Bloomberg:
- Crude oil is falling below $57/bbl. in NY on reduced concern that Iranian supplies would be curtailed after the US said it will issue a visa to Iran’s President so he can speak to the UN Security Council in NYC.
- The world’s shipping lines charged less to move containers in the fourth quarter as new vessels entered service, Containerisation International monthly magazine said.
- BJ Willingham, who oversees $115 million in oil and gas investments at a Houston hedge fund, said the drop in commodity prices that wiped out Amaranth Advisors LLC last year was a boon for managers who stick to stocks. Investors who were burned by the 2006 rout of natural gas prices are fleeing into the arms of energy hedge funds that trade only equities, eschewing the risks of commodities futures.
- US farmers will plant more corn than expected two months ago to take advantage of higher prices, Informa Economics Inc. said in a report to clients.
- Wal-Mart Stores(WMT) scrapped plans to open its own bank, ending a two-year controversy that roiled financial-services companies that feared direct competition from the world’s largest retailer.
Wall Street Journal:
- EBay Inc.’s(EBAY) Skype Internet telephone service attracted its biggest number of new customers in China.
- Jonathan Abrams, who founded Friendster Inc. social-networking Web site, will today introduce Socializer Inc., an Internet site designed to help viewers plan events.
- The US is expected by economic forecasters to avoid a recession and even a significant increase in unemployment, despite a perceived likelihood that recent defaults in the subprime mortgage market will spread to the wider mortgage market, citing a WSJ.com survey.
Deal.com:
- Kohlberg Kravis Roberts is favored to acquire Armstrong World Industries, a building products maker, for just under $3 billion.
CNBC:
- Merchant bank Blackstone Group LP may file for an IPO within the next two weeks. Goldman Sachs(GS) is working with Blackstone’s lawyers on a prospectus for the offering and the company is assessing potential opposition form equity partners.
Business Week:
- Google Inc.(GOOG), Coach(COH) and Gilead Sciences(GILD) are the best-performing companies, Business Week said in a cover story devoted to the 50 best performers.
Financial Times:
- Buyout firms are trying to prevent the loans they use to fund acquisitions from being sold on to hedge funds.
AFP:
- President Mahmoud Ahmadinejad said Iran won’t go back on sensitive nuclear work, after, after world powers agreed on new sanctions, citing Iran’s semi-official Fars news agency.
Valor Economico:
- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, will boost its exports of ethanol 700% this year on rising demand from Venezuela, Nigeria and the US.
Friday, March 16, 2007
CPI Still Below Average, Industrial Production Jumps, Sentiment Falls
- The Consumer Price Index for February rose .4% versus estimates of a .3% gain and a .2% rise in January.
- The CPI Ex Food & Energy for February rose .2% versus estimates of a .2% gain and a .3% rise in January.
- Industrial Production for February rose 1.0% versus estimates of a .3% gain and an upwardly revised -.3% decline in January.
- Capacity Utilization for February rose to 82.0% versus estimates of 81.3% and 81.4% in January.
- Preliminary Univ. of Mich. Consumer Confidence for March fell to 88.0 versus estimates of 89.0 and a reading of 91.3 in February.
- The CPI Ex Food & Energy for February rose .2% versus estimates of a .2% gain and a .3% rise in January.
- Industrial Production for February rose 1.0% versus estimates of a .3% gain and an upwardly revised -.3% decline in January.
- Capacity Utilization for February rose to 82.0% versus estimates of 81.3% and 81.4% in January.
- Preliminary Univ. of Mich. Consumer Confidence for March fell to 88.0 versus estimates of 89.0 and a reading of 91.3 in February.
BOTTOM LINE: Prices paid by US consumers rose .4% last month, higher than estimates, Bloomberg reported. Energy prices rose .9% in February versus a 1.5% decline in January due to the fact that we saw historically cold temperatures during the month. While the CPI came in above estimates, it is still nowhere near worrisome levels. The CPI year-over-year for February rose 2.4% vs. the 20-year average of 3.1%. Current Average Hourly Earnings year-over-year at 4.1% are still almost twice the rise in the CPI. Moreover, the 10-year yield is only 1 basis point higher on this morning's reports. I continue to believe inflation fears have peaked for this cycle.
Industrial production in the US rose last month by the most since November 2005, as manufacturing rebounded and the return of cold weather prompted a surge in utility use, Bloomberg said. The report indicates factories are making headway in their inventory reduction efforts, suggesting manufacturing may soon begin adding to US economic growth. Manufacturing, which accounts for most of the report, rose .4% versus a .5% decline the prior month. Computer production surged 2.2% and home electronics production soared 9.9%. Moreover, auto production rose 3.2%. Responses to a question in the Philly Fed report also indicated manufacturing will accelerate during the second quarter. The worst of the manufacturing slowdown is likely over. I continue to believe significant inventory de-stocking will lead to a below trend 1Q GDP report. However, manufacturing should begin adding to growth in the second quarter and help boost GDP back to average rates of around 3% by 3Q.
Confidence declined this month after fuel prices rose and stocks declined, Bloomberg reported. The expectations component of the index fell to 79.3 versus 81.5 in February. The current conditions component fell to 103.6 versus 106.7 in January. Consumers expect an inflation rate of 3% over the next 12 months, the same as February. Gas prices rose to $2.55/gallon this month even as crude oil prices continue to fall. Rising gas prices, the stock pullback and media’s obsession with housing all contributed to the decline in sentiment. I expect consumer confidence to hit a new cycles high by year-end as stocks rise, inflation decelerates further, gas prices fall, housing sales stabilize at relatively high levels, the job market remains healthy and wages continue to outpace inflation.
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.
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