BETWEEN THE HEDGES

Wednesday, July 25, 2007

Thursday Watch

Posted by Gary .....at 10:54 PM

Late-Night Headlines
Bloomberg:
- South Korea’s won is “overshooting” and poised to drop from its strongest since 1997 because the nation’s current account surplus is shrinking, Deputy Finance Minster Kim Sung Jin said.
- The US dollar traded near the strongest in more than two weeks against the euro on speculation the world’s biggest economy can withstand rising mortgage defaults.
- Shares of Nintendo Co. rose to a record, bringing the company’s market value to $71 billion, after the maker of the top-selling Wii console raised its earnings forecast on demand for the console and game titles.
- New Zealand’s central bank raised its benchmark interest rate to a record 8.25% and said borrowing costs may be high enough to contain inflation, triggering a decline in the nation’s currency.

Wall Street Journal:
- Verizon Wireless(VZ) will back some rules for an auction of US airwaves that would force the winner to open its network to all devices, reversing its current stance.
- The European Union may restrict Chinese imports if China’s regulators don’t take firm steps to raise manufacturing standards, citing Meglena Kuneva, the EU consumer-safety commissioner.
- Political Ads Stage a Comeback in Newspapers.

AppleInsider:
- Notes of interest from Apple’s(AAPL) Q307 quarterly conference call.

Commercial Times:
- Taiwan’s debt rating may be downgraded by S&P on concern about the island’s budget deficit, citing an internal study by the credit rating company.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (TSCO), target $65.
- Reiterated Buy on (PSYS), $49.

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 futures +.23%.
NASDAQ 100 futures +.52%.

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Earnings of Note
Company/EPS Estimate
- (MMM)/1.17
- (AET)/.80
- (AAI)/.36
- (ALK)/1.24
- (AYE)/.30
- (ABC)/.62
- (AMGN)/1.06
- (APA)/1.91
- (AN)/.42
- (AVID)/.16
- (BZH)/.16
- (BDX)/.93
- (BDC)/.70
- (BDK)/1.73
- (BWA)/1.29
- (BMY)/.37
- (CELG)/.23
- (CMCSA)/.19
- (CROX)/.44
- (CMI)/1.58
- (CYMI)/.51
- (DECK)/.11
- (DLX)/.56
- (DRIV)/.36
- (DOW)/1.05
- (DHI)/-.34
- (XOM)/1.96
- (FSS)/.26
- (FII)/.54
- (F)/-.37
- (GR)/.84
- (GT)/.30
- (IM)/.36
- (ICE)/.76
- (K)/.70
- (KLAC)/.86
- (LLL)/1.44
- (LVLT)/-.12
- (LYO)/1.26
- (MBI)/1.52
- (MFE)/.37
- (MCK)/.72
- (ODP)/.43
- (OSI)/.40
- (QLGC)/.19
- (RTN)/.68
- (RVBD)/.12
- (RCL)/.59
- (SPF)/-.34
- (TDW)/1.63
- (TRV)/1.49
- (VSEA)/.66
- (VRSN)/.25
- (WEN)/.33
- (WDC)/.36
- (XMSR)/-.44

Upcoming Splits
- (DIOD) 3-for-2
- (GMCR) 3-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for June are estimated to rise 1.9% versus a -2.8% decline in May.
- Durables Ex Transports for June are estimated to rise .6% versus a -1.0% decline in May.
- Initial Jobless Claims for last week are estimated to rise to 310K versus 301K prior.
- Continuing Claims are estimated to fall to 2543K versus 2571K prior.

10:00 am EST
- New Home Sales for June are estimated to fall to 890K versus 915K in May.

Other Potential Market Movers
- The weekly EIA natural gas inventory data, (MSFT) Analyst Meeting, (AMD) Technology Analyst Day and Morgan Keegan Insurance Conference could also impact trading today.

BOTTOM LINE: Asian indices are mixed, as weakness in mining shares is offsetting strength in technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Finish Higher on Earnings Optimism and Stability in Financial Shares

Posted by Gary .....at 5:40 PM

Indices
S&P 500 1,518.09 +.47%
DJIA 13,785.07 +.50%
NASDAQ 2,648.17 +.31%
Russell 2000 812.50 +.08%
Wilshire 5000 15,248.40 +.33%
Russell 1000 Growth 608.06 +.23%
Russell 1000 Value 855.10 +.51%
Morgan Stanley Consumer 728.18 +.21%
Morgan Stanley Cyclical 1,078.42 -.92%
Morgan Stanley Technology 652.17 +1.52%
Transports 5,231.96 -.63%
Utilities 497.89 +.21%
MSCI Emerging Markets 140.35 -.50%

Sentiment/Internals
Total Put/Call 1.04 -26.76%
NYSE Arms .82 -48.06%
Volatility(VIX) 18.10 -2.43%
ISE Sentiment 113.0 +.89%

Futures Spot Prices
Crude Oil 76.08 +3.43%
Reformulated Gasoline 209.10 +2.11%
Natural Gas 5.98 +2.11%
Heating Oil 206.80 +1.83%
Gold 675.10 -1.42%
Base Metals 260.25 -2.18%
Copper 357.0 -1.37%

Economy
10-year US Treasury Yield 4.90% -1 basis point
US Dollar 80.62 +.67%
CRB Index 319.13 +.39%

Leading Sectors
Biotech +1.68%
Energy +1.64%
Insurance +1.59%

Lagging Sectors
Coal -1.47%
Papers -1.61%
Gold -1.75%

Evening Review
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In Play

Afternoon Recommendations
Citigroup:
- Added (WLP) to Conviction Buy list.

Afternoon/Evening Headlines
Bloomberg:
- WSI Corp., a weather-forecasting company, reduced the number of hurricanes it’s predicting this year because of cooler-than-expected water temperatures in the North Atlantic.
- The Canadian dollar fell the most in almost a month amid a strengthening US dollar and weaker base metal prices.
- Apple Inc.(AAPL) said third-quarter profit soared 73% on record orders for its Macintosh notebook computers. The shares are +10 to $147.26 in after-hours trading.
- The Fed’s Beige Book said today that ‘capital spending increased,’ ‘manufacturing continued to expand,’ ‘employment increased in most regions,’ and the ‘commercial real estate market was generally more active.”
- Baidu.com(BIDU) said total revenues in the second quarter increased 109.4% to $52.7 million. The stock soared 18.2% in after-hours trading.
- Symantec Corp.(SYMC) reported profit and sales that beat analysts’ estimates after orders from consumers rose. The shares jumped 11.2% in extended trading.
- Akamai Technologies(AKAM) said second-quarter profit almost doubled as customers upgraded Web sites to carry more video. The shares declined 9% in after-hours trading after profit margins and new customers fell short of forecasts.

GlobeSt.com:
- GE Real Estate bought nine suburban Chicago properties from Blackstone Group LP for $1 billion, then immediately sold one of the buildings to Keystone Property Group.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Computer longs, I-Banking longs and Software longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly negative today as the advance/decline line finished mildly lower, sector performance was mixed and volume was heavy. Measures of investor anxiety were above average into the close. Today's overall market action was neutral. The broker/dealers outperformed today, with Goldman Sachs (GS) finishing near session highs, which is a big positive. Overall trading, however, was sloppy throughout the day, with little conviction being displayed in the broad market. A number of sectors were down, as well. Cyclical shares were especially weak with the MS Cyclical Index dropping 0.73%. I will closely monitor the market’s reaction to earnings reports and economic data tomorrow morning before shifting market exposure. I still think the major averages are consolidating recent gains before another substantial surge higher later this quarter.

Stocks Slightly Higher into Final Hour on Rebound in Broker/Dealers and Positive Earnings

Posted by Gary .....at 3:00 PM

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Computer longs, I-Banking longs and Software longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is mildly negative today as the advance/decline line is slightly lower, sector performance is mixed and volume is above-average. My intraday gauge of investor angst is at an above average level. The broker/dealers are displaying some relative strength today, which is a big positive. However, overall trading feels sloppy and buying is still being restrained by lingering credit worries. It seems that time and more data are needed to alleviate this uncertainty and allow stocks to lift with conviction. I expect US stocks to trade mixed into the close from current levels as profit-taking and higher energy prices offset bargain-hunting and short-covering.

Today's Headlines

Posted by Gary .....at 2:56 PM

Bloomberg:
- European Central Bank President Jean-Claude Trichet said the global economy is growing strongly and that recent financial market corrections are “healthy.”
- The Commodity Futures Trading Commission charged Amaranth Advisors LLC with trying to manipulate US natural gas prices and sought to permanently block the hedge fund’s access to all US commodity markets. The injunction extends to Amaranth’s former head of trading, Brian Hunter.
- Chrysler’s sale to Cerberus Capital Management LP will be completed after banks agreed to keep $10 billion of loans that investors refused to buy.
- The IMF raised its forecast for world economic growth to more than 5% for this year and next.
- Crude oil rose the most in more than nine weeks in NY after the US government reported a third straight weekly decline in oil inventories and increased refinery operations.
- Gold is falling from an 11-week high in NY as the US dollar gained the most against the euro in almost five months, eroding the metal’s appeal as an alternative investment.

Wall Street Journal:
- US states are blocking construction of coal-fired plants because of concerns that conventional plants pollute too much and installing cleaner equipment would be too expensive.
- Congress would be unwise to raise taxes on profit at private-equity firms, Steve Forbes wrote.
- Intel Corp.(INTC) made a silicon modulator that can erode data onto a beam of light and transmit it at a rate of 40 billion bits per second, or gigabits, citing researchers at the company.

NY Times:
- US women are the fastest-expanding customer base in the motorcycle industry and Harley-Davidson(HDI) is taking notice.
- Two staff members of NY Democratic Governor Eliot Spitzer refuse to be interviewed by the state attorney general’s office about attempts to use state police to gather information on Senate Majority Leader Joseph Bruno.
- IBM(IBM) will today announce a new employee program that allows workers to create 401k-like accounts to be used for training and education purposes.

Hollywood Reporter:
- Microsoft Corp.(MSFT) will cut the price of the Xbox 360 video-game console by $50 on Aug. 8.

Platts:
- Most supertanker owners aren’t making a profit when they hire out vessels because of lower rental rates and higher refueling costs, citing owners. “A majority of ship owners” are losing “lots of money,” Andrew Bonnington, managing editor of Platts Marine Alert, said.

AP:
- Paula Zahn is leaving Time Warner’s(TWX) CNN and turning her prime-time show over to Campbell Brown.

S&P Leveraged & Commentary Data:
- ServiceMaster(SVM) raised $4.45 billion of debt to finance its buyout by Clayton Dubilier & Rice.

China Central TV:
- China’s State Council, the cabinet, will set up a special committee to supervise food safety.

Existing Home Sales Fall

Posted by Gary .....at 10:16 AM

- Existing Home Sales for June fell to 5.75M versus estimates of 5.86M and 5.98M in May.

BOTTOM LINE: Sales of previously owned homes in the US fell in May, Bloomberg said. At the current sales pace, inventories rose to 8.9 months’ worth versus 8.4 months’ worth in April. Purchases fell 3.4% in the South and .8% in the West. They rose 5.8% in the Northeast and .7% in the Midwest. I continue to believe housing sales are in the process of stabilizing at relatively high levels and that new home construction will remain muted as homebuilders work down inventories.