Bottom Line: The DJTA has returned 25.2% this year. With falling energy prices and continuing solid US economic growth, this index should reach an ALL-TIME high before year-end.
Sunday, December 05, 2004
Chart of the Week
The Dow Jones Transportation Average
Bottom Line: The DJTA has returned 25.2% this year. With falling energy prices and continuing solid US economic growth, this index should reach an ALL-TIME high before year-end.
Bottom Line: The DJTA has returned 25.2% this year. With falling energy prices and continuing solid US economic growth, this index should reach an ALL-TIME high before year-end.
Market Week in Review
S&P 500 1,191.17 +.72%
Click here for the Weekly Wrap by Briefing.com.
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: U.S. stocks finished moderately higher last week, led once again by small-cap and technology shares. The Russell 2000 made another ALL-TIME high and the Transport Index is nearing its historic high set in May 1999. As well, volume accelerated and advances outnumbered decliners by a healthy margin. In my opinion, energy prices have peaked for the intermediate-term and should lead the CRB Index lower next year, which bodes well for future inflation readings. I suspect Intel's positive commentary on inventories and raised guidance will be echoed many times by other tech companies over the next couple of months. The recent worries over consumer spending are likely overblown. Holiday retail sales should benefit from a recent 20% plunge in the average price of gasoline, an almost 20% gain in the average stock from August lows, incomes rising at a better rate and unemployment falling. Internet commerce is probably cannibalizing traditional retail sales more than is currently realized. Overall, this holiday shopping/travel season should be a good one.
Saturday, December 04, 2004
Economic Week in Review
ECRI Weekly Leading Index 132.30 -.30%
Preliminary 3Q GDP rose 3.9% versus estimates of 3.7% and a 3.7% prior estimate. Preliminary 3Q Personal Consumption rose 5.1% versus estimates of a 4.7% increase and a 4.6% prior estimate. The Preliminary 3Q Price Deflator rose 1.3% versus estimates of a 1.3% increase and a prior estimate of a 1.3% gain. The 5.1% gain in consumer spending was the fastest in almost 3 years, Bloomberg said. "The economy had a lot more momentum and underlying strength in the third quarter," said James Glassman, a senior economist at J.P. Morgan. The Price Deflator, a measure of inflation, decelerated to 1.3% from 3.2% during the second quarter. As well, the prices of goods and services bought by consumers excluding food and energy rose at a .7% annual pace, the smallest gain since the 4th quarter of 1962. Finally, final sales to domestic purchases, a good gauge of U.S. demand, because it excludes trade and inventories, rose at a 4.9% annual rate, the strongest in a year, Bloomberg reported.
The Chicago Purchasing Manager Index for November fell to 65.2 versus estimates of 62.0 and a 16-year high reading of 68.5 in October. The employment component of the index soared to a 16-year high, suggesting the manufacturing recovery is secure and will help drive economic growth, Bloomberg reported. An index of new orders fell to 70.0 from a 20-year high of 79.4 in October. The general index "is still quite elevated, as are the new orders and production sub-indices," said Joshua Shapiro, chief U.S. economist at MFR Inc.
Consumer Confidence for November fell to 90.5 versus estimates of 96.0 and a reading of 92.9 in October. Confidence fell among those who earn less than $35,000/year as higher gas prices took their toll on sentiment. However, confidence rose for those making $35,000 or more, Bloomberg reported. Moreover, the group's overall gauge of optimism about consumer's present situation rose to 95.2 from 94 in October.
Personal Income for October rose .6% versus estimates of a .5% increase and a .2% rise in September. Personal Spending for October rose .7% versus estimates of a .4% increase and a rise of .6% in September. The Core PCE Deflator, Greenspan's favorite inflation measure, rose 1.5% at an annualized rate versus estimates of a 1.4% increase and a 1.5% gain in September. "We are starting off the fourth quarter on better footing than we expected," said Stephen Stanly, chief economist at RBS Greenwich Capital. The Fed said in its Beige Book summary "Labor markets continued to improve over the past few weeks, with numerous reports of hiring." "We are ending the year very, very strong," said Norbert Ore, chairman of the group's manufacturing committee. Finally, the Business Roundtable's outlook index signaled that businesses plan to increase capital spending over the next six months at the highest rate since the survey began in 2002, Bloomberg reported.
Construction Spending for October was unch. versus estimates of a .7% rise and a .1% gain in September. U.S. construction spending held steady in October at its highest level ever, as a decline in homebuilding was offset by increased government spending on streets and highways, Bloomberg said. Overall construction spending rose 7.1% over the same month a year earlier, Bloomberg reported. People have started to get the hurricane checks from their insurance settlements, which should benefit construction spending in the near-term, Bloomberg said.
ISM Manufacturing for November rose to 57.8 versus estimates of 57.0 and a reading of 56.8 in October. ISM Prices Paid for November fell to 74.0 versus estimates of 75.3 and a reading of 78.5 in October. U.S. manufacturing strengthened in November, with growth accelerating for the first time in four months, as orders and employment picked up. The new orders component of the index rose to 61.5 from 58.3 in October and the employment component rose to 57.6 from 54.8. Moreover, the prices paid index fell to the lowest level since December 2003. "The manufacturing sector is still growing at a healthy pace, and that's consistent with the decent growth in the overall economy," said Ethan Harris, chief U.S. economist at Lehman Brothers. Morgan Stanley economists increased their estimate for fourth-quarter US economic growth to 4.7% from 4.5%, Bloomberg reported. "A broad-based manufacturing expansion is under way," said Daniel Meckstroth, chief economist at Manufacturers Alliance.
Total Vehicle Sales for November fell to 16.4M versus estimates of 16.5M and 17.0M in October. Domestic Vehicle Sales in November fell to 12.9M versus estimates of 13.1M and 13.2M in October. U.S. automakers' market share hit a record low after declines at General Motors and Ford, Bloomberg said. DaimlerChrysler AG and Asian carmakers' share, led by Nissan's 26% gain, rose. "The domestics can't compete on just price," Argus Research analyst Kevin Tynan said. "Chrysler has done a good job of maintaining momentum with new models and Asian automakers attract buyers because customers are seeking the best value and quality for your dollar."
Factory Orders for October rose .5% versus estimates of a .2% gain and unch. in September. "The economy is on a relatively robust path" said Glenn Hubbard, dean of the Columbia Business School. Deere & Co., the world's largest maker of farm equipment, reported a pick up in new orders last quarter to the best pace since 1996. The Factory inventory-to-shipments ratio held at 1.24 months, near the record low 1.22 months reached in March, Bloomberg said.
The Unemployment Rate for November fell to 5.4% versus estimates of 5.4% and 5.5% in October. Average Hourly Earnings for November rose .1% versus estimates of a .3% rise and a .3% increase in October. The Change in Non-farm Payrolls for November was 112K versus estimates of 200K and a downwardly revised 303K in October. The Monster Employment Index, which measures demand for employees based on online recruiting, rose in November to the highest level since its inception last year. Postings for healthcare workers, business and finance professional showed the biggest increases, Bloomberg reported. The Fed should continue to raise interest rates "at a measured pace" next year as the economy expands close to a 4% rate, creating "solid but moderate gains in employment," said Philly Fed President Santomero. Job growth has averaged 185,450/month this year, the best since 1999, Bloomberg said. As well, current job growth compares favorably to the entire 1990s in which payrolls increased an average of 180,350/month. Finally, a recent survey by the Business Roundtable found that 80% of CEOs expect hiring to increase or remain the same over the next six months, Bloomberg said. Crude oil prices have declined 14% this week, the biggest weekly decline since the start of the U.S.-led liberation of Iraq, Bloomberg reported. Moreover, oil has plunged 23.1% from its high set 5 weeks ago. "As energy prices come down, there should be a reversal, and companies will hire more," said John Silvia, chief economist at Wachovia.
ISM Non-Manufacturing for November rose to 61.3 versus estimates of 58.5 and a reading of 59.8 in October. "Demand for services from consumers is quite strong," said Christopher Rupey, senior financial economist at Bank of Tokyo-Mitsubishi. The index of order backlogs rose to 54.0 from 52.5. Prices paid, a measure of costs for purchased materials and services, fell to 71.0 from 74.1, Bloomberg said.
Preliminary 3Q GDP rose 3.9% versus estimates of 3.7% and a 3.7% prior estimate. Preliminary 3Q Personal Consumption rose 5.1% versus estimates of a 4.7% increase and a 4.6% prior estimate. The Preliminary 3Q Price Deflator rose 1.3% versus estimates of a 1.3% increase and a prior estimate of a 1.3% gain. The 5.1% gain in consumer spending was the fastest in almost 3 years, Bloomberg said. "The economy had a lot more momentum and underlying strength in the third quarter," said James Glassman, a senior economist at J.P. Morgan. The Price Deflator, a measure of inflation, decelerated to 1.3% from 3.2% during the second quarter. As well, the prices of goods and services bought by consumers excluding food and energy rose at a .7% annual pace, the smallest gain since the 4th quarter of 1962. Finally, final sales to domestic purchases, a good gauge of U.S. demand, because it excludes trade and inventories, rose at a 4.9% annual rate, the strongest in a year, Bloomberg reported.
The Chicago Purchasing Manager Index for November fell to 65.2 versus estimates of 62.0 and a 16-year high reading of 68.5 in October. The employment component of the index soared to a 16-year high, suggesting the manufacturing recovery is secure and will help drive economic growth, Bloomberg reported. An index of new orders fell to 70.0 from a 20-year high of 79.4 in October. The general index "is still quite elevated, as are the new orders and production sub-indices," said Joshua Shapiro, chief U.S. economist at MFR Inc.
Consumer Confidence for November fell to 90.5 versus estimates of 96.0 and a reading of 92.9 in October. Confidence fell among those who earn less than $35,000/year as higher gas prices took their toll on sentiment. However, confidence rose for those making $35,000 or more, Bloomberg reported. Moreover, the group's overall gauge of optimism about consumer's present situation rose to 95.2 from 94 in October.
Personal Income for October rose .6% versus estimates of a .5% increase and a .2% rise in September. Personal Spending for October rose .7% versus estimates of a .4% increase and a rise of .6% in September. The Core PCE Deflator, Greenspan's favorite inflation measure, rose 1.5% at an annualized rate versus estimates of a 1.4% increase and a 1.5% gain in September. "We are starting off the fourth quarter on better footing than we expected," said Stephen Stanly, chief economist at RBS Greenwich Capital. The Fed said in its Beige Book summary "Labor markets continued to improve over the past few weeks, with numerous reports of hiring." "We are ending the year very, very strong," said Norbert Ore, chairman of the group's manufacturing committee. Finally, the Business Roundtable's outlook index signaled that businesses plan to increase capital spending over the next six months at the highest rate since the survey began in 2002, Bloomberg reported.
Construction Spending for October was unch. versus estimates of a .7% rise and a .1% gain in September. U.S. construction spending held steady in October at its highest level ever, as a decline in homebuilding was offset by increased government spending on streets and highways, Bloomberg said. Overall construction spending rose 7.1% over the same month a year earlier, Bloomberg reported. People have started to get the hurricane checks from their insurance settlements, which should benefit construction spending in the near-term, Bloomberg said.
ISM Manufacturing for November rose to 57.8 versus estimates of 57.0 and a reading of 56.8 in October. ISM Prices Paid for November fell to 74.0 versus estimates of 75.3 and a reading of 78.5 in October. U.S. manufacturing strengthened in November, with growth accelerating for the first time in four months, as orders and employment picked up. The new orders component of the index rose to 61.5 from 58.3 in October and the employment component rose to 57.6 from 54.8. Moreover, the prices paid index fell to the lowest level since December 2003. "The manufacturing sector is still growing at a healthy pace, and that's consistent with the decent growth in the overall economy," said Ethan Harris, chief U.S. economist at Lehman Brothers. Morgan Stanley economists increased their estimate for fourth-quarter US economic growth to 4.7% from 4.5%, Bloomberg reported. "A broad-based manufacturing expansion is under way," said Daniel Meckstroth, chief economist at Manufacturers Alliance.
Total Vehicle Sales for November fell to 16.4M versus estimates of 16.5M and 17.0M in October. Domestic Vehicle Sales in November fell to 12.9M versus estimates of 13.1M and 13.2M in October. U.S. automakers' market share hit a record low after declines at General Motors and Ford, Bloomberg said. DaimlerChrysler AG and Asian carmakers' share, led by Nissan's 26% gain, rose. "The domestics can't compete on just price," Argus Research analyst Kevin Tynan said. "Chrysler has done a good job of maintaining momentum with new models and Asian automakers attract buyers because customers are seeking the best value and quality for your dollar."
Factory Orders for October rose .5% versus estimates of a .2% gain and unch. in September. "The economy is on a relatively robust path" said Glenn Hubbard, dean of the Columbia Business School. Deere & Co., the world's largest maker of farm equipment, reported a pick up in new orders last quarter to the best pace since 1996. The Factory inventory-to-shipments ratio held at 1.24 months, near the record low 1.22 months reached in March, Bloomberg said.
The Unemployment Rate for November fell to 5.4% versus estimates of 5.4% and 5.5% in October. Average Hourly Earnings for November rose .1% versus estimates of a .3% rise and a .3% increase in October. The Change in Non-farm Payrolls for November was 112K versus estimates of 200K and a downwardly revised 303K in October. The Monster Employment Index, which measures demand for employees based on online recruiting, rose in November to the highest level since its inception last year. Postings for healthcare workers, business and finance professional showed the biggest increases, Bloomberg reported. The Fed should continue to raise interest rates "at a measured pace" next year as the economy expands close to a 4% rate, creating "solid but moderate gains in employment," said Philly Fed President Santomero. Job growth has averaged 185,450/month this year, the best since 1999, Bloomberg said. As well, current job growth compares favorably to the entire 1990s in which payrolls increased an average of 180,350/month. Finally, a recent survey by the Business Roundtable found that 80% of CEOs expect hiring to increase or remain the same over the next six months, Bloomberg said. Crude oil prices have declined 14% this week, the biggest weekly decline since the start of the U.S.-led liberation of Iraq, Bloomberg reported. Moreover, oil has plunged 23.1% from its high set 5 weeks ago. "As energy prices come down, there should be a reversal, and companies will hire more," said John Silvia, chief economist at Wachovia.
ISM Non-Manufacturing for November rose to 61.3 versus estimates of 58.5 and a reading of 59.8 in October. "Demand for services from consumers is quite strong," said Christopher Rupey, senior financial economist at Bank of Tokyo-Mitsubishi. The index of order backlogs rose to 54.0 from 52.5. Prices paid, a measure of costs for purchased materials and services, fell to 71.0 from 74.1, Bloomberg said.
Bottom Line: Overall, last week's economic data were positive. U.S. GDP growth has averaged a very strong 4.6% over the last 6 quarters and is projected by many economists to approach 4% in 2005. 3Q Personal Consumption was very strong and contradicts bears' claims that the consumer is "spent-up." While recent measures of consumer sentiment have dipped, last week's plunge in energy prices, continuing improvements in the job market, rising incomes and the upcoming free-elections in Iraq should boost confidence. A number of gauges of inflation showed deceleration, which is a pleasant surprise considering commodity prices were at all-time highs when these measures were taken. Measures of manufacturing continue to accelerate from the mid-year pause and should remain strong into the first quarter. Construction will likely continue to boost the economy on hurricane rebuilding, relatively low interest rates and lower commodity prices. The unemployment rate is low by historic standards and many measures show the outlook for labor is good. However, for interest rates to remain low, payroll growth needs to stay at moderate levels and not accelerate substantially. Over 70% of inflation is comprised of unit labor costs. Sustained, elevated hiring would result in an acceleration of inflation from current average rates, thus leading to a quickening of interest rate hikes by the Fed.
Weekly Scoreboard*
Indices
S&P 500 1,191.17 +.72%
Dow 10,592.21 +.66%
NASDAQ 2,147.96 +2.19%
Russell 2000 642.21 +1.75%
S&P Equity Long/Short Index 1,008.11 +.55%
Put/Call .69 unch.
NYSE Arms 1.37 +53.93%
Volatility(VIX) 12.96 +1.33%
AAII % Bulls 56.76 +14.71%
US Dollar 80.98 -.96%
CRB 284.40 -2.32%
Futures Spot Prices
Gold 457.30 +1.22%
Crude Oil 42.54 -13.75%
Unleaded Gasoline 113.49 -13.56%
Natural Gas 6.8 -20.52%
Heating Oil 123.59 -15.7%
Base Metals 117.20 -2.75%
10-year US Treasury Yield 4.26% +.09%
Average 30-year Mortgage Rate 5.81% +1.57%
Leading Sectors
Disk Drives +9.36%
Airlines +8.47%
Software +4.26%
Lagging Sectors
Utilities -4.17%
Energy -4.53%
Oil Service -5.33%
*% Gain or loss for the week
S&P 500 1,191.17 +.72%
Dow 10,592.21 +.66%
NASDAQ 2,147.96 +2.19%
Russell 2000 642.21 +1.75%
S&P Equity Long/Short Index 1,008.11 +.55%
Put/Call .69 unch.
NYSE Arms 1.37 +53.93%
Volatility(VIX) 12.96 +1.33%
AAII % Bulls 56.76 +14.71%
US Dollar 80.98 -.96%
CRB 284.40 -2.32%
Futures Spot Prices
Gold 457.30 +1.22%
Crude Oil 42.54 -13.75%
Unleaded Gasoline 113.49 -13.56%
Natural Gas 6.8 -20.52%
Heating Oil 123.59 -15.7%
Base Metals 117.20 -2.75%
10-year US Treasury Yield 4.26% +.09%
Average 30-year Mortgage Rate 5.81% +1.57%
Leading Sectors
Disk Drives +9.36%
Airlines +8.47%
Software +4.26%
Lagging Sectors
Utilities -4.17%
Energy -4.53%
Oil Service -5.33%
*% Gain or loss for the week
Friday, December 03, 2004
Mid-day Report
S&P 500 1,189.75 -.05%
NASDAQ 2,148.64 +.24%
Leading Sectors
Semis +2.45%
Homebuilders +2.18%
Iron/Steel +2.04%
Lagging Sectors
Papers -.89%
Broadcasting -1.26%
Airlines -1.62%
Other
Crude Oil 42.80 -1.04%
Natural Gas 6.80 -.09%
Gold 456.80 +1.04%
Base Metals 117.20 -.57%
U.S. Dollar 81.19 -.94%
10-Yr. T-note Yield 4.25% -3.55%
VIX 12.94 -.31%
Put/Call .71 -14.46%
NYSE Arms 1.35 +55.17%
Market Movers
INTC +6.21% after boosting 4Q outlook, reducing inventories and Needham upgrade to Buy.
AUGT +13.9% on Adams Harkness upgrade to Strong Buy, target $12.
NCR +4.2% after the State of Missouri selected its Teradata division to be its partner in the development of its new Tax Compliance System.
IMDC +6.0% after it and its partner, Genzyme, won U.S. approval to sell the Captique wrinkle gel.
SCSS -20.8% after cutting 4Q outlook.
FITB -6.1% after cutting 4Q outlook and multiple downgrades.
AAPL -3.7% on Needham downgrade to Hold.
ETM -4.6% on SunTrust downgrade to Neutral.
*Semis and equipment up across the board on INTC mid-quarter update.
*Homebuilders up across the board on a sharp decline in interest rates.
Economic Data
Unemployment Rate for November fell to 5.4% versus estimates of 5.4% and 5.5% in October.
Average Hourly Earnings for November rose .1% versus estimates of a .3% gain and a .3% increase in October.
Change in Non-farm Payrolls for November was 112K versus estimates of 200K and 303K in October.
Change in Manufacturing Payrolls for November was -5K versus estimates of 0K and -2K in October.
Average Weekly Hours for November was 33.7 versus estimates of 33.8 and 33.8 in October.
ISM Non-Manufacturing for November was 61.3 versus estimates of 58.5 and 59.8 in October.
Recommendations
-Goldman Sachs reiterated Outperform on INTC, ADP, HEW, PAYX, CEN, COH, WAG, AMGN, BSX . Goldman reiterated Underperform on ABY, PSS, RAI.
-Citi SmithBarney said to switch from TGT to WMT. Citi reiterated Buy on CNET, target $13. Citi reiterated Buy on BHI, target $57. Citi reiterated Buy on INTC, target $26.50. Citi reiterated Buy on CMCSK, target $34. Citi reiterated Buy on LYO, target $36. Citi reiterated Buy on FITB, target $58. Citi reiterated Buy on AMGN, target $90.
-UBS rated BEAV Buy, target $14.
-JP Morgan downgraded ANN to Underweight. JP Morgan downgraded CLE to Underweight.
-Merrill Lynch rated CTAS Buy, target $52. Merrill rated MAN Buy, target $63. Merrill rated KFY, target $23.50. Merrill rated RECN Sell.
-Thomas Weisel upgraded PLT and LRCX to Outperform.
Mid-day News
U.S. stocks are mixed mid-day as strength in tech and interest-rate sensitive sectors is being offset by worries over the consumer. Cell phone rings that play songs have been popular in Western Europe and Asia for the past two years and are catching on fast in the U.S., the Washington Post said. The Democratic National Committee raised more money during the past election than the Republican National Committee for the first time since the mid-1970s, and both sides broke all previous fundraising records, the Washington Post reported. Smaller computer-related companies are enjoying a strong market for IPOs after more than four years of little activity, the NY Times reported. Oregon Steel, the only maker of steel plates on the U.S. West Coast, plans to raise its prices in January, American Metal Market reported. New Jersey drugmakers, including Schering-Pough, are planning a program to allow low-income and families without health insurance better access to medicine, the Star-Ledger reported. An official of Hamas told the AP his group would be open to a Palestinian state and a lengthy truce with Israel. The LA Times will stop publishing its national edition at year-end because the Internet has made the separate newspaper irrelevant, the Washington Post reported. Ukraine's political crisis, which has driven down the price of the country's bonds and stocks, has failed to hurt the debt of other emerging-market nations, the Economist reported. A New Jersey legislative committee approved a bill that would allow casino betting on sporting events, as the state faces a $4 billion budget deficit and competition from casinos in other states, the Philadelphia Inquirer reported. Korn/Ferry Intl., the world's largest executive-search company, sees the job market for top and middle manager as robust, CEO Reilly told CNBC. Ukraine's Supreme Court threw out last month's presidential election results that showed Prime Minister Yanukovych beat rival Yushchenko, saying there is evidence the balloting was riddled with fraud, Bloomberg reported. John Henry, chairman of a $2.9 billion commodity-trading firm that bears his name, said he's betting on a drop in oil prices after profiting from their climb, Bloomberg said. U.S. Treasury notes rose the most in four months after job growth slowed in November, tempering speculation the Fed would accelerate the pace of interest rate increases, Bloomberg said. The ISM Non-manufacturing Index rose to a four-month high, surpassing expectations, Bloomberg reported. U.S. employers added 112,000 workers in November, fewer than economists expected, Bloomberg said. The unemployment rate fell to 5.4%, down from 6.3% in June of 2003, Bloomberg reported.
NASDAQ 2,148.64 +.24%
Leading Sectors
Semis +2.45%
Homebuilders +2.18%
Iron/Steel +2.04%
Lagging Sectors
Papers -.89%
Broadcasting -1.26%
Airlines -1.62%
Other
Crude Oil 42.80 -1.04%
Natural Gas 6.80 -.09%
Gold 456.80 +1.04%
Base Metals 117.20 -.57%
U.S. Dollar 81.19 -.94%
10-Yr. T-note Yield 4.25% -3.55%
VIX 12.94 -.31%
Put/Call .71 -14.46%
NYSE Arms 1.35 +55.17%
Market Movers
INTC +6.21% after boosting 4Q outlook, reducing inventories and Needham upgrade to Buy.
AUGT +13.9% on Adams Harkness upgrade to Strong Buy, target $12.
NCR +4.2% after the State of Missouri selected its Teradata division to be its partner in the development of its new Tax Compliance System.
IMDC +6.0% after it and its partner, Genzyme, won U.S. approval to sell the Captique wrinkle gel.
SCSS -20.8% after cutting 4Q outlook.
FITB -6.1% after cutting 4Q outlook and multiple downgrades.
AAPL -3.7% on Needham downgrade to Hold.
ETM -4.6% on SunTrust downgrade to Neutral.
*Semis and equipment up across the board on INTC mid-quarter update.
*Homebuilders up across the board on a sharp decline in interest rates.
Economic Data
Unemployment Rate for November fell to 5.4% versus estimates of 5.4% and 5.5% in October.
Average Hourly Earnings for November rose .1% versus estimates of a .3% gain and a .3% increase in October.
Change in Non-farm Payrolls for November was 112K versus estimates of 200K and 303K in October.
Change in Manufacturing Payrolls for November was -5K versus estimates of 0K and -2K in October.
Average Weekly Hours for November was 33.7 versus estimates of 33.8 and 33.8 in October.
ISM Non-Manufacturing for November was 61.3 versus estimates of 58.5 and 59.8 in October.
Recommendations
-Goldman Sachs reiterated Outperform on INTC, ADP, HEW, PAYX, CEN, COH, WAG, AMGN, BSX . Goldman reiterated Underperform on ABY, PSS, RAI.
-Citi SmithBarney said to switch from TGT to WMT. Citi reiterated Buy on CNET, target $13. Citi reiterated Buy on BHI, target $57. Citi reiterated Buy on INTC, target $26.50. Citi reiterated Buy on CMCSK, target $34. Citi reiterated Buy on LYO, target $36. Citi reiterated Buy on FITB, target $58. Citi reiterated Buy on AMGN, target $90.
-UBS rated BEAV Buy, target $14.
-JP Morgan downgraded ANN to Underweight. JP Morgan downgraded CLE to Underweight.
-Merrill Lynch rated CTAS Buy, target $52. Merrill rated MAN Buy, target $63. Merrill rated KFY, target $23.50. Merrill rated RECN Sell.
-Thomas Weisel upgraded PLT and LRCX to Outperform.
Mid-day News
U.S. stocks are mixed mid-day as strength in tech and interest-rate sensitive sectors is being offset by worries over the consumer. Cell phone rings that play songs have been popular in Western Europe and Asia for the past two years and are catching on fast in the U.S., the Washington Post said. The Democratic National Committee raised more money during the past election than the Republican National Committee for the first time since the mid-1970s, and both sides broke all previous fundraising records, the Washington Post reported. Smaller computer-related companies are enjoying a strong market for IPOs after more than four years of little activity, the NY Times reported. Oregon Steel, the only maker of steel plates on the U.S. West Coast, plans to raise its prices in January, American Metal Market reported. New Jersey drugmakers, including Schering-Pough, are planning a program to allow low-income and families without health insurance better access to medicine, the Star-Ledger reported. An official of Hamas told the AP his group would be open to a Palestinian state and a lengthy truce with Israel. The LA Times will stop publishing its national edition at year-end because the Internet has made the separate newspaper irrelevant, the Washington Post reported. Ukraine's political crisis, which has driven down the price of the country's bonds and stocks, has failed to hurt the debt of other emerging-market nations, the Economist reported. A New Jersey legislative committee approved a bill that would allow casino betting on sporting events, as the state faces a $4 billion budget deficit and competition from casinos in other states, the Philadelphia Inquirer reported. Korn/Ferry Intl., the world's largest executive-search company, sees the job market for top and middle manager as robust, CEO Reilly told CNBC. Ukraine's Supreme Court threw out last month's presidential election results that showed Prime Minister Yanukovych beat rival Yushchenko, saying there is evidence the balloting was riddled with fraud, Bloomberg reported. John Henry, chairman of a $2.9 billion commodity-trading firm that bears his name, said he's betting on a drop in oil prices after profiting from their climb, Bloomberg said. U.S. Treasury notes rose the most in four months after job growth slowed in November, tempering speculation the Fed would accelerate the pace of interest rate increases, Bloomberg said. The ISM Non-manufacturing Index rose to a four-month high, surpassing expectations, Bloomberg reported. U.S. employers added 112,000 workers in November, fewer than economists expected, Bloomberg said. The unemployment rate fell to 5.4%, down from 6.3% in June of 2003, Bloomberg reported.
Bottom Line: The Portfolio is unchanged mid-day as strength in my internet and semi-equipment longs is offsetting weakness in my Chinese ADR and retail longs. I exited an internet long this morning and added ELOS long, thus leaving the Portfolio 125% net long. I am using a $24.25 stop-loss on this position. While job creation was disappointing, the continuing fall in the unemployment rate is very positive. It also appears that weather effects are still significant. Over the last 3 months an ALL-TIME record number of people said they were not at work for weather-related reasons, yet an average of 178,000 jobs/month were created during this period. As I have stated before, over 70% of inflation comes from unit labor costs. Thus, a modestly improving labor market is better for stocks than robust job growth. This is why interest rates are plunging and one of the reasons stocks aren't selling off today. As well, the ISM Non-manufacturing Index shows an acceleration in services, the largest part of the U.S. economy. I expect U.S. stocks to trade mixed-to-higher into the afternoon as short-covering and optimism in the tech sector offsets worries over the consumer.
Friday Watch
Earnings of Note
Company/Estimate
None of note.
Splits
None of note.
Economic Data
Unemployment Rate for November estimated at 5.4% versus 5.5% in October.
Average Hourly Earnings for November estimated up .3% versus a .3% increase in October.
Change in Non-farm Payrolls for November estimated at 200K versus 337K in October.
Change in Manufacturing Payrolls for November estimated at 0K versus a loss of 5K in October.
Average Weekly Hours for November estimated at 33.8 versus 33.8 in October.
ISM Non-Manufacturing for November estimated at 58.5 versus 59.8 in October.
Recommendations
Goldman Sachs reiterated Outperform on AMGN, BSX, GE and INTC. Goldman reiterated Underperform on ALA and TLAB. Colgate-Palmolive(CL), whose shares have dropped 14% since Sept. 20 when the company said 2004 profits wouldn't meet forecasts, is again attracting investors, Business Week reported. Given Imaging(GIVN) shares may rise on sales of its diagnostic camera in a pill, Business Week reported. Curis(CRIS), a maker of drugs to fighter cancer and kidney disease, may become the target of a takeover because it has three big pharmaceutical companies as partners, Business Week reported.
Late-Night News
Asian indices are mostly higher on optimism for technology shares in the region after Intel's mid-quarter update. Nigeria wants to boost its oil exports to the U.S., President Obasanjo said in an interview with CNN. China faces a bigger influx of foreign currencies as investors bet the government will let the yuan appreciate, the state-run Xinhua News said. Credit-card issuers are losing business because consumers are shifting their debt to low-rate home-equity loans, Business Week reported. The number of blogs on the Internet has risen to about 4.8 million, from 100,000 two years ago, Business Week said. Dongfeng Motor of China and Cummins of the U.S. agreed to establish a $20 million research and development center for truck engines in Wuhan, central China, Chinanews agency reported. Citigroup CEO Charles Prince is considering taking steps to address investor worries that the company is too large to manage and grow, the NY Times said. President Bush will use a mid-December economic summit to begin a push for his plan to allow younger workers to invest part of their Social Security taxes, Bloomberg reported. The US dollar headed for its first weekly gain in eight against the euro in Asia on expectations a report today will show U.S. employers added enough workers to fuel consumer spending and economic growth, Bloomberg reported. Shares of NEC Electronics, Toshiba Corp. and other computer-related companies rose in Asia after Intel said fourth-quarter sales will exceed its previous forecast because of higher demand for processors used to power laptop, desktop and server computers, Bloomberg reported. Verizon raised $1.88 billion from the sale of its 20.5% stake in Canada's Telus Corp., Bloomberg reported. IBM wants to sell its pc business for between $1 billion to $2 billion, Bloomberg said.
Late-Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated +.39%.
NASDAQ 100 indicated +.81%
Company/Estimate
None of note.
Splits
None of note.
Economic Data
Unemployment Rate for November estimated at 5.4% versus 5.5% in October.
Average Hourly Earnings for November estimated up .3% versus a .3% increase in October.
Change in Non-farm Payrolls for November estimated at 200K versus 337K in October.
Change in Manufacturing Payrolls for November estimated at 0K versus a loss of 5K in October.
Average Weekly Hours for November estimated at 33.8 versus 33.8 in October.
ISM Non-Manufacturing for November estimated at 58.5 versus 59.8 in October.
Recommendations
Goldman Sachs reiterated Outperform on AMGN, BSX, GE and INTC. Goldman reiterated Underperform on ALA and TLAB. Colgate-Palmolive(CL), whose shares have dropped 14% since Sept. 20 when the company said 2004 profits wouldn't meet forecasts, is again attracting investors, Business Week reported. Given Imaging(GIVN) shares may rise on sales of its diagnostic camera in a pill, Business Week reported. Curis(CRIS), a maker of drugs to fighter cancer and kidney disease, may become the target of a takeover because it has three big pharmaceutical companies as partners, Business Week reported.
Late-Night News
Asian indices are mostly higher on optimism for technology shares in the region after Intel's mid-quarter update. Nigeria wants to boost its oil exports to the U.S., President Obasanjo said in an interview with CNN. China faces a bigger influx of foreign currencies as investors bet the government will let the yuan appreciate, the state-run Xinhua News said. Credit-card issuers are losing business because consumers are shifting their debt to low-rate home-equity loans, Business Week reported. The number of blogs on the Internet has risen to about 4.8 million, from 100,000 two years ago, Business Week said. Dongfeng Motor of China and Cummins of the U.S. agreed to establish a $20 million research and development center for truck engines in Wuhan, central China, Chinanews agency reported. Citigroup CEO Charles Prince is considering taking steps to address investor worries that the company is too large to manage and grow, the NY Times said. President Bush will use a mid-December economic summit to begin a push for his plan to allow younger workers to invest part of their Social Security taxes, Bloomberg reported. The US dollar headed for its first weekly gain in eight against the euro in Asia on expectations a report today will show U.S. employers added enough workers to fuel consumer spending and economic growth, Bloomberg reported. Shares of NEC Electronics, Toshiba Corp. and other computer-related companies rose in Asia after Intel said fourth-quarter sales will exceed its previous forecast because of higher demand for processors used to power laptop, desktop and server computers, Bloomberg reported. Verizon raised $1.88 billion from the sale of its 20.5% stake in Canada's Telus Corp., Bloomberg reported. IBM wants to sell its pc business for between $1 billion to $2 billion, Bloomberg said.
Late-Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated +.39%.
NASDAQ 100 indicated +.81%
BOTTOM LINE: I expect U.S. equities to open higher in the morning on optimism over Intel's mid-quarter update and a better-than-expected employment report. Interest rates will likely rise on this news which could lead to profit-taking later in the day, resulting in a modest daily gain for stocks. The Portfolio is 125% net long heading into tomorrow.
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