BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is gaining and volume is about average. The AAII investor sentiment survey just came out today at 32.26% Bulls and 39.78% Bears. I would like to emphasize the point that I truly believe overall investor sentiment has never been this poor in US history with the DJIA just off record highs. This is a gigantic positive. Current readings(not one or two weeks, but longer-term) are at levels associated with major market bottoms and this is with the DJIA only 1.6% off its all-time high. Of course bears will say sentiment gauges are “different this time” and are poor mechanisms to help time the longer-term trend of the market because current sentiment readings are so disturbing to the secular bear case. Let’s not forget the market is up almost 100% from its lows and the “bears that cried wolf” are more widely followed than ever. Moreover, during the recent mild pullback numerous market “fearleaders” insinuated that anyone that is bullish is a “cheerleader.” I heard this term dozens of times right around the recent lows. I would expect to hear this type of talk by bears at a market bottom, not a top. Around the time of the major market bottom in 2002, technicians didn’t like the market, quants didn’t like it and the fundamentals looked terrible. It was the extreme readings in investor pessimism that screamed “major market bottom.” The current explosion in low correlation and negative correlation US stock strategies is just a function of the current US “negativity bubble,” in my opinion. I know there will always be a place for these strategies in some investors’ portfolios, but their current extreme popularity is a result of the belief by the herd that the US is still in a secular bear or long-term trading range, in my opinion. I suspect the demand for these types of strategies is peaking right now and will fall markedly over the longer-term as the US secular bull continues. I expect US stocks to trade mixed-to-higher into the close on short-covering, buyout speculation, lessoned geopolitical tensions and bargain-hunting.
Thursday, April 05, 2007
Stocks Higher into Final Hour on Strength in Homebuilders, Biotech and Airlines Shares
Today's Headlines
Bloomberg:
- Crude oil is falling .50/bbl. to $63.90 even as unusually low refinery utilization continues to drive gas prices higher.
- Lyondell Chemical(LYO) said a gasoline-producing catalytic-cracking unit at the company’s Houston, Texas, refinery will be out of service for 10 days starting next week. The unit will be down to make “minor adjustments.”
- US soybean-oil inventories rose 23% to a record in February on reduced domestic demand for cooking oils and margarine.
- OPEC’s daily shipments of crude oil will probably rise 1.6% in the month ending April 21 as refineries around the world rebuild depleted inventories, consulting company Oil Movements said.
- Natural gas inventories rose again this week and are now 27.4% above the five-year average for this time of the time and poised to hit all-time highs later this year.
- China will allow its currency to appreciate over the next six months as monetary authorities face accelerating inflation, according to Goldman Sachs(GS).
- Inverness Medical(IMA) made an unsolicited proposal to acquire Biosite Inc.(BSTE), the maker of emergency-room tests for heart disease, for more than $1.6 billion, topping a bid from Beckman Coulter.
- All passenger vehicles sold in the US must be equipped with electronic stability control systems by the 2012 model year to prevent rollovers, US safety regulators said today.
- UK Prime Minister Tony Blair mixed his welcome of the safe return of 15 sailors and Marines who had been held by Iran with a warning to the country to drop its support for terrorism in Iraq.
- China ordered banks to set aside more money as reserves for the sixth time in less than a year to slow inflation and investment in the country.
Wall Street Journal:
- A Gas Exporting Countries Forum meeting next week in Doha, Qatar, may lay the groundwork for a version of OPEC for natural gas.
- Carlyle Group, a Washington, DC-based leveraged-buyout firm, will start a $1 billion hedge fund next month, its first.
- US property owners including doctors and lawyers are stocking more alpacas to get favorable tax reductions.
- Advanced Micro Devices(AMD) said its upgraded version of the Opteron computer chip, which operates at the speed of 3 gigahertz, is faster than those made by Intel Corp.(INTC), citing AMD vp Allen.
- Billionaire Carl Icahn’s gamble on a $920 million takeover bid for WCI Communities(WCI) homebuilding company may shed light on how soon Florida’s housing slump will turn around.
NY Times:
- Royal Dutch Shell Plc expects to resume full output of crude oil from the Niger Delta in Nigeria within five or six months, after reaching agreements with local communities.
CNBC:
- Tracinda Corp. said it will offer $4.5 billion to buy DaimlerChrysler AG’s(DCX) Chrysler unit.
NY Post:
- Jones Apparel Group(JNY) may sell or spin off its Barneys NY unit instead of breaking up the entire company.
- The American Stock Exchange is in “highly preliminary” talks with Susquehanna International Group about a possible sale or investment.
Financial Times:
- Ford Motor(F) said it will eliminate 600 of its US dealers, or 15%, in an attempt to brighten the financial picture for its remaining outlets.
TT:
- Volvo AB is close to an agreement with Transport for London to test about six diesel-electric hybrid double-decker buses in the UK capital next year.
Arab News:
- US Speaker of the House Nancy Pelosi held talks with Saudi Arabia’s King Abdullah in Riyadh on the Middle East peace process.
- Crude oil is falling .50/bbl. to $63.90 even as unusually low refinery utilization continues to drive gas prices higher.
- Lyondell Chemical(LYO) said a gasoline-producing catalytic-cracking unit at the company’s Houston, Texas, refinery will be out of service for 10 days starting next week. The unit will be down to make “minor adjustments.”
- US soybean-oil inventories rose 23% to a record in February on reduced domestic demand for cooking oils and margarine.
- OPEC’s daily shipments of crude oil will probably rise 1.6% in the month ending April 21 as refineries around the world rebuild depleted inventories, consulting company Oil Movements said.
- Natural gas inventories rose again this week and are now 27.4% above the five-year average for this time of the time and poised to hit all-time highs later this year.
- China will allow its currency to appreciate over the next six months as monetary authorities face accelerating inflation, according to Goldman Sachs(GS).
- Inverness Medical(IMA) made an unsolicited proposal to acquire Biosite Inc.(BSTE), the maker of emergency-room tests for heart disease, for more than $1.6 billion, topping a bid from Beckman Coulter.
- All passenger vehicles sold in the US must be equipped with electronic stability control systems by the 2012 model year to prevent rollovers, US safety regulators said today.
- UK Prime Minister Tony Blair mixed his welcome of the safe return of 15 sailors and Marines who had been held by Iran with a warning to the country to drop its support for terrorism in Iraq.
- China ordered banks to set aside more money as reserves for the sixth time in less than a year to slow inflation and investment in the country.
Wall Street Journal:
- A Gas Exporting Countries Forum meeting next week in Doha, Qatar, may lay the groundwork for a version of OPEC for natural gas.
- Carlyle Group, a Washington, DC-based leveraged-buyout firm, will start a $1 billion hedge fund next month, its first.
- US property owners including doctors and lawyers are stocking more alpacas to get favorable tax reductions.
- Advanced Micro Devices(AMD) said its upgraded version of the Opteron computer chip, which operates at the speed of 3 gigahertz, is faster than those made by Intel Corp.(INTC), citing AMD vp Allen.
- Billionaire Carl Icahn’s gamble on a $920 million takeover bid for WCI Communities(WCI) homebuilding company may shed light on how soon Florida’s housing slump will turn around.
NY Times:
- Royal Dutch Shell Plc expects to resume full output of crude oil from the Niger Delta in Nigeria within five or six months, after reaching agreements with local communities.
CNBC:
- Tracinda Corp. said it will offer $4.5 billion to buy DaimlerChrysler AG’s(DCX) Chrysler unit.
NY Post:
- Jones Apparel Group(JNY) may sell or spin off its Barneys NY unit instead of breaking up the entire company.
- The American Stock Exchange is in “highly preliminary” talks with Susquehanna International Group about a possible sale or investment.
Financial Times:
- Ford Motor(F) said it will eliminate 600 of its US dealers, or 15%, in an attempt to brighten the financial picture for its remaining outlets.
TT:
- Volvo AB is close to an agreement with Transport for London to test about six diesel-electric hybrid double-decker buses in the UK capital next year.
Arab News:
- US Speaker of the House Nancy Pelosi held talks with Saudi Arabia’s King Abdullah in Riyadh on the Middle East peace process.
Weekly Claims Rise Slightly, Job Market Still Healthy
- Initial Jobless Claims for last week rose to 321K versus estimates of 315K and 310K the prior week.
- Continuing Claims fell to 2492K versus estimates of 2505K and 2517K prior.
- Continuing Claims fell to 2492K versus estimates of 2505K and 2517K prior.
BOTTOM LINE: More US workers filed first-time claims for state unemployment benefits last week, while the number of people on jobless rolls remained at a level that indicates strength in the job market, Bloomberg reported. The four week moving-average of jobless claims fell to 315,750 from 317,250 the prior week. Construction and other housing-related businesses and automakers are reducing staff, while many other employers are keeping workers and adding new ones to help meet demand. The unemployment rate among those eligible for benefits held steady at 1.9%. In the most recent consumer confidence report, the percentage of Americans who said jobs are plentiful rose to the highest level since August 2001. I continue to believe the labor market will remain healthy over the intermediate-term as auto production rises and increased hiring in the healthcare, technology and financial sectors offsets housing related job cuts. Tomorrow’s non-farm payrolls will probably come in just slightly below estimates of 133,000. I suspect investors will be pleased with the number on Monday after the three-day weekend.
Wednesday, April 04, 2007
Thursday Watch
Late-Night Headlines
Bloomberg:
- Nintendo Co., the world’s biggest maker of handheld game players, said last fiscal year’s sales rose 90%, more than the company previously estimated, helped by demand for DS handheld game players.
- UK government officials in Tehran were today arranging the return to Britain of the 15 military personnel taken hostage by Iran on March 23.
- Sales of semiconductor equipment by companies such as Applied Materials(AMAT) and Tokyo Electron Ltd. rose 23% last year as memory chipmakers boosted spending to meet demand, a researcher said.
AFP:
- The European Union, the US and Russia have agreed on joint measures to better tackle global terrorism.
China Business News:
- Metro-Goldwyn-Mayer(MGM) has signed an agreement with China’s Diaoyutai State Guesthouse to set up a venture to develop hotels and holiday resorts, citing officials
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MON), target raised to $67.
- Micron’s(MU) earnings underscore our positive view of the DRAM industry and notably industry fundamentals are turning faster than we had anticipated. Spot pricing for DRAM has been up for the past week, reflecting a work down in inventories from customers and their renewed willingness to build inventory ahead of the normal seasonal build in May. NAND pricing remains upward biased, with demand from a major US vendor recently driving ASP’s. Mircon’s peers in Korea have recently called for NAND undersupply in 2H07. We are increasing estimates for FY07 and FY08 to ($.14), $.22, from ($.17), $.13. We reiterate Buy, price target is raised to $17 from $15.50.
Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated -.07%.
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
- (STZ)/.34
Upcoming Splits
- (CMI) 2-for-1
Economic Releases
10:00 am EST
- Initial Jobless Claims are estimated to rise to 315K versus 308K the prior week.
- Continuing Claims are estimated to fall to 2505K versus 2527K prior.
Bloomberg:
- Nintendo Co., the world’s biggest maker of handheld game players, said last fiscal year’s sales rose 90%, more than the company previously estimated, helped by demand for DS handheld game players.
- UK government officials in Tehran were today arranging the return to Britain of the 15 military personnel taken hostage by Iran on March 23.
- Sales of semiconductor equipment by companies such as Applied Materials(AMAT) and Tokyo Electron Ltd. rose 23% last year as memory chipmakers boosted spending to meet demand, a researcher said.
AFP:
- The European Union, the US and Russia have agreed on joint measures to better tackle global terrorism.
China Business News:
- Metro-Goldwyn-Mayer(MGM) has signed an agreement with China’s Diaoyutai State Guesthouse to set up a venture to develop hotels and holiday resorts, citing officials
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MON), target raised to $67.
- Micron’s(MU) earnings underscore our positive view of the DRAM industry and notably industry fundamentals are turning faster than we had anticipated. Spot pricing for DRAM has been up for the past week, reflecting a work down in inventories from customers and their renewed willingness to build inventory ahead of the normal seasonal build in May. NAND pricing remains upward biased, with demand from a major US vendor recently driving ASP’s. Mircon’s peers in Korea have recently called for NAND undersupply in 2H07. We are increasing estimates for FY07 and FY08 to ($.14), $.22, from ($.17), $.13. We reiterate Buy, price target is raised to $17 from $15.50.
Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated -.07%.
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
- (STZ)/.34
Upcoming Splits
- (CMI) 2-for-1
Economic Releases
10:00 am EST
- Initial Jobless Claims are estimated to rise to 315K versus 308K the prior week.
- Continuing Claims are estimated to fall to 2505K versus 2527K prior.
BOTTOM LINE: Asian indices are slightly lower, weighed down by commodity shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Slightly Higher, Building on Yesterday's Sharp Advance
Indices
S&P 500 1,439.37 +.11%
DJIA 12,530.05 +.16%
NASDAQ 2,458.69 +.34%
Russell 2000 810.79 -.12%
Wilshire 5000 14,539.49 +.10%
Russell 1000 Growth 567.70 +.26%
Russell 1000 Value 831.21 -.03%
Morgan Stanley Consumer 709.81 -.03%
Morgan Stanley Cyclical 966.35 -.04%
Morgan Stanley Technology 570.16 +.46%
Transports 4,891.77 -.20%
Utilities 508.23 -.37%
MSCI Emerging Markets 119.55 +.90%
Sentiment/Internals
Total Put/Call 1.02 -4.67%
NYSE Arms 1.01 +36.20%
Volatility(VIX) 13.24 -1.63%
ISE Sentiment 100.0 -5.66%
Futures Spot Prices
Crude Oil 64.39 -.39%
Reformulated Gasoline 210.60 +4.38%
Natural Gas 7.52 +1.25%
Heating Oil 186.57 +1.47%
Gold 679.30 +1.43%
Base Metals 261.10 +.90%
Copper 337.20 +1.73%
Economy
10-year US Treasury Yield 4.65% -1 basis point
US Dollar 82.95 -.24%
CRB Index 316.72 +.94%
Leading Sectors
Coal +5.72%
Gold +1.76%
Semis +1.03%
Lagging Sectors
Banks -.40%
REITs -.50%
Airlines -.57%
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
Oppenheimer:
- Rated (CHB) Buy, target $13.
Afternoon/Evening Headlines
Bloomberg:
- Micron Technology(MU), the largest maker of computer memory chips, reported a second-quarter loss of $52 million. Micron said DRAM dynamics shifted in January and that DRAM and flash prices have stabilized in the last week. The company also said demand strength for flash memory is catching supply. The shares are surging 4% after-hours.
- Crude oil fell .26/bbl. today after Iran’s president said he will release the 15 British hostages and gasoline inventories fell more than estimates.
- Gasoline prices surged 4.4%, the largest increase in two months, as refiners have been very slow to come back online after recent outages, thus leaving utilization at a low 87% and causing gas supplies to fall.
- The US Energy Dept. has rejected the initial bids it received, saying they were too high, in response to a request for as much as 4 million barrels of crude oil for the nation’s Strategic Petroleum Reserve.
- Australian oil companies have been accused of collusion over the raising of petrol prices before Easter. Victorian Treasurer John Brumby says the Australian Competition & Consumer Commission has repeatedly scrutinized the practice and there is definitely collusion.
S&P 500 1,439.37 +.11%
DJIA 12,530.05 +.16%
NASDAQ 2,458.69 +.34%
Russell 2000 810.79 -.12%
Wilshire 5000 14,539.49 +.10%
Russell 1000 Growth 567.70 +.26%
Russell 1000 Value 831.21 -.03%
Morgan Stanley Consumer 709.81 -.03%
Morgan Stanley Cyclical 966.35 -.04%
Morgan Stanley Technology 570.16 +.46%
Transports 4,891.77 -.20%
Utilities 508.23 -.37%
MSCI Emerging Markets 119.55 +.90%
Sentiment/Internals
Total Put/Call 1.02 -4.67%
NYSE Arms 1.01 +36.20%
Volatility(VIX) 13.24 -1.63%
ISE Sentiment 100.0 -5.66%
Futures Spot Prices
Crude Oil 64.39 -.39%
Reformulated Gasoline 210.60 +4.38%
Natural Gas 7.52 +1.25%
Heating Oil 186.57 +1.47%
Gold 679.30 +1.43%
Base Metals 261.10 +.90%
Copper 337.20 +1.73%
Economy
10-year US Treasury Yield 4.65% -1 basis point
US Dollar 82.95 -.24%
CRB Index 316.72 +.94%
Leading Sectors
Coal +5.72%
Gold +1.76%
Semis +1.03%
Lagging Sectors
Banks -.40%
REITs -.50%
Airlines -.57%
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
Oppenheimer:
- Rated (CHB) Buy, target $13.
Afternoon/Evening Headlines
Bloomberg:
- Micron Technology(MU), the largest maker of computer memory chips, reported a second-quarter loss of $52 million. Micron said DRAM dynamics shifted in January and that DRAM and flash prices have stabilized in the last week. The company also said demand strength for flash memory is catching supply. The shares are surging 4% after-hours.
- Crude oil fell .26/bbl. today after Iran’s president said he will release the 15 British hostages and gasoline inventories fell more than estimates.
- Gasoline prices surged 4.4%, the largest increase in two months, as refiners have been very slow to come back online after recent outages, thus leaving utilization at a low 87% and causing gas supplies to fall.
- The US Energy Dept. has rejected the initial bids it received, saying they were too high, in response to a request for as much as 4 million barrels of crude oil for the nation’s Strategic Petroleum Reserve.
- Australian oil companies have been accused of collusion over the raising of petrol prices before Easter. Victorian Treasurer John Brumby says the Australian Competition & Consumer Commission has repeatedly scrutinized the practice and there is definitely collusion.
BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Medical 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 slightly positive today as the advance/decline line finished slightly lower, most sectors gained and volume was above average. Measures of investor anxiety were above average into the close. Today's overall market action was mildly bullish. As has been the case for most of this year, select stocks substantially outperformed the broad market today with gains of 2%-4%. Most of these stocks fall into the mid-cap growth category. The odds of a U.S. recession this year continue to plunge on Intrade.com. There is now only about an 18% chance of one beginning this year, down from a 35% chance in January. Recent action in the 10-year seems to correspond with this. Options traders remain bearish into the recent rally in stocks. Overwhelming skepticism by investors over recent stock advances likely means more short-term gains are in the offing. Given concerns about the economy, I suspect anything but a really bad jobs report on Friday will produce a positive reaction by investors. I expect non-farm payrolls to come in just slightly below estimates of 133,000. Gasoline crack spreads soared 20% today back to very high levels seen during the hurricanes in 2005. This is a short-term positive for refiners and a longer-term negative, in my opinion. Moreover, it is likely just a matter of time before government investigations are launched looking into the circumstances that have produced this situation.
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