BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Retail longs and Medical longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is very positive as the advance/decline line is substantially higher, every sector is rising and volume is above average. Dow Jones is reporting that U.S. household net worth rose for the 17th consecutive quarter and hit another all-time record in the fourth quarter while consumer borrowing rose by the slowest pace in eight years, Federal Reserve figures showed today. The $1.4 trillion increase in household net worth last quarter followed an $839 billion gain in the third quarter and reflected a surge in stocks. Net worth related to real estate rose $246 billion for the quarter, which is very surprising. I am quite certain there will be very few stories in the financial or mainstream press regarding this very positive news. The ISE Sentiment Index plunged 30.3% to an extraordinarily depressed 46.0 this morning. It has been lower only three other days since the index began in October 2002. Its all-time low was 36.0 in July of last year. Moreover, its 10-day moving average is hitting an all-time record low of 91.80. While a test of the recent lows is possible, the historic intensity of recent selling likely presents longer-term investors another excellent entry point for long positions. I expect US stocks to trade mixed-to-lower into the close from current levels on rising apprehension ahead of tomorrow’s jobs report and sub-prime worries.
Thursday, March 08, 2007
Stocks Higher into Final Hour Even as Apprehension Remains High
Today's Headlines
Bloomberg:
- US household net worth rose to an all-time record in the fourth quarter and consumer borrowing rose by the slowest pace in eight years, Federal Reserve figures showed today. The $1.4 trillion increase in household net worth last quarter followed an $839 billion gain in the third quarter and reflected a pickup in stock and mutual-fund values. Net worth related to real estate rose $246 billion for the quarter.
- Greenlight Capital LLC founder David Einhorn resigned form the board of New Century Financial Corp.(NEW), the subprime lender facing a criminal accounting probe and a credit crisis.
- Crude oil fell, pulled lower by natural gas and heating oil, on speculation that US supplies of heating fuels will be adequate to meet demand during the last weeks of winter.
- The coldest February since 1979 caused US retailers’ sales to grow 2.5%, the slowest pace in three months, as consumers delayed purchases of spring merchandise.
- CBS News replaced the executive producer of Katie Couric’s evening newscast after the show failed to rise from last place among the three largest US broadcasting networks.
- Ford Motor(F) shares gained the most in four months after Credit Suisse Group raised its rating and forecast a narrower loss for the second-biggest US automakers.
- The US SEC froze the shares of 35 companies whose stocks trade over the counter as it examines whether promoters used e-mails to mislead investors and inflate stock prices.
- The US economy will strengthen during the year, overcoming hurdles, a survey of economists showed.
Wall Street Journal:
- A new group of drug-coated stents used to prop clogged cardiac arteries open is nearing filing at the FDA.
Reuters:
- BP Plc(BP) restarted Alaska’s Northstar oil field yesterday, almost three weeks after the field closed because of a pipeline leak.
- A key Nigerian oil pipeline ruptured by militant attacks will reopen in three months time.
AP:
- Top Democrats in the US House of Representatives plan to add a rule to a new funding bill to pull the country’s combat troops from Iraq by the fall of 2008.
Chronicle of Higher Education:
- State and local appropriations for public colleges in the 2005-2006 academic year rose faster than tuition rates did.
NY Post:
- The Carlyle Group will invest $100 million to build luxury homes in the Hamptons on NY’s Long Island in a partnership with Farrell Building.
Angola Press:
- Angola will invest $50 billion in its oil industry by 2013, citing Manuel Vicente, the chairman of state-owned Sonangol SA. The investment will help the country achieve daily production of 2 million barrels of oil per day.
- US household net worth rose to an all-time record in the fourth quarter and consumer borrowing rose by the slowest pace in eight years, Federal Reserve figures showed today. The $1.4 trillion increase in household net worth last quarter followed an $839 billion gain in the third quarter and reflected a pickup in stock and mutual-fund values. Net worth related to real estate rose $246 billion for the quarter.
- Greenlight Capital LLC founder David Einhorn resigned form the board of New Century Financial Corp.(NEW), the subprime lender facing a criminal accounting probe and a credit crisis.
- Crude oil fell, pulled lower by natural gas and heating oil, on speculation that US supplies of heating fuels will be adequate to meet demand during the last weeks of winter.
- The coldest February since 1979 caused US retailers’ sales to grow 2.5%, the slowest pace in three months, as consumers delayed purchases of spring merchandise.
- CBS News replaced the executive producer of Katie Couric’s evening newscast after the show failed to rise from last place among the three largest US broadcasting networks.
- Ford Motor(F) shares gained the most in four months after Credit Suisse Group raised its rating and forecast a narrower loss for the second-biggest US automakers.
- The US SEC froze the shares of 35 companies whose stocks trade over the counter as it examines whether promoters used e-mails to mislead investors and inflate stock prices.
- The US economy will strengthen during the year, overcoming hurdles, a survey of economists showed.
Wall Street Journal:
- A new group of drug-coated stents used to prop clogged cardiac arteries open is nearing filing at the FDA.
Reuters:
- BP Plc(BP) restarted Alaska’s Northstar oil field yesterday, almost three weeks after the field closed because of a pipeline leak.
- A key Nigerian oil pipeline ruptured by militant attacks will reopen in three months time.
AP:
- Top Democrats in the US House of Representatives plan to add a rule to a new funding bill to pull the country’s combat troops from Iraq by the fall of 2008.
Chronicle of Higher Education:
- State and local appropriations for public colleges in the 2005-2006 academic year rose faster than tuition rates did.
NY Post:
- The Carlyle Group will invest $100 million to build luxury homes in the Hamptons on NY’s Long Island in a partnership with Farrell Building.
Angola Press:
- Angola will invest $50 billion in its oil industry by 2013, citing Manuel Vicente, the chairman of state-owned Sonangol SA. The investment will help the country achieve daily production of 2 million barrels of oil per day.
Jobless Claims Lower
- Initial Jobless Claims for last week fell to 328K versus estimates of 330K and 338K the prior week.
- Continuing Claims fell to 2526K versus estimates of 2564K and 2624K prior.
- Continuing Claims fell to 2526K versus estimates of 2564K and 2624K prior.
BOTTOM LINE: The number of Americans filing first-time claims for state unemployment benefits declined last week, Bloomberg reported. The four-week moving average rose to 339,000 versus 335,250 the prior week. The unemployment rate among those eligible for benefits, with tracks the US unemployment rate fell to 1.9% versus 2.0% the prior week. I expect tomorrow’s non-farm payroll report to come in below estimates and the unemployment rate to tick higher. However, over the intermediate-term I expect the labor market to remain healthy as companies gain confidence in the sustainability of the current expansion and technology, healthcare and financial firms expand.
Wednesday, March 07, 2007
Thursday Watch
Late-Night Headlines
Bloomberg:
- Europe’s carbon-emissions trading program, meant to reduce pollution, is a “failure” as too many permits were given out for free, the UK’s Channel 4 News said, citing European Energy Commissioner Andris Piebalgs.
- Express Scripts(ESRX), vying with CVS Corp.(CVS) to buy Caremark RX(CMX), said it improved its offer with an added cash bonus.
- The New York Stock Exchange(NYX) plans to increase its capacity to handle orders by more than 60% to prevent computer slowdowns similar to those that last week forced some brokers to rely on pen and paper to complete transactions.
- 3M(MMM) sued companies including Sony Corp.(SNE), Lenovo Group Inc. and Matsushita Industrial Electric, accusing them of infringing patents for rechargeable lithium-ion batteries.
- Fremont General(FMT) was ordered to halt making subprime loans that borrowers can’t repay and to correct deficiencies in its commercial real-estate lending.
- Apple Inc.(AAPL) may introduce a new notebook this year that will save data on flash memory chips instead of a hard drive.
- India’s government is planning to charge tax on dividend income earned by individuals.
- The yen erased gains against the euro on speculation European Central Bank President Jean-Claude Trichet will raise borrowing costs today and signal higher interest rates are still needed.
- PetroChina Co. and China Petroleum and Chemical Corp., the nation’s two biggest oil companies, may double their production of natural gas and crude in Xinjiang by 2010, the province’s governor said. Production by PetroChina and Sinopec may reach the equivalent of 50 million tons of oil a year.
Wall Street Journal:
- Long layovers, missed flights and other travel problems are expected to result from the US moving to daylight-saving time three weeks earlier than usual.
- International Business Machines(IBM) plans to provide free and comprehensive financial advice to its 127,000 US employees.
AP:
- Saudi Arabia may build an oil refinery in the Dominican Republic to expand its access to the US fuel market, citing the Saudi’s embassy spokesman in Washington. A new Caribbean refinery would allow access to the US market, while avoiding environmental impact studies needed to build a refinery there.
London-based Times:
- Procter & Gamble(PG) may team up with private equity firms to pursue acquisitions, citing the CFO.
Seoul Economic Daily:
- South Korea has signed a non-binding agreement with the local government of the Kurdish town of Irbil, located in northern Iraq, to develop about 10 oil fields in the area.
Commercial Times:
- AU Optronics Corp.(AUO) sees signs of “recovery” in the display-panel industry after almost four months of “inventory correction,” citing company Executive VP Hui Hsiung. The recovery may be “V-shaped” if companies continue to carefully control their inventories, Hsiung said.
Late Buy/Sell Recommendations
Citgroup:
- Reiterated Buy on (SBUX), target $45.
- Raised (MNST) to Buy, target raised to $60.
Night Trading
Asian Indices are +.50% to +1.25% on average.
S&P 500 indicated +.21%.
NASDAQ 100 indicated +.20%.
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
- (ANH)/-.04
- (BWS)/.63
- (CMN)/.14
- (COO)/.54
- (COST)/.66
- (GGC)/-.58
- (HOV)/-.76
- (KFY)/.32
- (MTZ)/.14
- (NSM)/.20
- (NEW)/-.74
- (TTWO)/-.26
- (TECD)/.60
- (URBN)/.21
- (VTS)/1.30
- (WIND)/.11
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 331K versus 338K the prior week.
- Continuing Claims are estimated to fall to 2564K versus 2640K prior.
Bloomberg:
- Europe’s carbon-emissions trading program, meant to reduce pollution, is a “failure” as too many permits were given out for free, the UK’s Channel 4 News said, citing European Energy Commissioner Andris Piebalgs.
- Express Scripts(ESRX), vying with CVS Corp.(CVS) to buy Caremark RX(CMX), said it improved its offer with an added cash bonus.
- The New York Stock Exchange(NYX) plans to increase its capacity to handle orders by more than 60% to prevent computer slowdowns similar to those that last week forced some brokers to rely on pen and paper to complete transactions.
- 3M(MMM) sued companies including Sony Corp.(SNE), Lenovo Group Inc. and Matsushita Industrial Electric, accusing them of infringing patents for rechargeable lithium-ion batteries.
- Fremont General(FMT) was ordered to halt making subprime loans that borrowers can’t repay and to correct deficiencies in its commercial real-estate lending.
- Apple Inc.(AAPL) may introduce a new notebook this year that will save data on flash memory chips instead of a hard drive.
- India’s government is planning to charge tax on dividend income earned by individuals.
- The yen erased gains against the euro on speculation European Central Bank President Jean-Claude Trichet will raise borrowing costs today and signal higher interest rates are still needed.
- PetroChina Co. and China Petroleum and Chemical Corp., the nation’s two biggest oil companies, may double their production of natural gas and crude in Xinjiang by 2010, the province’s governor said. Production by PetroChina and Sinopec may reach the equivalent of 50 million tons of oil a year.
Wall Street Journal:
- Long layovers, missed flights and other travel problems are expected to result from the US moving to daylight-saving time three weeks earlier than usual.
- International Business Machines(IBM) plans to provide free and comprehensive financial advice to its 127,000 US employees.
AP:
- Saudi Arabia may build an oil refinery in the Dominican Republic to expand its access to the US fuel market, citing the Saudi’s embassy spokesman in Washington. A new Caribbean refinery would allow access to the US market, while avoiding environmental impact studies needed to build a refinery there.
London-based Times:
- Procter & Gamble(PG) may team up with private equity firms to pursue acquisitions, citing the CFO.
Seoul Economic Daily:
- South Korea has signed a non-binding agreement with the local government of the Kurdish town of Irbil, located in northern Iraq, to develop about 10 oil fields in the area.
Commercial Times:
- AU Optronics Corp.(AUO) sees signs of “recovery” in the display-panel industry after almost four months of “inventory correction,” citing company Executive VP Hui Hsiung. The recovery may be “V-shaped” if companies continue to carefully control their inventories, Hsiung said.
Late Buy/Sell Recommendations
Citgroup:
- Reiterated Buy on (SBUX), target $45.
- Raised (MNST) to Buy, target raised to $60.
Night Trading
Asian Indices are +.50% to +1.25% on average.
S&P 500 indicated +.21%.
NASDAQ 100 indicated +.20%.
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
- (ANH)/-.04
- (BWS)/.63
- (CMN)/.14
- (COO)/.54
- (COST)/.66
- (GGC)/-.58
- (HOV)/-.76
- (KFY)/.32
- (MTZ)/.14
- (NSM)/.20
- (NEW)/-.74
- (TTWO)/-.26
- (TECD)/.60
- (URBN)/.21
- (VTS)/1.30
- (WIND)/.11
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 331K versus 338K the prior week.
- Continuing Claims are estimated to fall to 2564K versus 2640K prior.
BOTTOM LINE: Asian indices are higher, boosted by utility and metal shares in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Stocks Finish Slightly Lower, Consolidating Yesterday's Gains
Indices
S&P 500 1,391.97 -.25%
DJIA 12,192.45 -.12%
NASDAQ 2,374.64 -.44%
Russell 2000 775.90 -.38%
Wilshire 5000 14,036.83 -.21%
Russell 1000 Growth 549.29 -.25%
Russell 1000 Value 802.23 -.23%
Morgan Stanley Consumer 684.21 -.49%
Morgan Stanley Cyclical 932.20 +.26%
Morgan Stanley Technology 552.54 -.96%
Transports 4,793.22 +.52%
Utilities 474.71 -.01%
MSCI Emerging Markets 108.81 -.34%
Sentiment/Internals
Total Put/Call 1.16 -4.92%
NYSE Arms .99 +207.64%
Volatility(VIX) 15.24 -4.51%
ISE Sentiment 66.0 -30.53%
Futures Spot Prices
Crude Oil 61.85 +1.93%
Reformulated Gasoline 189.65 +2.33%
Natural Gas 7.31 -2.07%
Heating Oil 176.57 +1.05%
Gold 651.0 +.74%
Base Metals 235.46 +.56%
Copper 279.15 +2.87%
Economy
10-year US Treasury Yield 4.49% - 4 basis points
US Dollar 83.74 -.36%
CRB Index 310.67 +1.23%
Leading Sectors
Oil Service +2.01%
Energy +1.46%
Retail +.98%
Lagging Sectors
Airlines -1.27%
Telecom -1.24%
REITs -1.41%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- Fremont General Corp. and New Century Financial Corp. led mortgage-lending stocks higher for a second day, buoyed by a report showing an increase in home-loan refinancing and rising prospects for takeovers.
- US Senator Charles Grassley proposed a legislative amendment that would subject hedge funds to increased oversight and routine inspections, reinstating rules struck down by a federal court last year.
- Brazil can ensure supplies of ethanol to Japan should the Asian country require that gasoline contain 3% of the biofuel, Agriculture Minister Luis Carlos Guedes Pinto said.
- Automakers will use higher-strength steel, aluminum and magnesium to lop 3.5% from the weight of their cars and light trucks by 2015, a materials-forecasting company predicted.
- Microsoft’s(MSFT) top executive in charge of the Internet search program will leave the company, the second defection from the online unit this week as the world’s largest software maker tries to narrow the gap with Google Inc.(GOOG).
- New Zealand’s central bank raised the benchmark interest rate a quarter point to a record to 7.5% and said it can’t rule out another increase.
- Former NY Mayor Rudolph Giuliani leads the Republican presidential candidates and is favored in a match-up against Democratic frontrunner Senator Hillary Clinton, a poll of three swing states found.
S&P 500 1,391.97 -.25%
DJIA 12,192.45 -.12%
NASDAQ 2,374.64 -.44%
Russell 2000 775.90 -.38%
Wilshire 5000 14,036.83 -.21%
Russell 1000 Growth 549.29 -.25%
Russell 1000 Value 802.23 -.23%
Morgan Stanley Consumer 684.21 -.49%
Morgan Stanley Cyclical 932.20 +.26%
Morgan Stanley Technology 552.54 -.96%
Transports 4,793.22 +.52%
Utilities 474.71 -.01%
MSCI Emerging Markets 108.81 -.34%
Sentiment/Internals
Total Put/Call 1.16 -4.92%
NYSE Arms .99 +207.64%
Volatility(VIX) 15.24 -4.51%
ISE Sentiment 66.0 -30.53%
Futures Spot Prices
Crude Oil 61.85 +1.93%
Reformulated Gasoline 189.65 +2.33%
Natural Gas 7.31 -2.07%
Heating Oil 176.57 +1.05%
Gold 651.0 +.74%
Base Metals 235.46 +.56%
Copper 279.15 +2.87%
Economy
10-year US Treasury Yield 4.49% - 4 basis points
US Dollar 83.74 -.36%
CRB Index 310.67 +1.23%
Leading Sectors
Oil Service +2.01%
Energy +1.46%
Retail +.98%
Lagging Sectors
Airlines -1.27%
Telecom -1.24%
REITs -1.41%
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
- None of note
Afternoon/Evening Headlines
Bloomberg:
- Fremont General Corp. and New Century Financial Corp. led mortgage-lending stocks higher for a second day, buoyed by a report showing an increase in home-loan refinancing and rising prospects for takeovers.
- US Senator Charles Grassley proposed a legislative amendment that would subject hedge funds to increased oversight and routine inspections, reinstating rules struck down by a federal court last year.
- Brazil can ensure supplies of ethanol to Japan should the Asian country require that gasoline contain 3% of the biofuel, Agriculture Minister Luis Carlos Guedes Pinto said.
- Automakers will use higher-strength steel, aluminum and magnesium to lop 3.5% from the weight of their cars and light trucks by 2015, a materials-forecasting company predicted.
- Microsoft’s(MSFT) top executive in charge of the Internet search program will leave the company, the second defection from the online unit this week as the world’s largest software maker tries to narrow the gap with Google Inc.(GOOG).
- New Zealand’s central bank raised the benchmark interest rate a quarter point to a record to 7.5% and said it can’t rule out another increase.
- Former NY Mayor Rudolph Giuliani leads the Republican presidential candidates and is favored in a match-up against Democratic frontrunner Senator Hillary Clinton, a poll of three swing states found.
BOTTOM LINE: The Portfolio finished about even today as gains in my Retail longs offset losses in my Energy-related shorts. I added back (IWM)/(QQQQ) hedges in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mostly negative and volume was above-average. Measures of investor anxiety were higher into the close. Today's overall market action was neutral after yesterday's sharp gains. However, the tech sector underperformed throughout the day. Natural gas is 2.2% lower as heating demand is projected at 23% below normal the next seven days. Nikkei futures are indicating a 29 point lower open in Japan. The Fed released its Beige Book earlier this afternoon. Here is a summary via Bloomberg:
- Dallas, New York, St. Louis and Boston noted some slowing.
- Most districts reported modest expansion.
- Housing market remained weak, but some signs of stabilization were noted.
- Price pressures are little changed.
- Pay increases moderate overall.
- Most districts showed labor market expansion.
- Steady growth in retail sales in most districts.
- Manufacturing is steady or expanding.
Surprisingly, the general tone of this report was upbeat. Moreover, it is very surprising and a big positive that manufacturing is "steady or expanding." I am disappointed with today's finish considering the news was better. I wouldn't be surprised to see some pre-jobs report jitters tomorrow.
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