Style Outperformer:
Large-Cap Growth (+.34%)
Sector Outperformers:
Oil Service (+1.43%), Networking (+1.43%) and HMOs (+1.28%)
Stocks Rising on Unusual Volume:
USMO, TSRA, TSL, NIHD, SLB, FCX, PUK, HBC, BAC, ICTG, SYKE, HELE, PLCM, GPRO, USMO, FWRD, SSRX, ACIW, COST, BJRI, MNRO, VCLK, PERY, BIDU, BARE, GLNG, TRGT, IDCC, TLB, AYI, SIG, HIT, FDO, YPF, VQ and STJ
Stocks With Unusual Call Option Activity:
1) CTAS 2) VCLK 3) IDCC 4) SYMC 5) COST
Wednesday, October 07, 2009
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Tuesday, October 06, 2009
Wednesday Watch
Late-Night Headlines
Bloomberg:
- The global recovery in stock markets will stretch into 2010 as people try to make more money than they can from cash and government bonds, according to the investment chief of Scotland’s largest money manager. “There is a wall of cash out there seeking income-earning assets,” Anne Richards, who oversees 129 billion pounds ($207 billion) at Aberdeen Asset Management Plc, said in an interview at the company’s offices in Edinburgh. “That wall of money will be supportive into next year.” American investors hold $3.5 trillion in cash, a higher proportion of the net assets of the companies in the S&P 500 Index than at the peak of the market in 2007, according to data compiled by the Investment Company Institute in Washington and Bloomberg as of Sept. 28. At the same time, interest rates worldwide are at or near record lows. The U.S. Federal Reserve cut its rate in December to between zero and 0.25 percent.
- A derivatives overhaul measure in the House may leave “regulatory gaps” and “inadvertently weaken” the Securities and Exchange Commission’s power to police fraud and manipulation of swaps transactions, an SEC official said. “Certain aspects of the discussion draft could unintentionally preserve existing regulatory gaps,” Henry T.C. Hu, director of the SEC’s new division of risk, strategy and financial innovation, said of the legislation proposed Oct. 2 by House Financial Services Committee Chairman Barney Frank. While Frank’s proposal is a “step in the right direction,” its “ambiguous” definition of risk management may leave a large number of corporations unregulated, Hu said. The draft by Frank, a Massachusetts Democrat, would ease trading and clearing requirements for derivatives dealers such as Morgan Stanley(MS) and Goldman Sachs Group Inc.(GS), compared with the administration’s proposal. “It is clearly the weakest of all the proposals I’ve seen to date,” said Christopher Whalen, managing director of Institutional Risk Analytics in
- Concerns about the federal budget deficit may thwart efforts by Senate Democrats to pass legislation this month calling for the biggest expansion of the U.S. health-care system since Medicare’s creation in 1965. The Senate Finance Committee, which had planned to approve its version of a health-care bill as early as today, scrapped a vote to give the Congressional Budget Office time to complete a cost assessment. The delay threatens to dash plans by Senate Majority Leader Harry Reid to start debate in the full Senate next week after combining the measure with one from the chamber’s health committee. “CBO has a lot of work to do,” said West Virginia Senator Jay Rockefeller, one of the finance panel’s 13 Democrats. He said the panel’s vote may be delayed for at least a week. Further clouding the timetable, a group of eight Democrats whose votes could be key to passage called on Reid, a Nevada Democrat, to delay final votes on the measure until the CBO estimates the full cost and the public has 72 hours to review it. Among the signatories were Blanche Lincoln of
- Microsoft Corp.(MSFT) CEO Steve Ballmer told Sky News that the economy has “reset to a lower level” and said he thought it will follow a “gradual growth path.”
- Verisk Analytics Inc., the supplier of actuarial data co-owned by insurers including Travelers Cos. and CNA Financial Corp., raised $1.88 billion in an initial public offering, the biggest U.S. IPO since Visa Inc. in 2008. Verisk sold about 85.3 million shares for $22 a share, according to Bloomberg data. The Jersey City, New Jersey-based company had said it would sell shares at $19 to $21 apiece.
- North Korea said dismantling the regime’s nuclear weapons is “unthinkable even in a dream,” while signaling a readiness to return to disarmament talks with the U.S., China, Russia, South Korea and Japan. The government in Pyongyang won’t give up its nuclear weapons unless the U.S. completely disarms, according to a statement by the Foreign Ministry sent in a letter to the United Nations Security Council by North Korean Ambassador Sin Son Ho.
Wall Street Journal:
- Fannie Mae and Freddie Mac are preparing to introduce a program aimed at helping independent mortgage banks acquire the short-term credit they need to make home loans, according to people familiar with the plans. The two government-backed mortgage companies, the main providers of funding for
- Attorney General Eric Holder credited counterterrorism tactics put in place in recent years for the federal arrests in Denver and New York that investigators say pre-empted a bombing plot by an alleged al Qaeda operative. Mr. Holder said Tuesday during a briefing with reporters that the arrest of Najibullah Zazi, a 24-year-old
- The other night, House Speaker Nancy Pelosi went after the commander of
CNNMoney.com:
- Beware the gold bubble. The run-up in price to more than $1,000 an ounce has investors excited. But market fundamentals point to a decline.
Politico:
- More than half of the Democrats in the House have signed on to a letter denouncing a key element of the Senate Finance Committee’s health care legislation as labor unions draw a line in the sand on paying for reform. The Democrats are attacking a plan to finance expanded health care by taxing expensive health insurance plans. The plan, sometimes cast as a tax on “Cadillac” plans, would in fact include the health care plans of many public employees and union members and has triggered a revolt from Obama’s labor supporters and their many allies on the Hill. The letter from 154 House Democrats to Speaker Nancy Pelosi urges her “to reject proposals to enact an excise tax on high-cost insurance plans that could be potentially passed on to middle-class families.”
- Despite the embarrassing rejection of his effort to lure the 2016 Olympic Games to his hometown of Chicago, President Barack Obama will keep the first-ever White House Olympic Office, POLITICO has learned. The White House stressed that the office, officially called the White House Office of Olympic, Paralympic and Youth Sport, is permanent and has purposes other than helping
- The Securities and Exchange Commission has opened a probe into whether the largest hospital company in the world, Hospital Corporation of America, violated securities law by manipulating its books and records, according to documents and people familiar with the investigation. The investigation has been focusing, at least in part, on HCA's
The Business Insider:
- Chart of the Day: Google(GOOG) Set To Dominate Mobile Advertising.
- U.S. consumers got good news Tuesday: Winter heating bills will drop an average of 8% nationwide from last year given cheaper fuel prices and expectations for milder weather. The Energy Information Administration, the forecasting arm of the Energy Department, said the average household will save $84 on heating bills this winter and pay $960 for the season, which runs through March.
Reuters:
- Bank of America Corp's (BAC) board has narrowed the list of company candidates to replace retiring chief executive Kenneth Lewis to the bank's chief risk officer and its consumer and small-business banking chief, The Wall Street Journal reported on its website on Tuesday.
- A U.S. Federal Reserve official said on Tuesday that while the U.S. economy is clearly rebounding, it is too soon to begin to withdraw the Federal Reserve's massive support. "I see nothing that conflicts with the widely held opinion that we are in recovery," Kansas City Fed President Thomas Hoenig said in remarks prepared for delivery to an economic conference. "I would not support a tight monetary policy in the current environment," Hoenig said.
- Citigroup (C) is working on a sale of its controversial commodities unit Phibro in a move that could raise hundreds of millions of dollars, the FT reported on Wednesday citing people close to the situation.
Nikkei English News:
- Samsung Electronics Co. aims to sell more than 10 million LED-backlit LCD televisions next year, five times the expected sales for 2009.
Australian Financial Review:
-
Economic Times:
- NEW DELHI: Several private equity (PE) firms are reviewing whether to continue operations in India even as the domestic economy is showing clear signs of recovery. Around half a dozen PE firms are said to be in the process of shutting shop including Candover, a UK-based buyout specialist, which has recently closed shop in
This is attributed to the slowdown in PE transactions with the average number of deals in a month more than halved compared to last year as investors have turned cautious in putting in fresh money.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (IRM), target $35.
Piper Jaffray:
- Raised (BARE) to Overweight, target $14.
- Raised (EL) to Overweight, target $55.
Night Trading
Asian Indices are +.50% to +1.75% on average.
Asia Ex-Japan Inv Grade CDS Index 110.0 unch.
S&P 500 futures +.02%.
NASDAQ 100 futures unch.
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Rasmussen Reports Polling
Earnings of Note
Company/EPS Estimate
- (FDO)/.41
- (WWW)/.56
- (MON)/.00
- (AA)/-.09
- (RT)/.09
- (AYI)/.57
- (COST)/.76
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a +2,796,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,000,000 barrels versus a -1,657,000 barrel decline the prior week. Distillate inventories are expected to fall by -400,000 barrels versus a +323,000 barre gain the prior week Finally, Refinery Utilization is expected to fall by -.33% versus a -1.01% decline the prior week.
3:00 pm EST
- Consumer Credit for August is estimated at -$10.0B versus -$21.6B in July.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Treasury’s 10-year Note Auction, weekly MBA mortgage applications report, (AIR) investor day, (SFE) investor day, (ADBE) analyst meeting, (CADX) analyst day, and retail same-store-sales after close, could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares 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.
Stocks Finish Sharply Higher, Boosted by Commodity, Tech, I-Banking, Gaming, Homebuilding and Insurance Shares
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Stocks Surging into Final Hour on Less Economic Fear, Technical Buying, Short-Covering, Less Financial Sector Pessimism
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is above average. Investor anxiety is very high. Today’s overall market action is very bullish. The VIX is falling 4.96% and is very high at 25.51. The ISE Sentiment Index is below average at 121.0 and the total put/call is around average at .77. Finally, the NYSE Arms has been running around average most of the day, hitting 1.51 at its intraday peak, and is currently .76. The Euro Financial Sector Credit Default Swap Index is falling -3.84% today to 70.33 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is declining -1.95% to 100.53 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is up 2 basis points to 22 basis points. The TED spread is now down 443 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is -.18% to 34.50 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +3 basis points to 1.76%, which is down 91 basis points since July 7th. The 3-month T-Bill is yielding .07%, which is down 2 basis points today. Today’s gains are broad-based, with market leaders outperforming. I-Banking, Coal, Alt Energy, Oil Tanker, Energy, Oil Service, Semi, Internet and Gold shares are especially strong, rising 2%+. The US Sovereign Debt CDS is falling back to its low at 20.0 basis points, which is also a positive. On of my longs, market leader (AAPL), is breaking out to a new 52-week high today on above-average volume. I still don’t think it is too late to purchase these shares around current levels and see substantial upside in the stock over the long-term. The broad market took a dip around mid-day on negative (GS) rumors. I doubt the validity of these concerns. Recent market action must be extremely frustrating for the many bears. After a brief pause, I suspect another broad market surge higher before week’s end on short-covering. Nikkei futures indicate an +100 open in Japan and DAX futures indicate a -9 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less financial sector pessimism, diminishing economic fear, technical buying and bargain-hunting.
Today's Headlines
Bloomberg:
- Saudi Arabia hasn’t held talks with China and other countries on dropping the dollar as the currency for pricing oil, Saudi Central Bank Governor Muhammad al-Jasser said, denying a report in the U.K.’s Independent newspaper. The Independent report is “absolutely incorrect” and there has been “absolutely nothing” of that nature discussed between Saudi Arabia, the world’s biggest oil exporter, and other countries, al-Jasser told reporters in Istanbul, where he’s attending an International Monetary Fund summit. The dollar pared losses after his remarks. “I don’t give credence to this story,” said Simon Williams, a Dubai-based economist at HSBC Holdings Plc. “Short- term, it’s highly unlikely that oil will not continue to be priced in dollars.”
- Sustainable economic growth and low interest rates worldwide will spur a “multi-year” bull market in equities, led by developing nations, said Fidelity International’s Anthony Bolton. “Low growth means low interest rates, and actually that’s one of the best environments for stock-market investing,” Bolton, president of investments at Fidelity International, which oversees about $141 billion, said in an interview on Bloomberg Television in Hong Kong. “Anything that can show growth in this low-growth environment is going to be bid up by investors.
- Emerson Electric Co.(EMR), the maker of power and cooling systems for data centers, agreed to buy Avocent Corp.(AVCT) for about $1.2 billion to add devices used to monitor computer networks. The acquisition at $25 a share is expected to be completed by Jan. 1, the companies said today in a statement. The offer values Huntsville, Alabama-based Avocent at 22 percent higher than the shares’ closing price yesterday.
- Gold rose to a record on speculation that currencies will depreciate, spurring inflation and boosting the appeal of the precious metal for investors seeking to preserve their wealth. Gold futures climbed as high as $1,045 an ounce in New York, topping the previous record of $1,033.90 in March 2008. The spot price is headed for a ninth straight annual gain, the longest rally since at least 1948. The dollar fell as much as 0.7 percent against a basket of six major currencies.
- Defense Secretary Robert Gates said any perceived U.S. retreat from Afghanistan would spur support for the Taliban insurgency in what he termed the “epicenter of jihad” and might deal a blow to American power. The Afghan-Pakistan border area is “where the mujahedeen defeated the other superpower,” Gates said at a forum taped by CNN in Washington yesterday, referring to the defeat of the Soviet army by Islamic fighters in the 1980s. “And their view is they now have the opportunity to defeat a second superpower.”
- A majority of Americans are skeptical that diplomacy with Iran will succeed and say the U.S. should use military action if necessary to prevent the Iranian government from developing a nuclear weapon. A Pew Research Center for the People & the Press survey released today found 61 percent of Americans would support a military strike. Twenty-four percent said it is more important to avoid conflict even if that means Iran will end up building nuclear arms.
- Tiffany & Co.(TIF) rose to the highest level in more than a year after Citigroup recommended buying shares of the world’s second-largest luxury jeweler, projecting they will increase to $50 within 12 months. The stock climbed $2.29, or 6 percent, to $40.80 at 12:12 p.m. in New York Stock Exchange composite trading, after reaching $40.96, the highest level since September 2008.
- The U.S. economy is on the mend and housing is poised for a rebound, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “The momentum in the economy is moving forward,” LaVorgna said today in an interview on Bloomberg Radio. Housing is close to a turnaround because “we have had a tremendous improvement on inventories,” he said. “We are much closer to a housing bottom than many believe.” At the current sales pace it would take 8.5 months to sell all the previously owned homes on the market, compared with 11.3 months in April 2008, the highest level since at least 1999. For new houses, supply dropped to 7.3 months in August, the shortest period since January 2007. Economic growth will reach 3 percent next year, “maybe a little more,” LaVorgna said. Economists surveyed by Bloomberg News last month projected the world’s largest economy will expand 2.4 percent in 2010, according to the median estimate. Core inflation, which excludes food and energy costs, will fall below 1 percent in 2010, and that will open the way for the Federal Reserve to refrain from raising its benchmark interest rate next year, LaVorgna said.
- Investors led by Starwood Capital Group LLC and TPG won an auction for the real estate assets of failed Chicago lender Corus Bankshares Inc. by outbidding the nearest competitor by 20 percent, including about $100 million more of their own cash, people familiar with the matter said. The Corus auction, managed by the Federal Deposit Insurance Corp., drew interest from real estate developers and investors specializing in distressed debt. Corus was a lender to Miami condominium developers and held as much as $3.9 billion in condo loans as of March 31, including almost $1 billion tied to properties in southeast Florida. Corus, which was seized on Sept. 11, had a $5.4 billion commercial real estate loan portfolio.
- U.K. manufacturing production unexpectedly slumped in August to the lowest level since 1992, a sign the economy is struggling to shake off the recession. Factory output dropped 1.9 percent from the previous month, the Office for National Statistics said today in London. Economists predicted a 0.3 percent increase, according to the median of 26 forecasts in a Bloomberg News survey. The index of manufacturing fell to 87.8, the lowest in 17 years.
- The recession and a cleaner fuel mix in the electricity sector should push U.S. carbon-dioxide emissions from coal, oil and natural gas 5.9 percent lower this year, the Energy Information Administration said today. “Changes in energy consumption in the industrial sector, a result of the weak economy, and changes in electricity generation sources are the primary factors for the decline,” the EIA said in its October Short-Term Energy Outlook.
- KeyCorp(KEY), Ohio’s second-largest bank, may jump by two thirds in New York trading as “problem” loans decrease and earnings rise, RBC Capital Markets analyst Gerard Cassidy said. KeyCorp shares may reach $10, the Cleveland-based company’s book value, Cassidy said today in an interview on Bloomberg Radio.
Wall Street Journal:
- The Pentagon is establishing two new units devoted to the Afghan war, highlighting the military's focus on the conflict even as the White House considers scaling back the overall U.S. mission there. The units -- a so-called Afghan Hands program run out of the Pentagon and a new intelligence center within Central Command, which oversees the wars in Iraq and Afghanistan -- are designed to help troops deepen their intelligence about the country's complex political and tribal dynamics. The Defense Department also is expected to announce that Brig. Gen. John M. Nicholson, one of the military's top experts on counterinsurgency, will assume the helm of the Pakistan-Afghanistan Coordination Cell, a Pentagon office established earlier this year to improve the military's performance in Afghanistan. The moves underline the military's efforts to remake itself in response to the Afghan war despite the Obama administration's signals that it is far from committed to the current counterinsurgency approach.
- The U.S. slightly tweaked its forecast higher Tuesday for OPEC crude oil output and surplus production capacity in 2009. Crude oil production from the Organization of Petroleum Exporting Countries will average 29.02 million barrels a day this year, a marginal increase over the previous estimate of 29.01 million barrels a day, the U.S. Department of Energy estimates in its latest monthly outlook. OPEC produced 28.7 million barrels a day during the first half of 2009. The EIA also raised its 2010 outlook for OPEC production by 300,000 barrels a day to 29.19 million barrels a day.
- The chief executive of International Business Machines Corp. (IBM) sees a huge business opportunity in making the U.S. health-care system more efficient. "Someone is going to drive incredible progress," IBM Chief Executive Sam Palmisano told a conference on medical innovation at the Cleveland Clinic Tuesday. "Someone is going to unlock this incredible economic opportunity. And I suggest, why shouldn't it be us?"
The Detroit News:
- The Senate Finance Committee's health care reform bill cut in half, to $5 billion, the amount set aside to help the United Auto Workers' health care trusts and other similar programs. A health care reform bill approved by a House committee in July included $10 billion to defray the medical costs of union members and others in retiree group health care associations through a reinsurance program. A plan proposed by Senate Finance Committee Chairman Max Baucus, D-Mont., would have eliminated the provision completely. But Sen. John Kerry, D-Mass., and Debbie Stabenow, D-Lansing, however, were able to get $5 billion restored. It's not clear how long that money will last. "The UAW obviously believes the $10 billion amount more accurately reflects the need for this program," Reuther said.
NJ.com:
- Governor Corzine overwhelmingly finances key Democratic campaign funds, feeding more than $1.4 million into a system that critics -- and he himself -- have targeted for reform. He is the biggest individual contributor to New Jersey Democrats’ three fattest pots, according to campaign-finance data. And he has given more than any other person to 20 of 21 Democratic county committees. Publicly, Corzine has faulted these funds’ tradition of “wheeling” -- or sending checks to out-of-district candidates, free of contribution caps. Critics say the practice wrongfully favors moneyed interests over donors who can give just $2,600 to each candidate. Privately, the governor has added $1,457,000 of his personal wealth to the wheeling pool since he took office in 2006. That’s nearly eight times the $185,000 given by the second-highest donors, real-estate developer David S. Steiner and his wife, Sylvia.
Rassmussen:
- Twenty-nine percent (29%) of Americans say they are less like to watch CBS’ “Late Night With David Letterman,” following the talk show host’s admission that he has had affairs with women who work on the show. A new Rasmussen Reports national telephone survey finds that five percent (5%) say that Letterman’s disclosure of sexual misbehavior makes them more likely to watch the show.
- Republican congressional candidates have moved slightly further ahead of Democrats this week in the latest edition of the Generic Congressional Ballot. The new Rasmussen Reports national telephone survey shows that 43% would vote for their district’s Republican congressional candidate while 39% would opt for his or her Democratic opponent.
Politico:
- Democrats involved in the Senate Intelligence Committee investigation of CIA interrogation techniques have found a way to avoid partisan fights: Keep working after the ranking Republican quits. Late last month, Sen. Kit Bond (R-Mo.) abruptly withdrew from the probe to protest Attorney General Eric Holder’s decision to appoint a special prosecutor to review the legality of Bush-era interrogation techniques. Bond’s departure means that Republican staffers aren’t playing much of a role in the investigation, either. And that suits several Democrats on the panel just fine.
Washington Times:
Reuters:
- A top U.S. bailout watchdog has her eye on the "pay czar" charged with vetting the packages of some of Wall Street's top earners. Elizabeth Warren, head of the Congressional Oversight Panel for the government's financial bailout program, is intent on ensuring taxpayers get to see how their money may be adding zeroes to those paychecks. Warren told Reuters she is pleased the government's pay czar, Kenneth Feinberg, is planning to publicly release his rulings on the contracts for the top 25 earners at firms that have received the biggest government bailouts. But she wants more. She said Feinberg has an obligation to detail how taxpayer dollars are being used to pay key workers at bailed out firms.
- While most retailers saw bleak sales this back-to-school season, consumer electronics chains saw renewed demand for notebook personal computers, according to a report from market research firm NPD Group. That could be good news for PC makers this holiday shopping season, with few stand-out gadgets to woo shoppers.
Financial Times:
Correio Braziliense:
- Brazil’s central bank and finance ministry are concerned that companies may lose money on wrong-way currency bets. Brazilian companies have $8 billion in bets against the US dollar.
ThisDay:
- Nigeria may peg the price of oil for planning its 2010 budget at $50 a barrel, compared with $45 last year, citing Finance Minister Mansur Muhtar.
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