S&P 500 1,147.06-.41%
NASDAQ 2,045.96-1.47%
Leading Sectors
Fashion+1.3%
Paper+1.27%
Food+.33%
Lagging Sectors
Telecom-1.71%
Software-2.48%
Networking-2.56%
Other
Crude Oil 35.85-.42%.
Natural Gas 5.24+.08%
Base Metals 112.92+.3%
Gold 411.10+.19%
U.S. Dollar Index 85.73-.15%
10-Yr. Long-Bond Yield 4.03% unch.
After-hours Movers
COX+1.79% after announcing Disney's ESPN renewed its distribution agreements with Cox and Charter(CHTR). Cox said the agreement was for 9 years and rates will increase 7% annually vs. 20% increases under the old contract.
WFII-9.8% after meeting 4Q estimates, lowering 1Q guidance and filing for a shelf registration for as much as $200M in securities.
BEAS+3.2% after better-than-expected 4Q earnings/sales and raising 1Q sales guidance. Integration sales climbed 40% sequentially which bodes well for later quarters.
BCSI+11.5% after significantly beating 3Q estimates.
After-hours News
Goldman Sachs says Disney parks in Orlando and Anaheim tracking above expectations and may signal a recovery in Theme Parks. Goldman also says communications end markets should provide most upside potential for semis and account for 21% of semiconductor consumption. Their favorite picks are MRVL and AGR/A. Carly Fiorina, Hewlett Packard's CEO, reiterated her conservative guidance for the year, saying "if the economy continues to improve, 4% IT spending growth is possible." The U.S. will mail $37B more in tax refunds to Americans in the next three months than it did at the same time last year because of new tax cuts taking affect, the Treasury Dept. said. Bill Sullivan, senior economist at Morgan Stanley, says this could add 1-2% onto GDP growth during this period. China may let domestic securities companies raise money from bond sales starting next month. Indian stocks attracted a record $7B from foreign investors last year as its main exchange, The Mumbai, soared 72%. KPMG is being investigated by the U.S Attorney's office, reported CNBC.
BOTTOM LINE: Today was a bad day for the Bulls. Strong earning's reports and the good job's data today should have propelled the market higher. Instead, a weak rally through mid-day turned nasty in the final 90 minutes. I took the Portfolio to market neutral(longs-shorts=0), as I sold longs and added shorts in the tech sector. Today's action clearly shows we are still in a consolidation/correction phase. I expect more down-side in the short-term before another test of the recent highs.
Thursday, February 19, 2004
Mid-day Update
S&P 500 1,155.99+.61%
NASDAQ 2,079.69+.15%
Leading Sectors
Disk Drives+2.01%
Paper+1.99%
Fashion+1.3%
Lagging Sectors
Software-.63%
Networking-.9%
Telecom-1.19%
Other
Crude Oil 35.80+.99%
Natural Gas 5.21-2.73%
Gold 411.90-.22%
Base Metals 112.92+.3%
U.S. Dollar 85.81-.15%
10-Yr. Long-Bond Yield 4.04%-.24%
Market Movers
ELN+16.4% on continued strength from accelerated ms drug schedule and positive comments from CSFB.
OVTI+20.6% on significantly better-than-expected 3Q report and raised 4Q guidance.
NXTL-2.3% on good 4Q, but mixed guidance.
PIXR+4.4% on talk of distribution contract with MGM.
PNRA-10.4% on 4Q sales below expectations and didn't raise guidance.
INTU-5.9% on beating 2Q expectations, but lowering 3Q guidance.
Recommendations
Morgan Stanley saying steel trade balance is best in 12 years, strengthening domestic steel market with no increase in U.S. consumption. MS also raising BRCM price target to $55. Goldman saying to buy LOW $60 calls ahead of earnings release. DHI cut to "Underperform" at CSFB. CTX raised to "Overweight" at JP Morgan. OVTI raised to "Strong Buy" at Needham. WMT raised to "Buy" at AG Edwards.
Economic Data
Initial jobless claims came in at 344K, better than the 355K estimate.
Continuing claims were 3186K vs. an estimate of 3105K.
Leading indicators met expectations of .5%
Philly Fed of 31.4 was below expectations of 35.
Mid-day News
U.S. stocks rose after companies such as Applied Materials gave forecasts that surpassed analyst estimates, providing reassurance that earnings will increase fast enough to justify further gains in share prices. EMC is saying corporate spending on tech is improving. Sales of homes in the San Francisco bay area reached a 15-year high last month. Former Enron CEO Skilling surrendered to the FBI this morning and will appear in court today. Initial jobless claims are now close to a 3-year low. Freddie Mac say 30-yr. mortgage rate fell to 5.58% this week.
BOTTOM LINE: I am disappointed with the relative weakness in the tech sector today. I am in the process of reducing my exposure in this area. This will take the Portfolio down to about 75% net long. I will then decide later in the day whether or not to add long positions in other sectors or keep my overall market exposure at current levels. AMAT is a prime example of what is going on with the overall market right now. Its P/E on 04 estimates was 35 before its earnings release. It is now around 22 as a result of significantly beating expectations. The current market P/E of 18 on 04 estimates is most likely inaccurate. Analysts have clearly underestimated the leverage in most company's business models. This means the current P/E for 04 estimates is likely below 15, near the market's long-term average. I contend that with interest rates at 46-year lows and corporate profitability near all-time highs the overall market deserves a premium valuation relative to its historical average. This is the main reason why I am very bullish on 04.
NASDAQ 2,079.69+.15%
Leading Sectors
Disk Drives+2.01%
Paper+1.99%
Fashion+1.3%
Lagging Sectors
Software-.63%
Networking-.9%
Telecom-1.19%
Other
Crude Oil 35.80+.99%
Natural Gas 5.21-2.73%
Gold 411.90-.22%
Base Metals 112.92+.3%
U.S. Dollar 85.81-.15%
10-Yr. Long-Bond Yield 4.04%-.24%
Market Movers
ELN+16.4% on continued strength from accelerated ms drug schedule and positive comments from CSFB.
OVTI+20.6% on significantly better-than-expected 3Q report and raised 4Q guidance.
NXTL-2.3% on good 4Q, but mixed guidance.
PIXR+4.4% on talk of distribution contract with MGM.
PNRA-10.4% on 4Q sales below expectations and didn't raise guidance.
INTU-5.9% on beating 2Q expectations, but lowering 3Q guidance.
Recommendations
Morgan Stanley saying steel trade balance is best in 12 years, strengthening domestic steel market with no increase in U.S. consumption. MS also raising BRCM price target to $55. Goldman saying to buy LOW $60 calls ahead of earnings release. DHI cut to "Underperform" at CSFB. CTX raised to "Overweight" at JP Morgan. OVTI raised to "Strong Buy" at Needham. WMT raised to "Buy" at AG Edwards.
Economic Data
Initial jobless claims came in at 344K, better than the 355K estimate.
Continuing claims were 3186K vs. an estimate of 3105K.
Leading indicators met expectations of .5%
Philly Fed of 31.4 was below expectations of 35.
Mid-day News
U.S. stocks rose after companies such as Applied Materials gave forecasts that surpassed analyst estimates, providing reassurance that earnings will increase fast enough to justify further gains in share prices. EMC is saying corporate spending on tech is improving. Sales of homes in the San Francisco bay area reached a 15-year high last month. Former Enron CEO Skilling surrendered to the FBI this morning and will appear in court today. Initial jobless claims are now close to a 3-year low. Freddie Mac say 30-yr. mortgage rate fell to 5.58% this week.
BOTTOM LINE: I am disappointed with the relative weakness in the tech sector today. I am in the process of reducing my exposure in this area. This will take the Portfolio down to about 75% net long. I will then decide later in the day whether or not to add long positions in other sectors or keep my overall market exposure at current levels. AMAT is a prime example of what is going on with the overall market right now. Its P/E on 04 estimates was 35 before its earnings release. It is now around 22 as a result of significantly beating expectations. The current market P/E of 18 on 04 estimates is most likely inaccurate. Analysts have clearly underestimated the leverage in most company's business models. This means the current P/E for 04 estimates is likely below 15, near the market's long-term average. I contend that with interest rates at 46-year lows and corporate profitability near all-time highs the overall market deserves a premium valuation relative to its historical average. This is the main reason why I am very bullish on 04.
Thursday Watch
Earnings Announcements
Company/Estimate
BEAS/.09
CHTR/-.46
CIEN/-.08
HPQ/.35
KVHI/-.10
NXTL/.40
PNRA/.34
JWN/.66
NANO/-.15
TGT/.87
WMT/.63
Splits
SNDK 2-for-1
Economic Data
Initial Jobless claims estimated at 355K vs. 363K last week.
Continuing claims estimated at 3105K vs. 3083K last week.
Leading Indicators estimated at .5% vs. .2% last month.
Philadelphia Fed. estimated at 35.0 vs. 38.8 last month.
Late-night News
North Korea is willing to discuss its highly enriched uranium program with the U.S. during six-nation talks to be held in Beijing next week. Guidelines for fining passengers who carry prohibited items on airplanes have been released by the Transportation Security Admin. Howard Dean dropped out of the presidential race. The U.S. will work with the Afghan government to try to meet the deadline of June this year for holding presidential and parliamentary elections. Iran shut the offices of 2 newspapers that published a letter by lawmakers criticizing Iran's supreme leader for allowing unfair elections to be held.
Late-Night Trading
Asian markets are mixed, ranging from +.5% to -.5%.
S&P 500 indicated +.24%.
NASDAQ indicated +.36%.
BOTTOM LINE: The major U.S. indices should rally tomorrow given the positive news in the tech sector after the close. A weak rally or sell-off on this news would most likely mean a continuation of the current consolidation. A strong rally tomorrow should eventually lead to a move through recent highs. The Portfolio is 100% net long, thus I will closely monitor the open tomorrow for any signs of weakness and cut market exposure accordingly.
Company/Estimate
BEAS/.09
CHTR/-.46
CIEN/-.08
HPQ/.35
KVHI/-.10
NXTL/.40
PNRA/.34
JWN/.66
NANO/-.15
TGT/.87
WMT/.63
Splits
SNDK 2-for-1
Economic Data
Initial Jobless claims estimated at 355K vs. 363K last week.
Continuing claims estimated at 3105K vs. 3083K last week.
Leading Indicators estimated at .5% vs. .2% last month.
Philadelphia Fed. estimated at 35.0 vs. 38.8 last month.
Late-night News
North Korea is willing to discuss its highly enriched uranium program with the U.S. during six-nation talks to be held in Beijing next week. Guidelines for fining passengers who carry prohibited items on airplanes have been released by the Transportation Security Admin. Howard Dean dropped out of the presidential race. The U.S. will work with the Afghan government to try to meet the deadline of June this year for holding presidential and parliamentary elections. Iran shut the offices of 2 newspapers that published a letter by lawmakers criticizing Iran's supreme leader for allowing unfair elections to be held.
Late-Night Trading
Asian markets are mixed, ranging from +.5% to -.5%.
S&P 500 indicated +.24%.
NASDAQ indicated +.36%.
BOTTOM LINE: The major U.S. indices should rally tomorrow given the positive news in the tech sector after the close. A weak rally or sell-off on this news would most likely mean a continuation of the current consolidation. A strong rally tomorrow should eventually lead to a move through recent highs. The Portfolio is 100% net long, thus I will closely monitor the open tomorrow for any signs of weakness and cut market exposure accordingly.
Wednesday, February 18, 2004
Wednesday Close
S&P 500 1,151.82-.45%
NASDAQ 2,076.47-.19%
Leading Sectors
Fashion+1.0%
Semis+.67%
Software+.51%
Lagging Sectors
Telecom-1.68%
Airlines-1.69%
Oil Service-1.78%
Other
Crude Oil 35.45 unch.
Natural Gas 5.36+.17%
Base Metals 112.58+.13%
U.S. Dollar Index 85.83-.13%
10-Yr. Long-Bond Yield 4.04% unch.
After-hours Movers
AMAT+5.4% on better-than-expected 1Q and raised 2Q expectations.
OVTI+18.6% after significantly beating 3Q estimates and raising 4Q guidance.
BRCM+3.3% on conf. call saying its sales for 1Q will be $565M, higher than the $528M forecast.
INTU-5.0% after exceeding 2Q estimates, but lowering 3Q guidance.
ECLG-8.4% after beating 4Q estimates, but lowering 1Q guidance.
After-hours News
Yahoo drops Google and says it will use it's own search software. A Houston grand jury issued a sealed indictment against former Enron CEO Jeff Skilling today, the Houston Chronicle said. Earnings growth for the S&P 500 has only been this high 4 other times in the last 130 years. Market breadth is continuing to expand at a healthy pace, with over 85% of stocks still above their 200-day moving averages, the strongest pace in the past 12 years.
BOTTOM LINE: I took some profits in a few of my basic material stocks and added a couple of tech stocks near the close. The portfolio was down today and is still 100% net long. Semi and Semi equipment stocks should lead the way tomorrow. OVTI, BRCM and AMAT all had very positive things to say on their calls after the close.
NASDAQ 2,076.47-.19%
Leading Sectors
Fashion+1.0%
Semis+.67%
Software+.51%
Lagging Sectors
Telecom-1.68%
Airlines-1.69%
Oil Service-1.78%
Other
Crude Oil 35.45 unch.
Natural Gas 5.36+.17%
Base Metals 112.58+.13%
U.S. Dollar Index 85.83-.13%
10-Yr. Long-Bond Yield 4.04% unch.
After-hours Movers
AMAT+5.4% on better-than-expected 1Q and raised 2Q expectations.
OVTI+18.6% after significantly beating 3Q estimates and raising 4Q guidance.
BRCM+3.3% on conf. call saying its sales for 1Q will be $565M, higher than the $528M forecast.
INTU-5.0% after exceeding 2Q estimates, but lowering 3Q guidance.
ECLG-8.4% after beating 4Q estimates, but lowering 1Q guidance.
After-hours News
Yahoo drops Google and says it will use it's own search software. A Houston grand jury issued a sealed indictment against former Enron CEO Jeff Skilling today, the Houston Chronicle said. Earnings growth for the S&P 500 has only been this high 4 other times in the last 130 years. Market breadth is continuing to expand at a healthy pace, with over 85% of stocks still above their 200-day moving averages, the strongest pace in the past 12 years.
BOTTOM LINE: I took some profits in a few of my basic material stocks and added a couple of tech stocks near the close. The portfolio was down today and is still 100% net long. Semi and Semi equipment stocks should lead the way tomorrow. OVTI, BRCM and AMAT all had very positive things to say on their calls after the close.
Mid-day Update
S&P 500 1,155.06-.16%
NASDAQ 2,080.29 unch.
Leading Sectors
Fashion+1.0%
Semis+.9%
Biotech+.82%
Lagging Sectors
Oil Service-.82%
Airlines-.92%
Telecom-1.78%
Other
Crude Oil 35.60+1.17%
Natural Gas 5.39+1.24%
Gold 413.80-.62%
Base Metals 115.72+2.93%
U.S. Dollar 85.23+.31%
10-Yr. Long-Bond Yield 4.01%-2.9%
Market Movers
ELN+30.0% on accelerated schedule for new ms drug.
RMBS+30.0% on dismissal of patent-fraud case, resulting in as much as $3B in royalties.
CMX+4.6% on winning contract from FEP covering 3.9M workers.
MHS-10.7% on losing contract to CMX.
NTES+21.0% on strong earnings report, strength of on-line gaming was big surprise.
BRCM+8.8% on expectations of positive conf. call after close.
NTAP+7.7% on strong 3rd Q and raised 4th Q guidance.
Recommendations
Goldman says Manufacturing sector capex for tech should increase 16% this year, dramatically improving in recent weeks. Goldman raising price forecasts for base metals across the board, favorites are AL, N and AA. Goldman raises rating on PCS to "Outperform" and NXTL raised to "In-Line." Citigroup's favorite semis are CY, FCS, INTC, MU and NSM. Also, Citi says BRCM may acquire PXLW, TRID or GNSS to bolster digital TV offerings. Leerlink raising target on CMX to $45 on massive contract win from Federal Employees Health Benefit Plan. JP Morgan raises VIP to "Overweight" and lowers MBT to "Neutral."
Mid-day News
U.S. stocks are down modestly at mid-day on weaker housing numbers. U.S. housing starts came in at 1903K, below the 1910K estimate. Building permits were 1899K, also failing to meet estimates of 1910K. The shortfall was blamed on cold weather and storms in some parts of the country. Cablevision(CVC) says capital costs low and margins high for VOIP, already seeing 40% direct margins. Copper prices hit an 8-yr. high as basic materials continue their strong advance.
BOTTOM LINE: The stair-step pattern continues as the markets rest after yesterdays strong advance. This is very healthy. I wouldn't be surprised to see a rally later in the day. A lot of stocks are moving up significantly on good news. Breadth is pretty good. My indicators are still on short-term sell in tech, so I will postpone my buying in this area for now. I haven't made any changes today, the Portfolio is currently down for the day and is 100% net long. I don't think the housing numbers are a big deal and I expect the market to resume its upward move shortly.
NASDAQ 2,080.29 unch.
Leading Sectors
Fashion+1.0%
Semis+.9%
Biotech+.82%
Lagging Sectors
Oil Service-.82%
Airlines-.92%
Telecom-1.78%
Other
Crude Oil 35.60+1.17%
Natural Gas 5.39+1.24%
Gold 413.80-.62%
Base Metals 115.72+2.93%
U.S. Dollar 85.23+.31%
10-Yr. Long-Bond Yield 4.01%-2.9%
Market Movers
ELN+30.0% on accelerated schedule for new ms drug.
RMBS+30.0% on dismissal of patent-fraud case, resulting in as much as $3B in royalties.
CMX+4.6% on winning contract from FEP covering 3.9M workers.
MHS-10.7% on losing contract to CMX.
NTES+21.0% on strong earnings report, strength of on-line gaming was big surprise.
BRCM+8.8% on expectations of positive conf. call after close.
NTAP+7.7% on strong 3rd Q and raised 4th Q guidance.
Recommendations
Goldman says Manufacturing sector capex for tech should increase 16% this year, dramatically improving in recent weeks. Goldman raising price forecasts for base metals across the board, favorites are AL, N and AA. Goldman raises rating on PCS to "Outperform" and NXTL raised to "In-Line." Citigroup's favorite semis are CY, FCS, INTC, MU and NSM. Also, Citi says BRCM may acquire PXLW, TRID or GNSS to bolster digital TV offerings. Leerlink raising target on CMX to $45 on massive contract win from Federal Employees Health Benefit Plan. JP Morgan raises VIP to "Overweight" and lowers MBT to "Neutral."
Mid-day News
U.S. stocks are down modestly at mid-day on weaker housing numbers. U.S. housing starts came in at 1903K, below the 1910K estimate. Building permits were 1899K, also failing to meet estimates of 1910K. The shortfall was blamed on cold weather and storms in some parts of the country. Cablevision(CVC) says capital costs low and margins high for VOIP, already seeing 40% direct margins. Copper prices hit an 8-yr. high as basic materials continue their strong advance.
BOTTOM LINE: The stair-step pattern continues as the markets rest after yesterdays strong advance. This is very healthy. I wouldn't be surprised to see a rally later in the day. A lot of stocks are moving up significantly on good news. Breadth is pretty good. My indicators are still on short-term sell in tech, so I will postpone my buying in this area for now. I haven't made any changes today, the Portfolio is currently down for the day and is 100% net long. I don't think the housing numbers are a big deal and I expect the market to resume its upward move shortly.
Wednesday Watch
Earngings Announcements
Company/Estimate
AMT/-.16
ADCT/.00
AMAT/.08
ECLG/.03
INTU/.70
OVTI/.42
Splits
OVTI 2-for-1
Economic Data
Housing starts estimated at 2000K vs. 2088K last month.
Building Permits estimated at 1910K vs. 1924K last month.
Late-night News
Senator Kerry edged out Senator Edwards in Wisconsin's primary. Thailand reports 7th human death from bird flu. Scott Moritz of TheStreet.com says Cingular/AT&T Wireless deal could be huge opportunity for OPWV. Jury finds against Tyson Foods in Cattle price-fixing, Tyson plans appeal.
Late-Night Trading
Asian markets are mostly higher, ranging from +.5% to +1.0%.
S&P 500 indicated +.02%.
NASDAQ indicated +.07%.
BOTTOM LINE: Very little late-night news of any importance. I still expect a pretty good day for the longs tomorrow, led by tech.
Company/Estimate
AMT/-.16
ADCT/.00
AMAT/.08
ECLG/.03
INTU/.70
OVTI/.42
Splits
OVTI 2-for-1
Economic Data
Housing starts estimated at 2000K vs. 2088K last month.
Building Permits estimated at 1910K vs. 1924K last month.
Late-night News
Senator Kerry edged out Senator Edwards in Wisconsin's primary. Thailand reports 7th human death from bird flu. Scott Moritz of TheStreet.com says Cingular/AT&T Wireless deal could be huge opportunity for OPWV. Jury finds against Tyson Foods in Cattle price-fixing, Tyson plans appeal.
Late-Night Trading
Asian markets are mostly higher, ranging from +.5% to +1.0%.
S&P 500 indicated +.02%.
NASDAQ indicated +.07%.
BOTTOM LINE: Very little late-night news of any importance. I still expect a pretty good day for the longs tomorrow, led by tech.
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