Style Underperformer:
Small-cap Value -.55%
Sector Underperformers:
Banks (-2.29%), I-Banks (-2.28%) and Road & Rail (-1.99%)
Stocks Falling on Unusual Volume:
CCC, GWR, PJC, UNP, WB, CINF, INFN, CDNS, SMTC,
Stocks With Unusual Put Option Activity:
1) RF 2) CTXS 3) ALL 4) CCL 5) IPI
- The Current Account Deficit for 1Q widened to -$176.4 billion versus estimates of -$172.5 billion and -$167.2 billion in 4Q.
- The Producer Price Index for May rose 1.4% versus estimates of a 1.0% increase and a .2% gain in April.
- The PPI Ex Food & Energy for May rose .2% versus estimates of a .2% increase and a .4% gain in April.
- Housing Starts for May fell to 975K versus estimates of 980K and 1008K in April.
- Building Permits for May fell to 969K versus estimates of 960K and 982K in April.
- Industrial Production for May fell .2% versus estimates of a .1% gain and a .7% decline in April.
- Capacity Utilization for May fell to 79.4% versus estimates of 79.7% and 79.6% in April.
BOTTOM LINE: Prices paid to US producers rose more than forecast in May as fuel and food costs climbed, Bloomberg reported. The PPI is rising at a 7.2% rate year-over-year versus the 20-year average of 2.4%. This is also up from a 6.9% rate in September 2005. Core prices rose 3.0% year-over-year versus the 20-year average of 1.8%. This is also up from a 2.9% rate in July 2005. Producers paid 9.3% more for gasoline, the biggest increase since November, and diesel fuel costs jumped 11.2%. Natural gas prices rose 5.7% for the prior month. Passenger car prices fell 1% and light truck prices dropped .9%. Capital equipment costs rose .1%. “Thus far, the pass-through of high raw materials costs to the prices of most other products and to domestic labor costs has been limited, in part because of softening domestic demand,” Fed Chairman Bernanke recently said. The 10-year TIPS spread, a good gauge of long-term inflation expectations, is down 4 basis points today to 2.52%. This is down 16 basis points from a 52-week high of 2.68% on March 13th. I still believe inflation fears have peaked and gauges will show a meaningful deceleration later this year. All that is separating us from talk of disinflation is a bursting of the current commodity bubble.
Builders in the
Style Outperformer:
Mid-cap Growth (+.24%)
Sector Outperformers:
Steel (+2.23%), Airlines (+1.83%) and Energy (+1.64%)
Stocks Rising on Unusual Volume:
GRT, SHLD, MEOH, CRK, SQM, ASMI, MENT, OCNF, CSIQ, TITN, DRYS, SAFM, AIMC, BOLT, XTRX, MALL, CPHD, CYBX, SPIR, TBSI, SOLF, RIMM, TEVA, SBLK, ELN, WYE and TWI
Stocks With Unusual Call Option Activity:
1) BBI 2) BBY 3) CREE 4) LULU 5) WYE
Late-Night Headlines
Bloomberg:
- CME Group Inc.(CME), the world’s largest futures exchange, received Dept. of Justice approval for its planned acquisition of the New York Mercantile Exchange.
- Crude oil extended its decline from the record $139.89/bbl. reached in NY yesterday on signs Saudi Arabia will increase production to stabilize prices.
- Samuel Israel, the convicted co-founder of bankrupt hedge fund firm Bayou Group LLC, was declared a fugitive by US authorities who dismissed the possibility that he killed himself by jumping off a bridge.
- Andy Lipow, president of Lipow Oil Associates LLC says oil may fall as much as $30/bbl. on Fed rate hikes.
- The cost of protecting the bonds of Lehman Brothers(LEH) from default fell after the fourth-largest US securities firm cut its mortgage holdings by 20%. The credit-default swaps dropped 5 basis points to 260 basis points, according to broker Phoenix Partners Group.
- Ryan Lentell, an analyst at Morningstar Inc.(MORN), says Lehman(LEH) has a ‘very strong’ balance sheet. (video)
- Citigroup Inc.(C), Bank of America(BAC) and other leading US mortgage lenders agreed to expand efforts to help borrowers avert foreclosures as the Senate prepares to weigh legislation addressing the housing crisis.
- General Motors Corp.(GM) returned to full production today for the first time since a three-month strike at its biggest axle supplier shut or partially idled about 30 North American plants.
- Australia’s central bank said interest-rate increases this year that have taken borrowing costs to a 12-year high may be enough to cool demand that has driven inflation to the highest since 1991.
- Toshiba Corp., Japan’s largest chipmaker, said it will reduce flash-memory chip production at some of its older manufacturing lines by 40% to cut costs.
Wall Street Journal:
- The hedge-fund business – among the most reliable fortune-producing machines in recent years – is going through a brutal shakeout.
CNBC.com:
- Telecommuting Picking Up As Gasoline Prices Soar.
CNNMoney.com:
- Honda hits the hydrogen highway. The FCX Clarity fuel cell car is now available in California.
- America’s 100 fastest-growing small public companies.
Reuters:
- Hedge funds attracted $2.6 billion in net new money during the first quarter, marking an 81 percent drop from what they pulled in during the fourth quarter, data released on Monday showed. During the first quarter, the largest hedge fund inflows went to managers betting on big events like mergers or interest rate moves, currency fluctuations and commodity price swings.
Financial Times:
- Goldman Sachs(GS) is close to finalizing a plan to restructure a $7 billion investment vehicle formerly run by London-based hedge fund Cheyne Capital, in a move that could potentially usher in a crucial new phase in the credit turmoil. The US bank’s proposed reorganization of the so-called structured investment vehicle is set to be just the first of a number of deals that could see about $18 billion worth of SIV assets restructured in the coming months.
- Call to tear up ‘offset’ CDS contracts.
- Financial markets are in danger of getting carried away with their expectations for Federal Reserve interest rate increases, some senior Fed officials believe. They do not dispute that the next move in US interest rates is very likely to be up. But they feel the market may be pricing in too much tightening too soon.
Late Buy/Sell Recommendations
Citigroup:
- Upgraded (CME) to Buy, target $485.
- Reiterated Buy on (ADBE), target $50.
CSFB:
- Reiterated Outperform on (CME), target $685.
Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 futures +.01%.
NASDAQ 100 futures -.06%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (BBY)/.37
- (FDS)/.63
- (GS)/3.42
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- The Current Account Deficit for 1Q is estimated at -$172.5 billion versus -$172.9 billion in 4Q.
- The Producer Price Index for May is estimated to rise 1.0% versus a .2% gain in April.
- The PPI Ex Food & Energy for May is estimated to rise .2% versus a .4% gain in April.
- Housing Starts for May are estimated to fall to 980K versus 1032K in April.
- Building Permits for May are estimated to fall to 960K versus 982K in April.
9:15 am EST
- Industrial Production for May is estimated to rise .1% versus a -.7% decline in April.
- Capacity Utilization for May is estimated at 79.7% versus 79.7% in April.
Other Potential Market Movers
- The weekly retail sales reports, (FSL) analyst meeting, (MAT) analyst conference, (WTM) investor meeting, (ACXM) investor day, CSFB Global Nanotech Conference, William Blair Growth Stock Conference, BIO International Convention, Merrill Lynch Transport Conference, could also impact trading today.