BOTTOM LINE: Sales of previously owned homes in the US unexpectedly rose 3.9%, the biggest monthly gain in almost three years, a sign the housing market is recovering even as lending standards tighten, Bloomberg said. Lower prices and low interest rates are boosting demand for homes. The median home prices fell 1.3%, from a year ago, to $212,800. Existing home inventories rose to 6.7 month’s supply at the current sales pace from 6.6 months the prior month. Purchases rose 14.2% in the Northeast, 3.9% in the Midwest and 1.6% in the South. Purchases fell slightly in the West. I continue to believe housing sales are stabilizing at relatively high levels and that home construction will remain subdued throughout the year as homebuilders work down excess inventory.
Friday, March 23, 2007
Existing Home Sales Hit 3-Year High
Existing Home Sales for February rose to 6.69M versus estimates of 6.30M and 6.44M in January.
Thursday, March 22, 2007
Friday Watch
Late-Night Headlines
Bloomberg:
- Russ Koesterich, who helps oversee $1.7 trillion at Barclays Global Investments says US sub-prime turmoil “looks contained.”
- New Century Financial(NEWC), struggling with a surge in bad loans and short on cash, said Barclays Plc dropped demands that the sub-prime lender buy back mortgages valued at $900 million.
- The US dollar headed for a weekly gain against the yen as investors pared bets the Fed will cut interest rates by June.
- Kraft Foods(KFT) will join the S&P 500, becoming the biggest company by market value to do so since Google Inc.(GOOG) last year, after Altria Group(MO) distributes its 89% stake to shareholders.
- Owl Creek Asset Management LP and seven other hedge funds disclosed their holdings in bankrupt Northwest Airlines(NWACQ), yielding to a federal judge’s order.
- The United Nations Security Council formally introduced a draft resolution that would freeze the assets of a state-owned Iranian bank and bar some exports from the country, to pressure Iran to suspend its nuclear program.
Business Week:
- Motion-capture technology, which grew out of Hollywood movie-making, is being used by other industries as the cost of the hardware and software involved falls. Anyone making a PowerPoint presentation soon will be able to operate the technology developed by Los Angles-based Gesture Studios, which uses cameras to track hand movements and translate them into computer instructions.
London-based Times:
- Iraq’s Kurdish area aims for an oil production of one million barrels a day within five years, citing Ashti Hawrami, the oil minister for Iraqi Kurdistan. Speaking in London yesterday, Hawrami said Kurdistan aims to be the “hub” for Iraq’s future oil industry and wants to sign as many as 10 exploration contracts by the end of the year.
China Daily:
- PetroChina Co. is pumping an initial 500 metric tons a day of crude oil from its new field in Bohai Bay off the coast of northeastern China. PetroChina will announce in the first half of this year details of a “very rich” new oilfield in Bohai Bay, Vice Chairman Jiang Jiemin told reporters on March 19. The field is the largest find in China in the past decade.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AIZ), target $62.
- Reiterated Buy on (NKE), target $115.
Business Week:
- Ultralife Batteries Inc.(ULBI), a maker of industrial and military lithium batteries, has attracted an investor who has “steadily been buying shares” because of the company’s potential to be acquired. Investment firm Grace Brothers has accumulated a 30% stake in the company since last year.
Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.04%.
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
- (FRE)/1.42
Upcoming Splits
- (KMX) 2-for-1
- (HSC) 2-for-1
Economic Releases
10:00 pm EST
- Existing Home Sales for February are estimated to fall to 6.30M versus 6.46M in January.
Bloomberg:
- Russ Koesterich, who helps oversee $1.7 trillion at Barclays Global Investments says US sub-prime turmoil “looks contained.”
- New Century Financial(NEWC), struggling with a surge in bad loans and short on cash, said Barclays Plc dropped demands that the sub-prime lender buy back mortgages valued at $900 million.
- The US dollar headed for a weekly gain against the yen as investors pared bets the Fed will cut interest rates by June.
- Kraft Foods(KFT) will join the S&P 500, becoming the biggest company by market value to do so since Google Inc.(GOOG) last year, after Altria Group(MO) distributes its 89% stake to shareholders.
- Owl Creek Asset Management LP and seven other hedge funds disclosed their holdings in bankrupt Northwest Airlines(NWACQ), yielding to a federal judge’s order.
- The United Nations Security Council formally introduced a draft resolution that would freeze the assets of a state-owned Iranian bank and bar some exports from the country, to pressure Iran to suspend its nuclear program.
Business Week:
- Motion-capture technology, which grew out of Hollywood movie-making, is being used by other industries as the cost of the hardware and software involved falls. Anyone making a PowerPoint presentation soon will be able to operate the technology developed by Los Angles-based Gesture Studios, which uses cameras to track hand movements and translate them into computer instructions.
London-based Times:
- Iraq’s Kurdish area aims for an oil production of one million barrels a day within five years, citing Ashti Hawrami, the oil minister for Iraqi Kurdistan. Speaking in London yesterday, Hawrami said Kurdistan aims to be the “hub” for Iraq’s future oil industry and wants to sign as many as 10 exploration contracts by the end of the year.
China Daily:
- PetroChina Co. is pumping an initial 500 metric tons a day of crude oil from its new field in Bohai Bay off the coast of northeastern China. PetroChina will announce in the first half of this year details of a “very rich” new oilfield in Bohai Bay, Vice Chairman Jiang Jiemin told reporters on March 19. The field is the largest find in China in the past decade.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AIZ), target $62.
- Reiterated Buy on (NKE), target $115.
Business Week:
- Ultralife Batteries Inc.(ULBI), a maker of industrial and military lithium batteries, has attracted an investor who has “steadily been buying shares” because of the company’s potential to be acquired. Investment firm Grace Brothers has accumulated a 30% stake in the company since last year.
Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.04%.
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
- (FRE)/1.42
Upcoming Splits
- (KMX) 2-for-1
- (HSC) 2-for-1
Economic Releases
10:00 pm EST
- Existing Home Sales for February are estimated to fall to 6.30M versus 6.46M in January.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and energy shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
Stocks Finish Mixed, Consolidating Yesterday's Sharp Gains
Indices
S&P 500 1,434.54 -.03%
DJIA 12,461.14 +.11%
NASDAQ 2,451.74 -.17%
Russell 2000 808.05 +.07%
Wilshire 5000 14,483.72 +.02%
Russell 1000 Growth 565.37 -.11%
Russell 1000 Value 828.54 +.07%
Morgan Stanley Consumer 706.99 +.02%
Morgan Stanley Cyclical 960.62 -.33%
Morgan Stanley Technology 563.86 -1.03%
Transports 4,891.63 -.04%
Utilities 497.31 +.11%
MSCI Emerging Markets 115.96 +.54%
Sentiment/Internals
Total Put/Call .94 -16.07%
NYSE Arms 1.11 +152.62%
Volatility(VIX) 12.93 +6.07%
ISE Sentiment 116.0 +16.0%
Futures Spot Prices
Crude Oil 61.76 +3.61%
Reformulated Gasoline 195.87 +3.22%
Natural Gas 7.33 +2.43%
Heating Oil 171.90 +3.27%
Gold 664.20 +.64%
Base Metals 248.96 +.71%
Copper 307.40 +1.82%
Economy
10-year US Treasury Yield 4.58% +4 basis points
US Dollar 83.06 +.35%
CRB Index 310.91 +1.50%
Leading Sectors
Energy +1.79%
Oil Service +1.60%
Telecom +.62%
Lagging Sectors
Steel -1.30%
Semis -1.50%
Airlines -2.82%
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
AG Edwards:
- Rated (ERTS), (THQI) Buy.
Afternoon/Evening Headlines
Bloomberg:
- Blackstone Group LP, the leveraged buyout firm that has spent $160 billion taking companies private in the past two decades, filed to raise as much as $4 billion in an IPO.
- Nike Inc.(NKE) said third quarter profit rose more than analysts anticipated on sales of new products such as the Air Force 25 and iPod-compatible shoes. The shares rose $1 after-hours to $109.60.
- Palm Inc.(PALM) posted a 61% drop in third quarter profit because of marketing and development spending to stem the loss of customers to Research In Motion’s(RIMM) BlackBerry. The shares rose .25 to $18.00 in after hours trading.
- Crude oil rose $2/bbl. on increased speculation by investment funds that demand will increase.
Wall Street Journal:
- Brian Hunter, the Amaranth Advisors LLC trader whose losses led to the biggest hedge-fund collapse in history, is seeking to raise money for new commodities funds. Hunter formed Solengo Capital and has hired colleagues from Amaranth and previous jobs. The firm, with offices in Calgary and Greenwich, Connecticut, wants to raise “hundreds of millions of dollars” from investors outside the US.
S&P 500 1,434.54 -.03%
DJIA 12,461.14 +.11%
NASDAQ 2,451.74 -.17%
Russell 2000 808.05 +.07%
Wilshire 5000 14,483.72 +.02%
Russell 1000 Growth 565.37 -.11%
Russell 1000 Value 828.54 +.07%
Morgan Stanley Consumer 706.99 +.02%
Morgan Stanley Cyclical 960.62 -.33%
Morgan Stanley Technology 563.86 -1.03%
Transports 4,891.63 -.04%
Utilities 497.31 +.11%
MSCI Emerging Markets 115.96 +.54%
Sentiment/Internals
Total Put/Call .94 -16.07%
NYSE Arms 1.11 +152.62%
Volatility(VIX) 12.93 +6.07%
ISE Sentiment 116.0 +16.0%
Futures Spot Prices
Crude Oil 61.76 +3.61%
Reformulated Gasoline 195.87 +3.22%
Natural Gas 7.33 +2.43%
Heating Oil 171.90 +3.27%
Gold 664.20 +.64%
Base Metals 248.96 +.71%
Copper 307.40 +1.82%
Economy
10-year US Treasury Yield 4.58% +4 basis points
US Dollar 83.06 +.35%
CRB Index 310.91 +1.50%
Leading Sectors
Energy +1.79%
Oil Service +1.60%
Telecom +.62%
Lagging Sectors
Steel -1.30%
Semis -1.50%
Airlines -2.82%
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
AG Edwards:
- Rated (ERTS), (THQI) Buy.
Afternoon/Evening Headlines
Bloomberg:
- Blackstone Group LP, the leveraged buyout firm that has spent $160 billion taking companies private in the past two decades, filed to raise as much as $4 billion in an IPO.
- Nike Inc.(NKE) said third quarter profit rose more than analysts anticipated on sales of new products such as the Air Force 25 and iPod-compatible shoes. The shares rose $1 after-hours to $109.60.
- Palm Inc.(PALM) posted a 61% drop in third quarter profit because of marketing and development spending to stem the loss of customers to Research In Motion’s(RIMM) BlackBerry. The shares rose .25 to $18.00 in after hours trading.
- Crude oil rose $2/bbl. on increased speculation by investment funds that demand will increase.
Wall Street Journal:
- Brian Hunter, the Amaranth Advisors LLC trader whose losses led to the biggest hedge-fund collapse in history, is seeking to raise money for new commodities funds. Hunter formed Solengo Capital and has hired colleagues from Amaranth and previous jobs. The firm, with offices in Calgary and Greenwich, Connecticut, wants to raise “hundreds of millions of dollars” from investors outside the US.
BOTTOM LINE: The Portfolio finished higher today on gains in my Medical longs, Retail longs and Telecom longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished slightly higher, sector performance was mixed and volume was above average. Measures of investor anxiety were above-average into the close. Today's overall market action was bullish considering yesterday’s gains. Many stocks broke meaningfully higher today, building on yesterday's sharp gains. Intuitive Surgical (ISRG), Google Inc.(GOOG), Quanta Services (PWR) and Tractor Supply (TSCO) are three of my longs that surged again. I would buy all three at current levels. The ISE Sentiment Index continues to trade at low levels as retail options traders remain bearish. The ABX Subprime Indicies continue to trend higher from the scare of a couple of weeks ago. So far, this year is turning into one of the better I can remember for stockpickers. Many individual equities are trouncing the major averages. I wouldn't be surprised to see some profit-taking again tomorrow morning on the likely weaker-than-expected existing home sales report due to one of the coldest Februarys in history. A number of the many US stock market bears are pointing to the 30s as a guide for recent technical stock market action. From a technical standpoint, today's DJIA looks much more like 1983 than 1937, in my opinion. Take a look at this long-term DJIA chart. Moreover, the current macro backdrop is far better today than either of those periods. This corresponds with my belief that we experienced an "accelerated" secular bear market from 1998 through 2003. I say "accelerated" because the explosion of hedge funds, massive increase in market participants and much better information flow than during other secular bear periods sped up the cleansing process.
Stocks Mixed into Final Hour, Consolidating Yesterday's Sharp Gains
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Medical longs and Telecom longs. I added to my (BRCM) long this morning and took profits in another trading long, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, sector performance is mixed and volume is average. NYSE short interest, from mid-February through mid-March, surged 10% to a record 10,510,000,000 shares. The second-largest short interest position on the NYSE, behind Ford Motor (F), is in iShares Russell 2000 Index (IWM) at 158,727,133 shares. The IWM is 3.0% higher ytd. and is 21.2% higher since the July bottom last year. Record short interest is playing a major role in recent record margin debt readings. The beginning of the "mother of all short-covering rallies" grows closer by the day, in my opinion. Weekly retail sales are trending higher, jobless claims are trending lower and mortgage applications have been trending higher. After two years of substantial slowing in housing, there is still little evidence of any significant consumer-related weakness as Americans' net worth remains at record high levels.
Here are the 20 NYSE stocks with the largest percentage increase in short interest relative to their float from mid-February through mid-March:
1. AVR +52.6%
2. FMT +28.1%
3. FED +19.7%
4. DSL +19.2%
5. NDE +18.9%
6. WY +14.2%
7. IMH +11.5%
8. NFI +10.1%
9. NYX +9.8%
10. GGC +8.5%
11. AHM +8.1%
12. SGK +8.0%
13. FBC +7.6%
14. CBS +7.6%
15. MTH +7.5%
16. SPC +7.4%
17. MHO +7.4%
18. MTG +7.0%
19. SIX +6.9%
20. CHB +6.9%
I expect US stocks to trade mixed-to-lower into the close on higher energy prices and apprehension ahead of tomorrow morning’s likely weaker-than-expected existing home sales report.
Today's Headlines
Bloomberg:
- Corn prices in Chciago are falling after a government report indicated that high prices have slowed demand for the biggest US crop.
- Michael Shaoul, CEO of investment research firm Oscar Gruss & Son Inc. in NY said the recent rally in copper is driven by speculative financial flows to investment funds rather than any improvements in the supply/demand situation for the metal.
- Oil is rising $2/bbl. as investment fund speculation increases on the belief that demand will improve later this year.
- KB Home(KBH) said fiscal first-quarter profit fell 84%, however this exceeded analysts’ estimates and the company’s cancellation rate fell to 31% from 48% in the fourth quarter. The shares are .50 higher on the report.
Wall Street Journal:
- Iberdrola SA’s success in persuading regulators worldwide to support investments in biodiesel, solar and wind power may spur bigger investments in alternative energy.
- Bear Stearns Cos.(BSC) is the latest financial group to apply to start an activity managed exchange-traded fund.
- Banks are using video face-recognition systems developed by 3VR Security Inc. to thwart people trying to pass fraudulent checks.
- The SEC is exploring ways to prevent possible manipulation of corporate elections by improper voting.
NY Times:
- Illegal immigrants in the US are increasingly stealing the identities of their legal counterparts and citizens to help get jobs. Employers, prosecuted for hiring illegal immigrants, are increasing applicant scrutiny, pushing illegal immigrants to abandon fake papers in favor of stealing identities or buying them from traffickers.
LA Times:
- News Crop.(NWS) and NBC Universal plan to create an online video site to compete against Google’s(GOOG) popular YouTube.
Star-Ledger:
- New Jersey lawmakers have introduced a bill to ban the use of mobile phones or other wireless communication devices to send text messages while driving.
USA Today:
- Congress has added $3.7 billion to the emergency spending bill to reward farm interests that make large contributions to Democrats. The proposed bill includes $74 million for storage fees for peanut growers, $25 million for spinach growers, $252 million for mild subsidies, and $3.3 billion for crop and livestock losses. Republicans said the provisions are designed to gain support from moderate Democrats for a US pullout from Iraq.
AP:
- A federal judge today struck down a 1998 US law that made it a crime for Web site operators to let children access porn. In the ruling, a setback to government efforts to rein in online pornography, US District Judge Lowell Reed Jr. of Pennsylvania said parents can protect children through software filters and less restrictive means that do not limit the free speech rights of others. The law was challenged by sexual health sites, the online magazine Salon.com and other Web sites backed by the American Civil Liberties Union.
Frankfurter Allgemeine Zeitung:
- A Muslim woman, whose request for a fast-track divorce was rejected, successfully argued her case should be reheard because the judge said the Koran allows a man to beat his wife.
Facts:
- Angel Gurria, secretary general of the OECD, said the cooling US housing market doesn’t constitute a crisis and he’s optimistic about the global economic outlook.
Le Temp:
- Switzerland sent a senior diplomat to Tehran to offer the Iranian government help in ending the dispute over its nuclear program.
Valor Economico:
- Norse Energy Corp. ASA, an oil and gas explorer, is among 29 Norwegian investors spending $170 million to for a venture with Brazil’s Grupo Albertina to expand ethanol production.
Ultimas Noticias:
- Venezuelans spend as much as 12 hours a month looking for foodstuffs in supermarkets, suggesting that shortages of basic foods are eroding living conditions mostly for the poor, citing a poll.
- Corn prices in Chciago are falling after a government report indicated that high prices have slowed demand for the biggest US crop.
- Michael Shaoul, CEO of investment research firm Oscar Gruss & Son Inc. in NY said the recent rally in copper is driven by speculative financial flows to investment funds rather than any improvements in the supply/demand situation for the metal.
- Oil is rising $2/bbl. as investment fund speculation increases on the belief that demand will improve later this year.
- KB Home(KBH) said fiscal first-quarter profit fell 84%, however this exceeded analysts’ estimates and the company’s cancellation rate fell to 31% from 48% in the fourth quarter. The shares are .50 higher on the report.
Wall Street Journal:
- Iberdrola SA’s success in persuading regulators worldwide to support investments in biodiesel, solar and wind power may spur bigger investments in alternative energy.
- Bear Stearns Cos.(BSC) is the latest financial group to apply to start an activity managed exchange-traded fund.
- Banks are using video face-recognition systems developed by 3VR Security Inc. to thwart people trying to pass fraudulent checks.
- The SEC is exploring ways to prevent possible manipulation of corporate elections by improper voting.
NY Times:
- Illegal immigrants in the US are increasingly stealing the identities of their legal counterparts and citizens to help get jobs. Employers, prosecuted for hiring illegal immigrants, are increasing applicant scrutiny, pushing illegal immigrants to abandon fake papers in favor of stealing identities or buying them from traffickers.
LA Times:
- News Crop.(NWS) and NBC Universal plan to create an online video site to compete against Google’s(GOOG) popular YouTube.
Star-Ledger:
- New Jersey lawmakers have introduced a bill to ban the use of mobile phones or other wireless communication devices to send text messages while driving.
USA Today:
- Congress has added $3.7 billion to the emergency spending bill to reward farm interests that make large contributions to Democrats. The proposed bill includes $74 million for storage fees for peanut growers, $25 million for spinach growers, $252 million for mild subsidies, and $3.3 billion for crop and livestock losses. Republicans said the provisions are designed to gain support from moderate Democrats for a US pullout from Iraq.
AP:
- A federal judge today struck down a 1998 US law that made it a crime for Web site operators to let children access porn. In the ruling, a setback to government efforts to rein in online pornography, US District Judge Lowell Reed Jr. of Pennsylvania said parents can protect children through software filters and less restrictive means that do not limit the free speech rights of others. The law was challenged by sexual health sites, the online magazine Salon.com and other Web sites backed by the American Civil Liberties Union.
Frankfurter Allgemeine Zeitung:
- A Muslim woman, whose request for a fast-track divorce was rejected, successfully argued her case should be reheard because the judge said the Koran allows a man to beat his wife.
Facts:
- Angel Gurria, secretary general of the OECD, said the cooling US housing market doesn’t constitute a crisis and he’s optimistic about the global economic outlook.
Le Temp:
- Switzerland sent a senior diplomat to Tehran to offer the Iranian government help in ending the dispute over its nuclear program.
Valor Economico:
- Norse Energy Corp. ASA, an oil and gas explorer, is among 29 Norwegian investors spending $170 million to for a venture with Brazil’s Grupo Albertina to expand ethanol production.
Ultimas Noticias:
- Venezuelans spend as much as 12 hours a month looking for foodstuffs in supermarkets, suggesting that shortages of basic foods are eroding living conditions mostly for the poor, citing a poll.
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