -2,058,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,875,000 barrels versus a -3,018,000 barrel decline the prior week. Refinery utilization is expected to rise .25% versus a -.70% decline the prior week. Finally, natural gas supplies are expected to fall by -226 bcf versus a -259 bcf withdrawal the prior week.
BOTTOM LINE: Asian indices are higher, boosted by technology shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Near Session Highs on Fed Commentary
Indices
S&P 500 1,457.63 -.14%
DJIA 12,738.41 -.38%
NASDAQ 2,518.42 +.21%
Russell 2000 827.33 +.15%
Wilshire 5000 14,723.0 -.08%
Russell 1000 Growth 576.67 -.05%
Russell 1000 Value 840.18 -.19%
Morgan Stanley Consumer 715.59 -.48%
Morgan Stanley Cyclical 971.68 +.03%
Morgan Stanley Technology 586.79 -.23%
Transports 5,178.37 +.63%
Utilities 474.89 -.50%
MSCI Emerging Markets 118.05 +.07%
Sentiment/Internals
Total Put/Call 1.13 +18.95%
NYSE Arms .92 -11.97%
Volatility(VIX) 10.20 -.39%
ISE Sentiment 124.0 -2.36%
Futures Spot Prices
Crude Oil 60.15 +2.21%
Reformulated Gasoline 170.30 +3.27%
Natural Gas 7.62 +.46%
Heating Oil 168.34 +2.33%
Gold 682.10 +3.19%
Base Metals 227.37 -1.23%
Copper 266.60 +2.54%
Economy
10-year US Treasury Yield 4.69% +1 basis point
US Dollar 84.22 +.05%
CRB Index 308.36 +1.61%
Leading Sectors
Steel +2.37%
Oil Service +1.88%
Alternative Energy +1.19%
Lagging Sectors
Retail -.39%
Utilities -.50%
Drugs -.54%
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
JPMorgan:
- Rated (ZION) Overweight. (ZION) top pick.
- Rated (MI) and (TCB) Underweight.
Afternoon/Evening Headlines
Bloomberg:
- Whole Foods Market(WFMI) said first quarter profit fell for the first time in five quarters and announced it agreed to buy rival Wild Oats(OATS) for $565 million in cash. The stock surged 5% after-hours.
- Analog Devices(ADI), a semiconductor maker used in products from mobile phones to cars, said first quarter profit increased 27% boosted by a royalty payment for use of its technology. The stock jumped 5.4% after-hours.
- The Fed’s Poole said inflation is likely to tilt down this year.
AP:
- US Senator Hillary Clinton’s unfavorable rating among New York voters has climbed 33% since her re-election victory in November, citing a statewide poll.
Australian:
- Australia will almost double its troops in Afghanistan, including commandos and more air support.
Sueddeutsche Zeitung:
- Expedia Inc.(EXPE), the world’s biggest online travel agency, aims to become the most profitable travel agency in the world
S&P 500 1,457.63 -.14%
DJIA 12,738.41 -.38%
NASDAQ 2,518.42 +.21%
Russell 2000 827.33 +.15%
Wilshire 5000 14,723.0 -.08%
Russell 1000 Growth 576.67 -.05%
Russell 1000 Value 840.18 -.19%
Morgan Stanley Consumer 715.59 -.48%
Morgan Stanley Cyclical 971.68 +.03%
Morgan Stanley Technology 586.79 -.23%
Transports 5,178.37 +.63%
Utilities 474.89 -.50%
MSCI Emerging Markets 118.05 +.07%
Sentiment/Internals
Total Put/Call 1.13 +18.95%
NYSE Arms .92 -11.97%
Volatility(VIX) 10.20 -.39%
ISE Sentiment 124.0 -2.36%
Futures Spot Prices
Crude Oil 60.15 +2.21%
Reformulated Gasoline 170.30 +3.27%
Natural Gas 7.62 +.46%
Heating Oil 168.34 +2.33%
Gold 682.10 +3.19%
Base Metals 227.37 -1.23%
Copper 266.60 +2.54%
Economy
10-year US Treasury Yield 4.69% +1 basis point
US Dollar 84.22 +.05%
CRB Index 308.36 +1.61%
Leading Sectors
Steel +2.37%
Oil Service +1.88%
Alternative Energy +1.19%
Lagging Sectors
Retail -.39%
Utilities -.50%
Drugs -.54%
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
JPMorgan:
- Rated (ZION) Overweight. (ZION) top pick.
- Rated (MI) and (TCB) Underweight.
Afternoon/Evening Headlines
Bloomberg:
- Whole Foods Market(WFMI) said first quarter profit fell for the first time in five quarters and announced it agreed to buy rival Wild Oats(OATS) for $565 million in cash. The stock surged 5% after-hours.
- Analog Devices(ADI), a semiconductor maker used in products from mobile phones to cars, said first quarter profit increased 27% boosted by a royalty payment for use of its technology. The stock jumped 5.4% after-hours.
- The Fed’s Poole said inflation is likely to tilt down this year.
AP:
- US Senator Hillary Clinton’s unfavorable rating among New York voters has climbed 33% since her re-election victory in November, citing a statewide poll.
Australian:
- Australia will almost double its troops in Afghanistan, including commandos and more air support.
Sueddeutsche Zeitung:
- Expedia Inc.(EXPE), the world’s biggest online travel agency, aims to become the most profitable travel agency in the world
BOTTOM LINE: The Portfolio finished higher today on gains in my Biotech longs, Telecom longs and Computer longs. I added (TSCO) long and added to some existing shorts today, thus leaving the Portfolio 100% net long. The tone of the market was mixed today as the advance/decline line finished about even, sector performance was mixed and volume was above average. Measures of investor anxiety were mostly higher into the close. Today's overall market action was neutral as the major averages and breadth finished near session highs despite potential downside catalysts. The Fed's Yellen just said that "sub-prime housing delinquencies are small and they will have little impact on overall consumption." She also said Fed policy may now be well positioned to bring inflation down. The 10-year yield finished only 1 basis point higher, which helped buoy equities. My intraday gauge of investor angst was above average levels for the second day in a row. I expect stocks will build on this week’s gains by Friday.
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