BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Telecom longs and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, almost every sector is declining and volume is about average. The Shanghai Composite Index is now up 242% in less than two years. It is up 31% year to date. I continue to believe the bubble in Asian emerging markets remains the most serious threat to the U.S. bull market longer-term. Tractor Supply (TSCO) boosted guidance slightly this morning. I still think long-term estimates are too low and the stock is still cheap at current levels based on my expectations. I am long the stock. While the MBA mortgage applications report was slightly lower, purchase applications rose a healthy 2.7%. There was something for the hawks and the doves in the FOMC minutes. The 10-year yield is moving only 1 basis point higher and the U.S. dollar is rising only slightly on the report. However, stocks are moving to session lows. There was nothing in the minutes that would change my mind regarding my expectations of the Fed remaining on hold throughout the year. I expect economic growth to improve to more average levels and inflation to decelerate further later this year. I expect US stocks to trade modestly higher into the close on short-covering and bargain-hunting.
Wednesday, April 11, 2007
Stocks Lower into Final Hour on Profit-taking, Mixed FOMC Minute Comments
Today's Headlines
Bloomberg:
- CBS News fired an unidentified producer after finding that a video essay was plagiarized from the Wall Street Journal and posted on the network’s Web site, citing CBS spokeswoman Sandra Genelius.
- Former US Senator and actor Fred Dalton Thompson disclosed today that he has indolent lymphoma, a slow-growing form of the cancer.
- Fed Reserve Chairman Bernanke said that a “light regulatory touch” on hedge funds is justified because of the incentives that investors and creditors have to monitor risks.
- Citigroup Inc.(C) and Bank of America(BAC), the two largest US banks will provide $1 billion in fixed-rate, below-market mortgages for predatory-lending victims on the verge of losing their homes, an advocacy group said.
- US aluminum production rose 9.2% in March, according to the Aluminum Assoc.
- Orange-juice futures fell in NY, heading for the biggest weekly drop in 15 months, as rains improved the prospect for next seasons citrus crop in Florida, the biggest US grower of oranges.
- Gasoline futures in NY are rising to an eight-month high, on rising investment fund speculation, as the government reported today that supplies fell more than estimates as refiner utilization remains exceptionally low due to rampant “outages.”
- Federal Reserve officials agreed higher interest rates could still “prove necessary” to control inflation even as they removed a reference in their statement to tighter credit because of increased economic risks.
- Comcast Corp.(CMCSA) CEO Roberts said consumers’ surging appetite for packages of television, telephone and Internet services justifies spending more to keep up with demand.
- ConocoPhillips(COP) CEO Jim Mulva became the first head of a major US oil company to call for federal rules to reduce emissions of so-called greenhouse gases.
- North Korea will start the process of shutting down its main atomic reactor within a day of receiving $25 million in previously frozen funds.
Wall Street Journal:
- Overseas investors quadrupled their ownership stake in big emerging-market companies over five years, citing a Citigroup survey.
- The Bush administration has completed rules requiring motor-fuel refiners to use more renewable fuels including ethanol to reduce dependence on oil imports. The Renewable Fuels Standard, mandated by Congress, requires refiners to use a minimum of 7.5 billion gallons of renewable fuels within 5 years. Officials said it may reduce oil consumption by as much as 3.9 billion gallons and greenhouse gas emissions by as much as 13.1 million metric tons over the same time period.
- The wheels aren’t about to come off at Wells Fargo(WFC), the fourth-biggest US bank, though its shares have taken a dip lately because of the company’s heavy involvement in the subprime mortgage market.
NY Times:
- Retail condominiums are becoming popular investments in major cities with global appeal.
Financial Times:
- Rudy Giuliani, the former mayor of NYC, said he is proposing to cut taxes and reduce the federal government payroll as part of his campaign to win the Republican nomination for US president.
Globe and Mail:
- Onex Corp., Canada’s biggest buyout firm, is considering a joint bid with auto-parts maker Magna International for DaimlerChrysler’s(DCX) Chrysler unit.
Gestion:
- Petroleo Brasileiro SA(PBR), Brazil’s state-run oil and natural-gas company, will join other companies in investing a combined $1 billion in energy exploration in Peru this year.
Interfax:
- Russia is concerned by Iran’s decision to conduct air-defense exercises close to a nuclear reactor that it is building in the Islamic state.
- CBS News fired an unidentified producer after finding that a video essay was plagiarized from the Wall Street Journal and posted on the network’s Web site, citing CBS spokeswoman Sandra Genelius.
- Former US Senator and actor Fred Dalton Thompson disclosed today that he has indolent lymphoma, a slow-growing form of the cancer.
- Fed Reserve Chairman Bernanke said that a “light regulatory touch” on hedge funds is justified because of the incentives that investors and creditors have to monitor risks.
- Citigroup Inc.(C) and Bank of America(BAC), the two largest US banks will provide $1 billion in fixed-rate, below-market mortgages for predatory-lending victims on the verge of losing their homes, an advocacy group said.
- US aluminum production rose 9.2% in March, according to the Aluminum Assoc.
- Orange-juice futures fell in NY, heading for the biggest weekly drop in 15 months, as rains improved the prospect for next seasons citrus crop in Florida, the biggest US grower of oranges.
- Gasoline futures in NY are rising to an eight-month high, on rising investment fund speculation, as the government reported today that supplies fell more than estimates as refiner utilization remains exceptionally low due to rampant “outages.”
- Federal Reserve officials agreed higher interest rates could still “prove necessary” to control inflation even as they removed a reference in their statement to tighter credit because of increased economic risks.
- Comcast Corp.(CMCSA) CEO Roberts said consumers’ surging appetite for packages of television, telephone and Internet services justifies spending more to keep up with demand.
- ConocoPhillips(COP) CEO Jim Mulva became the first head of a major US oil company to call for federal rules to reduce emissions of so-called greenhouse gases.
- North Korea will start the process of shutting down its main atomic reactor within a day of receiving $25 million in previously frozen funds.
Wall Street Journal:
- Overseas investors quadrupled their ownership stake in big emerging-market companies over five years, citing a Citigroup survey.
- The Bush administration has completed rules requiring motor-fuel refiners to use more renewable fuels including ethanol to reduce dependence on oil imports. The Renewable Fuels Standard, mandated by Congress, requires refiners to use a minimum of 7.5 billion gallons of renewable fuels within 5 years. Officials said it may reduce oil consumption by as much as 3.9 billion gallons and greenhouse gas emissions by as much as 13.1 million metric tons over the same time period.
- The wheels aren’t about to come off at Wells Fargo(WFC), the fourth-biggest US bank, though its shares have taken a dip lately because of the company’s heavy involvement in the subprime mortgage market.
NY Times:
- Retail condominiums are becoming popular investments in major cities with global appeal.
Financial Times:
- Rudy Giuliani, the former mayor of NYC, said he is proposing to cut taxes and reduce the federal government payroll as part of his campaign to win the Republican nomination for US president.
Globe and Mail:
- Onex Corp., Canada’s biggest buyout firm, is considering a joint bid with auto-parts maker Magna International for DaimlerChrysler’s(DCX) Chrysler unit.
Gestion:
- Petroleo Brasileiro SA(PBR), Brazil’s state-run oil and natural-gas company, will join other companies in investing a combined $1 billion in energy exploration in Peru this year.
Interfax:
- Russia is concerned by Iran’s decision to conduct air-defense exercises close to a nuclear reactor that it is building in the Islamic state.
Tuesday, April 10, 2007
Wednesday Watch
Late-Night Headlines
Bloomberg:
- The Dow Jones Industrial Average climbed for an eighth consecutive day, its longest streak since March 2003, propelled by improved profit outlooks.
- North Korea will start to implement a nuclear disarmament agreement within 30 days, after a dispute over $25 million of previously frozen funds was resolved yesterday.
- Most Americans expect a recession within a year even though the unemployment rate is at a five-year low, Americans’ net worth is at an all-time high and the DJIA is just off a record high, according to a new Bloomberg/LA Times poll. Nonetheless, 57% said the economy is doing well. 64% of those polled said their own finances are very or fairly secure. “People tend to be pretty optimistic about their own situation, but when it comes to the larger economy they’re much more pessimistic,” said Karlyn Bowman, a polling expert at the American Enterprise Institute in Washington. More than half of Americans expect homes in their neighborhood to hold their value over the next six months. Twice as many respondents said home prices will increase as those who predicted a decline, according to the poll.
- Alcoa(AA), the word’s largest aluminum company, reported its most profitable first-quarter ever as rising metal demand from China and the aerospace industry boosted prices. The stock rose .82 to $35.72 after-hours.
- The yen fell to a record low against the euro as signs of slower corporate spending in Japan raised speculation the interest-rate gap with Europe will widen.
- Chinese Premier Wen Jiabao and Japanese Prime Minister Shinzo Abe will discuss improved ties and environmental and energy issues today as Wen becomes China’s first leader to visit Japan in almost seven years.
- Japan’s machinery orders fell 5.2%, more than expected in February, highlighting concern among manufacturers that growth may slow this year.
- Luxury home prices in London rose at a record monthly pace in March as Russians and Middle Eastern buyers competed for a smaller number of properties with financiers from the City of London, real estate broker Knight Frank said.
- Standard & Poor’s plans in May to begin using a revised rating system for 2,000 high-yield secured loans and bonds that seeks to provide creditors with more detailed estimates of how much they may lose in a bankruptcy.
- LG.Philips LCD Co. led liquid-crystal display maker stocks higher after the company reported a loss that was smaller than some analysts estimated, fueling optimism industry profitability will improve.
Wall Street Journal:
- Nasdaq Stock Market(NDAQ) is in talks to acquire the Philadelphia Stock Exchange as it tries to enter the options-trading market. The Philadelphia exchange, the third-largest US options exchange by contracts traded, could be valued at $250 million to $300 million.
- Media entrepreneur John W. Kluge is expected to donate at least $400 million to Columbia University.
Reuters:
- Thomas H. Lee Partners LP hasn’t decided against increasing its $19 billion bid to acquire broadcaster Clear Channel Communications(CCU) with Bain Capital Partners LP.
Financial Times:
- Deputy finance ministers from the world’s seven leading industrial nations will meet with 20 hedge fund representatives this week to discuss targets for increasing transparency.
- Nielsen Media Research, whose television ratings are used to set advertising prices, will next month release ratings that measure the number of viewers during commercial breaks.
Xinhua News Agency:
- Microsoft Corp.(MSFT) signed agreements to use content from four Chinese Internet companies including Ctrip.com(CTRP) on its Web site in the Asian nation.
China Business News:
- China will scrap trade subsidies that clearly violate World Trade Organization rules, citing the Chinese Commerce Ministry’s director of foreign trade Wang Shouwen.
Late Buy/Sell Recommendations
Citigroup:
- Rated (AKAM) Buy, target $68. Our extensive and proprietary survey of over two dozen Internet content, commerce, software, and ad network companies, including the leading global Internet companies gives us confidence in AKAM’s ability to deliver sustainable revenue growth of 35-45% over the next few years. Three takeaways support our positive thesis: 1)The CDN market is robust and can support multiple players 2)AKAM’s position in Retail, Software, and Online Ad Network verticals is extremely strong 3) Its iTunes deal and exclusive provisioning of CBS’s March Madness, arguably the largest annual streaming event, show AKAM’s differentiation is valued by even the competitive Media & Entertainment segment.
- Reiterated Buy on (JCP), raised target to $114.
- Reiterated Buy on (MNST), target $55.
Piper Jaffray:
- Rated (SAPE) Outperform, target $9.
CSFB:
- AU Optronic’s(AUO) LCD panel shipments exceeded October peak: AU Optronics and Chi Mei Optoelectronics announced their March sales figures. Sales volume has recovered significantly since March. Panel prices have started turning higher in April, and we maintain our view that profitability for the panel makers will rebound from the Jan-Mar lows.
Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.01%.
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
- (BBBY)/.79
- (CBK)/.05
- (DNA)/.67
- (PGR)/.46
- (RI)/.53
Upcoming Splits
- (GEF) 2-for-1
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,700,000 barrels versus a 4,307,000 barrel increase the prior week. Gasoline supplies are expected to fall by -1,400,000 barrels versus a -5,030,000 barrel drawdown the prior week. Distillate inventories are estimated to fall by -850,000 barrels versus a -77,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise .5% versus a .02% increase the prior week.
2:00 am EST
- Minutes of March 21 FOMC Meeting
- The Monthly Budget Deficit for March is estimated to shrink to -$90.0 billion versus -$120.0 billion in February.
Bloomberg:
- The Dow Jones Industrial Average climbed for an eighth consecutive day, its longest streak since March 2003, propelled by improved profit outlooks.
- North Korea will start to implement a nuclear disarmament agreement within 30 days, after a dispute over $25 million of previously frozen funds was resolved yesterday.
- Most Americans expect a recession within a year even though the unemployment rate is at a five-year low, Americans’ net worth is at an all-time high and the DJIA is just off a record high, according to a new Bloomberg/LA Times poll. Nonetheless, 57% said the economy is doing well. 64% of those polled said their own finances are very or fairly secure. “People tend to be pretty optimistic about their own situation, but when it comes to the larger economy they’re much more pessimistic,” said Karlyn Bowman, a polling expert at the American Enterprise Institute in Washington. More than half of Americans expect homes in their neighborhood to hold their value over the next six months. Twice as many respondents said home prices will increase as those who predicted a decline, according to the poll.
- Alcoa(AA), the word’s largest aluminum company, reported its most profitable first-quarter ever as rising metal demand from China and the aerospace industry boosted prices. The stock rose .82 to $35.72 after-hours.
- The yen fell to a record low against the euro as signs of slower corporate spending in Japan raised speculation the interest-rate gap with Europe will widen.
- Chinese Premier Wen Jiabao and Japanese Prime Minister Shinzo Abe will discuss improved ties and environmental and energy issues today as Wen becomes China’s first leader to visit Japan in almost seven years.
- Japan’s machinery orders fell 5.2%, more than expected in February, highlighting concern among manufacturers that growth may slow this year.
- Luxury home prices in London rose at a record monthly pace in March as Russians and Middle Eastern buyers competed for a smaller number of properties with financiers from the City of London, real estate broker Knight Frank said.
- Standard & Poor’s plans in May to begin using a revised rating system for 2,000 high-yield secured loans and bonds that seeks to provide creditors with more detailed estimates of how much they may lose in a bankruptcy.
- LG.Philips LCD Co. led liquid-crystal display maker stocks higher after the company reported a loss that was smaller than some analysts estimated, fueling optimism industry profitability will improve.
Wall Street Journal:
- Nasdaq Stock Market(NDAQ) is in talks to acquire the Philadelphia Stock Exchange as it tries to enter the options-trading market. The Philadelphia exchange, the third-largest US options exchange by contracts traded, could be valued at $250 million to $300 million.
- Media entrepreneur John W. Kluge is expected to donate at least $400 million to Columbia University.
Reuters:
- Thomas H. Lee Partners LP hasn’t decided against increasing its $19 billion bid to acquire broadcaster Clear Channel Communications(CCU) with Bain Capital Partners LP.
Financial Times:
- Deputy finance ministers from the world’s seven leading industrial nations will meet with 20 hedge fund representatives this week to discuss targets for increasing transparency.
- Nielsen Media Research, whose television ratings are used to set advertising prices, will next month release ratings that measure the number of viewers during commercial breaks.
Xinhua News Agency:
- Microsoft Corp.(MSFT) signed agreements to use content from four Chinese Internet companies including Ctrip.com(CTRP) on its Web site in the Asian nation.
China Business News:
- China will scrap trade subsidies that clearly violate World Trade Organization rules, citing the Chinese Commerce Ministry’s director of foreign trade Wang Shouwen.
Late Buy/Sell Recommendations
Citigroup:
- Rated (AKAM) Buy, target $68. Our extensive and proprietary survey of over two dozen Internet content, commerce, software, and ad network companies, including the leading global Internet companies gives us confidence in AKAM’s ability to deliver sustainable revenue growth of 35-45% over the next few years. Three takeaways support our positive thesis: 1)The CDN market is robust and can support multiple players 2)AKAM’s position in Retail, Software, and Online Ad Network verticals is extremely strong 3) Its iTunes deal and exclusive provisioning of CBS’s March Madness, arguably the largest annual streaming event, show AKAM’s differentiation is valued by even the competitive Media & Entertainment segment.
- Reiterated Buy on (JCP), raised target to $114.
- Reiterated Buy on (MNST), target $55.
Piper Jaffray:
- Rated (SAPE) Outperform, target $9.
CSFB:
- AU Optronic’s(AUO) LCD panel shipments exceeded October peak: AU Optronics and Chi Mei Optoelectronics announced their March sales figures. Sales volume has recovered significantly since March. Panel prices have started turning higher in April, and we maintain our view that profitability for the panel makers will rebound from the Jan-Mar lows.
Night Trading
Asian Indices are unch. to +.75% on average.
S&P 500 indicated -.09%.
NASDAQ 100 indicated -.01%.
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
- (BBBY)/.79
- (CBK)/.05
- (DNA)/.67
- (PGR)/.46
- (RI)/.53
Upcoming Splits
- (GEF) 2-for-1
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil build of 1,700,000 barrels versus a 4,307,000 barrel increase the prior week. Gasoline supplies are expected to fall by -1,400,000 barrels versus a -5,030,000 barrel drawdown the prior week. Distillate inventories are estimated to fall by -850,000 barrels versus a -77,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise .5% versus a .02% increase the prior week.
2:00 am EST
- Minutes of March 21 FOMC Meeting
- The Monthly Budget Deficit for March is estimated to shrink to -$90.0 billion versus -$120.0 billion in February.
BOTTOM LINE: Asian indices are higher, boosted by technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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