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Friday, March 16, 2007
Friday Watch
Late-Night Headlines
Bloomberg:
- Crude oil is falling another .40/bbl. to $57.15 in NY after hitting a six week low yesterday on speculation demand is falling and OPEC won’t make further production cuts.
- Shares of TXU Corp.(TXU), the Texas power producer that agreed last month to be acquired in a record $45 billion buyout, rose for the first time this week after a report saying a rival bid may be in the works.
- Nissan Motor, Japan’s third-largest automaker, plans to cut production at two of its factories in Japan from April 2 until the end of June because of weaker domestic demand.
- Australia is committed to fighting the Taliban insurgency in Afghanistan and may send more troops, Prime Minister John Howard said during a visit to the country.
- China and Russia agreed with the US and its European allies to pressure Iran to curb its nuclear program by freezing the assets of a state-owned Iranian bank and the Iranian Revolutionary Guard Corps, and restricting travel by their officials.
- The Senate rejected Democratic-backed legislation that calls for US troops to be withdrawn from Iraq just hours after a House panel approved a plan to pull the troops out.
- Harbinger Capital Partners and Paulson & Co. are two hedge-fund managers who posted record profits last month on credit derivatives that increased in value as prices for securities backed by subprime loans fell. Paulson’s 8-month-old credit fund gained 67%, swelling assets to almost $2 billion. Harbinger’s $6 billion distressed-debt fund returned 8.1%, according to an investor update.
- Eric Chaney, Morgan Stanley’s chief European economist, calls France “the new sick man of Europe.” Finding a cure may be beyond the front-runners in its presidential election campaign.
- New Zealand house sales rose in February and prices increased to a record, adding to signs central bank Governor Alan Bollard may raise interest rates further to combat inflation.
- China’s production of aluminum soared 35% in the first two months of this year from the same period a year ago, the National Bureau of Statistics said.
- Japan’s central bank will probably keep interest rates unchanged next week as consumer prices threaten to drop, making it hard to justify a third increase in eight months.
- China’s spending on factories, real estate and other fixed assets grew at a slower pace in the first two months after the government curbed lending and project approvals in the world’s fourth-largest economy.
- Bear Stearns(BSC), the biggest US underwriter of mortgage-backed bonds, said rising subprime loan delinquencies aren’t spilling over into other markets and may be an opportunity for the firm to expand its market share.
Wealth News:
- Taiwan Semiconductor Manufacturing Co., the world’s biggest supplier of made-to-order chips, is close to filling its capacity for the second quarter, citing unidentified chip industry associates. The company’s inventories of chips used for computer graphics, video games, and communications have almost been depleted.
Wall Street Journal Asia:
- Quanta Computer Inc., the world’s largest maker of notebook computers, expects revenue to increase between 25% and 50% this year, driven by the introduction of Microsoft’s(MSFT) Windows Vista operating system.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MCO), raised target to $78.
Business Week:
- CB Richard Ellis Group’s(CBG) growing global real estate business makes the company a good investment as the Federal Reserve avoids cutting interest rates, citing Douglas Roberts of Channel Capital Research Institute. Brandon Dobell of CSFB gives the company a 12-month target of $44 and rates the company “outperform.”
Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.32%.
NASDAQ 100 indicated -.34%.
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
- (ANN)/.29
- (CCL)/.34
- (WPSC)/-.54
Upcoming Splits
- (GME) 2-for-1
- (CSL) 2-for-1
- (SEE) 2-for-1
- (RSG) 3-for-2
Economic Releases
8:30 am EST
- The Consumer Price Index for February is estimated to rise .3% versus a .2% gain in January.
- The CPI Ex Food & Energy for February is estimated to rise .2% versus a .3% gain in January.
9:15 am EST
- Industrial Production for February is estimated to rise .3% versus a -.5% decline in January.
- Capacity Utilization for February is estimated to rise to 81.3% versus 81.2% in January.
10:00 am EST
- Preliminary Univ. of Mich. Consumer Confidence for March is estimated to fall to 89.0 versus 91.3 in February.
Bloomberg:
- Crude oil is falling another .40/bbl. to $57.15 in NY after hitting a six week low yesterday on speculation demand is falling and OPEC won’t make further production cuts.
- Shares of TXU Corp.(TXU), the Texas power producer that agreed last month to be acquired in a record $45 billion buyout, rose for the first time this week after a report saying a rival bid may be in the works.
- Nissan Motor, Japan’s third-largest automaker, plans to cut production at two of its factories in Japan from April 2 until the end of June because of weaker domestic demand.
- Australia is committed to fighting the Taliban insurgency in Afghanistan and may send more troops, Prime Minister John Howard said during a visit to the country.
- China and Russia agreed with the US and its European allies to pressure Iran to curb its nuclear program by freezing the assets of a state-owned Iranian bank and the Iranian Revolutionary Guard Corps, and restricting travel by their officials.
- The Senate rejected Democratic-backed legislation that calls for US troops to be withdrawn from Iraq just hours after a House panel approved a plan to pull the troops out.
- Harbinger Capital Partners and Paulson & Co. are two hedge-fund managers who posted record profits last month on credit derivatives that increased in value as prices for securities backed by subprime loans fell. Paulson’s 8-month-old credit fund gained 67%, swelling assets to almost $2 billion. Harbinger’s $6 billion distressed-debt fund returned 8.1%, according to an investor update.
- Eric Chaney, Morgan Stanley’s chief European economist, calls France “the new sick man of Europe.” Finding a cure may be beyond the front-runners in its presidential election campaign.
- New Zealand house sales rose in February and prices increased to a record, adding to signs central bank Governor Alan Bollard may raise interest rates further to combat inflation.
- China’s production of aluminum soared 35% in the first two months of this year from the same period a year ago, the National Bureau of Statistics said.
- Japan’s central bank will probably keep interest rates unchanged next week as consumer prices threaten to drop, making it hard to justify a third increase in eight months.
- China’s spending on factories, real estate and other fixed assets grew at a slower pace in the first two months after the government curbed lending and project approvals in the world’s fourth-largest economy.
- Bear Stearns(BSC), the biggest US underwriter of mortgage-backed bonds, said rising subprime loan delinquencies aren’t spilling over into other markets and may be an opportunity for the firm to expand its market share.
Wealth News:
- Taiwan Semiconductor Manufacturing Co., the world’s biggest supplier of made-to-order chips, is close to filling its capacity for the second quarter, citing unidentified chip industry associates. The company’s inventories of chips used for computer graphics, video games, and communications have almost been depleted.
Wall Street Journal Asia:
- Quanta Computer Inc., the world’s largest maker of notebook computers, expects revenue to increase between 25% and 50% this year, driven by the introduction of Microsoft’s(MSFT) Windows Vista operating system.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MCO), raised target to $78.
Business Week:
- CB Richard Ellis Group’s(CBG) growing global real estate business makes the company a good investment as the Federal Reserve avoids cutting interest rates, citing Douglas Roberts of Channel Capital Research Institute. Brandon Dobell of CSFB gives the company a 12-month target of $44 and rates the company “outperform.”
Night Trading
Asian Indices are -.75% to -.25% on average.
S&P 500 indicated -.32%.
NASDAQ 100 indicated -.34%.
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
- (ANN)/.29
- (CCL)/.34
- (WPSC)/-.54
Upcoming Splits
- (GME) 2-for-1
- (CSL) 2-for-1
- (SEE) 2-for-1
- (RSG) 3-for-2
Economic Releases
8:30 am EST
- The Consumer Price Index for February is estimated to rise .3% versus a .2% gain in January.
- The CPI Ex Food & Energy for February is estimated to rise .2% versus a .3% gain in January.
9:15 am EST
- Industrial Production for February is estimated to rise .3% versus a -.5% decline in January.
- Capacity Utilization for February is estimated to rise to 81.3% versus 81.2% in January.
10:00 am EST
- Preliminary Univ. of Mich. Consumer Confidence for March is estimated to fall to 89.0 versus 91.3 in February.
BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and financial shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Thursday, March 15, 2007
Stocks Slightly Higher into Final Hour on Falling Energy Prices and Diminishing I-Bank Concerns
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs and Retail longs. I covered my remaining (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. There are an unusual number of stocks rising on significant volume today, considering the muted performance of the major averages. As well, I have numerous stocks on my monitor pages with 1%-3% gains. Finally, breadth is pretty good and economically sensitive small caps and cyclicals are outperforming despite today's manufacturing readings. The CBOE total put/call hit 1.85 earlier in the day. According to my Bloomberg data, this is the highest level ever seen on an up day for the major averages. I think the fact that we have seen some historic rises in gauges of investor angst during this mild pullback is very important. As well, the 10-day moving averages of the ISE Sentiment Index and CBOE total put/call index are both registering all-time high levels of bearishness by options traders. I suspect this period of high uncertainty regarding the economy will be viewed as another excellent buying opportunity over the coming months. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, falling energy prices, less concern over the I-Banking sector and short-covering.
Today's Headlines
Bloomberg:
- Crude oil is falling another .64 in NY after OPEC agreed to maintain production targets at a meeting in Vienna.
- Baghdad deaths from bomb attacks have fallen 30 percent since a security crackdown by the U.S.-led coalition and Iraqi forces began last month.
- Former Fed Chairman Greenspan said he expects the fallout from subprime mortgage defaults to spread if home prices decline, however he sees no signs of that at this time. He also said that a 10% gain in home prices would cure the entire subprime problem. Finally, he said he sees no negative effects on consumer spending from subprime problems.
- Bear Stearns(BSC), the biggest US underwriter of mortgage bonds, said first-quarter profit rose 8% as higher revenue from trading derivatives and debt of troubled companies overcame a slowing market for home loans.
- General Electric’s(GE) commercial-finance division agreed to buy PHH Corp.(PHH) for $1.8 billion and then sell the company’s mortgage unit to Blackstone Group LP.
- Cisco Systems(CSCO) agreed to buy WebEx Communications(WEBX), the largest provider of Internet teleconferencing services, for $3.2 billion to counter Microsoft’s(MSFT) expansion in the market.
- Stocks will weather a surge in US subprime loan defaults because earnings growth and a robust labor market are enough to sustain the world’s largest economy, according to Credit Suisse Group.
- Hepatitis infections in the US fell to the lowest incidence on record, reducing the threat from a leading cause of liver cancer, as vaccines prevented more disease.
- Intercontinental Exchange(ICE) made an unsolicited $9.9 billion bid for the Chicago Board of Trade(BOT), to bock a purchase by Chicago Mercantile Exchange Holdings(CME).
- Brazil, the world’s biggest maker of ethanol from sugarcane juice, may begin commercial production of the fuel from the tropical plant’s cellulose within 5 years, an executive at Dedini SA said.
- Copper prices in NY jumped the most in eight months as China’s industrial production exceeded estimates and US jobless claims fell.
Wall Street Journal:
- Average Americans will pay for Democratic budget proposals that raise taxes on families and business, New Hampshire Senator Judd Gregg and Iowa Senator Chuck Grassley wrote. The proposal wouldn’t extend policies and the lowest-income households would pay 33% more in taxes, they said. The $1,000 per child tax credit would be cut in half and the standard deduction for married couples reduced by $1,700, Grassley and Gregg write. The result would mean 45 million households with two children would pay $3,000 more in taxes per year, something that would amount to the equivalent of a 5% pay cut. The rise would slow the economy, damp investment and employment, and weaken the beneficial impact that the capital gains tax rate has had on investments.
Gulf News:
- Krispy Kreme Doughnuts(KKD) is opening its first store in the United Arab Emirates tomorrow as part of a plan to have 100 outlets in the Middle East.
Lloyd’s List:
- Qatar Petroleum needs $35 billion of investment over three years, mostly for its liquefied natural gas expansion plans.
- Crude oil is falling another .64 in NY after OPEC agreed to maintain production targets at a meeting in Vienna.
- Baghdad deaths from bomb attacks have fallen 30 percent since a security crackdown by the U.S.-led coalition and Iraqi forces began last month.
- Former Fed Chairman Greenspan said he expects the fallout from subprime mortgage defaults to spread if home prices decline, however he sees no signs of that at this time. He also said that a 10% gain in home prices would cure the entire subprime problem. Finally, he said he sees no negative effects on consumer spending from subprime problems.
- Bear Stearns(BSC), the biggest US underwriter of mortgage bonds, said first-quarter profit rose 8% as higher revenue from trading derivatives and debt of troubled companies overcame a slowing market for home loans.
- General Electric’s(GE) commercial-finance division agreed to buy PHH Corp.(PHH) for $1.8 billion and then sell the company’s mortgage unit to Blackstone Group LP.
- Cisco Systems(CSCO) agreed to buy WebEx Communications(WEBX), the largest provider of Internet teleconferencing services, for $3.2 billion to counter Microsoft’s(MSFT) expansion in the market.
- Stocks will weather a surge in US subprime loan defaults because earnings growth and a robust labor market are enough to sustain the world’s largest economy, according to Credit Suisse Group.
- Hepatitis infections in the US fell to the lowest incidence on record, reducing the threat from a leading cause of liver cancer, as vaccines prevented more disease.
- Intercontinental Exchange(ICE) made an unsolicited $9.9 billion bid for the Chicago Board of Trade(BOT), to bock a purchase by Chicago Mercantile Exchange Holdings(CME).
- Brazil, the world’s biggest maker of ethanol from sugarcane juice, may begin commercial production of the fuel from the tropical plant’s cellulose within 5 years, an executive at Dedini SA said.
- Copper prices in NY jumped the most in eight months as China’s industrial production exceeded estimates and US jobless claims fell.
Wall Street Journal:
- Average Americans will pay for Democratic budget proposals that raise taxes on families and business, New Hampshire Senator Judd Gregg and Iowa Senator Chuck Grassley wrote. The proposal wouldn’t extend policies and the lowest-income households would pay 33% more in taxes, they said. The $1,000 per child tax credit would be cut in half and the standard deduction for married couples reduced by $1,700, Grassley and Gregg write. The result would mean 45 million households with two children would pay $3,000 more in taxes per year, something that would amount to the equivalent of a 5% pay cut. The rise would slow the economy, damp investment and employment, and weaken the beneficial impact that the capital gains tax rate has had on investments.
Gulf News:
- Krispy Kreme Doughnuts(KKD) is opening its first store in the United Arab Emirates tomorrow as part of a plan to have 100 outlets in the Middle East.
Lloyd’s List:
- Qatar Petroleum needs $35 billion of investment over three years, mostly for its liquefied natural gas expansion plans.
PPI Rises, Jobless Claims Fall, Manufacturing Activity Muted, Intl. Demand for US Assets Strong
- The Producer Price Index for February rose 1.3% versus estimates of a .5% gain and a -.6% decline in January.
- The PPI Ex Food & Energy for February rose .4% versus estimates of a .2% gain and a .2% increase in January.
- Initial Jobless Claims fell to 318K versus estimates of 328K and 330K the prior week.
- Continuing Claims rose to 2576K versus estimates of 2538K and 2528K prior.
- Empire Manufacturing for March fell to 1.9 versus estimates of 17.5 and a reading of 24.4 in February.
- Net Long-term TIC Flows for January rose to $97.4 billion versus estimates of $70.0 billion and $14.7 billion in December.
- The Philly Fed for March fell to .
- The PPI Ex Food & Energy for February rose .4% versus estimates of a .2% gain and a .2% increase in January.
- Initial Jobless Claims fell to 318K versus estimates of 328K and 330K the prior week.
- Continuing Claims rose to 2576K versus estimates of 2538K and 2528K prior.
- Empire Manufacturing for March fell to 1.9 versus estimates of 17.5 and a reading of 24.4 in February.
- Net Long-term TIC Flows for January rose to $97.4 billion versus estimates of $70.0 billion and $14.7 billion in December.
- The Philly Fed for March fell to .
BOTTOM LINE: Prices paid to US producers rose in February by the most in three months, Bloomberg reported. This morning's "hot" PPI was only 2.5% year-over-year vs. the 20-year average of 2.3%. The PPI is highly correlated with the CRB Index. This index has since weakened from February. Energy prices rose 3.5% last month after falling 4.6% the prior month. Prices of cigarettes surged 4.6%, the most since 2001. Prices for passenger cars fell 1.2% versus a .1% decline the prior month. I continue to believe inflation fears have peaked for this cycle. I expect the PPI to decelerate next month.
The number of US workers filing first-time applications for state jobless benefits fell last week to the lowest level in more than a month, signaling the labor market remains healthy, Bloomberg reported. The four-week moving average fell to 329,250 versus 339,500 the prior week. Wage growth, substantially above inflation, and low unemployment will continue to boost consumer spending, according to economists. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2% versus 1.9% the prior week. I continue to believe the job market will remain healthy without generating substantial unit labor cost increases over the intermediate-term.
Manufacturing in NY state grew this month at a slower than expected pace, Bloomberg reported. The new orders component of the index fell to 3.1 versus 18.9 the prior month. The expectations component of the index fell to 35.2 versus 38.5 the prior month. The prices paid component rose to 30.2 versus 26.9 the prior month. This gauge is volatile historically and I expect a rebound next month.
Foreign investment in American securities rebounded in January, led by gains in purchases of corporate bonds and stocks, Bloomberg said. The US remained one of the world’s fastest-growing developed economies in the fourth-quarter and the country’s equity markets gained, helping to boost foreign demand for US assets. Private international investors bought $102.7 billion of long-term securities in January. Japan, the largest foreign owner of US Treasury securities, raised its holdings by $4.5 billion. Caribbean banking centers, which analysts link to hedge funds, sold a net $5.1 billion. I continue to believe demand for US assets by international investors will remain strong over the intermediate-term as economic growth accelerates back to average levels, stocks rise and the US dollar firms.
Manufacturing in the Philly region grew less than economists’ expected as companies reduced inventories, Bloomberg reported. The inventory component of the index fell to -3.7 from -1.9 the prior month. The prices paid component rose to 21.8 versus 15.8 the prior month. The new orders index rose to 1.9 versus .5 the prior month. The expectations component fell to 17.4 versus 20.3 the prior month. I continue to believe manufacturing will rebound modestly later this year on inventory rebuilding, stabilizing construction and rising auto production.
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