BETWEEN THE HEDGES

Tuesday, February 12, 2008

Wednesday Watch

Posted by Gary .....at 11:48 PM

Late-Night Headlines
Bloomberg:
- The euro will decline to its lowest level against the US dollar since October over the next three months as the European economy slows and the European Central Bank is forced to reduce its main interest rate, according to Credit Suisse Group.
- US farmers will produce more core per acre in the next decade as improved seed technology boosts yields enough to meet food and fuel needs, even as ethanol consumers about a third of the crop. Yields will rise 13% to 173.3 bushels per acre by 2017, compared with 153 bushels projected for this year, the Dept. of Agriculture said in a report.
- Wheat fell 3.9%, capping the biggest two-day loss since 2003, on speculation that farmers will increase planting.
- The Senate passed legislation to extend the Bush administration’s authority to eavesdrop on suspected terrorists and shield phone companies from privacy lawsuits for cooperating with the program.
- The Genentech Inc.(DNA), the largest US maker of anti-cancer drugs, said its Avastin treatment helped slow the spread of breast tumors in a clinical trial.
- Buffalo Wild Wings Inc.(BWLD) jumped as much as 15% in after-hours trading after the company reported fourth-quarter profit that beat the average estimate of analysts.
- Applied Materials(AMAT), the largest maker of semiconductor-production machines, reported a 35% drop in fiscal first-quarter profit after filling few orders from memory chipmakers. The stock rose 4.6% in after-hours trading.
- Wynn Resorts(WYNN) fell 4.2% in trading after the close following a decline in earnings at its Las Vegas property.
- The International Energy Agency will lower its forecast for global oil demand tomorrow, Executive Director Nobuo Tanaka said.

Wall Street Journal:
- Obama, McCain Sweep In Potomac Primaries.
- Sprint Nextel(S) director Ralph Whitworth may push for the sale of the Nextel network or the whole company.
- Morgan Stanley’s(MS) Jerker Johansson is the leading candidate to become head of UBS AG’s investment banking business.

MarketWatch.com:
- The world oil market is poised to ease over the next two years with production increases offsetting moderate growth in oil demand, the US Energy Information Administration said. Surplus production capacity is projected to grow from the current level of less than 2 million barrels a day to more than 4 million barrels a day by the end of 2009. World oil consumption is expected to grow by 1.4 million barrels a day in 2008, about 200,000 barrels lower than last month’s assessment.

CNBC.com:
- Bernanke Expects Housing Recovery by Year End.
- Apple(AAPL): On The Road(Back) To Respect?
- Long-Term Investing’s Other Benefit: Better Tax Rates.

NY Times:
- Businesses, large and small, will be directly helped by the new economic stimulus legislation passed by Congress last week, But small businesses, in particular, may get the biggest lift indirectly – from consumers spending their tax rebates.

BusinessWeek.com:
- Standard & Poor's expects the S&P 500 to post a 23.2% decline in earnings for the 2007 fourth quarter. But, excluding the financial sector, S&P projects a 13.7% gain in earnings.

CNNMoney.com:
- Despite widespread public perception that speculative investing is to blame for high oil prices, big investors distanced themselves from it Tuesday, saying the recent run up has more to do with strong demand, tight supply, and a desire to diversify instead of trading momentum. “It’s pure speculation,” longtime Oppenheimer oil analyst Fadel Gheit said recently.
- Berkshire Hathaway’s(BRK/A) offer to the troubled bond insurers is presented as a rescue, but its terms may be too tough for the companies’ shareholders to accept.

SmartMoney.com:
- Microsoft’s(MSFT) Drop Offers Tempting Entry Point.

Portfolio.com
- Why Google(GOOG) Might Want a Microsoft(MSFT)-Yahoo(YHOO) Merger.
- Illumina(ILMN) C.E.O. Jay Flatley is moving fast to outmaneuver rivals in a futuristic industry that stands to make billions of dollars off your DNA.

IBD:
- Sharp Steepening Of Yield Curve Shows Means To Refuel Growth.
- Chipmaker Nvidia(NVDA) Makes A Big Leap Into Smart Phones.

USA Today.com:
- Fed lends banks another $30 billion to keep credit flowing.

Reuters:
- Carrie McCabe, among the most prominent women executives in the hedge fund industry, is launching a new hedge fund investment firm backed by General Electric’s(GE) asset management division.
- Venezuela halts oil supplies to Exxon Mobil(XOM).

Late Buy/Sell Recommendations
Citigroup:
- Maintained Buy on (GME), target $65.
- Reiterated Buy on (HS), target $29.
- Maintained Buy on (MCD), target $64.
- Reiterated Buy on (GM), target $35.
- Maintained Buy on (AMAT), raised target to $26.
- Reiterated Buy on (TWTC), target $25.

Night Trading
Asian Indices are -.5% to +1.75% on average.
S&P 500 futures -.30%.
NASDAQ 100 futures -.14%.

Morning Preview
US AM Market Call
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Earnings of Note
Company/EPS Estimate
- (KO)/.55
- (DE)/.78
- (GBE)/.22
- (MTG)/-8.13
- (JNY)/.06
- (DTV)/.29
- (GENZ)/.92
- (DF)/.30
- (PFCB)/.31
- (FSLR)/.53
- (VCLK)/.18
- (A)/.41
- (BYI)/.39
- (NTAP)/.34
- (CAR)/.18
- (VMC)/1.09
- (MHK)/1.53
- (AAP)/.38
- (BIDU)/4.98
- (CLB)/1.35
- (NVDA)/.47
- (IM)/.14
- (TIE)/.30
- (JASO)/.13

Upcoming Splits
- (WGOV) 2-for-1

Economic Releases
8:30 am EST
- Advance Retail Sales for January are estimated to fall .3% versus a .4% decline in December.
- Retail Sales Less Autos for January are estimated to rise .2% versus a .4% decline in December.

10:00 am EST
- Business Inventories for December are estimated to rise .5% versus a .4% gain in November.

Other Potential Market Movers
- The weekly EIA energy inventory data, weekly MBA Mortgage Applications report, BB&T Transports Conference, Merrill Insurance Investors Conference, Citigroup Retail Conference, BIO CEO & Investor Conference, Lehman Industrial Select Conference, Deutsche Bank Small/Mid-cap Growth Conference and UBS Global Healthcare Services Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by shippling and commodity stocks 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 Higher, Boosted by REIT, Insurance, Telecom, Healthcare, Bank Shares

Posted by Gary .....at 4:25 PM

Evening Review
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Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play

Stocks Higher into Final Hour on Short-Covering, Lower Energy Prices, Bernanke Comments

Posted by Gary .....at 3:13 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Gaming longs, Software longs, Semi longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 4.8% today, but remains high at 26.3. The ISE Sentiment Index is a very low 80.0 and the total put/call is an above-average 1.06. The JPMorgan G-7 Currency Vix is falling 4% today and appears to be rolling over, which is also positive. Fed Chairman Bernanke said earlier today that inflation won’t prevent any needed cuts and that he is “ready to move if he needs to move.” He was also “very upbeat” about the prospects for avoiding recession. He said he sees very slow growth this quarter and just slow growth next quarter, before growth picks up in the second-half of the year. Fed fund futures now imply an 82% chance for a 50 basis point rate cut at the upcoming meeting and an 18% chance for a 75 basis point cut. It may just be profit-taking, but today’s oil/gold weakness is noteworthy considering emerging market stock gains and US dollar weakness. Many investors are worried about how much Shanghai re-opens lower tonight after its holiday break. This could be one of the reasons for today’s commodity weakness and above-average investor angst readings, despite nice stock gains. I still sense very few investors believe the lows for the major averages are in, which is a large positive. One of my longs, Nuance Communications(NUAN) is jumping 13% today on large volume after reporting solid 1Q results and boosting 2Q revenue guidance. I plan to add to this long position on any meaningful pullback from current levels and still see significant upside in the shares over the intermediate-term. The only real negative I see in today’s action is the relative weakness in some large-cap leaders. However, many of these stocks have posted pretty good gains over the last few days so I am not reading too much into it at this point. Nikkei futures indicate an +230 open in Japan and DAX futures indicate a +13 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, lower energy prices, constructive Fed comments and short-covering.

Today's Headlines

Posted by Gary .....at 2:05 PM

Bloomberg:
- Billionaire investor Warren Buffett said he offered to shore up $800 billion of municipal bonds guaranteed by troubled MBIA Inc.(MBI), Ambac Financial(ABK) and FGIC Corp. in a bid to gain 33% of the debt insurance market.
- Bank of America(BAC), Citigroup(C) and four other US lenders agreed with Treasury Secretary Henry Paulson to take new steps to help borrowers in danger of foreclosure stay in their homes.
- Bill Miller Says Microsoft(MSFT) Will Need to ‘Enhance’ Yahoo(YHOO) Offer.
- Boeing Co.(BA), the world’s second-biggest maker of commercial aircraft, said its planes may be flying on a mix of biofuel and jet kerosene within five years. A Virgin Atlantic Airways Ltd. Boeing 747 is scheduled to make the first biofuel-powered test flight for a commercial plane later this month. Boeing is focusing on so-called second-generation biofuels such as algae, oil from Babassu nuts and the hardy Jatropha bush.
- Genworth Financial(GNW), the insurer divested by GE, expects its US mortgage insurance business to rebound next year.
- AIG(AIG) Credit-Default Swap Losses Won’t Be ‘Material’.
- Monsanto Co.(MON), the world’s biggest seed producer, raised its 2008 profit forecast because of demand for week killer and genetically modified corn and soybeans.
- Julius Baer Group rose the most in 10 days in Zurich trading on speculation that Goldman Sachs(GS) may be interested in taking over Switzerland’s biggest independent money manager.
- Legg Mason Capital Management raised its stake in Countrywide Financial(CFC), the biggest US mortgage lender, to 15% and said it hasn’t decided whether to vote for Bank of America’s(BAC) $4 billion takeover.
- Nuance Communications(NUAN), the biggest maker of speech-recognition software, surged the most in a year after forecasting second-quarter sales that beat estimates on rising demand for its mobile-phone products.
- Nokia(NOK) will offer Google’s(GOOG) search engine on some handsets and will work with Orange SA to promote its Internet services and boost sales of devices with Web access.
- Danish police arrested three suspects in an alleged plot to murder one of 12 cartoonists whose caricatures of the Prophet Muhammad in 2005 sparked riots in Muslim communities around the world.
- Citigroup(C) has never been held in such low esteem by debt investors, and that’s why Prince Alwaleed bin Talal isn’t the only one in love with the bank whose looks are deceiving.

Wall Street Journal:
- H&R Block(HRB) Seen by Some as Well on Road to Recovery.

NY Times:
- US Immigration Rules Eased to Cope With Backlog.
- More Hedge Funds Likely to Fail as Losses Mount.

ZDNet:
- Google ‘Android’ Phones Debut at Barcelona Show.

news-journalonline.com:
- Officials tout alternative fuel to aid state farmers.

NY Sun:
- Applications for admission skyrocket at NYU.
- Quinn to Propose Incentive Pay for Some Teachers.

Washington Post:
- The European Union may fingerprint foreign travelers arriving and leaving the area and transfer the information to databases that could be shared with friendly nations.

Reuters:
- America Movil SAB, the biggest mobile-phone carrier in Latin America, will make videos from Google’s(GOOG) YouTube Web site available on its phones.
- Alternative investments firm First Avenue Partners said on Monday it planned to raise up to $750 million for a portfolio that will invest with start-up hedge funds, as well as funds that have seen heavy outflows.

Financial Times:
- Hedge funds investing in emerging markets pick London as their domicile more often than any other location, citing Hedge Fund Research. According to Hedge Fund Research, there are more than 950 hedge funds specializing in emerging markets, with a total of $110 billion under management.

YLE TV:
- Nokia(NOK) phones are being rejected by Germans following the announcement that the company would close its factory in the German town of Bochum. Nokia has also lost favor with consumers interviewed in market surveys, citing research firm Psychonomics AG.

El Universal:
- Supporters of Venezuelan President Hugo Chavez asked federal investigators to examine programming at privately-owned news channel Globovision, which they say has “slandered” the president.

Xinhua:
- China’s natural gas output rose 23% to 69.3 billion cubic meters in 2007, citing the China Petroleum and Chemical Industry Association. Production in 2008 may reach 76 billion cubic meters.

Bear Radar

Posted by Gary .....at 1:30 PM

Style Underperformer:

Mid-cap Growth +.57%

Sector Underperformers:

Coal (-3.08%), Gold (-1.81%) and Airlines (+.03%)

Stocks Falling on Unusual Volume:

DY, MAS, ZOLT, CYNO, HWAY, VRTX, BRKS, EXPD, WINN and ANR