BOTTOM LINE: The Portfolio is about even into the final hour as gains in my Computer longs and Retail longs are offsetting losses in my Medial longs. I covered some of my (IWM) and (QQQQ) hedges into this morning’s weakness, thus leaving the Portfolio 75% net long. The tone of the market is modestly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is very heavy. Subprime and emerging markets are investors' two chief worries. The subprime indices are stabilizing. Given that most emerging markets are getting very oversold short term, I wouldn't be surprised to see nice gains tonight in Asia. Considering the extent to which hedging and selling has occurred over the last three days, too much hot money may be leaning the wrong way. My intraday gauge of investor angst is still very elevated. As well, considering downside volume is once again swamping upside volume, the major averages' minor losses must be disturbing to the many bears. The airline, gaming, homebuilding, HMO, disk drive, software, restaurants, I-banks, Banks, computer hardware, steel, oil service, energy and utility sectors are now in positive territory. Tech leader Apple (AAPL) is near session highs, surging 3.8%. AppleInsider.com reported today that Pacific Crest made comments in a morning note that Mac sales accelerated to over 100% growth during the month of January vs. 55% growth in December. This surge also comes amid an increase in average selling prices.This bodes very well for Apple's (AAPL) upcoming quarter, and I believe that it is a sign of things to come for the entire year. I still expect the stock to rise at least 50% this year. It remains my second-largest long position. I expect US stocks to trade modestly higher into the close from current levels on short-covering, better economic data and bargain-hunting.
Thursday, March 01, 2007
Stocks Surge Substantially from Morning Lows on Heavy Volume
Today's Headlines
Bloomberg:
- The average US home price rose 5.87% during the fourth quarter from the fourth quarter a year ago.
- General Motors(GM) reported a 3.4% gain in February sales versus estimates of a 7% decline.
- US Treasury Secretary Henry Paulson said the economy is “healthy,” citing low unemployment and rising consumer confidence.
- The perceived risk of owning low-rated sub-prime mortgage bonds plunged today as a government report suggested that US home-price appreciation is stable.
- Corn, soybean and wheat prices plunged in Chicago after a US government report showed export sales of all three commodities declined last week.
- Gold in NY fell for a third straight day as speculators trimmed record long positions on worries over falling emerging market demand.
Wall Street Journal:
- People who put money into mutual funds that invest abroad took a beating in this week’s global share sell-off, citing figures from the Investment Company Institute. Funds that invest in the Asia-Pacific region, including Japan and China, fell 4.2%, those that spread their money over a wide range of emerging markets dropped 5% and those that concentrate on Latin America did worst, declining 7.7%.
- The US administration and Congress are trying to reach a compromise that would allow pending international trade agreements to move ahead while providing safeguards for labor rights.
NY Times:
- General Electric’s(GE) NBC may oust John Reiss as executive producer of “Nightly News With Brian Williams.” NBC executives told the Times that changes to the program aren’t a reaction to the sharp ratings drop.
- Oracle Corp.(ORCL) is close to a deal to buy Hyperion Solutions(HYSL) for more than $3.1 billion.
Financial Times:
- Home Depot’s(HD) wholesale supply unit is being targeted by three groups of private-equity firms and might fetch $11 billion if sold.
Wirtschaftswoche:
- SAP AG, the world’s largest business-management software maker, may get an offer from US buyout firm Silver Lake Partners.
Saudi Press Agency:
- Saudi Aramco, the world’s largest state oil company, reported a production capacity of 10.7 million barrels a day by the end of 2006, citing Abdallah Jum’ah, the company’s CEO. Aramco made gas finds last year of 10.4 trillion cubic feet, doubling the company’s target. The Haradh 300,000-barrel-a-day Arabian Light Crude increment was completed five months ahead of schedule.
- The average US home price rose 5.87% during the fourth quarter from the fourth quarter a year ago.
- General Motors(GM) reported a 3.4% gain in February sales versus estimates of a 7% decline.
- US Treasury Secretary Henry Paulson said the economy is “healthy,” citing low unemployment and rising consumer confidence.
- The perceived risk of owning low-rated sub-prime mortgage bonds plunged today as a government report suggested that US home-price appreciation is stable.
- Corn, soybean and wheat prices plunged in Chicago after a US government report showed export sales of all three commodities declined last week.
- Gold in NY fell for a third straight day as speculators trimmed record long positions on worries over falling emerging market demand.
Wall Street Journal:
- People who put money into mutual funds that invest abroad took a beating in this week’s global share sell-off, citing figures from the Investment Company Institute. Funds that invest in the Asia-Pacific region, including Japan and China, fell 4.2%, those that spread their money over a wide range of emerging markets dropped 5% and those that concentrate on Latin America did worst, declining 7.7%.
- The US administration and Congress are trying to reach a compromise that would allow pending international trade agreements to move ahead while providing safeguards for labor rights.
NY Times:
- General Electric’s(GE) NBC may oust John Reiss as executive producer of “Nightly News With Brian Williams.” NBC executives told the Times that changes to the program aren’t a reaction to the sharp ratings drop.
- Oracle Corp.(ORCL) is close to a deal to buy Hyperion Solutions(HYSL) for more than $3.1 billion.
Financial Times:
- Home Depot’s(HD) wholesale supply unit is being targeted by three groups of private-equity firms and might fetch $11 billion if sold.
Wirtschaftswoche:
- SAP AG, the world’s largest business-management software maker, may get an offer from US buyout firm Silver Lake Partners.
Saudi Press Agency:
- Saudi Aramco, the world’s largest state oil company, reported a production capacity of 10.7 million barrels a day by the end of 2006, citing Abdallah Jum’ah, the company’s CEO. Aramco made gas finds last year of 10.4 trillion cubic feet, doubling the company’s target. The Haradh 300,000-barrel-a-day Arabian Light Crude increment was completed five months ahead of schedule.
Personal Incomes Jump, Spending Exceeds Estimates, Jobless Claims Rise Modetsly, Manufacturing Expands, Construction Falls
- Personal Income for January rose 1.0% versus estimates of a .3% increase and a .5% gain in December.
- Personal Spending for January rose .5% versus estimates of a .4% gain and a .7% increase in December.
- PCE Core for January rose .3% versus estimates of a .2% increase and a .1% gain in December.
- Initial Jobless Claims for last week rose to 338K versus estimates of 325K and 331K the prior week.
- Continuing Claims rose to 2640K versus estimates of 2520K and 2506K prior.
- ISM Manufacturing for February rose to 52.3 versus estimates of 50.0 and a reading of 49.3 in January.
- ISM Prices Paid for February rose to 59.0 versus estimates of 54.0 and a reading of 53.0 in January.
- Construction Spending for January fell -.8% versus estimates of a -.5% decline and an upwardly revised .6% increase in December.
- Personal Spending for January rose .5% versus estimates of a .4% gain and a .7% increase in December.
- PCE Core for January rose .3% versus estimates of a .2% increase and a .1% gain in December.
- Initial Jobless Claims for last week rose to 338K versus estimates of 325K and 331K the prior week.
- Continuing Claims rose to 2640K versus estimates of 2520K and 2506K prior.
- ISM Manufacturing for February rose to 52.3 versus estimates of 50.0 and a reading of 49.3 in January.
- ISM Prices Paid for February rose to 59.0 versus estimates of 54.0 and a reading of 53.0 in January.
- Construction Spending for January fell -.8% versus estimates of a -.5% decline and an upwardly revised .6% increase in December.
BOTTOM LINE: Personal spending in the US increased more than forecast in January and incomes rose by the most since January 2006, Bloomberg reported. The surge in incomes may help to explain the Conference Board’s Consumer Confidence reading hitting cycle highs last month. The year-over-year PCE Core, the Fed’s favorite inflation gauge, rose 2.3%, well below last month’s Average Hourly Earnings’ increase of 4.0%. I expect personal spending and incomes to remain healthy over the intermediate-term as interest rates remain low, inflation decelerates, housing stabilizes at relatively high levels, stocks rise further, confidence increases and the job market remains healthy.
More Americans applied for state jobless benefits last week, and continuing claims rose, Bloomberg reported. The four-week moving-average of jobless claims rose to 335,250 from 327,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2% from 1.9% the prior week. While upcoming monthly job reports will likely weaken a bit, I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
Manufacturing in the US unexpectedly expanded by the most in five months in February, suggesting production is starting to stabilize, Bloomberg reported. The Orders to Be Filled Component surged to 51.5 from 43.5 the prior month. Manufactures have now pared inventories for seven straight months. Inventory de-stocking has been occurring at a very rapid rate. I expect manufacturing to improve meaningful over the course of the year as inventories are rebuilt and auto production rises.
Construction spending in the US fell by the most in three months in January, pulled lower by homebuilding and a jump the prior month, Bloomberg reported. Residential construction fell 19.1% at an annual rate during the fourth quarter as homebuilders sought to cut inventory. I continue to believe construction will remain muted throughout the year as homebuilders continue to slash inventory.
Wednesday, February 28, 2007
Thursday Watch
Late-Night Headlines
Bloomberg:
- US authorities arrested more than 400 people and seized 18 tons of illegal drugs over the course of a 20-month investigation into a Mexican smuggling cartel.
- Motorola Inc.(MOT) said billionaire investor Carl Icahn plans to buy as much as $2 billion in shares of the company’s stock.
- Pakistan’s President Pervez Musharraf said his government will force terrorists to leave the tribal region bordering Afghanistan and appealed to the Pakistani people to help the operations of security forces.
- Inpex Holdings Inc., Japan’s largest oil explorer, said it will spend more than $1.7 billion annually to search and develop oil and gas fields over the next three to four years.
- Former Fed Reserve Chairman Alan Greenspan said a recession in the US is possible, though not probable this year as inventory problems in the economy are being addressed quickly.
- Global semiconductor sales will rise 6.7% this year, according to Gartner Inc. Gartner had earlier forecast that 2007 semiconductor sales would rise 9.2%.
- Talks between the US and North Korea next week will start a process aimed at normalizing relations between the countries, US Secretary of State Christopher Hill said.
Wall Street Journal:
- MasterCard Inc.(MA), a credit- and debit-card company, in June will change the fees it charges merchants that accept its cards.
Financial Times:
- The UK will support a 20% mandatory target for renewable power by 2020 at a European Union summit next week. France yesterday indicated it may also drop its opposition to the mandatory targets.
- Sony Corp.(SNE) will increase supplies of PlayStation 3 consoles in the US to catch up with demand, citing Jack Tretton, chief executive of Sony Computer Entertainment’s US division.
- India, where elections can be won or lost on the price of onions, is trying to ensure that measures to control runaway inflation don’t derail economic growth. Higher incomes have increased consumer demand for wheat, sugar, cooking oil and other food staples, pushing India’s key inflation rate to 6.73% last month. A separate measure of consumer prices among farmers is at an eight-year high of 8.94%, and urban price gains are at the highest levels in six years.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Sell on (FRO), target $26.
- Reiterated Buy on (MRK), target $50.
Night Trading
Asian Indices are -1.50% to -.50% on average.
S&P 500 indicated -.36%.
NASDAQ 100 indicated -.21%.
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
- (AIG)/1.49
- (ILA)/-.05
- (CIEN)/.22
- (DLM)/.22
- (DELL)/.30
- (DISH)/.31
- (FAF)/.85
- (FLS)/.74
- (FLR)/.59
- (GPS)/.24
- (GM)/1.22
- (KSS)/1.42
- (MTZ)/.14
- (MDR)/.68
- (NOVL)/.00
- (OVTI)/.20
- (REV)/.10
- (SGMS)/.23
- (SFD)/.49
- (BID)/.97
- (SPLS)/.45
- (VIA/B)/.57
- (OATS)/.05
Upcoming Splits
- (ALB) 2-for-1
Economic Releases
8:30 am EST
- Personal Income for January is estimated to rise .3% versus a .5% gain in December.
- Personal Spending for January is estimated to rise .4% versus a .7% gain in December.
- PCE Core for January is estimated to rise .2% versus a .1% gain in December.
- Initial Jobless Claims for last week are estimated to fall to 325K versus 332K prior.
- Continuing Claims are estimated to rise to 2513K versus 2509K prior.
10:00 am EST
- ISM Manufacturing for February is estimated to rise to 50.0 versus a reading of 49.3 in January.
- ISM Prices Paid for February is estimated to rise to 54.0 versus a reading of 53.0 in January.
- Construction Spending for January is estimated to fall by -.5% versus a -.4% decline in December.
Afternoon:
- Total Vehicle Sales for February are estimated to fall to 16.2 million versus 16.7 million in January.
- Domestic Vehicle Sales for February are estimated to fall to 12.4 million versus 12.7 million in January.
Bloomberg:
- US authorities arrested more than 400 people and seized 18 tons of illegal drugs over the course of a 20-month investigation into a Mexican smuggling cartel.
- Motorola Inc.(MOT) said billionaire investor Carl Icahn plans to buy as much as $2 billion in shares of the company’s stock.
- Pakistan’s President Pervez Musharraf said his government will force terrorists to leave the tribal region bordering Afghanistan and appealed to the Pakistani people to help the operations of security forces.
- Inpex Holdings Inc., Japan’s largest oil explorer, said it will spend more than $1.7 billion annually to search and develop oil and gas fields over the next three to four years.
- Former Fed Reserve Chairman Alan Greenspan said a recession in the US is possible, though not probable this year as inventory problems in the economy are being addressed quickly.
- Global semiconductor sales will rise 6.7% this year, according to Gartner Inc. Gartner had earlier forecast that 2007 semiconductor sales would rise 9.2%.
- Talks between the US and North Korea next week will start a process aimed at normalizing relations between the countries, US Secretary of State Christopher Hill said.
Wall Street Journal:
- MasterCard Inc.(MA), a credit- and debit-card company, in June will change the fees it charges merchants that accept its cards.
Financial Times:
- The UK will support a 20% mandatory target for renewable power by 2020 at a European Union summit next week. France yesterday indicated it may also drop its opposition to the mandatory targets.
- Sony Corp.(SNE) will increase supplies of PlayStation 3 consoles in the US to catch up with demand, citing Jack Tretton, chief executive of Sony Computer Entertainment’s US division.
- India, where elections can be won or lost on the price of onions, is trying to ensure that measures to control runaway inflation don’t derail economic growth. Higher incomes have increased consumer demand for wheat, sugar, cooking oil and other food staples, pushing India’s key inflation rate to 6.73% last month. A separate measure of consumer prices among farmers is at an eight-year high of 8.94%, and urban price gains are at the highest levels in six years.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Sell on (FRO), target $26.
- Reiterated Buy on (MRK), target $50.
Night Trading
Asian Indices are -1.50% to -.50% on average.
S&P 500 indicated -.36%.
NASDAQ 100 indicated -.21%.
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
- (AIG)/1.49
- (ILA)/-.05
- (CIEN)/.22
- (DLM)/.22
- (DELL)/.30
- (DISH)/.31
- (FAF)/.85
- (FLS)/.74
- (FLR)/.59
- (GPS)/.24
- (GM)/1.22
- (KSS)/1.42
- (MTZ)/.14
- (MDR)/.68
- (NOVL)/.00
- (OVTI)/.20
- (REV)/.10
- (SGMS)/.23
- (SFD)/.49
- (BID)/.97
- (SPLS)/.45
- (VIA/B)/.57
- (OATS)/.05
Upcoming Splits
- (ALB) 2-for-1
Economic Releases
8:30 am EST
- Personal Income for January is estimated to rise .3% versus a .5% gain in December.
- Personal Spending for January is estimated to rise .4% versus a .7% gain in December.
- PCE Core for January is estimated to rise .2% versus a .1% gain in December.
- Initial Jobless Claims for last week are estimated to fall to 325K versus 332K prior.
- Continuing Claims are estimated to rise to 2513K versus 2509K prior.
10:00 am EST
- ISM Manufacturing for February is estimated to rise to 50.0 versus a reading of 49.3 in January.
- ISM Prices Paid for February is estimated to rise to 54.0 versus a reading of 53.0 in January.
- Construction Spending for January is estimated to fall by -.5% versus a -.4% decline in December.
Afternoon:
- Total Vehicle Sales for February are estimated to fall to 16.2 million versus 16.7 million in January.
- Domestic Vehicle Sales for February are estimated to fall to 12.4 million versus 12.7 million in January.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and automaker shares in the region. I expect US equities to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Stocks Finish Modestly Higher on Short-Covering, Bargain-Hunting
Indices
S&P 500 1,406.82 +.56%
DJIA 12,268.63 +.43%
NASDAQ 2,416.13 +.34%
Russell 2000 793.30 +.08%
Wilshire 5000 14,213.87 +.49%
Russell 1000 Growth 556.15 +.50%
Russell 1000 Value 811.61 +.58%
Morgan Stanley Consumer 693.52 +.58%
Morgan Stanley Cyclical 936.13 +.19%
Morgan Stanley Technology 564.47 +.43%
Transports 4,863.52 unch.
Utilities 479.19 -.06%
MSCI Emerging Markets 111.54 -.39%
Sentiment/Internals
Total Put/Call 1.10 -34.91%
NYSE Arms .95 -93.30%
Volatility(VIX) 15.42 -15.78%
ISE Sentiment 114.0 +2.70%
Futures Spot Prices
Crude Oil 61.72 +.42%
Reformulated Gasoline 184.76 +1.73%
Natural Gas 7.26 -3.50%
Heating Oil 178.04 +.06%
Gold 673.10 -2.05%
Base Metals 240.29 -1.02%
Copper 277.0 -1.95%
Economy
10-year US Treasury Yield 4.56% +5 basis points
US Dollar 83.56 +.12%
CRB Index 312.39 -.28%
Leading Sectors
Steel +8.3%
Telecom +1.97%
Computer Hardware +1.19%
Lagging Sectors
Airlines -.39%
Hospitals -.55%
Homebuilders -.69%
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
Raymond James:
- Upgraded (DLTR) to Outperform.
Afternoon/Evening Headlines
Bloomberg:
- Treasuries fell for the first time in four days as Federal Reserve Chairman Ben S. Bernanke said the economy may strengthen by mid-year.
- The House of Representatives voted today to revise rules for foreign investments in the US.
- DuPont Co., the third-largest US chemical maker, said a federal grant of as much as $80 million awarded to partner Broin Cos. will speed up the opening of a plant for making ethanol from corn waste by three years.
- Mitsui, Japan’s second-largest trading company, agreed to acquire US metals producer Steel Technologies(STTX) in a transaction valued at about $396 million in cash.
S&P 500 1,406.82 +.56%
DJIA 12,268.63 +.43%
NASDAQ 2,416.13 +.34%
Russell 2000 793.30 +.08%
Wilshire 5000 14,213.87 +.49%
Russell 1000 Growth 556.15 +.50%
Russell 1000 Value 811.61 +.58%
Morgan Stanley Consumer 693.52 +.58%
Morgan Stanley Cyclical 936.13 +.19%
Morgan Stanley Technology 564.47 +.43%
Transports 4,863.52 unch.
Utilities 479.19 -.06%
MSCI Emerging Markets 111.54 -.39%
Sentiment/Internals
Total Put/Call 1.10 -34.91%
NYSE Arms .95 -93.30%
Volatility(VIX) 15.42 -15.78%
ISE Sentiment 114.0 +2.70%
Futures Spot Prices
Crude Oil 61.72 +.42%
Reformulated Gasoline 184.76 +1.73%
Natural Gas 7.26 -3.50%
Heating Oil 178.04 +.06%
Gold 673.10 -2.05%
Base Metals 240.29 -1.02%
Copper 277.0 -1.95%
Economy
10-year US Treasury Yield 4.56% +5 basis points
US Dollar 83.56 +.12%
CRB Index 312.39 -.28%
Leading Sectors
Steel +8.3%
Telecom +1.97%
Computer Hardware +1.19%
Lagging Sectors
Airlines -.39%
Hospitals -.55%
Homebuilders -.69%
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
Raymond James:
- Upgraded (DLTR) to Outperform.
Afternoon/Evening Headlines
Bloomberg:
- Treasuries fell for the first time in four days as Federal Reserve Chairman Ben S. Bernanke said the economy may strengthen by mid-year.
- The House of Representatives voted today to revise rules for foreign investments in the US.
- DuPont Co., the third-largest US chemical maker, said a federal grant of as much as $80 million awarded to partner Broin Cos. will speed up the opening of a plant for making ethanol from corn waste by three years.
- Mitsui, Japan’s second-largest trading company, agreed to acquire US metals producer Steel Technologies(STTX) in a transaction valued at about $396 million in cash.
BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Retail longs, Computer longs and Telecom longs. I did not trade today, thus leaving the Portfolio 50% net long. The tone of the market was mildly positive as the advance/decline line finished modestly higher, most sectors rose and volume was heavy. Measures of investor anxiety were mostly lower into the close. Today's overall market action was just mildly bullish. considering yesterday's losses. Breadth was only modestly positive. Several sectors declined further. Mid- caps continue to be this year's star performers and are still up about 3.5% on average this year, despite yesterday's losses. While I suspect emerging market declines will lead to more choppiness in U.S. stocks in the near-term, I continue to believe any meaningful pullback in U.S. shares will present investors with excellent long entry points. This will likely coincide with a spike in "bear market" calls by the herd.
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